C
h
e
c
k
i
t
p
l
c
|
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
2
Elevating
the potential
of deskless
operations.
Checkit is the artificial intelligence
platform for deskless workforces,
enabling operational agility
and smart decision‑making
in large multinational and
complex organisations.
At Checkit, we have over 500 customers across the
globe, including Global Fortune 500 and public
health organisations. Our customers are making pen
and paper obsolete through the combination of
artificial intelligence (AI) and machine learning (ML)
enabled digital assistants and Internet of Things
(IoT) sensors. By automating the interaction
between people, assets, and buildings, more than
14 billion sensor readings per year now flow through
our AI enabled platform to unlock productivity
insights, missed sales opportunities and energy
efficiencies.
Smart People + Smart Assets + Smart Buildings
= Intelligent Operations
Checkit is transforming how organisations execute
deskless work, blending software, hardware, and
AI/ML insights to deliver intelligent operations
across every frontline business process.
We enable ’the augmented enterprise’. Checkit’s
intelligent operations platform connects people,
assets and buildings with digital assistants, sensors,
analytics, and artificial intelligence to create rich
performance data ensuring the effectiveness of
operational strategy, execution, and compliance.
Developed to drive impact quickly and scale to
the entire deskless workforce, Checkit has helped
customers unlock hidden operational insights that have
led to transformational reductions in cost and risk
and improved employee and patient experiences.
Intelligent operations make it simple for deskless
workers to capture their daily activities, share tasks,
visualise progress and continually improve. Business
and department leaders can quickly assess
performance, visualise the entire operation and
respond to changes by deploying enterprise-wide
process amendments in real time.
www.checkit.net
Linkedin: checkit-ltd
Twitter: _checkit
HIGHLIGHTS
CONTENTS
▶ Pipeline at year end £15.4m
▶ Annual recurring revenue (“ARR”) run rate at year
end of £8.2m (+43%) ahead of market expectations
(FY21: £5.8m normalised*)
▶ Annualised sales bookings at year end of £3.5m
▶ Recurring revenue (+31% to £6.8m) supported by
new customer wins and expansion within existing
accounts (FY21: £5.2m)
▶ Total Group revenue from continuing operations
£13.3m (-7%) (FY21: £14.4m normalised)*
▶ Non-recurring revenue declined by 29% primarily
driven by the planned transition of BEMS activity to
a SaaS (Software as a Service) offering as outlined at
the time of the fundraise
▶ Operating loss before non-recurring or special
items** £4.7m (FY21: loss of £3.1m) reflecting the
ongoing investment to accelerate Checkit’s strategic
plan
▶ Operating loss of £7.1m (FY21: loss of £5.3m)
▶ Cash at year end of £24.2m (FY21: £11.5m) following
receipt of proceeds from the placing, which raised
£21m (gross) to accelerate the Group’s growth
strategy
▶ Appointment of Kit Kyte, Chief Executive Officer,
bringing a renewed focus on the go-to-market
strategy, value-driven sales, and leading the
transition of Checkit towards a pure SaaS business.
▶ Strengthened US presence with the acquisition of
Tutela Monitoring Systems LLC (“Tutela”),
*
Normalised revenue refers to revenue that would have been included in the
Group’s financial results had Tutela LLC, which was acquired on 4 February 2021,
been owned by the Group throughout both periods.
** Non-recurring or special items include such items as restructuring, acquisition
costs and amortisation of acquired intangibles and other non-recurring items
incurred outside the normal course of business.
Strategic report
1 Highlights
2 Company overview
3 At a glance
4
Investment case
6 Non-Executive Chairman’s statement
7 Chief Executive Officer’s Review
10 Market overview
12 Platform overview
14 Business model
16 Business strategy
18 Stakeholder engagement and
Section 172
20 Strategy in action
24 Our people
26 Financial review
29 Principal risks and uncertainties
Corporate governance
32 Executive leadership
34 Corporate governance report
38 Audit Committee report
40 Remuneration report
45 Report of the Directors
47 Directors’ responsibilities statement
Financial statements
48
Independent auditor’s report
56 Consolidated statement of
comprehensive income
57 Consolidated balance sheet
58 Consolidated statement of changes
in equity
59 Consolidated statement of cash flows
60 Notes to the consolidated financial
statements
81 Parent company balance sheet
82 Parent company statement of changes
in equity
83 Notes to the parent company financial
statements
ibc Web property and advisers
Checkit plc | Annual Report and Accounts 2022
2
STR ATEGIC REPORT
COMPANY OVERVIEW
Our vision:
Our customers:
The augmented enterprise
Our mission:
To help business leaders
to execute smarter, faster
business decisions by
illuminating their dark
operations and elevating
their deskless workforce.
Smarter
People
AI-enabled
Intelligent Operations
An end-to-end intelligent workflow
platform and IoT ecosystem that
integrates a common set of repeatable
use cases and business intelligence,
including health and safety, compliance,
workforce management, production
planning and escalation and alerting.
Smarter
Assets
Smarter
Buildings
AI-enabled Intelligent Operations
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
3
AT A GLANCE
Intelligent Operations
Enterprise-level AI enabled insights – provided by digitally assisted, sensor enriched frontline work.
Checkit elevates the activities performed by deskless workforces through its end-to-end platform,
built to augment the future enterprise.
Smarter People
Digital assistants automate workflows
that prompt, guide, capture and analyse
frontline activities, ensuring the proper
action in the right place at the right time.
Smarter Assets
Equipment sensors stream real-time
telemetry data back to the Checkit AI
platform to be analysed and assessed and
prompt human intervention in the event of
an exception.
Smarter Buildings
Building sensors capture and analyse up
to the minute usage of facilities to ensure
safety and compliance, environmental
health, and prompt human intervention
in the event of an exception.
Benefits of an Intelligent Operations Platform
At a glance:
Strategic
1.
Maintain operational visibility
and control
2.
3.
4.
Drive agility and rapid change
Prevent missed sales and
improve top line performance
Reduce costs and waste
Execution
Compliance
1.
2.
Optimise labour utilisation
1. Mitigate risk of human error
Improve employee
engagement
2.
3.
Full digital audit trail
Rapid reporting
3. Accelerate employee
onboarding
4.
Enhance customer experience
Benefits in Practice:
Retail
Our platform provides John Lewis
Partners an end-to-end solution
spanning the whole customer-
facing retail environment,
from buildings, plant and
merchandising, retail, and energy
management. Using intelligence
derived from our sensors John
Lewis have mitigated over £1.48m
of stock loss, reduced engineering
callouts by £600k and saved over
£1.5m in energy.
Healthcare
Our sensors and digital insights
are helping the NHS reduce
drug wastage by automatically
monitoring storage temperatures,
increasing staff retention
through the efficient allocation
of tasks, and driving efficiency
by optimising workloads and
improving compliance. These
productivity measures directly
reduce the incidence of failed
CQC audits (which can lead to a
cost of up to £60,000 per non-
compliant incident).
Franchise
Our platform’s artificial
intelligence algorithm has driven
£2 million of additional revenue
from goods sold across 300
sites, labour savings of around
10 hours per week per location
and reducing food wastage by
approximately 1.6 million items.
Furthermore, the platform enabled
improved food compliance of
approximately 300% with the
training of nearly 7,500 staff in
4 weeks and the reduction in
human errors.
Checkit plc | Annual Report and Accounts 2022
4
STR ATEGIC REPORT
INVESTMENT CASE
Five powerful reasons
to invest in Checkit
Checkit investors are part of
the creation of a new industry
category. The Augmented
Enterprise for the deskless
industry. Our AI-enabled
end-to-end platform solves
the modern challenges of
deskless workforces and
enables intelligent operations
for the augmented enterprise.
Strong commercial model
▶ Through the evolution of our go-
to-market strategy, we increased
our sales pipeline to £15.4 million
during the period between January
2021 and January 2022.
▶ The split of the sales pipeline at
year end between tier one (Large
enterprise), tier two (Enterprise)
and tier three (Midsize) targets was
54%, 37% and 9% respectively.
▶ Greater expansion opportunities
from its existing client base. In
January 2022, 32% of the sales
pipeline originated from existing
clients with the remaining 68%
from potential new clients.
Macroeconomic
environment demands
efficiency gains
▶ Labour shortages continue to
intensify affecting productivity
and service levels driving
increased employment costs in the
services industry (7.1%) but most
prominently for those in leisure and
hospitality (8%)1.
▶ The Energy crisis is seeing one
in ten hospitality businesses with
energy cost increases of more
than 200%2.
▶ 68% of employees believe failure to
modernise IT will lead to a failure
to attract the best candidates3,
yet 73% of frontline employees
are still using manual and paper-
based processes in their work.
The knowledge of how to perform
those processes is kept in their
heads, and the outputs stored on
paper: this results in knowledge
“walking out of the door” when
such workers move jobs or retire.
1 FT.com
3 Computacenter
2 City A.M
4 Yoobic
Checkit plc | Annual Report and Accounts 2022
12 STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
5
Large, underserved
market
▶ Global deskless worker industry is
approximately 2.7 billion workers
in comparison to the knowledge
worker industry, which accounts
for approximately 1 billion workers
worldwide.
▶ The market for employee
experience platforms is estimated
to be $300 billion globally
(approximately £210 billion) and
when estimating the size of the
deskless worker industry we have
assumed it would be reasonable to
apply a multiple of 2.7 times this
amount, taking into account that
this industry not only encompasses
people, but also locations and
assets (i.e. IoT).
▶ We estimate the total addressable
market for Intelligent Operations
to be £570 billion with our target
addressable market being 5% of
this or approximately £27 billion.
Competitive advantage
Strong recurring revenues
▶ We are meeting market demand
with an unrivalled end-to-end
solution designed to connect a
deeply fragmented market.
▶ Our platform possesses powerful
AI, data and analytics capabilities
to provide meaningful insights
and enable data driven decisions,
providing fully automated
connectivity between client assets
(IoT) and the platform.
▶ We have built up considerable
domain knowledge of the
industries we serve, which
helps us to adapt to an evolving
business landscape.
▶ Our credibility and customer trust
comes from our status as a mature,
listed, and regulated entity.
▶ Strong set of financial results
in FY22, delivering a second
consecutive year of high-quality
recurring revenue growth with a
continued focus on attracting new
customers, while expanding our
footprint with existing customers.
▶ Annual recurring revenue grew by
43% to £8.2m (FY21 £5.8m), driven
by strong H2 sales.
▶ New business contributed £0.8m
of growth, driven by transformed
market positioning and through
demonstrating measurable value
to customers. The increase in ARR
resulted in 31% growth in reported
recurring revenue of £6.8m
(FY21 £5.2m).
▶ £3.5m in annualised sales bookings
which provides early confirmation
on the potential and size of
the growth opportunity in the
deskless market.
▶ We are now wholly focused on
delivering recurring revenue from
our technology solutions. As a
result, recurring revenue accounted
for 51% of total revenue for the full
year and in the last three months of
the year, it contributed 75% of total
revenue as we transition into a pure
SaaS business.
Checkit plc | Annual Report and Accounts 2022
345 6
STR ATEGIC REPORT
NON-EXECUTIVE CHAIRMAN’S STATEMENT
A transformative year
During the year leadership of the Group was transferred to
Kit Kyte and both as shareholder and director I am excited
by his vision.
Finally, and most importantly I should like
to thank all past and present employees
of Checkit (and Elektron Technology
plc in its former incarnation) for their
energy and dedication in creating value
for Shareholders. Although we live in an
uncertain world, I believe that the future
for Checkit is bright.
“ Although we live in an
uncertain world I believe
that the future for Checkit
is bright.”
Keith Daley
Non-Executive Chairman
5 May 2022
Dear Shareholder
I am pleased to present the Checkit 2022
Annual Report.
At the end of the 2022 financial year, I
completed 17 years as a director of the
Group and for much of the period this was
in an executive capacity. It was time for
me to step back from an operational role
and to that end I became non-executive
with effect from 1 February. In recent years
what was originally a mini-conglomerate
has been increasingly concentrated on
the high growth technology business of
Checkit. That transformation is complete,
giving management a single focus.
During the year leadership of the Group
was transferred to Kit Kyte and both as
shareholder and director I am excited by
his vision. You will read more about this
in the Annual Report. My other board
colleagues namely Greg Price (CFO), John
Wilson (Senior Independent Director)
and Simon Greenman (Non-Executive
Director) have provided immense
support. We continue to examine board
composition particularly with a view to
improving diversity.
I want to personally welcome the new
shareholders that joined us in the recent
placing and thank all our investors for their
support over the past year.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
7
CHIEF EXECUTIVE OFFICER’S REVIEW
Setting a course for
the SaaS growth
stratosphere
Checkit has realised a strong set of financial
results in FY22, delivering a second
consecutive year of high-quality recurring
revenue growth.
I am delighted to present Checkit’s
Annual Report for 2021, my first as CEO.
The growth of our customer base from
the beginning of the year, transitioning
towards a pure SaaS business model,
releasing the next generation of our
Connect platform and the successful
capital raise were all major milestones
for Checkit. It is a huge testament to
the hard work of our team that these
achievements were delivered against the
backdrop of the COVID-19 pandemic. As
with so many businesses, our standard
form of interaction with newly onboarded
customers and prospects was restricted
by the continuation of lock-down
measures. Checkit has continued to
respond with ingenuity and commitment
and adapted our implementation and
installation programmes to be delivered
remotely and we are proud to have
demonstrated the same benefits to our
customers versus traditional methods of
delivery. We also extended our offering
by building self-install features, digital
adoption technology and enhanced AI/ML
capabilities into the platform. We continue
to see significant global engagement
with our core value offering through key
expansion and new deals in Australia, New
Zealand and North America.
Strong Financial Performance
Checkit has realised a strong set of financial
results in FY22, delivering a second
consecutive year of high-quality recurring
revenue growth by continuing to focus on
attracting new customers, while expanding
our footprint and implementing price
initiatives with existing customers.
Annual recurring revenue grew by
43% to £8.2m (FY21 £5.7m), driven by
strong sales during H2. New business
contributed £0.8m of this growth, driven
by transformed market positioning and
through demonstrating measurable value
to customers. The increase in ARR resulted
in 31% growth in reported recurring
revenue of £6.8m (FY21 £5.1m). The lag
in Group recurring revenue percentage
growth, compared to the growth rate of
ARR reflects the acceleration reflects the
acceleration of contracts signed during
the second half of the financial year.
Reflecting ongoing investment to drive
strategic execution, operating losses for
the year (before non-recurring or special
items) in FY22 increased to £4.7m (2021:
£3.1m loss). The Group invested in its
product, sales, and marketing functions
to support its expansion, increasing new
product development spend to £3.4m
(FY21: £2.5m), as the Group invested in
new enhanced functionality, including
mobile alerting, shared libraries and
job-sharing capabilities, in addition to
doubling sales and marketing investment
to £2.7m (FY21: £1.4m) with an expanded
sales and marketing team in both the
UK and US to fuel growth. This latter
investment allowed the Group to deliver
new sales bookings of £3.5m.
This strong performance is underpinned
by the Group’s transformation into a
scale up SaaS business. The Group is now
wholly focused on delivering recurring
revenue from its technology solutions.
As a result, recurring revenue accounted
for 51% of total revenue for the full year
and in the last three months of the year, it
contributed 75% of total revenue for that
period as Checkit continues its transition
into a pure SaaS business.
Building a sustainable, software-
driven growth business
We are entering the most exciting period
in Checkit’s history. Let me explain why.
Through the evolution of our go-to-market
strategy, the Group has increased its
sales pipeline to £15.4 million during the
financial year and by the year end we had
secured more than £3.5m of annualised
new bookings.
Alongside this, the Company has
improved the quality of the sales pipeline
by achieving a higher mix of opportunities
from tier one and two enterprise targets.
The split of the sales pipeline by FY22
year-end between tier one, tier two and
tier three targets was 54%, 37%, and 9%
respectively compared to 21%, 72%, and
6% respectively in January 2021.
Checkit’s new customer pipeline in the
US, a key growth market for the Company,
now includes a number of multi-site
organisations across the healthcare, food
and hospitality sectors. The recent award,
Checkit plc | Annual Report and Accounts 2022
8
STR ATEGIC REPORT
CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED
Building a sustainable, software-
driven growth business continued
before year end, of the Grifols contract in
the US at a minimum value of £2.7m over
three years is further evidence of the size
of the opportunity in this market.
A rapidly evolving industry
Surprisingly, 73% of frontline employees
are still using manual and paper-based
processes to conduct their work. The
knowledge of how to perform those
processes is kept in their heads, and the
outputs stored on paper, which results
in: knowledge “walking out of the door”
when such workers move jobs or retire,
inconsistent work being performed and a
lack of visibility (particularly in real time) of
the state of the business – leading to the
creation of what Checkit refers to as “dark
operations”. Dark operations occur when a
large proportion of operations are hidden
from view, making it difficult for managers
to measure productivity and identify risks
and opportunities within their business.
We believe that there is a compelling
need to digitise the deskless workforce
to enable organisations to: (i) track and
optimise performance, (ii) reduce costs
and wastage; and (iii) increase efficiency,
especially against a backdrop of rising
labour costs and supply chain challenges,
which are significantly impacting
service delivery.
Growth strategy and ambitions
Checkit is well positioned to capitalise
on this growth opportunity due to the
following key strengths which differentiate
its offering from that of its competitors:
▶ Checkit is meeting market demand with
what we believe to be an unrivalled
end-to-end solution. The Checkit
platform possesses powerful AI, data
and analytics capabilities to provide
meaningful insights and enable data
driven decisions;
▶ providing fully automated connectivity
between client assets (IoT) and the
Checkit platform
▶ the Company has built up considerable
domain knowledge of the industries it
serves, which will help the Company
to adapt to an evolving business
landscape; and
▶ enhanced credibility and customer trust
due to its status as a mature, listed, and
regulated entity.
The Company intends to significantly
expand into the US market, with the aim
of growing it to become the leading
contributor of ARR to the business by
the end of FY24. In order to capitalise on
the opportunity presented by expanding
into the US and the rest of the world,
the Company intends to scale up the
headcount of sales and marketing in
both regions.
Checkit’s longer term objectives include
becoming the market leader in workflow
management for the deskless worker
industry and growing the US to become
the leading contributor of ARR to the
business.
In order to achieve our growth objectives
and deliver shareholder value, the
Company’s strategy will focus on:
Converting Checkit into a pure
SaaS business – with the aim
to create a fully integrated AI
platform with the ability to integrate
third party IoT within its ecosystem.
The improved Checkit platform
will also be the foundation of the
Smart Building SaaS offering once
the transition from building energy
management services (BEMS)
is complete.
Accelerating scale and global
growth – the Company will
invest significantly into sales
and marketing efforts to drive top
line growth coupled with further
development of the Checkit AI
platform to create a market leading
product. ARR growth will be further
accelerated through investment in
a separate sales function to focus
on increasing opportunities via
partnerships. The Company will
also consider compelling M&A
opportunities as an additional
scale opportunity.
Transform the operating model
and culture of the business
– in order to improve the
prospects of achieving our growth
objectives, we will seek to optimise
the Company’s existing processes
across its business and continuously
assess potential cost efficiencies
with the aim of improving margins.
Of paramount importance will be
our ability to maintain and grow a
high achieving mentality across the
Checkit workforce.
Annual recurring revenue
grew by 43% to
£8.2m
(FY21 £5.7m),
31% growth in reported
recurring revenue of
£6.8m
(FY21 £5.1m)
Annualised new sales bookings
£3.5m
Checkit plc | Annual Report and Accounts 2022
123 STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
9
Positive Outlook
Our purpose is to simplify and digitise
the running of operations for the deskless
industry – and never has that been more
important. We know that simplifying
how organisations manage operational
performance has a transformative
impact on organisational success, the
wellbeing of employees and the outcomes
for customers.
When we look back at what was a
tumultuous year for us all, we are excited
at the progress we have made as a
business and proud of the support we
have given our customers, providing them
with the insight, tools, and methodology
to thrive in these challenging times.
I join our Chairman and the rest of the
management team in thanking our entire
team around the world for their support
through what has been a tough year for so
many. I am incredibly proud of everything
the team has achieved to date, building a
market leading offering as well as a long-
term, international, blue-chip customer
base. However, we are very much still at
the start of our journey. Global supply
chain challenges, the rising cost of labour
and increased compliance requirements
mean that the premium on simplifying
deskless operations has never been
more relevant.
The Board continues to expect to meet
FY23 market expectations and remains
confident that we are well positioned to
deliver strong, sustainable organic growth.
Whilst the conflict in Ukraine has no direct
impact on the Group’s activities, the
Board remains cautious about its indirect
impact together with the potential for
general inflationary cost pressures.
Kit Kyte
Chief Executive Officer
5 May 2022
“ When we look back at what was a
tumultuous year for us all, we are excited
at the progress we have made as a
business and proud of the support we
have given our customers, providing them
with the insight, tools, and methodology
to thrive in these challenging times.”
Checkit plc | Annual Report and Accounts 2022
10
STR ATEGIC REPORT
MARKET OVERVIEW
Creating a new category
of SaaS platform in an
underserved market
An AI led Intelligent Operations Platform to connect fragmented enterprises with
their people, place and things. Enabling an Augmented Enterprise designed to
meet the future demands of an increasingly volatile world.
£570 billion
Our total addressable market
£27 billion
Our target addressable market
Our total addressable market
There is a compelling need for
organisations to digitalise their deskless
workforce practices enabling their
leadership to: (i) track and optimise
performance, (ii) reduce costs and
wastage; and (iii) increase efficiency,
especially against a backdrop of rising
labour costs, rising energy costs, supply
chain challenges which are significantly
impacting service delivery.
With a global deskless worker
industry comprising of approximately
2.7 billion workers1 in comparison to
the knowledge worker industry, which
accounts for approximately 1 billion
workers worldwide2.
The market for employee experience
platforms is estimated to be $300 billion
globally (approximately £210 billion)3
and when estimating the size of the
deskless worker industry, we have
assumed it would be reasonable to apply
a multiple of 2.7 times this amount, taking
into account that this industry not only
encompasses people, but also locations
and assets (i.e. IoT). As a result, we
estimate that the potential technology
spend within the deskless worker industry
could be approximately £570 billion with
our target addressable market being 5%.
of this or approximately £27 billion.
1 Forbes – https://www.forbes.com/sites/
lanxuezhao/2019/06/17/the-billion-dollar-
ideas-that-could-transform-the-deskless-
workforce/?sh=6cafc183a4fa
2 Forbes – https://www.forbes.com/sites/
forbestechcouncil/2020/12/10/the-year-of-the-
knowledge-worker/?sh=7a7efa8c7fbb
3 Josh Bersin – https://joshbersin.com/2021/02/the-
massive-market-impact-of-microsoft-viva/
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
11
Our target addressable market
Our target addressable market can be
broken down by our solutions aimed at
developing “Smart People” (applying
digital tools and monitoring to transform
working practices) and “Smart Assets and
Buildings” (incorporating physical assets
into a digital ecosystem using IoT sensors
and devices) with each being comprised of
the following submarkets:
Smart People:
Workforce management,
Microlearning, Field Service and
Employee Communication
Smart Assets and Buildings:
Global IoT and Smart Buildings.
The anticipated development of these
submarkets has underpinned our
assessment of our target addressable
market and based on independent
studies, the estimated growth with each of
the above is expected to be as follows:
Workforce Management
Field Service
$5.25 billion
10% compound annual growth rate (“CAGR”) until
2026 to a market size of $5.25 billion
$7.1 billion
15% CAGR until 2026 to a market value of $7.1 billion
Microlearning
Employee communication
$2.7 billion
13% CAGR until 2024 to a market size of $2.7 billion
$1.8 billion
12% CAGR until 2027, valuing it at $1.8 billion
Global IoT
Smart buildings
$1.5 billion
25% CAGR until 2027, valuing it at $1.5 billion
$10 billion
13% CAGR until 2026 to market value of $109 billion.
We believe that our target addressable market within this
sub market is approximately $10 billion.
Our position in the market
The deskless worker industry is a large, fragmented market and
currently no competitors offer the comprehensive, end-to-end
coverage of our platform.
We are currently serving customers within three out of a potential
seven markets – healthcare, retail and hospitality, catering to
almost 800 million deskless workers. We believe that by evolving
both the product and the go-to-market functions
there are significant expansion opportunities to adjacent
markets – education, manufacturing, transport and logistics and
construction.
The US remains the largest and most appealing market for the
digitalisation of deskless working practices, accounting for over
5 times more technology spend than the EU. We continue to
believe that the US is a key demographic for further expansion
and growth with the Group having made excellent progress in the
region following the Tutela acquisition in February 2021.
Checkit plc | Annual Report and Accounts 2022
12
STR ATEGIC REPORT
PL ATFORM OVERVIEW
An AI platform that captures
and creates operational insight
under one digital roof
We designed our platform to integrate a common set of repeatable
customer use cases. By augmenting these use cases with IoT sensors we
can capture the interaction between physical assets and people. From pilot
to full intelligent operations, our platform has been designed to measure
and guide daily operations and deliver actionable insights in real time.
Capture
Our digital assistants replace
paper checklists, spreadsheets,
and makeshift legacy technology
with digital workflows, and our IoT
sensors capture environmental
and telemetry data about assets
and buildings.
Connect
Data captured from people, assets
and buildings across different
teams, workplaces, and locations
are connected and mined for
insight about productivity.
Collaborate
Teams collaborate, evidence,
and annotate their tasks, alerts,
and interactions with assets in
eliminating duplicated effort, and
human error.
Comprehend
Business intelligence and
dashboards analytics stream
actionable insights to leaders
and managers driving behaviour
change and highlighting
performance improvements.
Checkit plc | Annual Report and Accounts 2022
e n d
h
p r e
Co m
Our AI
platform
C
o
l
l
a
b
o
r
a
t
e
C
a
p
t
u
r
e
n n ect
o
C
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
13
Designed for the speed and scale of deskless operations
Our platform was designed with ‘get started and grow’ in mind:
Drag and drop
workflow builder
No code workflows can be built and
deployed rapidly using a simple
who, what, where, and when wizard.
Shared libraries
Build, share and easily workflow
templates across the entire
organisation ensuring consistent
best practices, quality, compliance,
and safety standards.
Mobile Alerting
& Event Driven Actions
Prompt frontline workers from their
mobile device to carry out actions
triggered by sensor alerts from
equipment or buildings ensuring
remediation and risk prevention.
Job Sharing
Allow multiple staff to collaborate
on a single set of actions reducing
duplicated effort.
Business Intelligence
Dashboards
Out of the box dashboards and
intuitive business intelligence report
builder mean reports and insights
can be correlated with other sources
to create rich actionable insights.
Checkit plc | Annual Report and Accounts 2022
14
STR ATEGIC REPORT
BUSINESS MODEL
Our business model
Our value creation process
Seed
Land
Impact assesment
Deep domain expertise from our
Enterprise Technology Partners
(ETPs), partner with the customer
to uncover and rapidly digitalise
a single use case to demonstrate
impact and ROI.
Design & Onboard
Working with the customer our
ETPs and delivery teams will work
to identify and deploy additional
digitalisation use cases to increase
impact and value.
Initial relationship
▶ Customers will often start building their digital assistants and workflows
using individual use cases
▶ Initial implementations are typically focused on proof-of-concept workflows
or existing processes that are challenging to the business.
Support
▶ Our support team operate 24x7x365 days a year providing live call
outs for sensor alarms
Platform Enhancements
▶ Our platform continuously delivers features and enhancements
designed to improve usability, insights and unlock new use cases
Resources &
relationships
People and
domain expertise
Extensive domain knowledge
of the industries we serve
Enterprise-grade
end-to-end platform
We provide intelligent
operations via our digital
assistants and sensors, which
capture as much human task
interaction as possible.
Growing IoT
Ecosystem
A growing ecosystem of
IoT sensors and devices to
understand the surrounding
environment.
Strong financials
Our business model maintains
a strong cash position
strengthened by the recent
fundraise.
Checkit plc | Annual Report and Accounts 2022
Our value creation process
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
15
Expand
Platform
Growth
Customer Success work alongside
the customer to identify and
champion additional digitalisation
opportunities and improve
efficiencies by driving product
usage and aligning the platform to
the customer’s strategic goals.
Intelligent Operations
Customers achieve full Intelligent
operations by capturing and
connecting their entire deskless
workforce, assets, and buildings,
unlocking true business insight.
Customer Success
Our customer success team partner with the customer to understand their
strategic objectives associated with process automation and work alongside
them to deliver ongoing product education and deliver value.
Revenue
generation
Peace of Mind
Subscriptions
We sell software and hardware
subscriptions for our intelligent
operations platform as well as the
right to future software updates,
standard maintenance, sensor
calibration and support. We
also sell enhanced maintenance
and support, on top of the
base package.
Professional Services
We provide professional services,
including installation, training
and consultancy on intelligent
operations and digitalisation.
Stakeholder
value
Employees
170+
We have over 170
employees globally
Investors
CKT.LN
Our investors can invest in our
enterprise intelligent operations
platform in one of the world’s
largest underserved market
Customers
500+
We have over 500 customers
actively improving efficiency,
reducing waste, and cutting risk
using our platform and sensors
Checkit plc | Annual Report and Accounts 2022
16
STR ATEGIC REPORT
BUSINESS STR ATEGY
Evolving Checkit to
drive growth
1. Replacing customers’ dark operations
with Intelligent operations
Investing in product to unlock new insights
about more activities
▶ We will continue to expand our existing AI-enabled
platform to integrate additional workflow use cases. By
continuing to enhance our capabilities under ‘one digital
roof’ we will differentiate our value to customers and
provide an all-in-one out of the box solution to what is
commonly served by fragmented end point vendors.
▶ Continued expansion through the integration of best-
in-class third party sensors to expand our intelligent
operations platform and enrich its data capture abilities.
The objective of building an ecosystem of IoT sensors
is to automate the many interactions between physical
assets, buildings, and people, thus accelerating
productivity and efficiency gains.
▶ We plan to further enhance the capability of our business
intelligence and insights offering. Through the evolution
of our machine learning and artificial intelligence
software we aim to surface strategic level actionable
insight from the huge volumes of data passing through
the platform.
Progress in FY22:
1.6m
daily sensor readings triggering 26k alerts and
workflows helping organisations avoid risk, reduce
waste, and save time.
We’re systematically evolving
every aspect of Checkit to
capture our target market
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
17
2. Executing a pure SaaS
business model
3. Removing barriers to growth
Converting non-recurring revenues
to subscriptions
▶ We are transforming the part of the business that
historically engaged in building and energy management
systems (BEMS). This typically produces project-based,
one-off revenues.
▶ We are creating a software-driven smart buildings and
energy management solution. The aim is to expand
our IoT ecosystem to incorporate sensors that can be
plugged directly into our intelligent operations platform.
Investing in sales and marketing expansion
▶ We have invested heavily in sales and marketing and
this will be accelerated in the current year following the
successful funding round.
▶ We will continue to invest in US expansion to penetrate
a market that is deeply fragmented. Following the
acquisition in 2021 of Tutela LLC, we will continue to
cross-sell and upsell Intelligent operations to existing
customers.
57+
ARR by industry sector
Healthcare 57%
Retail 34%
Other 9%
Progress in FY22:
Progress in FY22:
75%
of overall revenue by Q4 was classed as recurring.
18
person sales, marketing and customer success team.
Checkit plc | Annual Report and Accounts 2022
34
+
9
+
K
18
STR ATEGIC REPORT
STAKEHOLDER ENGAGEMENT AND SECTION 172
Engaging with
our stakeholders
Section 172
Engaging with stakeholders is
crucial to the long-term success of
the company.
Stakeholder engagement is
coordinated consistently in line with
our fundamental principles and values.
The process of engagement informs
better decision-making at every level
of the company. We provide examples
of how we build and maintain
relationships with key stakeholder
groups on these pages.
Section 172 of the Companies
Act 2006 requires a director of a
company to act in a way that he
or she considers, in good faith,
would most likely promote the
success of the company for the
benefit of shareholders. In doing so,
consideration is given to a series of
important matters, including:
▶ Likely consequences of any
decisions in the long-term.
▶ Interests of the company’s
employees.
▶ The need to foster the company’s
business relationships with
suppliers, customers, and others.
▶ The impact of the company’s
operations on the community and
environment.
▶ The company’s reputation for high
standards of business conduct.
▶ The need to act fairly.
Checkit plc | Annual Report and Accounts 2022
Shareholders
Employees
We are committed to engaging
with shareholders using consistent
and effective communication.
Key considerations include the
company’s financial performance,
long-term strategy, corporate
governance, and stewardship.
The CEO and CFO have regular
meetings with investors for formal
and informal consultations.
Formal meetings coincide with
full-year and half-year results,
including the Annual General
Meeting. These are viewed not
only as opportunities to present
on recent performance and future
development but to engage in
conversation and answer questions.
In addition, the Checkit website was
relaunched in FY22 with a refreshed
investor relations section to
articulate the investment story and
highlight associated news. More
detail can be found in the corporate
governance report on page 34.
Our diverse, skilful, and experienced
workforce is recognised as the
business’s most important asset.
Checkit’s 170+ employees are
spread between offices in London,
Cambridge, Fleet, and the US.
Regular ‘Town Hall’ meetings allow
the leadership team to present
progress, listen to feedback
and answer questions. Regular
surveys are carried out to measure
employee sentiment and ensure
that strategic principles, news, and
values are understood.
A process has been implemented
to assess and respond to feedback,
with action plans to address any
issues or concerns. An intranet portal
provides employees with continually
updated information and knowledge
sharing. An employee forum has
been set up to deepen engagement.
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
19
Customers
Suppliers
Community and environment
We take a collaborative approach
to customer engagement.
A highlight of FY22 has been
creating a new customer success
function to ensure customers enjoy
the best possible partnership with
Checkit and that any issues are
proactively addressed. In addition,
dedicated account managers have
been assigned to oversee the
interests of key customers.
The end-to-end customer
experience is crucial to our
continuing success, and that
requires numerous functions
– including marketing, sales,
finance, operations, and support
– to prioritise customer needs.
A digital transformation project
was completed in early FY23
to consolidate the company’s
customer relationship management
(CRM) system, enhance data
analytics, and provide employees
with a single view of the customer.
Checkit places a high value on
its relationships with suppliers,
including contractors and service
providers. Trusted, collaborative
partnerships facilitate efficient and
effective business performance.
The company operates in a way
that guards against unfair business
practices and encourages suppliers
and contractual partners to adopt
responsible policies. Fair contract
and payment terms are essential.
The company liaises closely with
suppliers and partners to ensure
they operate in accordance with
agreed contract responsibilities
and conditions. Environmental
and social responsibilities are
considered during the assessment
of suppliers. All suppliers are asked
to sign Checkit’s Code of Conduct,
which details the standards of
business conduct and ethics the
company expects of its suppliers.
Regular meetings are held with key
suppliers to gather feedback and
continually improve relationships.
We are determined to contribute
positively to the broader community
and the environment. Our technology
helps customers reduce their
energy consumption and improve
remote operations management,
thus enhancing job satisfaction
and reducing avoidable travel. We
also have a policy of refurbishing
equipment wherever possible.
Additionally, our platform directly
enables customers to reduce
wastage of essential supplies,
including food and medicines.
Internally, Checkit is moving towards
a paperless environment and has
adopted a flexible, hybrid working
model with many employees
now based at home, reducing
transport requirements.
Checkit plc | Annual Report and Accounts 2022
20
STR ATEGIC REPORT
STR ATEGY IN ACTION
CASE STUDY: HALLMARK
Creating a digital-first
care home
Hallmark Care Homes recently introduced
Checkit’s intelligent operations
platform to digitise manual compliance,
maintenance, and quality procedures in
the estates team. During the initial pilot
programme at a single property, data from
the Checkit platform showed maintenance
issues were addressed 10x faster, reducing
the average response time to 20 hours.
Additionally, there was a 40% reduction in
time spent on audits while the completion
rate of routine room checks rose from
96% to 100%.
Challenge
The provision of high-quality care
depends on the painstaking work of
numerous operational teams spanning
facilities management, hospitality,
catering, compliance, and care quality.
In the estates management team, reliance
on paper-based processes to collect
important data on facilities, equipment
and compliance checks added to
that pressure.
Solution
Hallmark introduced Checkit’s intelligent
operations platform to digitise manual
checks and procedures. The Checkit
platform provides maintenance teams
with digital assistants to prompt, guide
and capture the daily activity of team
members. Using QR codes locations are
tracked, and all activity is automatically
tracked to a specific location and
time-stamped.
Dozens of everyday processes are now
digitally managed via workflows and
include checks relating to:
▶ Water flushing
▶ Vents
▶ Showerheads
▶ Bedroom compliance
▶ Water temperature/Legionella
▶ Fire doors
▶ Furniture
▶ Laundry lint
▶ Ambient room temperature
▶ Door alarms
▶ Nurse calls
“ I’m now able to check in every day and look at
trends. It’s far more efficient, giving me more time
to add value into the business and engage in more
strategic planning.”
Outcome
The Checkit platform has increased
management visibility, accelerated the
performance of frontline teams, raised
the consistency of standards, and
strengthened compliance metrics, all
while reducing administrative burdens
on frontline teams.
Within two weeks, there was a 10x
improvement in the speed at which
facilities issues were resolved, reducing
the average response time to 20 hours.
Additionally, the completion rate of
routine room checks rose from 96% in
month one to 100% in month two.
Estates Manager Steve Brine has
estimated a 40% reduction in his time
on audits.
“I’m now able to check in every day and
look at trends. It’s far more efficient,
giving me more time to add value into the
business and engage in more strategic
planning,” he said.
The introduction of Checkit’s intelligent
operations platform also enables
Hallmark to maximise its assurance of
safety. “Checkit has enabled me to take
a proactive approach to compliance and
performance improvement. It reduces
our risks ten-fold because our reporting
is more accurate, and we can see and
respond to trends before they become
bigger problems,” said Steve.
Steve Brine
Estates Manager at Hallmark
10x
faster issue resolution
40%
reduction in time spent on
audits
100%
Task completion rates rose from 96% to 100%.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
21
Checkit plc | Annual Report and Accounts 2022
22
STR ATEGIC REPORT
STR ATEGIC REPORT
STR ATEGY IN ACTION CONTINUED
CASE STUDY: SCIENSUS
Real-time alerts to protect
specialised medicines
Any variation in storage temperature
conditions beyond agreed parameters
presents a significant commercial risk to
the company.
Sciensus also wanted to reduce staff
time spent reporting the actions taken in
response to sensor alerts. Members of the
facilities and health & safety teams across
16 warehouse sites spent around 40 hours
per week completing paperwork and
scanning it into the company’s computer
system to create an audit trail.
Solution
Checkit’s mobile alerting solution was
easily integrated with the existing sensors
– covering ambient temperatures, product
temperatures and door opening/closing.
The solution sends alerts directly to the
mobile devices of nearby staff rather
than to central computers to accelerate
response times. Additionally, Checkit’s
mobile alerting system provides staff with
on-the-spot guidance to rectify the cause
of the alert.
Healthcare service provider Sciensus
wanted to strengthen the protection
of valuable medicines stored within its
temperature-controlled warehouses and
cold rooms while also saving staff time
spent on manual reporting. Checkit’s
mobile alerting solution prompts teams
with notifications and guidance to help
them rapidly rectify any temperature
variation. The solution ensures the
quality and safety of stock worth millions
of pounds and automatically creates a
detailed digital audit report. Around 40
hours of staff time per week has been
saved by eradicating manual reporting –
equivalent to one full-time staff member.
Challenge
Sciensus provides medicines and complex
clinical care to over 200,000 patients
across the UK and Europe. Formerly
known as Healthcare at Home, Sciensus
works with the NHS, pharmaceutical
companies, private medical providers,
and consultants to deliver life-changing
treatments to patients in their own homes.
The firm has 1,700 employees, including
nurses, drivers, dispensary, warehouse,
and support staff.
The COVID-19 pandemic has accelerated
the growing transfer of specific treatment
programmes into domestic settings.
As a result, Sciensus now serves an
increasing population of patients
with illnesses ranging from cancer to
rheumatoid arthritis.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
23
“ What Checkit put forward was a powerful solution to
address a significant operational issue. Instead of staff
having to fill in paperwork, the responsive actions of our
teams are automatically logged when they tap on the
screen of their mobile device.”
Patrick Rix
Validation and Compliance Manager
Patrick Rix said: “What Checkit put
forward was a powerful solution to
address a significant operational issue.
Instead of staff having to fill in paperwork,
the responsive actions of our teams are
automatically logged when they tap on
the screen of their mobile device. Our staff
include drivers who don’t always have time
to fulfil extra reporting requirements.”
Checkit managed the configuration and
set-up of the solution, with installation
completed in 24 hours to ensure an
immediate impact.
Outcome
The introduction of mobile alerting
has saved around 40 hours of frontline
staff time each week and reduced the
management burden. Patrick Rix no longer
needs to log into the portal to manually
review and sign off reports.
“We have a large team to manage, and
the previous portal was quite daunting
for those not familiar with it. The Checkit
solution is far more user friendly. It also
gives staff a greater feeling of control,
which is very important. And providing
guidance directly to mobile devices helps
to reinforce best practices. The system
shows them exactly what to do next, and
there are contact numbers so they can
call for help if they need engineering or
technical support. Alerts are now closed
down in about 15 minutes, which is eight
times faster than before.
The Checkit mobile alerting solution
incorporates QR code scanning and time-
stamping to ensure the time and location
of any intervention is seamlessly captured
for audit reporting.
Sciensus is now exploring the potential
to introduce the Checkit solution to
its facilities management and fleet
management functions.
Hours of frontline staff time
saved each week
40
Alerts resolved
8x faster
Checkit plc | Annual Report and Accounts 2022
24
STR ATEGIC REPORT
OUR PEOPLE
Powered by our people
To fulfil its growth objectives, facilitate sustainable success
and drive the best outcomes for customers, Checkit
prioritises the attraction and retention of talent.
Learning and development
Checkit introduced a new programme
of learning and development in FY22 to
support staff in reaching their full potential
and building new skills. This included the
roll-out of the LinkedIn Learning platform
for all employees. In addition, the software
development teams were given access
to Pluralsight to enhance their technical
capabilities. The company also partnered
with training specialists to utilise the
Apprenticeship Levy funding for upskilling
in project management, digital marketing,
and people management. This focus
continues into FY23 with a commitment
to creating clear career development
plans, setting objectives and key results
(OKRs) for all employees, and regularly
reviewing progress.
Checkit is entering the new financial year
as a single, united business following
a consolidation of processes, values,
and principles.
The company took several steps in
FY22 to strengthen the attraction and
retention of staff.
Workplace optimisation
Following the pandemic, Checkit
is progressing towards a hybrid
working model.
Desk-based employees mainly work from
home but have the flexibility to use the
offices when required. The Cambridge
office, for example, will be reconfigured
with hot desks and meeting spaces. A new
central London office has also opened in
early 2022.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
25
A winning culture
A positive culture is crucial to fulfilling
Checkit’s ambitious growth targets.
Checkit’s leadership team has encouraged
a growth mindset among employees so
that a focus on continuous improvement is
woven into their daily work. A ‘rocket ship’
mentality has been introduced to excite
employees about the journey Checkit is
undertaking. Regular meetings, off-site
sessions and internal communications
contribute to this. The evolution of
a united culture following business
acquisitions in recent years remains a
focus for Checkit.
Digital transformation
Empowering employees to do their best
work is central to the Checkit philosophy.
FY22 saw the launch of a digital
transformation programme, harnessing
the full potential of the Salesforce
platform to enhance information sharing
across the business, strengthen analytics
and provide a single view of the customer.
In FY23, this will extend to people
management with further digitisation of
HR systems and employee onboarding.
Dedicated talent acquisition
Finding and recruiting people with the
talent and characteristics to propel
Checkit forward are priorities for Checkit,
particularly in software development and
sales. With this in mind, the company
appointed a new Head of Talent
Acquisition in FY22. This newly-created
role will focus on defining and promoting
Checkit’s reputation as an employer
of choice.
Diversity and inclusion
A diverse and inclusive workforce is
considered critical to Checkit’s continuing
growth. The company considers it
extremely important to nurture diverse
thinking and viewpoints and ensure the
workforce reflects the wide-ranging
communities of people that Checkit
serves. Diversity in cultural background,
race, gender, and education are essential
to Checkit’s vision of creating an inclusive
internal environment and driving
shareholder value. The company has made
progress on its gender diversity agenda,
aiming to achieve 50/50 male / female
representation across the business. There
is still more to be done. In FY23, Checkit
will continue to drive internal momentum
with initiatives to champion more women
in technology and leadership roles and
address any areas of unconscious bias in
the business.
Checkit plc | Annual Report and Accounts 2022
26
STR ATEGIC REPORT
FINANCIAL REVIEW
Delivering smart growth
The financial results for FY22 represent another year of
strong progress for Checkit. The Group’s strategy to invest
to support its expansion, with a focus on delivering recurring
revenue from its technology solutions, has resulted in
a second consecutive year of significant ARR growth.
ARR and Revenue
The table below shows ARR and revenue
for the year ended 31 January 2022 and
includes comparisons with reported and
normalised1 prior year values.
ARR grew by 43% to close at £8.2m
(FY21: £5.8m normalised), driven by
strong H2 sales bookings.
Total Revenue for FY22 was to £13.3m,
a reduction of 7% compared to the prior
year on a normalised basis (FY21 £14.4m
normalised). While recurring revenue grew
by 31%, non-recurring revenue declined in
line with management’s expectations.
Investment in the business has resulted
in operating losses for the year (before
non-recurring or special items) increasing
to £4.7m (2021: £3.1m loss). Investment has
centered on new product development
and an enlarged sales and marketing team
both in the UK and the US, where the
Group’s acquisition of Tutela in February
2021 has provided a platform for Checkit,
allowing the Group to accelerate its
geographical expansion.
In November 2021, the Group successfully
raised £20.0m (net of expenses) through
the placing of 45.6m new shares. The
placing was significantly oversubscribed
as investors recognised the growth
potential and market opportunity
presented by the Group.
The Group intends to use the proceeds
raised to accelerate its growth strategy,
investing further in sales and marketing
to drive top line growth, transforming its
operating model to enable future cost
efficiencies, and continuing to develop
the Checkit platform to create a market
leading product. This cycle of sales
execution and phased investment will
allow Checkit to deliver smart growth.
(£’m)
ARR
Revenue
Recurring
Non-recurring
Total Group
Twelve months to
31 January
2022
Actual
31 January
2021
Actual
31 January
2021
Normalised 1
8.2
6.8
6.5
13.3
5.7
5.1
8.1
5.8
5.2
9.2
13.2
14.4
% Change
Normalised
43%
31%
(29)%
(7)%
1. Prior year revenue has been normalised to illustrate revenue that would have been included in the Group’s
financial results had Tutela LLC (acquired 4 February 2021) been fully owned by the Group throughout
both periods.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
27
ARR growth was driven by sales to new customers, as well as through pricing initiatives
and upsell with existing customers.
ARR Growth
5.7
0.1
0.8
0.3
1.3
8.2
9
8
7
6
5
4
3
2
1
0
Opening ARR
US acquisition New business
Conversion of
US contracts
Pricing
Closing ARR
New business was driven by transformed market positioning and through demonstrating
measurable value to customers.
The acquisition of Tutela enhanced Checkit’s reach within the Healthcare sector, making
this the fastest growing industry vertical. Together with NHS trusts in the UK, Healthcare
now represents 57% of Checkit’s ARR and offers significant growth potential, both in
terms of further customer acquisition and cross sell within existing customers.
The Group also extended its successful programme of transferring customers to new
subscription-based agreements to the US, combining recurring services with one-off
activities in line with the “peace of mind” SaaS pricing and contractual model now
adopted across Checkit.
As a result of this pricing initiative, the business unit saw further conversion from
non-recurring to recurring revenue during the year, contributing approximately
£0.3m to ARR.
The increase in ARR resulted in 31% growth in reported recurring revenue compared to
prior year on a normalised basis.
Recurring revenue includes like-for-like US recurring revenue growth of 82%, driven
by the strong bookings performance noted above. The lag in Group recurring revenue
percentage growth, compared to the growth rate of ARR reflects the acceleration in
ARR of contracts signed during the second half of the financial year.
Recurring revenue accounted for 51%
of total revenue for the full year. In the
last three months of the year, recurring
revenue contributed 75% of total revenue
as Checkit continued its transformation
into a pure SaaS business.
Non-recurring revenue declined in line
with management’s expectations and as
planned. The Group is now wholly focused
on delivering recurring revenue from its
technology solutions (including those
relating to smart buildings), rather than
traditional BEMS one-off projects with
minimal software input.
EBIT
The Group operating loss before
non-recurring or special items in FY22
was £4.7m (2021: £3.1m loss).
In line with the Group’s strategy, operating
expenses (excluding any non-recurring
or special items) increased to £10.9m
(2021: £9.6m), as the Group invested in its
product, sales, and marketing to support
its expansion.
New product development (NPD) spend
totaled £3.4m (FY21: £2.5m), of which
£1.5m was capitalised (FY21: £nil), as
the Group invested in new enhanced
functionality, including mobile alerting,
shared libraries and job sharing
capabilities.
Investment in sales and marketing almost
doubled to £2.7m (FY21: £1.4m), as the
Group invested in an expanded sales
and marketing team in both the UK and
US to fuel growth, with a strategic focus
on creating enterprise level relationships
with large multi-national and highly
distributed customers.
Checkit plc | Annual Report and Accounts 2022
28
STR ATEGIC REPORT
FINANCIAL REVIEW CONTINUED
Non-recurring or special items
Non-recurring or special items in the
year of £2.4m related to amortisation of
acquired intangible assets, costs relating
to the fundraise, and restructuring and
other one-off unusual costs related to the
organisational transformation programme:
£m
Restructuring and
transformation costs
Costs relating to fundraise
Disposal costs of India operations
Amortisation of acquired
intangible assets
Total non-recurring
or special items
FY22
0.7
0.1
0.2
1.4
2.4
Taxation
The Group is currently loss making and
therefore no corporate tax charge is
reported for the year FY22. A deferred
tax credit of £0.3m arises from the
amortisation of intangible assets arising
on the acquisition of Checkit UK Limited.
There remains over £22m in group carried
forward taxable losses and therefore there
is no expectation of tax payments in the
short to medium term.
EPS – continuing operations
The weighted average number of shares
in issue in FY22 was 68.1m. Loss per
share (basic & diluted) was 10.0 pence
(2021: 8.3 pence)
Acquisition
The acquisition of Tutela took place in
February 2021 and cost £0.4m, net of
£0.2m of cash acquired with the business.
The acquisition enables the Group
to accelerate its US expansion plans,
providing a footprint and an opportunity
to add further scale.
Cash
The group cash position at 31 January
2022 was £24.2m (31 January 2021: £11.5m),
reflecting the oversubscribed placing in
November 2021, when the Group raised
net proceeds of approximately £20.0m.
As a result, Checkit is well capitalised
and strongly positioned to accelerate
its programme of investment, with
the intention of achieving further ARR
growth in FY23.
Greg Price
Chief Financial Officer
5 May 2022
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
29
PRINCIPAL RISKS AND UNCERTAINTIES
Principal risks
and uncertainties
Effectively managing risks is a key priority for the
Checkit Group to support its growth agenda.
Checkit Board of Directors
Ownership and Monitoring
Audit Committee
Independent review and challenge
Risk Management Forum
Review and Input
Group Internal Audit
Independent, objective
review function
Departmental and Functional
Risk Register
Risk Management Forum
Chief Financial Officer – Chair
Chief Operational Officer
Chief Technology Officer
Chief People Officer
Director of Marketing
Company Secretary
Head of Quality & Compliance
– Risk Co-ordinator
Risk Management
The Board has overall responsibility for the maintenance of
systems and processes to manage risk and ensure delivery of
the business strategic priorities.
Risk management responsibility is set out in the displayed
organisation structure above.
To ensure sustainable delivery of shareholder value, a Risk
Management Forum (“RMF”) has been established, aligned to
the senior management structure to ensure risks are identified,
assessed, and mitigated.
The Audit Committee has responsibility for reviewing the
effectiveness of the RMF and internal controls and ensures that
the Group is in full compliance with relevant regulations and laws,
supported by the Company Secretary.
Executive Directors have responsibility for overall management
and delivery of the strategy, considering the risk environment and
regular review by the RMF.
Senior management within each department are responsible
for identifying and recording risks, and implementing agreed
mitigation actions, in line with Group strategic priorities and
risk appetite.
5
Reporting
1
Identify
internal and
external risks
4
Monitor
effectiveness
of mitigation
plans
Checkit
PLC Risk
Management
Forum
3
Manage and
mitigate risk
2
Assess and
quantify
risks
This is combined with a strategic top-down review by the RMF
to ensure that all appropriate risks are identified, assessed and
quantified. Mitigation plans and actions are then put in place to
ensure risks are reduced to a level that is as low as reasonably
practicable.
A bottom-up risk analysis is undertaken considering detailed
individual risks that fit into eight main categories: Corporate,
Commercial, Operational, Financial, Legal & Compliance, People,
Data/IT and External/Environmental.
The RMF reviews a consolidated Group risk register at least twice
a year. Risks are assessed both pre and post mitigation to identify
the overall risk level based on a combination of probability of
occurrence and the magnitude of potential consequences.
Checkit plc | Annual Report and Accounts 2022
30
STR ATEGIC REPORT
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Checkit Risk Heat Map
The risk heat map shows a representation of the
Group’s principal risks, including an assessment of
their relative impact and likelihood (after mitigation).
These risks are not intended to illustrate a full analysis
of all risks that could arise in the ordinary course of
business or otherwise.
More detail on the Group’s principal risks and
uncertainties, and how they are being managed, is
set out below. The principal risks facing Checkit have
changed positively with additional mitigations that
have been put in place during the FY22. The principal
financial risks are separately disclosed in note 24 to
the financial statements on page 77.
FY22 Principal Risks heat map
A Growth
B People & Culture
Software/Product
Development
C
Customer
Dependency
D
E
Information
Governance & Cyber
Security
Business
Transformation
F
h
g
H
i
d
o
o
h
i
l
e
k
i
L
w
o
L
F
B
D
A
E
C
Low
Impact
High
Risk description
A
Growth
Mitigation
The Group’s growth strategy may result in a number of challenges
for the business, including:
▶ increased demand on business resources, including people,
processes, and cash
▶ dependence on new sales to achieve financial and strategic
objectives
▶ dealing with new geographies and regulatory environments
▶ lack of experienced sales and marketing personnel due to the
emerging nature of the market
▶ supply chain pressure, exacerbated by a global lack of hardware
availability
▶ increased burden on operational, financial, and technical
infrastructures
▶ increased operating expenses, impacting Group profitability.
B
People and culture
Checkit is dependent on access to the right talent to deliver on its
strategic goals.
With a dependency on a core group of individuals for critical
knowledge, loss of key personnel could impact the business’
ability to deliver on its plans.
As the business grows, there is also pressure to attract new talent
to deliver key roles quickly to support the existing team.
This risk is increasing in importance in the context of cost-of-living
increases and the recruitment environment post COVID-19.
▶ Resource allocation and ROI processes
▶ Strategy to grow customer relationships over time, reducing the
barrier to adoption
▶ Regular Board reviews on progress
▶ Strategic and financial planning processes
▶ Business performance management reviews
▶ Increased global experience at senior management level
▶ Use of approved advisors
▶ Regular Sales and Operations Planning (S&OP) meetings
▶ Employee engagement programmes
▶ Talent and performance reviews
▶ Employee share option plans
▶ Single Point of Failure and key role identification
▶ Recruitment processes
▶ Business continuity plans
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
31
Risk description
Mitigation
C
Software/product development
Checkit’s proposition is targeted at an evolving market.
The Group’s offer may be disrupted by competitors with a similar
or better proposition if they develop more innovative technology.
Product reliability and performance is essential to customers’
business activities. Any long-term outage or underperformance
could impact the Group’s reputation.
Platform cost effectiveness is essential to ensuring a sustainable
product. Increases in per user or per sensor costs could impact
margin.
D
Customer dependency
The Group has a concentrated customer base, particularly in the
Healthcare and food retail sectors.
While the Group’s growth agenda means this risk continues to
reduce, any loss of business from its largest customers could
significantly impact business performance.
▶ High investment in product development
▶ Regular external analysis and PESTEL assessment
▶ Software testing/ Q&A processes
▶ Customer usage monitoring
▶ Platform load testing
▶ Long term contracts
▶ Customer Excellence programmes and retention plans
▶ Commercial operations and contracting processes
▶ Net Promoter Scores
▶ Customer relationship management
▶ Increased number of Tier 1 customers
E
Information governance and cyber security
The Group holds significant amounts of personal data. This carries
risks associated with information governance and data protection.
The Group is also reliant on cloud-based IT infrastructure, where
any long term loss of key systems could impact the business’
ability to operate.
While most security breaches are due to errors in disclosing data,
cyber-attacks and malware increasingly threaten the integrity of
Checkit’s own data and systems, as well as the data it holds on
behalf of customers.
This risk is increasing in importance in the context of growing
awareness around the sophistication of the threats faced.
F
Business transformation
Checkit is undergoing rapid change and transformation. This
could distract management, impact employee engagement, and
require excessive resource to complete.
Inconsistent communication across all stakeholder groups could
also impact the Group’s ability to execute its plans.
▶ ISO 27001 accredited framework of data security processes
▶ Cyber essentials certification
▶ Data management policies and incident management system
▶ Regular employee training and awareness
▶ Relevant insurances
▶ Use of large global providers
▶ Business continuity / disaster recovery plans
▶ DPO officer and DPO Centre (3rd Party for EU)
▶ Employee communication programme
▶ Clear ownership of transformation plans
▶ Regular Board reviews on progress and impact
▶ Business performance management processes
▶ OKR policies and cascade process
▶ Website overhaul
Checkit plc | Annual Report and Accounts 2022
32
CORPOR ATE GOVERNANCE
EXECUTIVE LEADERSHIP
Leading into the future
Keith Daley
Non-Executive
Chairman
Keith is an experienced
entrepreneur and chairman
with deep knowledge
of sales and marketing.
Originally a corporate
banker, he bought, invested
in, managed, and sold
numerous businesses over
almost 40 years.
Kit Kyte
Chief Executive Officer
Greg Price
Chief Finance Officer
Will Maunder-Taylor
Global VP of Sales
Kit was appointed in
February 2021 to head up
the Company’s growth
function, which combines
sales, marketing, and
commercial operations.
He was formerly Vice
President of Sales at global
professional services
firm Genpact. Before his
business career, he served
as a Captain in the Royal
Gurkha Rifles.
Joining Checkit as Director
of Finance in 2020, Greg
was appointed CFO a
year later, recognising his
strategic contribution. He
spent almost ten years at
Diageo before fulfilling
financial roles at the AA,
Monarch Airlines and
Northgate Public Services.
Leading Checkit’s growth
engine since June 2021,
Will has a robust track
record in technology sales
and is recognised as a
thought leader. Before
joining Checkit, he was
Growth Lead for EMEA at
SparkBeyond, one of the
world’s top AI specialists
John Wilson
Non-Executive Director
Simon Greenman
Non-Executive Director
R
A
R
A
Julie Webbe
Chief Human Resources
Officer
Victoria Thorpe
Chief Operating Officer
A member of the Board
since 2010, John specialises
in commercialising fast-
track product development.
He has extensive
experience in US markets,
channel management
and generating sales
outside the UK.
Simon has over 25 years
of global technology
leadership experience.
He has worked with and
consulted for brands
including B&W, AOL, and
Accenture. Simon sits on
the WEF’s Global AI Council
and is a partner at Best
Practice AI.
Julie joined Checkit in April
2021. With over 20 years of
experience across Fintech,
Real Estate and Media, she
is passionate about agile
approaches to supporting
the business and its people.
Her focus will be to create
an innovative and rewarding
working environment that is
inclusive and diverse.
Leading the Company’s
reshaped operations team,
incorporating delivery and
support, Victoria joined
Checkit in October 2020.
She was previously Director
of Global Operations at
technology firm Ceem,
having started her career in
the Police Force.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
33
Key
Board member
Executive leadership
A Audit committee
R Remuneration committee
Steve Peck
Managing Director,
Checkit Inc
Appointed in February
2021 to lead Checkit’s
US business, Steve is a
forward-thinking business
development professional.
He was previously Director
of Software and Services
at Oracle NetSuite, where
he managed a rapid-
growth team.
Ade Risidore
Global Director of
Marketing & Customer
Success
Since joining Checkit in
2021, Ade has transformed
the marketing and customer
success functions to ensure
scalability and sustainable
value. An experienced
marketing leader and SaaS
specialist, he previously
held senior roles at
Fuse Universal, Hadean
and Automic.
David Cottingham
Chief Product &
Technology Officer
David Davies
Chief Product Officer
Andrew Stevens
Chief Technology
Officer
Joining Checkit in 2022,
David spent 12 years at
Citrix and experience
spanning enterprise SaaS,
API integrations, and cloud
infrastructure. He combines
deep technical knowledge
with commercial experience
across the US, Europe,
India, China, and Japan.
Having joined the company
in 2011, David has led the
development of Checkit’s
product set for the past six
years. Before Checkit, he
held business development
and product strategy roles
at Corizon and BT.
Andrew was appointed
in January 2021 to
lead Checkit’s product
engineering team.
He has previously led
engineering areas across
business management,
PropTech and financial
services, having held key
positions in Kerridge CS,
DMGT, and Sage. He is a
champion of innovation and
transformation.
Checkit plc | Annual Report and Accounts 2022
34
CORPOR ATE GOVERNANCE
CORPOR ATE GOVERNANCE REPORT
Applying the principles
of governance
The Board recognises the value of good corporate governance and
can confirm that it has complied with the Quoted Company Alliance’s
Corporate Governance Code (the Code). The Board believes that
the QCA Code provides the most suitable framework of governance
arrangements for the Company, considering the size and stage of
development of the Company’s business. Checkit regularly reviews
the ten principles set out in the Code and updates the Corporate
Governance page on our website to explain how Checkit complies
with each principle. Our statement of compliance can be found at
https://www.checkit.net/investor-relations/corporate-governance/.
By complying with the Code and maintaining a strong governance
structure, Checkit aims to promote the long-term success of the
company and its shareholders.
Principle 1: establish a strategy and business
model which promotes long-term value for
shareholders
Checkit is transitioning to a dynamic Software-as-a-Service global
business model focused on annual recurring revenue driven by
the provision of intelligent operations to our customers. More
detail can be found in the strategic report at pages 2 to 31.
Strategy is the responsibility of the Chairman, Chief Executive
Officer, Chief Financial Officer, and the Global Leadership Council.
The business model is designed to achieve Checkit’s growth
ambitions by ensuring ability to scale and maximising efficiency.
Principle 2: seek to understand and meet
shareholder needs and expectations
The Board is committed to engaging with shareholders to ensure
that the business strategy, operating model, and performance are
clearly understood and communicated. The Executive Directors
are in contact with the Company’s major shareholders in relation
to strategic decisions and regularly pass feedback to the Board. In
addition, Checkit’s nominated advisor and broker (Singer Capital
Markets) keep the Executive Directors appraised of shareholder
expectations and reactions.
The Board looks to maximise opportunities to communicate and
actively encourages feedback from the investor community. The
Board places great emphasis on having constructive relationships
with all shareholders. The AGM is the main forum for dialogue
with private shareholders and the Board. Shareholders are given
the opportunity to raise questions during the AGM which Checkit
plans to (subject to a change in restrictions relating to COVID-19)
hold in an open capacity in person.
In addition, Checkit has a regular programme of investor
engagement which includes product and trading updates, an
annual capital markets day and presentations to shareholders and
analysts immediately following the publication of the half year and
full year results.
Feedback from shareholders is reviewed by the Board following
presentations, and Non-executive Directors are also available
to meet major shareholders, if required.
Checkit’s main point of contact for shareholder engagement is the
Company Secretary and general contact details are also available
on Checkit’s website to support communication and feedback.
Principle 3: take into account wider stakeholder
and social responsibilities and their implications
for long-term success
In addition to its shareholders, the Company considers its other
key stakeholder groups to be:
▶ Employees
▶ Customers
▶ Suppliers
▶ Regulators
▶ Local communities
Checkit takes its responsibility to these stakeholders seriously
and seeks to actively engage with them regularly to inform and
influence better decision making. A register of all interested
parties is maintained and assessed regularly by management as
part of the Quality Framework. More detail can be found in the
s172 statement at pages 18 to 19.
Principle 4: embed effective risk management,
considering both opportunities and threats,
throughout the organisation
The Board has responsibility for ensuring Checkit has effective
risk management processes and that a system of internal control
is embedded within the organisation. The principal risks identified
by the Board including mitigating controls are shown on pages 29
to 31 of this annual report. Checkit has an established framework
of internal financial controls which is subject to review by the
Executive Directors and the Audit Committee considering the
ongoing risks faced by the Group. In addition, Checkit’s auditors
are encouraged to raise with the Audit Committee any comments
they may have in relation to risk management on an ad-hoc basis
and in their management letter following their audit.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
35
The key elements of Checkit’s internal control
environment include:
▶ close involvement of the Executive Directors in the day-to-day
running of the Group;
▶ clear lines of authority and reporting established;
▶ regular internal audits of all departments within the business;
▶ centralised control and decision-making over key areas such
as capital expenditure and financing; and
▶ a suite of regular reports focusing on the key performance and
risk areas. Such reports include detailed annual budget setting
with monthly monitoring and daily reporting including reports
on sales, orders and cash balances compared with budget.
The Group undertakes regular updates and reviews of its business
processes, co-ordinated by the Group quality function to ensure
that it not only addresses basic financial controls but that non-
financial controls are also in place over areas such as information
security, calibration and certification, health and safety,
environmental issues and adherence to law and regulations.
Mitigation can only provide reasonable, but not absolute,
assurance against material misstatement or loss. As such the
Group maintains appropriate insurance cover for the Group’s
activities, with the types of cover and insured values being
reviewed on a regular basis by the Board.
The Group maintains a risk register which not only highlights risks
relevant to its businesses but also details the actions being taken
to mitigate these risks. These registers are reviewed regularly
at executive leadership team level and are subject to scrutiny
by the Board at least twice a year.
Principle 5: maintain the Board as a well-functioning,
balanced team led by the chair
The Board regularly reviews its composition and is satisfied that
it has an effective and appropriate balance of skills between the
Directors to deliver the strategy of the Company for the benefit
of its shareholders. The Board is satisfied that it has an effective
and appropriate balance of skills between the Directors to deliver
Checkit’s strategy for the benefit of its shareholders over the
medium to long term.
The Board comprises the Non-executive Chairman, Chief Executive
Officer, Chief Financial Officer and two Non-executive Directors.
Biographies are set out on page 32 and illustrate the range
of experience which the Board believes enables it to provide
effective business leadership. All Board Directors are put forward
for re-election at each AGM.
Where new Board appointments are considered, the search
for candidates is conducted and appointments are made, on
merit, against objective criteria and with due regard for the
benefits of diversity on the Board, including but not limited
to gender balance.
The Chairman takes responsibility for a calendar of regular Board
meetings and at least 6 times per year. Owing to the successful
fundraise which took place in late 2021, the Board met 26 times
in FY22. Of these 26 meetings, 12 were not focused on the
fundraise. The Chairman ensures that Board agendas reflect
good corporate governance and concentrate on the key strategic,
operational and financial issues.
The Board is aware of the backgrounds and other interests of
the Directors and changes to these are reported and where
appropriate agreed with the rest of the Board. Procedures are
in place to manage potential conflict of interest.
The Board is supported by an Audit Committee and
Remuneration Committee, of which Non-executive Directors
John Wilson (Chair of the Audit Committee and Remuneration
Committee) and Simon Greenman are members. John Wilson’s
extensive business management experience alongside Simon
Greenman’s senior leadership expertise provide the necessary
level and combination of skills and knowledge to each of
those Committees.
Principle 6: ensure that between them the
directors have the necessary up-to-date
experience, skills and capabilities
The Directors keep their skillset up to date with ongoing training
and are informally regularly assessed. All Directors are put
forward for re-election at each AGM.
The Directors are required to keep their relevant knowledge up to
date and are regularly assessed on an informal basis.
The Board is supported by the Company Secretary and every
Director is aware of the right to have concerns added to minutes
and to seek independent advice at the Group’s expense where
appropriate.
Principle 7: evaluate Board performance based
on clear and relevant objectives, seeking
continuous improvement
Evaluation of the Board has historically been carried out in an
informal manner. This financial year, the Board anticipates that
it will develop a formal review process which will consider the
performance of each Director.
Checkit plc | Annual Report and Accounts 2022
36
CORPOR ATE GOVERNANCE
CORPOR ATE GOVERNANCE REPORT CONTINUED
Principle 8: promote a corporate culture based
on ethical values and behaviours
The Board understands that a healthy corporate culture based
on sound ethical values and behaviours is essential to creating
a working environment in which employees feel valued and can
be most effective. The Board is committed to pursuing and
maintaining high standards of corporate governance across
the Group.
The employee handbook is updated regularly and provides
guidance to all business employees alongside a Company
provided employee assistance programme to ensure ongoing
employee wellbeing. Employee feedback and cultural tone are
regularly reviewed by the Board alongside regular employee
communication programmes. During FY21 an employee run
culture committee was formed to empower employees to
drive culture through environmental, employee wellbeing
and socially focused initiatives sponsored by senior and
executive management.
The Company has been through a period of significant
transformation as well as a challenging external environment
caused by the COVID-19 pandemic. During this time employee
wellbeing and alignment has been of significant importance to
the Board. Throughout the COVID-19 pandemic, Checkit has
supported employees who are able to work remotely and the
company has introduced a remote-working policy to embed
flexible ways of working within the company.
The Company has a strict share dealing policy covering insider
trading/inside information, the AIM Rules and Market Abuse
Regulations which apply to Checkit and individuals. This policy
is circulated to all individuals who qualify for share options and
who fall within the categories of insiders, PDMRs and restricted
persons. Relevant individuals are asked to sign a letter confirming
they understand the policy. Furthermore, in accordance with the
Market Abuse Regulations of the Financial Conduct Authority,
employees subject to this policy are required to seek the approval
of the Company Secretary and/or Chairman before dealing.
Principle 9: maintain governance structures and
processes that are fit for purpose and support
good decision-making by the Board
The long-term success of the Group is the responsibility of
the Board. Two Executive Directors have responsibility for
the operational management of the Group’s activities and
development of the Group strategy. Three Non-executive
Directors are responsible for bringing independent and objective
judgement to Board decisions. The Company Secretary is
responsible for ensuring that Board procedures are followed,
and applicable rules and regulations are complied with.
A corporate calendar is set at the beginning of the financial
year and includes provisional dates for all Board and committee
meetings ensuring an appropriate spread throughout the year.
Standing agenda items are agreed at the beginning of each year
and will include a schedule of matters which allow the Board to
carry out its duties effectively.
Agendas are finalised and circulated with relevant supporting
information and papers to Board members ahead of the meetings.
In addition, senior managers are regularly invited to attend
meetings to update on business performance as appropriate.
The Company Secretary is responsible for ensuring that a
corporate calendar is available to the Board which sets out
activities including but not limited to, board and committee
meetings dates, issue of key reports, business performance
cycle, key compliance activities, audits and key stakeholder
communication points.
This calendar is regularly reviewed and may be supplemented
with additional meetings as business needs arise.
The Board has two sub-committees as follows:
Audit Committee:
The Audit Committee oversees the integrity of the financial
results and risk management strategy of the Company.
It engages and works with the external financial auditor and Group
management. It reviews and reports to the Board on significant
issues including estimates and judgements made in connection
with the preparation of the Group financial statements.
Full details of the Report of the Audit Committee are set out on
pages 38 to 39. The Audit Committee met 4 times during FY22.
Remuneration Committee:
This Committee ensures that the Group’s Executive remuneration
policy is aligned to the implementation of the Company strategy
and shareholder interests. The Committee seeks to establish
a remuneration policy that is designed to motivate, retain and
attract Executives of the calibre necessary to achieve the Group’s
strategic ambitions. Full details of the Report of the Remuneration
Committee can be found on pages 40 to 44. The Remuneration
Committee met 7 times during FY22.
Given the current size and complexity of the Group, the Board
does not currently consider that a nominations committee
is required.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
37
Principle 10: communicate how the company
is governed and is performing by maintaining
a dialogue with shareholders and other
relevant stakeholders
Engagement with our stakeholders is key to a successful business
and is an ongoing part of managing our business. We summarise
why and how we engage with our six key stakeholders including
our shareholders on pages 18 to 19.
The Group communicates with shareholders in a number of
ways, including:
▶ The Group’s annual report and accounts
▶ Full year and half-year result announcements
▶ Other regulatory announcements
▶ The Annual General Meeting and outcomes
▶ Meetings with existing shareholders
▶ Webinars or roadshows
▶ One to one meetings with major (or potential) shareholders
Corporate information available on the Company
website includes:
▶ Annual reports for the last six completed financial years
▶ Full and half year results announcements
▶ Notices of general meetings for the last six completed
financial years
▶ Other regulatory announcements
The Company engages its broker and investor relations advisers
(Singer Capital Markets) to assist in shareholder interaction and
feedback. The Board receives regular updates on the views of
shareholders from these advisers.
Regular townhalls with employees take place to share trading
updates and results following the publication of half and full-year
results. Employees are also directed to the Company website and
encouraged to keep up to date with Company reports. For further
and more detailed explanations of how the Group maintains a
dialogue with shareholders and other relevant stakeholders see
the Company’s S172(1) statement on pages 18 to 19.
Checkit plc | Annual Report and Accounts 2022
38
CORPOR ATE GOVERNANCE
AUDIT COMMIT TEE REPORT
Audit
Committee
report
Dear Shareholders,
I am pleased to present my report as Chair of the Audit
Committee (“Committee”) for the financial year ended
31 January 2022.
Composition
The Committee consists of the Non-executive Directors Simon
Greenman and myself. I was appointed Chair of the Committee
in August 2020. The biographies of the Committee members can
be found on page 32 and the Company’s website.
The Board considers that for the size and complexity of the
Company, the Committee is properly constituted and has a
sufficient level of competence.
External Independent Auditor
The detailed independent report of the auditor is shown on
pages 48 to 55.
Re-appointment
The appointment of the independent external auditor is
approved by shareholders annually. The audit of the financial
statements is conducted in accordance with International
Standards on Auditing (UK) (ISAs), issued by the Auditing
Practices Board.
There are no contractual obligations that act to restrict the
Committee’s choice of external auditor.
Grant Thornton UK LLP was appointed as independent auditor for
FY21, with re-appointment for FY22 approved by shareholders at
the Annual General Meeting.
This year, having considered the effectiveness and performance
of the independent auditor, who has reported on the Company
for the past two financial years, the Committee has recommended
to the Board the re-appointment of Grant Thornton UK LLP as
independent auditor of the Company for the next financial year.
Services, independence and fees
The independent auditor provides the Committee with:
▶ A report to the Committee giving an overview of the results,
significant contracts and judgements and observations on the
control environment; and
▶ An opinion on the truth and fairness of the Group and
Company accounts.
The Committee monitors the cost effectiveness of audit and
assesses if any non-audit work performed by the independent
auditor could result in a conflict of interest.
The Committee has reviewed the controls in place to ensure Audit
independence, which include:
▶ Group policies around committee approval requirement for
significant non-audit work;
▶ Group policy prohibiting the provision of bookkeeping
services;
▶ Regulations around appointment of Auditor ex-employees;
▶ Regular reviews of non-audit fees to independent auditor; and
▶ Grant Thornton UK LLP internal controls and procedures
preventing a conflict of interest.
FY22 non-audit fees amounted to £26,000 (FY21: £61,300).
Governance
The Group applies the Quoted Companies Alliance Corporate
Governance Code.
The Committee’s terms of references are available on request
from the Company Secretary and on the company website
www.checkit.net
Main activities
The Committee met four times during the financial year.
Grant Thornton attended two of the meetings. Subsequent to
the year end, the Committee has met once with the independent
auditor to discuss the findings of the year-end audit and contents
of the Audit report.
The Executive Directors are not members of the Committee but
attend Committee meetings by invitation, in particular, attending
the meetings at which the interim and annual results are reviewed.
The key activities carried out by the Committee include:
▶ Monitoring the integrity of the financial statements and
reporting of the Group;
▶ Reviewing financial reporting significant issues, accounting
policies and disclosures;
▶ Reviewing the effectiveness of the Group’s risk management
framework;
▶ Reviewing the appropriateness and effectiveness of Group
internal controls;
▶ Making recommendations to the Board on the appointment, re-
appointment and removal of the Group’s independent auditor;
▶ Reviewing the independent auditor’s audit strategy and
implementation plan;
▶ Reviewing auditor findings in relation to the annual and
interim reports;
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
39
▶ Overseeing the Board’s relationship with the independent
auditor; and
▶ Reviewing the Group’s procedures for detecting and
responding to possible wrongdoing, fraud and bribery.
The Committee reports on all such matters to the Board.
The Committee’s work also included reviewing the financial
statements, key financial policies, including accounting, tax and
treasury, and significant issues of judgement, detailed as follows:
Going concern
The Group continues to prepare its financial statements on
a going concern basis, as set out in Note 1 to the financial
statements. The Committee has reviewed the financial forecasts
prepared by management as at the date of this report, and has
concluded that it was appropriate for the Group to prepare its
financial statements on a going concern basis.
Revenue recognition
The revenue recognition accounting policies across the business
are set out in Note 1 to the financial statements.
Acquisition of Tutela Monitoring Systems LLC
In February 2021, the Company acquired Tutela Monitoring
Systems LLC (“Tutela”) including cash of approximately $0.25m
(£0.2m) in Tutela as at the date of completion for a total upfront
cash consideration of $0.85m (£0.62m). The acquisition was
funded from the Group’s existing cash resources.
Tutela, which is based in Florida, provides wireless temperature
monitoring systems for all applications and facilities which store
sensitive inventory for businesses within the healthcare sector.
The Group intends to utilise Tutela as a platform to pursue all
industries and verticals targeted by Checkit.
In the year ending 31 December 2020 Tutela’s sales were
approximately $2m (£1.46m) with profit before tax of $0.27m
(£0.20m) and net assets (including cash) amounting to $0.16m
(£0.12m). If the businesses had been consolidated during that
period, approximately £1 million would have been added to
Group sales per annum after eliminating intercompany sales on
consolidation.
Deferred taxation
The Committee reviewed the appropriateness of the recognition
of deferred taxation. The level of deferred tax asset recognition
in relation to accumulated tax losses is underpinned by a range
of judgements. The Committee was satisfied that no recognition
of deferred tax asset is included. Further details on these are
disclosed in Notes 8 and 14 respectively.
Internal financial control systems
The Audit Committee is required to assist the Board in its annual
assessment of the effectiveness of risk management and internal
control systems.
The Committee approved the rollout of a Group risk management
framework and regularly reviews the risk register and profile, as
managed by the Board members and senior management.
The internal control framework is reviewed for effectiveness using
an assessment framework to ensure the following are in place:
▶ Risk mitigation controls can be evidenced and supported;
▶ Issues are raised appropriately, documented and followed up,
including those raised by the external auditor;
▶ Appropriate defined processes and policies are in place;
▶ Clearly defined lines of responsibility are in place;
▶ Appropriate segregation of duties is built into processes;
▶ Appropriate delegation of authority is in place, including Board
approval of budgets and forecasts;
▶ A process of results comparison and financial performance
management is in place, and variances are followed up and
investigated;
▶ The Group appoints staff of the required calibre to fulfil their
allotted responsibilities; and
▶ Annual management reviews of controls and risk are evidenced
and actions are completed.
The Committee was satisfied that it was appropriate for the Board
to make the statements regarding internal controls included in
the Report of the Directors and the Directors’ responsibilities
statement.
Quality accreditations and internal audit
The Audit Committee approved the rollout of a new risk
management framework for the Group. The Group has policies
and processes in place, which meet the requirements of ISO 9001
and ISO 27001. These standards are audited annually and the
Group is accredited with both as at 31 January 2022.
The standard illustrates Group compliance with industry
standards around the framework of Group processes and data
security.
From FY21, a compliance manager was appointed, with
responsibility for facilitating audits and started a programme of
internal audit, ensuring effective risk management throughout a
time of business transformation. The Committee is confident in
the internal audit activity and that the framework is effective.
Reporting to the Board
The Committee reports back to the Board regularly on matters
under its purview.
Approval
This report was approved by the Committee, on behalf of the
Board, on the date shown below and signed on its behalf by:
John Wilson
Chair of the Audit Committee
5 May 2022
Checkit plc | Annual Report and Accounts 2022
40
CORPOR ATE GOVERNANCE
REMUNER ATION REPORT
Remuneration
report
Terms of reference reflect the adoption of the QCA Code and
are available on our website or from the Company Secretary
on request.
Unaudited information
The independent auditor is not required to audit and has not,
except where indicated, audited the information included in
the Remuneration report. The audited information meets the
remuneration disclosure requirements of Rule 19 of the AIM Rules
for Companies.
Executive Directors’ remuneration policy
The Group’s remuneration policy has been designed with ambitious
growth plans and a transforming Software as a Service (SaaS)
business in mind.
The purpose of the policy is to motivate and incentivise
appropriately experienced senior Executives of high calibre,
who are best placed to ensure the Company achieves its strategic
goals and delivers medium- to long-term shareholder value.
Dear Shareholder
The following Remuneration report for FY22 has been prepared
by the Remuneration Committee and approved by the Board.
Shareholders will be invited to approve this report at the
forthcoming Annual General Meeting.
Composition
The Remuneration Committee currently consists of Simon Greenman
and myself. Simon Greenman replaced Rachel Neaman following
her resignation from the Board in June 2021. The biographies
of Committee members can be found on page 32 of this report
and on the Company’s website.
No member of the Committee has or has had any personal
financial interest (other than as shareholder) or conflicts of
interest from cross directorships.
Role
The Committee sets policy on Directors’ remuneration and
determines the remuneration packages of each of the Group’s
Executive Directors.
The Committee also reviews and determines elements of
remuneration related to:
▶ Any employee with a base salary of >£120k.
▶ All employee schemes involving equity-related incentive.
Governance
The Committee regularly reviews Group remuneration and
ensures an appropriate balance between fixed and variable
elements. Director packages are benchmarked against market
norms and independent advisers engaged where appropriate.
It is the responsibility of the Committee to ensure the policy
is effectively implemented and that shareholders’ interests are
at the core of any remuneration policy design.
Companies with securities listed on AIM are not required to
comply with either the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations 2013
or the UKLA Listing Rules.
The Company has adopted the QCA Code and applied the
regulations and guidelines as far as is practical, given the size
of the Group.
This reflects the Company’s commitment to maintaining high
standards of corporate governance and open communication
with shareholders.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
41
Executive Directors’ remuneration policy continued
The table below illustrates the policy to operate until the next AGM in 2023:
Purpose
Basic salary
Principles and application
To attract and retain high calibre Executives who are
expected to design and execute an ambitious growth strategy
Salaries are reviewed annually in light of benchmarking data and
competitor intelligence
Pension
To offer the opportunity for Executives to accrue pension
rights in line with maximum HMRC limits
Executives are eligible to join the Group pension scheme
immediately on joining
Benefits
To offer a benefits package in line with best market practice
Executives are offered income protection, family private medical
cover and in-service death cover
Short term incentive plans (STIP)
To incentivise strong short-term financial performance
in each year
Long term incentive plans (LTIP)
To incentivise long-term performance and sustained
improvement in shareholder value
Plans are reviewed and set annually with financial performance
targets being set in Q1. Payment may be in either cash or company
shares. Maximum payment will not normally exceed 100% of
base salary
A long term incentive plan has been established to provide a
meaningful reward over a period of five years by incentivising the
delivery of shareholder value. The LTIP is linked to Rule of 40 growth
and profit metrics and a share price target.
Options plan: Enterprise Management Incentive Scheme (EMI)
To incentivise long-term performance and sustained
improvement in shareholder value
Option grants are made at Remuneration Committee discretion.
No EMI total award shall exceed £250,000
Notes
Basic salary
FY22:
The basic salaries for Executive Directors were not reviewed or changed in FY22.
FY23:
In light of current inflationary pressures, the Committee may consider a review of base salaries.
Annual bonus plan
Bonuses are not contractual and remain at the discretion of the Remuneration Committee.
FY22:
Bonus payments were earned by Executive Directors in FY22 as follows. Keith Daley was paid a bonus of £200,000 following the
reorganisation of the Group consequent on the sale of Bulgin. The reorganisation was completed during FY21 and the bonus was
agreed by shareholders at the general meeting held on 3 September 2019.
In FY22 bonus payments were awarded to Kit Kyte of £225K and Greg Price of £15K based upon achieving targets set at the start
of the year.
FY23:
An FY23 in year Executive bonus plan has been agreed per below:
Executive Director
Kit Kyte
Greg Price
Metrics
Financial Performance
Financial Performance
Earning potential
100% of base salary
50% of base salary
Detailed financial targets and performance metrics have been agreed. Payment of any bonus is dependent on Remuneration
Committee assessment and approval.
Checkit plc | Annual Report and Accounts 2022
42
CORPOR ATE GOVERNANCE
REMUNER ATION REPORT CONTINUED
Notes continued
Long-term incentive plans
In March 2022, Kit Kyte was granted options under an LTIP. The LTIP was designed to provide a meaningful reward over a period
of five years by incentivising the delivery of shareholder value. The LTIP is linked to Rule of 40 growth and profit metrics and a share
price target.
Enterprise Management Incentive Plan
The Board approved in May 2020 a tax-advantaged Enterprise Management Incentive (EMI) Plan (the Plan) to grant options to staff. The
Plan was drafted with input from Deloitte LLP and complies with the provisions of the EMI Code of the Income Tax (Earnings & Pensions)
Act 2003.
Under the Plan the Company may grant share options to staff over shares with a value up to a limit of £250,000 per employee as part
of the Company’s reward and retention policy.
Non-executive Directors are not eligible for this scheme. Options may be exercised between years three and ten. Options will lapse
if employment ceases.
The Remuneration Committee is responsible for approving all awards and its current policy is to issue options to all employees with
the minimum award being over 5,000 shares.
EMI options in issue as at 31 January 2022 are per below:
Employee
Kit Kyte
Kit Kyte
Greg Price
Other employees
Other employees
Other employees
US Sub Plan
US Sub Plan
US Sub Plan
Total
Exercise
date
17 February 2024
19 February 2024
17 February 2024
7 July 2023
17 February 2024
12 July 2024
17 February 2024
19 February 2024
12 July 2024
Option
price
55.5p
55p
55.5p
40.5p
55.5p
57p
55.5p
55p
57p
Options at
31 January
2022
225,000
227,500
100,000
1,315,000
365,000
885,000
347,500
227,500
155,000
3,847,500
Employment contracts
Executive Directors
All Executive Directors are employed on service contracts terminable on six months’ notice by the Company or the Director.
Non-executive Directors
All Non-executive Directors serve under letters of appointment that either party can terminate on three months’ written notice. Their
remuneration is determined by the Board (excluding the Non-executive Directors) within the limits set by the Articles of Association and
is based on fees paid in similar companies and the skills and expected time commitment of the individual concerned.
The basic fees were reviewed during 2021 and while fees were aligned, no other increases were given. The Non-executive Directors
receive no remuneration or benefits in kind other than their basic fees and are not eligible for any equity-based incentive schemes.
Total emoluments and the single figure of total remuneration emoluments for the Executive and Non-executive Directors are set
out below.
The figures represent amounts earned during the relevant financial year. Such emoluments are charged in the same financial year.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
43
Audited information
Year to
31 January 2022
Executive Directors
K Daley
A Muir
K Kyte
G Price
Non-executive
Directors
J Wilson
R Neaman
S Greenman
TOTAL
Year to
31 January 2021
Executive Directors
K Daley
A Weatherstone
A Muir
Non-executive
Directors
J Wilson
R Neaman
R Piper
TOTAL
Basic pay
£’000
Benefits 1
£’000
Bonuses
£’000
196
173
155
60
40
14
26
664
6
7
6
1
—
—
—
20
—
80
225
15
—
—
—
Total
£’000
202
260
386
76
40
14
26
320
1,004
Basic pay
£’000
Salary
supplement
£’000
Fees for
additional
work 3
£’000
Benefits 1
£’000
Bonuses
£’000
COVID-19
Q1 Salary
reduction
£’000
206
146
49
38
40
19
498
133
—
—
—
—
—
133
—
—
—
—
65
—
65
13
9
4
—
—
—
26
—
—
—
—
—
—
—
(53)
(12)
—
(3)
(4)
(1)
(73)
Total
£’000
299
143
53
35
101
18
649
1 Benefits include car or car allowance, if applicable fuel and private medical insurance for Directors and dependants.
2
Includes payments made in lieu of pension contributions.
3 Fees paid to Neaman Consultancy Ltd for management consultancy and services in FY22.
The emoluments of the highest paid Director in FY22 were £398,000 compared to £299,000 in FY21.
The annual basic pay for each current serving Director as at 31 January 2022 is as follows:
Year to 31 January
K Daley
K Kyte
G Price
A Muir
J Wilson
S Greenman
R Neaman
TOTAL
LTIPs vested
or options
exercised
in year
£’000
Single
figure
remuneration
£’000
Pension
contribution 2
£’000
—
18
12
4
—
—
—
34
—
—
—
—
—
—
—
—
202
278
398
80
40
14
26
1,038
LTIPs vested
or options
exercised
in year
£’000
Single
figure
remuneration
£’000
Pension
contribution 2
£’000
21
11
2
—
—
—
34
—
—
—
—
—
—
—
320
154
55
35
101
18
683
Basic pay at
31 January
2022
£’000
Basic pay at
31 January
2021
£’000
189
275
150
—
40
40
—
505
206
—
—
140
40
—
40
426
K Daley basic pay reduced to £100,000 from 1 February 2022 on transferring to the role of Non-Exec Chair from that date.
Checkit plc | Annual Report and Accounts 2022
44
CORPOR ATE GOVERNANCE
REMUNER ATION REPORT CONTINUED
Unaudited information
Directors’ share ownership
The shares owned by the current Directors serving as at 31 January 2022 are as follows:
K Daley
K Kyte
G Price
J Wilson
S Greenman
TOTAL
Shares owned
outright at
date of
this report
20,925,366
Shares owned
outright at
31 January
2022
20,925,366
108,695
54,350
906,650
56,347
108,695
54,350
906,650
56,347
Shares owned
outright at
31 January
2021
14,838,410
—
—
789,259
—
22,051,408
22,051,408
15,627,669
Amounts payable to outside advisers in respect of Directors’ remuneration:
Independent remuneration advisers were engaged during FY22 at a cost of £4k (FY21: nil).
Approval
This report was approved by the Board of Directors on the date shown below and signed on its behalf by:
John Wilson
Chair of Remuneration Committee
5 May 2022
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
45
REPORT OF THE DIRECTORS
Report of
the Directors
The Directors present their annual report and accounts, together
with the audited financial statements for the year ended
31 January 2022.
Principal activity
Checkit plc is the holding company of Checkit Europe Limited
and Checkit UK Limited (together “Checkit”) which is a leading
provider of an intelligent operations management platform for
deskless workforces, enabling operational agility and intelligent
decision-making in large multinational and complex national
organisations.
Checkit’s SaaS business model offers optional plugins for sensor
networks and smart building management. Checkit’s solutions
apply digital tools and monitoring to transform workforce
management, and incorporate physical assets into a digital
ecosystem using IoT sensors and monitoring devices.
to ensure that its activities comply at all times with relevant
environmental legislation.
Streamlined energy and carbon reporting
The Group has chosen not to report data from any of its UK
subsidiary undertakings as none of them are large companies
and, therefore, are not required to report such information
on a stand-alone basis. The parent company is exempt from
reporting as given the nature of its activities it is a low energy user
consuming less than 40MWh during the year.
Financial instruments
Principal financial risks and mitigating activities have been set out
within the strategic report. Additionally, Note 24 to the financial
statements provides further details in respect of financial risk
management and objectives.
A detailed review of the business, its results and future direction
is included in the strategic report set out on pages 2 to 31.
Directors and their interests
The present membership of the Board is as follows:
Results and future developments
The Group’s loss on ordinary activities after taxation for the year
£6.8m compared to £4.4m last year. The Group’s results are set
out in the consolidated income statement on page 56 and are
explained in the Chief Financial Officer’s statement on pages
pages 26 to 28.
The subsidiaries of the Group as at 31 January 2022 are listed
in Note 13.
The Directors do not propose a dividend in respect of the year
ended 31 January 2022 (2021: £nil).
Going concern
The Group’s business activities, performance and position are
set out in the strategic report. The financial position of the
Group is described on pages 26 to 28. Details of the key risks and
uncertainties in the business along with the mitigation actions in
place, has been presented in the risks and uncertainties on pages
29 to 31.
The Directors have considered the going concern assumption
and have reviewed detailed budgets for the next two years.
Having considered the Group’s cash flows and liquidity position
following the placing which raised a net c.£20 million in November
2021, the Directors have concluded that the Group has adequate
resources to continue operations for the foreseeable future and
therefore continue to adopt the going concern basis in preparing
the financial statements.
Health, safety and environment
The Group recognises and accepts its responsibilities for
maintaining high standard of health and safety management
for all its operations to safeguard its employees, customers and
the local community. The Group strives to minimise its impact
on the environment and is committed to the maintenance of
environmental controls as they relate to the business and aims
▶ Christopher Kyte, Chief Executive Officer (appointed
12 July 2021)
▶ Gregory Price, Chief Financial Officer (appointed
6 September 2021)
▶ Keith Daley, Non-executive Chair (who moved to a
non-executive role from 1 February 2022)
▶ John Wilson, Non-executive Director
▶ Simon Greenman, Non-executive Director (appointed
7 June 2021)
The following directors resigned during the year:
▶ Rachel Neaman (resigned 2 June 2021)
▶ Aylsa Muir (resigned 3 September 2021)
Biographical details of the current Directors are set out on page
32 and details of Directors’ beneficial interests in the shares of the
Company as at 31 January 2022 are set out in the Remuneration
report on pages 40 to 44.
The Board follows best practice recommendations and,
accordingly, the whole Board will be offering itself for re-
appointment or appointment as appropriate.
Directors’ indemnity arrangements
The Company has granted indemnities to each of its Directors
of all losses arising out of or in connection with the execution
of their powers, duties and responsibilities as Directors to
the extent permitted by the Companies Act 2006 and the
Company’s articles.
Such qualifying third-party indemnity provisions remain in force at
the date of this report.
The Group has purchased and maintained throughout the year
Directors’ and Officers’ liability insurance in respect of itself and
its Directors.
Checkit plc | Annual Report and Accounts 2022
46
CORPOR ATE GOVERNANCE
REPORT OF THE DIRECTORS CONTINUED
Directors’ remuneration
Details of Directors’ remuneration are contained in the
Remuneration report on pages 40 to 44.
Share capital
As at the date of this report, the total number of shares in issue
(being ordinary shares of 5 pence each) is 108,008,562 (2021:
62,447,542).
During the year, the Company issued 45,561,020 ordinary shares
of 5 pence each (2021: 413,925 shares). This was on the exercise
of share options and a placing of 45,561,020 shares in November
2021 to raise net c.£20m – please see page 75 for further details
about the fundraise.
Auditor and disclosure of information to auditor
The Directors confirm that there is no relevant audit information
of which the Group’s auditor is unaware and each Director has
taken all the steps that he ought to have taken as a Director to
make himself aware of any relevant audit information and to
establish that the Group’s auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with Section 418 of the Companies Act 2006.
Annual General Meeting
The Company’s AGM will be held on 9 June 2022. Accompanying
this annual report and accounts is a letter from the Chairman and
a Notice of AGM that sets out the resolutions to be considered
and approved at the meeting.
Details of the share capital are given in Note 20 to the
financial statements.
On behalf of the Board
Hugh Wooster
Company Secretary
5 May 2022
Registered number
448274
Substantial shareholdings
As at 31 March 2022 (being the latest practicable date before
the publication of this report), the Company has been notified in
accordance with Chapter 5 of the Disclosure Transparency Rules,
of the following interests of 3% or more in its issued ordinary
share capital:
D&A(UK) Holdings Limited
Mr K Daley
Ruffer LLP
Herald Investment Management Limited
Chelverton Asset Management
EdenTree Investment Management
Richard Sneller
21.76%
19.37%
8.50%
7.32%
4.50%
3.92%
3.30%
As far as the Directors are aware, there were no other interests
above 3% of the issued ordinary share capital.
The Company’s website, www.checkit.net, provides updated
information on substantial shareholdings.
Employees
The Group’s policies are designed to provide for the welfare,
health and safety of its employees. The Group is committed
to ensuring there are equal opportunities for all employees,
regardless of gender, race, age, disability, religion or sexual
orientation, where it is reasonable and practicable within existing
legislation. The Group offers training (through LinkedIn learning,
for example) to employees enabling them to enhance their skill
base and assist the business in meeting future challenges. The
Group continues to keep its staff informed of matters affecting
them as employees and of the various factors affecting the
performance of the Group through regular townhall meetings.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
47
DIRECTORS’ RESPONSIBILITIES STATEMENT
Directors’
responsibilities statement
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.
Directors’ responsibilities statement
We confirm that to the best of our knowledge:
▶ the financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company and the undertakings included in the
consolidation taken as a whole;
▶ the annual report includes a fair review of the development
and performance of the business, the position of the Company
and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that it faces; and
▶ the annual report and financial statements, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s performance, business model and strategy.
By order of the Board
Greg Price
Chief Financial Officer
5 May 2022
The Directors are responsible for preparing the annual report
and the Group and parent company financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and
parent company financial statements for each financial year. As
required by the AIM Rules of the London Stock Exchange they are
required to prepare the Group financial statements in accordance
with UK-adopted International Accounting Standards (‘IFRSs’) and
applicable law and have elected to prepare the parent company
financial statements in accordance with UK accounting standards
and applicable law (UK Generally Accepted Accounting Practice),
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 of the Group and parent company and
of their profit or loss for that period. In preparing each of the
Group and parent company financial statements, the Directors
are required to:
▶ select suitable accounting policies and then apply
them consistently;
▶ make judgements and estimates that are reasonable, relevant,
reliable and prudent;
▶ for the Group financial statements, state whether they have
been prepared in accordance with IFRSs;
▶ for the parent company financial statements, state whether
applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained
in the financial statements;
▶ assess the Group and parent company’s ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
▶ use the going concern basis of accounting unless they either
intend to liquidate the Group or the parent company or to
cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the parent
company’s transactions and disclose with reasonable accuracy
at any time the financial position of the parent company and
enable them to ensure that its financial statements comply with
the Companies Act 2006. They are responsible for such internal
control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud and
other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic report and a Directors’
report that comply with that law and those regulations.
Checkit plc | Annual Report and Accounts 2022
48
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
to the members of Checkit Plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Checkit plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended
31 January 2022, which comprise the consolidated statement of comprehensive income, the consolidated balance sheet, the
consolidated statement of changes in equity, the consolidated statement of cash flows, the parent company balance sheet, the parent
company statement of changes in equity and notes to the consolidated and parent company financial statements, including a summary
of significant accounting policies. The financial reporting framework that has been applied in the preparation of the group financial
statements is applicable law and UK-adopted international accounting standards. The financial reporting framework that has been
applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
▶ the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 January 2022
and of the group’s loss for the year then ended;
▶ the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
▶ the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
▶ the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our
report. We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
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 and 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 group or the parent company to cease to continue as a going concern.
Our evaluation of the directors’ assessment of the group’s and the parent company’s ability to continue to adopt the going concern
basis of accounting included reviewing management’s base case cash flow forecasts covering the period to 31 May 2023 and
challenging the underlying assumptions used within these forecasts. We obtained management’s sensitivity analysis to evaluate the
impact and availability of mitigating actions. Our assessment also included a review of the accuracy of management’s past forecasting
and an assessment of the adequacy of related disclosures within the annual report.
In our evaluation of the directors’ conclusions, we considered the inherent risks associated with the group’s and the parent company’s
business model including effects arising from 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
group’s and 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 group’s and 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.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
49
Our approach to the audit
Overview of our audit approach
Overall materiality:
Group: £224,000, which represents 5% of the group’s loss before taxation, excluding non-recurring or
special items.
Parent company: £168,000, which represents 2% of the parent company’s total assets, capped at 75%
of group materiality.
Key audit matters were identified as:
Key audit matters – Group
▶ Improper recognition of revenue due to fraud (same as the previous year); and
▶ Impairment of intangible assets (including goodwill) (same as the previous year).
Key audit matters – Parent company
▶ Recoverable value of amounts due from subsidiary undertakings – Parent company only (same as
the previous year)
Materiality
Key Audit
matters
Scoping
Our auditor’s report for the year ended 31 January 2021 included one key audit matter that has not
been reported as a key audit matter in our current year’s report. This relates to going concern.
Based on our review of management’s going concern assessment, we concluded that the Group
has sufficient resources (cash and other liquid assets) to operate as a going concern for the period
to 31 May 2023. The group has no external commitments which warrant going concern being a key
audit matter.
We performed an audit of the financial information of the significant components using component
materiality (full-scope audit procedures) for the parent company, Checkit plc, and two subsidiaries;
Checkit Europe Limited and Checkit UK Limited.
We performed specified audit procedures (an audit of one or more classes of transactions, account
balances or disclosures relating to significant risks of material misstatement of the Group financial
statements) on the financial information of Tutela Monitoring Systems LLC.
We performed analytical procedures on the financial information of Electron Eye Technology Ltd,
Hartest Precision Instruments Ltd and all other components of the group.
There are no key changes in the scope of the audit from the prior year except for performing
analytical procedures on the financial information of Electron Eye Technology Ltd rather than
full scope audit procedures, since this component did not have material operations and account
balances during the current year. In addition, Tutela Monitoring Systems LLC was acquired during
the year, so was not included in the prior year audit scope.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of
most significance in our audit of the financial statements of the current period
and include the most significant assessed risks of material misstatement (whether
or not due to fraud) 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 financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on
these matters.
Description
Audit response
KAM
Disclosure
Our results
Checkit plc | Annual Report and Accounts 2022
50
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Checkit Plc
Key audit matters continued
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
High
Intangible asset impairment
(including goodwill)
Revenue
recognition
Potential
financial
statement
impact
Inventory
Trade
receivables
New system
implementation
Management
override of controls
Presentation of
non-recurring
or special items
Going concern
Capitalisation of
development costs
Trade
payables
Cost of sales and
payroll costs
Recoverable value of amounts
due from subsidiary undertakings
(parent company only)
Low
Low
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
Key Audit Matter – Group
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the following
audit procedures:
▶ assessing whether the group’s revenue recognition policy is
consistent with IFRS 15;
▶ understanding management’s basis of assessment to support
key judgements impacting revenue recognition;
▶ testing the design and the implementation effectiveness of
controls relating to contract approval and revenue recognition;
▶ corroborating a sample of customer contracts to signed
agreements and supporting documentation;
▶ testing a sample of subscription income and recalculating
expected revenue to be recognised, including the amount of
deferred income at the year end;
▶ testing a sample of project revenues by corroborating
management’s calculations supporting the stage of
completion; and
▶ for a sample of deferred and accrued income balances,
recalculating revenue recognised, deferred or
accrued and agreeing amounts to invoices and other
supporting documentation.
Revenue recognition
We identified improper recognition of revenue as one of the most
significant assessed risks of material misstatement due to fraud
and error.
The group has recognised revenues of £13.3m (2021: £13.2 m)
which is represented by recurring revenues from subscription
services and revenue from installation, maintenance and support.
The Group sells Software as a Service as part of a fee-based
subscription service. Revenue for these services is recognised
over time. It also installs building energy management systems.
Revenue for these projects is determined based on stage
of completion of the work performed, in accordance with
International Financial Reporting Standard (‘IFRS’) 15 ‘Revenue
from Contracts with Customers’.
We considered that a significant risk arises on the occurrence of
revenue for new Software as a Service contracts as there is greater
potential for fraud and error than on existing contracts where
revenues primarily arise from the release of contract liabilities
recognised in the prior year.
We also consider that a significant risk arises on the occurrence of
revenue for building energy management systems projects which
were not completed during the year. This requires management to
make a number of assumptions to determine the level of revenue
and profit that it recognises, as well as the associated contract
assets and liabilities. The most significant of those assumptions is
the stage of completion of certain contracts. These assumptions
are subject to error and management bias due to their subjective
and complex nature and can have a significant impact on the
results of an individual financial year.
Relevant disclosures in the Annual Report and Accounts 2022
▶ Financial statements: The group’s accounting policy on revenue
recognition is shown in note 1 to the financial statements and
associated disclosures are included in note 2.
Our results
Based on our audit work, we did not identify any instances
where revenue was not recognised in accordance with the stated
accounting policies.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
51
Key audit matters continued
Key Audit Matter – Group
Impairment of intangible assets (including goodwill)
We identified impairment of intangible assets (including
goodwill) as one of the most significant assessed risks of material
misstatement due to error.
This is due to the inherent uncertainty involved in forecasting
future results and cashflows of the cash generating units,
including growth in revenues and operating profit margins as well
as determining an appropriate discount factor.
Relevant disclosures in the Annual Report and Accounts 2022
▶ Financial statements: The group’s accounting policy on
intangible assets including goodwill is shown in note 1 to the
financial statements and relevant disclosures are included
in note 11.
How our scope addressed the matter – Group
In responding to the key audit matter, we performed the following
audit procedures:
▶ understanding management’s impairment review process,
considering the internal controls relevant to the audit for
appropriate design and implementation;
▶ obtaining management’s annual impairment assessment for
intangible assets, which includes goodwill, acquired intangible
assets and capitalised development costs which are not yet
available for use;
▶ critically evaluating management’s identification of cash
generating units to ensure this is in accordance with
International Accounting Standard (‘IAS’) 36 ‘Impairment
of Assets’;
▶ evaluating the key assumptions including the basis of forecasts,
growth rates and discount rates applied;
▶ comparing the forecast used in management’s impairment
assessment with the group business plan and obtaining
explanations for variances;
▶ assessing management’s forecasting accuracy;
▶ obtaining management’s sensitivity analysis on the discount
rate used and evaluating the sensitivity to the growth in revenue
included in the model and assessing the level of headroom with
respect to the carrying value of intangible assets; and
▶ ensuring that these sensitivities are appropriately disclosed in
accordance with IAS 36, ‘Impairment of assets’.
Our results
Based on our audit work, we are satisfied that sufficient evidence
is available to support management’s assessment of impairment.
Key Audit Matter – Parent company
How our scope addressed the matter – Parent company
Recoverable value of amounts due from
subsidiary undertakings
We identified recoverable value of amounts due from subsidiary
undertakings as one of the most significant assessed risks of
material misstatement due to error.
At 31 January 2022, the parent has investments in subsidiary
undertakings of £14.5m net of impairments (2021: £9.5m).
Furthermore, the parent has £4.8m (2021: £0.2m) due from
subsidiary undertakings.
Certain subsidiaries have generated losses in the current and prior
years. There is a risk that the investment values and amounts due
from subsidiary undertakings may not be recoverable. As a result,
the provision held as at 31 January 2022 may not be adequate.
In responding to the key audit matter, we performed the following
audit procedures:
▶ understanding management’s review process, considering the
internal controls relevant to the audit for appropriate design
and implementation;
▶ obtaining management’s impairment review of investments in
subsidiaries and intercompany balances and challenging their
assessment over the existence of any impairment indicators;
▶ obtaining an understanding of how management considers the
balances to be recoverable through future cash flow projections
and net present value calculations;
▶ challenging the methodology and key assumptions used by
management in assessing value in use, including the revenue
growth forecast;
▶ assessing whether information included in the value in use
models is consistent with the results of our procedures on
subsidiaries and forecasts used for the impairment of goodwill
and going concern assessment; and
▶ assessing whether information included in the impairment
models is consistent with our knowledge of the business and
other audit information obtained.
Relevant disclosures in the Annual Report and Accounts 2022
▶ Financial statements: The parent’s accounting policy on
investments is shown in note 1 to the parent company financial
statements and disclosures are included in note 3.
Our results
We obtained sufficient evidence to support management’s
assessment of the recoverability of investment in subsidiaries and
amounts due from subsidiary undertakings.
Checkit plc | Annual Report and Accounts 2022
52
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Checkit Plc
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements
on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows:
Materiality measure
Group
Parent company
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
£224,000, which is 5% of the group’s loss before
taxation and non-recurring or special items.
£168,000, which is 2% of the parent company’s total
assets, capped at 75% of group materiality.
Significant judgements made
by auditor in determining
materiality
Significant revision of
materiality threshold that
were made as the audit
progressed
Performance materiality
used to drive the extent
of our testing
Performance
materiality threshold
In determining materiality, we made the following
significant judgements:
In determining materiality, we made the following
significant judgements:
Loss before taxation adjusted for non-recurring or
special items was considered the most appropriate
benchmark because the group is a commercially
focused organisation and the result before tax,
non-recurring or special items is a key financial
measure for the shareholders.
Materiality for the current year is the same as the
level that we determined for the year ended 31
January 2021. For the year ended 31 January 2022
we excluded non-recurring or special items from
the benchmark as the statutory loss for the year
had increased relative to total revenues.
We calculated materiality of £195,000 during
the planning stage of the audit and then during
the course of our audit, we re-assessed initial
materiality based on the actual results for the year
being higher than the extrapolated Q3 results
used at the planning stage.
The parent entity is a holding company and
therefore the asset base is the most relevant
benchmark for materiality. Materiality for the
current year is the same as the level that we
determined for the year ended 31 January 2021.
We calculated materiality of £147,000 during the
planning stage of the audit and then during the
course of our audit, we increased materiality to 75%
of the revised Group materiality.
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.
£168,000, which is 75% of financial
statement materiality.
£126,000, which is 75% of financial
statement materiality.
Significant judgements made
by auditor in determining
performance materiality
In determining performance materiality, we made the judgement of setting it at 75% as an appropriate
threshold based on our experience with auditing the financial statements of the group and the parent
company in prior years, noting that there were no material adjustments identified in 2021.
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account balances or
disclosures for which misstatements of lesser amounts than materiality for the financial statements as a
whole could reasonably be expected to influence the economic decisions of users taken on the basis of
the financial statements.
Specific materiality
We determined a lower level of specific materiality
for the following areas:
We determined a lower level of specific materiality
for the following areas:
▶ Directors Emoluments
▶ Related party transactions
▶ Share-based payments
▶ Directors Emoluments
▶ Related party transactions
▶ Share-based payments
We determine a threshold for reporting unadjusted differences to the audit committee.
£8,400 and misstatements below that threshold
that, in our view, warrant reporting on
qualitative grounds.
Communication of
misstatements to the
audit committee
Threshold for communication £11,200 and misstatements below that
threshold that, in our view, warrant reporting on
qualitative grounds.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
53
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential
uncorrected misstatements.
Overall materiality – Group
Loss before
tax
£7.1m
95+5
FSM
£224,000
Total assets
£42.8m
PM
£168,000
75%
Overall materiality – Parent company
3.2% 95+5
TFPUM
£56,000
25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
FSM
£168,000
0.4%
PM
£126,000
75%
TFPUM
£42,000
25%
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular
matters related to:
Understanding the group, its components, and their environments, including group-wide controls
▶ The engagement team obtained an understanding of the group and its environment, including group-wide controls, and assessed
the risks of material misstatement at the group level;
▶ All financial reporting is based in the UK. The group operates separate finance systems and records for each subsidiary.
▶ The group has centralised processes and controls over the key areas of audit focus. Group management is responsible for all
judgemental processes and significant risk areas.
▶ We have tailored our audit response accordingly with all audit work undertaken by the group audit team. The group audit team
visited the client office in addition to working remotely. The audit team attended the client’s premises and those of a key supplier
for the physical verification of inventory existence.
▶ The Group’s financial reporting system is centralised, and was subject to a system migration at the end of the current financial year.
Our audit included testing to provide assurance over the accuracy and completeness of data transferred to the new system.
Identifying significant components
▶ We considered the size and risk profile of each component including the one acquired during the current year, any changes in the
business and other factors when determining the level of work to be performed on the financial information of each component.
The financial significance of each component was determined based on the percentage of the Group’s revenues and total assets.
▶ In assessing the risk of material misstatement to the group financial statements we assessed the significance of each component
and determined the planned audit response based on a measure of materiality assigned to the components.
Type of work to be performed on financial information of parent and other components (including how it
addressed the key audit matters)
▶ Full scope audit procedures were performed on the following subsidiary entities in the group: Checkit Plc (parent company),
Checkit UK Limited, and Checkit Europe Limited. These procedures were undertaken using component materialities determined
for each of them;
▶ Specified audit procedures were performed on the financial information of the component Tutela Monitoring Systems LLC;
▶ Analytical review procedures on the financial information of the component (subsidiaries) were performed for Elektron Eye
Technology Limited, Checkit Inc, Hartest Precision Instruments Limited, Hartest Precision Instruments India Private Limited;
▶ Checkit Inc, Elektron Technology PTE Ltd and Elektron Technology (Shanghai) Trading Limited are dormant subsidiaries of the group
and they were not subject to audit procedures at the group level on the basis that the financial information associated with them
was immaterial;
▶ Elektron Enterprises 1 Limited, Elektron Precision Instruments Limited, and Elektron IP Limited were dissolved during the year and our
procedures for these entities were limited to testing the dissolution and settlement of any balances which were material to the group.
Performance of our audit
▶ As documented above, the Group has a centralised finance function based at the Group’s head office in Fleet, UK. All procedures
were performed by the Group engagement team, there are no component auditors.
▶ The total percentage coverage of full-scope audit and specified audit procedures over the Group’s revenue was 99%;
▶ The total percentage coverage of full scope audit and specified audit procedures over the Group’s total assets was 96%.
Changes in approach from previous period
▶ There has been no change in our assessment of scoping the group and the parent company audits from the prior year except for the
group scoping of Elektron Eye Technology Limited due to its reduced operations, and the audit procedures performed on Tutela
Monitoring Systems LLC, which was acquired during the year.
Checkit plc | Annual Report and Accounts 2022
54
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Checkit Plc
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the 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 in the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
▶ the information given in the strategic report and the report of the directors for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
▶ the strategic report and the report of the directors have been prepared in accordance with applicable legal requirements.
Matter on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the group and 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 report of the directors.
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 financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
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.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
55
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 that are applicable to the Company and determined that the
most significant are those that relate to the reporting frameworks (UK-adopted international accounting standards, the Companies
Act 2006 and the AIM listing rules) and the relevant tax compliance regulations in the jurisdictions in which the company operates.
▶ We made enquiries of management and the audit committee concerning the Group’s policies and procedures relating to:
▶ the identification, evaluation and compliance with laws and regulations;
▶ the detection and response to the risks of fraud; and
▶ the establishment of internal controls to mitigate risks related to fraud or non-compliance with laws and regulations.
We corroborated our inquiries through our reading of board meeting minutes.
▶ 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. This included the evaluation of
the risk of management override of controls. We determined that the principal risks were in relation to:
▶ journal entries that increased revenues or that reclassified costs from the statement of comprehensive income to the balance sheet; and
▶ potential management bias in determining accounting estimates.
▶ Our audit procedures involved:
▶ gaining an understanding of the entity’s operations, including the nature of its revenue sources, products and services and of its
objectives and strategies to understand the classes of transactions, account balances, expected financial statement disclosures
and business risks that may result in risks of material misstatement;
▶ assessing the design effectiveness of controls management has in place to prevent and detect fraud and the adequacy of
procedures for authorisation of transactions and internal review procedures;
▶ challenging assumptions and judgements made by management for significant accounting estimates; and
▶ journal entry testing, with a focus on material manual journals, including those with unusual account combinations.
▶ In addition, we completed audit procedures to conclude on the compliance of disclosures in the annual report and accounts 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;
▶ 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 audit engagements of a similar nature and complexity through appropriate
training and participation;
▶ knowledge of the industry in which the client operates; and
▶ understanding the legal and regulatory requirements specific to the entity.
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.
Andrew Hodgekins
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
5 May 2022
Checkit plc | Annual Report and Accounts 2022
56
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
year ended 31 January 2022
Revenue
Cost of sales
Gross profit
Operating expenses
Operating expenses (excluding non-recurring or special items)
Operating loss before non-recurring or special items
Non-recurring or special items
Total operating expenses
Operating loss
Finance income
Loss before taxation
Taxation
Loss from continuing operations
Profit from discontinued operations
Loss for the year attributable to equity shareholders
Other comprehensive income/(expense)
Exchange differences on translation of foreign operations
Reclassification of exchange differences to income statement for discontinued items
Total comprehensive income for the financial year attributable to equity shareholders
Loss per share from continuing operations
Basic EPS
Diluted EPS
Notes
2
3
4
3
4
5
8
26
2022
£m
13.3
(7.1)
6.2
(10.9)
(4.7)
(2.4)
(13.3)
(7.1)
—
(7.1)
0.3
(6.8)
—
(6.8)
—
—
(6.8)
Restated
2021
£m
13.2
(6.7)
6.5
(9.6)
(3.1)
(2.2)
(11.8)
(5.3)
—
(5.3)
0.3
(5.0)
0.6
(4.4)
—
—
(4.4)
10
(10.0)p
(10.0)p
(8.3)p
(8.3)p
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
57
CONSOLIDATED BALANCE SHEET
as at 31 January 2022
Assets
Non-current assets
Goodwill arising on acquisition
Other intangible assets
Property, plant and equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Contract lease liabilities
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Long-term contract lease liabilities
Long-term provisions
Total non-current liabilities
Total liabilities
Net assets
Equity attributable to the owners of the Company
Called up share capital
Share premium
Capital redemption reserve
Own shares
Other reserves
Retained earnings
Total equity
Notes
11
11
12
15
16
17
22
14
22
19
20
20
20
20
20
20
2022
£m
4.5
2.8
1.0
8.3
1.8
3.0
24.2
29.0
37.3
5.2
0.5
5.7
0.1
0.2
0.3
0.6
6.3
31.0
5.4
23.3
6.4
—
0.1
(4.2)
31.0
2021
£m
4.3
1.7
0.8
6.8
1.1
4.9
11.5
17.5
24.3
5.6
0.3
5.9
0.3
0.2
0.3
0.8
6.7
17.6
3.1
5.4
6.4
—
0.1
2.6
17.6
The financial statements of Checkit plc (registered no. 00448274) were approved by the Board of Directors on 5 May 2022 and were
signed on its behalf by:
Kit Kyte
Director
Greg Price
Director
Checkit plc | Annual Report and Accounts 2022
58
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
year ended 31 January 2022
At 31 January 2020
Loss for the year
Total comprehensive income for the year
Correction of reserve classification
Own shares sold
Share-based payments
Transaction with owners
At 31 January 2021
Loss for the year
Total comprehensive income for the year
Issue of new shares
Share-based payments
Transaction with owners
At 31 January 2022
Share
capital
£m
3.1
—
—
—
—
—
—
3.1
—
—
2.3
—
2.3
5.4
Share
premium
£m
Capital
redemption
reserve
£m
5.4
—
—
—
—
—
—
5.4
—
—
17.9
—
17.9
23.3
6.4
—
—
—
—
—
—
6.4
—
—
—
—
—
6.4
Own
shares 1
£m
(0.7)
—
—
0.2
0.5
—
0.7
—
—
—
—
—
—
—
Other
reserves
£m
Translation
reserve
£m
Retained
earnings
£m
—
—
—
—
—
0.1
0.1
0.1
—
—
—
—
—
0.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7.2
(4.4)
(4.4)
(0.2)
—
—
(0.2)
2.6
(6.8)
(6.8)
—
—
—
(4.2)
Total
£m
21.4
(4.4)
(4.4)
—
0.5
0.1
0.6
17.6
(6.8)
(6.8)
20.2
—
20.2
31.0
1 Shares held by the Elektron Technology 2012 EBT were treated as treasury shares. All of the own shares were sold by the trust during the prior year, resulting in a gain.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
59
CONSOLIDATED STATEMENT OF CASH FLOWS
year ended 31 January 2022
Net cash outflow from operating activities
Investing activities
Interest received on bank deposits
Purchase of property, plant and equipment
Investment in product development projects
Investment in other intangibles
Purchase of business (net of £0.2m cash acquired)
Sale of businesses (net of cash sold)
Net cash used in investing activities
Financing activities
Issue of new shares
Sale of own shares
Repayment of contract lease liabilities
Net cash generated by financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
6
27
26
2022
£m
(4.9)
—
(0.1)
(1.5)
(0.7)
(0.4)
0.4
(2.3)
20.2
—
(0.3)
19.9
12.7
11.5
24.2
2021
£m
(2.9)
—
(0.3)
—
—
—
0.3
—
—
0.5
(0.4)
0.1
(2.8)
14.3
11.5
Checkit plc | Annual Report and Accounts 2022
60
FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
year ended 31 January 2021
General information
Checkit plc (the “Group” or “Checkit”) is a public limited liability company incorporated in England and Wales and domiciled in the UK.
The address of its registered office is Broers Building, JJ Thomson Avenue, Cambridge CB3 0FA. The nature of the Group’s operations
and its principal activities are set out in the Report of the Directors on pages 45 and 46.
These financial statements are presented in Sterling, the currency of the primary economic environment in which the Group operates,
and all values are rounded to the nearest hundred thousand (£0.1m) except where otherwise stated.
1. Summary of significant accounting policies
The particular accounting policies adopted by the Directors in the preparation of these consolidated financial statements are
described below:
Basis of accounting
The consolidated financial statements of Checkit plc have been prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The consolidated financial statements have been prepared on the historical cost basis, except for the revaluation of financial
instruments. The principal accounting policies adopted are set out below. These policies have been applied consistently to all years
presented, unless otherwise stated.
New standards, interpretations and amendments effective from 1 February 2021
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 February 2021, which
had a significant effect on the Group’s financial statements.
Critical accounting judgements
Development costs – Under IAS 38, research and development costs and internally generated technology should be capitalised
if the capitalisation criteria are met. Assumptions and judgements are made with regard to assessing the expected future economic
benefits, the economic useful life and the level of completion of the project. Under IAS 38, at the point where activities no longer relate
to development but to maintenance, capitalisation is to be discontinued. In accordance with IAS 38 the Group will only recognise the
costs of an intangible asset if and only if it is more likely than not that the expected future economic benefits that are attributable to the
asset will flow to the entity and the cost of the asset can be measured reliably.
The key judgement is reliably measuring the expenditure attributable to development projects and determining whether the project
meets the criteria to recognise an asset. An assessment is made when looking at the costs incurred and criteria for development costs,
including the commercial and technical viability of the costs being assessed. The main costs attributed to development costs are that
of payroll and dedicated third party resources.
Estimation of the useful economic life for development costs is considered with regard to the future economic benefits which will be
derived. In future, development costs will be amortised over a range of 2 to 5 years, determined on an asset-by-asset basis.
Restatement of prior year
The Group has changed its accounting policy for Cost of Sales to better reflect the management of the business and only include costs
directly incremental to delivering revenue. Cost of sales now includes the cost of materials and hardware, the direct labour costs relating
to delivery, external systems and associated direct hosting costs for cloud platform products. All other operating expenses incurred in
the ordinary course of business are recorded in selling and administrative expenses.
The prior year consolidated statement of comprehensive income and related notes have been restated for the reclassification of certain
costs between cost of sales and administrative expenses. Consequently, 2021 results have been restated in these financial statements
to reflect a reduction in cost of sales of £1.8m, with a corresponding increase in operating expenses. The overall operating loss for the
year for the Group remains unchanged.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
61
1. Summary of significant accounting policies continued
Restatement of prior year continued
Quantitative impact of restatement on financial results
Year ended 31 January 2021
Consolidated statement of comprehensive income
Revenue
Cost of sales
Gross profit
Operating expenses (excluding non-recurring or special items)
Operating loss before non-recurring or special items
Non-recurring or special items
Total operating expenses
Operating loss
As originally
reported
£m
Reclassification
of costs
£m
As restated
£m
13.2
(8.5)
4.7
(7.8)
(3.1)
(2.2)
(10.0)
(5.3)
—
1.8
1.8
(1.8)
—
—
(1.8)
—
13.2
(6.7)
6.5
(9.6)
(3.1)
(2.2)
(11.8)
(5.3)
Goodwill impairment CGU groups – determining whether goodwill is impaired requires management’s judgement in assessing
cash-generating unit (CGU) groups to which goodwill should be allocated. Management allocates a new acquisition to a CGU group
based on which one is expected to benefit most from that business combination. The allocation of goodwill to existing CGUs is generally
straightforward and factual, however over time as new businesses are acquired and management reporting structures change
management reviews the CGU groups to ensure they are still appropriate.
Sources of estimation uncertainty
▶ IFRS 3 (revised) “Business Combinations” requires that goodwill arising on the acquisition of subsidiaries is capitalised and included
in intangible assets. IFRS 3 (revised) also requires the identification and valuation of other separable intangible assets at acquisition.
The assumptions involved in valuing these intangible assets require the use of management estimates.
▶ The estimates include identification of relevant assets, future growth rates, expected inflation rates and the discount rate used.
Management also make estimates of the useful economic lives of the intangible assets.
▶ The value in use calculation used to test for impairment of goodwill involves an estimation of the present value of future cash flows
of CGUs. The future cash flows are based on annual budgets and forecasts, as approved by the Board, which include management’s
expectation of growth. The present value is then calculated based on management’s estimate of future discount and long-term growth
rates. The Board reviews these key assumptions (market-share, long-term growth rates, and discount rates) and the sensitivity analysis
around these assumptions.
▶ The recoverability of internally generated intangible assets: at each balance sheet date, the Group reviews the carrying amounts of its
internally generated intangible assets to determine whether there is any indication that those assets have suffered an impairment loss.
Estimated future cash flows deriving from these assets must be determined and an appropriate discount rate applied to calculate
present value.
Going concern
The Strategic report sets out the Group’s business activities and headline results, together with the financial statements and notes
which detail the results for the year, net current asset position and cash flows for the year ended 31 January 2022.
The Directors have prepared cash flow forecasts for the Group for a review period of twelve months from the date of approval of the
2022 financial statements and consider the assumptions used therein to be reasonable and reflective of its long-term SaaS contracts
and contracted recurring revenue. These forecasts reflect an assessment of current and future market conditions and their impact on
the Group’s future cash flow performance. Alternative scenarios have also been prepared to consider sensitivities for a reduction in
revenue to the end of the review period. Forecasts indicate the Group would have sufficient funds to continue as a going concern.
The Board has considered the impact of COVID-19 and does not expect it to have a material impact on these scenarios.
Should sales reduce further than the sensitised case, the Group has a number of mitigating actions such as reducing discretionary
spend, delaying capital expenditure and research and development costs to protect the Group’s cash position.
The Directors remain confident in the long-term future prospects for the Group and therefore the Directors have a reasonable expectation
that the Group has adequate resources to continue for the foreseeable future. As a result, they continue to adopt the going concern
basis in preparing the financial statements.
Consolidation
The consolidated financial statements incorporate the financial statements of Checkit plc and all subsidiary undertakings drawn up
to 31 January each year. Subsidiaries are all entities over which the Group has the power to control the financial and operating policies
so as to obtain benefit from their activities. The results of businesses acquired during the year are included from the effective date of
acquisition. The results of businesses discontinued during the year are included until the date of disposal. Balances between Group
companies are eliminated, and no profit is taken on intra-group sales.
Checkit plc | Annual Report and Accounts 2022
62
FINANCIAL STATEMENTS
1. Summary of significant accounting policies continued
Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The consideration for each acquisition is
measured at the aggregate of the fair value (at the date of exchange) of assets given, liabilities incurred or assumed, equity instruments
issued and cash paid by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in the statement of
comprehensive income as incurred.
Where a business combination is achieved in stages, the Group’s previously held interests in the acquired entity are re-measured to fair
value at the acquisition date.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 “Business
Combinations” are recognised at their fair value at the acquisition date.
Goodwill
Goodwill represents the difference between the cost of the acquisition and the fair value of the net identifiable assets acquired.
Goodwill has an indefinite expected useful life and is not amortised, but is tested annually for impairment.
Goodwill is recognised as an intangible asset in the consolidated balance sheet. Goodwill therefore includes non-identified intangible
assets including business processes, buyer-specific synergies, know-how and workforce-related industry-specific knowledge and technical
skills. Negative goodwill arising on acquisitions would be recognised directly in the consolidated income statement. On closure or
disposal of an acquired business, goodwill would be taken into account in determining the profit or loss on closure or disposal.
Other intangible assets
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally generated intangible asset arising from the Group’s development is recognised only if all of the following conditions are met:
▶ an asset is created that can be identified (such as software and new processes);
▶ it is probable that the asset created will generate future economic benefits;
▶ the development cost of the asset can be measured reliably;
▶ the project is technically and commercially feasible;
▶ the Group intends to and has sufficient resources to complete the project; and
▶ the Group has the ability to use or sell the services and product developed.
The cost of acquiring software (including associated implementation costs where applicable) that is not specific to an item of property,
plant and equipment is classified as an intangible asset.
Other intangible assets that are separately acquired by the Group are stated at fair value.
Amortisation of intangible assets is charged on a straight line basis over the estimated useful lives of intangible assets determined
on an asset-by-asset basis. The estimated useful lives are as follows:
▶ Computer software
3–10 years
▶ Marketing, customer and technology-related assets
3 years
▶ Development costs
2–5 years
Property, plant and equipment
The cost of property, plant and equipment is their purchase cost, together with any incidental costs of acquisition. Depreciation is
calculated on the cost of each property, plant and equipment asset individually on a straight line basis and is designed to write off the
costs of the assets less any residual value over their estimated useful lives. The estimated useful lives are:
▶ Plant, equipment and tools
▶ Motor vehicles
▶ Fixtures and fittings
▶ Leasehold improvements
3–15 years
4 years
8–16 years
Term of the lease
Reviews are made periodically of the estimated remaining lives of individual productive assets, taking account of commercial and
technological obsolescence as well as normal wear and tear. The carrying value is reviewed for impairment in the period if events or
changes in circumstances indicate the carrying value may not be recoverable.
Impairment of tangible and intangible assets
The carrying amount of the Group’s assets is reviewed at each balance sheet date to determine whether there is any indication
of impairment. If any such indication exists, the assets’ recoverable amount is estimated.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value. If the recoverable amount of an asset is estimated to be less than its carrying amount, the
carrying amount is reduced to its recoverable amount with the impairment loss recognised as an operating expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no
impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised as income immediately.
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
63
1. Summary of significant accounting policies continued
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct expenditure and, where appropriate,
production overheads based on the normal level of activity. Where necessary, provision is made for obsolete, slow-moving and defective
stocks. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price less all
estimated costs to completion.
Employee benefits
Pensions to employees are provided through defined contribution plans.
A defined contribution plan is a pension plan under which the Group pays fixed contributions to an independent entity. The Group has
no legal obligations to pay further contributions after payment of the fixed contribution.
The contributions recognised in respect of defined contribution plans are expensed as they fall due. Liabilities and assets may be
recognised if underpayment or prepayment has occurred and are included in current liabilities or current assets as they are normally
of a short-term nature.
Share-based employee remuneration
The Group’s management awards certain employee incentives from time to time on a discretionary basis and through its Company
Enterprise Management Incentive Plan (EMI) and Long Term Incentive Plan (LTIP).
In accordance with IFRS 2 “Share-based Payments”, the Group reflects the economic cost of awarding shares and share options to
employees by recording an expense in the statement of comprehensive income equal to the fair value of the benefit awarded, fair value
being estimated using the Black-Scholes option pricing model. The expense is recognised in the statement of comprehensive income
over the vesting period of the award. Equity-settled share-based payments to employees, and others providing similar services, are
measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting
conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in Note 20.
Leases
The Group assesses whether a contract is or contains a lease at inception of the contract. The Group recognises a right-of-use
asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short-term leases
(defined as leases with a lease term of twelve months or less) and leases of low value assets. For these leases, the Group recognises
the lease payments as an operating expense on a straight line basis over the term of the lease unless another systematic basis is more
representative of the time pattern in which economic benefits from the leased assets are consumed. The lease liability is initially measured
at the present value of the lease payments that are not paid at the commencement date, discounted by using the rate implicit in the lease.
If this rate cannot be readily determined, the Group uses its incremental borrowing rate. Lease payments included in the measurement
of the lease liability comprise:
▶ fixed lease payments (including in substance fixed payments), less any lease incentives;
▶ variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;
▶ the amount expected to be payable by the lessee under residual value guarantees;
▶ the exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and
▶ payments of penalties for terminating the lease if the lease term reflects the exercise of an option to terminate the lease.
The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently
measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by
reducing the carrying amount to reflect the lease payments made.
In addition, the Group re-measures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:
▶ the lease term has changed or there is a change in the assessment of exercise of a purchase option, in which case the lease liability
is re-measured by discounting the revised lease payments using a revised discount rate; or
▶ the lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value,
in which case the lease liability is re-measured by discounting the revised lease payments using the initial discount rate (unless the
lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used); or
▶ a lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability
is re-measured by discounting the revised lease payments using a revised discount rate.
The Group did not make any such adjustments during the periods presented.
The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before
the commencement day and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and
impairment losses. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the underlying asset.
If a lease transfer’s ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise
a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts
at the commencement date of the lease.
The Group does not have any leases that transfer ownership of the underlying asset. The Group does not have any leases with a purchase
option where there is a reasonable expectation that the option will be exercised. The right-of-use assets are presented within the same
line item as that within which the corresponding underlying assets would be presented if they were owned – for the Group this is
property, plant and equipment.
Checkit plc | Annual Report and Accounts 2022
64
FINANCIAL STATEMENTS
1. Summary of significant accounting policies continued
Leases continued
For short-term leases (lease term of twelve months or less) and leases of low value assets (such as personal computers and office
furniture), the Group has opted to recognise a lease expense on a straight line basis as permitted by IFRS 16.
Financial liabilities/assets
The Group’s financial liabilities are trade and other payables and finance leasing liabilities. They are included in the balance sheet line
items “trade and other payables”.
All interest-related charges are recognised as an expense in “finance costs” in the statement of comprehensive income.
Trade payables are stated at their amortised cost.
Receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise
when the Group provides goods directly to a debtor. Receivables are subsequently measured at amortised cost using the effective
interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment is recognised
in the statement of comprehensive income.
Provision against trade receivables represents the expected lifetime credit losses for all trade receivables. The expected lifetime credit
loss reflects assumptions on the ageing of overdue debts that may become unrecoverable, based upon historical observed default rates,
adjusted for current economic environment.
Equity instruments
Share capital is determined using the nominal value of shares that have been issued. Equity-settled share-based employee remuneration
is credited to other reserves until the related equity instruments are realised by the employee.
Cash and cash equivalents
Cash and cash equivalents comprise cash and short-term bank deposits with an original maturity of three months or less, net of
outstanding bank overdrafts, and include cash at bank and in hand and bank deposits available at less than 24 hours’ notice. Bank
overdrafts and invoice discounting advances are presented as current liabilities to the extent that there is no right of offset with cash
balances. The carrying value of these assets is approximately equal to their fair value.
Accounting for taxes
Current tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting
period that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal
periods to which they relate, based on the taxable profit for the year.
Where an item of income or expense is recognised in the statement of comprehensive income, any related tax generated is recognised
as a component of tax expense in the statement of comprehensive income. Where an item is recognised directly to equity and presented
within the statement of comprehensive income, any related tax generated is treated similarly.
Deferred taxation
Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities
in the financial statements and corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance
sheet liability method.
Deferred taxation liabilities are generally recognised on all taxable temporary differences. Deferred taxation assets are recognised
to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.
Deferred taxation is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised based on tax laws and rates that have been enacted at the balance sheet date. The carrying value of deferred taxation assets is
reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available
against which taxable temporary differences can be utilised. Deferred tax is charged or credited to the statement of comprehensive
income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Revenue recognition
The Group sells Software as a Service as part of a fee-based subscription service. It also installs building energy management systems.
In respect of discontinued operations revenue arises from the manufacture and sale of engineered and ophthalmic products. Revenue
is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the Group.
To determine whether to recognise revenue, the Group follows a five-step process:
1.
identifying the contract with a customer;
2.
identifying the performance obligations;
3. determining the transaction price;
4. allocating the transaction price to the performance obligations; and
5.
recognising revenue when/as performance obligation(s) are satisfied.
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022 STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
65
1. Summary of significant accounting policies continued
Revenue recognition continued
Software as a Service
The Group recognises revenue depending on the substance and legal form of the contracts with its customers. Revenue is recognised
once a legally binding contract between the Group and its customers has been established and the delivery of the service including
support and maintenance has commenced. Service delivery is triggered once the customer has been provided access to the software.
The Group has assessed that the provision of these goods and services represent a single combined performance obligation over which
control is considered to transfer over time as the respective elements are considered as being intertwined and therefore inseparable
due to their value together in respect of Checkit Europe sales. Contractual terms for the Checkit UK business unit include the provision
of hardware sold under a separate contract, and a sale is recognised upon its installation upon completion of this separate performance
obligation. Checkit UK’s service provision is recognised over time similar to Checkit Europe.
Revenues are recognised monthly as the Group has an enforceable right to payment for contracted services provided.
The Group recognises liabilities for consideration received in respect of unsatisfied performance obligations under the service
contracts and reports these amounts as part of other creditors.
Consultancy and other services
Consultancy or training service revenues are recognised at the point when the service has been delivered and are considered
as separate performance obligations.
A receivable is recognised when the performance obligations are satisfied, as this is the point in time that the consideration
is unconditional because only the passage of time is required before the payment is due.
Projects and installations
Revenue arising on contracts where the customer has control over the project, and for which the Group has a right to payments for
work performed, is recognised over time. Revenue and costs are recognised over time with reference to the stage of completion of
the contract activity at the balance sheet date where the outcome of a contract can be estimated reliably. This is normally measured
by surveys of work performed to date. Variations in contract work, claims and incentive payments are included to the extent that it is
probable that they will result in revenue and they are capable of being reliably measured. When goods to be installed are delivered to
site at the start of contract, revenue is recognised but no profit is recognised at that point in time for these goods. When it is probable
that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Sale of engineered and ophthalmic products (discontinued operations)
Revenue from the sales of these products for a fixed price is recognised when the Group transfers control of the assets to the customer.
Invoices for goods fall due for settlement upon dispatch to the customer, the customer has full discretion over the use of the components
and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Transfer of control does not occur
until the risks of obsolescence and loss have been transferred, and either the products have been accepted in accordance with the
sales contract, the acceptance provisions have lapsed, or the Group has objective evidence that all criteria for acceptance have
been satisfied.
Foreign currencies
The individual financial statements of each Group company are presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position
of each Group company are expressed in Sterling, which is the functional currency of the Group and the presentation currency for the
consolidated financial statements.
In preparing the financial statements of the individual companies, transactions in currencies other than the entity’s functional currency
(foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date,
monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet
date. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the
date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are
not retranslated.
Exchange differences arising on the settlement of monetary items and on the retranslation of monetary items are included in profit
or loss for the period. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in profit
or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are
recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly
in equity.
Government grants
Government grants are recorded if there is a reasonable assurance that the Group will comply with all attached conditions for receiving
the grant and the grant will be awarded. Grants related to the UK Government Job Retention Scheme are deducted from related expenses
in the period in which the corresponding expenses are incurred.
Provisions
Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that the Group will be
required to settle that obligation.
Checkit plc | Annual Report and Accounts 2022
66
FINANCIAL STATEMENTS
1. Summary of significant accounting policies continued
Financial risk management
In the course of its business, the Group is mainly exposed to liquidity risk and credit risk. Financial risk management is an integral part
of the way the Group is managed. Financial risk management policies are set by the Board. Further details are included in the Report of
the Directors.
The Group does not hold or use derivative financial instruments.
(i) Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach
to managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under
both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group
manages this risk by maintaining adequate levels of cash resources.
(ii) Credit risk
Credit risk arises because a counterparty may fail to perform its obligations. The Group is exposed to credit risk on financial assets such
as cash balances, trade and other receivables.
The Group’s credit risk is primarily attributable to its trade receivables. The amounts recognised in the balance sheet are net of appropriate
allowances for doubtful receivables, estimated by the Group’s management based on prior experience and its assessment of the current
economic environment. Trade receivables are subject to credit limits and control and approval procedures in the operating companies.
Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on its
trade receivables.
Credit risk associated with cash balances is managed by transacting with financial institutions with high-quality credit ratings. Accordingly,
the Group’s associated credit risk is limited. The Group has no significant concentration of credit risk.
The Group’s maximum exposure to credit risk is represented by the carrying amount of each financial asset in the Group balance sheet.
Capital management
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are
recognised as a deduction from equity, net of any tax effects.
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future
development of the business.
Details of share-based payments are disclosed in Note 20.
The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the
advantages and security afforded by a sound capital position.
From time to time the Group purchases its own shares in the market; the timing of these purchases depends on market prices. Buy
and sell decisions are made on a specific transaction basis by the Board.
There were no changes to the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements.
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate line of business or geographical area
of operation that has been disposed of, has been abandoned or meets the criteria to be classified as held for sale.
Discontinued operations are presented on the statement of comprehensive income as a separate line and are shown net of tax.
Assets and businesses held for sale
Assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell.
Impairment losses on initial classification as held for sale and gains or losses on subsequent re-measurements are included in the
income statement. No depreciation is charged on assets and businesses classified as held for sale.
Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale
transaction rather than through continuing use. The asset or business must be available for immediate sale and the sale must be highly
probable within one year.
Non-GAAP measures
These financial statements contain references to operating profit before non-recurring or special items, EBITDA and alternate cash
measures. These financial measures do not have any standardised meaning prescribed by IFRS and are therefore referred to as non-GAAP
measures. The non-GAAP measure used by the Company may not be comparable to similar measures used by other companies.
In line with the way the Board and Chief Operating Decision Maker review the business, non-recurring or special items are separately
identified. Management has defined and reports such items as restructuring and integration costs, costs associated with acquisitions,
amortisation of acquired intangible assets and other non-recurring and non-operating items.
The Board believes that this is a useful supplemental metric as it provides an indication of the results generated by the Company’s
principal business activities prior to consideration of how the results are impacted by one-time exceptional charges.
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022 STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
67
1. Summary of significant accounting policies continued
Non-recurring items or special items
Non-recurring items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding
of the financial performance of the Group. They are material one-off items of income or expense that have been shown separately due
to the significance of their nature or amount and do not reflect the ongoing cost base or revenue generating ability of the Group. In
addition, management has defined charges in respect of amortisation of acquired intangibles as a special item requiring separate
disclosure, if material.
2. Segmental reporting
Management provides information reported to the Chief Operating Decision Maker (“CODM”) as a single operating segment for the
purpose of assessing performance and allocating resources. The CODM is the Chief Executive Officer.
The Group’s main activities are the supply of Connected Workflow Management, automated monitoring and building management,
Internet of Things (“IoT”), and operational insight-based products and services.
Revenue by type of the continuing operations
The following table presents the different revenue streams of Checkit:
Recurring revenues from subscription services
Installation maintenance and support
Total
Geographical information
The Group considers its operations to be in the following geographical regions:
United Kingdom
The Americas
Total
2022
£m
6.8
6.5
13.3
Revenue from
external customers
2022
£m
11.7
1.6
13.3
2021
£m
5.1
8.1
13.2
2021
£m
12.7
0.5
13.2
Information about major customers of the continuing operations
During FY22, the Group had one customer who generated revenues of 29% of total revenue (FY21: 29%).
Revenue expected to be recognised
The Group expects to recognise revenue amounting to £2.3m (2021: £2.1m) in FY23 relating to performance obligations from existing
contracts that are unsatisfied or partially satisfied as at 31 January 2022.
3. Net operating expenses
Net operating expenses
Selling and distribution costs
Administrative expenses
Operating expenses excluding non-recurring or special items
Non-recurring or special items (see Note 4)
Total operating expenses
2022
£m
2.7
8.2
10.9
2.4
13.3
Restated
2021
£m
1.4
8.2
9.6
2.2
11.8
Non-recurring or special items are disclosed separately to improve visibility of the underlying business performance.
Management has defined such items as restructuring, amortisation of acquired intangibles and other non-recurring items incurred
outside the normal course of business.
Checkit plc | Annual Report and Accounts 2022
68
FINANCIAL STATEMENTS
4. Operating loss – continuing operations
Operating loss is after charging/(crediting):
Depreciation on owned property, plant and equipment
Depreciation on right-of-use assets
Product development costs expensed
Government job retention scheme
Auditor’s remuneration:
– fees payable to the Company’s auditor for the audit of the Company’s annual accounts
– fees payable to the Company’s auditor for the audit of the Company’s subsidiaries pursuant to legislation
Total audit fees for audit services
Tax services
Total auditor’s remuneration
Non-recurring or special items:
– Restructuring and integration costs
– Costs incurred in issue of new shares
– Disposal costs of India operations
– Pre-acquisition costs of Tutela LLC
– Amortisation of acquired intangible assets
Total non-recurring or special items
2022
£m
0.2
0.3
1.9
—
—
0.2
0.2
—
0.2
0.7
0.1
0.2
—
1.4
2.4
2021
£m
0.1
0.5
2.5
(0.4)
—
0.1
0.1
0.1
0.2
0.8
—
—
0.1
1.3
2.2
Included within auditor’s remuneration for audit services in FY22 is a sum for less than £0.1m (2021: less than £0.1m) for the audit of
overseas subsidiaries carried out by an auditor other than Grant Thornton UK LLP.
Grant Thornton UK LLP was paid less than £0.1m for tax advisory and compliance services (2021: £0.1m).
5. Finance income
Finance income comprised:
2022
£m
—
2021
£m
—
Notes
2022
£m
2021
£m
26
12
11
26
(7.1)
—
0.5
1.4
—
—
—
(5.2)
1.6
(0.6)
(0.8)
(5.0)
—
(5.0)
0.1
(4.9)
(5.3)
0.6
0.6
1.3
(0.5)
0.1
—
(3.2)
(0.9)
0.6
0.6
(2.9)
—
(2.9)
—
(2.9)
Interest receivable on cash and bank balances, and treasury deposits
The Group incurred finance costs in relation to IFRS 16 right-of-use contract liabilities of less than £0.1m.
6. Net cash flows from operating activities
(Loss)/profit before taxation
– from continuing operations
– from discontinued operations (before tax)
Adjustments for:
Depreciation
Amortisation
Gain on the sale of discontinued businesses
Share-based payments
Finance income
Operating cash flow before working capital changes
Decrease/(increase) in trade and other receivables
(Increase)/decrease in inventories
(Decrease)/increase in trade and other payables
Operating cash flow after working capital changes
(Increase)/decrease in provisions
Cash generated by operations
Tax credit received
Net cash outflow from operating activities
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
69
7. Staff information (including Directors)
Employee costs were:
Wages and salaries
Social security costs
Other pension costs
2022
Note
Continuing
£m
Discontinued
£m
23
10.1
1.1
0.3
11.5
—
—
—
—
2021
Continuing
£m
Discontinued
£m
7.0
0.9
0.2
8.1
0.1
—
—
0.1
Total
£m
10.1
1.1
0.3
11.5
Total
£m
7.1
0.9
0.2
8.2
Redundancy costs of less than £0.1m (2021: less than £0.1m) were incurred in the year within operating costs. Employee costs of the
discontinued businesses are included within the discontinued result for the year.
The average monthly number of people employed by the Group during the year, including Executive Directors, was as follows:
2022
2021
Continuing
Number
Discontinued
Number
Total
Number
Continuing
Number
Discontinued
Number
Total
Number
Administration and sales
Development
Field service
Production
112
33
37
—
182
1
—
—
—
1
113
33
37
—
183
95
29
48
1
173
2
—
—
—
2
Details of Directors’ remuneration are included in the Remuneration report on pages 40 to 44. Employee costs of the discontinued
businesses are included within the discontinued result for the year.
8. Taxation
(a) Analysis of tax (credit)/charge for the year – continuing operations
Current taxation:
UK corporation tax charge on profit for the year
Total current taxation
Deferred tax:
On separately identifiable acquired intangibles (as a result of amortisation)
Total deferred taxation
Tax charge on continuing operations
(b) Analysis of tax charge for the year – discontinued operations
Current taxation:
UK corporation tax charge on profit for the year
Overseas corporation tax charge on profit for the year
Overprovision for prior year – UK
Total current taxation
Deferred tax:
Origination and reversal of temporary differences
Under provision in respect of prior years
Total deferred taxation
Tax charge on discontinued operations
2022
£m
—
—
(0.3)
(0.3)
(0.3)
2022
£m
—
—
—
—
—
—
—
—
(c) Factors affecting taxation charge for the year – continuing operations
The effective tax rate for the year was 19%.
Loss on continuing operations before taxation
Loss on ordinary activities multiplied by weighted average standard rate of corporation tax
in the UK of 19%
Effects of:
Expenses not deductible for tax purposes
Temporary differences not recognised
Tax losses not recognised
Surrender of losses to discontinued operations
2022
Tax rate
19.0%
(1.3)%
(2.1)%
(11.3)%
0%
(4.3)%
2021
Tax rate
19.0%
(2.5)%
2.6%
(11.3)%
(1.9)%
(5.9)%
£m
(7.1)
(1.3)
0.1
0.1
0.8
—
(0.3)
97
29
48
1
175
2021
£m
—
—
(0.3)
(0.3)
(0.3)
2021
£m
—
—
—
—
—
—
—
—
£m
(5.3)
(1.0)
0.1
(0.1)
0.6
0.1
(0.3)
Checkit plc | Annual Report and Accounts 2022
70
FINANCIAL STATEMENTS
8. Taxation continued
(d) Factors affecting taxation charge for the year – discontinued operations
Profit on discontinued operations before taxation
Profit on ordinary activities multiplied by weighted average standard rate of corporation tax
in the UK of 19%
Effects of:
Profits not subject to tax
Temporary differences not recognised
Surrender of losses from continuing operations
Prior year adjustments
2022
Tax rate
—
—
—
—
—
—
£m
—
—
—
—
—
—
—
2021
Tax rate
19.0%
—
—
(19.0)%
—
—
£m
0.6
0.1
—
—
(0.1)
—
—
Discontinued Operations for FY22 relate to the sale of Elektron Eye Technology. This was also included in Discontinued Operations for FY21.
(e) Factors that may affect future taxation charges
Deferred taxation assets amounting to £4.1m (2021: £2.9m) have not been provided in respect of unutilised income tax losses of £22.0m
(2021: £15.5m) that can only be carried forward against future taxable income of that same trade as there is currently insufficient
evidence that these assets will be recovered.
The Finance (No.2) Act 2015 reduced the main rate of UK corporation tax to 19%, effective from 1 April 2017. A further reduction in the
UK corporation tax rate to 17% was expected to come into effect from 1 April 2020 (as enacted by Finance Act 2016 on 15 September
2016). However, legislation introduced in the Finance Act 2020 (enacted on 22 July 2020) repealed the reduction of the corporation tax,
thereby maintaining the current rate of 19%. Deferred taxes on the balance sheet have been measured at 19% which represents the
future corporation tax rate that was enacted at the balance sheet date.
The UK Budget 2021 announcements on 3 March 2021 included measures to support economic recovery as a result of the ongoing
COVID-19 pandemic. These included an increase to the UK’s main corporation tax rate to 25%, which is due to be effective from 1 April 2023.
These changes were not substantively enacted at the balance sheet date and hence have not been reflected in the measurement of deferred
tax balances at the period end. If the Group’s recognised deferred tax balances at the period end were remeasured at 25% this would
result in a deferred tax charge of £0.1m.
9. Dividends paid
No interim or final dividend was paid for the year ended 31 January 2022 (2021: £nil).
10. Earnings per share
Earnings per share (EPS) is the amount of post-tax profit attributable to each share (excluding those held by the Company). Basic EPS
measures are calculated as the Group profit for the year attributable to equity shareholders divided by the weighted average number
of shares in issue during the year. Diluted EPS takes into account the dilutive effect of all outstanding share options priced below the
market price, in arriving at the number of shares used in its calculation.
Both of these measures are also presented on an adjusted basis, to remove the effects of non-recurring or special items, being items
of both income and expense which are sufficiently large, volatile or one-off in nature, to assist the reader of the financial statements
to get a better understanding of the underlying performance of the Group. The note below demonstrates how this calculation has
been performed.
Weighted average number of shares for the purpose of basic earnings per share
Dilutive effect of employee share options1
Weighted average number of shares for the purpose of diluted earnings per share
Loss for the year
Profit from discontinued operations, net of tax
Continuing loss for the year attributable to equity shareholders
Total non-recurring or special items net of tax
Loss for adjusted EPS
EPS measures
Basic and diluted1 continuing EPS
Adjusted EPS measures
Adjusted basic and diluted1 continuing EPS
Key
A
B
Key
F
E
C
D
Key
C/A
D/A
2022
m
68.1
—
68.1
£m
(6.8)
—
(6.8)
2.1
(4.7)
2021
m
61.5
—
61.5
£m
(4.4)
(0.6)
(5.0)
1.9
(3.1)
2022
2021
(10.0)p
(8.3)p
(7.0)p
(5.2)p
The adjusted EPS information is considered to provide a fairer representation of the Group’s trading performance.
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
71
10. Earnings per share continued
Discontinued earnings per share
EPS measures
Basic EPS
Diluted EPS1
Total earnings per share for the year attributable to equity shareholders
EPS measures
Basic EPS
Diluted EPS1
Key
2022
(E)/A
(E)/B
—
—
2021
1.0p
1.0p
Key
2022
2021
(F)/A
(F)/B
(10.0)p
(10.0)p
(7.3)p
(7.3)p
1
In the current and prior year, the dilutive impact of employee share options is ignored since there is no dilutive impact on continuing operations EPS measures given the
continuing loss for the year.
11. Intangible assets
Cost
At 1 February 2020
Additions
Disposals
At 31 January 2021
Additions
Businesses acquired
Disposals
At 31 January 2022
Amortisation
At 1 February 2020
Charge for the year
Disposals
At 31 January 2021
Charge for the year
Disposals
At 31 January 2022
Carrying amount
At 1 February 2020
At 31 January 2021
At 31 January 2022
Development
costs
£m
Computer
software
£m
Acquired
intangible
assets
£m
Goodwill
£m
7.1
—
(0.6)
6.5
1.5
—
—
8.0
7.1
—
(0.6)
6.5
—
—
6.5
—
—
1.5
0.1
—
—
0.1
0.7
—
—
0.8
0.1
—
—
0.1
—
—
0.1
—
—
0.7
4.0
—
—
4.0
—
0.3
—
4.3
1.0
1.3
—
2.3
1.4
—
3.7
3.0
1.7
0.6
4.3
—
—
4.3
—
0.2
—
4.5
—
—
—
—
—
—
—
4.3
4.3
4.5
Total
£m
15.5
—
(0.6)
14.9
2.2
0.5
—
17.6
8.2
1.3
(0.6)
8.9
1.4
—
10.3
7.3
6.0
7.3
Acquired intangible assets are made up of the separately identified intangibles acquired with the purchase of Next Control Systems
in May 2019 and those acquired with the purchase of Tutela LLC in February 2021.
Impairment testing for goodwill
The Group identifies cash-generating units (CGUs) at the operating company level, as this represents the lowest level at which cash
inflows are largely independent of other cash inflows. Goodwill acquired in a business combination is allocated, at acquisition, to the
groups of CGUs that are expected to benefit from that business combination.
Goodwill at 31 January 2021 all relates to the acquisition of Checkit UK Limited in May 2019. Goodwill at 31 January 2022 includes the
acquisition of Tutela LLC in February 2021. The CGUs of Checkit UK Limited, Checkit Europe Limited and Tutela LLC are all expected
to benefit from these acquisitions and the cash flows are grouped for the purpose of the impairment review.
Goodwill values have been tested for impairment by comparing them against the “value in use” in perpetuity of the relevant CGU
group. The value in use calculations were based on projected cash flows, derived from the latest forecasts prepared by management
and budgets approved by the Board, discounted at CGU specific, risk adjusted, discount rates to calculate their net present value.
Key assumptions used in “value in use” calculations
The calculation of “value in use” is most sensitive to the CGU specific operating and growth assumptions, that are reflected in management
forecasts for the five years to January 2027. CGU specific operating assumptions are applicable to the forecasted cash flows and relate to
revenue forecasts and forecast operating margins in each of the operating companies and are based on the strategic plans for the Group.
These assumptions include the expected impact and recovery from COVID-19. Long-term growth rates are capped at 1%.
Checkit plc | Annual Report and Accounts 2022
72
FINANCIAL STATEMENTS
11. Intangible assets continued
Key assumptions used in “value in use” calculations continued
The revenue growth rates used in the cash flow forecast are based on management’s expectations of the future opportunities for the
Checkit platform and the ability to upsell to existing customers on a global basis, including the planned US expansion. The forecasts
include the costs associated with delivering the SAAS platforms, which are directly linked to the forecast sales growth. Given the stage
of development of the business, the forecasts assume significant growth in revenue based on targeted ARR growth of 70% during the
5 year forecast period. A 20% reduction in the terminal value growth does not result in any impairment at 31 January 2021.
Discount rates are based on estimations of the assumptions that market participants operating in similar sectors would make, using the
Group’s economic profile as a starting point and adjusting appropriately. Sensitivity to the discount rate has been applied to evaluate
impairment testing using discount rates ranging from 10% to 20%.
Based on the forecasts consistent with the strategic business plan developed, no impairment sensitivity is identified.
12. Property, plant and equipment
Cost
At 1 February 2020
Additions
Disposals
At 31 January 2021
Additions
Disposals
At 31 January 2022
Depreciation
At 1 February 2020
Charge for the year
Disposals
At 31 January 2021
Charge for the year
Disposals
At 31 January 2022
Net book value
At 31 January 2021
At 31 January 2022
Property
£m
Plant and
machinery
£m
Equipment,
fixtures, fittings
and vehicles
£m
1.2
—
—
1.2
0.6
(0.9)
0.9
0.6
0.4
—
1.0
0.2
(0.9)
0.3
0.2
0.6
0.3
—
—
0.3
—
(0.1)
0.2
0.2
—
—
0.2
—
(0.1)
0.1
0.1
0.1
1.4
0.3
(0.2)
1.5
0.1
(0.7)
0.9
0.9
0.2
(0.1)
1.0
0.3
(0.7)
0.6
0.5
0.3
Total
£m
2.9
0.3
(0.2)
3.0
0.7
(1.7)
2.0
1.7
0.6
(0.1)
2.2
0.5
(1.7)
1.0
0.8
1.0
The net book value of tangible fixed assets held as right of use assets was £0.8m (2021: £0.4m) (see Note 22).
13. Investment in subsidiary undertakings
The subsidiary undertakings at 31 January 2022 were:
Name
Checkit Europe Limited
Registered office
Broers Building, JJ Thomson Avenue,
Cambridge, UK
Country of
incorporation
England
and Wales
Checkit UK Limited
Broers Building, JJ Thomson Avenue,
Cambridge, UK
England
and Wales
Tutela Monitoring Systems LLC
485 Mariner Blvd, Spring Hill,
Florida 34609, USA
USA
Nature of business
Web-based service for
work management and
automated monitoring
Building energy management
and automated
monitoring systems
Web-based service for
work management and
automated monitoring
Shares held
by parent
Shares held
by Group
100%
100%
100%
100%
100%
100%
Checkit Inc
Elektron Eye Technology Ltd
Hartest Precision
Instruments Limited
11849 Telegraph Road, Santa Fe Springs,
California 90670, USA
USA
Holding Company
100%
100%
Broers Building, JJ Thomson Avenue,
Cambridge, UK
Broers Building, JJ Thomson Avenue,
Cambridge, UK
England
and Wales
England
and Wales
Design, manufacture and sale
of ophthalmic products
100%
100%
Dormant company
100%
100%
Hartest Precision Instruments
India Private Limited
304, Plot No.7, Mahajan Tower LSC,
Shreshtha, Vihar, Delhi-110092
India
Dormant company
100%
100%
All subsidiary undertakings are operated primarily in the country of incorporation. In the year, Elektron Technology PTE Limited was
deregistered and Elektron Enterprises 1 Limited, Elektron Precision Instruments Limited and Elektron IP Limited were dissolved.
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
73
14. Deferred tax
Deferred tax
The gross movement on the deferred tax is as follows:
Deferred tax asset/(liability) at 1 February
Businesses sold
Businesses acquired including on separately identifiable acquired intangibles
Deferred tax on amortisation of separately identifiable acquired intangibles
Origination and reversal of other temporary differences
Deferred tax asset/(liability) at 31 January
Analysed as follows:
Depreciation in excess of capital allowances
Deferred tax on capitalised development costs
Separately identifiable acquired intangibles
Other short-term temporary differences
Taxation losses
Deferred tax asset
Deferred tax liability
2022
£m
—
2021
£m
—
Notes
8
2022
£m
0.1
2022
£m
(0.3)
—
(0.1)
0.3
—
(0.1)
(0.3)
—
(0.1)
—
0.3
(0.1)
2021
£m
0.3
2021
£m
(0.6)
—
—
0.3
—
(0.3)
(0.1)
(0.3)
—
—
0.1
(0.3)
Deferred taxation assets have only been recognised for subsidiaries with a past history of profitable trends where there is persuasive
and reliable evidence in the form of management accounts and financial projections that taxable profits are anticipated to arise in
the foreseeable future. Deferred taxation assets have not been provided in respect of unutilised income tax losses that can be carried
forward against future taxable income as there is currently uncertainty over their offset against future taxable profits and therefore
their recoverability.
No deferred tax liabilities have been provided in respect of the unremitted earnings of the overseas subsidiaries. The amount of such
unremitted earnings is estimated to be a retained profit of less than £0.1m (2021: £0.3m).
15. Inventories
Raw materials
Work in progress
Finished goods and goods for resale
2022
£m
0.3
—
1.5
1.8
2021
£m
0.4
—
0.7
1.1
In the ordinary course of business, the Group makes provision for slow-moving, excess and obsolete inventory as appropriate. Inventory
is stated after charging impairments of £0.3m in the year (2021: £0.3m), which are included within operating profit.
The amount of inventory recognised as an expense within the cost of sales for continuing operations amounted to £2.7m (2021: £2.5m).
16. Trade and other receivables
Gross trade receivables
Less: expected credit losses
Trade receivables – net
Other receivables
Prepayments
2022
£m
1.5
(0.1)
1.4
1.2
0.4
3.0
2021
£m
3.2
(0.1)
3.1
1.3
0.5
4.9
The fair values of trade and other receivables are considered to be as stated above.
The Group applies the IFRS 9 simplified model of recognising lifetime expected credit losses for all trade receivables, as these do not
have a significant financing component. The expected lifetime credit losses reflect assumptions on the ageing of the overdue debts that
may become unrecoverable, equivalent to a total Group rate of 2.0% (2021: 2.0%). The provision is based upon historical observed
default rates over the expected life of trade receivables, adjusted for an assessment of the current economic environment.
Trade receivables are normally due within 30 to 90 days and do not bear any effective interest rate. Failure to receive payment within
180 days of payment due date is considered indication of no reasonable expectation of recovery. One customer makes up 29% of Group
annualised revenues (FY21: 29%) but based on the Group’s assessment of its credit rating the risk of failure is considered low.
Trade receivable days are 40 days (2021: 80 days normalised).
Checkit plc | Annual Report and Accounts 2022
74
FINANCIAL STATEMENTS
16. Trade and other receivables continued
Ageing of balances with expected credit losses is as follows:
Not past due
Between one month and two months past due
Over two months past due
Movements on the provision for impairment of trade receivables are as follows:
At 1 February 2021
Increase in provision
At 31 January 2022
The gross carrying amounts of trade and other receivables are denominated in the following currencies:
Sterling
US Dollar
Euro
Other
17. Trade and other payables
Trade payables
Other payables
Accruals
Deferred service and subscription income
Expected credit loss
2022
£m
—
—
0.1
0.1
2021
£m
—
—
0.1
0.1
Expected credit loss
2022
£m
0.1
—
0.1
2022
£m
3.0
0.1
—
—
3.1
2022
£m
0.9
0.4
1.6
2.3
5.2
2021
£m
0.1
—
0.1
2021
£m
4.9
0.1
—
—
5.0
2021
£m
1.0
1.1
1.4
2.1
5.6
Management considers the carrying amounts of trade and other payables recognised in the balance sheet to be a reasonable approximation
of their fair value.
Trade payable days are 45 days (2021: 41 days).
Advances received for project and installation work and deferred service and subscription income represents customer payments
received in advance of performance that are expected to be recognised in revenue in FY23. Project and installation contracts range
from 3–12 months from design to completion.
Service and subscription income contracts vary from 12–48 months in length, however, customers are only required to pay in advance
for each successive 12–month period.
The amounts recognised as a contract liability will generally be utilised within the next reporting period.
18. Borrowings
The Group has no borrowings or facilities as at 31 January 2022.
19. Provisions
Current
Non-current
2022
£m
—
0.3
0.3
2021
£m
—
0.3
0.3
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
75
19. Provisions continued
At 1 February 2021
Utilised
Increase in provision
Business sold
At 31 January 2022
Anticipated utilisation
Within one year
Beyond one year
Dilapidation
costs
£m
0.3
(0.1)
0.1
—
0.3
—
0.3
Total
£m
0.3
(0.1)
0.1
—
0.3
—
0.3
The dilapidation costs relate to redecoration, maintenance and reinstatement costs required to meet the terms of property leases held
by the Group.
20. Share capital and reserves
Share capital
Authorised
200,000,000 (2021: 200,000,000) ordinary shares of 5 pence each
Allotted, called up and fully paid
108,008,562 (2021: 62,447,542) ordinary shares of 5 pence each
2022
£m
10.0
5.4
2021
£m
10.0
3.1
On 17 December 2021, the Company completed a placing of 45,561,020 ordinary shares to raise gross proceeds of approximately
£21.0m (£20.0m net of expenses) at a price of 46 pence per share.
The Placing Price of 46 pence per share represented a discount of approximately 4.2 per cent to the closing middle market price of
48 pence of an ordinary share on 25 November 2021, being the latest practicable trading day prior to the announcement of the
proposed placing.
Share options
Checkit Enterprise Management Incentive Plan (EMI)
Year of grant
FY21
FY22
Exercise period
2023–2030
2024–2031
Option
price
40.50p
56.03p
Number of options
2022
’000
1,315
2,533
2021
’000
2,625
—
The weighted average exercise price of all options under the EMI scheme in 2022 was 50.7 pence (2021: 40.5 pence).
Movement in share options during the year:
Outstanding at beginning of the year
Granted during the year
Exercised during the year
Forfeited during the year
Outstanding at the year end
Exercisable at the end of the period
2022
2021
No. of shares
’000
Weighted
average
No. of shares
’000
2,625
3,153
—
(1,930)
3,848
—
40.5p
56.0p
—
(45.3)p
50.7p
—
414
3,120
(414)
(495)
2,625
—
Weighted
average
12.33p
40.5p
(12.33)p
(40.5)p
40.5p
—
A new EMI scheme was launched in 2020. 3,152,500 (2021: 3,120,000) share options were granted during the year with options granted,
of which 1,930,000 (2021: 495,000) share options lapsed as a result of employees leaving the Group. No share options were eligible to
be exercised during the year. In the prior year, 414,000 share options were exercised by employees, representing the final options
outstanding under the CSOP scheme.
Valuation of share awards
Share-based payments, including awards under the EMI and CSOP, are valued using an independent probability valuation model
and take account of performance criteria (if any).
The Group recognised a charge of less than £0.1m in the year (2021: less than £0.1m).
Checkit plc | Annual Report and Accounts 2022
76
FINANCIAL STATEMENTS
20. Share capital and reserves continued
Reserves
The nature of the reserves shown in the consolidated balance sheet and consolidated statement of changes in equity is as follows:
Share premium
Amount subscribed for share capital in excess of nominal value.
Capital redemption reserve
The cumulative nominal value of own shares acquired by the Company.
Own shares
The value of the Company’s shares held by the Elektron Technology 2012 EBT.
Translation reserve
Gains and losses arising on retranslating the net assets of overseas operations into Sterling of less than £0.1m (2021: less than £0.1m).
Other reserves
A reserve arising from the application of IFRS 2 “Share-based Payments”.
Retained earnings
Cumulative gains and losses recognised in the consolidated statement of comprehensive income not included above.
21. Capital commitments
Expenditure sanctioned but not contracted for amounted to £nil (2021: £0.1m), and expenditure contracted but not provided for
in the financial statements amounted to £nil (2021: £1.1m).
22. Contract lease obligations
The right-of-use assets recognised and the movement during the year is as follows:
Motor
vehicles and
equipment
£m
Property
£m
1.3
—
(0.1)
1.2
0.6
(0.9)
0.9
0.7
0.4
(0.1)
1.0
0.2
(0.9)
0.3
0.2
0.6
0.5
0.1
(0.1)
0.5
0.1
(0.1)
0.5
0.2
0.1
—
0.3
0.1
(0.1)
0.3
0.2
0.2
Total
£m
1.8
0.1
(0.2)
1.7
0.7
(1.0)
1.4
0.9
0.5
(0.1)
1.3
0.3
(1.0)
0.6
0.4
0.8
Cost
At 1 February 2020
Additions
Disposals
At 31 January 2021
Additions
Disposals
At 31 January 2022
Depreciation
At 1 February 2020
Charge for the year
Disposals
At 31 January 2021
Charge for the year
Disposals
At 31 January 2022
Net book value
At 1 February 2021
At 31 January 2022
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
77
22. Contract lease obligations continued
The movement on the lease liability during the year is summarised as follows:
As at 1 February 2021
New leases entered into during the year
Acquisitions
Disposals
Payments made during the year
At 31 January 2022
Presented as:
Lease liability within one year
Lease liability in more than one year
At 31 January 2022
£m
0.5
0.6
—
—
(0.3)
0.8
0.2
0.6
0.8
The table below summarises the maturity profile of the Group’s financial liabilities based upon the contractual undiscounted payments
as at 31 January 2022.
No later than one year
Later than one year and no later than five years
Later than five years
2022
£m
0.2
0.6
—
0.8
23. Retirement benefit schemes
The Group operates a Group Personal Pension Plan (which is a defined contribution scheme) for all qualifying employees. The assets
of the schemes are held separately from those of the Group in funds under the control of the trustees.
Contributions to the Group Personal Pension Plan and to other personal pension plans are charged to the statement of comprehensive
income as they become payable. The pension cost charge for the year for continuing operations was £0.3m (2021: £0.2m) and
outstanding contributions at the year end amounted to less than £0.1m (2021: less than £0.1m).
24. Financial assets and liabilities
(i) Financial instruments
The Group’s financial instruments comprise cash and cash equivalents, and various items such as trade receivables and payables that
arise directly from its operations. The main purpose of these instruments is to raise finance for operations. The Group has not entered
into derivative transactions nor does it trade in financial instruments as a matter of policy. The main risk arising from the Group’s
financial instruments is liquidity risk. The Board’s policy on each is described in Note 1 and is subject to regular monitoring and review,
and remains unchanged since 2021. Operations are financed through working capital management and existing cash resources.
Treasury matters are dealt with on a Group basis and are approved by the Board.
(ii) Financial assets
Details of trade and other receivables are provided in Note 16. The only other current financial asset held is cash and cash equivalents.
The cash balances as at 31 January 2022 are detailed below:
US Dollar
Indian Rupee
Euro accounts
Pound Sterling
(iii) Financial liabilities
At 31 January 2022 the Group had no borrowings.
(iv) Maturity
All financial liabilities are contractually due within six months.
2022
£m
0.3
—
—
23.9
24.2
2021
£m
—
—
—
11.5
11.5
Checkit plc | Annual Report and Accounts 2022
78
FINANCIAL STATEMENTS
24. Financial assets and liabilities continued
(v) Fair value of financial assets and liabilities
IFRS 7 “Financial Instruments” requires disclosure of fair value measurements by the level of the following fair value measurement hierarchy:
▶ quoted prices (unadjusted) in active markets (Level 1);
▶ inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly (Level 2); and
▶ inputs for the asset or liability that are not based on observable market data (Level 3).
There are no applicable financial assets at the end of 31 January 2022 (2021: £nil).
(vi) Committed undrawn borrowing facilities
At the year end the Group had committed undrawn facilities of £nil (2021: £nil).
(vii) Currency risk
The Group’s principal functional currency remains Pound Sterling with limited transactions in Euro and US Dollar.
The Group does not trade in derivatives or make speculative hedges. At 31 January 2022 the Group had no commitments under non-
cancellable forward contracts (2021: £nil).
(viii) Categories of financial instruments
Financial assets held at amortised cost
Cash and bank balances
Trade and other receivables (Note 16)
Financial liabilities held at amortised cost
Trade and other payables (Note 17)
2022
£m
24.2
2.6
26.8
2022
£m
1.3
2021
£m
11.5
4.4
15.9
2021
£m
2.1
25. Related party transactions
(a) Transactions between Group companies, which are related parties, have been eliminated on consolidation and have therefore not
been disclosed.
(b) Key management of the Group are the Directors and other members of the Executive Leadership Team of the Group business segments.
Key management personnel remuneration was:
Short-term employee benefits:
Salaries including bonuses
Social security costs
Company benefits (car, PMI, etc.)
Post-employment benefits:
Defined contribution pension plans
Total remuneration
2022
£m
1.8
0.2
—
2.0
—
2.0
2021
£m
1.4
0.2
—
1.6
—
1.6
Share-based payments to key management amounted to £nil (2021: £nil).
26. Discontinued operations
During the prior year, the Group sold assets relating to its Elektron Eye Technology business. Consequently, the business has continued
to be included as discontinued operations.
Total discontinued operations comprise:
Revenue
Cost of sales
Gross profit
Operating expenses
Profit before tax
Attributable tax
Profit from discontinued operations before gain on disposal
Gain on disposal and loss on re-measurement
Attributable tax to gain
Profit from discontinued operations attributable to equity shareholders
Foreign currency reserve reclassification
Other comprehensive income from discontinued operations
Checkit plc | Annual Report and Accounts 2022
2022
£m
0.2
(0.2)
—
—
—
—
—
—
—
—
—
—
2021
£m
0.3
(0.2)
0.1
—
0.1
—
0.1
0.5
—
0.6
—
—
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
79
26. Discontinued operations continued
Elektron Eye Technology
The results of the Elektron Eye Technology discontinued operation, which have been included in the consolidated statement of
comprehensive income, were as follows:
Revenue
Cost of sales
Gross profit
Operating expenses
Profit before tax
Attributable tax
Profit from Elektron Eye Technology
Gain on sale and loss on re-measurement to fair value
(Loss)/profit from Elektron Eye Technology discontinued operation attributable to equity shareholders
Cash flows from Elektron Eye Technology
Net cash inflow from operating activities
Net cash inflow/(outflow) from investing activities
Cash received on sale of assets
Expenditure on intangible assets
Total net cash inflow/(outflow) from investing activities
Interest payable
Total net cash outflow from financing activities
2022
£m
0.2
(0.2)
—
—
—
—
—
—
—
2022
£m
—
0.4
—
0.4
—
—
On 1 July 2020 and 13 January 2021, the Group disposed of assets relating to its Elektron Eye Technology business for a total net
proceeds of £0.9m, with £0.2m payable as deferred consideration at the end of the year.
The gain on disposal in FY21 is summarised as follows:
Intangible assets (held for resale)
Total assets sold
Gain on disposal
Total consideration
Satisfied by:
Deferred consideration
Total consideration
2021
£m
0.3
(0.2)
0.1
—
0.1
—
0.6
0.5
0.6
2021
£m
0.1
0.3
—
0.3
—
—
£m
0.4
0.4
0.5
0.9
0.9
0.9
27. Businesses acquired – Tutela Monitoring Systems LLC
On 4 February 2021, the Group acquired 100% of the equity of Tutela Monitoring Systems LLC (“Tutela”), a US-based business.
Tutela was previously owned by Next Control Systems Limited (now Checkit UK Limited, a subsidiary of the Group), before Next Control
Systems Limited was acquired by the Group in May 2019. It was sold to the US management team of Tutela in August 2018.
Tutela, which is based in Florida, provides wireless temperature monitoring systems for all applications and facilities which store
sensitive inventory for businesses within the healthcare sector. The Group intends to utilise Tutela as a platform to pursue all industries
and verticals targeted by Checkit.
The acquisition serves to accelerate the Group’s US expansion plans, providing a footprint and an opportunity to add further scale.
The Directors believe that, based on relative population sizes, the US represents an addressable market around five times larger than
the UK, and therefore believe the acquisition represents a significant milestone in its growth strategy.
Checkit plc | Annual Report and Accounts 2022
80
FINANCIAL STATEMENTS
27. Businesses acquired – Tutela Monitoring Systems LLC continued
The details of the business combination are as follows:
Fair value of consideration transferred
Amount settled in cash
Deferred consideration outstanding from 2018 sale
Recognised amounts of identifiable net assets
Other intangibles
Total non-current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Trade and other payables
Total current liabilities
Total non-current liabilities
Identifiable net assets
Goodwill on acquisition
Consideration settled in cash
Cash and cash equivalents acquired
Net cash outflow on acquisition
£m
0.6
0.1
0.3
0.3
0.1
0.1
0.2
0.4
(0.2)
(0.2)
—
0.5
0.2
0.6
0.2
0.4
Consideration transferred
The acquisition of Tutela was settled in cash amounting to £0.6m. Acquisition related costs amounting to £0.1m were expensed and
treated as a non-recurring item. Deferred consideration of £0.1m outstanding from the 2018 sale was discharged on acquisition.
Identifiable net assets
The fair value of the trade and other receivables acquired as part of the business combination amounted to £0.2m, with a gross contractual
amount also being £0.2m. As of the acquisition date, the Group expected to collect the full balance of the contractual cashflow.
Separable intangible assets
Two separable intangible assets were identified at acquisition, being the sole distributorship agreement and the acquired customer list.
The sole distributorship agreement represents a re-acquired asset from the 2018 sale, for which a price of $300K was paid at the time.
The asset has been valued on the basis of the remaining term of the agreement. The useful life has been set as 1.9 years.
The acquired customer list was valued by assessing a discounted cashflow based on expected customer attrition rates and using
a discount factor of 28.8%. The useful life has been estimated at 3 years.
Goodwill
Goodwill is primarily related to the core growth expectations, expected future profitability and expected business synergies. Goodwill
has been allocated to the Checkit segment and is not expected to be deductible for tax purposes.
Tutela’s contribution to the Group results
Tutela US LLC generated a loss of £0.2m for the period from 4 February 2021 to the reporting date. Revenue for the period to
31 January 2022 was £1.6m.
In its financial year ending 31 December 2020, Tutela’s sales were approximately $2m (£1.46m) with profit before tax of $0.27m
(£0.20m) and net assets (including cash) amounting to $0.16m (£0.12m). If the businesses had been consolidated during that period,
approximately £1m would have been added to Group sales per annum after eliminating intercompany sales on consolidation.
28. Non-GAAP performance measures
A reconciliation of non-GAAP performance measures to reported results is set out below:
Profit measures – LBITDA – continuing operations
LBITDA
Depreciation and amortisation
Reported operating loss for the year before non-recurring and special items
2022
£m
(4.2)
(0.5)
(4.7)
2021
£m
(2.5)
(0.6)
(3.1)
Checkit plc | Annual Report and Accounts 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUEDyear ended 31 January 2022 STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
81
PARENT COMPANY BALANCE SHEET
as at 31 January 2022
Fixed assets
Investments in subsidiary undertakings
Intangible assets
Tangible fixed assets
Current assets
Debtors
Cash in hand and at bank
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Long-term contract lease liabilities
Long-term provisions
Net assets
Capital and reserves
Called up share capital
Share premium
Capital redemption reserve
Other reserves
Profit and loss account
Shareholders’ funds
Notes
3
4
5
6
7
8
2022
£m
14.5
0.5
0.4
15.4
5.4
22.0
27.4
(4.4)
23.0
38.4
(0.1)
(0.2)
38.1
5.4
23.3
6.4
—
3.0
38.1
2021
£m
9.5
—
0.3
9.8
0.6
8.8
9.4
(3.4)
6.0
15.8
(0.2)
(0.2)
15.4
3.1
5.4
6.4
—
0.5
15.4
The parent company’s profit for the financial year amounted to £2.5m (2021: £2.7m loss).
The notes form an integral part of the financial statements.
The financial statements were approved by the Board of Directors on 5 May 2022 and were signed on its behalf by:
Kit Kyte
Director
Greg Price
Director
Checkit plc | Annual Report and Accounts 2022
82
FINANCIAL STATEMENTS
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
year ended 31 January 2022
At 1 February 2020
Loss for the year
Total comprehensive expense for the year
Total transaction with owners
At 31 January 2021
Profit for the year
Total comprehensive income for the year
Issue of new shares
Total transaction with owners
At 31 January 2022
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Profit
and loss
account
£m
3.1
—
—
—
3.1
—
—
2.3
2.3
5.4
5.4
—
—
—
5.4
—
—
17.9
17.9
23.3
6.4
—
—
—
6.4
—
—
—
—
6.4
3.2
(2.7)
(2.7)
—
0.5
2.5
2.5
—
—
3.0
Total
£m
18.1
(2.7)
(2.7)
—
15.4
2.5
2.5
20.2
20.2
38.1
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
83
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
year ended 31 January 2022
1. Accounting policies
Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006. The Company meets
the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council.
Accordingly, the financial statements have therefore been prepared in accordance with Financial Reporting Standard 101 (FRS 101)
“Reduced Disclosure Framework” as issued by the Financial Reporting Council.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management, presentation of comparative information in respect of certain assets,
presentation of a cash flow statement and certain related party transactions. Where required, equivalent disclosures are given in the
consolidated financial statements.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same
as those set out in Note 1 to the consolidated financial statements except as noted below:
Investments
Investments in subsidiaries and associates are stated at cost less, where appropriate, provisions for impairment.
2. Profit for the financial year
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part of
these financial statements. The parent company’s profit for the financial year amounted to £2.5m (2021: £2.7m loss).
3. Investments in subsidiary undertakings
At 1 February
Acquisitions – external
Acquisitions – intra-group
Disposals
Provisions
At 31 January
Investment in subsidiary undertakings are made up as follows:
Checkit Europe Limited
Checkit UK Limited
Elektron Eye Technology Limited
2022
£m
9.5
—
—
—
5.0
14.5
Net book value
Cost
£m
9.0
10.5
2.6
22.1
Impairment
£m
—
(5.0)
(2.6)
(7.6)
2022
£m
9.0
5.5
—
14.5
2021
£m
9.6
—
—
(0.8)
0.7
9.5
2021
£m
4.0
5.5
—
9.5
Following the intercompany sale of certain assets from Checkit UK Limited to Checkit Europe Limited at book value, management
has reassessed the value in use of the investment in Checkit Europe, leading to a reversal of the impairment loss of £5m. Using a
discount rate of 16% (FY21: 17.5%), management has assessed the recoverable amount of the investment in Checkit Europe Limited to
be the original cost of the investment of £9.0m, supported by its value in use. The assumptions used to determine the value in use are
consistent with those disclosed in note 11 to the group financial statements for the purpose of goodwill impairment testing, amended
where necessary to consider only the investment in Checkit Europe Limited.
Checkit plc | Annual Report and Accounts 2022
84
FINANCIAL STATEMENTS
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED
year ended 31 January 2022
4. Tangible fixed assets
Cost
At 1 February 2021
Additions
Disposals
At 31 January 2022
Depreciation
At 1 February 2021
Charge for the year
Disposals
At 31 January 2022
Net book value
At 1 February 2021
At 31 January 2022
Amounts owed by subsidiary undertakings are repayable on demand and do not bear interest.
5. Debtors: amounts falling due within one year
Amounts owed by subsidiary undertakings
Other debtors and repayments
Amounts owed by subsidiary undertakings are repayable on demand and do not bear interest.
6. Creditors: amounts falling due within one year
Amounts owed to subsidiary undertakings
Other creditors
Contract lease liabilities
Amounts owed to subsidiary undertakings are repayable on demand and do not bear interest.
7. Provisions
At 1 February 2021
Utilised
Increase in provision
At 31 January 2022
Anticipated utilisation
Within one year
Beyond one year
Property –
right-of-use
asset
£m
1.1
0.4
(0.7)
0.8
0.8
0.3
(0.7)
0.4
0.3
0.4
2021
£m
0.2
0.4
0.6
2021
£m
2.7
0.6
0.1
3.4
Dilapidation
costs
£m
0.2
—
—
0.2
—
0.2
2022
£m
4.8
0.6
5.4
2022
£m
3.2
0.8
0.4
4.4
8. Share capital and reserves
Details of the share capital and reserves are given in Note 20 of the notes to the consolidated financial statements.
9. Capital expenditure commitments
Expenditure sanctioned but not contracted for amounted to £nil (2021: £0.1m), and expenditure contracted but not provided for
in the financial statements amounted to £nil (2021: £1.1m).
10. Contingent liabilities
The Company guaranteed rental obligations of certain subsidiary companies up to £nil (2021: £nil).
11. Related party transactions
Related party transactions are the same for the Company as for the Group. Details can be found in Note 25 of the notes to the
consolidated financial statements.
Checkit plc | Annual Report and Accounts 2022
STR ATEGIC REPORT
CORPOR ATE GOVERNANCE
FINANCIAL STATEMENTS
85
WEB PROPERT Y AND ADVISERS
Web property
Checkit
www.checkit.net
Advisers
Company Secretary
Hugh Wooster
Registered office
Broers Building
JJ Thomson Avenue
Cambridge CB3 0FA
Registered in England
No. 448274
Registrars
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Nominated adviser and broker
Singer Capital Markets
1 Bartholomew Lane
London EC2N 2AX
Auditor
Grant Thornton UK LLP
101 Cambridge Science Park
Milton Road
Cambridge CB4 0FY
Bankers
HSBC Bank plc
69 Pall Mall
London SW1Y 5EZ
Barclays Bank plc
Leicester
LE87 2BB
CBP012334
Checkit plc’s commitment to environmental issues is reflected in this
Annual Report, which has been printed on Symbol Freelife Satin, an
FSC® certified material.
This document was printed by L&S using its environmental print
technology, which minimises the impact of printing on the
environment, with 99% of dry waste diverted from landfill. Both the
printer and the paper mill are registered to ISO 14001.
Checkit plc | Annual Report and Accounts 2022
C
h
e
c
k
i
t
p
l
c
|
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
2
Checkit plc
Broers Building
JJ Thomson Avenue
Cambridge CB3 0FA
www.checkit.net