Innovate how you operate Annual Report and Accounts 2024 Checkit is the augmented workflow solution for frontline workers and smart sensor automation, enabling large multinational and complex organisations to operate more safely, efficiently and sustainably – driving them towards achieving intelligent operations. At Checkit, we have hundreds of customers across the globe, including Global Fortune 500 and public health organisations. Our customers are digitising their manual processes through our highly customisable workflow software and our top-of-the-line Internet of Things (IoT) sensors, increasingly aided by Machine Learning and AI. More than 12 billion sensor readings and 42 million completed workflows per year are sent through our platform enabling our customers to become more efficient, ensure safety and deliver complete operational visibility. Software + Sensors + Services = Intelligent Operations Checkit is transforming how forward-thinking and digital- first organisations execute frontline work, blending software, hardware, and event-driven actions to deliver value across every frontline business process. We enable organisations to progress in their digital maturity journey towards achieving intelligent operations by connecting people, assets and processes to create rich performance data which directly informs efficient operational strategy, execution, and compliance. Our proven reliable single-source digital solution drives fast and scalable efficiencies across the entire frontline workforce and business asset portfolios. Checkit is helping customers uncover operational insights that lead to transformational reductions in cost and risk and better delivered experiences at point of use. Intelligent operations make it simple for business and department leaders to quickly assess performance, visualise the entire operation and respond to changes by deploying enterprise-wide process and asset use improvements effortlessly. To find out more visit: www.checkit.net LinkedIn: checkit-ltd X: _checkit Contents Operational highlights ARR growth of 16% in line with market expectations, despite a challenging global economy Compound recurring revenue growth of 30% since FY20, reflecting strategic focus on subscription-based sales Net revenue retention (NRR)2 of 111% demonstrating land and expand strategy New product functionality enabling customers to deliver sustainability and energy-saving initiatives Progress towards profitability with a 46% improvement in adjusted LBITDA, driven by revenue growth of 17%, an increase in gross margins to 67% and an 11% reduction in operating costs Financial highlights Annual Recurring Revenue (ARR) run rate £13.3m +16% (FY23: £11.5m)1 Recurring revenue £11.2m +17% (FY23: £9.6m) Total Group revenue from continuing operations £12.0m +17% (FY23: £10.3m) Adjusted LBITDA3 from continuing operations £3.4m (FY23: loss of £6.4m) Net cash at year end £9.0m (FY23: £15.6m) 1 Annual Recurring Revenue (ARR) is defined as the annualised value of contracted recurring revenue from subscription services as at the period end, including committed annual recurring revenue from new wins. This has been restated from the prior year (reported ARR of £11.5m), where it related only to contracts that were installed. 2 Net retention revenue (NRR) is defined as the amount of recurring revenue from existing customers retained over the year, excluding new wins in the last twelve months. 3 Adjusted LBITDA is the loss on operating activities before depreciation and amortisation, share-based payment charges and non-recurring or special items. STRATEGIC REPORT FINANCIAL STATEMENTS 1 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 HIGHLIGHTS Strategic report 1 Highlights 2 Company overview 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 Financial review 20 Chief People Officer’s review 22 Strategy in action 26 Environment, Social and Governance (ESG) 30 Stakeholder engagement and Section 172 32 Principal risks and uncertainties Corporate governance 37 Executive leadership 38 Corporate governance report 41 Audit Committee report 43 Remuneration report 48 Report of the Directors 50 Directors’ responsibilities statement Financial statements 51 Independent auditor’s report 55 Consolidated statement of comprehensive income 56 Consolidated balance sheet 57 Consolidated statement of changes in equity 58 Consolidated statement of cash flows 59 Notes to the consolidated financial statements 79 Parent company balance sheet 80 Parent company statement of changes in equity 81 Notes to the parent company financial statements IBC Web property and advisers Our vision: Empowering work without waste. Our mission: To make it easy for organisations and workers to understand what they need to do, when they need to do it, and how to do it more efficiently, keeping their customers and teams safe whilst lowering costs and reducing waste. We empower dispersed teams with smart sensors and a workflow platform that provides the agility and visibility that leaders need to deliver a high-quality, safe and profitable service. Our customers: Some of our key customers include: STRATEGIC REPORT 2 Checkit plc | Annual Report and Accounts 2024 COMPANY OVERVIEW “We view Checkit in terms of efficiency. The work still needs to be done, but it’s now done in a way that makes every second count. Once we input the data into Checkit, it’s there for everyone involved to make best possible use of. Whether that means reporting, analysis or spotting ways to improve how we work.” Caitlin McArthur Contract Catering Team Manager, Sodexo “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, Hallmark Care Homes “The dashboard gives me all the information I need, wherever I happen to be and whenever I need to check. This system puts everything in one place – and being web-based we can see which wards are doing well and which are not.” Nigel Barnes Director of Pharmacy & Medicines Management, Birmingham and Solihull Mental Health NHS Foundation Trust An end-to-end digital solution. STRATEGIC REPORT FINANCIAL STATEMENTS 3 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Intelligent Operations: Intelligent Operations – provided by digitally enabled frontline workers and sensors – drives value and impact from the outset. Checkit enhances the activities performed by deskless workforces and increases asset utilisation efficiency through its end-to-end platform, built to help organisations become digital and data-first. Sensors ▶World-leading smart sensors ▶Effective, reliable and compliant technology ▶Fully-installed and maintained by Checkit’s team of experts Software ▶Monitors and analyses all mission-critical sensor data ▶Real time, pre-emptive digital alerts ▶Task management and automated workflows ▶Advanced analytics and dashboards Services ▶Enable an organisation to move from manual labour dependency to a digitally-optimised automated workplace ▶Responsive, experienced staff who know sensors and software in multiple environments empowering reliable and stable operations Sensors Services Software Simplify. Harmonize. Empower. STRATEGIC REPORT 4 Checkit plc | Annual Report and Accounts 2024 INVESTMENT CASE ▶World-class products, benefiting from AI enhancements ▶Exposure to huge US market ▶Focus on large vertical markets with reference customers in place ▶Recurring revenue model delivering path to profitability Guided workflow software, smart sensor automation Organisations everywhere are spending more and more money to increase operational efficiency and to make scarce capital go further. Checkit’s products help businesses and public sector bodies manage two of their most valuable resources – people and business assets – more productively. State-of-the-art products using ML and AI Our software and sensors provide real-time intelligence, with value adding using AI tools, on staff workflow and asset health. This enables managers to better plan working practices to release gains in productivity as well as enhancing customer service for workers in the field and the more efficient management of assets such as freezers which cuts costs, minimises wastage and reduces emissions. Workflow Intelligence IoT I n t e g r a t e D e fi n e A s s i s t C o ll e c t M a n a g e I n f o r m Reasons to invest in Checkit STRATEGIC REPORT FINANCIAL STATEMENTS 5 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Succeeding in the United States Our focus is to build a business of scale in the extensive US market in parallel with continuing to grow our UK business. We are succeeding in this ambition thanks to our “land and expand” strategy with the US now accounting for nearly a third of current Group annual recurring revenues. Serving large vertical markets We focus on two principal markets, the UK and the US, targeting sectors such as hospitality, leisure, healthcare and retail. Our flagship customers in leisure and retailing include John Lewis & Partners, Center Parcs and BP. In the healthcare sector, customers include Octapharma (the largest privately owned and independent plasma fractionator in the world), Grifols (a leading global healthcare company that develops plasma-derived medicines and other biopharmaceutical solutions) and the UK’s NHS. £0m £1m £2m £3m £4m £5m £6m £7m £8m £9m £10m £11m £12m £3.9m £5.2m CAGR 30% £9.6m £6.8m £11.2m FY20 FY21 FY22 FY23 FY24 A recurring revenue model That we serve fast-growing markets is illustrated by the 30% CAGR (Compound Annual Growth Rate) in recurring revenues over the last five years. We have great customer retention, with some 93% of revenues classed as recurring, underpinning the outlook for future financial years. With further growth in revenues and with careful control of costs, this provides us with a pathway to positive cash flow. STRATEGIC REPORT 6 Checkit plc | Annual Report and Accounts 2024 Investing in innovation Dear Shareholders, Despite the economic uncertainty that has characterised the financial year ending 31 January 2024, Checkit has delivered an operating performance in line with Board and market expectations with annual revenues increased by 17% over last year. I am particularly pleased that we delivered losses (adjusted LBITDA) better than expected and nearly halving for the year to £3.4m (FY23: LBITDA of £6.4m) whilst recurring revenues now account for 93% of total revenues. After transitioning to an exclusively subscription-based model, our goal now is to enhance revenue growth in our key markets of Western Europe and North America. With a solid financial foundation, we are well-positioned to pursue our growth objectives, advance our technology, improve operational efficiencies, and hasten our progress towards profitability. I should like to thank Chief Executive Officer Kit Kyte and the rest of the senior management team who led the Group effectively during what was a difficult macro-economic environment. You will read more about the team’s vision below. We are helping large blue-chip customers to be as productive, efficient, and compliant as possible in the face of cost pressures and operational complexities. Our industry-leading customer retention rates demonstrate how embedded our growing range of capabilities have become within our clients’ technology stacks; a trend we expect to continue as the tailwinds of digital transformation, operational efficiency imperatives, and automation strengthen. In FY24, we have re-examined each of our markets and products and concluded there is substantial long-term value to be created by continuing to invest in product innovation to spearhead the growth of our high quality recurring subscription revenue. Our levels of recurring revenue give us excellent future income visibility and provide a stable platform from which to expedite the path to profitability, a key Company priority over the next two years. On behalf of the Board, I would like to thank each member of our teams in Cambridge, London, Fleet and Tampa for their commitment in FY24. Across the business, our people consistently demonstrate their ingenuity, tenacity, ambition and humanity. They are our most valuable asset and the reason for our success. Keith Daley Non-Executive Chairman 24 April 2024 Following another year of strong progress, we are well placed to achieve sustainable growth and profitability. “There is substantial long-term value to be created by continuing to invest in product innovation.” NON-EXECUTIVE CHAIRMAN’S STATEMENT Keith Daley Non-Executive Chairman STRATEGIC REPORT FINANCIAL STATEMENTS 7 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Checkit has delivered a positive set of financial results in FY24, delivering balanced growth, retaining customers to an industry-leading standard and improving operational efficiency. CHIEF EXECUTIVE OFFICER’S REVIEW The road to profitability: consistent growth whilst driving down costs Reflecting on a year filled with macro- economic challenges, we are both excited about our progress and proud of the support we’ve provided to our customers, equipping them with the insights, tools, and strategies needed to succeed in difficult times. Our ‘land and expand’ strategy of up-selling and cross-selling has generated growth from our existing customer base, whilst at the same time we have actively identified areas of expansion and opportunity both geographically and vertically. With recurring revenues now representing 93% of the total and our high net revenue retention of 111%, we have a sound base to pursue our drive towards profitability. Financial performance Checkit’s financial results for FY24 were in line with Board and market expectations, generating an overall increase in ARR of 16% to £13.3m (FY23: £11.5m). Revenue has grown by 17% to £12.0m, despite the challenging global economy. This represents a fourth consecutive year of high-quality recurring revenue growth. Our focus on gross margin expansion continues to deliver with a 4% improvement to 67%. We delivered losses (adjusted LBITDA) better than expected and nearly halving for the year to £3.4m (2023: LBITDA of £6.4m) as we drive operational efficiencies and carefully manage costs across the business. The Company continues to expand into the extensive US market, achieving 21% year-on-year growth in US ARR contribution from £2.8m in FY23 to £3.4m in FY24. This steady expansion demonstrates the measurable benefits we offer to customers, including operational insight, enhanced staff retention, cost-effectiveness, and heightened compliance. Our drive to profitability continues with an improvement in LBITDA for the year to £3.4m (FY23: £6.4m), driven by the growth in revenues and reduced operating costs. Product development spend reduced by 7% to £3.9m (FY23: £4.2m), although the amount capitalised increased by 11% to £2.0m (FY23: £1.8m), as the Group invested in developing AI capability and unifying products around our platform. Sales and marketing investment decreased by 12% to £2.6m (FY23: 3.0m), with a focus on existing customers and identifying opportunities in adjacent markets and geographies. Through our “land and expand” customer strategy, we win new business in a discreet customer location or function and form close customer bonds that allow us to expand the services we offer over time. We do this by building trust through valuable insights and enhancing our customers’ own operational performance. Our ability to grow with our customers is demonstrated by a net retention rate of 111% and provides visibility on future ARR growth. The economic environment remains very challenging and the Board remains cautious about the impact of geopolitical trends on the development of the business. As a result, our focus is to achieve an accelerated path to profitability by balancing our growth ambitions with an increased emphasis on cost efficiency. This was demonstrated in FY24 by an increased gross margin of 67% (FY23: 63%), as well as operational cost savings across the business. The net cash position of £9m as at 31 January 2024 means we are well positioned to continue on our growth trajectory, and to develop our technology at the same time as achieving further cost efficiencies. Kit Kyte Chief Executive Officer Annual recurring revenue grew by 16% to £13.3m (FY23: £11.5m) 17% growth in reported recurring revenue of £11.2m (FY23: £9.6m) STRATEGIC REPORT 8 Checkit plc | Annual Report and Accounts 2024 CHIEF EXECUTIVE OFFICER’S REVIEW CONTINUED offers significant advantages; however, their true power is realised when they are seamlessly integrated, unlocking unparalleled value for our clients. The essence of our innovation lies in the intelligent orchestration of IoT sensors, digital workflows, and AI. IoT sensors revolutionise traditional data collection methods with continuous and automated sensing capabilities. When coupled with AI, these sensors not only capture and monitor data but also unveil opportunities to enhance customer performance and foresee potential issues. This integration is further amplified when combined with digital workflows, enabling real-time, actionable responses by dedicated workforces. Our digital workflows transform outdated manual processes into streamlined, guided procedures for our customers. This transformation is exponentially enhanced by IoT automation and AI-driven insights, facilitating process improvements and targeted training opportunities. AI’s capability to process and analyse vast data sets becomes significantly more valuable when integrated with IoT and digital workflows, allowing for immediate application of insights and converting them into tangible actions. At the core of Checkit’s strategy and competitive edge is the exploitation of these combined capabilities within a unified platform. This unique capability positions us to solve a broad spectrum of our customers’ business challenges. Our initial focus has been on critical areas such as food safety, service operations, and the monitoring of medical and life science environments—sectors that demand rigorous continuous monitoring and efficient workflow management, areas where the synergy of modern analytics and AI surpasses traditional human oversight. As we continue to navigate this journey, we are resolved to harness emerging technological opportunities that are relevant. We are committed to expanding our reach and enhancing the value we deliver. The road ahead is filled with promise, and we are eager to lead the way in transforming how businesses leverage technology for unparalleled efficiency and effectiveness. Positive outlook Our mission is to streamline and digitise the work and processes of the deskless workforce, a goal that has never been more critical. We understand the profound effect that simplifying operational management can have on organisational success, employee wellbeing, and customer satisfaction. Alongside our Chair and management team, I extend heartfelt thanks to our global team for their resilience and dedication. I am immensely proud of what we have accomplished, from establishing a leading market position to building a robust, long-term customer base with international, blue-chip clients. We are just at the beginning of our journey and the potential for growth is vast. Current global supply chain issues, increasing labour costs and higher compliance demands highlight the growing importance of making deskless work simpler and more efficient. Looking forward, the Board is optimistic about meeting market expectations for FY25 and confident in our ability to continue to achieve strong, sustained organic growth. Kit Kyte Chief Executive Officer 24 April 2024 Growth strategy and ambitions Our growth strategy is showing results. We are fulfilling market needs with a comprehensive solution that excels in data and analytics, offering insights that empower our customers to make informed decisions. Our goal to lead in augmented workflow management for the deskless industry is within reach. We’ve made significant strides in transforming Checkit into a predominantly subscription-based model, with non-recurring revenues now only 7% of our total revenue. This shift enhances our revenue predictability and strengthens our customer engagements, paving the way for increased contract values. The Group’s focus is around building a sustainable and higher conversion rate pipeline across the retail, healthcare, facilities management, franchise and biopharma verticals. We are increasing customer loyalty by continuously investing in our platform, including its capacity to incorporate external technologies, positioning us at the forefront of the market. Our sales and marketing efforts are geared towards generating high- quality leads with improved conversion rates, especially in our key sectors and expanding further into the US market. Checkit’s new customer pipeline in the US – a key growth market – includes a number of multi-site organisations across the healthcare, food retail, hospitality, and biopharma sectors. The US remains on course to be the largest contributor to Group revenues Concurrently, we are committed to refining our operational efficiencies to expedite profitability and deliver shareholder value. Looking ahead, we are open to strategic partnerships that could further scale our business. However, balancing cost management with growth initiatives will be crucial to maintain a culture of excellence within the Checkit team. Innovation Our vision is to reshape business performance through a combination of automation and human ingenuity. Our ambition is to pioneer in leveraging the transformative potential of three pivotal technological trends: the integration of Internet of Things (IoT) sensors, the digitisation of frontline work, and the application of Artificial Intelligence (AI). Individually, each of these technologies STRATEGIC REPORT FINANCIAL STATEMENTS 9 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Comprehend Business intelligence and dashboard analytics stream actionable insights to leaders and managers, driving behaviour change and highlighting performance improvements. 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. Our platform C a p t ur e C o n n e ct C o m p r e h e n d C o ll a b o r a t e STRATEGIC REPORT 10 Checkit plc | Annual Report and Accounts 2024 MARKET OVERVIEW Our platform empowers a large, underserved and available market in an unpredictable world to become digitally enabled, connecting and revealing its people and assets, and preparing them to meet future demands. The market opportunity for augmented workflow technology A large addressable market The global deskless worker industry comprises approximately 2.7 billion workers – or 80% of workers worldwide. Yet despite this, just fewer than six in ten frontline workers use mobile devices as part of their jobs and 73% are still using paper forms1. Continuing shortages of frontline workers, high employee turnover, increasing supply chain costs and external pressures to demonstrate sustainability mean there is a compelling need for organisations to digitalise their deskless workforce practices. Continuing advances in technology and particularly in the areas of machine learning and AI enable organisation leaders to: (i) track and optimise performance; (ii) reduce costs and wastage; (iii) increase efficiency; and (iv) attract and retain talent. The market for employee experience platforms is estimated to be $300 billion globally (approximately £210 billion)2 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. STRATEGIC REPORT FINANCIAL STATEMENTS 11 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 1 Forbes – https://www.forbes.com/sites/ lanxuezhao/2019/06/17/the- billion-dollarideas-that-could-transform-the-desklessworkforce/?sh=6c afc183a4fa. 2 Josh Bersin – https://joshbersin.com/2021/02/themassive-market- impact-of-microsoft-viva/. Workforce management $8.0 billion 11.7% compound annual growth rate (CAGR) until 2030 to a market size of $19.3 billion Field service $8.2 billion 15% CAGR until 2026 to a market value of $8.2 billion Microlearning $3.6 billion 11% CAGR until 2027 to a market size of $3.6 billion Employee communication $2.0 billion 12% CAGR until 2027, valuing it at $2.0 billion Global IoT $1.9 billion 25% CAGR until 2027, valuing it at $1.9 billion Digital food safety $7.0 billion 8% CAGR until 2027, valuing it at $7.0 billion Our target addressable market Our target addressable market applies to both our sensor and software solutions – the augmented workflow offering – aimed at incorporating physical assets into a digital ecosystem and applying digital tools and monitoring to transform working practices. Currently serving three out of seven potential sectors We are currently serving customers within three out of a potential seven markets – the healthcare, retail and hospitality sectors, catering to almost 800 million deskless workers. We believe that by evolving both the product and the go‑to-market functions, we can address significant expansion opportunities in adjacent markets including manufacturing, biotechnology, higher education, transport and logistics. Targeting the US market The US remains the largest and most appealing market for the digitalisation of deskless working practices, accounting for over five times more technology spend than the European market. The US market currently accounts for 26% of ARR and we continue to believe it presents significant opportunity for further expansion and growth. We anticipate the US contributing more than 50% of Group revenues in the medium term. £570bn Our total addressable market £27bn Our target addressable market STRATEGIC REPORT 12 Checkit plc | Annual Report and Accounts 2024 PLATFORM OVERVIEW Our product vision is to transform business performance at the intersection of automation and people. Our products put three of today’s biggest technology trends to work for our customers: IoT sensors replace manual, occasional data gathering with continuous sensing; front line work digitisation replaces manuals and paper forms with smart apps; and Artificial Intelligence creates insights and suggestions that would have been previously missed. Each is powerful, but it is when they work together that far more value can be unlocked. ▶IoT sensors alone capture data and detect when readings go out of a defined range. But with AI, they can uncover opportunities to improve performance and predict problems. Combine this with workflow and things aren’t just detected, they are acted on promptly by busy workers. ▶Digital workflows replace paper and spreadsheets with guided processes. But, that is far more powerful if some of the work can be replaced by automation using IoT. AI offers the potential of identifying how to improve processes and where training is needed. ▶AI is able to process and interpret vast amounts of data, but it can only be as good as the data it has to work on. Integration with workflow and IoT means intelligence can be put to work quickly without hassle and its conclusions can be turned back into actions. Exploiting this combination of capabilities in a single platform is at the heart of Checkit’s vision and differentiation. It means we are uniquely able to address a wide set of business problems. To date, we have focused on food safety and food service operations as well as monitoring medical and life sciences environments. Both require continuous monitoring (IoT) and for busy front line workers to perform and record workflows. Both also require the visibility and efficiency at scale that is far better provided by modern analytics and AI than by human oversight and analysis. However, these are only examples. Any process that requires a combination of continuous monitoring that then requires users to take actions is susceptible. Examples include a wide range of maintenance problems, production processes and logistics management. We are continuing to evolve our products to deliver the benefits of this vision. Our guiding principles are: a single platform that deeply integrates IoT, Workflow and AI and is to enable multiple industry solutions; massive scalability; simplicity for users and owners; and an open, modular approach that fits with customer processes and IT architectures. Our product development is shaped by our vision and feedback from our customers. This has yielded three exciting current priority areas: ▶Developing our AI capabilities. We are trialling and optimising Machine Learning that turns sensor data into actions that reduce energy consumption, assess asset health and improve availability. ▶Unifying our products into our future platform. This is designed to bring capabilities like AI to our current customer base, and will create a new generation of medical monitoring solutions that will be fully integrated and more efficient to own and operate. ▶Exploring how we can respond to customer demand to expand how we handle “issues” that occur in their operations (for example equipment failure or accidents), expanding the breadth of processes we support. These developments are exciting steps towards our vision, bringing the latest innovations in technology such as AI to the practical problems our customers wrestle with daily. As these opportunities continue to emerge, we will exploit them, expanding our scope and value. We are taking the critical next steps on an exciting journey. Putting intelligence to work STRATEGIC REPORT FINANCIAL STATEMENTS 13 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Drag and drop workflow builder No code workflows can be built and deployed rapidly using a simple who, what, where, and when wizard. Powerful IoT devices Broad range of first and third party sensors that can monitor and alert on critical assets. Alert to workflow technology Prompt frontline workers from their mobile device to carry out actions triggered by sensor alerts from equipment or buildings ensuring remediation and risk prevention. Real-time collaboration 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. Designed for the speed and scale of deskless operations Rapid time-to-value, with unique features that help teams as they grow. STRATEGIC REPORT 14 Checkit plc | Annual Report and Accounts 2024 BUSINESS MODEL Our business model Resources & relationships Our value creation process Design and 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. Support Our support team operate 24/7/365 days a year to answer customer calls. Increased automation to address sensor alarms allows rapid response times. Land Impact assessment We partner with our customers to uncover and rapidly digitalise single use cases to demonstrate impact and ROI. Seed People and domain expertise Deep domain knowledge from our Enterprise Technology Partners (ETPs) of the industries we serve. Enterprise-grade end-to-end platform We empower dispersed teams with smart sensors and workflow software, which combine to help organisations become digital and data-first. Growing IoT ecosystem A growing ecosystem of IoT sensors and devices to understand the surrounding environment. Strong financials Our business model is based on high quality recurring revenue growth from landing new customers and expanding existing relationships. Initial relationship Customers will often start building their sensor network 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. STRATEGIC REPORT FINANCIAL STATEMENTS 15 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Platform enhancements Our platform continuously delivers features and enhancements designed to improve usability, insights and unlock new use cases. Revenue generation Peace of mind subscriptions We sell software and sensor 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. 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. Expand Platform Stakeholder value 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. Employees 155 We have 155 employees globally. Investors CKT.LN Our investors can invest in the creation of a new industry category with a large underserved market. Professional services We provide professional services, including how to move to a digital workplace; and training and consultancy on intelligent operations and digitalisation. STRATEGIC REPORT 16 Checkit plc | Annual Report and Accounts 2024 BUSINESS STRATEGY We’re systematically evolving every aspect of Checkit to capture our target market including turning our attention to operating as sustainably as possible with a view to breaking even by FY26. Putting Checkit on the path to profitability ▶We aim to create a fully integrated data platform with the ability to accommodate third party IoT use cases within its ecosystem. ▶The improved Checkit platform will also be the core of our end-to-end insights, analytics and dashboarding functionality that separates us from competition. Progress in FY24: 93% recurring revenue of total FY24 revenues (FY23: 93%) Converting Checkit into a pure subscription business and pursuing optimum sustainable growth rates ▶The Company will invest in a targeted, ROI led basis into sales and marketing efforts to help drive top line growth coupled with further development of the Checkit platform to create a market leading product. ▶The Company will also consider compelling partner opportunities as an additional scale opportunity. Progress in FY24: 17% recurring revenue growth vs. FY23 (FY23: 41% vs. FY22) Accelerating scale and sustainable growth ▶In order to improve the prospects of achieving our pivot to profitability, 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 balance cost and growth initiatives in order to cultivate and maintain a high-achieving mentality across the Checkit workforce. Progress in FY24: 4% expansion in gross margin of 67% (FY23: 9% expansion to 63% from FY22: 54%) Converting Checkit into a pure subscription business and pursuing optimum sustainable growth rates STRATEGIC REPORT 18 Checkit plc | Annual Report and Accounts 2024 FINANCIAL REVIEW Progressing on the path to profitability The financial year in review Financial results in FY24 reflect execution against a wide range of metrics with revenue growth, increasing gross margins and reducing operating cost. Revenue has grown by 17% to £12.0m, in line with market expectations despite the challenging global economy. Our ‘land and expand’ strategy of up-selling and cross-selling has generated growth from our existing customer base, whilst at the same time we have actively identified areas of expansion and opportunity both geographically and vertically. Adjusted LBITDA of £3.4m (FY23: £6.4m), an improvement of 46%, reflects the Group’s strategic priority to balance growth with driving operational efficiencies. As a result, gross margin increased to 67% (FY23: 63%) and operating expenses reduced by 11%. With recurring revenues now representing 93% of the total and our high net revenue retention of 111%, we have a sound base to pursue our drive towards profitability. The Group continues to benefit from a strong balance sheet and with the economic environment remaining challenging, will continue to execute against its growth strategy and develop its technology, whilst also driving further operating efficiencies and progressing on the path to profitability. ARR grew by 16% to £13.3m (FY23: £11.5m), in line with market expectations. Total Group revenue for FY24 was £12.0m, an increase of 17% compared to the prior year (FY23: £10.3m). Twelve months to (£m) Reported 31 January 2024 31 January 2023 % Change ARR1 13.3 11.5 +16% Revenue from continuing operations Recurring 11.2 9.6 +17% Non-recurring 0.8 0.7 +18% Total Group 12.0 10.3 +17% 1 Annual recurring revenue (ARR) is defined as the annualised value of contracted recurring revenue from subscription services as at the period end, including committed annual recurring revenue from new wins. 2 Net retention revenue (NRR) is defined as the amount of recurring revenue from existing customers retained over the period, excluding new wins in the period. Gross retention revenue (GRR) is defined as the amount of recurring revenue from existing customers retained over the period, excluding new wins or upsell/ expansion in the period. ARR growth was achieved through both sales to new customers, as well as upsell with existing customers and improved pricing, as we continued to benefit from our “land and expand” strategy and maintained high retention rates. Sales bookings have benefitted from a number of small wins with potential for future upsell, supported by a master service agreement signed with Compass Contract Services (U.K) Limited (“Compass”) for the provision of CAM and CWM to their end users, primarily in the food services sector. Since signing the MSA with Compass, Checkit has entered into several new contracts with Compass and is in discussion over further opportunities. We have also secured our largest contract renewal, with John Lewis plc, at £6m total contract value over three years. Although the sales cycle has lengthened as a result of customer caution in the current environment, our pipeline remains strong. The Group has also continued to grow in the US, with 21% growth in ARR to £3.4m (FY23: £2.8m). Our land and expand strategy, where we look to prove our value in an initial relationship with customers and then build over time, allows us to grow with our customers, identifying additional use cases, extending our footprint and driving price initiatives. This is evidenced in a net retention rate of 111%2 and a gross retention rate of 99%2. LBITDA Checkit’s adjusted LBITDA for the year was £3.4m (FY23: £6.4m), an improvement of 46%, reflecting a milestone on our path to profitability. As we balance our growth strategy with an increased focus on operational efficiency, this has maintained revenue growth of 17%, while improving gross margin to 67% and reduced operating costs by 11%. Greg Price Chief Financial and Operations Officer STRATEGIC REPORT FINANCIAL STATEMENTS 19 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 £12m £10m £8m £6m £4m £2m £0m £3.9m £5.2m CAGR 30% £9.6m £6.8m £11.2m Gross margin improvement to 67% (FY23: 63%) was driven by increased efficiency from utilising third party providers in our delivery model, as well as the full year effect of procurement savings secured in our platform costs. Operating expenses reduced by 11%, as we controlled costs in the face of the challenging economic environment and pursued efficiency opportunities in our operations. These included the introduction of automated call handling and offshoring part of the customer support team in H2. As a result of the focus on cost management, investment in sales and marketing reduced by 12% in the year to £2.6m (FY23: £3.0m), with a focus on our existing customer base and identifying opportunities in adjacent markets and geographies. New product development (NPD) spend also reduced by 7% to £3.9m (FY23: £4.2m) as a result of efficiencies achieved, although the amount capitalised increased to £2.0m (FY23: £1.8m), as the Group invested in developing our AI capabilities and unifying our products around our platform. This tailored investment allows us to introduce innovation to our technology and offer increased scope and value to customers, which will drive the next phase of our growth and enable continuing progress towards profitability. Non-recurring or special items Non-recurring or special items in the year of £0.2m related to amortisation of acquired intangible assets, and restructuring costs related to the cost efficiency programme: FY24 £m Restructuring costs 0.1 Amortisation of acquired intangible assets 0.1 Total non-recurring or special items 0.2 Taxation The Group is currently loss making and therefore no corporate tax charge is reported for the year FY24. There remains over £30m in Group carried forward taxable losses and therefore there is no expectation of tax payments in the short to medium term. Contingent liability Checkit plc and HMRC have been in correspondence since early 2022 regarding matters of input tax recoverability. The matter is ongoing and the substance of discussions remains unchanged from the prior year. A statutory review of the case is being conducted and management continue to disagree with HMRC’s position. Specialist tax advice has been sought throughout the correspondence. The total amount of input tax claimed since VAT registration to 31 January 2023 is £1.2m. Given the uncertainty and materiality of the issue, we do not consider it appropriate at this stage to provide for this and are disclosing as a contingent liability. EPS – continuing operations The weighted average number of shares in issue in FY24 was 108.0m. Loss per share (basic and diluted) was 4.2 pence (FY23: 11.2 pence). Cash The Group cash position at 31 January 2024 was £9.0m (31 January 2023: £15.6m), reflecting the 46% reduction in LBITDA and the strategic purchase of inventory to mitigate supply chain constraints in the market. We expect this position to unwind over the next 12-18 months, supporting further revenue growth. FY24 saw a 23% reduction in cash burn in comparison to FY23. With the completion of inventory purchases, we expect cash burn to continue to reduce into FY25. The strong cash position bolsters Checkit’s strategic drive to profitability, whilst maintaining its growth strategy and technology development. Greg Price Chief Financial and Operations Officer 24 April 2024 FY20 FY21 FY22 FY23 FY24 Recurring revenue growth progression STRATEGIC REPORT 20 Checkit plc | Annual Report and Accounts 2024 CHIEF PEOPLE OFFICER’S REVIEW Embracing inclusivity Our people We continue to build on the progress made last year to improve the employee experience and to further support our teams’ wellbeing. With voluntary attrition dropping by half across the year, it has afforded us the opportunity to enhance the development of our people. We continued to develop our HR portal with further functionality and automation added during FY24 to support our processes as we grow. We have further plans to enhance the employee experience with new-joiner automated onboarding. This will streamline our procedures even more and allow us to operate efficiently as we grow. The spotlight continues on team wellbeing and we have seen a good uptake on the additional benefits we implemented in FY22. The opportunity to work from anywhere and our hybrid-working policy has added flexibility that is valued by our teams. The Spring of FY24 saw us launch a team- building exercise with teams participating in a remote exercise “race”, raising much needed funds for five charities. We have made further progress in the management of our OKRs, which are now linked to key strategic initiatives which, when delivered, will directly benefit our overriding goals and objectives. Each initiative follows a clear code of governance and is managed by a programme owner, while open for all staff to attend to encourage learning and collaborative problem solving. As part of our commitment to enhance our workplace culture, we are investing in resources to support our internal communications strategy. This will allow us to improve how and when we communicate with our teams and to improve engagement across the business. Talent acquisition FY24 saw further significant progress made in our objective to reduce our reliance on third party recruitment agencies with more than 82% of all recruitment delivered by our in-house team. We exceeded our targets in relation to time-to-hire and cost-per-hire and with the fall in attrition, this indicates we are attracting and retaining talent to the business. Looking towards FY25, we will continue this work by providing bespoke training to our hiring managers to ensure they have the right skills to maintain our momentum. We are also elevating our onboarding procedures by providing further automation and creating an in-depth induction programme to give our new team members the best possible experience and ensure optimum performance within eight weeks of joining the business. Learning and development Developing our wider leadership team has been a focus for us in FY24 with the introduction of two programmes: Future Leaders Coaching and Management Skills Development. Both programmes offer an extended period of either individual coaching sessions or classroom style training delivered by an external consultancy. We plan to continue these programmes over the next 24 months to ensure we can deliver a talent succession plan as we grow. We aim to create a rewarding experience for our people and to build a culture that is stimulating and fulfilling. The wellbeing of our teams is top of mind in everything we do, underpinned by our belief that everyone has the right to work in an environment that respects individuality and embraces inclusivity. We continue with our aim to create a workplace that reflects our values and has our employees’ best interests at heart. Julie Webbe Chief People Officer STRATEGIC REPORT FINANCIAL STATEMENTS 21 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 We have also implemented formal performance appraisals and career management procedures that allow team members regular, dedicated time with their manager to discuss and agree plans that support their career and skills development. Functionality has also been embedded in our HR portal to digitise this process. We have extended the performance appraisal process to include the Executive and Non-Executive Directors, as part of Board appraisal. We continue to support our teams with access to LinkedIn Learning for all staff and Pluralsight for our Tech and Product teams. We are also planning further development of our data teams by utilising our Apprenticeship Levy funds. Diversity, inclusion and belonging We have focused on diversity in FY24 and, working with the ESG Committee, have delivered a diversity survey that has given us a good baseline from which to develop our diversity, equity and inclusion strategy for FY25. We also delivered a short series of diversity-themed workshops, open to all staff, with plans to extend these into FY25. In 2023, we established a Charity Committee and have conducted a poll across the business to select charities we can support as a company. We also plan to set up payroll-giving functionality with our payroll provider to allow people the ability to make one-off or regular charitable donations via their salary. Julie Webbe Chief People Officer 24 April 2024 STRATEGIC REPORT 22 Checkit plc | Annual Report and Accounts 2024 STRATEGY IN ACTION CASE STUDY: KEDRION BIOPHARMA Company profile: Kedrion Biopharma are a market leader in the biopharmaceutical market, leading research, development and production of blood plasma derived therapies worldwide. These are used in the treatment and prevention of life threatening conditions such as immunodeficiency, coagulation and neurological disorder and disease. Kedplasma, as part of Kedrion Biopharma, operate plasma collection centres throughout the United States, existing in 22 states with over 70 sites, providing opportunities for individuals to donate and support the vital work that Kedrion delivers. The storage and management of this blood plasma is highly regulated, to ensure that products are fit for onward purpose. Maintaining accurate records of temperature during the full lifecycle is key to ensuring all valuable donations can be utilised. Kedrion partnered with Checkit in 2021 to manage this task, implementing our hardware and software offering at over 60 locations. Over 600 fully calibrated sensors installed across the estate monitor the temperature state within a tight, prescribed range. Sensors trigger alerts to key assigned contacts within the individual sites if there has been a breach, allowing quick response and resolution. Alongside this, Checkit captures and digitises all data to enable complete compliance records and storage to replace any manual, cumbersome paper based reporting. The solution provides Kedrion with ‘information at their fingertips’, providing them the security that they are robustly meeting the requirements of their manufacturing partners, regulators and auditing authorities. The value of ‘continuous monitoring data’ reduces risk to the product and product waste, and the ability to access historical data records with the click of a button saves time and effort for each site. Checkit provides Kedrion with confidence that they have visibility over their product in each and every centre, with clear oversight over each asset which is temperature alarmed. They’re empowered, being able to view the status of an asset across time, what and where has alarmed, and who and whether it was solved and rectified. How Checkit helps ensure Kedrion Biopharma keeps blood plasma safe “It’s hundreds of thousands of dollars in every freezer, so it is important that it is measured and monitored appropriately. I think it’s the system that really saves us time, you can trust over time that we’re able to sustain the product at the temperatures that are required by our manufacturers, the company and regulatory bodies.” Joseph Thomas, Sr. Director of Field Operations STRATEGIC REPORT FINANCIAL STATEMENTS 23 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 STRATEGIC REPORT 24 Checkit plc | Annual Report and Accounts 2024 STRATEGY IN ACTION CASE STUDY: P&O FERRIES STRATEGIC REPORT FINANCIAL STATEMENTS 25 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 P&O Ferries has been connecting Europe and the UK for nearly two centuries, offering a service to millions of passengers, cars and freight across the English Channel, North Sea and Irish Seas, with nearly 20,000 sailings annually. A household name, the company has been a dependable establishment for over 185 years, holding Customers and their service at the front of all they do. P&O were looking for a solution to bridge the gap between ship and shore side, in order to provide greater visibility over what happens at sea. Being able to learn from the data on board is a central part of their growth initiatives. Alongside this, they wanted an easier way to continue meeting and exceeding compliance standards with various enforcement bodies which are involved in naval travel. With the completion of two new ships to their fleet servicing Customers with short sea travel, Checkit was introduced to support these areas of focus for the company. Checkit is ‘the right product at the right time’, also offering P&O the opportunity to drive efficiencies in areas such as waste management, food health, supply chain and environmental goals. With the automation of data capture P&O has a new level of robustness in their service ensuring they can meet audit requests but also be assured in any complaint procedures. All temperature management is easily traceable, by just ‘typing a few dates, hitting go and getting the report you need’. This is beginning to replace manual paper logs and checks which are labour intensive, require significant training, prone to human errors, limited to a snapshot in time, environmentally costly to produce, require significant storage space and cumbersome to access to address any food complaints or compliance enquiries. We hope to continue supporting P&O in their ongoing success at sea. Supporting P&O Ferries in connecting Europe and the UK “The crew have been very receptive to the introduction of the Checkit system removing the need for paper process by using the Checkit handheld device.” Steve Brewer, Food Safety and Public Health Manager STRATEGIC REPORT 26 Checkit plc | Annual Report and Accounts 2024 ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) Nurturing a sustainable future Environment Checkit is delighted to present its inaugural ESG report. The Board and senior leadership team recognise our responsibility to uphold environmental and social values, and we are dedicated to making a positive impact through ESG initiatives. In FY23, we undertook a comprehensive materiality assessment, which guided the launch of our ESG programme in FY24. Our vision is to seamlessly integrate ESG metrics and initiatives into the foundations of Checkit, creating a dynamic strategy that evolves year after year. Our pledge to sustainability: At Checkit, we take pride in equipping our customers with tools to promote sustainability, aligning our ESG programme with our own commitment to minimising environmental impact. Take-back scheme In FY24, we launched a take- back scheme for batteries and equipment, ensuring responsible product life cycle management and reducing waste. Reducing mileage We are monitoring and reducing travel mileage for engineers across the US and UK, using engineer resource as efficiently as possible to minimise our environmental impact. Low emissions fleet We invested in hybrid vehicles to reduce emissions associated with engineer travel. STRATEGIC REPORT FINANCIAL STATEMENTS 27 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Our emissions reduction journey We partnered with Carbon Neutral Britain in FY24 to calculate our emissions in accordance with ISO 14064 and GHG Emissions Protocol standards. The breakdown reveals vehicle emissions as our major contributor (42%), followed by business travel (9%) and organisation site energy usage (9%). Checkit subsequently offset its emissions through schemes certified by Verra – Verified Carbon Standard, the Gold Standard – Voluntary Emissions Reduction and the United Nations – Certified Emissions Reduction programmes. Checkit Europe Limited achieved Carbon Neutral Certification, certified by Carbon Neutral Britain, an initiative that was completed in December 2023. In the future, we aim to expand our offsetting and carbon reduction calculations to include our US operations. Scope Emissions (tCO2e) Scope 1 95.49 Scope 2 20.81 Scope 3 107.27 Total 223.57 Emission per FTE 1.49 Carbon reduction plan Our commitment extends beyond offsetting emissions to achieving Net Zero by 2050. Our targeted plan focuses on reducing vehicle emissions, business travel and site energy consumption, with strategic initiatives already in motion. Our Carbon Reduction Plan will focus on our key emissions areas: ▶vehicle emissions; ▶business travel; and ▶site energy consumption. We are already implementing ways to reduce the key emissions listed above and we hope to make impactful changes over the next twelve months. STRATEGIC REPORT 28 Checkit plc | Annual Report and Accounts 2024 ENVIRONMENT, SOCIAL AND GOVERNANCE (ESG) CONTINUED Social An inclusive environment where our people can bring their whole selves to work In the year under review, we partnered with diversity, equity and inclusion consultants to deliver a programme of workshops open to all employees, designed to encourage open discussion and education on key themes of an inclusive workplace. In addition, we launched our annual Company culture survey which sought to engage with employees in order to determine where the business should focus in order to promote an inclusive and empowering culture. The results of this survey, for the first time, provide Checkit with tangible insight and shines a light on where increased focus can benefit our employees and enhance our culture. Employee age distribution 55–64 45–54 35–44 25–34 0.0% 10.0% 20.0% 30.0% 40.0% 17.1% 30.3% 25.0% 27.6% We prioritise the well-being and mental health of our people and support them through the following: ▶mental health first aiders; ▶two well-being days per employee per year; ▶flexible working – for work-life balance. In FY24, we formed a Charity Committee with representatives from across the business to co-ordinate Checkit’s fundraising initiatives and elevate the charitable giving and fundraising activities of our employees. Over the current financial year, we will focus on fundraising for three charities selected by our employees to be Checkit’s chosen charities of the year. 76% of respondents agree that they can bring their whole selves to work. 71% of respondents agree or strongly agree that Checkit’s culture supports work-life balance and employee wellbeing. 78% of respondents agree that Checkit is an inclusive and diverse workplace. Gender diversity statistics Male Female Demographic statistics White Black Mixed Asian Religious diversity at Checkit Christian Jewish Muslim No religion STRATEGIC REPORT FINANCIAL STATEMENTS 29 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Governance The Board and ESG Working Group are committed to prioritising sustainable and ethical corporate governance. Checkit has adopted and complies with the Quoted Companies Alliance Corporate Governance Code and has in place robust governance functions. We are, however, continuously working to improve our governance and match emerging governance expectations. Our key focuses for FY24 were: Board evaluation We conducted a thorough Board evaluation and, for the first time, completed separate appraisals for the individual Directors, Non-Executive Directors and the Chairman to encourage transparency and accountability on the Board. Suppliers We have amended and strengthened our Suppliers’ Code of Conduct, which sets out the standards and practices our suppliers must adhere to. We have also included additional ESG and sustainability questions in our supplier questionnaire to encourage our suppliers to have their own good practices in relation to ESG. In addition, we formed an ESG Working Group with representatives from across the business to ensure our programme is developed by our employees instead of being imposed on our employees. For more information, please see our corporate governance report on pages 38 to 40. Our ESG journey is not just a report: it’s a living testament to our ongoing efforts to shape a responsible future and it complements our commitment to help our customers reduce waste. STRATEGIC REPORT 30 Checkit plc | Annual Report and Accounts 2024 STAKEHOLDER ENGAGEMENT AND SECTION 172 Working for the benefit of all our stakeholders Section 172 Engaging with our stakeholders is crucial to the long-term success of the Company. In engaging with our stakeholders, we consistently we refer to our fundamental principles, values and culture. This 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 the directors, 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: ▶the likely consequences of any decisions in the long-term; ▶the 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; and ▶the need to act fairly. 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 CFOO 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. We recognise our diverse, skilful and experienced workforce of 150+ employees as our most important asset. With an emphasis on flexible working, we are constantly reviewing how to effectively balance the benefits of remote working with the value of in-person collaboration. Regular off-site meetings and online Company-wide meetings allow the leadership team to present progress, listen to feedback and answer questions. Regular employee surveys are carried out to measure employee sentiment and ensure that strategic principles, news and values are understood. This year, we ran a survey focused on equality, inclusion and diversity which also asked questions about culture; this survey will be run annually to monitor where additional attention is required. An enhanced HR portal (Checked In) provides employees with continually updated information and knowledge sharing. STRATEGIC REPORT FINANCIAL STATEMENTS 31 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Customers Suppliers Community and environment We look to engage collaboratively with our customers and their end‑to-end experience is essential to our success. We regularly consult our customers using NPS surveys to obtain contemporaneous feedback. Utilising data insights is a core tenet of understanding our customers and the completion of our digital transformation project in FY23 consolidated our customer relationship management (CRM) system with operational and finance activity to provide employees with a single view of the customer. We are refining how we harness this to deliver an improved customer experience. In addition to dedicated account managers who support the interests of key customers, our Customer Success team liaises with customers to ensure they enjoy the best possible partnership with Checkit and that any issues are addressed proactively. 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. 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. In FY24, we reviewed and strengthened our Code of Conduct and supplier questionnaires to reinforce this. Regular meetings and audits are held with key suppliers to gather feedback and continually improve relationships. We are dedicated to contributing positively to the broader community and environment, and want to empower customers to work without waste. Our platform directly enables customers to increase efficiencies and reduce operational waste, such as food, medicines and supplies. Our solutions help our customers reduce their energy consumption and improve remote operations management. Checkit is committed to a flexible, hybrid working model, resulting in reduced transport requirements and an increasingly paperless environment. The majority of our shareholders now receive all documentation electronically to reduce unnecessary paper waste. In FY24, Checkit launched its ESG programme, detailed in the ESG report on pages 26 to 29. STRATEGIC REPORT 32 Checkit plc | Annual Report and Accounts 2024 Principal risks and uncertainties Prioritising effective risk management is of fundamental importance to Checkit in the pursuit of its strategic objectives. Risk management The Board holds ultimate responsibility for upholding systems and processes aimed at risk management and ensuring the fulfilment of the business’s strategic priorities. The delineation of risk management duties is outlined in the organisation structure displayed on the right. Senior management within each department identifies and records risks, with agreed mitigation plans, in line with Group strategic priorities and risk appetite. The Risk Management Forum (RMF) meets quarterly to ensure risks are being identified, assessed and mitigated. Executive Directors have responsibility for the overall management and delivery of the strategy and regularly attend and review the output of the RMF. The Audit Committee provides an independent review of 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 Group General Counsel and Company Secretary. Checkit Board of Directors Ownership and monitoring Audit Committee Independent review and challenge Group Internal Audit Independent, objective review function Risk Management Forum Review and input Departmental and Functional Risk Register Risk Management Forum Chief Financial and Operations Officer – Chair Chief Technology Officer Chief People Officer Vice President of Sales RoW Group General Counsel and Company Secretary Head of Quality & Compliance – Risk Co-ordinator PRINCIPAL RISKS ANDSIES Re po rt in g Id en tif y in te rn al an d A ss es s an d mi ti ga te r is k o f mi ti ga ti on p la ns e xt er na l r is ks qu a nt if y ri sk s M an a ge a n d M on it or e ff ec ti ve ne ss Checkit plc Risk Management Forum STRATEGIC REPORT FINANCIAL STATEMENTS 33 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 A Growth B People and culture C Software/product development D Customer dependency E Information and cyber security F Business operations Low FY24 principal risks heat map Low Impact Likelihood High High F B C D A A bottom-up risk analysis is undertaken, considering detailed individual risks that fit into eight main categories: ▶corporate; ▶commercial; ▶operational; ▶financial; ▶legal and compliance; ▶people; ▶data/IT; and ▶external/environmental. 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. The RMF reviews a consolidated Group risk register quarterly. Risks are assessed both pre- and post-mitigation to identify the overall risk level based on a combination of probability of occurrence (likelihood) and the magnitude of potential consequences (impact). 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. In FY24, additional mitigations were introduced to address the principal risks facing Checkit. However, this has been partly offset by the impact of the changes seen in the global economy. The principal financial risks are separately disclosed in Note 1 to the financial statements on page 64. E STRATEGIC REPORT 34 Checkit plc | Annual Report and Accounts 2024 PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED Risk description Mitigation A Growth 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; and ▶increased burden on operational, financial, and technical infrastructures. ▶Resource allocation and ROI processes. ▶Strategy to grow customer relationships over time, reducing the barrier to adoption. ▶Increased automation and efficiency in operational delivery – address platform architecture and growth constraints. ▶Regular Board reviews in progress. ▶Strategic and financial planning processes. ▶Business performance management reviews. ▶Regular sales and operations planning (S&OP) meeting. ▶Sales – pipeline reviews. B People and culture Checkit is dependent on access to the right talent to deliver on its strategic goals. As the business grows, there is pressure to attract new talent to deliver key roles quickly to support the existing team. With a dependency on a core group of individuals for critical knowledge, loss of key personnel could also impact the business’s ability to deliver on its plans. Due to the ongoing risk from the economic environment, with inflationary pressures leading to cost-of-living increases, this risk continues to be relevant. ▶Employee engagement programmes, including enhanced benefit offering and employee share option plans. ▶Improved talent acquisition infrastructure. ▶Single point of failure and key role identification with increased notice periods adopted and employment terms harmonised. ▶Formal succession planning completed and reported to the Board. ▶Business continuity plans. ▶Structured quarterly performance reviews. ▶Leadership training. ▶Increased DE&I activity including workshops and surveys. C Software/product development Checkit’s proposition is targeted at an evolving market and 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 on 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. ▶Build competitive position: launch innovative products harnessing AI. ▶Software testing/Q&A processes. ▶Customer usage monitoring. ▶Platform load testing – evolving platform to be simpler to maintain. ▶Cost efficiency initiatives with increased use of third party technologies. ▶Improve data centre infrastructure. STRATEGIC REPORT FINANCIAL STATEMENTS 35 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Risk description Mitigation D Customer dependency The Group has a relatively 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 may impact business performance. ▶Long-term contracts. ▶ Dedicated account management for high tier customers to nurture and scale ongoing relationships. ▶Customer Success programmes. ▶Monthly customer review meetings. ▶Commercial operations and contracting processes. ▶Net promoter scores. ▶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 loss of key systems could impact the business’s 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. ▶ISO 27001 accredited framework of data security processes/ Cyber essentials certification. ▶Asset risk assessments aligned to ISO 27001. ▶Regular employee training and awareness. ▶Data management/cyber security policies and incident management system and response. ▶Increase in SSO applications, asset management capabilities and delivery of security roadmap. ▶Relevant insurances. ▶Business continuity/disaster recovery plans/annual penetration testing. ▶DPO officer and DPO centre (third party for EU). F Business Operations Checkit has undergone rapid change and transformation. This risk concerns whether we can continually meet customer requirements and have operational processes and systems that can meet the demands placed on our products and employees. Inconsistent communication across all stakeholder groups could also impact the Group’s ability to execute its plans. ▶Employee communication programme. ▶Performance management process/leadership training. ▶Creation of service catalogue. ▶Regular Board review on progress. ▶Monthly operational performance reviews. ▶Increased focus on customer journey, including operational kick-off post sale. 37 Executive leadership 38 Corporate governance report 41 Audit Committee report 43 Remuneration report 48 Report of the Directors 50 Directors’ responsibilities statement Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE 36 Corporate governance STRATEGIC REPORT FINANCIAL STATEMENTS 37 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 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. Keith was appointed Non‑Executive Chairman in 2022 having previously served Checkit in an Executive capacity. Alex Curran Non-Executive Director Since October 2022, Alex has been responsible for leading Aptitude Software plc’s North America region as Regional Chief Executive Officer. In November 2023, Alex was appointed CEO of Aptitude Software. Aptitude Software is a global financial software provider that helps complex organisations automate and transform their financial business models. Alex was appointed to the Board in January 2023. Greg Price Chief Financial and Operations Officer Joining Checkit as Director of Finance in 2020, Greg was appointed CFOO 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. Kit Kyte Chief Executive Officer 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. Simon Greenman Non-Executive Director Simon has over 25 years of global technology leadership experience as a Chief Digital Officer and CEO. He has worked with and consulted for brands including B&W, AOL and Accenture. Simon, until recently, sat on the World Economic Forum’s Global AI Council, is a recognised global expert on AI and is a partner at Best Practice AI. Earlier in his career, he co-founded MapQuest. com, one of the first internet and AI brands. Simon was appointed to the Board in 2021. A R Key Board member Executive leadership A Audit Committee R Remuneration Committee R A R CORPORATE GOVERNANCE 38 Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE REPORT Applying the principles of governance The Board recognises the value of robust corporate governance and can confirm that it has complied with the Quoted Company Alliance’s Corporate Governance Code (the Code, which was first adopted in 2019). The Board continues to believe that the 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 subscription-based global business model, focused on annual recurring revenue driven by the provision of real-time operations management capability to our customers. In the past year, Checkit has continued to win new business in the US market and has appointed a new VP of Sales to assist with the acceleration of the Company’s presence in the US. More detail can be found in the Strategic report on pages 1 to 35. Strategy is the responsibility of the Board, the Chief Executive Officer, the Chief Financial and Operations Officer and the Global Leadership Council. The business model is designed to achieve Checkit’s growth and profitability ambitions by ensuring ability to scale and maximising operating 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 adviser and broker (Singer Capital Markets) and investor relations adviser (Yellowstone Advisory) 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. In addition, Checkit has a regular programme of investor engagement which includes product and trading updates and presentations to shareholders immediately following the publication of the half-year and full-year results. The half-year and full-year presentations give shareholders an opportunity to raise questions with the Executives. 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’s other key stakeholder groups are: ▶employees; ▶customers; ▶suppliers; ▶regulators; and ▶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 on pages 30 and 31. 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 32 to 35 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. The Audit Committee is bound by formal terms of reference (which can be found on the Company’s website). In addition, Checkit’s auditor is encouraged to raise with the Audit Committee any comments it may have in relation to risk management on an ad hoc basis and in its management letter following its audit. STRATEGIC REPORT FINANCIAL STATEMENTS 39 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 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 and compliance 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. More detail can be found in the principal risks and uncertainties report on pages 32 to 35. Principle 5: maintain the Board as a well- functioning, balanced team led by the Chairman 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 comprises the Non-Executive Chairman, Chief Executive Officer, Chief Financial and Operations Officer and two Non-Executive Directors. Biographies are set out on page 37 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 six times per year. The Board met eight times in FY24. 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. The Remuneration Committee is comprised of Non-Executive Directors Keith Daley (Chair of Remuneration Committee), Simon Greenman and Alex Curran. The Audit Committee is comprised of Simon Greenman (Chair of the Audit Committee) and Alex Curran. Keith Daley’s financial background and in-depth knowledge of Checkit, Simon Greenman’s senior leadership expertise and Alex Curran’s mixture of UK and US high growth orientated experience provide the necessary level and combination of skills and knowledge to the respective Committees. Principle 6: ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities The Directors keep their skill set 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 experience, skill and capabilities 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 The Board conducted an evaluation of its effectiveness during the year ending 31 January 2024 and no major issues were identified. A further evaluation is expected to be conducted in the third quarter of the year ending 31 January 2025. In addition, individual Board member appraisals were undertaken for the first time to aid overall Board effectiveness. 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 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. Team-based events are delivered regularly throughout the year to promote a sense of belonging and to promote collaboration and to build strong relationships. During FY24, a Charity Committee was formed to support our cultural values and to promote charitable initiatives. FY25 will see an investment in resource for internal communications and engagement to further drive a positive and inclusive culture. Since the COVID-19 pandemic, Checkit has supported employees who are able to work remotely and 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. CORPORATE GOVERNANCE 40 Checkit plc | Annual Report and Accounts 2024 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. 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 41 and 42. The Audit Committee met three times during FY24. 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 43 to 47. The Remuneration Committee met six times during FY24. Given the current size and complexity of the Group, the Board does not currently consider that a Nominations Committee is required. 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 stakeholders, including our shareholders, on pages 30 and 31. 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; and ▶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; and ▶other regulatory announcements. The Company engages its broker (Singer Capital Markets) and investor relations advisers to assist in shareholder interaction and feedback. The Board receives regular updates on the views of shareholders from these advisers. Regular online Company-wide meetings, off-site events and video updates from the Executives ensure that important updates are communicated to employees. All employees are invited to watch the presentation by the Executives which follow the release of our half and full-year results. Employees are also directed to the Company website, internal HR portal 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 30 and 31. CORPORATE GOVERNANCE REPORT CONTINUED STRATEGIC REPORT FINANCIAL STATEMENTS 41 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 Audit Committee report Dear Shareholders, I am pleased to present my report as Chair of the Audit Committee (the Committee) for the financial year ended 31 January 2024. Composition The Committee consists of Non- Executive Director Alex Curran and myself. I was appointed Chair of the Committee in January 2023 and am grateful for the support I have received from the Committee in assisting with the preparation of this report. The biographies of the Committee members can be found on page 37 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 51 to 54. 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. In FY23, the Committee recommended to the Board the appointment of a new auditor. The Committee ran a competitive tender exercise to ensure that the Company receives value for money and the Company’s auditor for FY23 is better suited to the profile of the Company. Following the tendering exercise, the Company appointed Cooper Parry Group Limited as independent auditor for FY23. This year, having considered the effectiveness and performance of the independence auditor, who reported on the Company last year, the Committee has recommended to the Board the re-appointment of Cooper Parry Group Limited 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 the independent auditor; and ▶Cooper Parry Group Limited recommended internal controls that have been implemented to prevent a conflict of interest. FY24 non-audit fees amounted to £nil (FY23: £nil). AUDIT COMMITTEE REPORT Simon Greenman Non-Executive Director CORPORATE GOVERNANCE 42 Checkit plc | Annual Report and Accounts 2024 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 https://www.checkit.net/investor-relations/committees/. Main activities The Committee met three times during the financial year. Cooper Parry 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 reports; ▶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. 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 1, 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 continued use 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; ▶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 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 of 31 January 2024. The standard illustrates Group compliance with industry standards around the framework of Group processes and data security. The Company employs a compliance manager with responsibility for facilitating audits and maintaining 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: Simon Greenman Chair of the Audit Committee 24 April 2024 AUDIT COMMITTEE REPORT CONTINUED Remuneration report STRATEGIC REPORT FINANCIAL STATEMENTS 43 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 REMUNERATION REPORT Dear Shareholders, The following Remuneration report for FY24 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, Alex Curran and myself. 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 more than £150k; and ▶all employee schemes involving equity- related incentives. Governance 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 its commitment to maintaining high standards of corporate governance and open communication with shareholders. Terms of reference reflect the adoption of the QCA Code and are available on our website or from the Company Secretary on request. 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. 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. Keith Daley Non-Executive Chairman CORPORATE GOVERNANCE 44 Checkit plc | Annual Report and Accounts 2024 REMUNERATION REPORT CONTINUED Executive Directors’ remuneration policy 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. The table below illustrates the policy to operate until the next AGM in 2025: Purpose Principles and application Basic salary 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 at an enhanced rate of Company contributions. 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. 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 125% of base salary. Long Term Incentive Plans (LTIP) To incentivise long-term performance and sustained improvement in shareholder value. An LTIP has been established for the CEO to provide a meaningful reward over a period of five years by incentivising the delivery of shareholder value. The LTIP is linked to 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 relate to shares exceeding a value of £250,000 measured at time of grant. Notes Basic salary FY24: The Committee awarded an increase in base salaries of 3.5%, effective from 1 August 2023. FY25: Subject to the level of ongoing inflationary pressure, the Committee may consider a review of base salaries in August 2024. Annual bonus plan Bonuses are not contractual and remain at the discretion of the Remuneration Committee. FY24 In FY24, bonuses were awarded to Kit Kyte of £51k and Greg Price of £14k based on the achievement of targets set at the start of the year. FY25: An FY25 in-year Executive bonus plan has been agreed per below: Executive Director Metrics Earning potential K Kyte Financial performance 125% average of base G Price Financial performance 50% average of base Detailed financial targets and performance metrics have been agreed. Payment of any bonus is dependent on Remuneration Committee assessment and approval. STRATEGIC REPORT FINANCIAL STATEMENTS 45 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 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 growth and profit metrics and a share price target. Under the terms of the LTIP, Mr. Kyte has been granted nominal cost options over 1,500,000 Ordinary Shares. The options will vest over three separate periods in tranches of 500,000 options. The vesting date for the first tranche of options will be 10 business days after the publication of the Group’s audited annual accounts for the financial year ending 31 January 2025 or, in the Board’s absolute discretion, 10 business days after the publication of the Group’s interim report for the financial year ending 31 January 2026. The vesting date for the second tranche shall follow the same pattern as the first tranche albeit for the financial year ending 31 January 2026 in relation to the audited annual accounts and 31 January 2027 for the interim report. The vesting date for the third tranche shall be the date 10 business days from the publication of the audited consolidated accounts for the Group for the financial year ending 31 January 2027. Each tranche of options will be subject to performance criteria and shall only vest subject to a ‘Rule of 40 Target’ being met on the dates outlined above. In addition, to be exercisable, the share price must be at or above a share price target of 130p (the “Share Price Target”) on the date the options are exercised and the average share price must have been at or above this level during the 6 months prior to the exercise date. If the Rule of 40 and Share Price Target are not met on the relevant vesting date(s) set out above the relevant tranche of options shall lapse, subject to the discretion of the Board. Enterprise Management Incentive Plan In May 2020, the Board approved 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 (measured at time of grant) per employee as part of the Company’s reward and retention policy. Company Share Option Plan In March 2022, the Board approved a tax-advantaged Company Share Option Plan (CSOP) as a schedule of the EMI Plan. Under the Plan, the Company may grant share options to staff over shares with a value up to a limit of £60,000 per employee as part of the Company’s reward and retention policy. Non-Executive Directors are not eligible for the EMI or CSOP scheme. Share options may be exercised between years three and ten and will lapse if employment ceases. The Remuneration Committee is responsible for approving all awards of EMI and CSOP share options and its current policy is to issue options to all employees with the minimum award being over 5,000 shares. Since January 2023, all options awarded to employees contain an EBITDA performance condition; options can only be exercised if the Company is EBITDA breakeven or positive at the date of exercise and has been EBITDA breakeven or positive on average over the six months prior to the date of exercise. EMI and CSOP options in issue as at 31 January 2024 are as per below Employee Exercise date Option price Options at 31 January 2024 K Kyte 25 March 2025 0.05p 1,500,000 K Kyte 9 January 2026 23p 500,000 G Price 17 February 2024 55.5p 100,000 G Price 9 July 2025 23p 845,653 Other employees 7 July 2023 40.5p 900,000 Other employees 17 February 2024 55.5p 105,000 Other employees 12 July 2024 57p 410,000 Other employees 9 January 2026 23p 75,000 Other employees 9 July 2025 23p 75,000 Other employees 18 March 2025 40p 717,500 Other employees 11 August 2026 23p 790,000 Other employees 5 October 2026 30p 495,000 US Sub Plan 17 February 2024 55.5p 122,500 US Sub Plan 18 March 2025 40p 75,000 US Sub Plan 9 January 2026 23p 5,000 US Sub Plan 11 August 2026 23p 10,000 K Kyte total 2,000,000 G Price total 945,653 Employees total 3,780,000 Total 6,725,653 CORPORATE GOVERNANCE 46 Checkit plc | Annual Report and Accounts 2024 REMUNERATION REPORT CONTINUED Notes continued 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 terminable on three months’ written notice by the Company or the Director. 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 FY24 and fees were increased by 3.5% at the mid-year point. 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. Audited information Year to 31 January 2024 Basic pay £’000 Benefits 1 £’000 Bonuses £’000 Total £’000 Pension contribution 2 £’000 LTIPs vested or options exercised in year £’000 Single figure remuneration £’000 Executive Directors K Kyte 329 2 51 382 19 — 401 G Price 179 — 14 193 13 — 206 Non-Executive Directors K Daley 106 — — 106 — — 106 S Greenman 42 — — 42 — — 42 A Curran 33 — — 33 — — 33 Total 689 2 65 756 32 788 Year to 31 January 2023 Basic pay £’000 Benefits 1 £’000 Bonuses £’000 Total £’000 Pension contribution 2 £’000 LTIPs vested or options exercised in year £’000 Single figure remuneration £’000 Executive Directors K Kyte 306 2 202 510 23 — 533 G Price 153 — 51 204 11 — 215 Non-Executive Directors K Daley 102 — — 102 — — 102 J Wilson 41 — — 41 — — 41 S Greenman 41 — — 41 — — 41 A Curran — — — — — — — Total 643 2 253 898 34 — 932 The emoluments of the highest paid Director in FY24 were £401,000 compared to £533,000 in FY23. 1 Benefits include private medical insurance for directors and dependants 2 Includes payments made in lieu of pension contributions. STRATEGIC REPORT FINANCIAL STATEMENTS 47 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 The annual basic pay for each current serving Director as at 31 January 2024 is as follows: Year to 31 January Basic pay at 31 January 2024 £’000 Basic pay at 31 January 2023 £’000 K Daley 108 104 K Kyte 323 312 G Price 183 156 S Greenman 43 41 A Curran 43 41 Total 700 654 Unaudited information Directors’ share ownership The shares owned by the current Directors serving as at 31 January 2024 are as follows: Shares owned outright at the date of this report Shares owned outright at 31 January 2024 Shares owned outright at 31 January 2023 K Daley 21,425,366 20,925,366 20,925,366 S Greenman 56,347 56,347 56,347 A Curran 1,600 1,600 — K Kyte 167,872 167,872 108,695 G Price 54,350 54,350 54,350 Total 21,705,535 21,205,535 21,144,758 Amounts payable to outside advisers in respect of Directors’ remuneration: Independent remuneration advisers were engaged during FY24 at a cost of £nil (FY23: £9k). Approval This report was approved by the Board of Directors on the date shown below and signed on its behalf by: Keith Daley Chair of Remuneration Committee 24 April 2024 CORPORATE GOVERNANCE 48 Checkit plc | Annual Report and Accounts 2024 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 2024. Principal activity Checkit plc is the holding company of Checkit Europe Limited, Checkit UK Limited, Checkit Inc, Checkit LLC and two other non‑trading companies detailed on page 71 (together Checkit) and 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 subscription business model offers optional plug‑ins for smart sensor networks and workflow task management. Checkit’s solutions apply digital tools and monitoring to transform workforce management, and incorporate physical assets into a digital ecosystem using Internet of Things (IoT) sensors and monitoring devices. A detailed review of the business, its results and future direction is included in the Strategic report set out on pages 1 to 35. Results and future developments The Group’s loss on ordinary activities after taxation for the year was £4.5m compared to £12.3m last year. The Group’s results are set out in the consolidated income statement on page 55 and are explained in the Chief Financial and Operations Officer’s statement on pages 18 and 19. The subsidiaries of the Group as at 31 January 2024 are listed in Note 13. The Directors do not propose a dividend in respect of the year ended 31 January 2024 (2023: £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 18 and 19. Details of the key risks and uncertainties in the business, along with the mitigation actions in place, have been presented in the risks and uncertainties on pages 32 to 35. 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, 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 standards 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 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. Directors and their interests The present membership of the Board is as follows: ▶Kit Kyte, Chief Executive Officer; ▶Gregory Price, Chief Financial and Operations Officer; ▶Keith Daley, Non-Executive Chairman; ▶Simon Greenman, Non-Executive Director; and ▶Alex Curran, Non-Executive Director. Biographical details of the current Directors are set out on page 37 and details of Directors’ beneficial interests in the shares of the Company as at 31 January 2024 are set out in the Remuneration report on pages 43 to 47. The Board follows best practice recommendations and, accordingly, the whole Board will be offering itself for re‑appointment or appointment as appropriate. STRATEGIC REPORT FINANCIAL STATEMENTS 49 CORPORATE GOVERNANCE Checkit plc | Annual Report and Accounts 2024 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. Directors’ remuneration Details of Directors’ remuneration are contained in the Remuneration report on pages 43 to 47. 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 (2023: 108,008,562). Details of the share capital are given in Note 20 to the financial statements. Substantial shareholdings As at 31 March 2024 (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 21.76% Mr K Daley 19.84% Herald Investment Management Limited 9.42% Ruffer LLP 7.30% Chelverton Asset Management 5.09% 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. In addition, the Group ran a series of equality, diversity and inclusion workshops this financial year. 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 communications including fortnightly videos from the Chief Executive Officer. Disclosure of information to the 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 at noon on 6 June 2024 at the offices of Fieldfisher LLP, Riverbank House, 2 Swan Lane, London EC4R 3TT. 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. On behalf of the Board Hugh Wooster Group General Counsel and Company Secretary 24 April 2024 Registered number 00448274 CORPORATE GOVERNANCE 50 Checkit plc | Annual Report and Accounts 2024 DIRECTORS’ RESPONSIBILITIES STATEMENT 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. 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 and Operations Officer 24 April 2024 Directors’ responsibilities statement Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 51 INDEPENDENT AUDITOR’S REPORT to the members of Checkit plc Opinion We have audited the financial statements of Checkit plc (the ‘parent company’) and its subsidiaries (the ‘Group’) for the year ended 31 January 2024 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated and Company Balance Sheets, the Consolidated and Company Statements of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes to the 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 2024 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 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. Our approach to the audit The group audit was scoped by obtaining an understanding of the group and its environment, including the group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. In order to assess the risks identified, and to determine the planned audit responses based on a measure of materiality, the engagement team performed an evaluation of identified components calculated by considering the significance of components as a percentage of the group’s total revenue and loss before taxation and the group’s total assets. In establishing the overall approach to the group audit, we assessed the audit significance of each reporting unit in the group by reference to both its financial significance and other indicators of audit risk, such as the complexity of operations and the degree of estimation and judgement in the financial results. We identified four individually significant components. We performed a full-scope audit of the financial statements of the parent company, Checkit Europe, Checkit UK and Checkit LLC. The operations that were subject to full-scope audit procedures made up 100% of consolidated revenues and 99% of consolidated loss after tax. Entities subject to review-scope audit procedures made up 0% of the consolidated revenue and 1% of consolidated loss after tax. We applied analytical procedures to the Balance Sheets and Statements of comprehensive income of the entities comprising the remaining operations of the group, focusing on applicable risks identified as above, and their significance to the group’s balances. 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 year and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 52 INDEPENDENT AUDITOR’S REPORT CONTINUED to the members of Checkit plc Key audit matters continued Risk Description Our response to the risk Revenue recognition As detailed in note 1 to the financial statements, Summary of significant accounting policies, the Group’s revenue is generated from a number of streams, including subscription services, consultancy and other services. Given the material nature of revenue and the variety of methods it is generated through, the appropriateness of revenue recognition and management’s application of the Group’s revenue recognition accounting policies represents a key risk area of significant judgement in the financial statements. In particular, we consider that a significant risk arises on the occurrence of revenue for new SaaS 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 have assessed accounting policies for consistency and appropriateness with the financial reporting framework and in particular that revenue was recognised when performance obligations were fulfilled. In addition, we reviewed for the consistency of application as well as the basis of any recognition estimates. We have obtained an understanding of processes through which the businesses initiate, record, process and report revenue transactions. We performed walkthroughs of the processes as set out by management, to ensure controls appropriate to the size and nature of operations are designed and implemented correctly throughout the transaction cycle. A sample of contracts have been reviewed and tied through to sales transactions throughout the year. These have been vouched to invoice, signed contracts, sales quotes and purchase orders and nominal posting. A complete listing of journals posted to revenue nominal codes has been obtained. We have tested unexpected manual adjustments to supporting evidence on a sample basis. We performed cut-off procedures to test transactions around the year end and verified a sample of revenue to originating documentation to provide evidence that transactions were recorded in the correct year. Our procedures did not identify any material misstatements in the revenue recognised during the year. We challenged the assumptions used in the impairment model for goodwill and intangibles, which is described in note 11 to the financial statements. Impairment of goodwill The group invests heavily in development and capitalises the costs of that development where deemed appropriate. The recoverability of the resulting intangible asset is a material judgement, and the group’s assessment of carrying value requires significant judgement, in particular regarding cash flows, growth rates, discount rates and sensitivity assumptions. In addition, given the current overall performance of the business there is a risk of impairment with regard to intangible assets, including goodwill. We considered accuracy of forecasts by comparing historical budgets to recent trading performance. We assessed the appropriateness of the assumptions concerning growth rates and inputs to the discount rates against latest market expectations. We performed sensitivity analysis to determine whether an impairment would be required if bookings growth was lower than forecast rate. We concur with the assessment that there is no identified impairment of the goodwill and intangibles balance as at year end. Our application of materiality We apply the concept of materiality in planning and performing our audit, in determining the nature, timing and extent of our audit procedures, in evaluating the effect of any identified misstatements, and in forming our audit opinion. The materiality for the group financial statements as a whole was set at £240,000. This has been determined with reference to the benchmark of the group’s revenue which we consider to be an appropriate measure for a group of companies such as these. Materiality represents 2% of revenue. Performance materiality has been set at 75% of group materiality. Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 53 Our application of materiality continued The materiality for the parent company financial statements as a whole was set at £216,000 and performance materiality represents 75% of materiality. This has been determined with reference to the parent company’s net assets, capped at 90% of group materiality, which we consider to be an appropriate measure for a holding company with investments in trading subsidiaries. Materiality represents 0.5% of net assets as presented on the face of the parent company’s Balance Sheet. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group and parent company’s ability to continue to adopt the going concern basis of accounting included: • Reviewing management’s cash flow forecasts for a period of at least 12 months from the date of approval of these financial statements; • Challenging management on key assumptions included in their forecast scenarios; • Considering the potential impact of various scenarios on the forecasts; • Reviewing results post year end to the date of approval of these financial statements and assessing them against original budgets; and • Reviewing management’s disclosures in the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information included in the annual report. 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. 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. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: ▶the information given in the Strategic report and the Directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and ▶the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors’ report. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: ▶adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or the parent company financial statements are not in agreement with the accounting records and returns; or ▶certain disclosures of Directors’ remuneration specified by law are not made; or ▶we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on page 50, 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 the parent company or to cease operations, or have no realistic alternative but to do so. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 54 INDEPENDENT AUDITOR’S REPORT CONTINUED to the members of Checkit plc 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: Our assessment focused on key laws and regulations the group and parent company have to comply with and areas of the financial statements we assessed as being more susceptible to misstatement. These key laws and regulations included but were not limited to compliance with the Companies Act 2006, AIM listing rules, UK adopted international accounting standards, United Kingdom Generally Accepted Accounting Practice (UK GAAP) and relevant tax legislation in the jurisdictions in which the group operates. We are not responsible for preventing irregularities. Our approach to detecting irregularities included, but was not limited to, the following: ▶obtaining an understanding of the legal and regulatory framework applicable to the group and parent company and how the group and parent company is complying with that framework by making enquiries of management, those responsible for legal and compliance procedures and the Company Secretary. We corroborated our enquiries through review of board minutes for instances of non-compliance; ▶obtaining an understanding of the group and parent company’s policies and procedures and how the group and parent company has complied with these, through discussions and sample testing of controls; ▶obtaining an understanding of the group and parent company’s risk assessment process, including the risk of fraud; ▶designing our audit procedures to respond to our risk assessment; ▶performing audit testing over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness with a focus on manual journals and those posted directly to the consolidation that increased revenue or that reclassified costs from the statement of comprehensive income to the balance sheet, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for bias specifically those in relation to goodwill and development costs intangible assets. Whilst considering how our audit work addressed the detection of irregularities, we also consider the likelihood of detection based on our approach. Irregularities arising from fraud are inherently more difficult to detect than those arising from error. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. We are not responsible for preventing non-compliance and cannot be expected to detect non-compliance with all laws and regulations. The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify and recognise non-compliance with laws and regulations through the following: ▶understanding of, and practical experience with, audit engagements of a similar nature and complexity, through appropriate training and participation; and ▶knowledge of the industry in which the client operates. A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the parent 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 parent 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 parent company and the parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Melanie Hopwell Senior Statutory Auditor For and on behalf of Cooper Parry Group Limited Chartered Accountants and Statutory Auditor Sky View Argosy Road East Midlands Airport Castle Donington Derby DE74 2SA 24 April 2024 Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 55 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME year ended 31 January 2024 Notes 2024 £m 2023 £m Revenue 2 12.0 10.3 Cost of sales (4.0) (3.8) Gross profit 8.0 6.5 Operating expenses 3 (11.4) (12.9) Adjusted LBITDA* (3.4) (6.4) Depreciation and amortisation (1.3) (1.0) Share-based payment charge (0.2) (0.2) Non-recurring or special items 4 (0.2) (4.8) Operating loss 4 (5.1) (12.4) Finance income 5 0.5 0.1 Loss before taxation (4.6) (12.3) Taxation 8 0.1 0.3 Loss from continuing operations (4.5) (12.0) Loss from discontinued operations 26 — (0.3) Loss for the year attributable to equity shareholders (4.5) (12.3) Other comprehensive income/(expense) Exchange differences on translation of foreign operations — — Reclassification of exchange differences to income statement for discontinued items — — Total comprehensive expense for the financial year attributable to equity shareholders (4.5) (12.3) Loss per share from continuing operations Basic EPS 10 (4.2)p (11.2)p Diluted EPS 10 (4.2)p (11.2)p The above statement should be read in conjunction with the accompanying notes on pages 59 to 78. * Adjusted loss before interest, tax, depreciation and amortisation “LBITDA” is calculated by taking operating profit and adding back depreciation and amortisation, share-based payment charge and non-recurring or special items. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 56 CONSOLIDATED BALANCE SHEET as at 31 January 2024 Notes 2024 £m 2023 £m Assets Non-current assets Goodwill arising on acquisition 11 0.2 0.2 Other intangible assets 11 4.8 3.8 Property, plant and equipment 12 0.8 0.9 Total non-current assets 5.8 4.9 Current assets Inventories 15 3.8 2.4 Trade and other receivables 16 4.5 4.5 Cash and cash equivalents 9.0 15.6 Total current assets 17.3 22.5 Total assets 23.1 27.4 Current liabilities Trade and other payables 17 7.8 7.5 Contract lease liabilities 22 0.2 0.3 Total current liabilities 8.0 7.8 Non-current liabilities Deferred tax liabilities 14 — — Long-term contract lease liabilities 22 0.3 0.3 Long-term provisions 19 0.2 0.4 Total non-current liabilities 0.5 0.7 Total liabilities 8.5 8.5 Net assets 14.6 18.9 Equity attributable to the owners of the Company Called up share capital 20 5.4 5.4 Share premium 20 23.3 23.3 Capital redemption reserve 20 6.4 6.4 Other reserves 20 0.5 0.3 Retained earnings 20 (21.0) (16.5) Total equity 14.6 18.9 The above statement should be read in conjunction with the accompanying notes on pages 59 to 78. The financial statements of Checkit plc (registered no. 00448274) were approved by the Board of Directors on 24 April 2024 and were signed on its behalf by: Kit Kyte Greg Price Chief Executive Officer Chief Financial and Operations Officer Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 57 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY year ended 31 January 2024 Share capital £m Share premium £m Capital redemption reserve £m Other reserves £m Translation reserve £m Retained earnings £m Total £m At 31 January 2022 5.4 23.3 6.4 0.1 — (4.2) 31.0 Loss for the year — — — — — (12.3) (12.3) Total comprehensive income for the year — — — — — (12.3) (12.3) Share-based payments — — — 0.2 — — 0.2 Transaction with owners — — — 0.2 — — 0.2 At 31 January 2023 5.4 23.3 6.4 0.3 — (16.5) 18.9 Loss for the year — — — — — (4.5) (4.5) Total comprehensive income for the year — — — — — (4.5) (4.5) Share-based payments — — — 0.2 — — 0.2 Transaction with owners — — — 0.2 — — 0.2 At 31 January 2024 5.4 23.3 6.4 0.5 — (21.0) 14.6 The above statement should be read in conjunction with the accompanying notes on pages 59 to 78. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 58 CONSOLIDATED STATEMENT OF CASH FLOWS year ended 31 January 2024 Notes 2024 £m 2023 £m Net cash outflow from operating activities 6 (4.7) (6.4) Investing activities Interest received on bank deposits 0.5 0.1 Purchase of property, plant and equipment (0.1) (0.2) Investment in product development projects (2.0) (1.8) Investment in other intangibles — (0.2) Sale of businesses (net of cash sold) 26 — 0.2 Net cash used in investing activities (1.6) (1.9) Financing activities Repayment of contract lease liabilities (0.3) (0.3) Net cash utilised by financing activities (0.3) (0.3) Net decrease in cash and cash equivalents (6.6) (8.6) Cash and cash equivalents at the beginning of the year 15.6 24.2 Cash and cash equivalents at the end of the year 9.0 15.6 The above statement should be read in conjunction with the accompanying notes on pages 59 to 78. Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 59 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS year ended 31 January 2024 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, J J 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 48 and 49. 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 2023 There were no new standards or interpretations effective for the first time for periods beginning on or after 1 February 2023, 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. Development costs are amortised over a range of two to five years, determined on an asset-by-asset basis. 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 makes 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. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 60 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 1. Summary of significant accounting policies continued 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 2024. The Directors have prepared cash flow forecasts for the Group for a review period of twelve months from the date of approval of the 2024 financial statements and consider the assumptions used therein to be reasonable and reflective of its long-term subscription 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. 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. 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 Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 61 1. Summary of significant accounting policies continued 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 3–15 years ▶Motor vehicles 4 years ▶Fixtures and fittings 8–16 years ▶Leasehold improvements 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. 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 March 2022, the Board approved a tax-advantaged Company Share Option Plan (CSOP) as a schedule of the EMI Plan. Under the CSOP, the Company may grant share options to employees over shares with a value up to a limit of £60,000 per employee as part of the Company’s reward and retention policy. 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 or the Monte Carlo method, as appropriate. 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. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 62 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 1. Summary of significant accounting policies continued Leases continued 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. 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. Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 63 1. Summary of significant accounting policies continued 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 subscription services for workflow software and IoT sensors. In respect of discontinued operations, revenue arises from installation and maintenance of building energy management systems and 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. Subscription services 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. 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, installations and maintenance (discontinued operations) 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. Maintenance revenue is recognised evenly over the period the maintenance support is contracted to cover. 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. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 64 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 1. Summary of significant accounting policies continued 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. 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. 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, number of customers and mixed billing frequencies, 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. Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 65 1. Summary of significant accounting policies continued 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 earnings before depreciation and amortisation, share-based payment and non-recurring or special items. 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. 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: 2024 £m 2023 £m Recurring revenues from subscription services 11.2 9.6 Consultancy and other services 0.8 0.7 Total 12.0 10.3 Geographical information The Group considers its operations to be in the following geographical regions: Revenue from external customers 2024 £m 2023 £m United Kingdom 8.9 7.7 The Americas 3.1 2.6 Total 12.0 10.3 Information about major customers of the continuing operations During FY24, the Group had one customer who generated revenues of 17% of total revenue (FY23: 16%). Revenue expected to be recognised The Group expects to recognise revenue amounting to £4.6m (2023: £4.1m) in FY25 relating to performance obligations from existing contracts that are unsatisfied or partially satisfied as at 31 January 2024. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 3. Net operating expenses 2024 £m 2023 £m Net operating expenses Selling and distribution costs 2.6 3.0 Administrative expenses 8.8 9.9 Total operating expenses 11.4 12.9 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. 4. Operating loss – continuing operations 2024 £m 2023 £m Operating loss is stated after charging: Product development costs expensed 1.9 2.4 Depreciation on owned property, plant and equipment 0.1 0.1 Depreciation on right-of-use assets 0.3 0.4 Amortisation on development costs 0.7 0.3 Amortisation on computer software 0.2 0.2 Auditor’s remuneration: – fees payable to the Company’s auditor for the audit of the Company’s annual accounts 0.1 — – fees payable to the Company’s auditor for the audit of the Company’s subsidiaries pursuant to legislation 0.1 0.1 Total audit fees for audit services 0.2 0.1 Tax services — — Total auditor’s remuneration 0.2 0.1 Non-recurring or special items: – restructuring and integration costs 0.1 — – impairment of goodwill — 4.3 – amortisation of acquired intangible assets 0.1 0.5 Total non-recurring or special items 0.2 4.8 Cooper Parry Group Limited was paid £nil for tax advisory and compliance services (2023: Cooper Parry Group Limited, £nil). 5. Finance income Finance income comprised: 2024 £m 2023 £m Interest receivable on cash and bank balances, and treasury deposits 0.5 0.1 The Group incurred finance costs in relation to IFRS 16 right-of-use contract liabilities of less than £0.1m (2023: less than £0.1m). 6. Net cash flows from operating activities Notes 2024 £m 2023 £m Loss before interest and taxation – from continuing operations (5.1) (12.3) – from discontinued operations (before tax) 26 — (0.3) Adjustments for: Depreciation 12 0.4 0.5 Amortisation 11 1.0 1.0 Impairment of intangible assets and goodwill — 4.3 Share-based payments 0.2 0.2 Operating cash flow before working capital changes (3.5) (6.6) Decrease/(increase) in trade and other receivables 0.1 (1.7) Increase in inventories (1.4) (0.6) Increase in trade and other payables 0.3 2.3 Operating cash flow after working capital changes (4.5) (6.6) (Decrease)/increase in provisions (0.2) 0.1 Cash utilised by operations (4.7) (6.5) Tax credit received — 0.1 Net cash outflow from operating activities (4.7) (6.4) Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 67 7. Staff information (including Directors) Employee costs were: 2024 2023 Note Continuing £m Discontinued £m Total £m Continuing £m Discontinued £m Total £m Wages and salaries 9.7 — 9.7 10.1 0.3 10.4 Social security costs 1.1 — 1.1 1.1 — 1.1 Other pension costs 23 0.4 — 0.4 0.4 — 0.4 11.2 — 11.2 11.6 0.3 11.9 Redundancy costs of less than £0.1m (2023: 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: 2024 2023 Continuing Number Discontinued Number Total Number Continuing Number Discontinued Number Total Number Administration and sales 80 — 80 97 — 97 Development 49 — 49 44 — 44 Field service 29 — 29 22 4 26 158 — 158 163 4 167 Details of Directors’ remuneration are included in the Remuneration report on pages 43 to 47. 8. Taxation (a) Analysis of tax credit for the year – continuing operations 2024 £m 2023 £m Current taxation: UK corporation tax (credit) on loss for the year (0.1) (0.1) Adjustment in respect of prior periods — (0.1) Total current taxation (0.1) (0.2) Deferred tax: On separately identifiable acquired intangibles (as a result of amortisation) — (0.1) Total deferred taxation — (0.1) Tax credit on continuing operations (0.1) (0.3) (b) Analysis of tax charge for the year – discontinued operations 2024 £m 2023 £m 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 — — Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 8. Taxation continued (c) Factors affecting taxation credit for the year – continuing operations The effective tax rate for the year was 24%. 2024 2023 Tax rate £m Tax rate £m Loss on ordinary activities before taxation (4.6) (12.0) Loss on ordinary activities multiplied by weighted average standard rate of corporation tax in the UK of 24% 24.0% (1.1) 19.0% (2.3) Effects of: Expenses not deductible for tax purposes (3.2%) 0.2 (7.5%) 0.9 Income not deductible 2.1% (0.1) 1.0% (0.1) Temporary differences not recognised — — (1.6%) 0.2 Tax losses not recognised 18.7% 0.9 (9.2%) 1.1 R&D tax credit — — 1.0% (0.1) Surrender of losses to discontinued operations (1.6%) 0.1 0% — 2.2% (0.1) (2.5)% (0.3) (d) Factors affecting taxation charge for the year – discontinued operations 2024 2023 Tax rate £m Tax rate £m Loss on ordinary activities before taxation — (0.3) Loss on ordinary activities multiplied by weighted average standard rate of corporation tax in the UK of 19% — — 19.0% (0.1) Effects of: — — Temporary differences not recognised — — 19.0% 0.1 — — — — (e) Factors that may affect future taxation charges Deferred taxation assets amounting to £7.7m (2023: £6.5m) have not been provided in respect of unutilised income tax losses of £30.8m (2023: £25.8m) 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 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 was effective from 1 April 2023. These changes were substantively enacted at the balance sheet date and hence, any deferred tax balances have been calculated as at 25%. 9. Dividends paid No interim or final dividend was paid for the year ended 31 January 2024 (2023: £nil). Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 69 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. Key 2024 m 2023 m Weighted average number of shares for the purpose of basic earnings per share A 108.0 108.0 Dilutive effect of employee share options1 — — Weighted average number of shares for the purpose of diluted earnings per share B 108.0 108.0 Key £m £m Loss for the year F (4.5) (12.3) Loss from discontinued operations, net of tax E — 0.3 Continuing loss for the year attributable to equity shareholders C (4.5) (12.0) Total non-recurring or special items net of tax 0.1 4.5 Loss for adjusted EPS D (4.4) (7.5) Key 2024 2023 EPS measures Basic and diluted1 continuing EPS C/A (4.2)p (11.2)p Adjusted EPS measures Adjusted basic and diluted1 continuing EPS D/A (4.1)p (6.9)p The adjusted EPS information is considered to provide a fairer representation of the Group’s trading performance. Discontinued earnings per share Key 2024 2023 EPS measures Basic EPS E/A — (0.3)p Diluted EPS1 E/B — (0.3)p Total earnings per share for the year attributable to equity shareholders Key 2024 2023 EPS measures Basic EPS F/A (4.2)p (11.5)p Diluted EPS1 F/B (4.2)p (11.5)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. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 11. Intangible assets Development costs £m Computer software £m Acquired intangible assets £m Goodwill £m Total £m Cost At 1 February 2022 8.0 0.8 4.3 4.5 17.6 Additions 1.8 0.2 — — 2.0 Disposals — — — — — At 31 January 2023 9.8 1.0 4.3 4.5 19.6 Additions 2.0 — — — 2.0 Disposals — — — — — At 31 January 2024 11.8 1.0 4.3 4.5 21.6 Amortisation At 1 February 2022 6.5 0.1 3.7 — 10.3 Charge for the year 0.3 0.2 0.5 — 1.0 Impairment — — — 4.3 4.3 Disposals — — — — — At 31 January 2023 6.8 0.3 4.2 4.3 15.6 Charge for the year 0.7 0.2 0.1 — 1.0 Disposals — — — — — At 31 January 2024 7.5 0.5 4.3 4.3 16.6 Carrying amount At 1 February 2022 1.5 0.7 0.6 4.5 7.3 At 31 January 2023 3.0 0.7 0.1 0.2 4.0 At 31 January 2024 4.3 0.5 — 0.2 5.0 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 Checkit 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 relates to the acquisition of Checkit UK Limited in May 2019 and of Checkit LLC in February 2021. 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 2029. 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. Long-term growth rates are capped at 1%. 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 Checkit platforms, which are directly linked to the forecast sales growth. 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%. Following the decision to close the BEMS business unit, management has assessed that the carrying value of the goodwill associated with the acquisition of Checkit UK should continue to be fully impaired. The carrying value in relation to the acquisition of Checkit LLC has not identified any impairment. Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 71 12. Property, plant and equipment Property £m Plant and machinery £m Equipment, fixtures, fittings and vehicles £m Total £m Cost At 1 February 2022 0.9 0.2 0.9 2.0 Additions 0.2 0.1 0.1 0.4 Disposals — — — — At 31 January 2023 1.1 0.3 1.0 2.4 Additions — 0.1 0.2 0.3 Disposals (0.3) — — (0.3) At 31 January 2024 0.8 0.4 1.2 2.4 Depreciation At 1 February 2022 0.3 0.1 0.6 1.0 Charge for the year 0.3 0.1 0.1 0.5 Disposals — — — — At 31 January 2023 0.6 0.2 0.7 1.5 Charge for the year 0.2 — 0.2 0.4 Disposals (0.3) — — (0.3) At 31 January 2024 0.5 0.2 0.9 1.6 Net book value At 31 January 2023 0.5 0.1 0.3 0.9 At 31 January 2024 0.3 0.2 0.3 0.8 The net book value of tangible fixed assets held as right-of-use assets was £0.5m (2023: £0.6m) (see Note 22). 13. Investment in subsidiary undertakings The subsidiary undertakings at 31 January 2024 were: Name Registered office Country of incorporation Nature of business Shares held by parent Shares held by Group Checkit Europe Limited Broers Building, J J Thomson Avenue, Cambridge, UK England and Wales Web-based service for work management and automated monitoring 100% 100% Checkit UK Limited Broers Building, J J Thomson Avenue, Cambridge, UK England and Wales Building energy management and automated monitoring systems 100% 100% Checkit LLC 485 Mariner Blvd, Spring Hill, Florida 34609, USA USA Web-based service for work management and automated monitoring 100% * 100% Checkit Inc 11849 Telegraph Road, Santa Fe Springs, California 90670, USA USA Holding company 100% 100% Hartest Precision Instruments Limited Broers Building, J J Thomson Avenue, Cambridge, UK England and Wales 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% * Includes holdings held indirectly through Checkit Inc. All subsidiary undertakings are operated primarily in the country of incorporation. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 14. Deferred tax Deferred tax asset Deferred tax liability 2024 £m 2023 £m 2024 £m 2023 £m Deferred tax — — — — The gross movement on the deferred tax is as follows: Notes 2024 £m 2023 £m Deferred tax asset/(liability) at 1 February — (0.1) Businesses sold — — Businesses acquired including on separately identifiable acquired intangibles — — Deferred tax on amortisation of separately identifiable acquired intangibles 8 — 0.1 Origination and reversal of other temporary differences — — Deferred tax asset/(liability) at 31 January — — 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 (2023: less than £0.1m). 15. Inventories 2024 £m 2023 £m Raw materials — — Finished goods and goods for resale 3.8 2.4 3.8 2.4 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 £0.2m in the year (2023: £0.4m), which are included within operating profit. The amount of inventory recognised as an expense within the cost of sales for continuing operations amounted to £1.2m (2023: £1.6m). 16. Trade and other receivables 2024 £m 2023 £m Gross trade receivables 3.0 3.2 Less: expected credit losses (0.2) (0.2) Trade receivables – net 2.8 3.0 Other receivables 1.1 1.0 Prepayments 0.6 0.5 4.5 4.5 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 5.9% (2023: 4.0%). 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 15% of Group annualised revenues (FY23: 16%) but based on the Group’s assessment of its credit rating the risk of failure is considered low. Trade receivable days are 81 days (2023: 108 days normalised). Trade debtors include significant sales invoices for subscriptions due annually in advance, sales which are consequently included in deferred income on the balance sheet and are not recognised revenue. Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 73 16. Trade and other receivables continued Ageing of balances with expected credit losses is as follows: Expected credit loss 2024 £m 2023 £m Not past due — — Between one month and two months past due — — Over two months past due 0.2 0.2 0.2 0.2 Movements on the provision for impairment of trade receivables are as follows: Expected credit loss 2024 £m 2023 £m At 1 February 2023 0.2 0.1 Increase in provision — 0.1 At 31 January 2024 0.2 0.2 The gross carrying amounts of trade and other receivables are denominated in the following currencies: 2024 £m 2023 £m Sterling 3.9 4.1 US Dollar 0.8 0.6 Euro — — Other — — 4.7 4.7 17. Trade and other payables 2024 £m 2023 £m Trade payables 1.2 1.1 Other payables 0.7 0.5 Accruals 1.3 1.8 Deferred service and subscription income 4.6 4.1 7.8 7.5 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 31 days (2023: 41 days). Service and subscription income contracts vary from 12–48 months in length; however, customers are only required to pay in advance for each successive twelve 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 2024. 19. Provisions 2024 £m 2023 £m Current — — Non-current 0.2 0.4 0.2 0.4 Dilapidation costs £m Total £m At 1 February 2023 0.4 0.4 Utilised (0.2) (0.2) Increase in provision — 0.1 At 31 January 2024 0.2 0.3 Anticipated utilisation Within one year — — Beyond one year 0.2 0.2 The dilapidation costs relate to redecoration, maintenance and reinstatement costs required to meet the terms of property leases held by the Group. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 20. Share capital and reserves Share capital 2024 £m 2023 £m Authorised 200,000,000 (2023: 200,000,000) ordinary shares of 5 pence each 10.0 10.0 Allotted, called up and fully paid 108,008,562 (2023: 108,008,562) ordinary shares of 5 pence each 5.4 5.4 Share options Number of options Year of grant Exercise period Option price 2024 ’000 2023 ’000 FY21 2023–2030 40.50p 900 905 FY22 2024–2031 56.03p 738 1,983 FY23 2025–2032 30.29p 3,793 4,786 FY24 2026–2033 20.69p 1,295 — The weighted average exercise price of all options in 2024 was 35.3 pence (2023: 39.0 pence). Movement in share options during the year: 2024 2023 No. of shares ’000 Weighted average No. of shares ’000 Weighted average Outstanding at beginning of the year 7,731 39.0p 3,848 50.7p Granted during the year 1,518 25.7p 4,898 31.8p Exercised during the year — — — — Forfeited during the year (2,523) 43.2p (1,015) 44.3p Outstanding at the year end 6,726 35.3p 7,731 39.0p Exercisable at the end of the period 900 40.5p — — During the year, 1,517,500 (2023: 4,898,000) share options were granted to the following schemes: ▶1,057,500 to the Company Share Option Plan (CSOP) scheme launched in 2022; ▶375,000 to the existing EMI scheme launched in 2020; and ▶85,000 unapproved share options to the USA Subplan. ▶900,000 share options were eligible to be exercised during the year. As at 31 January 2024, 6,725,653 (2023: 7,731,000) share options remain outstanding as follows: ▶1,702,500 (2023: 1,368,000) shares in a CSOP; ▶2,810,653 (2023: 3,703,000) shares in an EMI Plan; ▶2,000,000 (2023: 2,000,000) shares under a LTIP; and ▶212,500 (2023: 660,000) shares in a USA Subplan. For further details see page 45 of the Remuneration report. Valuation of share awards Share-based payments, including awards under the EMI, CSOP and LTIP, are valued using an independent probability valuation model and take account of performance criteria (if any). The Group recognised a charge of £0.2m in the year (2023: charge of £0.2m). 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. Translation reserve Gains and losses arising on retranslating the net assets of overseas operations into Sterling of less than £0.1m (2023: 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. Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 75 21. Capital commitments Expenditure sanctioned but not contracted for amounted to £nil (2023: £nil), and expenditure contracted but not provided for in the financial statements amounted to £nil (2023: £nil). 22. Leases The right-of-use assets recognised and the movement during the year is as follows: Property £m Motor vehicles and equipment £m Total £m Cost At 1 February 2022 0.9 0.5 1.4 Additions 0.2 — 0.2 Disposals — — — At 31 January 2023 1.1 0.5 1.6 Additions — 0.2 0.2 Disposals — — — At 31 January 2024 1.1 0.7 1.8 Depreciation At 1 February 2022 0.3 0.3 0.6 Charge for the year 0.3 0.1 0.4 Disposals — — — At 31 January 2023 0.6 0.4 1.0 Charge for the year 0.2 0.1 0.3 Disposals — — — At 31 January 2024 0.8 0.5 1.3 Net book value At 1 February 2023 0.5 0.1 0.6 At 31 January 2024 0.3 0.2 0.5 The movement on the lease liability during the year is summarised as follows: £m As at 1 February 2023 0.6 New leases entered into during the year 0.2 Disposals — Payments made during the year (0.3) At 31 January 2024 0.5 Presented as: Lease liability within one year 0.2 Lease liability in more than one year 0.3 At 31 January 2024 0.5 The table below summarises the maturity profile of the Group’s financial liabilities based upon the contractual undiscounted payments as at 31 January 2024. 2024 £m No later than one year 0.2 Later than one year and no later than five years 0.3 Later than five years — 0.5 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 £0.4m (2023: £0.4m) and outstanding contributions at the year end amounted to less than £0.1m (2023: less than £0.1m). Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 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 2024 are detailed below: 2024 £m 2023 £m US Dollar 0.3 1.4 Indian Rupee — — Euro accounts — — Pound Sterling 8.7 14.2 9.0 15.6 (iii) Financial liabilities At 31 January 2024, the Group had no borrowings. (iv) Maturity All financial liabilities are contractually due within six months. (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 2024 (2023: £nil). (vi) Committed undrawn borrowing facilities At the year end, the Group had committed undrawn facilities of £nil (2023: £nil). (vii) Currency risk The Group’s principal functional currency remains Pound Sterling with transactions in Euro and US Dollar. The Group does not trade in derivatives or make speculative hedges. At 31 January 2024, the Group had no commitments under non- cancellable forward contracts (2023: £nil). (viii) Categories of financial instruments Financial assets held at amortised cost 2024 £m 2023 £m Cash and bank balances 9.0 15.6 Trade and other receivables (Note 16) 4.5 5.4 13.5 21.0 Financial liabilities held at amortised cost 2024 £m 2023 £m Trade and other payables (Note 17) 1.9 1.5 Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 77 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: 2024 £m 2023 £m Short-term employee benefits: Salaries including bonuses 1.6 2.0 Social security costs 0.2 0.2 Company benefits (car, PMI, etc.) — — Post-employment benefits: 1.8 2.2 Defined contribution pension plans 0.1 0.1 Total remuneration 1.9 2.3 Share-based payments to key management amounted to £0.1m (2023: £nil). 26. Discontinued operations During the prior year, the Group discontinued its activity in Building Energy Management Systems; consequently, the results from this revenue stream were included as discontinued operations. Total discontinued operations comprise: 2024 £m 2023 £m Revenue — 0.6 Cost of sales — (0.7) Gross loss — (0.1) Operating expenses — (0.2) Loss before tax — (0.3) Attributable tax — — Loss from discontinued operations before gain on disposal — (0.3) Gain on disposal and loss on re-measurement — — Attributable tax to gain — — Loss from discontinued operations attributable to equity shareholders — (0.3) Foreign currency reserve reclassification — — Other comprehensive income from discontinued operations — (0.3) Building Energy Management Systems The results of ceasing operations of Building Energy Management Systems, which have been included in the consolidated statement of comprehensive income, were as follows: 2024 £m 2023 £m Revenue — 0.6 Cost of sales — (0.7) Gross profit/(loss) — (0.1) Operating expenses — (0.2) Profit/(loss) before tax — (0.3) Attributable tax — — Profit/(loss) from Building Energy Management Systems — (0.3) Gain on sale and loss on re-measurement to fair value — — Profit/(loss) from Building Energy Management Systems discontinued operation attributable to equity shareholders — (0.3) Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 26. Discontinued operations continued Cash flows from Building Energy Management Systems 2024 £m 2023 £m Net cash outflow from operating activities — (0.3) Net cash inflow from investing activities — Cash received on sale of assets — — Expenditure on intangible assets — — Total net cash inflow from investing activities — — Interest payable — — Total net cash inflow from financing activities — — 27. Contingent liabilities Checkit plc and HMRC have been in correspondence since early 2022 regarding matters of input tax recoverability. The matter is ongoing and the substance of discussions remains unchanged from the prior year. A statutory review of the case is being conducted and management continues to disagree with HMRC’s position. Specialist tax advice has been sought throughout the correspondence. The total amount of input tax claimed since VAT registration to 31 January 2023 is £1.2m. Given the uncertainty and materiality of the issue, we do not consider it appropriate at this stage to provide for this and are disclosing as a contingent liability. 28. Non-GAAP performance measures A reconciliation of non-GAAP performance measures to reported results is set out below: Profit measures – LBITDA – continuing operations 2024 £m 2023 £m LBITDA (3.4) (6.4) Depreciation and amortisation (1.3) (1.0) Share-based payment charge (0.2) (0.2) Non-recurring or special items (0.2) (4.8) Operating loss for the year (5.1) (12.4) Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 79 PARENT COMPANY BALANCE SHEET as at 31 January 2024 Notes 2024 £m 2023 £m Fixed assets Investments in subsidiary undertakings 3 14.5 14.5 Intangible assets 0.4 0.5 Tangible fixed assets 4 0.2 0.4 15.1 15.4 Current assets Debtors 5 22.2 21.9 Cash in hand and at bank 7.5 12.4 29.7 34.3 Creditors: amounts falling due within one year 6 (5.6) (10.8) Net current assets 24.1 23.5 Total assets less current liabilities 39.2 38.9 Long-term liabilities Long-term contract lease liabilities (0.1) (0.2) Long-term provisions 7 (0.2) (0.3) Net assets 38.9 38.4 Capital and reserves Called up share capital 8 5.4 5.4 Share premium 23.3 23.3 Capital redemption reserve 6.4 6.4 Other reserves 0.5 0.2 Profit and loss account 3.3 3.1 Shareholders’ funds 38.9 38.4 The parent company’s profit for the financial year amounted to £0.2m (2023: less than £0.1m profit). The notes form an integral part of the financial statements. The financial statements were approved by the Board of Directors on 24 April 2024 and were signed on its behalf by: Kit Kyte Greg Price Chief Executive Officer Chief Financial and Operations Officer Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 80 PARENT COMPANY STATEMENT OF CHANGES IN EQUITY year ended 31 January 2024 Share capital £m Share premium £m Capital redemption reserve £m Other reserves £m Profit and loss account £m Total £m At 1 February 2022 5.4 23.3 6.4 — 3.0 38.1 Profit for the year — — — — — — Total comprehensive income for the year 5.4 23.3 6.4 — 3.0 38.1 Issue of own shares — — — 0.2 0.1 0.3 Total transaction with owners — — — 0.2 0.1 0.3 At 31 January 2023 5.4 23.3 6.4 0.2 3.1 38.4 Profit for the year — — — — 0.2 0.2 Total comprehensive income for the year 5.4 23.3 6.4 0.2 3.3 38.6 Own shares — — — 0.3 — 0.3 Total transaction with owners — — — 0.3 — 0.3 At 31 January 2024 5.4 23.3 6.4 0.5 3.3 38.9 Checkit plc | Annual Report and Accounts 2024 CORPORATE GOVERNANCE STRATEGIC REPORT FINANCIAL STATEMENTS 81 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS year ended 31 January 2024 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 £0.2m (2023: £0.1m profit). 3. Investments in subsidiary undertakings 2024 £m 2023 £m At 1 February 14.5 14.5 Acquisitions – external — — Acquisitions – intra-group — — Disposals — — Provisions — — At 31 January 14.5 14.5 Investment in subsidiary undertakings are made up as follows: Net book value Cost £m Impairment £m 2024 £m 2023 £m Checkit Europe Limited 9.0 — 9.0 9.0 Checkit UK Limited 10.5 (5.0) 5.5 5.5 Checkit Inc — — — — Hartest Precision Instruments India Private Limited — — — — Hartest Precision Instruments Limited — — — — 19.5 (5.0) 14.5 14.5 The Group is loss making and this is an indicator for potential impairment of its investments. Management has completed impairment reviews through estimating the recoverable value of these assets and concluded that impairments should remain unchanged as set out above. 4. Tangible fixed assets Property – right-of-use asset £m Cost At 1 February 2023 0.9 Additions — Disposals — At 31 January 2024 0.9 Depreciation At 1 February 2023 0.5 Charge for the year 0.2 Disposals — At 31 January 2024 0.7 Net book value At 1 February 2023 0.4 At 31 January 2024 0.2 Amounts owed by subsidiary undertakings are repayable on demand and do not bear interest. Checkit plc | Annual Report and Accounts 2024 FINANCIAL STATEMENTS 82 NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS CONTINUED year ended 31 January 2024 5. Debtors: amounts falling due within one year 2024 £m 2023 £m Amounts owed by subsidiary undertakings 21.3 21.1 Other debtors and repayments 0.9 0.8 22.2 21.9 Amounts owed by subsidiary undertakings are repayable on demand and do not bear interest. 6. Creditors: amounts falling due within one year 2024 £m 2023 £m Amounts owed to subsidiary undertakings 4.2 9.0 Other creditors 1.3 1.6 Contract lease liabilities 0.1 0.2 5.6 10.8 Amounts owed to subsidiary undertakings are repayable on demand and do not bear interest. 7. Provisions Dilapidation costs £m At 1 February 2023 0.3 Utilised (0.2) Increase in provision 0.1 At 31 January 2024 0.2 Anticipated utilisation Within one year 0.1 Beyond one year 0.1 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 (2023: £nil), and expenditure contracted but not provided for in the financial statements amounted to £nil (2023: £nil). 10. Contingent liabilities Details of contingent liabilities are given in Note 27 of the notes to the consolidated financial statements. 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. WEB PROPERTY AND ADVISERS Web property Checkit www.checkit.net Advisers Group General Counsel and Company Secretary Hugh Wooster Registered office Broers Building J J Thomson Avenue Cambridge CB3 0FA Registered in England No. 448274 Registrars Link Group 10th Floor, Central Square 29 Wellington Street Leeds LS1 4DL Nominated adviser and broker Singer Capital Markets 1 Bartholomew Lane London EC2N 2AX Auditor Cooper Parry Group Limited Sky View, Argosy Road East Midlands Airport Derby DE74 2SA Bankers HSBC Bank plc 69 Pall Mall London SW1Y 5EZ Barclays Bank plc Leicester LE87 2BB 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. The printer is a CarbonNeutral® company. Both the printer and the paper mill are registered to ISO 14001. Checkit plc Broers Building J J Thomson Avenue Cambridge CB3 0FA www.checkit.net