Beeks Financial Cloud Group PLC
30 June 2022
Registered Number SC521839
CONTENTS
FINANCIAL AND OPERATIONAL HIGHLIGHTS
SUPERSONIC LOW LATENCY SPEED
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
CORPORATE GOVERNANCE
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 CASH FLOW STATEMENT
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF BEEKS FINANCIAL CLOUD PLC
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENT OF CHANGES IN EQUITY
NOTES TO THE COMPANY FINANCIAL STATEMENTS
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2 Beeks Financial Cloud Group PLC
Financial and Operational Highlights
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Financial and Operational Highlights
For the year ended 30 June 2022
3
Revenues1 increased
57%
TO £18.29m
(2021: £11.62m)
Underlying2
EBITDA increased
52%
TO £6.31m
(2021: £4.14m)
Annualised Committed Monthly
Recurring Revenue (ACMRR) up
40%
TO £19.3m
(2021: £13.8m)
Underlying profit
before tax3 increased
28%
TO £2.06m
(2021: £1.61m)
Net cash as at
30 June 2022
£7.86m
(30 June 2021: net cash £1.89m)
Gross profit up
49%
TO £7.94m
(2021: £5.33m)
Underlying diluted EPS4
4.19p
(2021: 2.99p)
1 Revenue referenced throughout the accounts excludes grant income and rental income
2 Underlying EBITDA is defined as profit for the year before amortisation, depreciation, finance costs, taxation, acquisition costs, share-based
payments, exchange rate gains/losses on statement of financial position translation and exceptional non-recurring costs
3 Underlying profit before tax is defined as profit before tax excluding amortisation on acquired intangibles, acquisition costs, share-based
payments, exchange rate gains/losses on statement of financial position translation and exceptional non-recurring costs
4 Underlying diluted EPS is defined as profit for the year excluding amortisation on acquired intangibles, acquisition costs, share-based payments,
exchange rate gains/losses on statement of financial position translation and exceptional non-recurring costs divided by the number of shares
including any dilutive share options
operational HIGHLIGHTS
FINANCIAL and
OUTLOOK
/ While cognisant of the ongoing
pressures of the macroeconomic
environment, the size of the sales
pipeline and expanded product
offering provides the Board with
confidence in the prospects for Beeks
/ We have the potential for
considerable additional growth
given the size of the sales pipeline,
however these types of discussions
will take time to flow through into
contracts and revenues
/ As separately announced today,
the Group has secured two 3-year
contracts via a partner with
aggregate TCV of $2 million, further
underpinning our FY23 expectations
STATUTORY
EQUIVALENTS
The highlights opposite are
based on underlying results.
Reconciliations between underlying
and statutory results are contained
within these financial statements.
The statutory equivalents of these
results are as follows:
PROFIT BEFORE TAX WAS £0.07M
(2021: £1.25M)
BASIC EPS WAS 1.43P (2021: 3.07P)
OPERATIONAL
HIGHLIGHTS
/ Oversubscribed fundraising
in Apri 2022 of approximately
£15 million, with funds allocated
towards continued exploitation of
considerable market opportunity of
the Private Cloud, Proximity Cloud
and Exchange Cloud offerings
/ Exchange Cloud launched in June
2022, explicitly designed for global
financial Exchanges and Electronic
Communication Networks (ECNs)
/ ICE Global Network (IGN), part of
ICE Data Services - a division of
Intercontinental Exchange (NYSE:
ICE), signed a multi-year contract,
with a period of exclusivity
/ Currently in talks with a number
of major Exchanges across the
globe, including additional proof of
concept implementations
/ Ongoing success of Proximity Cloud
offering, launched in August 2021
/ The total value of Proximity Cloud
contracts to date stands at $5.2
million since launch
/ The Proximity Cloud pipeline
continues to build
/ A leading cloud-native payments
technology provider appointed Beeks
to underpin its technology platform,
with subsequent expansion of the
contract
/ Extended Asia-Pacific presence with
access to the Australian Securities
Exchange (ASX) offering colocation
services into the Australian Liquidity
Centre (ALC)
/ Moved to a new head office in
February 2022, allowing the Group to
execute its expansion plans, as well
as securing the business’s position as
an attractive place to work
/ Increased headcount within the
business to 89 by the end of the year,
to support the product roadmap and
sales
/ Further expansion of data centre
geographies with additional operations
now in Switzerland and Amsterdam
Supersonic
low-latency speed
there’s no points
for second place
From an enemy jet to an experimental stealth plane,
we’ve put the best of the best jets against our own
Beeks supersonic low latency. Destination, NY4. Only
one can reach the target destination in time.
6
Beeks Financial Cloud Group PLC
Our Compnay at a Glance
For the year ended 30 June 2022
OUR COMPANY
AT A GLANCE
Beeks Financial Cloud Group PLC
Chairman’s Statement
For the year ended 30 June 2022
7
CHAIRMAN’S
STATEMENT
WHAT WE DO
Beeks Financial Cloud Group plc
trades as Beeks Group and has
been the leading managed cloud
compute, connectivity and analytics
provider in the financial markets
since 2011. Beeks delivers bare-metal
cloud and low-latency compute,
connectivity and analytics, on
demand and optimised exclusively
for global capital markets and
financial services.
The Group offers bare metal and
virtual private servers, as well as
connectivity, co-location, dedicated
fibre, market data as well as MT4/
MT5 hosting. We have an established
connectivity footprint with over 200
pre-built connections to venues and
Exchanges across the globe.
With sub-millisecond latencies, the
Beeks infrastructure greatly expedites
the time taken from placing a trade
to its execution – a critical factor
given the time-sensitivity demands
of our customers.
Our cloud-based
Infrastructure-as-a-Service (IaaS)
model gives 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.
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.
Based in the UK with an expanding
network of global data centres in key
financial locations, Beeks supports
international customers at scale
in leading financial hubs such as
New York, London, Hong Kong, Tokyo,
Singapore and Australia, supported
by our 24/7 Network Operations
Centre (NOC).
OFFICE LOCATIONS
/ Renfrew, UK
/ London, UK
/ Tokyo, Japan
/ Surabaya, Indonesia
DATA CENTRE LOCATIONS
/ London, UK
/ Frankfurt, Germany
/ Amsterdam, Netherlands
/ Paris, France
/ Geneva, Switzerland
/ Zurich, Switzerland
/ Chicago, US
/ New York, US
/ Washington DC, US
/ Hong Kong, China
/ Tokyo, Japan
/ Singapore
/ Sydney, Australia
/ Toronto, Canada
This has been a year in which Beeks
has proven its ability to deliver on
its ambition. Following several years
of investment into the offering and
team, two significant new products
were launched targeting the
world’s largest financial institutions
and several multi-million pound
contracts secured.
The potential for these offerings
and the business can be seen
in the financial results, delivering
57% growth in revenues and 52%
growth in underlying EBITDA. But the
Board is confident this is still only
the beginning of Beeks’ growth.
The opportunity ahead of Beeks
is global in nature and with the
product-market fit having been
proven, careful investment into their
evolution will continue.
We were grateful for the support
shown by new and existing
investors in the significantly
over-subscribed £15 million
equity fundraise which took
place in April 2022, providing the
firepower to develop and launch
the exciting Exchange Cloud
offering. These resources have
been carefully invested, with over
£10 million gross cash remaining
on the Consolidated Statement
of Financial Position, providing
the business with the funding to
execute on its growth strategy.
The management team successfully
navigated the macroeconomic
challenges prevalent through the
year, ensuring supply chain issues
did not materially impact the
capability to deploy equipment for
clients, while successfully hiring
and retaining valuable new team
members across sales and product
development.
The Beeks team has expanded
considerably over the last two
years, and I would like to thank
all of them for the diligence and
enthusiasm with which they have
contributed to the success of
Beeks. The fact that some of the
world’s largest organisations are
now signing up to the offerings
they have developed speaks to the
quality of the team.
With over £19 million in ACMRR, and
a considerable sales pipeline, Beeks
has entered the new financial year
in a strong position and the Board
is confident in continued success in
this coming year and beyond.
MARK CUBITT
Chairman
8 October 2022
8
Beeks Financial Cloud Group PLC
Strategic Overview
For the year ended 30 June 2022
strategic
OVERVIEW
“CLOUD IS THE POWERHOUSE THAT DRIVES TODAY’S
DIGITAL ORGANISATIONS.”
Sid Nag, Research Vice President at Gartner
MARKET OVERVIEW
We operate in a considerable, and
growing, market. The global cloud
computing market size is expected to
reach USD 456.05 billion in 2022, and
is projected to grow at a CAGR 15.14%
to reach USD 923.46 billion by 20271.
Infrastructure-as-a-Service (IaaS) is
forecast to experience the highest
end-user spending growth in 2022
at 30.6%2.
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),
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 organisations toward the
adoption of hybrid cloud.
A large majority (76%) of companies
are using two or more public clouds,
with the average having 2.3 clouds
in use. For larger organisations, these
figures are even higher: those with
more than USD 1 billion in revenue
are twice as likely to be using
three or more clouds, than smaller
businesses3.
The ‘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.
Capital Markets Infrastructure
Providers (CMIPs) have been
conspicuous high achievers in
recent years, posting 3% average
annual revenue growth despite
mixed fortunes in the wider financial
services sector4.
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.
Cloud’s scale, resiliency and
continuous innovation mean it will
likely form a critical part of every
future business and technology
roadmap.
There are many factors that give
rise to financial services companies’
adoption of public cloud, including
pressure from internal and external
customers to digitise processes
while maintaining strict security and
compliance controls.
1 August 10, 2022 09:06 ET | Source: ReportLinker
2 Gartner (April 2022)
3 451 Research’s Voice of the Enterprise: Cloud, Hosting & Managed Services, Vendor Evaluations 2020 survey
4 McKinsey&Partners (Capital Markets Infrastructure: An Industry Reinventing Itself)
Beeks Financial Cloud Group PLC
Financial and Operational Highlights
For the year ended 30 June 2022
9
The realisation is that incremental
adoption of public cloud solutions
could enable firms to keep pace,
while also providing cost, revenue
and agility benefits. To realise these
benefits, firms need to scale up
from discrete, targeted cloud use
cases and create a foundational
enterprise-wide cloud layer.
Our innovations, enhanced product
range, breadth of asset classes and
growing number of Tier 1 customers,
position us well to benefit from the
growth in the market for automated
trading and the continued adoption
of cloud computing by financial
services organisations.
Our latest iteration of Proximity Cloud
is a pre-configured IaaS trading
environment platform derived from
an identified demand from global
Exchanges for a secure, multi-client
private cloud environment.
Explicitly designed for global
Exchanges and Electronic
Communication Networks (ECNs),
Exchange Cloud is a multi-home
version of Proximity Cloud, a fully
configured and pre-installed,
physical trading environment. While
Proximity Cloud makes it easier to
quickly deploy on premise, Exchange
Cloud takes it one step further by
introducing multi-home capabilities.
BUSINESS MODEL
For over eleven years Beeks has
honed its infrastructure provision and
software development approach
in direct response to its customers’
needs and requirements.
The expansion into trading analytics
and launch of Analytics-as-a-Service
(AaaS) expanded our product
offering to include the required
analytics around those infrastructure
environments.
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.
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
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
STRATEGY
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.
Our main strategic priority is to
continue to grow our customer
base both for public, private
and secure cloud deployment
as well as complementary
performance-analytics solutions.
In order to satisfy existing demand
and attract new customers, we will
continue to develop innovative new
products like Proximity and Exchange
Cloud. We also plan to expand into
new asset classes and geographies,
encouraged by the significant
opportunities we have identified.
#POWEREDBYBEEKS
10
Beeks Financial Cloud Group PLC
Strategic Report – Chief Executive’s Review
For the year ended 30 June 2022
executive’s review
chief
OUR VISION IS SIMPLE:
Build. Connect. Analyse. Providing
end-to-end outsourcing of financial
services compute environments.
I’m delighted to report on a record
trading performance for Beeks in
the year, with our enlarged team
executing on the opportunity in front
of them. The strong demand for our
product offering from both existing
and new customers saw us deliver
record revenue growth of 57% to over
£18.3m, underlying EBITDA of £6.3m and
an exit ACMRR of £19.3m, all ahead of
initial market expectations and thus
providing a strong basis for further
growth in the current year.
Since our IPO in FY18, we have been
focused on extending our offering to
meet the needs of the world’s largest
financial services organisations,
investing in our product set and team.
These investments saw the launch
in August 2021 of Proximity Cloud,
wrapping up our low-latency private
cloud product into a pre-built, physical
cabinet and delivered to site, for those
customers who wish to benefit from
the cloud within their own infrastructure.
And in June 2022, the launch of
Exchange Cloud, the adaption
of our offering specifically for the
requirements of Exchanges, enabling
them to provide secure, low-latency
cloud computing to their customers.
In less than one year post launch,
Proximity Cloud accounts for 12% of
this year’s total revenue having been
purchased by some of world’s leading
financial services organisations. All
of these contracts have the potential
to expand, and we have a growing
sales pipeline. Meanwhile, Exchange
Cloud has now launched with our first
customer, InterContinental Exchanges,
revenue from which underpins our
FY23 expectations, and we are in
conversation with many of the largest
Exchanges in the world.
The success of our investment
strategy can be seen in the typical
deal sizes we are now securing, with
several deal sizes in the TCV range
of between £1.5m and £3m secured
in the year. Moving into this type of
contract will naturally increase the
length of our sales cycles, but we
are now in multiple conversations
which could transform our business.
Meanwhile, our underlying base of
business continues to grow, as our
customers expand their use of our
offerings within both the mid-market
and the Tier 1 space. The investments
into our team mean that more than
half our technical team are now
software engineers, a considerable
shift in focus for us, providing us with the
resources to continue to expand our
offerings in line with the requirements
of our evolving customer base.
We see a considerable opportunity
ahead, and while the macro
environment presents challenges
to all businesses, we believe the shift
of the financial services sector to cloud
computing will continue at pace and
our pipeline of business with both
existing and potential new customers
provides us with a considerable
runway of visible revenue.
FINANCIAL PERFORMANCE
Revenue in the year grew by 57%
to £18.3m (2021: £11.6m), resulting in
an increase in underlying EBITDA
of 52% to £6.3m (2021: £4.1m). Beeks
has 76% (2021: 93%) recurring revenue,
changed by the introduction of
more up-front revenue in relation to
Proximity Cloud sales (information
on the Proximity Cloud revenue
recognition accounting policy is in
Note 2 of the Consolidated Financial
Information). Customer retention
remained within target and our ACMRR
grew 40% to £19.3m at 30 June 2022.
Operating margins have reduced
in the year, in line with the Board’s
expectations, given the level of
investment into product and
capacity. We expect operating
margins to increase in the medium
terms as we grow in scale, however
we are also cognisant that the
global macro-economic climate
and growing inflationary pressures
and supply chain pressures may
have some impact on our operating
margins in the short term. We remain
well funded and are confident in our
ability to navigate such issues helped
by our recently improved statement
of financial position strength. This
will allow us to benefit from holding
higher levels of fixed asset inventory
to deploy against our growing sales
pipeline.
OPERATIONAL EXPANSION
This was another year of significant
investment across the business, in
which we expanded our offering
and team in order to strengthen our
Beeks Financial Cloud Group PLC
Strategic Report – Chief Executive’s Review
For the year ended 30 June 2022
11
position in the rapidly growing cloud
computing market.
Headcount increased to an average
of 89 in the year, up from 73 in the
year to 30 June 2021. The hires have
predominantly been in the area of
product development to support
the roll out and evolution of Proximity
Cloud and Exchange Cloud. We have
also instigated our first graduate
recruitment programme, as part
of our commitment to support the
local community. This will involve
working in partnership with two local
universities to onboard software
developer graduates, network
engineer graduates and back-office
graduates. We will also be supporting
Strathclyde University’s summer intern
scheme by welcoming several interns
to our Software Development team to
support with their workplace learning
with a view to welcoming them to
Beeks once they have graduated.
In September 2021, we acquired a new
premises for the Group headquarters
and moved in during February 2022.
With roughly three times the square
footage, the larger premises is suitable to
provide the necessary space to fulfil the
Group’s further growth potential and we
have found to be beneficial in attracting
talented team members to the Group.
Our growing partnership with IPC has
enabled us to expand our geographical
data centre footprint in Toronto and
Sydney. We have also launched
services in Zurich, Geneva, Amsterdam,
Washington DC, with Mexico
scheduled for later in the year. We
now have data centres in 14 locations
and will continue with our approach
of expanding into areas where we
already have customer demand.
PRODUCT ROADMAP
With the initial launches of Proximity
Cloud and Exchange Cloud now
complete, the team continues to build
out the functionality of both offerings,
with further releases planned for
later in the year. We have a product
roadmap that extends out for the next
couple of years and see significant
opportunity by investing resources
in our two major product lines: our
Private/Public and our Proximity/
Exchange Cloud offerings.
$1m contract for global private cloud
solution increased to $7.9m by year
end, and an increased initial contract
for an open banking provider that is
now seven times its initial monthly
commitment with further expansion
opportunities ahead across our
client base.
CUSTOMERS
We continue to see considerable
expansion of the types of customer
we support, with Beeks now catering
for banks, brokers, hedge funds, crypto
traders and Exchanges, insurance
organisations, financial markets
technology providers and payments
providers.
LAND AND EXPAND
We have been successful at
reaching new Tier 1 customers
through the execution of our Land
and Expand strategy.
This focuses on growing our Tier 1
customer base, with organisations
of varying sizes, ranging from
proof of concepts to large scale
phase 2 roll-outs, with expansion
opportunities across the majority.
Significant new customers secured in
the year include:
/ $1m Proximity Cloud multi-year
contract with a leading technology
and service provider to global financial
markets
/ $2.2m Proximity Cloud contract over
4 years with one of the world’s largest
Foreign Exchange brokers
/ $2m Proximity Cloud initial contract
over 5 years with a North American
bank via a partner
/ £4.4m Private Cloud contract over
5 years with a European Tier 1 client
via a partner
We have also had success at
‘expanding’ our contracts during
the period: with additional revenue
coming from deals that have grown
in size since being signed - an initial
FUTURE GROWTH AND OUTLOOK
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.
The majority of financial services
organisations around the world are
exploring how to utilise the power of
the cloud to support their ambitions.
This presents us with a considerable
opportunity and through our Private
Cloud, Proximity Cloud and Exchange
Cloud, we have the offering to
address it.
The Board is confident in achieving
results for FY23 in line with market
expectations, with the potential for
considerable additional growth given
the size of the pipeline for Exchange
Cloud. These types of discussions
however will naturally take time to flow
through into contracts and revenues.
We will continue to invest into the
development of our offering and
increased sales and marketing
activities to capitalise on our
early successes in this significant
market. We have a considerable
and growing pipeline and look to the
future with confidence.
GORDON MCARTHUR
CEO
8 October 2022
12
Beeks Financial Cloud Group PLC
Strategic Report – Financial Review
For the year ended 30 June 2022
FINANCIAL
REVIEW
Key Performance Indicator Review
Revenue1 (£m)
ACMRR (£m)
Gross Profit (£m)
Gross Profit margin2
Underlying EBITDA3 (£m)
Underlying EBITDA margin4
Underlying Profit before tax5 (£m)
Underlying Profit before tax margin6
Profit before tax (£m)
Underlying EPS7 (pence)
FY22
18.29
19.30
7.94
43.4%
6.31
34.5%
2.06
11.3%
0.07
4.49
FY21
11.62
13.80
5.33
45.9%
4.14
35.7%
1.61
13.9%
1.26
3.14
Growth
57%
40%
49%
(2.5%)
52%
(1.2%)
28%
(2.6%)
(94.8%)
43%
1 Revenue excludes grant income and rental income
2 Gross profit margin is statutory gross profit divided by Revenue
3 Underlying EBITDA is defined as profit for the year excluding amortisation, depreciation, finance costs, taxation, acquisition costs, share-based payments,
exchange rate gains/losses on statement of financial position translation and exceptional non-recurring costs
4 Underlying EBITDA margin is defined as Underlying EBITDA divided by Revenue
5 Underlying profit before tax is defined as profit before tax excluding amortisation on acquired intangibles, acquisition costs, share-based payments,
exchange rate gains/losses on statement of financial position translation and exceptional non-recurring costs
6 Underlying profit before tax margin is defined as Underlying profit before tax divided by Revenue
7 Underlying EPS is defined as profit for the year excluding amortisation on acquired intangibles, acquisition costs, share-based payments,
exchange rate gains/losses on statement of financial position translation and exceptional non-recurring costs divided by the number of shares
8 Underlying profit before tax margin has been added as a KPI in the current year for additional key trading profitability information. Dividend per share
has been removed following the change in dividend policy in the prior year
Beeks Financial Cloud Group PLC
Strategic Report – Financial Review
For the year ended 30 June 2022
13
REVENUE
FY22 was an exceptional year in
terms of revenue growth. Group
revenues grew by 57% to £18.29m
(2021: £11.62m) driven mainly
by both Tier 1 growth and new
sales relating to Proximity Cloud.
Proximity Cloud has a different
revenue recognition profile under
international accounting standards
due to the preconfigured nature
of the appliance and associated
performance obligations. As such,
a significant proportion of the total
contract value is recognised upfront
on delivery of the Proximity Cloud to
the client. Proximity Cloud sales of
three contracts contributed towards
£2.28m (12%) of the overall Group
revenue in the year (FY21: £0m). Refer
to Note 3 for a further breakdown
of the Group’s revenues. 76% of
revenues were recurring with Tier 1
customers now representing 34.7% of
delivered revenue (2021: 18%).
GROSS PROFIT
Statutory gross profit earned
increased 49% to £7.94m (2021:
£5.33m), with gross margin
reduced in line with expectations
following a significant investment
in both hardware infrastructure
and software development costs
in the current year. The Group
has undergone a major period of
investment over the past few years
in capacity, people and product
which has culminated in the
successful launch of both Proximity
and Exchange Cloud. The sales of
Proximity Cloud have underpinned
the current year’s revenue growth
and there is also a strong pipeline
of these deals as we look forward to
the year ahead. The investment in
both Proximity Cloud and Exchange
Cloud including Analytics during
the year has incurred internal gross
capitalised development costs of
£2.59m (2021: £1.98m) in line with
the recruitment drive in the year.
UNDERLYING
ADMINISTRATIVE EXPENSES
Underlying administrative expenses,
which are defined as administrative
expenses less share-based
payments and non-recurring
costs, have increased by £2.0m
from £3.94m to £5.94m primarily
as a result of headcount increases
within our software development
function. We had an average
headcount of 89 throughout the
year (2021: 73) therefore gross
staff costs have increased by 28%
from £4.41m to £5.62m. Given a
high proportion of recruitment has
been to support our Proximity and
Exchange Cloud development,
some of these costs are capitalised.
Net staff costs, which is defined as
total staff costs less capitalised
development costs, has increased
by 16%. Most of our headcount
increase 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 2% to £6.31m (2021: £4.14m). 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. The key
adjusting items are share-based
payments, amortisation and grant
income.
Underlying Profit before tax increased
to £2.06m (2021: £1.61m).
Statutory Profit before tax
decreased to £0.07m (2021: £1.26m)
mainly as a result of the fact there
was a one-off write back of £1.99m
due to the contingent consideration
due to VMX Ltd in FY21 that was
not paid. The other reconciling
differences are shown on the
following table:
14
Beeks Financial Cloud Group PLC
Strategic Report – Financial Review
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Strategic Report – Financial Review
For the year ended 30 June 2022
15
Year ended 30 June 2022
£’000
Year ended 30 June 2021
£’000
Statutory Profit Before Tax
66
1,255
Add back:
Acquisition costs/post acquisition
integration costs
Share-based payments
Other Non-recurring costs
Amortisation of acquired intangibles
Impairment of goodwill
Deduct:
Write back of contingent
consideration
Grant income
Exchange rate (gains)/losses on
intercompany translation
Underlying profit for the year
-
1,661
28
802
-
-
(419)
(81)
2,057
140
546
165
806
994
(1,989)
(309)
-
1,608
EBITDA2
Grant Income
Exchange rate (gains)/losses on
intercompany translation
Underlying EBITDA
Year ended 30 June 2022
Year ended 30 June 2021
£'000
6,811
(419)
(81)
6,311
£'000
4,454
(309)
-
4,145
1 Other non-recurring costs in the year relates to head office relocation expenses with no further property moves anticipated due to the purchase of
Riverside building. Prior year non-recurring costs were incurred due to refinancing, acquisition transition costs and Covid-19 related expenditure. All of
these costs are not expected to recur and are therefore disclosed separately to trading results.
2 EBITDA is defined as earnings before depreciation, amortisation, acquisition costs, share based payments and non-recurring costs
TAXATION
The Effective Tax Rate (‘ETR’) for the
period was -1,144.64%, (2021: -27.81%).
The overall effective tax rate
has benefited from the UK
super-deduction on plant and
machinery assets, deferred tax
on share options not previously
recognised and prior year
adjustments for R&D claims.
See tax Notes 10 and 14 for further
details.
EARNINGS PER SHARE
Underlying earnings per share
increased 43% to 4.49p (2021: 3.14p).
Underlying diluted earnings per
share increased to 4.19p (2021: 2.99p).
The increase in underlying EPS is
as a result of both the increased
underlying profitability when
compared to last year and also the
additional taxation credits when
compared to the prior year. This has
more than offset the dilution as a
result of the equity raise in April 2022.
See Note 25 for further details.
Basic earnings per share decreased
to 1.43p (2021: 3.07p). The decrease in
basic EPS is largely as a result of last
year’s one-off gain on the revaluation
of the contingent consideration and
subsequent increase in statutory
profit after tax in FY21. Diluted earnings
per share has also decreased to 1.42p
(2021: 3.07p).
STATEMENT OF FINANCIAL
POSITION AND CASH FLOWS
The statement of financial position
shows an increase in total assets
to £44.7m (2021: £22.9m) with
operating cash flows during the
year increased by 66% to £6.7m
(FY21: £4.04m). Our Equity Raise
in April 2022 saw us strengthen
our Consolidated Statement of
Financial Position by raising net
proceeds of £14.3m to fund the
next stage of our growth. The cash
raised in April 2022 will provide
us with the ability for additional
infrastructure capacity and product
development (including internal
and external resource) for Exchange
Cloud, investment into the recent
and future expected contract wins
and for additional working capital,
including advanced purchases of
IT rack capacity, computer servers
and other associated hardware to
help minimise impact from global
supply chain issues.
We referred to 2021 as our “Year
of Product” and have made
further investment in our two new
strategic product lines of Proximity
and Exchange Cloud (with pre-
configured built-in analytics) of
£2.6m (2021: £2.0m). This is offset by
amortisation and further helped by
the Scottish Enterprise Grant award
of which £0.4m was recognised
against the development costs for
the year.
Our strategy is always to have
sufficient infrastructure capacity
both across our global data centre
network and to hold a sufficient
level of IT Inventory at our Glasgow
head office. As such, a proportion of
our capital spend during the year
is to satisfy the growing pipeline
demand for the year ahead.
Investment in property, plant and
equipment hardware infrastructure
was again significant with over
£5.2m (2021: £4.7m) of additions
(excluding property and new
leases in accordance with IFRS 16)
throughout our expanding global
network and supporting the client
and revenue growth made during
the year.
During the year we took on additional
borrowings of £1.5m against the £2.1m
purchase of our new head office
facilities in Glasgow. We paid down
debt of £0.6m against our term loan
and also fully repaid our revolving
credit facility. This revolving credit
facility is due to mature in December
2022 but we are in discussions
with our lender on extending and
increasing this facility in order to
give us more flexibility in our working
capital. Our net cash at the end of
the year is £7.86m (30 June 2021: net
debt £1.89m) and gross borrowings
at £2.3m are 0.37 x Underlying EBITDA
of £6.3m 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 2022, net assets were
£30.7m compared to net assets of
£13.8m at 30 June 2021.
FRASER MCDONALD
Chief Financial Officer
8 October 2022
16
Beeks Financial Cloud Group PLC
Strategic Report – principal risks and uncertainties
For the year ended 30 June 2022
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 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
The below risks have been identified
by the Board as the principal risks
that the Group face. These risks
are reviewed on an ongoing basis
and updated at each reporting
period. Upon review of principal
risks in the current financial year,
the Group determined that whilst
the following areas remained risks
to the business, they were no longer
classed as principal risks – reliance
on key individuals, competition,
achievement of strategic aims,
damage to the Group’s reputation
or brand and the Group’s
counterparties may become
insolvent or their circumstances
may change.
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 Geo-Political
issues and 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:
/ Implementation of a Security
Incident and Event Management
(SIEM) system to identify, intercept
and manage threats and attacks
/ Improved internal anti-DDoS
infrastructure and integration into
SIEM
/ Enhanced security defences
including endpoint management,
data leakage protection and threat
protection
/ 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
/ Maintained ISO 27001 (Information
Security Management) certification.
This certification proves Beeks
Financial Cloud Group PLC has
structured its IT and cyber security
to effectively manage risks and
demonstrates to customers our
robust policies protect against
today’s 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
/ 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:
Beeks Financial Cloud Group PLC
Strategic Report – principal risks and uncertainties
For the year ended 30 June 2022
17
/ 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 with follow-up actions
identified and reported against
c. Actions of third parties
and suppliers
The Group 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 Group. This
risk is being mitigated by:
/ Upgrading and enhancing of
network infrastructure to improve
stability and resilience
/ Cybersecurity monitoring of key
supply chain and own external
network
/ 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 relationships and to identify
and resolve any potential issues
d. Volatility in energy prices
and supply chain
Due to recent unprecedented
global events, the wholesale cost
of energy has risen sharply and
remains volatile. The data centres
we take services from are large
consumers of electricity to power
servers and provide cooling. Due to
recent events, we expect electricity
costs to materially increase next
year. If such costs are not passed
onto our customers or mitigated
this could have an impact on
profitability. The core of our existing
customer agreements, to varying
degrees, allow us to increase
pricing due to increases in our
costs. This is something we normally
do annually albeit not at the levels
we are foreseeing.
Beeks rely on building new
infrastructure and expanding
existing hosting environments in
line with customer orders and the
speed of getting new clients to
market is one of Beeks’ key selling
points. The global supply chain
shortages of electronic hardware
caused by the pandemic-related
economic downturn and the
continuing reduced production of
raw materials is well documented
and affects all sectors. Beeks have
been tracking the global situation
at Board level since January 2021
and have taken steps to mitigate
the risk. These include more
direct communication with the
key manufacturers (Supermicro,
Juniper, Cisco), working more
closely with distributors for visibility
of their inventory forecast and
building up levels of stock of key
hardware devices to avoid delays in
delivering solutions to clients.
e. 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
f. Other operational risks
The greatest operational risk
remains as the management of
any unexpected peaks or troughs in
service orders and ensuring 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
18
Beeks Financial Cloud Group PLC
Strategic Report – principal risks and uncertainties
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Strategic Report – principal risks and uncertainties
For the year ended 30 June 2022
19
prospective shareholders during the
equity raise and at half-year and
full-year results.
g. 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.
as much as possible and enabling
efficient access to a large, global
and scalable pool of independent
contractors.
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 31 to 39 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. In
the current year we have launched a
number of additional benefits for our
employees’ health and well-being
such as providing free access to the
head office gymnasium (including free
personal training and yoga classes).
We have also improved the private
healthcare benefits and are currently
in the process of improving the Group
pension scheme. These initiatives are
designed both to retain and attract
new employees to our business. Share
ownership remains at the heart of
our strategy with all employees (not
just our Board members) eligible to
participate in our Long-Term Incentive
Programme (LTIP) following a period of
continuous employment.
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. During the year the
Group participated in two FX Expo
events in both Cyprus and Thailand
where senior management as well
as sales and marketing met with
key customers and prospective
customers to help engage in
conversations on their cloud
computing strategies.
d. The CEO and COO continue to
engage with a number of key strategic
partners to ensure we monitor the
quality of our suppliers to optimise
operational efficiency, ensure we
receive the best level of service and
continue to contract on favourable
terms to support the business. For
more details on how the Group
engages with suppliers, see the
Directors’ report on page 24.
e. The impact of the Group’s
operations on the community
and the environment: the impact
on both the community and the
environment is factored into the
Group’s decision-making process.
During the year the Group helped
both local and international
projects in sponsoring a local and
African football team.
f. The Board engages with
shareholders throughout the year
through the annual and half-year
results, trading updates, regulatory
news service announcements, the
Annual General Meeting, the investor
roadshows and the investor pages on
the Beeks Group website. The Board
receives detailed feedback reports
via our various advisors, on views of
shareholders and covering analysts.
Throughout the year the Board have
maintained open and effective
engagement with shareholders
and investors on key topics such as
strategy, Environmental, Social and
Governance (“ESG”) and business
performance. During the year
management met with existing and
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 and Exchange Cloud
offerings and their 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
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 assessed the implications of the
new products, Proximity Cloud at the beginning of the financial
year and Exchange Cloud at the end of the financial year. The
Board was presented with management’s view (supported by
professional 3rd party advisers) on the revenue recognition
characteristics of these new products as well as the likely
impact on financial forecasts for the year depending on likely
delivery dates.
The Board also reviewed the strategic priorities placed on
key revenue streams now grouped under Private/Public and
Proximity/Exchange Cloud offerings. The view was formed that
historic reporting of retail and analytics revenue has been
superseded by these new strategic revenue segments. For
further information on this, refer to Note 3 Operating Segments
within the Notes to the Consolidated Financial Statements.
The Board reviewed the Group’s cash position and working
capital requirements during the year before proceeding with
the equity raise in April 2022. Quantum of raise and alternative
financing were all considered before the process was initiated
with the Board being kept informed throughout the process.
Given previous engagements and platforms with retail investors,
it was decided to extend the equity raise to include retail as well
as institutional investors.
Beeks Financial Cloud Group PLC
Strategic Report – principal risks and uncertainties
For the year ended 30 June 2022
21
Key Impact
Key Decision Made
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
ef
board members.
Key Stakeholder
Group’s impacted
Shareholders,
Employees,
Customers,
Suppliers,
Environment
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 Beeks’ 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 ISO 27001 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.
ncipal
Risks and Uncertainties on page 17 and the Corporate Governance
report on page 313, the Board has formally considered the risk
mitigating measures as a result of Brexit and global supply chain
issues through the use of alternative suppliers and 3rd party
carriers to minimise potential impact.
The strategic report on pages 10 to 21 has been approved by the Board and signed on its behalf by:
GORDON MCARTHUR
CEO
8 October 2022
22
Beeks Financial Cloud Group PLC
Board of Directors
For the year ended 30 June 2022
BOARD OF
FLIGHT DIRECTORS
mark cubitt
non-executive chairman
age 59
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.
gordon mcarthur
chief executive officer
age 46
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 Master’s in Business Information
Management from Glasgow
Caledonian University.
Beeks Financial Cloud Group PLC
Board of Directors
For the year ended 30 June 2022
23
Fraser McDonald
Chief Financial Officer
Age 48
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 54
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.
Kevin Covington
Non-Executive Director
Age 63
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.
24
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2022
directors’
report
RESULTS AND DIVIDENDS
The Group’s audited financial
statements for the year ended
30 June 2022 are set out on pages
63 to 111 The Group’s profit for
the year after tax amounted to
£0.68m. (2021: £1.6m). £nil dividends
were paid during the year (2021:
£nil) following consultation with
shareholders during FY21 to
change our dividend policy and
put dividends on hold and further
re-invest in the business.
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 10 to 21.
DIRECTORS AND
THEIR INTERESTS
The present membership of the
Board is set out on pages 223 and
23 and the Directors who served
during the year are listed on page
36. Details of Directors’ interests
in the Group’s shares are set out
below.
The Directors’ interest in the
Company’s £0.00125 ordinary share
capital are detailed in the table
below.
INSURANCE FOR DIRECTORS
AND OFFICERS
The Group 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
2022
Shares
2022
Options
Gordon McArthur
24,593,440
Mark Cubitt
William Meldrum
70,707
41,450
-
-
-
2021
Shares
26,290,410
70,707
23,500
2021
Options
-
-
-
Fraser McDonald
44,118
839,742
44,118
713,369
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2022
25
operations. The main risks arising
from the Group’s financial
instruments are credit 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.
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 Consolidated Statement of
Financial Position 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.
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 17 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 charged
at a fixed rate, other than the
term loan which is charged at the
base rate of interest plus margin.
Therefore, the Group has limited
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
10 to 21 including the potential
impact of the macro-economic
climate. 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 12 to 15.
Over the past two years since the
response to the Covid-19 pandemic
was initiated in the UK, there has
been a limited impact on Beeks’
trading as referenced in previous
reports. It appears clear that global
economies will experience some
negative factors in the short-term,
from intensifying inflationary
pressures on energy prices, supply
chain challenges combined
with geo-political uncertainties.
While Beeks will not be immune
to this economic backdrop, the
requirement for organisations to be
supported with their hybrid cloud
challenges will continue to grow for
the foreseeable future.
We take great comfort from the
resilience of our business model.
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
macro-economic climate may
create, particularly on the SME
segment of the market.
Note 15 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.
The Directors are of the opinion that
the Group can operate within its
current debt facilities and comply
with its banking covenants. Given
the accelerated investment profile
over the past period, the Group
requested waivers in December
2021 and March 2022 from their
cash covenants to support the
accelerated investment within the
business ahead of the equity raise
in April 2022.
At the end of the financial year, the
Group had net cash of £7.8m (2021:
Net debt £1.89m). 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.
26
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Directors’ Report
For the year ended 30 June 2022
27
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.
FRASER MCDONALD
Chief Financial Officer
8 October 2022
The Directors have considered
the Group budgets and the cash
flow forecasts to December 2023,
and associated risks, including the
potential impact of the current
economic climate.
We have run appropriate
scenarios applying reasonable
downside sensitivities and are
confident we have the resources
to meet our liabilities as they
fall due including the base case
assumption of our existing loan
facilities not being made available
at the end of current terms
(December 2022).
We have also run reverse stress
test scenarios in order to identify
circumstances where cash
reserves would be depleted. The
circumstances that would lead
into such scenarios (such as
moving from revenue growth
to revenue attrition) are not
considered plausible given the
historic track record and trading
prospects of
the Group.
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 Group
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 44.
STREAMLINED ENERGY AND
CARBON REPORTING
As the Company does not meet the
large sized threshold, the Directors
are not required to disclose the
reporting requirements of SECR.
DIRECTORS’ RESPONSIBILITIES
STATEMENT
Directors are responsible for
preparing the annual 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 UK-adopted international
accounting standards and have
elected to prepare the Parent
Company financial statements
in accordance with UK Generally
Accepted Accounting Practice
(UK Accounting Standards and
applicable law, including FRS 101
‘Reduced Disclosure Framework’).
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
UK-adopted international
accounting standards have been
followed for the Group financial
statements and whether applicable
UK Accounting Standards have
been followed for the parent
company financial statements,
subject to any material departures
disclosed and explained in the
financial statements; and
/ Prepare the financial statements
on the going concern basis unless it
is appropriate to presume that the
Company will continue in business.
The Directors are responsible for
keeping adequate accounting
records that are sufficient to
show and explain the Company’s
transactions and disclose with
reasonable accuracy at any
time the financial position of
the Company and enable them
to ensure that the financial
statements comply with the
Companies Act 2006. They are also
responsible for safeguarding the
assets of the Company and 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 UK governing the preparation
and dissemination of financial
statements may differ from
legislation in other jurisdictions.
28
Beeks Financial Cloud Group PLC
Report on Remuneration
For the year ended 30 June 2022
report on
remuneration
DIRECTORS’ REMUNERATION
REPORT FOR THE YEAR ENDED
30 JUNE 2022
On behalf of the Board, I am
pleased to present the Directors’
Remuneration Report for the year
ended 30 June 2022 which sets out
our Directors’ Remuneration policy
and provides details of amounts
earned by Directors in respect of
the year ended 30 June 2022.
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 2006,
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 Directors and is
chaired by Mark Cubitt.
REMUNERATION COMMITTEE
REPORT
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.
Beeks Financial Cloud Group PLC
Report on Remuneration
For the year ended 30 June 2022
29
Basic
salary
£’000
Benefits
In kind ^
£’000
Total
£’000
Pension
£’000
25
109
35
35
35
239
30
104
35
35
17
221
-
-
-
-
-
-
-
-
-
-
-
-
25
109
35
35
35
239
30
104
35
35
17
221
1
3
-
-
-
4
1
3
-
-
-
4
2022
Executive Directors
Gordon McArthur
Fraser McDonald
Non-executive Directors
Mark Cubitt
William Meldrum
Kevin Covington
Total
2021
Executive directors
Gordon McArthur
Fraser McDonald
Non-executive directors
Mark Cubitt
William Meldrum
Kevin Covington
Total
30
Beeks Financial Cloud Group PLC
Report on Remuneration
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
31
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 Directors.
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 21.
Share Options awarded to the
Director, Fraser McDonald are
shown below.
The aggregate amount of gains
realised by Directors, who served
during the year, on the exercise of
share options during the year was
£133,051 (2021: £43,180).
For the year ended 30 June 2022,
share options awards have been
proposed to the Remuneration
Committee as part of the LTIP.
These options will have a
three-year vesting period 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 and are expected
to be approved during October
2022.
DIRECTORS’ SHARE INTERESTS
The Directors’ shareholdings in
the Company are shown in the
Directors’ Report on page 24.
MARK CUBITT
Chairman of the Remuneration
Committee
8 October 2022
Director
Date
of Grant
Share
Options
Vesting
Date
Lapse
Date
Exercise
Price (£)
Fraser McDonald
17 Oct 19
538,922
17 Oct 22
17 Oct 29
0.00125
Fraser McDonald
19 Oct 20
105,820
19 Oct 23
19 Oct 29
0.00125
Fraser McDonald
26 Nov 21
195,000
26 Nov 24
26 Nov 31
0.00125
During the year ended 30 June 2022, share options exercised by the Director, Fraser McDonald are shown below:
Fraser McDonald
6 Sept 18
68,6271
6 Sep 21
6 Sep 28
0.00125
corporate
governance
CHAIRMAN’S INTRODUCTION
TO CORPORATE GOVERNANCE
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 Beeks’ stakeholders, including
shareholders, lenders, 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 Group
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 companies
across multiple asset classes.
Beeks’ strategy is to ensure
maximum security, optimise
performance and deliver
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 global
data centres with secure setup
/ 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
/ Proximity Cloud offering
fully-managed and configurable
compute, storage and analytics
rack built with low latency hardware
that allow capital markets and
financial services customers to run
compute, storage and analytics
on-premise
/ Exchange Cloud, an evolution
of Proximity Cloud that has been
explicitly designed for global
32
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
33
financial Exchanges and Electronic
Communication Networks (ECNs),
offering a secure, multi-client cloud
environment which they could offer
to their customers
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
and in turn delivers value to our
shareholders.
The Group’s strategy can be viewed
on page 9.
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 CEO
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 CEO 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
CEO 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.
During the year, as a result of
enquires and demand from private
shareholders, the Board, with
support from the NOMAD allowed
private shareholders to participate
in the equity raise via a third-party
provider. Historically equity raises
were only open to institutional
shareholders.
PRINCIPLE 3: TAKE INTO
ACCOUNT WIDER STAKEHOLDER
AND SOCIAL RESPONSIBILITIES
AND THEIR IMPLICATIONS FOR
LONG-TERM SUCCESS
In addition to its shareholders,
the Group believes its main
stakeholders are its employees
and clients. The Group 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 Group believes 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 Group’s culture. Staff
are also encouraged to develop
their skills and budget is always
identified for staff training and
development. The Group 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
ORGANISATION
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 CEO 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
More information on the Group’s
principal risks and internal control
procedures are set out on pages 16
to 21.
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.
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
2022, the PLC Board comprises
the independent Non-Executive
Chairman, the CEO, 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 41,450 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.
34
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
35
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 is
also currently non-executive
chairman of AIM listed Concurrent
Technologies plc and a non-
executive director of private
company, RHA Technologies Ltd
based in Glasgow. 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 2022.
The attendance of each director is
shown on page 36.
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 CEO’s
responsibility to ensure they are
delivered upon. To facilitate this, the
CEO 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 2022
the PLC board comprises the
Non-Executive Chairman, the CEO,
the CFO and the Non-Executive
Directors. Short biographies of the
Directors are given on pages 23
and 24. 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 45 to 46.
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.
The Audit Committee met three
times during the year and the
Nominations and Remuneration
Committee met once 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 2022.
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
22 and 23.
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 CEO’s role is critical in
developing and maintaining the
sustainability and effectiveness of
the Group. Specifically, the CEO’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
CEO 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 CEO 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
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’s
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; and
/ 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.
36
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
37
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 PROGRAME
The Board is scheduled to meet twelve
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 its agreed
Board meetings
Audit Committee
Remuneration
Committee
Possible
Attended
Possible
Attended
Possible
Attended
12
12
12
12
12
12
12
12
12
12
3
3
3
3
3
3
3
3
3
3
1
1
1
1
1
1
1
1
1
1
Executive Directors
Gordon McArthur
Fraser McDonald
Independent
Non-executive Directors
Mark Cubitt
William Meldrum
Kevin Covington
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.
During the financial year ended 30 June
2022, the business reviewed matters
including revenue recognition and
capitalisation of R&D activities. Similar
to the prior year, technical accounting
papers were prepared, reviewed and
assessed 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
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
CEO’s responsibility to ensure they
are delivered upon.
To facilitate this, the CEO 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.
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;
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 at the very core of
who we are, why we are successful
and why we continue to attract
some of the best talent around!
We are committed to providing a
unique, non-corporate environment
surrounded by smart interesting
people doing smart interesting work,
and have some fun in the process.
This applies to our teams working
in Glasgow, London, the US and our
remote workers around the world.
Positive Workplace Culture
The Beeks Group has had
something of a transformation
in the last year which has been
driven by our state of the art new
Headquarters based in Renfrew,
Glasgow. Coming out of lockdown,
we believed it was crucial to keep
the Beeks culture at the forefront of
who we are after being separated
for so long, and having so many new
faces join us during the pandemic.
With that we introduced a hybrid
working week and looked for ways
to encourage our people to want
to come into the office. These
included the introduction of several
employee benefits including the
Beeks fully equipped gym and
facilities to help promote employee
health and wellbeing.
Employee Benefits and Reward
As we continue to expand, so too
does our benefits and rewards
strategy. This year we have
made a number of significant
improvements which range from an
upgraded Group pension fund to
enhancing our private healthcare
offerings for all employees to
expand the level of cover as well as
including dental care.
38
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Corporate Governance
For the year ended 30 June 2022
39
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 2018 to encourage
employee share ownership after
admission to AIM, with applications
exceeding expectations. This
scheme also acts as a substantial
incentive for attracting potential
candidates.
Recruitment, Tenure and Vacancies
The Company had another busy
year increasing our headcount with
particular investment in our technical
teams including hiring two new
Network Engineer Graduates from
Glasgow Caledonian University and
ending the year with a headcount of
89 employees.
There has also been a focus on
supporting and encouraging
internal moves with various
internal promotions during the
year and increased training as
well as undertaking a Graduate
Apprenticeship Programmes with a
local university.
The targeted focus on increasing
engagement, benefits and rewards,
encouraging training, boosting
morale and being seen as an
employer of choice has gone
a long way to attracting and
retaining staff in an extremely
buoyant labour market seeing us
improve our YTD retention rate by
1% to 84%.
Diversity and Equal Opportunities
At the heart of the Company’s
approach to people is the provision
of an environment where everyone
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. We
have increased the gender split in
our organisation by 4% to 22% in the
last year with several initiatives to
attract women to the organisation
including a push to encourage
female graduates to join our
organisation.
Suppliers, customers & lenders
The Beeks Group believes strong
business relationships with
suppliers, lenders 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.
The CEO and CFO have regular
communication with the Group’s
lender, Barclays Bank PLC keeping
the bank informed of business
performance, strategy and
expected funding requirements.
Beeks recognise that a shared
commitment to the values of ESG
is compelling market players to
establish partnerships to deliver
workable and sustainable financial
systems with one example being
our partnership with trade comms
leaders IPC to deliver accessible,
cloud-based solutions that turbo-
charge market participants’
business. We are constantly seeking
infrastructure partners with high
ESG capability in line with our
customers’ requirements; and as
we collaborate with others our own
ESG preparedness expands and
benefits from shared approaches.
Environment
Beeks’ most recent dedicated
server hosting solution, Proximity
Cloud, features high density
compute racks accommodating up
to 80 servers within a data centre.
By fitting up to 8 times more servers
in a rack than other providers, we
help organisations reduce their
data centre footprint and achieve
natural efficiencies in power
consumption, cost and cooling.
Co-locating in data centres such as
one the ones owned by Equinix, Beeks
and our customers also benefit from
Equinix’ Corporate Sustainability
Programme, ensuring reduced
power consumption and heightened
energy efficiency for cooling and
lighting across the whole site.
Every ESG-sensitive operation would
favour monitoring, fine-tuning and
improving their existing infrastructure
over acquiring new kit. This is also
where Beeks’ technology steps in as
we offer cloud-based Analytics as a
Service enabling businesses to get
more granular insight into how their
networks are performing, and how to
optimise the existing stack.
As such, Beeks’ commercial model
allows firms to commit for a shorter
period of time than an on-prem
data centre would demand and
Beeks’ IaaS eliminates the need
for extra hardware; meaning less
capital spend, more sustainable
co-locations, and more rapid and
cost-effective expansion into global,
diverse and inclusive markets.
Local Community
We remain committed to hiring
locally and a large proportion of
our new headcount in the last
year have been within commuting
distance to our Glasgow office. We
have begun an extensive graduate
programme which will flourish in the
coming years as we have also had
several interns from Strathclyde
and Glasgow University supporting
our teams to support their studies.
We have increased our charitable
activities in the year, including
partnering with IPC to sponsor
a football team in Africa and
Scotland. Beeks and IPC are also
beginning an initiative to make
donations to local charities
following each new Equinix data
centre instance.
In addition, Beeks are proud
sponsors of two local sports teams.
By order of the Board.
MARK CUBITT
Chairman
8 October 2022
40
Beeks Financial Cloud Group PLC
Report of the Audit Committee
For the year ended 30 June 2022
report of the
audit committee
Beeks Financial Cloud Group PLC
Report of the Audit Committee
For the year ended 30 June 2022
41
COMMITTEE ACTIVITIES IN
THE FINANCIAL YEAR ENDING
30 JUNE 2022
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 36.
The Committee met three times in
relation to the financial year ended
30 June 2022, two of the meetings
were post year end, with the fourth
meeting to approve the 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;
and
/ Review the enhanced audit report.
Significant areas considered by the
Audit Committee in relation to the
2022 financial statements are set
out on page 37.
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
£121,025 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
8 October 2022
Areas of estimates
Matter Considered and Role of the Committee
Recoverability of Investment in VMX & Impairment of
Goodwill
Revenue recognition
Capitalisation and recoverability of intangibles
During the year ended 30 June 2022 the committee
considered the impairment assessment prepared
by management and critically assessed the inputs
and assumptions 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 in line with the
operating segments.
As part of this process, the Committee considered
the change in key operating segments in the year to
public/private cloud and Proximity/Exchange Cloud
in line with the strategic direction of the organisation,
and consideration was given to the reasonableness of
the impairment assessment of analytics goodwill now
integrated within the public/private cloud segment.
The committee considered the risk associated with
revenue recognition and considered new contracts
awarded during the year.
The committee considered management’s
assessment of revenue recognition in relation to
the newly launched Proximity Cloud and critically
assessed the principles, assumptions, judgements and
estimates applied by management to identify and
allocate amounts to each performance obligation.
As the evolvement and development of Proximity/
Exchange Cloud and analytics products continued
in the year to 30th June 2022, the committee
assessed the capitalisation and recoverability
of these intangibles in line with how the relevant
criteria have been met given these capitalised costs
are subsequent to the initial project having been
completed. The committee critically assessed the
inputs and resultant costs capitalised in line with the
relevant accounting standard.
42
Beeks Financial Cloud Group PLC
Independent Auditors’ Report
To the members of Beeks Financial Cloud Group PLC
independent
auditors’ report
To the members of Beeks Financial Cloud Group PLC
Beeks Financial Cloud Group PLC
Independent Auditors’ Report
To the members of Beeks Financial Cloud Group PLC
43
OPINION
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 2022,
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 Financial
Statements, including a summary of
significant accounting policies. The
financial reporting framework that
has been applied in their preparation
is applicable law and UK-adopted
international accounting standards.
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 2022 and of its profit for the
year then ended;
/ have been properly prepared
in accordance with UK-adopted
international accounting standards;
and
/ have been prepared in
accordance with the requirements
of 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
assessment of going concern
and supporting information which
covers the period to December
2023, including cash flow forecasts.
We evaluated how these forecasts
were compiled, and assessed
their reasonableness by validating
underlying information and
determining the mathematical
accuracy of the model used;
/ We performed a retrospective
review of management’s previous
forecasts by comparing those
forecasts to actual results in
the previous two financial years
to determine the accuracy of
management’s forecasting. We
also compared actual results
subsequent to the reporting date to
management’s forecasts;
/ We challenged management on
the key assumptions used within
the forecasts, being the revenue
and costs cash flows, testing their
reasonableness by corroborating
to supporting information as well
as considering any known post
balance sheet events;
/ We obtained forecast covenant
compliance workings for the going
concern assessment period and
reperformed the calculations to
corroborate their mathematical
accuracy; while noting that all
external debt facilities are due to
be paid during the going concern
assessment period;
/ We evaluated the reverse
stress test scenario prepared by
management and the likelihood
of this occurring, also considering
the mitigations available to
management should such a
scenario occur;
/ We reviewed the sensitivity
analysis performed by
management to assess whether
this appropriately reflected
plausible downside scenarios and
the impact they could have on the
Group’s financial position; and
/ We assessed the adequacy of
the disclosures in the financial
statements, comparing them to
management’s going concern
assessment.
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 financial
statements’ section of this report.
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
Directors’ use of the going
concern basis of accounting in
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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.
OUR APPROACH
TO THE AUDIT
OVERVIEW OF OUR AUDIT APPROACH
Overall materiality: £277,500, which
represents approximately 1.5% of
the Group’s revenue.
Key audit matters were
identified as:
/ Revenue recognition (same as
previous year);
/ Impairment of goodwill related
to the Velocimetrics Limited cash-
generating unit (CGU) (same as
previous year); and
/ Capitalisation of development
costs in intangible fixed assets
(new).
information of the Japanese
component, Beeks Financial Cloud
Co. Ltd. and on Velocimetrics Inc.
Key changes in the scope of the
audit from the prior year are in
relation to Beeks Financial Cloud
Group PLC (parent company)
where we performed specific audit
procedures compared to a full
scope audit in the prior year. All of
the procedures were performed
from the Group’s headquarters in
Glasgow, UK as that is where all of
the Group’s accounting records are
kept.
We performed full-scope audit
procedures on the financial
information of Beeks Financial
Cloud Limited, the largest UK
trading company within the Group.
In total our audit procedures
covered 100% of the Group’s
revenue and 86% of the Group’s
total assets.
We performed an audit of one or
more account balances, classes
of transactions or disclosures
on the financial information
of Velocimetrics Limited. We
performed specific audit
procedures on Beeks Financial
Cloud Group PLC (the parent
company) and Beeks FX VPS USA
Inc. We performed analytical
procedures on the financial
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Key Audit Matter
How our Scope Addressed the Matter
Key Audit Matter
How our Scope Addressed the Matter
Revenue recognition (Applicable to Beeks Financial
Cloud Limited and Velocimetrics Limited (“VMX”))
In responding to the key audit matter, we performed
the following audit procedures:
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 £11.6m last year to £18.3m for the year ended 30
June 2022.
We have pinpointed the significant risk of fraud in
revenue recognition to fall into three areas:
• manual adjustments to revenue that were outside
of the normal pattern of journal entries expected,
based on our understanding of the Group’s pattern
of revenue recognition;
• new contracts within VMX. Given the nature and
terms of these contracts, they are usually more
bespoke and involve elements of management
judgement related to identification of performance
obligations and allocation of the purchase price to
those obligations. These new contracts contributed
£0.38m of revenue in the year; and
• management judgements made in relation to a
new revenue stream in the year known as “Proximity
Cloud”. Significant judgement and estimation was
required by management in the application of IFRS
15 to this revenue stream, which contributed £2.28m
of revenue in the period.
New contracts within VMX
VMX enters into contracts that span a period of four
to five years. Determining the amount of revenue
to be recognised from such contracts requires
management estimation around the allocation of
revenue to individual performance obligations. While
the overall contracts are agreed on a commercial
basis, these may not reflect the standalone prices
of the performance obligations in line with the
requirements of IFRS 15. This estimate is susceptible
to potential error and management bias due to the
subjectivity involved and can have a significant impact
on the revenue recognised in the financial period.
• We utilised revenue data analytics on private
and wholesale revenue streams to identify any
anomalies, being transactions the software
identifies that fall outside of the standard posting
cycle. Any anomalies identified were followed
up with management and explanations were
corroborated to supporting evidence, however no
such items were noted;
•
In addition to this, a sample of invoices was
selected for testing to gain further evidence over
the occurrence of these sales;
• We selected all new contracts within VMX and
assessed whether revenue recognition was in
accordance with the Group’s accounting policies,
and assessed management’s assumptions and
estimates in the allocation of revenue across
performance obligations for reasonableness and
consistency;
• For the Proximity Cloud revenue stream we
assessed the technical paper provided by
management outlining the accounting policies
adopted for this stream, challenging management
where required to ensure all areas of IFRS 15
have been considered and corroborating any
assertions made within the paper to relevant
supporting documentation and discussions with
relevant individuals outside of the finance team.
This included inspecting relevant contracts and
obtaining a detailed technical understanding of the
operation of the products, for which assistance was
sought from our internal IT audit specialists; and
• We assessed whether the accounting policies
adopted by the Directors are in accordance
with the requirements of IFRS 15, and whether
management applied them consistently and
appropriately to revenue transactions.
Proximity Cloud contracts
The Group enters into Proximity Cloud contracts that
span a period of four to five years. Determining the
performance obligations along with the amount
of revenue to be allocated to these performance
obligations requires management to make key
judgements and estimates. The most significant
of these judgements is the recognition of the main
performance obligation at a point in time rather than
over time, with the key estimate related to the costs
expected to be incurred for future maintenance and
upgrades when calculating the cost plus mark-up
approach. These areas are susceptible to error and
management bias given their subjectivity and can
have a significant impact on the revenue recognised
in the financial period.
Relevant disclosures in the Annual Report and
Accounts 2022
•
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: Page 7: Section172 report,
Performance of the Group including financial
performance section
Report of the Audit Committee, Page 45:
Significant areas of estimates considered by the
Audit Committee
•
•
•
Our results
Overall, our audit testing did not identify evidence
of material misstatement in respect of Group
revenue recognition.
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Key Audit Matter
How our Scope Addressed the Matter
Key Audit Matter
How our Scope Addressed the Matter
Our results
Based on our audit work, we have not identified
evidence of material misstatement in respect of
impairment of goodwill in the Velocimetrics CGU.
Impairment of Goodwill in Velocimetrics cash
generating unit (“CGU”)
In responding to the key audit matter, we performed
the following audit procedures:
Relevant disclosures in the Annual Report and
Accounts 2022
We identified the carrying value of goodwill
specifically in relation to the Velocimetrics CGU as
one of the significant assessed risks of material
misstatement due to error.
In the prior year, due to the performance of this CGU
falling below expectations, an impairment charge of
£0.1m was recognised. The remaining carrying value
of this Goodwill is £0.9m (2021: £0.9m).
Goodwill is allocated by the Group to individual
CGUs on the basis of the Group’s operations as
disclosed in the segmental analysis, and as the board
reviews results on this segmental level, the Group
assesses impairment of goodwill on an equivalent
segmental basis. 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 discounted cash flow model
can significantly impact the results of the impairment
review.
During the year, the Directors reassessed their
operating segments, which resulted in this element
of goodwill being reallocated to the new Public/
Private cloud segment, based on the current reporting
structure of the Group. This assessment is highly
judgemental and could be subject to management
bias.
We identified significant management judgements in
the following areas:
• Re-assessment of segments and the impact of this
on allocated goodwill;
• The allocation of assets and corporate assets to
each CGU;
• The cash flow forecasts, particularly revenue
growth; and
• The discount rate applied to those cash flows.
• We obtained management’s technical paper
• 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: Page 45, Areas
of estimates.
related to the change in segments identified within
the year, assessing whether this was determined
in accordance with relevant accounting standards
(IFRS 8 ‘Operating Segments’) and corroborated
key assumptions to supporting evidence such as
internal board packs to evidence the way the Board
look at the business;
• We obtained management’s assessment of the
allocation of cash flows and assets, including
corporate assets, to the relevant CGU, and
assessed it for consistency and reasonableness;
• We obtained the impairment model prepared by
management and challenged key assumptions
such as revenue growth based on our knowledge
of the business, and other sources such as third-
party industry reports;
• We considered the historic accuracy of
management’s forecasting to inform certain
sensitivities to be tested by the audit team;
• We assessed the cash flow forecasts for
consistency with the board-approved budget used
by the Directors in their going concern assessment;
• Costs and the allocation of sufficient corporate
assets were considered and challenges made to
management with regards to the reasonableness
of overheads incorporated;
• Assessed the discount rate in comparison to similar
discount rates within the business in previous years,
and this rate’s sensitivity to reasonable changes;
• Sensitivities were performed on the cash flows to
bring together all evidence to identify any 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, and the rationale for the change in
composition of CGUs.
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Key Audit Matter
How Our Scope Addressed the Matter
Key Audit Matter
How Our Scope Addressed the Matter
Our results
Overall, our audit testing did not identify any
evidence of material misstatement in respect of the
Group’s capitalisation of development costs.
Relevant disclosures in the Annual Report and
Accounts 2022
• 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, Capitalised development costs.
• Financial statements: Note 10 – Intangible assets; and
• Report of the Audit Committee: Areas of estimates.
Capitalisation of development costs in intangible
fixed assets
In responding to the key audit matter, we performed
the following audit procedures:
We identified that the capitalisation of development
costs, specifically related to subsequent expenditure
on additional phases of already existing assets as
one of the significant assessed risks of material
misstatement due to error.
• Obtained a breakdown of the development costs
incurred in the current period and management’s
technical paper setting out their rationale for
the capitalisation of such costs with reference to
applicable accounting standards.
We are aware that development costs have been
capitalised relating to subsequent expenditure
which involves more complex judgements to
differentiate between what is maintenance of the
existing asset and what is an improvement that
is eligible for capitalisation per IAS 38 ‘Intangible
Assets’.
We identified that £2.59m of development costs
were capitalised in the year, with £2.44m related
to subsequent expenditure on updated versions of
assets which were already being amortised.
IAS 38 sets out the criteria for recognising and
measuring intangible assets and requires
disclosures about them. The process for assessing
whether development costs incurred are
capitalised when all the relevant conditions have
been met can be highly judgemental.
We have identified significant management
judgements in whether to capitalise these costs.
• We reviewed management’s assessment setting
out the relevant projects for which costs have been
capitalised, and assessed whether these have
been accounted for in line with IAS 38, specifically
on how the relevant criteria have been met,
including where the capitalised costs relate to
newer versions of an already completed asset;
• We selected a sample of capitalised costs during
the period, agreeing each item to supporting
documentation, such as timesheet and payroll
records, discussions with individual employees and
third-party invoices. This was to obtain evidence
that the costs represented a valid transaction and
that the associated amounts were appropriately
capitalised per the requirements of IAS 38;
We challenged management as to the key
differences between the initial version of an asset,
and the more up to date version, to assess whether
subsequent expenditure was maintenance in
nature or whether the costs related to substantially
improving the original asset through additional
functionality or features; and
• We assessed management’s determination
of the useful estimated lives of the assets
through discussions with relevant personnel and
comparison with similar companies. We also
assessed the point at which they became “in use”
by reference to when this was communicated
externally, through market announcements or
customer correspondence.
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53
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:
OVERALL MATERIALITY
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance
for potential uncorrected misstatements
Materiality measure
Group
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
£277,500, which represents approximately 1.5% of the Group’s revenue.
Significant
judgements
made by auditor
in determining
materiality
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 by increasing its investment in its people, product and
network to capture more customers in its growing markets.
Materiality for the current year is higher than the level that we determined for the year
ended 30 June 2021 to reflect an increase in revenue across the Group as a whole.
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
performance
materiality
Specific materiality
£187,312, which is approximately 67.5% of financial statement materiality.
In determining performance materiality, we made the following significant judgements:
We have determined 67.5% of materiality as performance materiality across the Group.
This was considered appropriate as a result of the volume and individual amounts of
audit adjustments in the prior period.
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 transactions with directors.
Communication of
misstatements to the
audit committee
We determine a threshold for reporting unadjusted differences to the audit committee.
Threshold for
communication
£13,900 and misstatements below that threshold that, in our view, warrant reporting on
qualitative grounds.
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 consider size, risk
profile, changes in the business
environment and other factors
when assessing the level of
work to be performed on each
component; and
/ We obtained an understanding
of the component-level controls
of the Group, 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, one was
determined to be significant to
the Group: Beeks Financial Cloud
Limited. Full scope audit
procedures were completed
on this component.
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 and total
assets (excluding balances
which are eliminated on
consolidation).
TYPE OF WORK TO BE PERFORMED ON
FINANCIAL INFORMATION OF PARENT
AND OTHER COMPONENTS
(including how it addressed the key
audit matters)
/ Audit of the financial information
of the component using
component materiality (full-scope
audit) for Beeks Financial Cloud
Limited;
/ Audit of one or more account
balances, classes of transactions
or disclosures of the component
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.
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(specific-scope audit) for
Velocimetrics Limited;
/ Specific audit procedures on
Beeks Financial Cloud Group PLC
and Beeks FX VPS USA Inc.;
/ Analytical procedures at Group
level (analytical procedures) for
Beeks Financial Cloud Co. Ltd and
Velocimetrics Inc.; and
/ We identified revenue recognition,
impairment of goodwill in relation
to VMX and capitalisation of
development costs as key audit
matters and the procedures
performed in respect of those areas
has been included in the key audit
matters section of our report.
PERFORMANCE OF OUR AUDIT
/ In total, our full scope and specific-
scope audit procedures covered 100%
of the Group’s total revenue, and 86%
of the Group’s total assets; and
/ The audit was performed by a
combination of on site and remote
procedures.
COMMUNICATIONS WITH
COMPONENT AUDITORS
/ No component auditors were
utilised throughout this audit; all
work was performed by the Group
engagement team.
CHANGES IN APPROACH FROM
PREVIOUS PERIOD
/ Specific audit procedures
were performed for the parent
company for the purpose of the
Group opinion, to obtain sufficient
coverage in areas which were not
deemed to be of increased levels
of risk in the Group therefore not
being considered significant
components, which was a change
from the prior period in which a full
scope audit was performed.
OTHER INFORMATION
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.
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55
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 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 and the part of the
Directors’ remuneration report to
be audited 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 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.
OTHER MATTER
We have reported separately on
the parent company financial
statements of Beeks Financial
Cloud Group PLC for the year
ended 30 June 2022. 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.
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 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: UK-adopted
international accounting standards,
the Companies Act 2006, the
AIM Rules for Companies, the
Quoted Companies Alliance (QCA)
Corporate Governance Code
and the relevant tax compliance
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/ 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.
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 ANDERSEN
Senior Statutory Auditor
For and on behalf of Grant Thornton
UK LLP
Statutory Auditor,
Chartered Accountants
Glasgow, 8 October 2022
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regulations in the jurisdictions in
which the Group operates.;
/ 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. 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;
or error. The risk of not detecting
a material misstatement due to
fraud is higher than the risk of
not detecting one resulting from
error and detecting irregularities
that result from fraud is inherently
more difficult than detecting those
that result from error, as fraud
may involve collusion, deliberate
concealment, forgery or intentional
misrepresentations. Also, the
further removed non-compliance
with laws and regulations is
from events and transactions
reflected in the financial
statements, the less likely we
would become aware of it;
/ 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. The procedures
included:
- Evaluation of the design
effectiveness of controls that
management has in place to
prevent and detect fraud;
- Journal entry testing, with a
focus on manual journals with
an impact on revenue outside
of expectation, and journals
processed by users where such
entries were considered higher
risk;
- Challenging assumptions
and judgements made by
management in areas of
estimation; and
- Assessing the extent of
compliance with the relevant
laws and regulations as part
of our procedures on legal
expenditure.
/ These audit procedures were
designed to provide reasonable
assurance that the financial
statements were free from fraud
/ We completed audit procedures
to conclude on the compliance of
disclosures in the annual report
and financial statements with
applicable financial reporting
requirements;
/ 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;
- knowledge of the industry in
which the Group operates; and
- understanding the legal and
regulatory requirements specific
to the Group;
/ Our communications 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. This is also reported as
a key audit matter in the relevant
section of our report where the
matter is explained in more detail;
58
Beeks Financial Cloud Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Consolidated Statement of Comprehensive Income
For the year ended 30 June 2022
59
consolidated statement of
comprehensive income
The following income statement should be read in conjunction with the accompanying notes.
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
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
11
10
10
10
4
21
4
6
5
9
24
24
2022
£’000
18,289
512
2021
£’000
11,615
309
(10,862)
(6,591)
7,939
5,333
(7,554)
(5,783)
385
(450)
6,811
3,213
802
726
-
-
1,661
24
4,452
2,020
806
231
994
140
546
165
(385)
(450)
-
21
(340)
66
760
826
5
831
1,989
5
(289)
1,255
349
1,604
(157)
1,447
pence
pence
1.43
1.42
3.07
3.07
60
Beeks Financial Cloud Group PLC
Consolidated Statement of Financial Position
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Consolidated Statement of Financial Position
For the year ended 30 June 2022
61
Note
2022
£’000
2021
£’000
consolidated statement
of financial position
Non-current assets
Intangible assets
Property, plant and equipment
Deferred tax
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax
Total non-current liabilities
Current liabilities
Trade and other payables
Lease liabilities
Borrowings
Total current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share premium
Reserves
Retained earnings
Total equity
10
11
12
14
13
15
17
17
12
18
18
17
20
22
22
6,698
16,270
4,201
27,169
5,600
1,818
10,160
17,578
6,008
10,390
896
17,294
2,210
-
3,372
5,582
44,747
22,876
1,320
2,303
2,968
6,591
5,139
1,280
978
7,397
896
2,210
617
3,723
4,143
656
589
5,388
13,988
9,111
30,759
13,765
82
23,775
2,657
4,245
30,759
70
9,452
1,261
2,982
13,765
The following statement of financial position should be read in conjunction with the accompanying notes.
These financial statements were
approved by the Board of Directors
on 8 October 2022 and were signed
on its behalf by:
Gordon McArthur,
Chief Executive Officer,
Beeks Financial Cloud Group Plc,
Company number: SC521839
62
Beeks Financial Cloud Group PLC
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
63
consolidated statement
of changes in equity
The following statement of changes in equity should be read in conjunction with the accompanying notes.
Issued
capital
Foreign
currency
reserve
Merger
reserve
Other
reserve
Share
based
payments
Share
premium
Reserve
Retained
earnings
Total
equity
£’000
£’000
£’000
£’000
£’000
£’000
£’000
£’000
As at 1 July 2020
64
145
705
(315)
374
4,309
1,434
6,716
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
-
-
-
-
6
-
-
-
6
-
(157)
(157)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
547
(38)
-
-
-
-
-
5,143
-
-
-
1,604
1,604
-
(157)
1,604
(1447)
86
86
-
-
5,149
547
38
-
(180)
(180)
509
5,143
(56)
5,602
Balance at 30 June 2021
70
(12)
705
(315)
883
9,452
2,982
13,765
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
Total transaction with owners
Balance at
30 June 2022
-
-
-
-
12
-
-
12
-
5
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,323
1,661
(270)
-
-
826
826
-
826
167
-
-
5
831
167
14,335
1,661
270
-
1,391
14,323
437
16,163
82
(7)
705
(315)
2,274
23,775
4,245
30,759
64
Beeks Financial Cloud Group PLC
Consolidated Cash Flow Statement
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Consolidated Cash Flow Statement
For the year ended 30 June 2022
65
consolidated
cash flow statement
Note
2022
£’000
2021
£’000
Cash flows from operating activities
Profit before taxation for the year
Adjustments for:
Depreciation and amortisation
10/11
Foreign exchange
Interest received
Gain on disposal of property, plant and equipment
Gain on revaluation of contingent consideration
Impairment
Bank charges
Loan interest
Share options
6
5
5
21
66
1,255
4,741
(66)
(21)
(24)
-
-
95
245
1,661
3,059
(6)
(5)
-
(1,989)
994
-
190
546
Operating cash flows
6,697
4,044
Increase in receivables
Increase in inventory
Increase in payables
14
13
17/18
(3,014)
(988)
1.765
(874)
-
2,336
Operational cash flows after movement in working capital
4,460
5,506
Corporation tax received/(paid)
Net cash generated from operating activities
44
4,504
(33)
5,473
The above cash flow statement should be read in conjunction with the accompanying notes.
66
Beeks Financial Cloud Group PLC
Consolidated Cash Flow Statement
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
67
Cash flows from financing activities
Repayment of existing loan borrowings
Lease liabilities
Interest on lease liabilities
Deferred consideration
Issue of loans
Bank charges
Loan interest
Dividends paid
Proceeds from the issue of share capital
Interest received
(2,900)
(3,736)
(936)
(131)
-
3,670
(95)
(242)
-
14,989
21
(485)
(99)
(460)
3,050
-
(190)
(180)
5,198
5
19
17
5
5
20
6
Net cash generated from financing activities
14,376
3,103
Net increase in cash and cash equivalents
6,788
1,939
Cash and cash equivalents at beginning of year
3,372
1,433
Cash and cash equivalents at end of year
15
10,160
3,372
notes to the consolidated
financial statements
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
Riverside Building, 2 Kings Inch Way,
Renfrew, Renfrewshire, PA4 8YU.
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
UK-adopted International Accounting
Standards and 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 following
accounting policies.
The measurement bases and
principal 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 (including the June 2020
Amendments to IFRS 17)
– Insurance Contracts;
/ Amendments to IFRS 10 and IAS
28 – Sale or Contribution of Assets
between an Investor and
its Associate or Joint Venture;
/ Amendments to IAS 1
– Classification of Liabilities
as Current or Non-current;
/ Amendments to IFRS 3
– Reference to the Conceptual
Framework;
/ Amendments to IAS 16
– Property, Plant and Equipment
– Proceeds before Intended Use;
/ Amendments to IAS 37
– Onerous Contracts
– Cost of Fulfilling a Contract;
/ Annual Improvements to IFRS
Standards 2018-2020 Cycle
– Amendments to IFRS 1
First-time Adoption of International
Financial Reporting Standards,
IFRS 9 Financial Instruments and
IFRS 16 Leases;
/ Amendments to IAS 1 and IFRS
Practice Statement 2
– Disclosure of Accounting Policies;
/ Amendments to IAS 8
– Definition of Accounting
Estimates; and
/ Amendments to IAS 12
– Deferred Tax related to Assets
and Liabilities arising from a single
transaction
None of these have been adopted
early and the Directors do not
expect that the adoption of the
Standards listed above will have
a material impact on the financial
statements of the Group in future
periods.
68
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
69
Adoption of new and revised
Standards - amendments to IFRS
that are mandatorily effective for
the current year
There are no new accounting policies
applied in the year ended 30 June
2022 which have had a material
effect on these accounts. In addition,
the Directors do not consider that
the adoption of new and revised
standards and interpretations issued
by the IASB in 2021 has had any
material impact on the financial
statements of the Group.
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 10 to 21.
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; and
/ The finance facilities available to
the Group, including the availability
of any short-term funding required.
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 12 to 15.
Over the past two years since the
response to the Covid-19 pandemic
was initiated in the UK, there has
been a limited impact on Beeks’
trading as referenced in previous
reports. It appears clear that global
economies will experience some
negative factors in the short-
term, from intensifying inflationary
pressures on energy prices, supply
chain challenges combined with
geo-political uncertainties.
While Beeks will not be immune
to this economic backdrop, the
requirement for organisations to be
supported with their hybrid cloud
challenges will continue to grow for
the foreseeable future.
We take great comfort from the
resilience of our business model.
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
macro-economic environment
may create, particularly on the SME
segment of the market. Note 16 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.
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 £7.86m (2021: Net
cash £1.9m) 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 to December 2023,
and associated risks, including the
potential impact of the current
economic climate. We have run
appropriate scenarios applying
reasonable downside sensitivities
and are confident we have the
resources to meet our liabilities
as they fall due including the base
case assumption of our existing
loan facilities not being made
available at the end of current
terms (December 2022).
We have also run reverse stress
test scenarios in order to identify
circumstances where cash
reserves would be depleted. The
circumstances that would lead into
these are not considered plausible
given the historic track record and
trading prospects of the Group.
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 2022.
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 are
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 profit or loss. 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.
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
4. Allocating the transaction price
to the performance conditions
5. Recognising revenue when/
as performance obligation(s) are
satisfied.
70
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
71
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
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 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.
Where an agreement includes
a royalty fee as a result of future
sales by a customer to third parties
and there is a minimum amount
guaranteed, this is recognised at
point in time 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; and
/ 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.
Revenue in respect of installation
or training, as part of the set-up,
is recognised when delivery and
installation of the equipment is
completed on a point in time basis.
Hardware and software sales
Revenue from the supply of
hardware is recognised when
control of the goods has
transferred. For hardware, this
occurs upon delivery of the item
to the customer. For software,
control is deemed to pass on
provision of the licence key to the
customer being the point in time
the customer has the right to use
the software.
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. Refer
to Note 2 for more detail on these
considerations.
Professional and consultancy
services
Revenue from professional
and 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.
Proximity Cloud Services
During the year, the Group
launched a new product Proximity
Cloud. Proximity Cloud is a fully-
managed and configurable
compute, storage and analytics
rack built with industry-leading low
latency hardware that allow capital
markets and financial services
customers to run compute, storage
and analytics on-premise.
Revenue from the sale of Proximity
Cloud contracts has been assessed
under IFRS 15 and using the five step
process, the following performance
obligations have been identified:
/ Delivery and installation of the
hardware, and provision of the
software licence;
/ Delivery of maintenance and
technical support over the contract;
and
/ Delivery of unspecified upgrades
and future software releases.
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
The delivery and installation of
the hardware, and provision of
the software licence are highly
interrelated and considered to be
one performance obligation. This
is recognised on a point in time
basis when the control of the goods
have been transferred, being when
delivery of the item is completed and
the right to use the software is granted.
The maintenance and technical
support over the contract, as well
as the delivery of the unspecified
upgrades and future software
releases are recognised evenly on an
over time basis over the period of the
contract. The performance obligation
for both is considered to be that of
standing ready to provide technical
product support and unspecified
updates, optional upgrades and
enhancements on a when-and-if-
available basis over the period of
service being rendered.
The Proximity Cloud contracts
include multiple deliverables.
The Group applies judgement to
determine the transaction price
to be allocated between a) the
delivery and installation of the
hardware and provision of the
software licence, recognised on
a point in time basis and b) the
stand ready services (support,
maintenance, unspecified
upgrades) recognised over time.
The Group applies the expected
cost plus margin approach to
the stand ready services and
the delivery and installation of
the hardware and provision of
software licence is estimated using
the residual approach, given this
is a new product to market and
standalone selling prices are not
directly observable. Further detail
is provided within key judgement
and estimations on page 91.
Where such contracts include a
financing component, the Group
also adjusts the transaction price
to reflect the time value of money.
Finance income is recognised as
other income in the statement of
the comprehensive income.
Revenue recognised over time and
at a point in time is disclosed at
Note 3 of the notes to the financial
statements
GOVERNMENT GRANT INCOME
Grants from Government agencies
are recognised where there
is reasonable assurance that
the grant 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.
RENTAL INCOME
Rental income from property
leased out under operating leases
is recognised in the statement of
the comprehensive income as
other income as these services are
rendered, as the tenant occupies
the space.
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
part of the financing component
within some Proximity Cloud
contracts. 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 flows
through the expected life of the
financial asset to the net carrying
amount of the financial asset.
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
72
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Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
73
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.
Financial assets and liabilities are
recognised initially at fair value,
and subsequently measured at
amortised cost, 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 the 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 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 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 ‘administrative expenses’
in the Consolidated Statement of
Comprehensive Income.
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 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.
contribution superannuation plans
are expensed in the period in which
they are incurred.
A corresponding increase to the
share based payment reserve in
equity is recognised.
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.
For Proximity Cloud, given these
contracts obtain a significant
financing component, the Group
has chosen to measure any loss
allowance at an amount equal to
lifetime expected credit losses.
FINANCIAL LIABILITIES
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
provides benefits based on the
value of contributions made.
Contributions to the defined
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.
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 retained earnings
reserve. Amounts held in the share
based payments reserve are
transferred to Retained Earnings on
exercise of the related options.
The Group has no legal or constructive
obligation to repurchase or settle
the options in cash.
Where the Group entity incurs a
share based payment charge
relating to subsidiary employees,
the charge is treated as a capital
contribution in the subsidiary and
an increase in investment in the
Group entity.
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 the financial
period in which they are incurred.
74
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Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
75
During the year the Group
purchased a new headquarters.
The property is valued at cost at
date of acquisition.
Depreciation on IT infrastructure
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;
/ Freehold property over 50 years;
/ Computer Equipment over 5 years
and over the length of lease; and
/ Office equipment and fixtures and
fittings over 5-20 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.
Inventories
Inventories are stated at the lower
of cost and net realisable value.
Cost includes all expenses directly
attributable to bringing the asset
to its current condition. Costs of
ordinarily interchangeable items are
assigned using the first in, first out
cost formula. Net realisable value
is the estimated selling price in the
ordinary course of business less any
directly attributable selling expenses.
At each reporting date, an
assessment is made for
impairment. Any excess of the
carrying amount of inventories
over its estimated selling prices
less costs to complete and sell is
recognised as an impairment loss
in the income statement. Reversals
of impairment losses are also
recognised in profit or loss.
Leases
A lease is defined as a contract,
or part of a contract, that conveys
the right to use 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 Consolidated
Statement of Financial Position. 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 Consolidated
Statement of Financial Position 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. Where non-contractual
payment discounts are subsequently
received from suppliers, these are
treated as a discharge of the lease
liability with a credit recognised in the
income statement.
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 state,
right-of-use assets have been
included in right of use assets and
lease liabilities have been included
in lease liabilities due within one
year and after more than one year.
During the year, the Group disposed
of a lease for the old headquarters.
The right-of-use asset and lease
liability were de-recognised of at
the date of conclusion of the lease
agreement and a corresponding
gain was recognised.
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 Consolidated Statement of
Comprehensive Income 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 as well as the
purchase of Velocimetrics Ltd.
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. 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 life
is deemed to be five years for
all developments capitalised.
Amortisation is charged at the
point of a major product release
or upgrade in which that asset is
made available for sale or release
to the customer. Charges are
recognised through cost of sales
in the Consolidated Statement
of Comprehensive Income 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
76
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Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
77
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.
recorded at the proceeds received
net of direct issue costs.
The share capital account
represents the amount subscribed
for shares at nominal value. Details
on this can be found at Note 22.
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.
A previously recognised impairment
loss is reversed only if there is an
indication that an impairment
loss recognised in prior periods
for an asset or cash-generating
unit may no longer exist or may
have decreased. If that is the case,
the carrying amount of the asset
is increased to its recoverable
amount. That increased amount
cannot exceed the carrying
amount that would be determined,
net of depreciation, had no
impairment loss been recognised
for the asset or cost-generating
unit in prior years. Such a reversal
is recognised in profit or loss unless
the asset is carried at a revalued
amount, in which case the reversal
is treated as a revaluation increase.
EQUITY
Ordinary shares are classified as
equity. An equity instrument is
any contract that evidences a
residual interest in the assets of
Beeks Financial Cloud Group plc
after deducting all of its liabilities.
Equity instruments issued by Beeks
Financial Cloud Group plc are
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.
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.
Trade receivables and trade
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
net 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.
ALTERNATIVE PERFORMANCE
MEASURES
In addition to measuring financial
performance of the Group based
on statutory profit measures, the
Group also measures performance
based on underlying EBITDA,
underlying profit before tax and
underlying diluted earnings
per share.
The alternative performance
measures provide management’s
view of the Group’s financial
performance and are not
necessarily comparable with
other entities. These alternative
measures exclude significant costs
(such as Share Based Payments)
and as such, should not be
regarded as a complete picture of
the Group’s financial performance.
These measures should not
be viewed in isolation, but as
supplementary information to the
rest of the financial statements.
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 Group considers underlying
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. Reference is also
made to the right of use asset
implication on depreciation in the
year as a result of the Group taking
additional space in data centres.
Underlying profit before tax
Underlying profit before tax
is defined as profit before tax
adjusted for the following:
/ Amortisation charges on acquired
intangible assets;
/ Exchange variances on statement
of final position gains and losses;
/ 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.
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.
Net cash/Net Debt
Net cash/net debt is a financial
liquidity metric that measures
the ability of a business to pay
all its debts if they were to be
called immediately. This is defined
as current borrowing liabilities
(excluding lease liabilities) + non-
current borrowing liabilities – cash
and cash equivalents.
Operational costs
Operational costs are defined
as operating expenses less
exceptional costs, share based
payments and non-recurring costs.
These costs are adjusted to reflect
the true business operational
trading costs.
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
Profit after Tax
Management believes that
profitability measures after tax
are not key measures that would
specifically require alternative
performance measures as they do
not constitute trading results. Tax
legislation is out with the control
of the Group. Whilst the Group
currently benefits from some tax
relief such as R&D tax credits, the
Group does not rely on these in
terms of trading results or provide
consideration of the tax impact
of adjusted items for alternative
performance measures. Further
information on tax impact on
profitability can be found on Note 9.
Annualised Committed Monthly
Recurring Revenue
Annualised Committed Monthly
Recurring Revenue (ACMRR) is
committed recurring revenue.
Management believes that ACMRR
is a key measure as it provides
investors with the total contracted
committed revenue of the Group.
2. CRITICAL ACCOUNTING
JUDGEMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
KEY JUDGEMENTS
The key judgments in preparation
of the financial statements are
below:
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. The Group also applied
several areas of judgement within
the revenue recognition of Proximity
Cloud contracts as outlined below.
Full details of the Group’s revenue
recognition policy can be found on
page 73.
Principal v agent
Management is required to exercise
its judgement in the classification of
revenue recognition on either
78
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Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
79
an agent or principal basis.
Management have considered the
primary indicators used to assess
the agent/principal classification
and has concluded that the Group
acts as a principal in each sales
transaction. This judgement has
been reached on the basis that
the Group holds the inventory risk,
has control over the pricing over a
particular service, takes the credit
risk, and bears the responsibility
to service the promise of the
agreements. If management
concluded that the Group acted
as agent, then this would result in
revenue being recognised on a net
basis where margin earned would
be recognised as revenue with nil
costs being recognised.
Proximity Cloud
The Proximity Cloud contracts
include multiple deliverables. The
Group applies judgement to identify
the performance obligations which
ultimately feeds into the estimation
of the transaction price to be
allocated between them. The Group
has identified the performance
obligations as:
/ the delivery and installation of
the hardware and provision of the
software licence (the appliance),
recognised on a point in time basis;
and
/ the stand ready services
(support, maintenance, unspecified
upgrades) recognised over time.
Management considers that
the delivery and installation of
the hardware and provision of
the software licence are highly
interrelated as the Group could
not fulfil its promise to deliver the
software licence without delivery
and installation of the hardware.
As such, the Group consider this
to be one performance obligation,
recognised at a point in time basis,
once the delivery of the appliance
to the customer is complete and
the relevant licence key has been
provided.
Management considers that the
stand ready services do not affect
the customers’ ability to use and
benefit from the software licence
and the software can function on
its own without this support. As
such, the provision of stand ready
services is considered to be a
separate performance obligation,
recognised over time as the
services are rendered.
Please refer to Key estimations
on the next page for further
information.
Software Licences
Management have applied
judgement in determining the
performance obligations of the
delivery of software licenses and
maintenances. Management
have concluded that delivery
of the software license key is
one performance obligation,
recognised upfront at a point in
time when control of the goods
has transferred, being the delivery
of the software licence keys to the
customer. The ongoing support and
maintenance service is deemed a
separate performance obligation
and is recognised evenly over the
period as the service is rendered.
Operating Segments / Cash
Generating Units
The Group applies judgement
over the operating segments
to be reported in the financial
statements. The key concept
applied is to provide information
used by management that will
allow users to understand the
entity’s main activities, where
these are located and how these
are performing. In doing so,
management exercise judgement
over who the chief operating
decision makers (CODMs) are,
consider the discrete financial
information available and
determine what information is
regularly reviewed by the CODMs.
During the year ended 30 June
2022, following management
judgement, the Group was re-
organised into two main business
segments for revenue purposes -
public/private cloud and Proximity
Cloud/Exchange Cloud. This was
considered appropriate as the
historic operating segments (Retail
and Analytics) are no longer seen
by the Group as individual revenue
streams. The historic Retail part
of the business is not part of the
growth strategy and is considered
as part of a wider public cloud
offering and the Group now views
Analytics as part both the public/
private cloud offering and as
part of the wider Exchange Cloud
opportunity.
Also given the heavily integrated
nature of the business, the CGU
associated with analytics is now
classed at operating segment
level and as a result of this
change, goodwill is allocated
and tested against these new
segments. Refer to Note 10 for
further information on this.
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, and the inclusion of
non-contractual discounts on lease
payments.
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.
Where non-contractual payment
discounts are subsequently received
from suppliers, management use
judgement to determine that these
should be treated as a discharge
of the lease liability with a credit
recognised in profit or loss. If these
non-contractual discounts were
included as a deduction from the
lease payments there would be
a material reduction in the lease
liability and right of use asset
recognised on inception of the lease.
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.
Any non-development costs are
recognised in the statement of
comprehensive income. See note 10
for further information.
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.
Software licences
and maintenance
Management have used observable
evidence from maintenance
support time, pricing models and
industry practice comparisons to
estimate the percentage of split
between licence and maintenance
for the sale of software licences that
have an attached maintenance
performance obligation.
Proximity Cloud
As noted above, the Proximity
Cloud contracts include multiple
deliverables, and the Group
has identified the performance
obligations as:
/ the delivery and installation of
the hardware and provision of the
software licence, recognised on a
point in time basis; and
/ the stand ready services (support,
maintenance, unspecified upgrades)
recognised over time.
As a new product to market,
standalone selling prices are not
directly observable. As such, they
are estimated using the methods
outlined by IFRS 15, principally the
expected cost plus margin and
residual approach.
In order to allocate transaction
price, Management have used
all observable evidence that is
available to them. First of all, an
expected cost plus margin
approach was applied to the stand
ready services. This is based on the
estimated amount of time and cost
involved to provide the services
based on recent evidence and
similar services for other contracts.
The delivery and installation of the
hardware and provision of
the software licence is then
estimated using the residual
approach by reference to the total
transaction price less the transaction
price allocated to the stand ready
services.
Within this assessment, key
assumptions include:
/ Time and costs allocated to
support proximity contracts
/ Margins to be applied to expected
costs
Sensitivity analysis has also been
performed on the assumptions that
apply to transaction price including
finance charges, margins to be
applied and level of support (time
and subsequent cost).
Revenue recognised in CY
£2.2m
Change in estimate of time and costs allocated to
support proximity contracts
Change in estimate
(%)
Range in revenue
recognition (£)
(+/-) 20%
(+/-) £0.1m
are no longer reviewed in isolation by
the chief operating decision makers
and instead considered under the
wider public/private cloud segment.
In the current year there are two
customers that account for more
than 10% of Group revenue (nil in prior
year). The total revenue for these two
customers amounts to £6.92m, with
the largest customer accounting for
£4.58m. £1.37m of this revenue has
occurred within the Proximity Cloud
operating segment, with the other
£5.55m of revenue included within
public/private cloud revenue.
Performance is assessed by a focus
on the change in revenue across
public/private cloud and new
sales relating to Proximity Cloud/
Exchange Cloud. 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.
Revenues by operating segment,
further disaggregated are as
follows:
80
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Nevertheless, as a new product to
market, management recognise that
these assumptions and estimates
may be subject to change as these
contracts mature. The contracts
are monitored as they progress
and estimates of revenue are taken
into account for future contracts
if circumstances change and as
more observable evidence becomes
available.
Where such contracts include a
financing component, the Group
also adjusts the transaction price to
reflect the time value of money using
at a rate applicable at the point of
inception of the contract.
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 for details of the relevant
estimates and sensitivities in the
current year.
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 key estimate on the vesting
conditions that apply to share
options relates to the achievement
of annual objectives. 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 2022,
the Group was reorganised from
three operating segments, being
institutional, retail and analytics into
two main segments as a result of the
strategic direction of the Group. The
two new segments are public/private
cloud and Proximity Cloud/Exchange
Cloud. Retail and analytics segments
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
81
Year ended 30/06/22
£’000
Year ended 30/06/21
£’000
Public/Private
Cloud
Proximity Cloud
Total
Public/Private
Cloud
Proximity Cloud
Total
Over time
Infrastructure/
software as a
service
Maintenance
Proximity Cloud
Professional
services
13,057
-
13,057
9,781
518
57
234 -
518
57
234
685
187
Over time total
13,809
57
13,866
10,653
Point in time
Proximity Cloud
-
2,222
2,222
1,601
520
80
4,423
-
337
556
69
962
18,289
11,615
Hardware/Software
resale
Software licences
Set up fees
Point in time total
Total revenue
1,601
520
80
2,201
16,010
-
-
-
2,222
2,279
Revenues by geographic location are as follows:
United Kingdom
Europe
United States
Rest of World
Total
-
-
-
-
-
-
-
-
-
-
2022
£’000
5,849
2,508
5,556
4,376
18,289
9,781
685
187
10,653
-
337
556
69
962
11,615
2021
£’000
3,214
2,282
2,003
4,116
11,615
During the year £419k (2021: £309k) was recognised in other income for grant income received from Scottish
Enterprise and £93k (2021: £nil) was recognised as rental income.
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
United States – Property, plant and equipment
Total Non-Current Assets
2022
£’000
2021
£’000
8,132
1,717
5,330
1,368
2,509
3,912
3,980
727
4,640
1,368
3,878
1,805
22,968
16,398
82
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
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 10. 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.
Longer term contracts continue to
be paid on a monthly basis.
6. FINANCE INCOME
Financing charge on Proximity Cloud contracts
Exchange gain on intercompany retranslation
Total finance income
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
83
2022
£’000
2021
£’000
21
-
21
-
5
5
4. OPERATING PROFIT
Staff costs
Depreciation
Depreciation right-of-use assets
Amortisation of acquired intangibles
Amortisation of other intangibles
Other cost of sales1
Impairment of intangible
Foreign exchange losses
Note
7
11
11
10
10
10
Non-recurring acquisition integration costs
Share based payments
Other non-recurring costs – refinancing
Other non-recurring costs – head office relocation
Other non-recurring costs
1Included 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.
Auditors remuneration
Audit
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
Total
5. FINANCE COSTS
Bank charges
Loans and leasing
Total finance costs
2022
£’000
5,637
2,189
1,024
802
726
6,452
-
(98)
-
1,661
-
24
-
2021
£’000
4,408
1,396
626
806
231
3,319
994
47
140
546
37
25
103
2022
£’000
2021
£’000
63
59
4
126
2022
£’000
95
245
340
37
28
5
70
2021
£’000
92
197
289
7. 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
2022
£’000
32
57
89
2022
£’000
4,925
591
121
5,637
1,661
2021
£’000
25
48
73
2021
£’000
3,870
453
86
4,409
546
Note
21
Wages and salaries directly attributable to the development of products are capitalised in intangible assets (Note 10).
8. DIRECTORS EMOLUMENTS
Aggregate remuneration in respect of qualifying services
Aggregate amounts of contributions to pension
schemes in respect of qualifying services
Other benefits in kind
Gain on exercise of options
Total Directors’ emoluments
Highest paid director - aggregate remuneration (excluding share based payments)
2022
£’000
239
4
2
133
378
109
2021
£’000
221
4
2
43
270
104
There are two directors (2020: two) who are accruing retirement benefits in respect of qualifying services.
84
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
9. TAXATION EXPENSE
Current tax
UK tax
Foreign tax on overseas companies
Total current tax
Origination and reversal of temporary differences
Prior year deferred tax adjustments
Total deferred tax
2022
£’000
2021
£’000
-
33
33
(435)
(358)
(793)
(32)
28
(4)
(272)
(73)
(73)
Tax on profit on ordinary activities
(760)
(349)
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:
Profit before tax
Profit on ordinary activities multiplied by
the standard rate of corporation
tax in the UK of 19% (2020: 19%)
Effects of:
Impact of super deduction
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
2022
£’000
%ETR
movement
%ETR
movement
2021
£’000
1,255
19%
238
19%
(257.81%)
(7.57%)
(212.12%)
(81)
(95)
(95)
(6,45%)
(7.57%)
(7.57%)
66
13
(170)
243
(140)
-
(173)
(262.12%)
-
(358)
(175)
-
-
0.00%
(542.42%)
(265.15%)
-
-
9
(32)
(73)
58
4
-
0.72%
(2.55%)
(5.82%)
4.62%
0.32%
-
(760)
(1,151.51%)
(349)
(27.81%)
The effective tax rate (ETR) for the year was –1,151.51% (2021: -27.81%).
10. INTANGIBLE ASSETS
Intangible assets
Cost
Balance at 30 June 2020
Additions
Grant funding received
Foreign exchange movements
As at 1 July 2021
Additions
Grant Funding received
Currency translation differences
As at 30 June 2022
Accumulated Amortisation
As at 30 June 2020
Charge for the year
Impairment
Foreign exchange movements
As at 30 June 2022
Charge for the year
Foreign exchange movements
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
85
Acquired
Customer
Lists
£’000
Development
Costs
£’000
Trade
Name
£’000
Goodwill
£’000
Total
£’000
2,533
-
-
(150)
2,383
-
-
147
2,530
(552)
(277)
-
56
(773)
(287)
(86)
2,573
1,977
(560)
-
3,990
2,590
(432)
-
6,148
(331)
(733)
-
-
(1,064)
(1,214)
-
137
2,365
-
-
-
137
-
-
-
28
-
(57)
2,336
-
-
-
137
2,336
(7)
(27)
-
-
(34)
(27)
-
(61)
23
-
-
-
(968)
-
-
7,608
2,005
(560)
(207)
8,846
2,590
(432)
147
8,846
(867)
(1,037)
(994)
59
(2,839)
(1,528)
(86)
NBV as at 30th June 2022
1,384
3,870
76
1,368
6,698
Development costs have been recognised in accordance with IAS 38 in relation to the network automation
project and development of the Proximity Cloud (and two instances below) product, including analytics and
its integration into this product. Development costs in relation to Proximity Cloud have a remaining useful of 4
years.
In addition, there are £1.7m of development costs relating to the development of Proximity Cloud V2/Exchange
Cloud which will be amortised for five years commencing July 2023. All costs incurred during the preliminary
stages of development projects are charged to profit or loss.
-
(377)
(30.04%)
NBV as at 1st July 2021
1,611
2,926
103
1,368
6,008
As at 30 June 2022
(1,146)
(2,278)
(968)
(4,453)
86
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
87
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 segmental analysis. As the Board reviews results on a segmental level, the Group
monitors goodwill and annually assesses it on the same basis for impairment.
The carrying value of goodwill by each CGU is as follows:
11. NON-CURRENT ASSETS - PROPERTY, PLANT AND EQUIPMENT
Computer
equipment
Office
equipment
and fixtures
and fittings
Right of use
The carrying value of goodwill by each CGU is as follows:
Private/public cloud
Proximity/Exchange Cloud
Total goodwill
2022
£’000
1,368
-
1,368
In the previous year, the £1,368k
goodwill was allocated against
the prior year operating segments.
Following the changes to operating
segments (as detailed within the
Segment Information at note 3,
goodwill has been allocated to
the public/private segment and
management have reviewed
and confirmed that there is no
indication of impairment. There is
no requirement for an impairment
review of the Proximity/Exchange
Cloud segment in the current
year as there are no associated
indefinite life intangibles.
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.
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 allocated to Public/Private
Cloud. 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 (13.5%) and
cost base assumptions that included
contingency and investment to
deliver against the weighted sales
pipeline. Conservative mid-term
and long term growth rates were
estimated, which were less than
both the Group’s internal business
plan and external market mid-term
forecasts.
Based on an analysis of the
impairment calculation’s
sensitivities to changes in
key parameters (growth rate,
discount rate and pre-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 2022, no change to the
impairment provision against
the carrying value of intangibles
was required. The revaluation of
these from prior year represents
exchange adjustment only.
Cost
As at 30 June 2020
Exchange adjustments
Additions
As at 1 July 2021
Stock transfers
Disposals
Exchange adjustments
As at 30 June 2022
Depreciation
As at 30 June 2020
Charge for the year
Exchange adjustments
As at 1 July 2021
Charge for the year
Exchange adjustments
Depreciation on disposals
£’000
7,590
(12)
4,733
12,311
(830)
-
7
16,543
(3,274)
(1,381)
8
(4,647)
(2,134)
3
-
£’000
58
-
13
71
-
(54)
-
180
(23)
(15)
-
(38)
(28)
-
18
£’000
2,993
-
915
3,908
-
(485)
-
5,420
(589)
(626)
-
(1,215)
(1,024)
-
185
Freehold
property
£’000
-
-
-
-
-
-
-
Total
£’000
10,641
(12)
5,661
16,290
(830)
(539)
7
3,034
25,177
-
-
-
-
(27)
-
-
(3,886)
(2,022)
8
(5,900)
(3,213)
3
203
As at 30 June 2022
(6,778)
(48)
(2,054)
(27)
(8,907)
N.B.V. 30 June 2021
N.B.V. 30 June 2022
7,664
9,765
33
132
2,693
-
10,390
3,366
3,007
16,270
Of the total additions in the year of
£10.2m, £2m relates to right-of-use
assets. £3m additions have also
been recognised in relation to the
purchase and refurbishment of the
head office in Glasgow.
Disposals of £0.5m within
right-of-use assets relate to the
termination of the previous head
office lease in Glasgow. A
right-of-use liability of £0.4m
was also disposed of as part of
this lease assignation. £0.06m
proceeds were received in
relation to the disposal. All
revenue generating depreciation
charges are included within cost
of sales. Non-revenue generating
depreciation charges are included
with admin costs.
88
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
12. NON-CURRENT ASSETS - DEFERRED TAX
13. CURRENT ASSETS - INVENTORIES
Deferred tax is recognised at the
standard UK corporation tax of 25%
for fixed assets in the UK (2021: 25%).
Deferred tax in the US is recognised
at an average rate of 21% for 2022
(2021: 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
the year and tax losses carried
forward in both UK and overseas
companies. Deferred tax assets
and liabilities on statement of
financial position 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. The movement
indeferred tax assets and liabilities
during the year is as follows:
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
Other movements
Closing balance
The movement in deferred tax assets and liabilities during the year is as follows:
2022
£’000
2021
£’000
(2,968)
4,201
1,233
279
793
167
(6)
1,233
(617)
896
279
(151)
345
85
-
279
Tax
losses
carried
forward
Accelerated
tax
depreciation
and other
movement
Share
Options
£’000
£’000
-
138
85
223
281
167
671
325
305
-
630
2,747
-
3,377
£’000
55
(12)
-
43
110
-
153
Total
deferred
tax asset
carried
forward
£’000
380
431
85
896
3,138
167
4,201
Total
deferred tax
(liability)
carried
forward
£’000
(531)
(86)
-
(617)
(2,351)
-
(2,968)
At 1 July 2020
Charge to income
Charge to equity
As at 30 June 2021
Charge to income
Charge to equity
As at 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
89
2022
£’000
1,566
252
1,818
2021
£’000
-
-
-
Materials
Consumables
With the launch of Proximity Cloud
in the current year, the Group now
holds hardware which can be used
in the sale of Proximity or Exchange
Cloud contracts. Subsequent to
the year end, if they are not used
as part of a Proximity or Exchange
Cloud sale, they will be reclassified
as PPE at the point in which they
are delivered into one of the
Group’s data centres. During the
period, £0.99m of inventories were
recognised as an expense in the
period.
14. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES
Current assets - Trade and other receivables
Trade receivable
Less: allowance for impairment of receivables
Prepayments
Contract asset
Other taxation
Other receivables
2022
£’000
2021
£’000
1,036
(80)
956
2,083
2,329
107
125
1,032
(19)
1,013
723
191
241
42
5,600
2,210
The contract assets primarily relate
to our rights to a consideration for
goods or services delivered but
not invoiced at the reporting date.
The contract assets are transferred
to receivables when invoiced.
Contract liabilities relate to deferred
revenue. At the end of each
reporting period, these positions
are netted on a contract basis
and presented as either an asset
or a liability in the Consolidated
Statement of Financial Position.
Consequently, a contract balance
can change between periods from
a net contract asset balance to a
net contract liability balance in the
statement of financial position.
Significant changes in the contract
assets and the contract liability
balances during the period are as
follows:
Balance at 1 July 2021
Transferred to receivables from contract assets from the beginning of the period
Revenues recognised during the period to be invoiced
Revenue recognition that was included in the contract liability balance at the beginning of the period
Remaining performance obligations for which considerations have been received
Balance at 30 June 2022
Contract
assets
£’000
Contract
liabilities
£’000
191
(191)
2,329
-
-
2,329
982
-
-
(979)
958
961
90
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
91
The credit risk relating to trade receivables is analysed as follows:
The aging of trade receivables at the reporting date is 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
Closing balance
2022
£’000
1,036
(80)
956
19
91
(30)
80
2021
£’000
1,032
(19)
1,013
20
46
(47)
19
Not yet due
Past due 1 to 3 months
Past due 3 to 6 months
15. CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash and bank balances
2022
£’000
923
68
45
1,036
2022
£’000
10,160
10,160
2021
£’000
706
307
19
1,032
2021
£’000
3,372
3,372
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 2022 is £74k (2021 - £8k).
The increase in expected credit loss
allowance is in line with the more
challenging wider macroeconomic
environment.
The following table details the risk
profile of trade receivables based
on the Group’s provision matrix.
As the Group’s historical credit
loss experience does not show
significantly different loss patterns
for different customer segments,
the provision for loss allowance
based on past due status is not
further distinguished between
the Group’s different customer
segments.
2022
ECL rate
2022 ECL
allowance
2021
ECL rate
2021 ECL
allowance
Risk profiling
category (ageing)
Current
0-30 days
30-60 days
60-90 days
Over 90 days
Total
£’000
%
£’000
923
20
8
40
45
1,036
-1.50%
-2.00%
-15.00%
-45.00%
-90.00%
14
0
1
18
41
74
£’000
706
90
36
181
19
1,032
%
£’000
-0.25%
-0.25%
-0.25%
-2.00%
-8.00%
2
0
0
4
2
8
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.
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.
16. 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 cost
with the exception of contingent
consideration with is measured at
Fair Value through profit or loss.
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:
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 £111,000 (30 June
2021 £172,000). A 10% movement in
the Euro rate would have an impact
on the Group’s profit and equity by
approximately £14,300 (£49,000 at
30 June 2021).
The Group had potential exchange
rate exposure within USD trade
payable balances of £1,512,444 at
30 June 2022 (£1,210,143 at 30 June
2021) and potential exchange rate
exposure within EUR trade payables
balances of £26,500 (£18,100 at 30
92
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
93
June 2021). The Group had potential
exchange rate exposure within
USD trade receivables of £403,700
(£182,000 at 30 June 2021) and
potential exchange rate exposure
within EUR trade receivables of
£9,300 (£7,900 at 30 June 2021).
Cash flow and interest rate risk
The Group has relatively limited
exposure to interest rate risk in
respect of cash balances and
long-term borrowings held with
banks and other highly rated
counterparties. Loans are at
variable rates of interest based on
the Bank of England’s base rate
therefore the Group is subject to
changes in interest rates. Given
the relatively low level of debt the
Board do not consider this to be a
significant risk. At a total debt level
of £2.3m, a 1% increase in interest
rates will give rise to an additional
annual interest rate charge of
£23,000.
As disclosed within the going
concern note, the Group requested
waivers in December 21 and March
22 from their cash covenants to
support the accelerated investment
within the business ahead of
the equity raise in April 2022.
Judgement is required in assessing
what items are allowable for the
adjusted components.
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. Given the higher cash
balances following the equity raise
during April the Group is currently
looking at putting surplus cash 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.
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:
As at 30 June 2022, the Group’s financial liabilities (excluding leases disclosed in Note 17) have contractual
maturities (including interest payments where applicable) as summarised below:
Cash and cash equivalents
Trade receivables
Contract asset
Other receivables
2022
£’000
10,160
1,036
2,329
104
13,629
2021
£’000
3,372
1,032
191
43
4,638
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 £956,000 (2021:
£1,013,000) 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 statement of financial position
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 management’s view of
expected future events and market
conditions.
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 its current debt
facilities and complies both with
its gross borrowings to adjusted
EBITDA and minimum adjusted cash
banking covenants.
Liquidity risk
Trade and other payables
Borrowings
Current
Non-Current
Within
1 month
£’000
4,409
-
1–3
months
£’000
683
211
3–12
months
£’000
49
767
1–5
years
£’000
-
1,320
After
5 years
£’000
-
-
The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of
the liabilities at the reporting date.
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
2022
£’000
30,759
10,160
40,919
30,759
2,297
3,583
36,639
1.12
2021
£’000
13,765
3,372
17,137
13,765
1,485
2,866
18,116
0.95
94
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
95
17. NON-CURRENT LIABILITIES - BORROWINGS AND OTHER FINANCIAL LIABILITIES
18. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Other loans
Lease liabilities
Other loans
Under one year
Between one to five years
2022
£’000
1,320
2,303
3,623
978
1,320
2,298
2021
£’000
896
2,210
3,106
589
896
1,485
Trade payables
Other loans
Lease liability
Accruals
Contract liabilities
Other taxation and social security
Other payables
VAT
Deferred consideration
Contingent consideration
2022
£’000
3,378
978
1,280
575
961
192
33
-
-
-
2021
£’000
2,538
589
656
472
982
128
23
-
-
-
7,397
5,388
The bank loan derives from a £1.8m
term loan facility taken out from
Barclays Bank in December 2020 and
a £1.47m property loan facility taken out
from Barclays Bank in December 2021.
The property loan is repayable in 8
quarterly instalments of £0.03m which
commenced in December 2021 along
with a bullet balance repayable at
Maturity in September 2023.
credit facility balance of £2.2m was
unutilised as at 30 June 2022.
Barclays have been given security
for the facility of the UK assets of the
Group and an unlimited guarantee
is afforded to Barclays.
The term loan is repayable in 8
quarterly instalments of £0.15m which
commenced in March 2021 along
with a bullet balance repayable at
Maturity in December 2022.
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 available revolving
Costs of £21,500 have been
amortised over the life of the term
loan and aged in line with the
capital repayments.
Changes in liabilities ariding from financing activities:
Balance at 1 July 2021
Lease liabilities additions IFRS 16
Proceeds from new loans
Loan repayments
Lease repayments
Balance at 30 June 2022
Lease
liabilities
£’000
2,866
1,492
-
-
(1,031)
3,327
Loans
£’000
1,485
-
3,670
(2,858)
-
2,297
Total
£’000
4,351
1,492
3,670
(2,858)
(1,031)
5,624
19. LEASES
The Group leases assets including the space in data centres in order to provide infrastructure services to its customers.
During the year, the Group disposed of a lease used for its old headquarters. Information about leases for which the
Group is a lessee is presented below:
RIGHT-OF-USE ASSETS
Balance at 1 July 2021
Additions
Disposals
Depreciation
Balance at 30 June 2022
Leasehold
Property and
improvement
£’000
2,653
1,998
(300)
(1,024)
3,327
The right-of-use assets in relation to leasehold property are disclosed as PPE (note 10).
96
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
97
LEASE LIABILITIES
Maturity analysis:
Within one year
Within two to five years
Add: unearned interest
Total lease liabilities
Analysed as:
Non-current
Current
Note
2022
£’000
2021
£’000
(1,407)
(2,408)
232
(806)
(2,269)
209
(3,583)
(2,866)
18
19
(2,303)
(1,280)
(3,583)
(2,210)
(656)
(2,866)
The Group does not face a significant
liquidity risk with regard to its lease
liabilities. The interest expense on
lease liabilities amounted to £131k for
the year ended 30 June 2022 (2021:
£99k). 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 2022, 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
Amounts recognised in the consolidated statement of cash flows:
Amounts payable under leases:
Short-term and low value lease expense
Repayment of lease liabilities within cash flows from financing activities
20. EQUITY - ISSUED CAPITAL
Ordinary shares - fully paid
65,406,764
56,051,149
2022
shares
2021
shares
2022
£’000
82
Movements in ordinary share capital
Details
Balance
Date
Shares
Issue price
30 June 2018
50,043,100
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
EMI Share options exercised
9 November 2020
New share issue
New share issue
Balance
15 December 2020
26 April 2021
30 June 2021
56,051,149
EMI Share options exercised
15 November 2021
New share issue
9 November 2020
264,705
9,090,910
Balance
30 June 2022
65,406,764
677,700
32,200
111,800
363,458
44,118
430,946
4,347,827
£.00125
£.00125
£.00125
£.00125
£.00125
£.00125
£.00125
£.00125
£.00125
2021
£’000
70
£’000
62
1
-
1
-
-
1
5
70
-
12
82
2022
£’000
10
1,024
131
2021
£’000
25
619
99
2022
£’000
2020
£’000
25
1,067
25
558
ORDINARY SHARES
During the year 9,090,910 ordinary shares were issued for a total consideration of £15.00m resulting in a premium over
the nominal value of £11,364. Transaction costs of £0.67m were netted off against the premium.
During the year, 264,705 share options were exercised. The share price at the exercise date was £1.94. The Director,
W Meldrum, purchased 17,950 shares during the year. The share price at the purchase date
was £1.94.
21. 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
2022
£’000
2021
£’000
2,916,973
1,889,662
(264,705)
2,273,400
(44,118)
1,071,429
4,925,668
2,916,973
-
-
98
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
99
The Group granted a total of 2,273,400 share options to members of its management team on 26th November 2021.
These share options outstanding at the end of the year have the following expiry dates and exercise prices:
Grant 2
Grant 3
Grant 4A
Grant 4B
Grant 4C
Total
Shares
1,580,838
1,071,429
1,012,500
630,450
630,450
4,925,668
Date of
grant
Exercise
price
Vesting
date
17-10-2019
09-10-2020
26-11-2021
26-11-2021
26-11-2021
£0.00125
£0.00125
£0.00125
£0.00125
£0.00125
17-10-2022
09-10-2023
26-11-2024
26-11-2024
26-11-2024
22. 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.
The merger reserve initially arose
on the share for share exchange
reflecting the difference between the
nominal value of the share capital
in Beeks Financial Cloud Group
PLC and the value of the Group
being acquired, Beeks Financial
Cloud Limited. The merger reserve
then increased upon acquisition of
Velocimetrics Ltd in FY 2018, reflecting
the difference between the nominal
value of the share capital issued from
Beeks Financial Cloud Group PLC and
the value of the shares issued to the
owners of Velocimetrics Ltd.
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. Any transaction
costs associated with the issuing
of shares are deducted from share
premium, net of any related income
tax benefits.
23. RELATED PARTY TRANSACTIONS
Retained earnings represents
retained profits and losses.
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.
These share options vest under
challenging performance conditions
based on underlying profitability
growth during the periods.
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:
PARENT ENTITY
Beeks Financial Cloud Group PLC is the parent entity.
SUBSIDIARIES
Interests in subsidiaries are set out in note 25.
TRANSACTIONS WITH RELATED PARTIES
The following transactions occurred with related parties:
Grant 1
Grant 2
Grant 3
Grant 4A
Grant 4B
Grant 4C
Total
Shares
264,706
1,580,838
1,071,429
1,012,500
630,450
630,450
5,190,373
Withdrawals from the director, Gordon McArthur
2022
£’000
41
2021
£’000
4
Share price (£)
Volatility
Annual risk
free rate
Exercise strike
price (£)
Time to
maturity (yrs)
1.02
5%
4%
0.84
0.945
1.575
1.575
1.575
5%
4%
5%
4%
5%
4%
5%
4%
5%
4%
0.00125
0.00125
0.00125
0.00125
0.00125
0.00125
3
3
3
3
3
2
The total expense recognised from
share based payments transactions
on the Group’s profit for the year was
£1,661,273 (2021: £546,363).
These share options vest on the
achievement of challenging
growth targets. It is management’s
intention that the Group 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.
Beeks Financial Cloud Limited
previously 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 £nil (2021: £123,480) to Ofelia
Algos Limited and the amounts due
to Beeks Financial Cloud Limited at
the year-end were £nil (2021: £20,682).
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
Social security costs
Other pension costs
Other benefits in kind
Share based payments
2022
£’000
2021
£’000
239
27
4
2
316
221
24
4
2
141
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
101
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.
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.
Riverside Building, 2 Kings Inch
Way, Renfrew, Renfrewshire,
PA4 8YU
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 2022, until they are satisfied in full.
26. ULTIMATE CONTROLLING PARTY
The Directors have assessed that there is no ultimate controlling party.
100
Beeks Financial Cloud Group PLC
Notes to the Consolidated Financial Statements
For the year ended 30 June 2022
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
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
Exchange gains/losses on statement of financial position retranslation
Tax effect
Underlying profit for the year
2022
£’000
826
Pence
1.43
1.42
2021
£’000
1,604
Pence
3.07
3.07
Number
Number
57,885,241
52,276,498
96,454
15,351
57,981,696
52,291,848
2022
£’000
66
-
1,661
802
28
-
(419)
-
(81)
542
2,599
2021
£’000
1,255
140
546
806
165
994
(309)
(1,989)
-
34
1,642
Weighted average number of shares in issue - basic
Weighted average number of shares in issue - diluted
57,885,241
61,985,547
52,276,498
54,915,279
Underlying earnings per share - basic
Underlying earnings per share - diluted
4.49
4.19
3.14
2.99
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 Group will meet the challenging growth targets
therefore, based on management expectations, the share options are included in the calculation of underlying diluted EPS.
102
Beeks Financial Cloud Group PLC
Independent Auditors’ Report
To the members of Beeks Financial Cloud PLC
independent
auditors’ report
To the members of Beeks Financial Cloud PLC
OPINION
Our opinion of the parent financial
statements is unmodified
We have audited the parent
company financial statements of
Beeks Financial Cloud Group PLC
for the year ending 30 June 2022,
which comprise the Company
statement of Financial Position, the
Company Changes in Equity and
Notes to the Financial Statements
including a summary of significant
accounting policies. The financial
reporting framework that has been
applied in their preparation is
applicable law and UK Accounting
Standards, including Financial
Reporting Standard 101: Reduced
Disclosure Framework (UK 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 2022;
/ have been properly prepared
in accordance with UK 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 included:
/ Obtaining management’s
assessment of going concern
and supporting information which
covers the period to December
2023, including cash flow forecasts.
We evaluated how these forecasts
were compiled, and assessed
their reasonableness by validating
underlying information and
determining the mathematical
accuracy of the model used;
/ We performed a retrospective
review of management’s previous
forecasts by comparing those
forecasts to actual results in the
previous two financial years to
determine the accuracy of
Beeks Financial Cloud Group PLC
Independent Auditors’ Report
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103
management’s forecasting. We
also compared actual results
subsequent to the parent company
reporting date to management’s
forecasts;
/ We challenged management on
the key assumptions used within
the forecasts, being the revenue
and costs cash flows, testing their
reasonableness by corroborating
to supporting information as well
as considering any known post
balance sheet events;
/ We obtained forecast covenant
compliance workings for the going
concern assessment period and
reperformed the calculations to
corroborate their mathematical
accuracy; while considering that all
external debts are currently due to
be paid during the going concern
assessment period;
/ We evaluated the reverse
stress test scenario prepared by
management and the likelihood
of this occurring , also considering
the mitigations available to
management should such a
scenario occur;
/ we reviewed the sensitivity
analyses performed by
management to assess whether
they appropriately reflected
plausible downside scenarios and
the impact they could have on the
parent company’s financial position
in the future;
/ We assessed the adequacy of
the disclosures in the financial
statements, comparing them to
management’s going concern
assessment.
In our evaluation of the Directors’
conclusions, we considered the
inherent risks associated with
the parent company’s business
model including effects arising
macro-economic uncertainties
such as Brexit and Covid-19, 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 financial
statements’ section of this report.
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report
To the members of Beeks Financial Cloud PLC
105
OUR APPROACH
TO THE AUDIT
OVERVIEW OF OUR AUDIT APPROACH
Overall materiality: £277,500, which
represents approximately 1% of
the parent company total assets,
capped at Group materiality.
The only key audit matter identified
was the risk of impairment of
the company’s investment in
Velocimetrics Limited. This was also
the only key audit in the prior year.
We performed a full scope audit
of the financial statements of the
parent company.
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.
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107
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
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:
Key Audit Matter
How Our Scope Addressed the Matter
Materiality Measure
Parent Company
Impairment of investment in Velocimetrics Limited
(“VMX”)
We identified the potential impairment of the
investment in VMX as one of the most significant
assessed risks of material misstatement due to error.
In the prior year, an impairment of the investment in
VMX was recognised, resulting in an investment in
shares in group undertakings with a carrying value
of £4.045m. There is a risk that these values are now
further impaired.
The process for assessing whether an impairment
exists under International Accounting Standard (IAS)
36 ‘Impairment of Assets’ is complex and requires
calculation of 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. It is highly
judgemental and subject to management bias. The
selection of certain inputs into the discounted cash
flow model can significantly impact the result of the
impairment review.
The key inputs impacting the model
are considered to be:
• Revenue growth, which is driven by annual
recurring revenue and the pipeline of future sales
opportunities; and
•
The discount rate applied to the forecast cash
flows.
In responding to the key audit matter, we performed
the following audit procedures:
• We obtained management’s impairment
assessment, including their discounted cash flow
model and associated sensitivities and challenged
the key assumptions within this such as revenue
growth based on our knowledge of the business,
and other sources such as third-party industry
reports;
• We assessed the cash flow forecasts for
consistency with the board-approved budget used
by the Directors in their going concern assessment;
• We assessed the reasonableness of the discount
rate applied by management, taking into account
the prior year rate as well as any known changes to
macro-economic conditions or risks specific to the
investment that might impact this rate;
• Costs were considered and challenges made to
management with regards to the reasonableness
of overheads incorporated, with these being
reduced from previous years with a change in
focus of the overall group;
• Assessment of the sensitivities performed by
management to assess whether there was
evidence of 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.
Relevant disclosures in the Annual Report and
Accounts 2022
• Financial statements: Note 2, Investments and
Note 2 – Critical accounting judgements and key
sources of estimation uncertainty, Investments
Our results
Our audit testing did not identify evidence that any
further material impairment charge was required
against the carrying value of the investments in VMX.
Materiality for financial statements as a whole
Materiality threshold
Significant judgements made by auditor in
determining materiality
Performance materiality used to drive the extent of
our testing
Performance materiality threshold
Significant judgements made by auditor in
determining performance materiality
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.
£277,500 which represents approximately 1% of the
parent company’s total assets, capped at group
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 2021
to reflect the increase in total assets, particularly in
intercompany receivables and plant, property and
equipment as a result of the purchase of the new
Head Office.
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.
£187,312 which is approximately 67.5% of financial
statement materiality.
In determining performance materiality, we made the
following significant judgements:
We have determined 67.5% of materiality as performance
materiality across the Group. This was considered
appropriate as a result of the volume and individual
amounts of audit adjustments in the prior period.
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Materiality was determined as follows:
Materiality Measure
Parent Company
Specific materiality
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.
We determined a lower level of specific materiality for
the following areas:
• Directors’ remuneration and transactions with
directors.
Communication of misstatements to the audit
committee
We determine a threshold for reporting unadjusted
differences to the audit committee.
Threshold for communication
Threshold for communication £13,900 and
misstatements below that threshold that, in our view,
warrant reporting on qualitative grounds.
OVERALL MATERIALITY
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance
for potential uncorrected misstatements.
Beeks Financial Cloud Group PLC
Independent Auditors’ Report
To the members of Beeks Financial Cloud PLC
109
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 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 (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 matters section, was
the valuation of the investment
in VMX, where the impairment
assessment was audited to gain
assurance over the valuation of the
investment at year end.
PERFORMANCE OF OUR AUDIT
/ The audit was performed by a
combination of on site and remote
procedures.
Changes in approach from
previous period
/ There were no material changes
in the scope of the audit as
compared with the prior year.
OTHER INFORMATION
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
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.
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Beeks Financial Cloud Group PLC
Independent Auditors’ Report
To the members of Beeks Financial Cloud PLC
111
OPINION
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; 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
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 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.
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
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.
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 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;
/ 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. 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 processed by users
where such entries were considered
higher risk;
- Challenging assumptions and
judgements made by management
in areas of estimation;
- 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.
/ We completed audit procedures
to conclude on the compliance of
disclosures in the annual report and
financial statements with applicable
financial reporting requirements;
/ These audit procedures were
designed to provide reasonable
assurance that the financial
statements were free from fraud
or error. The risk of not detecting
a material misstatement due to
fraud is higher than the risk of not
detecting one resulting from error
and detecting irregularities that
result from fraud is inherently
more difficult than detecting
those that result from error, as
fraud may involve collusion,
deliberate concealment, forgery
or intentional misrepresentations.
Also, the further removed non-
compliance with laws and
regulations is from events and
transactions reflected in the
financial statements, the less likely
we would become aware of it;
/ 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.
- understanding the legal and
regulatory requirements specific to
the parent company.
/ Our communications with
management and the Audit
Committee in respect of non-
compliance with laws and regulations
and fraud included the potential for
management override of controls,
including in areas of judgement or
estimation;
/ 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 staff of changes in legislation,
internal review procedures and
resources available to ensure that
possible breaches of requirements
are appropriately investigated and
reported.
OTHER MATTER
We have reported separately on the
Group financial statements of Beeks
Financial Cloud Group PLC for the
year ended 30 June 2022. That report
includes details of the Group 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 ANDERSEN
Senior Statutory Auditor
For and on behalf of Grant Thornton
UK LLP
Statutory Auditor,
Chartered Accountants
Glasgow
8 October 2022
112
Beeks Financial Cloud Group PLC
Company Statement of Financial Position
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Company Statement of Financial Position
For the year ended 30 June 2022
113
company statement
of financial position
Assets
Non-current assets
Investments
Property, plant and equipment
Deferred tax
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Total current liabilities
Non-current liabilities
Lease liability
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Share premium
Reserves
Retained earnings
Total equity
Note
4
5
6
7
8
8
9
11
12
2022
£’000
4,727
3,106
590
8,423
22,028
163
22,191
2021
restated
£’000
4,045
347
313
4,705
7,368
1,930
9,298
30,614
14,003
620
-
620
-
-
620
383
72
455
368
368
823
29,994
13,180
82
23,775
2,979
3,158
29,994
70
9,452
1,588
2,070
13,180
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 £714,819 (2021: £1,958,641).
These financial statements were
approved by the Board of Directors
and were authorised for issue on 8th
October 2022 and are signed on its
behalf by:
GORDON MCARTHUR
Chief Executive Officer
Company name, Beeks Financial
Cloud Group PLC
Company number, SC521839
114
Beeks Financial Cloud Group PLC
Company Statement of Changes in Equity
For the year ended 30 June 2022
Beeks Financial Cloud Group PLC
Company Statement of Changes in Equity
For the year ended 30 June 2022
115
company statement
of changes in equity
Issued
capital
£’000
Merger
reserve
£’000
Share
based
payments
£’000
Share
premium
£’000
Retained
earnings
£’000
Total
equity
£’000
Balance at 1 July 2020
64
705
374
4,309
184
5,636
Profit after income tax
expense for the year
Total comprehensive
income
Deferred tax
Issue of share capital
Share based payments
Exercise of share options
Dividends paid
Total transactions with
owners
-
-
-
6
-
-
-
6
-
-
-
-
-
-
-
-
Balance at 30 June 2021
70
705
Profit after income tax
expense for the year
Total comprehensive
income
Deferred tax
Issue of share capital
Share based payments
Exercise of share options
Total transactions with
owners
-
-
-
12
-
-
12
-
-
-
-
-
-
-
-
-
-
-
547
(38)
-
509
883
-
-
-
-
1,661
(270)
-
-
-
5,143
-
-
-
5,149
9,452
-
-
-
14,323
-
-
1,391
14,323
1,959
1,959
1,959
1,959
69
-
-
38
(180)
(73)
69
5,149
547
-
(180)
5,585
2,070
13,180
715
715
103
-
-
270
373
715
715
103
14,335
1,661
-
16,099
Balance at 30 June 2022
82
705
2,274
23,775
3,158
29,994
116
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2022
notes to the company
financial statements
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 Riverside Building, 2 Kings
Inch Way, Renfrew, Renfrewshire,
PA4 8YU. 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 is a holding company
that holds investments in
subsidiaries and holds various
central overheads and salary costs.
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 71 to 88. 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.
/ Capital management disclosures.
Going concern
The Company has net current
assets of £21.57m at 30th June 2022
(2021: £8.84m).
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 to December 23). For this
reason they continue to adopt the
going concern basis in preparing
the financial statements. Further
information can be seen in the Going
Concern note within the Directors’
Report in the Group accounts.
Revenue
Revenue arises from intercompany
management charges, stated
net of VAT. Such charges are
recognised in the period they are
earned.
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.
Property, plant and equipment
(PPE)
PPE is stated at historical cost
less accumulated depreciation.
Historical cost includes expenditure
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2022
117
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 the financial
period in which they are incurred.
During the year the Group
purchased a new headquarters. The
property is valued at cost at date of
acquisition.
Depreciation on IT infrastructure
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:
/ Freehold property over 50 years
/ Fixtures and fittings over 5-20
years
The residual values, useful lives and
depreciation methods are reviewed,
and adjusted if appropriate, at each
reporting date.
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
Company 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 Company; the Company 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 Company
has the right to direct the use of
the identified asset throughout the
period of use.
At the lease commencement date,
the Company recognises a right-
of-use asset and a corresponding
lease liability on the statement of
financial position. 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 Company. The
Company 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 Company
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 statement of
financial position 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 Company
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
Company 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 Company 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 Company
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 statement of financial
position, 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.
118
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2022
Critical accounting estimates
and key sources of estimation
uncertainty
The key estimates in preparation of
the financial statements are below:
Carrying value of investments
The Company carries out an
impairment review whenever
events or changes in circumstance
indicates that the carrying value
of an investment is possible. In
addition, the Company carries out
an impairment review where there
are indicators of impairment. An
impairment is recognised when the
recoverable amount is less than the
carrying amount. The impairment
tests 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.
Management performed a full
impairment assessment on the
carrying value of the investment
of Velocimetrics Ltd. 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%) (FY 21: 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 years 2-5
was assumed at 3% (FY 21: 3%) and
a terminal value of 2% (FY 21: 2%)
was used following the 5 year cash
flow projection. Sensitivities were
then performed against a range
of possible downside scenarios
including further downside
weighting against the sales pipeline
and changing of the discount rate.
Management concluded, based
on the range of possible outcomes,
and sensitivity of both the sales
pipeline and discount rate, that
there were no indications of
impairment or reversal of the prior
year’s impairment.
3. STAFF COSTS
Average monthly number of employees (including directors) by activity:
4. INVESTMENTS
Shares in Group undertakings
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2022
119
2022
£’000
4,727
2021
£’000
4,045
During the year, the Group charged share based payments of £681,456 (2021: £308,144) to employees of the subsidiary
companies. As a result, the investment in subsidiaries has increased during the year to reflect this.
5. PROPERTY, PLANT AND EQUIPMENT
Freehold
property
£’000
Fixtures and
fittings
£’000
Leasehold
property
£’000
Cost
As at 1 July 2020
Additions (Prior period adjustment)
As at 1 July 2021 (Restated)
Additions
Disposals
-
-
-
-
-
-
3,034
104
-
-
As at 30 June 2022
3,034
104
Total
£’000
-
416
416
3,138
(416)
3,138
-
69
69
32
(69)
32
-
416
416
-
(416)
-
-
69
69
-
(69)
-
Management and administration
28
22
As at 1 July 2021 (Restated)
-
-
2022
£’000
2021
£’000
Depreciation
As at 1 July 2020
Charge for the year (Restated)
-
-
-
-
Cost of employment (including directors):
Wages and salaries
Social security costs
Pension costs
Total employee benefits expense
Charge for the year
Eliminated on disposal
As at 30 June 2022
27
5
-
27
-
5
2022
£’000
1,472
241
45
1,758
2021
£’000
1,399
170
34
1,603
NBV 30 June 2021
-
-
347
347
NBV 30 June 2022
3,007
99
-
3,106
A security is held against the property in respect of the subsidiary’s debt to the lender.
In the year to 30 June 2021, additions were restated from £nil to £416K and the related depreciation charge
restated from £nil to £69K. Details of this prior period adjustment are included at note 17.
120
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2022
6. DEFERRED TAX
9. NON-CURRENT LIABILITIES
Tax losses carried forward
Share based payments, recognised in equity
Deferred tax asset
7. CURRENT ASSETS – TRADE AND OTHER RECEIVABLES
Prepayments and accrued interest
Amounts due from Group undertakings
Trade debtors
Other recievables
2022
£’000
487
103
590
2022
151
21,857
1
19
22,028
2021
£’000
244
69
313
Reinstated
2021
75
7,293
-
-
7,368
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2022
121
2022
£’000
-
-
Restated
2021
£’000
368
368
Lease liability
In the year to 30 June 2021, the non-current lease liability was restated from £nil to £368K. Details of this prior
period adjustment are included at Note 17.
10. LEASES
The Company had a lease for the Head Office in relation to its old Glasgow Headquarters. This was disposed of
during the current year.
Information about leases for which the Company is a lessee is presented below:
Management have assessed recoverability of intercompany balances and deem no issues in terms of credit losses.
In the year to 30 June 2021, amounts due from Group undertakings were restated from £7,275K to £7,368K. Details of this
prior period adjustment are included at Note 17.
8. CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
Right-of-use-assets
Balance at 1 July 2021
Additions
Depreciation
Disposals
Balance at 30 June 2022
Trade payables
Accruals
Other taxation and social security
Other payables
Lease liability
2022
160
263
187
10
-
620
Reinstated
2021
23
148
205
7
72
455
The right-of-use assets in relation to leasehold property are disclosed as PPE (Note 5).
Maturity analysis:
Analysed as:
Non-current
Current
Note
8
9
2022
£’000
2021
£’000
-
-
-
368
72
440
In the year to 30 June 2021, the current lease liability was restated from £nil to £72K. Details of this prior period
adjustment are included at Note 17.
The interest expense on lease liabilities amounted to £12,559 for the year ended 30th June 2022. Lease liabilities are
calculated are calculated at the present value of the lease payments that are not paid at the commencement date.
Leasehold
property
£’000
416
-
(69)
(347)
-
122
Beeks Financial Cloud Group PLC
Notes to the Company Financial Statements
For the year ended 30 June 2022
FLIGHT
NOTES
11. EQUITY – ISSUED CAPITAL
For details of the issued share
capital see note 20 in the Group
notes.
12. 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 merger reserve arose on the
share for share exchange reflecting
the difference between the nominal
value of the share capital in Beeks
Financial Cloud Group PLC and the
value of the Group being acquired,
Beeks Financial Cloud Limited.
13. 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.
14. CAPITAL COMMITMENTS
The Company had no material
capital commitments at 30 June
2022.
15. CONTINGENT LIABILITIES
The Company had no material
contingent liabilities at 30 June
2022.
16. ULTIMATE CONTROLLING
PARTY
The Directors have assessed that
there is no ultimate controlling
party.
17. PRIOR PERIOD ADJUSTMENT
During the year, it was identified
that contracts recognised as right
of use assets and liabilities had
been incorrectly recognised within
another subsidiary of the Group
when the contractual obligation
lay in the Company. This error has
been corrected by restating the
values of the right of use asset,
depreciation and right of use
liabilities and trade and other
receivables in the prior year.
The right of use assets have been
restated from £nil to £416k and the
right of use depreciation restated
from £nil to £69k. The current right
of use liability was restated from £nil
to £72k and the non-current right
of use liability restated from £nil to
£368k. Trade and other receivables
have been restated from £7,275K to
£7,368K.
The retained earnings and SOCI
were not materially impacted by
this adjustment. Whilst an increase
in depreciation is noted, an increase
in Group management recharges
offsets this as it is all contained within
the same financial statement line.
FLIGHT
NOTES
Riverside Building, 2 Kings Inch Way,
Braehead, Renfrew, PA4 8YU, United Kingdom
beeksgroup.com