®
Annual Report & Accounts
year ending 31 March 2018
Company Registration Number 01892751
Strategic report
Headlines
D4t4 Solutions plc Annual Report & Accounts 2018
Revenue
(£m)
2018
2017
2016
GP margin
(%)
20.09
2018
17.67
2017
57.31
55.82
18.61
2016
49.52
2015*
12.90
2015*
36.37
Up by £2.42m
Up by 2.67%
Adjusted profit before tax **
(£m)
Adjusted diluted EPS **
(pence)
2018
2017
2016
5.15
2018
4.22
3.50
2017
2016
11.01
9.97
8.24
2015*
1.22
2015*
3.86
Up by £0.93m
Up by 1.04p
* 2015 (15 months)
** Before amortisation of intangibles, share based payments charges and foreign exchange gains as
per note 13 on page 68.
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Strategic report
01 Headlines
Corporate governance
Financial statements
26 Board of Directors
47 Independent auditors report
02 Statement by the Chairman
28 Statement of corporate governance
50 Consolidated income statement
04 Statement by the CEO
33 Audit committee report
08 What we do
10 Vision & strategy
12 Business model
34 Nomination committee report
35 Remuneration committee
36 Directors’ remuneration report
14 Our innovative technology &
41 Directors’ report
intellectual property
16 Data & analytics market
18 Growth acceleration plan
20 Key performance indicators
22 Principal risks & uncertainties
25 Sustainability
46 Statement of Directors’
responsibilities
Consolidated statement of
comprehensive income
51 Consolidated statement of changes
in equity
52 Consolidated statement of
financial position
53 Consolidated cash flow statement
54 Company statement of changes
in equity
55 Company statement of
financial position
56 Company cash flow statement
57 Notes to the financial statements
84 Corporate information
D4t4 Solutions plc Annual Report & Accounts 2018Strategic report
Strategic report
Statement by the Chairman
“Our focus on providing the best real time
data collection platform in the industry
continues and this coupled with our hybrid
cloud data platform services leave us well
placed to take advantage of the market
need for real time, accurate, customer data
and finding better ways to analyse and use
that data.”
Dear Shareholder
I am delighted to present this Annual Financial Report for
These two sectors represent both our largest installed base
We have always been very proud of the increasingly diverse
As a group we have invested in our people, our systems
2017-18 which records another very successful year for
and our greatest growth opportunity. (further details are
culture of the group and D4t4 prides itself on a family ethos
and our products and we look forward to keeping you up to
the group.
given in Vision and Strategy, page 10).
that can be felt in every location, no matter where that is in
date on progress during what looks to be a very interesting
The year began with a lower than expected first half
Operations
performance due primarily to longer than expected sales
This past year has seen investment in a whole range of
cycles. This was more than offset by a record second half
new operational process initiatives, with our executive team
the world. It is all too easy to lose focus on these principles
and profitable year.
within the regulatory environment of a publicly quoted
company.
during which we booked the two largest contracts in our
implementing a wide range of improvements that include
During the year we have seen increases in our Indian
group’s history and ended up delivering both revenues and
our CRM, accounting, management support and reporting
development and support teams along with investment
profits in excess of the previous year.
systems. The most noticeable difference is that the business
globally in sales and marketing, pre-sales and consulting
is now more nimble, robust and able to engage more easily
and the Board would like to welcome all new colleagues to
Peter Simmonds
Non-executive Chairman
25 June 2018
Our focus on providing the best real time data collection
platform in the industry continues and this coupled with our
with our clients and the market that we operate in.
hybrid cloud data platform services leave us well placed to
Some of these activities span more than a year and so I look
take advantage of the market need for real time, accurate,
forward to updating you at a later stage with what I believe
customer data and finding better ways to analyse and use
will be significant further progress.
that data.
All our services are governed by our ISO27001/2013
In the year under review we have seen the release of our
compliant data security platform and where required our
GDPR compliant Celebrus product and we have also
Payment Card Industry (PCI DSS) compliant security
increased the product functionality considerably with the
platform. This year will see the introduction of the new
the business. This growth has delivered substantial benefits
during the last twelve months and will continue to do so in
the future.
I would like to sincerely thank our management and all our
staff for their contribution to our Company and its excellent
performance, not only on my behalf but on behalf of all our
stakeholders.
Outlook
release of Celebrus V8 update 19 of the software which
General Data Protection Regulation (GDPR) and I am
Going forward, our focus remains on the collection,
includes many new features including Integration with
sure that all of you will now be aware of its importance to
management and analysis of data thereby assisting our
Adobe Experience Cloud, a new connector to extend our
any business. We have implemented the required GDPR
clients to derive considerable value from their customer
Google and Facebook functionality and extended Hadoop
compliance mechanisms within the business and I am
data and on delivering highly scalable analytical platforms
(big data) capabilities.
Strategic direction
We have honed our strategic direction to focus our
happy to report that we were ready prior to its introduction
with our hybrid cloud data platform services.
on 25 May 2018.
People
The first few months of the year have started inline with
our plan and we continue to attract new partners, new
activities primarily on two areas, the financial services
At 31 March 2018 the Group employed a total of 128 staff
opportunities and new clients. This leads us to be confident
industry and Consumer organisations.
in its operations located in India, EMEA and the USA.
for the year ahead.
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Statement by the Chief Executive Officer
“Our clients operate in markets where in many
cases the only differentiation that they have from
their competitors is how well they understand and
interact with their customers and how quickly they
can capitalise on that customer interaction. All of
which drives increasing demand for more scalable
and cost-effective, compliant data collection and
analytical platforms”
“Our strategy continues to deliver and is reflected in our strong profit growth. The business enters
the new financial year in robust shape after achieving record bookings in the second half year under
review - we are encouraged by the opportunities and outlook for the business in the coming year.”
Introduction
I am pleased to present to all stakeholders our Strategic
and Financial Report covering the year ended 31 March
2018, which records another strong year of profitable
growth for the group and culminated in the signing of the
two largest contracts in the group’s history – see more
details below.
As a business, we have successfully grown both top line
revenue and profits over the comparable year and it is
pleasing to witness that the Group has achieved notable
sales success in North America following our recent sales
and marketing investment in the region.
Our pleasing performance stems from the effectiveness of
the group’s investment programme into our core products
for both data capture and its successful implementation
on behalf of our clients and, in our hybrid cloud data
platform service business which provides a scalable
platform to allow our clients to focus on understanding
their customers’ behaviour better, calculate risk and ensure
regulatory compliance.
Overview
D4t4 has continued to build upon our previously stated
strategic objectives of “empowering our clients to gain
significant value from their customer data and through
this to deliver major uplifts in terms of their revenues and
profitability” (further details are given in What we do, page 8);
subsequently, as a result I am delighted to report a 13.71%
increase in top-line growth with total revenues for the group
rising to £20.09m.
Importantly, we have been able to maintain gross profit
margins through a combination of product sales, our hybrid
cloud data platform/projects business and our recurring
revenue business, which has resulted in a 22% growth in
underlying profitability yielding an adjusted pre-tax profit for
the group of £5.15m (2017: £4.22m) (see page 6).
Our clients continue to operate in markets where in many
cases the only differentiation that they have from their
competitors is how well they understand and interact with
their customers and how quickly they can capitalise on
that customer interaction. This coupled with a challenging
market environment characterised by legislative
uncertainties, and increased (and ever increasing)
regulatory demands, for example GDPR, and in the
Financial markets - CCAR and CECL, are driving increasing
demand for more scalable and cost-effective, compliant
data collection and analytical platforms.
New customer wins in the UK, Europe and North America
were represented across our targeted industry segments
including Banking, Insurance, Online retail and Consumer,
and our land and expand methodology for sales has had a
great deal of success with an increasing proportion of our
client base now using our Celebrus product set. During the
period under review we signed at least one new Celebrus
customer per month.
The North American market contributed greatly to new
sales in 2017-18 following last year’s investment in the
North American team. This important market has the
potential for much higher growth, therefore, the Board
has approved a development strategy within this territory
which includes ongoing investments in pre-sales, partner
sales, project management and consulting expertise.
This, in addition to forming further strategic alliances and
partnerships, will enable us to continue to expand our skill
set, marketing and sales capacity within this region.
Our strategic partnerships also remain a major focus for
our business as we enthusiastically recognise that the
geographical reach and business diversity that our partners
bring to us is key to our own future growth. During the
year under review we have successfully continued to
promote and enhance our relationships with Teradata, SAS,
Microsoft, Pegasystems and Adobe both directly and via
their partners.
Summary review of the year ended 31 March 2018
D4t4 has had another successful financial year.
Our business has delivered revenues of £20.09 million
(2017: £17.67m) producing an adjusted profit before tax of
£5.15m (2017: £4.22m) see page 6, with a statutory profit
before tax of £4.4m (2017: £4.24m). This solid growth
has been driven by an increase in gross profit margin
(GP) for the year to 57.31% which was ahead of market
expectations and the previous year (2017: 55.82%). The
group remains strongly cash generative however, due to
the stronger second half weighting and several contracts
which signed close to the year end, net cash reserves were
at £3.85m compared to £5.09 million the previous year (net
cash is gross cash less any loans). This therefore resulted
in trade debtors being far higher than previous and finished
the year in March 2018 at £19.53m (2017: £3.66m).
The last twelve months to March 2018 has seen the
continuing evolution of our business into the data and
analytics market space with a focus on growing our
Celebrus software customer base and our hybrid cloud
data platform services, which in turn contribute to our
licence, recurring and project revenues.
As we have indicated earlier, we have invested in our
partner, sales and pre-sales teams, particularly in North
America, the outcome of which we are pleased to report
is the winning of several significant major contracts with
both new and existing clients. We have also invested in
our partner-based sales strategy and in 2018-19 we will
continue to scale up these relationships which will pay
rewards both this year and in the future.
During the last 12 months we have seen a shift in the mix
of sales within the group. Firstly, through the growth in the
demand for term or recurring licence sales of our Celebrus
product set which had an impact on the perpetual licence
sales that we have been used to in the past but has had
the beneficial effect of increasing our recurring revenue.
Celebrus sales now represent 21.72% of Group revenue.
Secondly, we have seen an increase in demand for our
hybrid cloud data platform services which have developed
well in the year particularly in the North American market.
These combined with the ongoing development of
our business to the more profitable data and analytics
projects and associated recurring revenues has assisted in
delivering the overall strong group profit level.
Our hybrid cloud data platform Projects business has
had a strong year delivering an 31.06% increase in year-
on year sales to £12.41 million, (2017: £9.47m). This
robust/creditable performance over the previous year
provides us with a good level of contract visibility into the
immediate future.
Recurring revenues from our managed service and
software licence recurring revenue service delivered income
of £4.78 million (2017: £4.49m). As mentioned previously
this steady growth in performance was due in part to the
increase in our Celebrus annuity revenues during the year
as more clients move to a term licence arrangement.
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Statement by the Chief Executive Officer (Continued)
Financials
Revenue
Licence sales
Projects
Recurring income
Gross profit
GP margin
Profit before tax
Adjusted profit before tax *
Basic EPS
Adjusted basic EPS *
Diluted EPS
Adjusted diluted EPS
Dividend for the period
Net cash position **
2018
£2.90m
£12.41m
£4.78m
£20.09m
£11.52m
57.31%
£4.40m
£5.15m
9.90p
11.49p
9.49p
11.01p
2.50p
£3.85m
2017
£3.71m
£9.47m
£4.49m
£17.67m
£9.86m
55.82%
£4.24m
£4.22m
10.49p
10.44p
10.02p
9.97p
2.25p
£5.09m
Year on year
growth
-21.82%
+31.06%
+6.53%
+13.71%
+16.74%
+2.67%
+3,72%
+22.04%
-5.61%
+10.06%
-5.33%
+10.43%
+11.11%
-24.27%
* before amortisation of intangibles, share based payments charges and foreign exchange gains as per note 13 on page 68
** Net cash is gross cash less outstanding borrowings. 2018 Cash position is lower due to business weighting occurring late
in second half of year and with a corresponding increase in level of trade debtors
Gross profit in the year was £11.52 million (2017: £9.86m) whilst statutory profit before tax for the period was £4.40m
(2017: £4.24m). Administration costs were £7.15m (2017: £5.63m) due in part to staff cost increases see page 64.
Therefore, reported profit from operations is £4.43m (2017: £4.29m) and adjusted profit for the year before tax is £5.15m
(2017: £4.22m). This includes a foreign exchange loss for the year of £0.40m (2017: £0.36m gain) the loss was due primarily
to the significant shift In the US Dollar exchange rate during the year.
Debtors grew from £4.27m to £20.54m, due to timing of contracts, two of which were signed close to the year end. From
an income perspective one was recognised in March 2018 while the other was part recognised during March 2018 with
the major part to be recognised during the current financial year, this has resulted in the increase in debtors and a deferred
income balance of £12.40m (2017: £2.60m).
Cash and cash equivalents at 31 March 2018 stood at £4.63m (2017: £6.29m) this, as we said above, reflects the increased
level of trade debtors 2018 £19.53m (2017: £3.66m) due to the business weighting occurring late in the second half. Total
net assets at the end of the year were £20.99m (2017: £17.55m) partly as a result of the increase in value of our head office
building, which at the end of March 2018 was valued at £3.3m compared to £2.25m in March 2017, see note 29 for details
of the revaluation.
Adjusted fully diluted earnings per share grew 10.43% to 11.01 pence (2017: 9.97p), unadjusted diluted EPS was 9.49
pence (2017: 10.02 pence) down some 5.33%. mainly due to the significant movement in the US$ to UK£ foreign exchange
rates during 2017-2108.
Dividend
As stakeholders are aware the Company remains committed to a progressive dividend policy whilst balancing its
investments for future growth. It is the Board’s intention to declare future dividends based on the overall performance, with
appropriate cover in the range of 3-4 times.
The Board is recommending a final dividend of 1.875p which, if approved by shareholders at the Annual General Meeting,
which is to be held on the 23 August 2018, will be paid on 14 September 2018 to Members on the Register at the close of
business on 10th August 2018. The Ordinary shares become ex-dividend on 9 August 2018.
People
2017-18 has been a very successful year for the Group, which of course is made up of a great many team and individual
successes. This is a testament to the hard work, expertise and professionalism of the D4t4 team.
At the end of March 2018 the Group employed 128 staff in its operations located in India, EMEA and North America.
I personally would like to welcome all new colleagues to the business and to thank everyone for their contribution to another
successful year, during which our colleagues have demonstrated outstanding efforts and commitment to ensure that our
clients and their customers receive the maximum benefit from the products and services that we supply.
Outlook
As documented in our trading update released in April, during the last quarter of the year under review we signed two
significant contracts which are also the biggest in our Group’s history. From an income perspective one was recognised
in March 2018 while the other was part recognised during March 2018 with the major part to be recognised during the
current financial year. We have also recently delivered our first implementations of Celebrus as a Service, our cloud-based
deployment, which bodes well for the future.
All of this exciting news and progress gives us an excellent start to the current year and, coupled with an ever- growing
opportunity pipeline and even greater cooperation with our growing list of business partners, the Board remains confident
in the future of the business and believes that it has a clear strategy in place to develop the opportunities that will deliver
sustainable growth and enable us to achieve the ambitious plans for the year ahead.
I hope that you enjoy reading about us in this Annual Report – and we look forward to keeping you updated on our business
and contract wins throughout the forthcoming year.
And please, do not forget, it really is “All about the Data”.
Peter Kear
Chief Executive Officer
25 June 2018
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What we do
D4t4 create, author, market and sell a software product, Celebrus, focused on the capture of customer data from all digital channels.
This data is then used in applications that deliver artificial intelligence, customer insight and analytics, personalisation, decisioning and
customer relationship management.
D4t4 services are focused on delivering data management using public and private cloud infrastructure that is securely designed
to ensure our clients can operationalise data within their organisation. Our role is to provide the expertise that enables our clients
to derive value from their data with insightful analytics as well as providing the technical architecture skills to design and build
performant platforms for critical business, analytics, compliance, risk, marketing and artificial intelligence applications.
D4t4 Solutions plc Annual Report & Accounts 2018
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Data
Capture (Example)
Data
Management (Example)
Data
Platforms (Example)
Data
Analytics (Example)
Real-time customer tracking solution
delivered at a leading Scandinavian bank
Management of a data platform for an
industry wide anti-fraud consortium
Business challenge
Business challenge
Platform migration, consolidation and
management of mission-critical risk
environment for a top 5 global bank
Customer experience analytics and
visualisation for a leading Japanese
automotive manufacturer
The bank sought to provide its customers with the
A not-for-profit company (acting as a central hub
Business challenge
Business challenge
best possible user experience, positively impacting
for the sharing of knowledge and sensitive data to a
Our client was struggling with a fragmented analytics
With multiple touchpoints for customer interaction, our
customer satisfaction and driving loyalty, retention and
network of industry specific service providers), was
estate, operating at poor performance levels and
client needed to consolidate its disparate customer
incremental business. In support of a specific desire to
looking for a highly secure, performant and scalable
delivering a sub-optimal user experience. Additionally,
data sources to give them a complete picture of
optimise one-to-one customer marketing, a data feed
platform, packaged as a hosted managed service, to
a key driver for change was that outdated versions
experience, engagement and satisfaction for both
was needed to power systems of engagement within
be delivered in a short time frame, including a disaster
of operational software were unsupported, leading to
pre- and post-sales contact. A solution was required
the bank network, most notably real-time decisioning
recovery (DR) facility. This environment was to
potential issues with regulatory compliance.
to mine text from five different central customer data
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for delivering immediate one-to-one personalisation.
Our solution
D4t4 was selected to provide and implement its
Celebrus Customer Data Platform for advanced
customer tracking and analytics.
The main driver for the selection of Celebrus was
its market-leading completeness, accuracy, pre-
built integrations and immediacy in customer data
processing. As a result of the software, customers
now receive a one-to-one personalised experience
across the bank’s digital channels, in real-time, based
upon the customers’ behaviour. This represents a
transformation in our client’s ability to relate to its
customers based on need and motivation, which
allows the bank to provide the appropriate next best
messages to individuals depending on their place in
their journey.
support the deployment of a new industry leading
software application.
Our solution
We architected a managed solution that ensured
performance, scalability and availability, with particular
concentration on the high level of security required; these
considerations defined the Service Level Agreement
(SLA) that operates on a 24/7, 365-day basis covering
both hardware and software.
Under the SLA we also provide services to ensure that the
infrastructure is performing efficiently and that planned
upgrades and backups are carried out as required.
Extensive reporting mechanisms enable our client to be
kept informed of the infrastructure’s performance.
Security is a high priority therefore a customised plan
was incorporated into the SLA that focuses on these
aspects of the service. Independent security analysis and
penetration testing of the network environment safeguard
security and measures are constantly re-evaluated in
response to ever-changing security risks.
This was both a challenging and rewarding project from
both a technical and practical aspect. D4t4’s experience
in technical and time challenging infrastructure projects
was invaluable in overcoming risks and potential issues,
enabling a successful delivery of the project as planned,
on time and budget.
This was an urgent requirement with compliance
deadlines looming and substantial fines threatened.
Our solution
sources, including social media, surveys and call
centre, along with technical, network support and
customer relations data from the dealer side of the
business. It was also a requirement that the data be
Rather than effecting a short-term fix to overcome
presented in a dashboard reporting format that made it
these challenges, D4t4 proposed a transformational
accessible to business users across the organisation.
approach aimed at creating a lasting solution to
overcome all of the challenges deemed to be restricting
the analytical capability of the bank.
The solution that we delivered has redefined the way
in which our client operates its risk analytics platform,
significantly reducing cost, dramatically improving
performance and enhancing the experience of analytics
users. Our consolidation of their data platform has
also been architected in such a way that it can scale
very rapidly, allowing the bank to flex its hardware and
software as requirements dictate.
The success of this project has resulted in D4t4 being
invited to expand its relationship within the bank to
assist with other mission critical data projects.
Our solution
D4t4 Solutions used analytics and integration skills to
blend the data into a model that could be mined for
customer insight, sentiment analysis and experience
metrics. Our visualisation of this data enables non-
technical users to drill down into the data to identify
concerns emerging from customers and internal
technical teams, highlighting these for action before
they become serious issues. The solution is now being
expanded with the addition of Celebrus data collection
to provide even more granular data.
The solution has been implemented at the
manufacturer’s UK headquarters as well as across its
200+ strong dealer network. It has become a critical
tool for measuring customer sentiment, enabling our
client to introduce improvements that positively impact
the customer experience.
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Vision & strategy
Group vision
Our business vision is to earn high-margin, recurring revenues by creating the innovative data platform software and
building the data platform solutions that financial services institutions and consumer focussed organisations need to power
their artificial intelligence, advanced analytics, compliance, marketing and customer experience initiatives.
Group strategy
To deliver the vision our strategy is to focus our activity on two complementary areas that financial services and consumer
organisations are investing in today and will continue to invest in for the foreseeable future:
1
Increasing revenues derived from our customer data platform, Celebrus, generates high margin
sales in the short-term as well as building a longer-term recurring revenue stream and creating
more platform opportunities.
2
Generating recurring income through developing, deploying and managing ‘big data’ platforms that
combine the services, software and hardware needed to help our clients get strategic advantage from
their data by deploying artificial intelligence and advanced analytics.
This strategy will be achieved by evolving our business based upon our core values of innovation, trust, collaboration and
security and, by growing or enhancing the required core capabilities of data collection, data platforms, data management
and data analytics.
D4t4 Solutions plc Annual Report & Accounts 2018
Our tactics
To deliver on the strategy we have four tightly integrated service lines that we offer to our clients.
Our integrated core services
Data
Capture
Data
Platforms
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Collecting data from all consumer
touchpoints, using our patented customer
data platform software, to create behaviour
profiles and then transferring data in real-time
to personalisation, artificial intelligence and
analytics systems.
Rapidly solving the issue of under-performing
multi-siloed, mixed technology data
environments by consolidating them into
simpler, fully managed platforms or cloud
services. These solutions integrate hardware
and software using our own proprietary tools.
Data
Management
Data
Data
Analytics
Analytics
Flexible management services for data
platforms including hosting, private cloud,
public cloud and application management with
an emphasis on secure, high-performance and
mission critical systems.
Providing insight and models using analytical
data platforms to join dis-similar data sets into
a single environment in which visualisation,
statistical and artificial intelligence tools can
be deployed to quickly and efficiently create
business value.
Target markets
We have a depth of expertise and wide connections within the financial services sector,
and to deliver on our strategy we currently concentrate on this sector above all others. This
concentration facilitates the cross-sell of all four of our services to clients. We also have
significant consumer sector expertise where we can leverage the knowledge, experience and
tools we have developed.
We keep this portfolio of services under constant review, adjusting our offering to suit the needs of our clients and to ensure
we deliver the company vision and strategy.
We are confident that building solid and successful relationships with clients in the data arena, deploying a mix of our own
software and services, will lead to additional high-quality earnings that comprise greater levels of recurring revenue.
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Business model
Our strengths
Our core capabilities
Our values
D4t4 Solutions plc Annual Report & Accounts 2018
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Data
Capture
Product planning and
software development
skills coupled with
innovation capabilities
and deep data collection
domain knowledge.
Data
Management
Operational systems
management skills coupled
with strong security skills
and in-depth technical
knowledge across a broad
range of technologies
People
They are at the heart of the business. They understand the markets we operate
in, create innovative solutions, write product code, drive sales and deliver
solutions. D4t4 seeks to attract and retain the best talent in our marketplace
in order to maintain and drive the business forward. The business is primarily
organised as a single team, rather than divisions; as the business wins and
delivers new contracts this format gives us the best flexibility to deploy skilled
staff on to the right projects at the right time.
Intellectual property
To deliver the strategy the business invests in developing IP. Competitive
advantage is maintained through continual investment in the core functionality
of our software product, developing solution ‘know-how’, building tools to
automate processes (such as software deployment, applying for additional legal
protection for our IP) and the development of a network of partners who rely on
the technology for their own business.
Innovative technology & intellectual property | page 14
Partners
Our route to market is to sell our software and solutions in conjunction with
other third-party organisations, including SAS Institute, Dell EMC, Teradata,
Pegasystems, Microsoft and Adobe.
The solutions D4t4 deliver primarily contain components from SAS Institute,
Microsoft and Dell EMC and our own software, Celebrus. We undertake joint
sales and marketing activities with the organisations to generate the majority of
our sales.
Security
Data security is vitally important to both our clients and us.
Regulations such as the European General Data Protection Regulation (GDPR)
and the nature of the consumer data D4t4 handles means secure process and
facilities that enable ISO27001 and PCI compliance are needed. Our software is
regularly tested to ensure it is safe, private and secure.
Data
Platforms
Architecture and
deployment skills for
high performance on
premise or cloud solutions
that combine hardware,
software and services.
Data
Analytics
Analytics strategy and
business consulting
skills, coupled to data
solutions, data wrangling,
visualisation and advanced
analysis capabilities.
The unique combination of these four elements, make D4t4 a distinctive
business. They create competitive advantage by enabling the Company to offer
complete enterprise scale data solutions for the largest financial services and
consumer organisations.
For investors
Our strategy and business model are designed to create the opportunity to earn
high margin recurring revenues, delivering dividend and capital growth.
For customers
D4t4 provides an end-to-end data service that is designed, from the ground up,
to be a safe, secure and high quality, delivering exceptional value to our clients
over many years.
For employees
D4t4 provides a stable and secure working environment in which staff can
develop their own careers. As a global business we aim to help staff gain
valuable international experience as well as broad exposure to all the latest
data tools and technologies.
The Board is confident that the D4t4 model supports the business strategy of
growing software and recurring revenues, however, as the business grows and
evolves the growth plan is kept under review
12
12
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Our innovative technology & intellectual property
Data Capture
Celebrus is the ‘customer data platform’ (CDP) software that the Group acquired in 2015.
The underlying technology has been in continuous development since 1999 and is protected by a number of patents.
Celebrus is typically bought by clients for a single use case (e.g. personalised messages) using data from a limited number
of sources. As clients adopt Celebrus fully they typically expand the number of data sources, the number of countries
deployed in and the number of use cases. All these trends combine to grow additional revenue for D4t4 over time. The
charts below illustrate the point by showing how the number of deployments (a deployment is by country or collection
In 2018, CDP’s became recognised as a category of software product, and the world’s leading research and advisory
method) is growing faster than the number of clients and the geographic reach of the technology.
company, Gartner, Inc (NYSE: IT), has started to cover the category. This bodes well for future demand of Celebrus
software as more potential clients become aware of the product category.
The core functions of a CDP are to collect data from all the contact points consumers have with a business. This raw
data is then processed to create unified profiles which aggregate data across channels and time to produce a complete
view of how an individual is interacting with an organisation. This data is then made actionable by feeding it into artificial
intelligence, machine learning and analytics systems as well as personalisation and marketing tools.
Customer data sources
Web
Messages
Video / audio
Apps
Advertising
ChatBots
IoT
Voice
API
Customer Data Platform
Unified Customer Profiles
Segmentation
Real-time Connections
AI / ML & analytics
Customer experience
Customer acquisition
Customer retention
Product & pricing
Lending & risk
Personalisation
@
P A Y
Decisions
Product recommendations
Web & app content
Digital messages
Direct mail
Outbound calls
r
o
t
c
e
s
s
s
e
n
s
u
B
i
Consumer
Banking and
insurance
1
2
Celebrus deployments per customer
Countries where Celebrus is sold
Data migration tools
In the course of delivering data management solutions and data platforms, D4t4 has developed a suite of tools to assist in
the migration of data to newer platforms. These include tools for synchronising very large data quantities non-disruptively,
taking across extended access control information, and converting data in the background between old and new formats.
Iterate through smaller cycles / more frequently
+
+
+
Synchronise data
& access rights
Convert
Import / update
Test / accept
GO LIVE
The Customer Data Platform from D4t4 Solutions
Data sources
Using these tools, we speed client adoption of new technology and enable them to test in parallel and converge on a
working delivery quickly, thereby, reducing the timescale and costs for new project implementation.
14
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Strategic report
Data & analytics market
D4t4 Solutions operates within the fast-growing data and analytics market.
Regulatory Environment
This market encompasses ‘big data’, artificial intelligence, machine learning and the business intelligence market; this
market which has been estimated to be valued at US$150
billion (by the global independent analyst International
Data Corporation (IDC), with a projected growth of 11.9%
annually until 2020 when the market is anticipated to be
worth US$210 billion.
The specific areas of focus for D4t4 are data and analytics
related to the collection of data on how consumers interact
with digital channels, the management and analysis of that
data and the implementation of cost effective platforms to
assist companies get real value from their data assets.
Celebrus, our software product, is a customer data platform
that is in a market, according to research by the Customer
Data Platform Institute (CDPI), that is expected to grow from
£300m in 2016 to £1bn in 2019.
250
200
150
n
o
i
l
l
i
b
$
100
50
0
2017
2020
‘Big data’, artificial intelligence,
machine learning and the
business intelligence market
1000
n
o
i
l
l
i
m
$
800
600
400
200
0
2016
2019
Customer Data
Platform market
source: Gartner inc
source: Customer Data Platform Institute
Sector focus
D4t4 is focused on the finance and consumer sectors. This
emphasis allows the business to build a deep understanding
11%
of the core sectors and more easily design, sell and deliver
12%
software and services.
The finance sector is very attractive because of the potential
disruption from fintech vendors, its global nature, the
number of clients undergoing transformation programmes
and, the financial health of the sector.
The consumer sector encompasses all those businesses
that interact directly with large numbers of consumers,
including e-commerce, travel, telecoms and automotive
78%
Finance
Consumer
Other
% sales by sector 2017-18
The clients and the areas of the market D4t4 operates within are impacted by regulatory and accounting framework
changes. Regulations such as Comprehensive Capital Analysis and Review and the Current Expected Credit Loss
framework drive additional demand within the financial services sector.
Regulations like the recently introduced GDPR and the proposed European e-Privacy Regulation together with the California
Consumer Privacy Act have an impact on software development and sales, though this can be positive or negative
depending on the final shape they take.
Key trends
The market for data technologies and services is evolving very rapidly with many changes.
Trends such as the drive amongst businesses to derive competitive advantage from data, the move to cloud computing and
the rise of open source analytical software are now well established and expected to endure.
There are four emerging trends in the market that D4t4 is currently monitoring closely:
Artificial intelligence has advanced and is increasingly entering mainstream business use. This trend fuels the need for
high-quality data and data platforms that aggregate disparate sources of data such as our software product Celebrus.
Privacy has become of much greater concern to every organisation and many individuals. This may have implications
on how organisations collect and use data going forward.
The term “Customer data platform” has become a popular term to describe the functionality of our software product
Celebrus; this term is now used by leading analysts, such as Gartner and consequently, this is expected to assist the
acceleration of sales whilst at the same time also increase competition.
Blockchain technologies have the potential to cause disruption to the established data management norms, creating
both threats and opportunities for the Company.
D4t4 is aware of these key trends and takes them into account when devising strategy and tactics to deliver growth. The
market trends are also a core part of the strategy and business model reviews which take place annually or as required.
organisations. The large data volumes, increasing concerns about data security and data sharing make this a vibrant
area on which the Company can focus.
Geographic focus
The market for data solutions is global and D4t4 has the
working process, skills and people to serve clients wherever
7%
18%
they may be.
The distribution of sales achieved to date reflects both this
global demand and the working capability of the business
model. This international capability is one that will be
developed, enabling D4t4 to follow clients and to move to
areas of greatest demand.
12%
63%
England
Europe
USA
Others
% geographical sales 2017-18
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Growth acceleration plan
Our business model, our chosen market, our innovative technology and our intellectual property are all harnessed to grow
the business by following a three-pronged approach:
1
We will grow our client base, with particular emphasis on North America,
by working with new and existing partners more closely to identify
opportunities and generate sales.
2
We will work with our existing software clients to grow revenues by
implementing additional data capture channels, extra data connectors,
incremental regional deployments and selling additional licenses to cover
data volume increases.
3
We will sell the full portfolio of services to each client to maximise the
value of the relationship to both parties.
New clients
• USA
• Europe
• Asia
Software
• Data source
• Connectors
• Geography
• Volume
Cross-sell
• Platforms
• Capture
• Manage
• Analytics
Our aim is to ‘land and expand’; selling in a single service element and then growing revenue by adding further regions or
data collection points, and subsequently cross-selling more services as we build our relationships with clients. Likewise,
this works well for our new business opportunities allowing us to target them with our full portfolio of data services and then
look to extend our business reach over time.
In practice when you look at our top 50 enterprise scale clients in both the financial services and consumer sectors it is
evident that our “land and expand” sales methodology works well.
The table overleaf gives a snapshot of both the progress made and the opportunity to expand with some of our existing top
50 enterprise account customers:
D4t4 Solutions plc Annual Report & Accounts 2018
S
t
r
a
t
e
g
c
i
r
e
p
o
r
t
Headquartered
Revenue (regions)
Target (regions)
USA
UK
UK
France
USA
France
UK
UK
Japan
UK
2
11
1
2
1
4
1
2
1
1
4
20
1
12
1
15
1
2
10
1
Client
A top 20 global bank
A top 10 global bank
A financial fraud bureau
A top 5 global insurance co.
A top 10 global bank
A top 10 global bank
+ 25 more FS organisations
I
S
T
N
E
L
C
E
C
N
A
N
F
E
R
O
C
1
3
I
S An omni-channel retailer
A top 5 ecommerce
A global car manufacturer
A loyalty scheme
+ 15 more consumer organisations
Revenue (Regions) are the number of regions in which sales have been made, Target(Regions) are the number of regions in
which sales are being sought.
Cross-selling services are another strong driver for the business. This table gives a snapshot of progress made to date in
some of our top 50 enterprise accounts as well as the opportunity to drive more revenue from existing clients:
SERVICE STATUS
Capture
Management
Platforms
Analytics
Client
A top 20 global bank
A top 10 global bank
A financial fraud bureau
A top 5 global insurance co.
A top 10 global bank
A top 10 global bank
+ 25 more FS organisations
I
S
T
N
E
L
C
E
C
N
A
N
F
E
R
O
C
1
3
I
S An omni-channel retailer
A top 5 ecommerce
A global car manufacturer
A loyalty scheme
+ 15 more consumer organisations
KEY
Sale made
Sales pipeline or sales potential
No current opportunity
The Board is confident that the business model, the innovative technology and the chosen markets support the business
strategy of growing software and recurring revenues. As always, the growth plan is kept under constant review as the
business grows and evolves.
I
T
N
E
L
C
R
E
M
U
S
N
O
C
9
1
I
T
N
E
L
C
R
E
M
U
S
N
O
C
9
1
18
18
19
19
D4t4 Solutions plc Annual Report & Accounts 2018Strategic report
Strategic report
Key performance indicators
In addition to the growth in the data capture total sales (including recurring revenue, licences and services); the Group’s
financial KPIs are revenue, gross profit margin, cash, profit before tax and adjusted earnings per share.
Group’s financial key performance indicators
Revenue
Gross profit margin
Adjusted profit
before tax
Adjusted diluted EPS
Data capture growth
Net cash
+13.71%
+2.67%
+22.04%
+10.43%
-11.70%
-24.27%
2018
2017
£20.09m
£17.67m
2018
2017
57.31%
55.82%
2018
2017
£5.15m
£4.22m
2018
2017
11.01p
9.97p
2018
2017
£4,335k
£4,909k
2018
2017
£3.85m
£5.09m
The increase in revenue is driven
Previous investment in our hybrid
The increase in gross profit
Although this has increased over
Data capture saw increases in
As previously announced,
by increases in both project and
cloud analytic services business
has translated to an increase
2017, the increase has been
both its project and recurring
a number of contracts were
recurring revenues offset by a
and economies of scale,
in adjusted profit before tax
affected by a return to tax
revenues which were more
signed close to the year end,
reduction in licence revenue due
particularly from our two large
even taking into account our
paying status following the full
than offset by the reduction in
and although the revenue for a
in part to increased demand
contract wins, have resulted in
recent investment in sales and
utilisation over the past few years
licence revenue due partly to
portion of this was recognised
for Celebrus term or recurring
higher gross profit margins in our
marketing in the North America
of the tax losses acquired on the
the increased demand for term
during 2018, the corresponding
licences which had an impact on
projects business and an overall
region.
the perpetual licence sales.
increase in gross profits.
Speed-Trap (Celebrus)
acquisition in 2015.
licences from perpetual licences.
invoices remained in trade
The active Celebrus user base
debtors at the year end. The
grew by 16% which gives
confidence for the future.
debtor balance at the year end
stood at £19.53m (2017: 3.66m).
20
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Principal risks and uncertainties
D4t4 Solutions faces all the normal economic, commercial and political risks facing any UK
based business that trades internationally.
The major risks to the group that the Board focuses upon are shown below:
1
Execution timing
2
People risks
3
Competition
4
Market and
regulatory changes
Risk heat map
1 Execution timing
2 People risks
3 Competition
4 Market and regulatory changes
5 Client or partner loss
6 Supplier loss
7 Data loss risk
h
g
H
i
2
1
3
444
6
6
5
7
7777777777777
Low
IMPACT
High
I
I
Y
T
L
B
A
B
O
R
P
w
o
L
22
At the centre of our strategy is the
delivery of product and projects in
line with our business plan. Failure
to deliver these projects and
products within the constraints of
our fiscal periods would impact
our overall objectives.
A loss or severe issue with key
New competitors or changes to
The group is exposed to the
personnel could impact the
existing competitors’ products
risks of changing regulations for
ability of the group to execute on
can significantly alter the market
the collection of consumer data.
its strategy, causing reputational
dynamics, which in turn risks
Some of these changes may
and operational challenges.
the position and standing that
be positive, but others negative
our own Intellectual Property
which can impact on D4t4’s
has in the banking, finance and
performance and outlook.
consumer marketplace.
Change in risk
Change in risk
Change in risk
Change in risk
Increase in risk level
No change in risk level
Increase in risk level
Increase in risk level
Increase in risk level due to the
increasing scale and complexity
of projects.
Increase in risk level due to the
Increase in risk level due to the
faster development of the CDP
greater attention being given to
market and the development of
personal data by governments
more big data technologies.
globally.
Mitigation
Mitigation
Mitigation
Mitigation
Our clients are typically engaged
with us on multiyear programmes,
so we invest significantly in sales,
marketing and partner activities
to ensure we can plan and predict
the associated growth and
revenue targets.
Key individuals are identified,
The group continually scans the
D4t4 monitors the markets in
succession plans put in place and
market for potential technology
which we operate by close
actions taken to spread the risk
threats and has a development
collaboration with our clients,
between more individuals.
process in place to ensure its own
suppliers and partners. We
technology continues to evolve to
then plan product, project or
meet client needs, that cannot be
operational changes to ensure
easily disrupted, and which can
we are minimising the impact of
be protected by patents.
changes. We follow proposed
regulatory changes closely.
23
D4t4 Solutions plc Annual Report & Accounts 2018Strategic report Strategic report
Principal risks & uncertainties (Continued)
Strategic report
Sustainability
5
Client or
partner loss
6
Supplier loss
7
Data loss risk
The loss of a key client or
The loss of a key supplier
A significant IP, data loss, or
significant sales partner would
would impact the ability of the
security breach could impact
impact the ability of the group to
company to meet its key business
the brand and reputation of D4t4
meet its key business objectives.
objectives.
Solutions plc
Change in risk
Change in risk
Change in risk
No change in risk level
Reduction in risk level
No change in risk level
No change in risk level as our
Risk level reducing due to
No change in risk level because
clients and partners continue to
increased supplier engagement
there has been no significant
engage and plan with D4t4
and the proven mutual relationship
change in the way D4t4 manages
value
data
Mitigation
Mitigation
Mitigation
The business has specific
The business is conscious of
We are certified to ISO 27001
relationship management plans
the need to ensure its suppliers
and operate an information
in place for both clients and
get benefit from the relationship
security process that controls and
partners. The status of the
and that both parties are aligned
minimises the risks. This process
relationships is reviewed by
with its joint objectives, such
is externally assessed yearly.
management on a regular basis
that success is mutual, thereby
and actions out in place to reduce
underpinning the basis for a
the risk of loss.
successful ongoing relationship.
D4t4 Solutions aims to work in a way that delivers socially responsible and environmentally sustainable business
performance. We ensure observance of the law and conduct activities to the highest ethical standards, and we expect our
customers and suppliers to embrace these same principles.
D4t4 Solutions is a Rated Supplier on the Chartered Institute of Procurement and Supply (CIPS) Sustainability Index, and
the current rating is shown below.
Economic
Score 83%
Environmental
Score 53%
Social
Score 73%
Overview
Doing well
- Corporate Governance
- Financial Robustness
- Business Integrity and Ethics
Doing ok
- Innovation Capacity
Need to improve
- None
Overview
Doing well
- None
Doing ok
Overview
Doing well
- Employment Practice
Doing ok
- Environmental Management
- Waste Management
- Corporate Citizenship
- People Management and Development
Need to improve
?
Need to improve
?
?
- Water Consumption and Discharges
- Materials and Resource use
- Human Rights Compliance
The CIPS Sustainability Index is an independent assessment of an organisation’s social, economic and environmental
impacts to see where pressures are most likely to come and also to see where the organisation is providing un-priced,
social, economic and environmental benefits for which they are not receiving credit.
These ratings are comparable to those of similar sized organisation and those in the sector. The environmental score is
slightly lower than expected but given the very low quantities of water consumed and packaging used by the business this
is not of great concern currently. The Human Rights requirements relate to supplier monitoring and slavery within our supply
chain; however given the very high quality of our suppliers, their processes and the scale of D4t4 this is not an area of
significant concern.
D4t4 values teamwork, taking personal responsibility, positive attitudes and working hard to deliver beneficial outcomes for
all our customers, staff and shareholders alike. We encourage personal learning and development of our team members in
order to create a more sustainable workforce.
24
25
D4t4 Solutions plc Annual Report & Accounts 2018Strategic report Corporate governance
Board of Directors
Chairman’s introduction to governance
The Board is committed to upholding high standards of corporate
governance throughout the Group. As part of that, the Board
acknowledges its role in setting the culture, values and ethics of the
Group, and its collective responsibility for delivering long-term success
to the Group. As Chairman, I have ultimate responsibility for corporate
governance, and have prepared this governance statement accordingly.
The Board’s aim is to operate as effectively as possible, and in March
2018 it formally selected the Quoted Companies Alliance (QCA)
Corporate Governance Code (the QCA Code) as the appropriate
recognised corporate governance code to be applied for this purpose.
Board discussions are conducted openly and transparently, which
creates an environment for sustainable and robust debate. In the year,
the Board has constructively and proactively challenged management
on Group strategies, proposals, operating performance and key
decisions, as part of its ongoing work to assess and safeguard the
position and prospects of the Group.
Key risks and uncertainties affecting the business are regularly
assessed and updated. The Board challenges management to
ensure appropriate risk mitigation measures are in place. The Board
has completed a full, specific review of the Group’s key risks and
uncertainties (see page 22), in light of the new and emerging risks
or uncertainties arising from the Group’s strategic growth plans and
the wider economic, political and market conditions. As part of a
critical review of the group’s procedures, a rolling risk review process
has been developed which seeks to ensure that risks are constantly
monitored, assessed and quantified, so that action may be prioritised
by the board accordingly.
Whilst the current composition of the Board demonstrates a wide
balance of skills our nominations committee has been working to
further strengthen the balance of independent non executives on the
board and to address diversity issues, in order to further progress
towards achieving full compliance with the QCA Code.
Finally, the Board continues to engage with shareholders and
welcomes ongoing dialogue throughout the year and as always, I
welcome shareholder attendance and participation at the forthcoming
Annual General Meeting.
Peter Kear
Chief Executive Officer
Peter co-founded the company in
1985 and became CEO in 2016,
having been responsible until then
for both the sales and business
Jim Dodkins
Chief Technical Officer
Mark Boxall
Chief Operating Officer
Carmel Warren
Chief Financial Officer
Jim is responsible for the Company’s
Mark brings a wealth of knowledge
Carmel was appointed to the Board
strategic direction in technology,
and experience in the areas of Sales,
in 2015 following the acquisition
specialising in solution architecture
Delivery, Operations and Finance
of Celebrus. Carmel qualified as a
for D4t4 Solutions and its clients.
having been both board director
Chartered Accountant with Ernst &
development aspects of the company.
Prior to joining D4t4 Solutions he
and senior manager at technology
Young and has acquired substantial
His position as CEO involves overall
responsibility for the management of
the Group’s activities and he works
closely with the other executive
directors on the determination of the
Group’s overall strategy.
worked for Logica plc in various
consultancies and product based
experience in strategic financial
roles, where he gained wide industry
technology companies such as rbase,
planning, as well as strong listed
experience and later managed the
Morse, PTC and Siemens, and most
company experience. Carmel
division responsible for projects in the
recently Dell EMC.
Broadcast and Media sector.
joined Celebrus as Chief Financial
Officer in 2007 after having held
senior positions at Ernst & Young,
ExxonMobil and Brightside Group plc.
Matthew Tod
Chief Data Officer
Matthew brings a wealth of expertise
in big data, analytics and software
to the Board. Prior to joining D4t4
Solutions, Matthew had established
himself as a digital data expert within
the key sectors of retail, e-commerce,
Peter Simmonds
Non-executive Chairman
John Lythall
Non-executive Director
Roger McDowell
Non-executive Director
Peter was appointed to the Board
John co-founded the company in
Widely experienced Chairman,
as Chairman in April 2015. He is
1985 and was Managing Director of
Non-executive Director and board
chairman of the audit, nomination and
D4t4 Solutions from 1985 to 2016
committee member. Roger is a
remuneration committees. He was
before moving to a non-executive
member of the Audit, remuneration
CEO of dotDigital Group plc for eight
director position and member of the
and nomination committees. Current
years and a major contributor to their
remuneration committee. Prior to that
directorships include ThinkSmart
A statement of the Directors’ responsibilities in respect of the accounts
mail- order, media, consumer goods
success prior to stepping down into
he was Managing Director of Hawke
plc, Tribal Group plc, Augean plc,
is set out on page 46.
Peter Simmonds
Non-executive Chairman
25 June 2018
26
and insurance. His company, Logan
Tod & Co. was acquired by PwC in
2012 and he became a partner within
PwC’s Customer Consulting Group.
the role of non- executive director. He
Electronics, a computer systems
Hargreaves Services plc, Swallowfield
is also Chairman of Cloudcall Group
distribution business. He has a wealth
plc, Proteome Sciences plc and Chair
plc and is a board member of the
of experience in Sales, Operations
of Avingtrans plc.
Quoted Company Alliance.
and Finance and is a member of the
audit and remuneration committees.
27
D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance Corporate governance
Statement of corporate governance
This statement explains how D4t4 Solutions plc has applied the main and supporting principles of corporate governance
and describes the Company’s compliance with the provisions of the QCA Corporate Governance Code (2018) by the
Quoted Companies Alliance.
Statement by the Directors on compliance with the QCA Corporate Governance Code
The Company has complied throughout the year with the principles (Principles) of the QCA Corporate Governance Code
2018 (Code) and their practical application, with the exception of the matters referred to in the table below. Certain
disclosures concerning corporate governance issues are included elsewhere in this Annual Report, including matters
pertaining to strategy (Principle 1) explaining our business on pages 8 to 9, with challenges in execution on pages 10 and
11, and it is discussed on page 22, Risk management (Principal 4) on pages 22 to 24 and page 32, and corporate culture
(Principle 8) under Sustainability on page 25 and Our values on page 14.
It should be noted further in relation to Principle 6, the experience, skills and capability of the Board are discussed on
pages 26 to 27. There were no significant matters arising during the year on which it was considered necessary for the
board or any of its committees to seek external advice, although the board consults with its Nominated Adviser and other
professional advisers on routine matters arising in the ordinary course of its business.
Exceptions
Principle
Exceptions and explanations
Principle 5. Maintain the board as a
well-functioning, balanced team led
by the chair.
Application: The board should have
an appropriate balance between
executive and non-executive directors
During the year, the board consisted of 8 members, 5 executive and 3 non-
executive. This breakdown would not meet the general expectation that at least
half of a board should be independent non-executives, and therefore the board
recognises that there is currently not an appropriate balance. As described in
the nominations committee report, the board has been actively pursuing the
recruitment of at least one further non-executive in order to redress the balance.
Principle
Exceptions and explanations
Principle 6. Ensure that between
The male to female ratio on the board is presently 7:1 and there are currently no
them the directors have the
female non-executive directors. This reflects however a strong gender bias in the
necessary up-to-date experience,
technology industry as a whole, and the board remains confident both that the
skills and capabilities.
opportunities in the Company are not excluded or limited by any diversity issues
(including gender) and that the board nevertheless contains the necessary mix of
experience, skills and other personal qualities and capabilities necessary to deliver
its strategy.
Application: The board should contain
the necessary mix of experience,
skills, personal qualities (including
gender balance) and capabilities to
deliver the company’s strategy over
the medium to long term.
The Board and its committees
Board composition
The Board is currently comprised of the Non-Executive Chairman, five Executive Directors and two Non-Executive Directors.
The roles of Chairman and Chief Executive are distinct, set out in writing and agreed by the Board. The Chairman is
responsible for the effectiveness of the Board and ensuring communication with shareholders, and the Chief Executive is
accountable for the management of the Group.
Non-Executive Directors constructively challenge and assist in the development of strategy. They scrutinise the performance
of management in meeting agreed goals and objectives and monitor the reporting of performance.
The Board has not appointed a Senior Independent Non-Executive Director, but currently this role is performed by the Chairman.
The Company Secretary is Mr J Thorne, a Solicitor of 25 years’ standing, who was appointed to the role on 27 July 2017.
Mr J Thorne is not a Director of the Company. The appointment and removal of the Company Secretary is a matter for the
Application: The board should have
at least two independent
non-executive directors.
Independence is a board judgement.
Principle 7. Evaluate board
performance based on clear
and relevant objectives, seeking
continuous improvement
28
The board currently has three non executive directors:
Mr P Simmonds is considered to be independent
Board as a whole.
Operation of the Board
Mr J Lythall is not considered independent due to the fact that prior to
1st April 2016 he acted in the capacity of CEO. In addition, he currently holds
share options which were issued at the time that he was CEO but which vest
in the year ended 31 March 2019. Consequently, Mr Lythall will henceforth
retire and offer himself for re-election on an annual basis, rather than on the
basis of the general rotation of one-third of the board annually.
Mr R McDowell has now served more than 9 years on the board since his
first appointment. He is nevertheless currently still considered independent
by the board, but is also now subject to the requirement to retire annually and
offer himself for re-election by the shareholders.
The Nomination committee report includes an update on the work being
undertaken on the appointment of a new independent non-executive director.
The board is in the process of implementing a formal process for the periodic
review of overall board performance, which will be based on the chairman’s
review of (and his recommendations arising from) anonymous responses to a
board effectiveness questionnaire currently being developed for this purpose.
The first such review is expected to take place before the end of the calendar
year 2018
The Board is responsible to shareholders for the proper management of the Group. A statement of the Directors’
responsibilities in respect of the financial statements is set out on page 46 and a statement on going concern is given on
page 41.
The Board normally meets once a month and has a formal schedule of matters specifically reserved to it for decision. These
include strategic planning, business acquisitions and disposals, authorisation of major capital expenditure and material
unusual contractual arrangements, setting policies for the conduct of business and approval of budgets and financial
statements. Other matters are delegated to the Executive Directors, supported by policies for reporting to the Board.
Presentations are made to the main Board at each monthly Board meeting by the Executive Directors and also on regular
occasions by operational management.
The Company Secretary is responsible to the Board for ensuring that Board procedures are followed and that applicable
rules and regulations are complied with and for advising the Board, through the Chairman, on corporate governance
matters. The Company maintains appropriate insurance cover in respect of legal action against the Company’s Directors
and the Company Secretary, but no cover exists in the event that the Director is found to have acted fraudulently or
dishonestly.
29
D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance Corporate governance
Statement of corporate governance (Continued)
The Non-Executive Chairman and the Non-Executive Directors are able to meet without Executives present prior to each
Evaluation of the Board’s performance
Board meeting. The agenda and relevant briefing papers for each Board meeting are distributed in advance of each
Board meeting.
Board Review
Mr Peter Simmonds is available to shareholders if they
have concerns where contact through the normal channel
of Chief Executive has failed to resolve or for which such
Where Directors have concerns which cannot be resolved about the running of the Company or a proposed action, these
concerns are recorded in Board minutes. On resignation, a Non-Executive Director is required to provide a written statement
to the Chairman for circulation to the Board if there are any such concerns.
The Board has formed certain committees, namely an audit committee, a remuneration committee and a nomination
committee, to deal with the specific aspects of the Group’s affairs. Each of the committees is governed by terms of
reference available on request from the company secretary. Details of the committees’ constituent members and the roles,
responsibilities and activities of each of the committees are described in more detail in the individual committee reports
commencing page 33.
Meetings and attendance
The following table summarises the number of Board, audit committee, remuneration committee and nomination committee
meetings held during the year and the attendance record of individual Directors at those meetings:
MG Boxall
JL Dodkins
PJ Kear
J Lythall
RS McDowell
PA Simmonds
M Tod
CE Warren
Board
11/12
12/12
12/12
12/12
11/12
12/12
11/12
11/12
Audit
Remuneration
Nomination
-
-
-
1/2
2/2
2/2
-
-
-
-
-
-
2/2
2/2
-
-
-
-
2/2
-
2/2
2/2
-
-
Induction, training and performance evaluation
Induction and training
It is board policy that Executive Directors receive suitable training for their position, which is considered as part of the
appraisal process.
The Chairman ensures that Directors update the skills and knowledge required to fulfil their roles on the Board and
committees. Ongoing training is provided as necessary and includes updates from the Company Secretary on changes
to the AIM Rules, requirements under the Companies Act and other regulatory matters. Directors may consult with the
Company Secretary at any time on matters related to their role on the Board.
The Board annually informally reviews the effectiveness of
contact is inappropriate.
itself, its committees and the individual Directors in the
following manner:
(i)
The Role of the committees is considered by the
executive Directors without the presence of the non-
executive Directors.
(ii) The Chairman and CEO examine the contribution and
effectiveness of the individual Directors with regard to
their line role and contribution at Board meetings.
(iii) The whole Board examines its purpose and
effectiveness with regard to identified key areas.
(iv) The whole Board considers its structure, size and
composition with particular regard to the skills,
knowledge and experience of its members and
otherwise as advised by the Nominations Committee.
Retirement and re-election
Constructive use of the AGM
The Board uses the AGM to communicate with private and
institutional investors and welcomes their participation.
Seven members of the Board attended the Company’s last
AGM, and the Chairman aims to ensure that all members of
the Board will be available at the forthcoming AGM.
Details of resolutions to be proposed at the AGM can be
found in the Notice of the Meeting. A separate resolution is
proposed for each substantially separate issue including a
separate resolution relating to the Annual Financial
Report 2018.
Accountability and audit
Financial reporting
The Board is responsible for presenting a balanced and
understandable assessment of the Company’s position
All Directors are subject to election by shareholders at
and prospects, extending to Interim Reports and other
the first AGM immediately following their appointment
price-sensitive public reports and reports to regulators as
and thereafter are subject to re-election at intervals of no
well as to information required to be presented by statutory
more than three years. All Non-Executive Directors are
requirements. A statement of the Directors’ responsibilities
appointed for fixed terms in line with corporate governance
is set out on page 46.
requirements.
Relations with shareholders
Dialogue with institutional shareholders
The Board as a whole is responsible for ensuring that a
dialogue is maintained with shareholders based on the
mutual understanding of objectives.
Management and specialists within the Group’s finance
department are responsible for ensuring the appropriate
maintenance of financial records and processes that ensure
all financial information is relevant, reliable, in accordance
with the applicable laws and regulations, and distributed
both internally and externally in a timely manner. A review
of the consolidation and financial statements is completed
Members of the Board meet with major shareholders on a
by management to ensure that the financial position and
regular basis, including presentations after the Company’s
results of the Group are appropriately reported. All financial
announcement of the year-end results and at the half year.
information published by the Group is subject to the
The Board is kept informed of the views of shareholders
approval of the audit committee.
at each Board meeting through a report from the Chief
Auditor Independence
Executive together with formal feedback on shareholders’
The Board has considered the issue of external auditor
views gathered and supplied by the Company’s advisers.
independence and is satisfied that independence has been
The views of private and smaller shareholders, typically
maintained. Audit Committee approval is required before
arising from the AGM or from direct contact with the
the external auditor may perform any non-audit work.
Company, are also communicated to the Board on a
regular basis.
30
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D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
Going concern
Risk Management
The Directors are required to report that the business
The Directors and operating Company management have
is a going concern, with supporting assumptions and
a clear responsibility for identifying risks facing each of the
qualifications as necessary. The Directors have concluded
businesses and for putting in place procedures to mitigate
that the business is a going concern as further explained in
and monitor risks. Risks are formally assessed during the
the Directors’ Report on page 41.
annual budget process, which is monitored by the Board,
Control environment
Internal controls
and the ongoing Group strategy process. There has been
(and continues to be) particular focus on credit worthiness
of clients and, although the Company has a strong balance
The Directors are responsible for the Group’s system of
sheet, on cash flow. The monthly board pack includes a
internal control and for reviewing its effectiveness which,
review of the risk register.
On behalf of the Board
Peter Simmonds
Chairman
25 June 2018
by its nature, can only provide reasonable and not absolute
assurance against material misstatement or loss regarding:
i.
the safeguarding of assets against unauthorised use
or disposition; and
ii.
the maintenance of proper accounting records and
the reliability of financial information used with the
business or for publication.
The Board has reviewed the effectiveness of the Group’s
internal control systems from the period 1 April 2017 to the
date of approval of these financial statements. The Board
reviews the effectiveness of its control assessment system
on a regular basis. Given the current size of the Group, the
Directors consider that an internal audit function would not
be appropriate. However this matter is kept under review.
The Board has established procedures which are designed
to provide effective internal control for the Group and these
include:
Control Environment and Procedure
The Directors have in place an organisational structure
with clearly defined levels of responsibility and delegation
of authority. Group policies and procedures are set out in
formal procedure manuals which are held by all operating
companies. These include annual budgets, detailed review
and appraisal procedures, designated
levels of authority and levels for board approval. In
particular, there are clearly defined guidelines for the review
and approval of capital expenditure projects and, where
appropriate, due diligence work will be carried out when a
business is to be acquired.
A formal whistle-blowing policy is in place and is
communicated to employees via an employee manual.
Corporate governance
Audit committee report
Audit committee membership
Peter Simmonds (committee chairman)
Roger McDowell
The Audit committee acts as a committee focused on risk
and reviews the risk register and considers the impact on the
company results.
Auditor Independence
Dear Shareholder
I am pleased to present the report of the audit committee for
the year ended 31 March 2018.
The Audit Committee comprises two non-executive Directors
of the Company, Peter Simmonds and Roger McDowell. In
line with corporate governance best practice, John Lythall
resigned during the year due to being considered non
To ensure Audit independence, consideration is given to their
integrity and the objective approach of the audit process. The
use of non-Audit services is not significant and amounts paid
in respect of these are disclosed in note 6.
I am satisfied that the committee has satisfactorily
discharged its duties in the year in accordance with its terms
of reference.
independent. The committee is chaired by Peter Simmonds
The terms of reference are reviewed annually.
Peter Simmonds
Chair of the audit committee
25 June 2018
and met twice during the year under review. It operates under
formal terms of reference, which are available on request
from the Company Secretary or at the AGM. The committee
provides a forum for reporting by the Group’s auditors. By
invitation, the meetings are also attended by the CEO and
CFO of the Company.
The Audit Committee is responsible for reviewing a wide
range of financial matters including ensuring that the financial
performance of the Group is adequately measured and
controlled, correctly represented, reported to and understood
by the Board. The Audit Committee advises the Board on the
appointment of external auditors and on their remuneration,
both for audit and non-audit work, and discusses the nature
and scope of their audit.
The Audit Committee meets the auditors at least once a year
without any executive Directors present.
The Audit Committee includes one financially qualified
member as recognised by the Consultative Committee of
Accountancy Bodies. All Audit Committee members are
expected to be financially literate. Following the above, the
Audit Committee has recommended to the Board that RSM
UK Audit LLP is re-appointed.
The two main issues that the audit committee are concerned
with are in relation to revenue recognition and the carrying
value of goodwill. The committee review the group’s revenue
recognition policies to ensure that they are compliant and are
mindful of the impact of IFRS 15 on them. They also review
revenue streams in relation to various customers to ensure
that the carrying value of goodwill remains supported
32
33
D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
the following financial period and made recommendations to
the Board on the overall package for Executive Directors.
I am satisfied that the committee has appropriately
discharged its duties in the year in accordance with its
responsibilities and encourage you to read the Directors
remuneration report on the following pages.
Peter Simmonds
Chair of the remuneration committee
25 June 2018
Corporate governance
Nomination committee report
Nomination committee membership
Peter Simmonds (committee chairman)
Roger McDowell
Peter Kear (CEO)
Dear Shareholder
I am pleased to present the report of the nomination
balance of skills and experience within the Group and
on the Board. With regards to Non-Executive Directors,
the committee considers, amongst other factors, their
other significant outside commitments prior to making
recommendations. This is designed to ensure that they have
sufficient time to meet what is expected of them, and keeps
any changes to these commitments under review.
committee for the year ended 31 March 2018.
I am satisfied that the committee has satisfactorily
The Nominations Committee consists of me as chairman plus
one Independent Non-Executive Director, and the CEO. In the
discharged its duties in the year in accordance with its terms
of reference.
performance of its duties, the committee held one meeting in
The terms of reference are reviewed annually.
Peter Simmonds
Chair of the nomination committee
25 June 2018
the year.
The principal activity of the nomination committee in the
year was leading the recruitment process and ultimately
recommending the appointment of a new non-executive
director, which will be reported in the next few weeks.
The process included a merit-based assessment based on
objective criteria having regard to the Group’s current and
future requirements.
The Board’s policy is to ensure that all appointments are
merit-based and based on clear and objective criteria,
giving due regard to equality of opportunity, and to promote
inclusion and diversity. The Board notes that achieving
diversity in the technology sector is challenging, having
regard to the available pool of individuals with the right
skills, experience and talent. Given the size of the Board
and the Group, the committee does not currently set any
measurable objectives for implementing a diversity policy but
it acknowledges the role of the Board in promoting diversity,
including gender diversity, throughout the Group. Currently
there is one female member of the Board, representing
12.5% of Board membership.
In relation to succession planning, the nomination committee
keeps under review, and takes appropriate action to ensure,
orderly succession for appointments to the Board and to
senior management, thereby maintaining an appropriate
Corporate governance
Remuneration committee
Remuneration committee membership
Peter Simmonds (committee chairman)
Roger McDowell
John Lythall
Dear Shareholder
I am pleased to introduce the Directors’ Remuneration Report
for the year ended 31 March 2018.
The committee consists of three non-executive Directors,
Peter Simmonds, Roger McDowell and John Lythall,
and is chaired by myself. The Committee’s terms of
reference require it to meet not less than once each year.
It is responsible for reviewing and determining the policy
of the Company on executive remuneration including
specific remuneration packages for each of the executive
members of the Board, pension rights and compensation
payments. The Committee is also responsible for monitoring
compliance with the implementation by the Company of
the legal requirements and, so far as reasonably practical,
recommendations and guidelines relating to Directors’
remuneration.
None of the Committee has any personal financial interest
(other than as shareholders or as noted in the Directors’
report), conflicts of interests arising from cross-directorships
or day-to-day involvement in running the business. The
Committee makes recommendations to the board. No
Director plays any part in any discussion about his or her own
remuneration.
For 2017/2018, the committee has continued to operate
a simple remuneration structure made up of basic salary,
performance-related bonuses, share options, benefits and
pensions. As previously, a significant proportion of executive
remuneration is based on performance, designed to align
executive pay with shareholder interests. In this respect,
the committee has assessed the performance of Executive
Directors for the year reported, set performance targets for
34
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D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
Corporate governance
Directors’ remuneration report
This report complies with the requirements of the Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 as amended in 2013, the provisions of the QCA Corporate Governance Code 2018 and the AIM Rules.
The report is in two sections:
The directors’ remuneration policy which sets out the Company’s current policy on remuneration for Executive and
Non-Executive Directors; and
The directors’ remuneration report. This section sets out details of how the remuneration policy was implemented for
the year ended 31 March 2018.
Directors’ remuneration policy
Element of remuneration
Link to Group strategy
Operation
Framework
Share option plan
Aligns the interests of the
The committee has discretion
The share option plans are subject to rules and
executive directors with the
to make option grants to
limits approved by shareholders in general meeting.
interest of the long term
Executive Directors and other
Options are granted at an exercise price based on
shareholders as the options
staff, subject to the
the mid-market price of ordinary shares on the day
only deliver value if the share
scheme rules, and to
prior to the date of grant. All options are subject to
price rises.
determine appropriate
a minimum three-year vesting period, and any
performance conditions.
exercise is subject to satisfaction of the specified
performance conditions defined.
Executive remuneration packages are prudently designed to attract, motivate and retain Directors of the high calibre needed
Pension
Ensures that the company
Pension contributions are made
Executive directors are members of the Company
to maintain the Company’s position as a market leader and to reward them for enhancing value to shareholders. The
performance measurement of the executive Directors and key members of senior management, and the determination of
their annual remuneration package are undertaken by the Committee. The remuneration of the non-executive Directors is
determined by the Board within limits set out in the Articles of Association.
The company’s policy is that a substantial proportion of the potential remuneration of the executive directors should
be performance related. The performance criteria set should motivate the executive directors to create value for the
shareholders.
There are five main elements of the remuneration package for executive directors and senior management:
Element of remuneration
Link to Group strategy
Operation
Framework
Base salary
Ensures that the company
Base salary is paid monthly
An executive director’s salary is determined by
can recruit and retain high-
and reviewed annually, with any
the Committee in March of each year and when
quality executives to deliver on
increases applying from 1 April.
an individual changes position or responsibility.
the company strategy in the
interest of the shareholders.
In deciding appropriate levels, the Committee
considers the Company as a whole and relies
on objective research which gives up to date
information on a comparable group of companies.
Benefits
Ensures that the company
Benefits principally comprise
In relation to health care and death in service
can recruit and retain high-
private healthcare and death in
benefits, premiums are paid by the Company to an
quality executives to deliver on
service insurance. In addition,
external broker to arrange cover, in line with other
the company strategy in the
two executive directors receive
Group employees. These benefits are standard for
interest of the shareholders.
company cars.
all Group employees.
The company offers company cars / car allowances
to a number of employees across the organisation.
Annual bonus
Rewards and incentivises the
The committee sets annual
The remuneration Committee sets bonus plans for
executive directors
performance targets, linked to
executive directors based upon achieving a number
for achievement of strategic
strategic objectives and risk
of pre defined growth targets including revenue
objectives.
management. Bonus payments
and EPS.
in respect of a year are made in
June, or later if any element
is deferred.
can recruit and retain
by the Company to a defined
Money Purchase pension scheme.
high-quality executives to
deliver on the company
contribution scheme operated
by third party providers.
strategy in the interest of the
shareholders.
To the extent that contributions to the company
scheme are restricted by HMRC limits, the
Company contributes 6% of the Director’s salary
providing the director contributes a minimum of 4%
of his salary by way of salary sacrifice. There are no
unfunded pension promises or similar arrangements
for directors. There were 5 directors in the scheme
in 2018 (2017:5).
Chairman and Non-
Executive Director fees
Ensures that the company
Fees for Non-Executive
A basic fee is set for normal duties, commensurate
can recruit and retain a
Directors are set by the Board
with fees paid for similar roles in other similar
high-quality Chairman and
(excluding
companies, taking account of the time
Non-Executive directors
Non-Executive Directors). Fees
commitment, responsibilities, and committee
to deliver on the company
are paid monthly / quarterly.
position(s). Supplementary fees are paid for any
strategy in the interest of the
shareholders.
additional duties at fixed day rates. Non-Executive
Directors are not eligible for pensions, incentives,
bonus or any similar payments other than normal
out-of-pocket expenses incurred on behalf of the
business. Compensation for loss of office is not
payable to Non-Executive Directors.
Remuneration policy considerations
Recruitment
The Company’s nomination committee is responsible for
leading the process for Board appointments and making
staff members of the Group when designing and setting
executive remuneration. Underpinning all pay is an intention
to be fair to all staff of the Group, taking into account the
individual’s seniority and local market practices.
recommendations to the Board. Refer to the report of the
Consultation with shareholders
nomination committee for details.
Loss of office payments
In the event of early termination, all the Directors’ contracts
provide for compensation up to a maximum of basic salary
plus benefits for the notice period.
Wider staff employment conditions
The remuneration committee considers pay and
employment conditions for other Senior Executives and
The remuneration committee is committed to an ongoing
dialogue with shareholders and seeks the views of
significant shareholders when any major changes are being
made to remuneration arrangements. The committee takes
into account the views of significant shareholders when
formulating and implementing the policy.
36
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D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
Corporate governance
Directors’ remuneration report (Continued)
Consultation with employees
Single figure for the total remuneration (audited)
The Board and the remuneration committee did not consult with employees when formulating and implementing the policy.
Service contracts and letters of appointment
It is the Company’s policy that executive Directors should have contracts with an indefinite term providing for a maximum of
one year’s notice.
Executive Directors
PJ Kear and JL Dodkins have Directors’ service agreements which can be terminated on twelve months’ notice. These
agreements were dated 29 August 1997. CE Warren also has a service agreement which can be terminated on 3 months’
notice dated 1 June 2007. MG Boxall and ML Tod have service agreements which can be terminated on 4 weeks notice
dated 1 November 2015 and 4 April 2016 respectively.
Non-executive Directors
PA Simmonds, R McDowell and J Lythall each have an agreement for 12 months. The fees of the non-executive Directors
are determined and confirmed by the full board excluding (in each case) the non- executive Director concerned.
Policy on Director shareholdings
The Company has no policy on Director shareholdings.
Outside Appointments
Executive directors are entitled to accept appointments outside the Company providing that the Chairman’s permission is
sought and fees in excess of £20,000 from all such appointments are accounted for to
the Company.
Aggregate Directors’ remuneration
The directors are considered key management personnel and the following tables set out the single figure for total
remuneration for the financial years ended 31 March 2018 and 2017:
31 March 2018
Executives
PJ Kear
JL Dodkins
CE Warren
MG Boxall (appointed 26/9/2016)
ML Tod (appointed 21/12/2016)
Non-Executives
PA Simmonds
J Lythall
RS McDowell
PD English (retired 20/7/2016)
MLS Tinling (retired 20/7/2016)
Total
Fees/basic
salary
£000
Benefits
Bonus
Sub total
Pension
£000
£000
£000
£000
Total
2018
£000
Total
2017
£000
157
127
109
120
120
35
28
15
-
-
711
23
12
2
2
2
-
5
-
-
-
46
139
82
55
110
80
-
-
-
-
-
466
319
221
166
232
202
35
33
15
-
9
8
6
7
7
-
-
-
-
328
229
172
239
209
35
33
15
-
-
1,223
-
37
-
1,260
206
171
142
159
76
30
86
15
5
5
895
The remuneration package of each Executive Director includes non-cash benefits including the provision of private
healthcare and death in service insurance.
Pension costs represent contributions made by the Company for 5 directors (2017: 5) to money purchase pension schemes.
No directors (2017: Nil) are covered by defined benefit schemes.
J Lythall retired as an executive director on 31 March 2016 and became a non executive director on 1 April 2016. His
remuneration in both years includes fees for consulting services to the company.
Emoluments (Fees / basic salary, benefits and annual bonus)
Money purchase pension contributions
IFRS2 share-based payment charges
Employer’s National Insurance
Total
2018
£000
1,223
37
1,260
66
1,326
162
1,488
2017
£000
864
31
895
51
946
100
1,046
No payments were made for loss of office (2017: Nil).
Remuneration of highest paid director
Remuneration
Company contributions to money purchase pension schemes
Highest paid director
2018
319
2017
198
9
8
328
206
No directors (2017: 3) exercised options during the year with gains on exercise of share options during the year totalling
£Nil (2017: £320k).
There are no other long term incentive schemes.
Emoluments for the highest paid director for the year ended 31 March 2018 and 31 March 2017 are included in the table
above. No share options were exercised in 2018 (2017: nil)
38
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D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
Corporate governance
Directors’ remuneration report (Continued)
Corporate governance
Directors’ report
Directors share options
Aggregate emoluments disclosed above do not include any amounts for the value of options to acquire ordinary shares in
the Company granted to or held by the Directors, but do include the relevant IFRS 2 share-based payment charges in the
profit and loss account associated with options issued to them.
Details of options for directors who served during the year are as follows:
Number at
Number at
31 March 2017
31 March 2018
Option price
Expiry date
Exercisable from
PJ Kear
JL Dodkins
CE Warren
MG Boxall
ML Tod
J Lythall
RS McDowell*
35,000
400,000
400,000
53,864
150,000
300,000
250,000
400,000
-
35,000
400,000
400,000
53,864
150,000
300,000
250,000
400,000
-
18.5p
51.0p
51.0p
27.85p
90.5p
75.0p
113.0p
51.0p
-
PA Simmonds*
-
-
* PA Simmonds, RS McDowell, PD English and MLS Tinling did not hold any share options during the year.
-
04/01/2020
31/07/2025
31/07/2025
24/05/2024
22/01/2026
02/11/2025
26/06/2026
31/07/2025
-
-
07/01/2013
31/07/2018
31/07/2018
24/06/2015
22/01/2017
02/11/2016
26/06/2017
31/07/2018
-
-
The market price of the shares at 31 March 2018 was 118.5p (139.5p at 31 March 2017) and the range in the period under
review was 113.0p to 188.0p.
There have been no variations to the terms and conditions or performance criteria for share options during the financial year.
As the share options have been issued on different dates, they have different performance criteria attached, however these
performance criteria are in line with increasing company Earnings per Share.
Directors shareholdings and dividends paid to directors are disclosed in the Directors’ report on page 42.
Performance graphs
Company share price
The graph to the left shows the Company’s share price
performance compared with the performance of the FTSE
AIM All-Share and FTSE SmallCap Index (GTBP) for the
last six years. The FTSE Aim All-Share and FTSE SmallCap
Index (GBP) have been selected for this comparison
because it is the board opinion that they give a true
comparison to its peers
2013
2014
2015
2016
2017
2018
D4t4 Solutions Plc
FTSE Aim
FTSE Small Cap
Peter Simmonds
Chair of the remuneration committee
25 June 2018
500
400
300
200
100
40
The Directors present their annual report and the audited
With regard to the appointment and replacement of
financial statements for the year ended 31 March 2018,
Directors, the Company is governed by its Articles of
which should be read in conjunction with the Strategic Report
Association, the Companies Acts and related legislation.
on pages 2 to 25. The Corporate Governance Statement set
The Articles themselves may be amended by special
out on pages 26 to 46 forms part of this report.
resolution of the shareholders. The powers of Directors are
Incorporation
D4t4 Solutions plc is a company incorporated in the
United Kingdom under the Companies Act 1985. In
described in the Main Board Terms of Reference, copies
of which are available on request, and the Corporate
Governance Statement on page 28.
accordance with S414C (11) of the Companies Act 2006;
Under its Articles of Association, the Company has
included in the Strategic report is the disclosure of future
authority to issue 50,000,000 ordinary shares.
developments and results of the year. This information
would have otherwise been required by Schedule 7 of
the Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 to be contained
in the Directors’ report.
Dividends
There are a number of agreements that take effect, alter
or terminate upon a change of control of the Company
such as commercial contracts, bank loan agreements,
property lease arrangements and employees’ share plans.
None of these are considered to be significant in terms
of their likely impact on the business of the Group as a
The Directors recommend a final dividend of 1.875p
whole. Furthermore, the Directors are not aware of any
(2017: 1.7p) per ordinary share to be paid on 14 September
agreements between the Company and its Directors or
2018 to ordinary shareholders on the register on 10 August
employees that provide for compensation for loss of office
2018.
Future outlook
or employment that occurs because of a takeover bid.
Going Concern
The Groups future outlook and opportunities are referred to
The Group’s business activities, together with the factors
in the Chief Executive Officer report on page 4.
likely to affect its future development, performance and
Capital structure
Details of the authorised and issued share capital, together
with details of the movements in the Company’s issued
share capital during the year are shown in note 22. The
Company has one class of ordinary shares which carry no
right to fixed income. Each share (other than own shares
held in treasury) carries the right to one vote at general
meetings of the Company.
There are no specific restrictions on the size of a holding
nor on the transfer of shares, which are both governed by
the general provisions of the Articles of Association and
prevailing legislation. The Directors are not aware of any
agreements between holders of the Company’s shares that
may result in restrictions on the transfer of securities or on
voting rights.
Details of employee share schemes are set out in note 27.
position are set out above and the risks and uncertainties
summarised. The Group and Company has sufficient
financial resources to cover budgeted future cash-
flows and also has contracts in place with a number of
customers and suppliers across different geographic areas
and industries. As a consequence of these factors, the
Directors believe that the Group is well placed to manage
its business risks successfully.
Having reviewed the future plans and projections for
the business, the Directors believe that the Group and
Company and its subsidiary undertakings have adequate
resources to continue in operational existence for the
foreseeable future. For this reason, they continue to
adopt the going concern basis in preparing the financial
statements.
In accordance with the Companies Act s414c(11)
information in relation to the business and risks is shown in
No person has any special rights of control over the
the Strategic Report.
Company’s share capital and all issued shares are fully paid.
41
D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
Supplier Payment Policy
Substantial Holdings
It is the Company’s policy to pay all claims from suppliers according to agreed terms of payment upon receipt of a valid
As far as the Directors are aware, as at 21 June 2018, the only holdings of 3% or more of the Company’s issued share
invoice which is materially correct. The Company does not follow a code on standard payment practice. At 31 March 2018
capital are the following:
Number of
ordinary shares
Canaccord Genuity Wealth Management
River & Mercantile Asset Management
J Lythall Esq
Beaufort Nominees Limited
Herald Investment Management
HALB Nominees Limited (including 1,550,000 held by RS McDowell Esq)
Securities Services Nominees Limited
P Kear Esq
M Ward Esq
State Street Nominees Limited
5,522,000
2,564,700
1,913,960
1,731,572
1,700,400
1,575,500
1,500,000
1,340,752
1,283,532
1,179,427
%
14.43
6.70
5.00
4.53
4.44
4.12
3.92
3.50
3.35
3.08
the Company had 65 days (2017: 65 days) of outstanding liabilities to creditors.
Directors and Directors’ Interests
The Directors who held office during the year and to the date of signing, unless otherwise stated, were as follows:
PJ Kear
JL Dodkins
CE Warren
MG Boxall
ML Tod
PA Simmonds
J Lythall
RS McDowell
At the AGM, Peter Simmonds, John Lythall and Roger McDowell will offer themselves for re-appointment in accordance
with the Articles.
The Directors who held office at the end of the financial year had the following interests in the ordinary shares of the
Company as recorded in the register of Directors’ share and debenture interests.
Class of shares Interest at Interest at
PJ Kear
JL Dodkins
CE Warren
MG Boxall (appointed 26 Sept 2016)
ML Tod (appointed 21 Dec 2016)
PA Simmonds
J Lythall
RS McDowell
Ordinary 2p
Ordinary 2p
Ordinary 2p
Ordinary 2p
Ordinary 2p
Ordinary 2p
Ordinary 2p
Ordinary 2p
31 March 2018 31 March 2017
1,340,752 1,340,752
490,266 490,266
129,275 129,275
10,000 10,000
10,000 nil
301,500 251,500
1,913,960 1,848,960
1,550,000 1,350,000
During the year the Directors received dividends on their shares at the same rate as any other shareholder. Details of share
options can be found on page 40.
During 2015 the directors made loans to the company to facilitate the acquisition of Speed-Trap Holdings Ltd. All loans have
been repaid, the final one during the year ended 31 March 2018. There are no outstanding loans at the balance sheet date
(2017: £119,360).
42
43
D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
Acquisition of the company’s own shares
Options Scheme. Details of the share options are laid out
This confirmation is given and should be interpreted in
At the end of the year, the Directors had authority, under the shareholders’ resolution of 20 July 2017, to purchase through
on page 76 within note 27 to the accounts.
accordance with the provisions of s418 of the Companies
the market up to 3,795,092 of the Company’s shares at a maximum price of 105% of the average middle market price for
the five business days immediately preceding the date of purchase and a minimum price of 2p per share. This authority
expires at the AGM to be held on 23 August 2018. 244,416 shares were purchased in the year ending 31 March 2018.
Treasury Policy
The Group’s operations are funded by cash reserves. The
Act 2006.
Auditor
Group has taken a mortgage to fund the purchase of its
In accordance with Section 489 of the Companies Act
Own shares are ordinary 2p shares purchased in order to satisfy outstanding option obligations. Sales from own shares are
land and building. The policy of the Group is to ensure
2006, a resolution for the re-appointment of RSM UK Audit
the shares issued to option holders on exercise of their options. The maximum number of own shares held in the year was
that all cash balances earn a market rate of interest. Bank
LLP as the auditor of the Company is to be proposed at the
247,815 (2017: 125,063), which represents 0.65% (2017: 0.33%) of the issued share capital.
relationships are maintained to ensure that sufficient cash
forthcoming Annual General Meeting.
The following purchases and sales of own shares (shares held in treasury) have been made in order to satisfy share
and unutilised facilities are available to the Group.
By order of the Board
options requirements:
Balance of own shares at 1 April 2016
27 June 2016
9 September 2016
15 September 2016
23 September 2016
26 September 2016
7 December 2016
17 January 2017
22 March 2017
Balance of own shares at 31 March 2017
Total consideration paid in year ending 31 March 2017
6 December 2017
18 December 2017
1 February 2018
9 February 2018
26 March 2018
Balance of own shares at 31 March 2018
247,815
Total consideration paid in year ending 31 March 2018
Number of
own shares
14,613
85,450
25,000
(73,258)
20,000
(70,000)
(1,000)
10,000
(7,406)
3,399
79,155
20,000
50,000
10,000
85,261
Share price at
point of transaction
in pence
155.00
% share
capital
0.04%
Consideration
paid £
116.59
123.50
137.00
136.87
136.50
180.00
172.00
156.70
129.99
116.00
126.68
114.17
119.68
0.23%
0.07%
0.20%
0.05%
0.19%
0.00%
0.03%
0.02%
0.01%
0.21%
0,05%
0.13%
0.03%
0.22%
0.65%
99,622
30,875
27,374
17,200
175,071
102,894
23,200
63,341
11,417
102,042
302,893
Employees
and opportunities. Information on matters of concern to
The Group has a policy of offering equal opportunities to
employees is presented in house.
employees at all levels in respect of the conditions of work.
Throughout the Group it is the Board’s intention to provide
employment opportunities and training for disabled people
and to care for employees who become disabled having
regard to aptitude and abilities.
The group operates share option schemes which are used
to retain and reward its employees. The options are issued
based on criteria that support the overall group objectives
and the criteria is reviewed on a regular basis. The two
current Schemes are the D4t4 Solutions Employee Share
Regular consultation and meetings, formal or otherwise,
Options ‘A’ Scheme and the D4t4 Solutions EMI Share
are held with all levels of employees to discuss problems
Peter Kear
Chief Executive Officer
25 June 2018
Research and Development
The group has continued to attach a high priority to
research and development throughout the year aimed at
the development of new products and maintaining the
technological excellence of existing products.
Financial Instruments
The Group’s financial risk management objectives and
policies are discussed on page 78 within note 29 to the
accounts.
Branch operations
The group has branch operations located in Chennai, India.
Political and Charitable Contributions
The Group made no political contributions or charitable
donations during the year (2017: £nil).
Insurance
The Company holds Directors and Officers Liability
insurance.
Disclosure of Information to the Auditor
In the case of each of the persons who are Directors of the
Company at the date when this report was approved:
so far as each of the Directors are aware, there is no
relevant audit information (as defined in the
Companies Act 2006) of which the Company’s auditor
is unaware; and
each of the Directors has taken all the steps that he/
she ought to have taken as a Director to make himself/
herself aware of any relevant audit information (as
defined) and to establish that the Company’s auditor is
aware of that information
44
45
D4t4 Solutions plc Annual Report & Accounts 2018Corporate governance
Corporate governance
Statement of Directors’ responsibilities
Financial statements
Independent auditors report to the members of D4t4 Solutions plc
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the group’s and the company’s transactions and disclose
with reasonable accuracy at any time the financial position
of the group and the company and enable them to ensure
that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding
the assets of the group and the company and hence for
taking reasonable steps for the prevention responsible for
safeguarding the assets of the group and the company and
hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the D4t4 Solutions website.
Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
By order of the Board
Peter Kear
Chief Executive Officer
25 June 2018
The directors are responsible for preparing the Strategic
Report and the Directors’ Report and the financial
statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare group
and company financial statements for each financial year.
The directors are required by the aim rules of the London
Stock Exchange to prepare group financial statements
in accordance with International Financial Reporting
Standards (“IFRS”) as adopted by the European Union
(“EU”) and also elected under Company Law to prepare the
company financial statements in accordance with IFRS as
adopted by the EU.
The financial statements are required by law and IFRS
adopted by the EU to present fairly the financial position of
the group and the company and the financial performance
of the group. The Companies Act 2006 provides in relation
to such financial statements that references in the relevant
part of that Act to financial statements giving a true and fair
view are references to their achieving a
fair presentation.
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
the company and of the profit or loss of the group for that
period.
In preparing the group and company financial statements,
the directors are required to:
a.
select suitable accounting policies and then
apply them consistently;
b. make judgements and accounting estimates
that are reasonable and prudent;
c.
state whether they have been prepared in
accordance with IFRSs adopted by the EU;
d. prepare the financial statements on the going
concern basis unless it is inappropriate to
presume that the group and the company will
continue in business.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the group’s and the company’s transactions and disclose
with reasonable accuracy at any time the financial position
of the group and the company and enable them to ensure
that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the
assets of the group and the company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
Opinion
We believe that the audit evidence we have obtained is
We have audited the financial statements of D4t4 Solutions
sufficient and appropriate to provide a basis for our opinion.
plc (the ‘parent company’) and its subsidiaries (the ‘group’)
Conclusions relating to going concern
for the year ended 31 March 2018 which comprise of the
consolidated income statement, consolidated statement of
comprehensive income, consolidated statement of changes
in equity, consolidated statement of financial position,
consolidated cash flow statement, company statement
of changes in equity, company statement of financial
position, company cash flow statement, and notes to the
We have nothing to report in respect of the following
matters in relation to which the ISAs (UK) require us to
report to you where:
the directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is not appropriate; or
financial statements, including a summary of significant
the directors have not disclosed in the financial
accounting policies. The financial reporting framework
statements any identified material uncertainties that
that has been applied in their preparation is applicable law
may cast significant doubt about the group’s or the
and International Financial Reporting Standards (IFRSs)
parent company’s ability to continue to adopt the
as adopted by the European Union and, as regards to
going concern basis of accounting for a period of
the parent company financial statements, as applied in
at least twelve months from the date when the
accordance with the provisions of the Companies Act 2006.
financial statements are authorised for issue.
In our opinion:
Key audit matters
The financial statements give a true and fair view of
Key audit matters are those matters that, in our professional
the state of the group’s and the parent company’s
judgment, were of most significance in our audit of the
affairs as at 31 March 2018 and of the group’s profit
financial statements of the current period and include the
for the year then ended;
The group financial statements have been properly
prepared in accordance with IFRSs as adopted by the
European Union;
The parent company financial statements have been
properly prepared in accordance with IFRSs as
adopted by the European Union and as applied in
accordance with the provisions of the Companies Act
2006; and
The financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are
independent of the group 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 SME listed entities and we have fulfilled our other
ethical responsibilities in accordance with these requirements.
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.
Revenue recognition
Risk
The group has several different revenue streams, under
licence sales, project work and recurring revenue
segments. See notes 2, 4 and 5 for further details.
The project work segment includes revenue of one or
more elements of hardware, software, installation services
and timesheet-based project work, all of which can be
considered individually significant. We consider there
to be a significant risk of misstatement of the financial
statements related to transactions occurring close to the
year end, as transactions could be recorded in the wrong
financial period (cut-off) and have therefore determined this
to be a key audit matter.
46
47
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Our response
the discount rate and considered whether the disclosures
information. If, based on the work we have performed, we
In preparing the financial statements, the directors are
In order to address the risk of misstatement related to cut-
about the sensitivity of the outcome of the impairment
conclude that there is a material misstatement of this other
responsible for assessing the group’s and the parent
off in revenue recognition, we tested balances recognised
assessment to reasonably possible changes in key
information, we are required to report that fact. We have
company’s ability to continue as a going concern,
in the group’s statement of financial position and tested
assumptions were adequate and properly reflected the risks
nothing to report in this regard.
disclosing, as applicable, matters related to going concern
individual transactions occurring either immediately before
inherent in the assessment of the carrying value of goodwill.
or after the year end.
Our application of materiality
Our tests of detail focused on transactions occurring within
When establishing our overall audit strategy, we set certain
Opinions on other matters prescribed by the
Companies Act 2006
In our opinion, based on the work undertaken in the course
proximity of the year end across these segments, obtaining
thresholds which help us to determine the nature, timing and
of the audit:
evidence to support the appropriate timing of revenue
extent of our audit procedures and to evaluate the effects
recognition, based on terms and conditions set out in sales
of misstatements, both individually and on the financial
contracts and delivery documents.
statements as a whole. During planning we determined a
We also performed tests of details on accrued revenue,
deferred revenue and accounts receivables balances
recognised at 31 March 2018.
Goodwill
Risk
magnitude of uncorrected misstatements that we judge
would be material for the financial statements as a whole
(FSM). During planning FSM was calculated as £474,000,
which was not changed during the course of our audit. We
agreed with the Audit Committee that we would report to
them all unadjusted differences in excess of £10,000, as
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.
The Group carries goodwill amounting to £8.7m. As set out
well as differences below those thresholds that, in our view,
in note 14 of the financial statements, the recoverability of
warranted reporting on qualitative grounds.
the goodwill arising on past acquisitions is dependent on
An overview of the scope of our audit
In the light of the knowledge and understanding of the
group and the parent company and its environment
obtained in the course of the audit, we have not identified
Our audit was scoped by obtaining an understanding of the
material misstatements in the Strategic Report or the
Group and its control environment and assessing the risks
Directors’ Report.
Matters on which we are required to report by exception
with ISAs (UK) will always detect a material misstatement
and using the going concern basis of accounting unless
the directors either intend to liquidate the group or the
parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at: http://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company’s
members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept by
the parent company, or returns adequate for our audit
have not been received from branches not visited by
us; or
the parent company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration
specified by law are not made; or
we have not received all the information and
explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities
statement set out on page 46 the directors are responsible
for the preparation of the financial statements and for being
David Clark
Senior Statutory Auditor
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
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street, London, EC4A 4AB
from material misstatement, whether due to fraud or error.
25 June 2018
the underlying businesses generating sufficient cash flows
in the future. Due to the significant management judgement
in forecasting the cash flows and selecting an appropriate
discount rate there is a high level of estimation uncertainty
which results in there being a significant risk associated
with determining whether goodwill is impaired and have
therefore determined this to be a key audit matter.
Our response
Our audit procedures included auditing the discounted
cash flow model, testing and challenging the judgements
and assumptions used by management in their assessment
of whether goodwill had been impaired and assessing
management’s sensitivity analysis on the cash flow model.
We have used our knowledge of comparable companies
of material misstatement. The financial statements were
audited on a consolidated basis using Group materiality.
The scope of our audit covered 100% of both consolidated
profit before tax and consolidated net assets.
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report, other than the financial statements
and our auditor’s report thereon. Our opinion on the
financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in
our report, we do not express any form of assurance
and market data to challenge the assumptions and inputs in
conclusion thereon.
determining the discount rate used to calculate the present
value of projected future cash flows. We have also challenged
the valuation model and the basis of managements
impairment considerations.
We considered the historical accuracy of key assumptions
by comparing the accuracy of the previous estimates of
profitability and related cash flows to the actual amounts
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing
so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies
or apparent material misstatements, we are required to
realised. We assessed management’s sensitivity analysis of
determine whether there is a material misstatement in the
key assumptions, including the revenue growth forecasts and
financial statements or a material misstatement of the other
48
49
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Consolidated income statement for the year ended 31 March 2018
Consolidated statement of changes in equity attributable to
Owners of the Parent for the year ended 31 March 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Administration expenses
Other operating income
Profit from operations
Finance income
Finance costs
Profit before tax
Tax
Attributable to owners of the parent
Earnings per share from continuing operations
Statutory
Basic
Diluted
Adjusted
Basic
Diluted
Notes
4
30
8
9
9
10
13
2018
£’000
20,092
(8,577)
11,515
(7,151)
67
4,431
1
(31)
4,401
(628)
3,773
9.90p
9.49p
11.49p
11.01p
Consolidated statement of comprehensive income for the year
ended 31 March 2018
Attributable to owners of the parent
Other comprehensive income:
Items that will not be reclassified to profit or loss
Gains on property revaluation
Income tax on items that will not be reclassified to profit or loss
Total comprehensive income for the year attributable
to equity holders of the parent
2018
£’000
3,773
706
-
4,479
2017
£’000
17,670
(7,806)
9,864
(5,631)
55
4,288
1
(46)
4,243
(340)
3,903
10.49p
10.02p
10.44p
9.97p
2017
£’000
3,903
47
-
3,950
Balance at 1 April 2016
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
Settlement of share
based payments
Notes
12
23
30
30
Issue of shares from
30
equity reserve
Share-based payment charge 27
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Rate change on deferred tax
Deferred tax on outstanding
share options
Balance at 1 April 2017
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
12
23
22
Settlement of share
based payments
Share-based payment charge 27
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Deferred tax on outstanding
share options
Balance at 31 March 2018
11
Share
capital premium
1,893
Share Merger Revaluation
reserve
276
reserve
5,225
732
Own
shares
(23)
Equity
reserve
940
Retained
earnings
5,602
Total
£’000
14,645
1
-
10
-
16
-
27
-
-
-
-
-
-
20
-
30
175
-
-
-
30
-
-
-
-
-
384
-
579
-
-
-
-
759
-
1,923
-
5,804
-
-
6
-
-
6
-
-
-
-
-
49
-
-
49
-
-
-
-
-
113
-
-
113
-
-
-
-
-
-
-
-
-
-
-
47
47
-
-
323
-
-
-
-
-
-
-
706
706
-
(175)
-
192
-
-
17
-
-
-
-
-
(6)
-
(302)
-
-
-
(302)
-
-
-
6
-
(53)
(68)
(400)
-
(515)
-
-
-
(780)
-
-
(753)
(175)
162
(298)
(174)
-
86
(992)
3,903
-
3,903
-
86
(854)
3,903
47
3,950
(45)
30
(15)
(138)
242
-
-
(51)
-
-
(51)
-
-
-
(39)
8,504
(884)
-
-
(20)
100
(804)
3,773
-
3,773
(177)
17,549
(884)
(302)
117
(20)
100
(989)
3,773
706
4,479
-
765
-
1,972
-
5,917
-
1,029
-
(308)
(58)
133
4
11,477
(54)
20,985
50
51
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Consolidated statement of financial position as at 31 March 2018
Consolidated cash flow statement for the year ended 31 March 2018
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Tax liabilities
Borrowings
Non-current liabilities
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger reserve
Revaluation reserve
Treasury shares reserve
Equity reserve
Retained earnings
Attributable to the equity holders of the company
Notes
14
15
16
11
18
19
20
21
21
11
22
22, 30
24, 30
25
23
26
2018
£’000
8,696
1,261
3,892
389
14,238
20,544
-
4,634
25,178
39,416
(16,910)
(495)
(695)
(18,100)
(85)
(246)
(331)
(18,431)
20,985
765
1,972
5,917
1,029
(308)
133
11,477
20,985
2017
£’000
8,696
1,507
2,595
230
13,028
4,269
341
6,290
10,900
23,928
(4,922)
-
(421)
(5,343)
(780)
(256)
(1,036)
(6,379)
17,549
759
1,923
5,804
323
(6)
242
8,504
17,549
These financial statements were approved by the Board of Directors and authorised for issue on
25 June 2018 and were signed on its behalf by:
Peter Kear
Chief Executive Officer
Company registration number: 01892751 (England and Wales)
52
Operating activities
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance income
Finance expense
Share-based payments
Settlement of share based payments
Gain on sale of property, plant and equipment
Operating cash flows before movements in working capital
Exchange loss / (gain) on cash and cash equivalents
Increase in receivables
Decrease / (Increase) in inventories
Increase / (Decrease) in payables
Cash absorbed in operations generated from
Income taxes paid
Net cash generated from operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Dividends paid
Repayment of borrowings
Interest paid
Payments to finance lease creditors
Purchase of own shares
Sale of own shares
Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at start of year
Exchange loss / (gain) on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
2018
£’000
30
4,401
30
30
30
251
246
(1)
31
100
(20)
-
5,008
116
(16,275)
341
12,034
1,224
(400)
824
1
(844)
(843)
(884)
(414)
(31)
(7)
(302)
117
(1,521)
(1,540)
6,290
(116)
4,634
2017
£’000
4,243
221
247
(1)
46
86
(172)
(1)
4,669
(305)
(1,512)
(341)
(123)
2,388
(26)
2,362
1
(162)
(161)
(753)
(403)
(46)
(8)
(175)
162
(1,223)
978
5,007
305
6,290
53
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Company statement of changes in equity attributable to Owners of
the Parent for the year ended 31 March 2018
Company statement of financial position as at 31 March 2018
Balance at 1 April 2016
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
Settlement of share
based payments
Notes
12
23
30
30
Issue of shares from
30
equity reserve
Share-based payment charge 27
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Rate change on deferred tax
Deferred tax on outstanding
share options
Balance at 1 April 2017
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
12
23
22
Settlement of share
based payments
Share-based payment charge 27
Transactions with owners
Profit for the year
Other comprehensive income
Total comprehensive income
Deferred tax on outstanding
share options
Balance at 31 March 2018
11
Share
capital premium
1,893
Share Merger Revaluation
reserve
276
reserve
5,225
732
Own
shares
(23)
Equity
reserve
940
Retained
earnings
5,592
Total
£’000
14,635
1
-
10
-
16
-
27
-
-
-
-
-
-
20
-
30
175
-
-
-
30
-
-
-
-
-
384
-
579
-
-
-
-
759
-
1,923
-
5,804
-
-
6
-
-
6
-
-
-
-
-
49
-
-
49
-
-
-
-
-
113
-
-
113
-
-
-
-
-
-
-
-
-
-
-
47
47
-
-
323
-
-
-
-
-
-
-
706
706
-
(175)
-
192
-
-
17
-
-
-
-
-
(6)
-
(302)
-
-
-
(302)
-
-
-
6
-
(53)
(68)
(400)
-
(515)
-
-
-
(780)
-
-
(753)
(175)
162
(297)
(173)
-
86
(991)
4,071
-
4,071
-
86
(853)
4,071
47
4,118
(45)
30
(15)
(138)
242
-
-
(51)
-
-
(51)
-
-
-
(39)
8,663
(884)
-
-
(20)
100
(804)
4,187
-
4,187
(177)
17,708
(884)
(302)
117
(20)
100
(989)
4,187
706
4,893
-
765
-
1,972
-
5,917
-
1,029
-
(308)
(58)
133
4
12,050
(54)
21,558
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment in subsidiaries
Deferred tax assets
Current assets
Trade and other receivables
Inventories
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Tax liabilities
Borrowings
Non-current liabilities
Borrowings
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger reserve
Revaluation reserve
Treasury shares reserve
Equity reserve
Retained earnings
Attributable to equity holders of the parent
The Company’s profit for the year was £4.2m (2017: £4.1m)
Notes
14
15
16
17
11
18
19
20
21
21
11
22
22, 30
24, 30
25
23
26
2018
£’000
8,696
1,261
3,892
273
186
14,308
21,458
-
4,634
26,092
40,400
(17,321)
(495)
(695)
(18,511)
(85)
(246)
(331)
(18,842)
21,558
765
1,972
5,917
1,029
(308)
133
12,050
21,558
2017
£’000
8,696
1,507
2,595
273
230
13,301
4,581
341
6,290
11,212
24,513
(5,348)
-
(421)
(5,769)
(780)
(256)
(1,036)
(6,805)
17,708
759
1,923
5,804
323
(6)
242
8,663
17,708
These financial statements were approved by the Board of Directors and authorised for issue on 25 June 2018
and were signed on its behalf by:
Peter Kear
Chief Executive Officer
Company registration number: 01892751 (England and Wales)
54
55
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Company cash flow statement for the year ended 31 March 2018
Notes to the financial statements
Operating activities
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance income
Finance expense
Share-based payments
Settlement of share based payments
Gain on sale of property, plant and equipment
Operating cash flows before movements in working capital
Exchange gains on cash and cash equivalents
Increase in receivables
Decrease / (Increase) in inventories
Increase / (Decrease) in payables
Cash generated from operations
Income taxes paid
Net cash generated from operating activities
Investing activities
Interest received
Purchase of property, plant and equipment
Net cash used in investing activities
Financing activities
Dividends paid
Repayment of borrowings
Interest paid
Payments to finance lease credit ors
Purchase of own shares
Sale of own shares
Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at start of year
Exchange gains on cash and cash equivalents
Cash and cash equivalents at end of year
Notes
2018
£’000
30
4,815
30
30
30
251
246
(1)
30
100
(20)
-
5,421
116
(16,877)
341
12,222
1,223
(400)
823
1
(844)
(843)
(884)
(414)
(30)
(7)
(302)
117
(1,520)
(1,540)
6,290
(116)
4,634
2017
£’000
4,411
221
247
(1)
46
86
(172)
(1)
4,837
(305)
(1,641)
(341)
(162)
2,388
(26)
2,362
1
(162)
(161)
(753)
(403)
(46)
(8)
(175)
162
(1,223)
978
5,007
305
6,290
1. General information
D4t4 Solutions plc is a public limited company incorporated
and domiciled in England and Wales and quoted on the
AIM Market, hence there is no one, ultimate controlling
party. Details of substantial shareholdings are shown in the
Directors’ report on page 43.
Together with annual improvements, the adoption of these
Standards has had no material impact on the results for the
year ended 31 March 2018
Standards, amendments and interpretations to existing
standards that are not yet effective and have not been
adopted early by the Group
The address of its registered office, registered number and
principal place of business is disclosed on the inside cover
of the financial statements.
IFRS 2 Share-base payments
IFRS 9
Financial Instruments
The financial statements of D4t4 Solutions plc and its
subsidiaries (the Group) for the year ended 31 March 2018
were authorised and issued by the Board of Directors on
25 June 2018 and the Consolidated statement of financial
position was signed on the Board’s behalf by Peter Kear.
2. Significant accounting policies
Basis of preparation
The financial statements have been prepared in accordance
with International Financial Reporting Standards (IFRSs)
adopted by the European Union and the Companies Act
2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the
historical cost convention, with the exception of land and
buildings which is held at valuation.
The presentation and functional currency of the financial
statements is British Pounds and amounts are rounded to
the nearest thousand pounds.
Going concern
The Group and Company’s business activities, together
with the factors likely to affect its future development,
performance and position and the risks and uncertainties
are presented in the Strategic Report on pages 22 -24. The
Group and Company have sufficient financial resources to
cover budgeted future cashflows, together with contracts
with a number of customers and suppliers across different
geographic areas and industries. As a consequence, the
Directors believe that the Group and Company are well
placed to manage their business risks successfully.
Having reviewed the future plans and projections for
the business, the Directors believe that the Group
and company have adequate resources to continue in
operational existence for the foreseeable future. For this
reason, they continue to adopt the going concern basis in
preparing the financial statements.
Adoption of new and revised standards
Standards, amendments and interpretations effective in
the period to 31 March 2018:
IAS 7
Statement of cash flows
IAS 12
Income taxes
IFRS 15 Revenue from contracts with customers
IFRS 16 Leases
IFRS 9 will be effective for the year ending 31 March 2019
onwards. IFRS 9 introduces:
New requirements for the classification and
measurement of financial assets and financial instruments;
A new model for recognising provisions abased on
expected credit losses; and
Simplified hedge accounting by aligning hedge
accounting more closely with an entity’s risk
management methodology.
The group has completed an assessment of the impact
of IFRS 9 and it is expected that adoption will not have
a material impact on Consolidated Income Statement or
Statement of Financial Position.
IFRS 16 will be effective for the year ending 31 March
2020. On the adoption of IFRS 16, lease arrangements
will give rise to a right-of-use asset and a lease liability for
future lease payables. The asset will be depreciated on
a straight line basis over the life of the lease. Interest will
be recognised on the lease liability, resulting in a higher
interest expense in the earlier years of the lease term. The
total expenses recognised in the Income Statement over
the life of the lease will be unaffected by the new standard.
However IFRS 16 will result in the timing of lease expenses
recognition being accelerated for leases which would be
currently accounted for as operating leases. The Group has
one leased property in India, details of which are in note 28,
and the directors are currently reviewing the requirements
of the new standard to determine its impact.
The directors anticipate that the adoption of the other
Standards and Interpretations in future periods will have no
material impact on the financial statements of the Group.
IFRS 15 will be applied by the group for the first time in the
half year report ending 30 September 2018 and the annual
report ending 31 March 2019.
The standard introduces a single, five-step revenue
recognition model that is based upon the principle that
56
57
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
revenue is recognised at the point that control of goods or
services is transferred to the customer.
The standard also updates revenue disclosure
requirements.
The Directors have specifically considered the adoption
of IFRS 15 on the revenue recognition of the Group’s
solutions income which combine the delivery of software
licences, project work (including hardware, software and
installation) and recurring revenues from hosting, support
& maintenance services. Under our current policies, we
recognise software licences and projects income at the
point of delivery, with hosting, support and maintenance
income being recognised over time.
We have commissioned a report on the expected
implications of IFRS15 and are currently analysing the
impact of changes from this new standard. Our analysis
leads us to conclude that the satisfaction of different
performance obligations, especially in respect of our project
work, is where IFRS15 will impact. We have concluded
that the recognition of software licence sales and recurring
revenue sales will are expected to remain unchanged, with
software licence sales being recognised upon delivery and
recurring revenue sales being recognised over time.
For the year ended 31 March 2018, there were a number of
projects which spanned the financial year end. Our current
IFRS 15 evaluation involves reviewing whether we have
met the full performance obligations in the year ended 31
March 2018 or whether the completion of the performance
obligations mean that this revenue will be recognised in the
year ended 31 March 2019. Our initial assessment of this
potential adjustment is in the range of a reduction of £1.5-
2m for revenue and £1-1.5m for profit before tax in the year
ended 31 March 2018. The calculation of this adjustment
will be reported with the 30 September 2018 financial
results. This adjustment is expected to be recognised in the
year ended 31 March 2019, and is not expected to occur in
future years.
Basis of consolidation
The consolidated financial statements incorporate the
financial statements of the Company and its subsidiaries
made up to the reporting date.
Investees are classified as subsidiaries where the Company
has control, which is achieved where the Company has
the power to govern the financial and operating policies
of an investee entity, exposure to variable returns from the
investee and the ability to use its power to affect those
variable returns. All intra-group transactions, balances,
income and expenses are eliminated on consolidation.
The consolidated financial statements incorporate the
results of business combinations using the acquisition
method. In the statement of financial position, the
acquiree’s identifiable assets and liabilities are initially
recognised at their fair values at acquisition date. The
results of acquired entities are included in the Consolidated
Statement of Comprehensive Income from the date at
which control is obtained and are deconsolidated from the
date control ceases.
In accordance with Section 408 of the Companies Act
2006 D4t4 Solutions plc is exempt from the requirement to
present its own income statement and related notes that
form a part of these approved financial statements. The
profit of the parent is disclosed in the Company balance
sheet and statement of changes in equity for the year.
Property, plant and equipment
The carrying value of these assets is stated at cost
or valuation, less accumulated depreciation and any
impairment loss. Freehold land is not depreciated. The
estimated lives of assets are reviewed annually by the
Board, the lives and values are adjusted as necessary, and
any impairment loss is recognised in the income statement.
Freehold land and buildings are professionally valued
periodically and were last valued at 31 March 2018. The
carrying values are reviewed for impairment when events or
changes in circumstances indicate that the carrying value
may not be recoverable.
The group makes provision for depreciation so that the cost
less estimated residual value of each asset is written off by
equal instalments over its estimated useful economic life as
follows:
Buildings
- up to 35 years
Leasehold improvements
- up to 10 years
Fixtures and equipment
- up to 4 years
Motor vehicles
- up to 5 years
Revaluation gains/losses are shown on the statement of
comprehensive income, where losses are greater than
previously recognised gains, these are taken to the
income statement.
Acquisitions
On the acquisition of a business, net fair values are
attributed to the identifiable assets and liabilities acquired.
Where the cost of acquisition exceeds this net fair
value, the difference is treated as purchased goodwill
and capitalised in the Group balance sheet in the year
of acquisition. If a subsidiary’s assets are subsequently
hived up into the parent then the corresponding amount of
goodwill is capitalised in the Company balance sheet too.
Goodwill
Capitalised goodwill is shown in the balance sheet.
Its carrying value is subject to annual review and any
impairment is recognised immediately as a loss which
cannot subsequently be reversed. Goodwill arising on
acquisitions made before the date of transition to IFRS has
been retained at the previous UK GAAP amount subject to
being tested annually for impairment.
Goodwill has arisen from the acquisition of businesses.
Investments in subsidiaries
The carrying value of investments is stated at cost less any
provision for impairment. This value is reviewed annually
by the Board with respect to future cash flows in respect of
revenue streams related to the investment.
Other intangible assets
IPR
On the acquisition of a business, the fair value of IPR is
estimated and capitalised taking into consideration the
software development cycle and the amount of effort
involved between updated versions of the software. The fair
value is amortised over the expected development cycle
which is estimated to be 8 years.
Capitalised IPR is shown in the balance sheet. Its carrying
value is subject to annual review and any impairment
is recognised immediately as a loss which cannot
subsequently be reversed.
Trade name
On the acquisition of a business, the future value of the
trade name of that business is estimated and capitalised.
The fair value is amortised over 10 years.
Impairment of intangibles is reviewed annually with
reference to future cash flows from the specific cash
generating units to which the intangible has been allocated.
Inventory policy
Inventories are stated at the lower of cost or net realisable
value. The valuation method for each item of inventory
remains consistent from one accounting period to the next.
Research and development costs
Under IAS 38 development costs can only be recognised as
an intangible asset if and only if:
it is probable that future economic benefits to the
company can be attributed to that asset; and
the cost of the asset can be reliably measured.
If these criteria are not met then the expenditure must be
recognised as an expenses when it is incurred.
To this end, our expenditure on research and development
is currently recognised as an expense in the period in which
it is incurred, as we cannot as yet reliably predict future
economic benefits.
Historic intangible assets are being written off on a straight
line basis over the expected life of the revenue stream.
Foreign currencies
In line with IAS 21, transactions denoted in foreign
currencies are recorded at an approximation of the
exchange rate ruling on the date of the transaction.
Monetary assets and liabilities denominated in foreign
currencies are translated using the rate of exchange ruling
at the balance sheet date and the gains or losses on
translation are included in the profit and loss account.
Similarly, for translation of foreign operations, transactions
are recorded at an approximation of the exchange rate
ruling in the period of consolidation. Monetary assets and
liabilities are translated using the rate of exchange ruling
at the balance sheet date and the gains or losses on
translation are included in the profit and loss account.
Profit from operations
Profit from operations is stated before investment income,
finance costs and other gains and losses. Other gains and
losses principally include movements in property valuation
and are included in the statement of comprehensive income
after tax.
Lease commitments
Rentals payable under operating leases are recognised
as a cost on a straight line basis over the life of the lease.
Similarly rental income arising from operating leases is
credited to income on a straight-line basis over the period
of those leases.
Dividends
Final dividend distribution to the Company’s shareholders is
recognised as a liability in the Group’s financial statements
in the period in which the dividends are approved by the
Company’s shareholders.
Interim and prior periods’ dividends paid are included in the
statement of comprehensive income.
Share-based payments
Periodically the Group offers share options (at the prevailing
market price) to all employees. The Group has conformed
with the requirements of IFRS2 “Share Based Payment” for
share options issued after 7 November 2002 and unvested
at 1 January 2012. Those options are measured at fair
value (using the Black-Scholes model and management’s
best estimates) and are expensed on a straight-line basis
over their vesting period. Options vest only when the
58
59
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
Remuneration committee is satisfied that the vesting
criteria have been met, and are settled subsequently by
equity shares in the parent company and unless the board,
at its discretion, agrees to settle in cash.
Treasury shares
From time to time the Company purchases its own
shares for the purpose of satisfying the future exercising
of outstanding share options. These shares are held in
treasury and are shown as a reduction in the company’s
reserves.
Contingent shares
On the acquisition of a business, the accrual for the future
value of own shares contingent upon no warranty claims
being made is classified as equity where there is a fixed
value and hence fixed number of the company’s shares to
be issued. Where the value of the contingent shares is not
fixed at the point of acquisition, these would be treated as a
financial liability under IAS 32.
Pension costs
The group operates a defined contribution pension scheme.
The assets of the scheme are held separately from those
of the group in an independently administered fund. The
amount charged against profits represents the contributions
payable to the scheme in respect of the accounting period.
Taxation
Current tax (UK and foreign) is calculated on the profit for
the year (adjusted for appropriate tax reliefs, allowances,
non-deductible expenses and timing differences) using the
appropriate tax rates and laws that have been enacted or
substantively enacted by the balance sheet date. Deferred
tax is recognised in respect of all material temporary
differences in the treatment of certain items for taxation
and accounting purposes which have arisen but have
not reversed by the balance sheet date. It is recognised
at the expected prevailing rate at the time of reversal,
and is recognised as an asset only to the extent that it is
probable that taxable profits will be available to utilise it. It
is reviewed annually.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable from the sale of goods and services
in the ordinary course of the Group’s activities. Revenue is
shown net of value added tax, rebates and discounts and
after the elimination of intercompany transactions within the
Group.
The Group recognises revenue when the amount of revenue
can be reliably measured and it is probable that the future
economic benefits will flow to the entity. The Group bases
its estimates on historical results, taking into consideration
the type of customer, the type of transaction and the
specifics of each arrangement.
Revenue is classified as being derived from
Licence sales;
Project work; and
Recurring revenues
Perpetual licence revenue is recognised upon delivery as
the company has no further obligations to the customer
once the non refundable licences have been delivered.
Any upgrade to the software will be supplied as part of
an ongoing maintenance contract that the customer may
make. This maintenance contract is covered under the
hosting and support services policy below.
Term licences are recognised upon delivery at the
commencement of the term where the licence is not
cancellable during the term.
Project work carried out for customers includes one or
more elements of hardware, software, installation services
and timesheet based project work. Each separate element
is fixed in terms of price and deliverables.
The revenue for each delivered product, hardware and /or
software, is recognised when the individual components
are delivered to the customers designated premises or for
licences to designated customer contacts as the risks and
rewards transfer on delivery.
For installation services the stage of completion is
determined by reference to the time spent as a proportion
of the total time expected. In relation to the installation
services, there is no one act which is more important
than any other and therefore the revenue is recognised in
proportion to time worked.
In relation to time based projects, time on projects is
recoverable on a time and expenses basis at an agreed
daily rate and is invoiced to the customer in the month of
performance, and associated value recognised. The risk
and reward transfers as work progresses on a daily basis.
Recurring revenues are made up of hosting, support
services and maintenance where the performance consists
of an indeterminate number of acts over a specified period.
This revenue is recognised on a straight line basis over the
period of the contract, normally 12 months.
Partnerships with third party organisations
The company sells both directly to the customer and
through partnerships. There are two types of partnerships.
The first is where the company acts as principal in the sale
to the partner. The partner then uses the products and
services purchased from the company as part of their sale
to their customer. The second is where the company acts
on an agency basis. Here the company acts as a supply
channel on behalf of the software supplier who dictates
the sell and buy price and provides details of the customer.
In the first case, the revenue will consist of a combination
of licence, project and recurring as defined in the revenue
recognition policy above, and hence is recognised as
defined there. In the second case, where the company acts
on an agency basis, revenue will be recognised at the point
of sale to the end customer.
Financial Instruments
Financial assets and liabilities are recognised on the
balance sheet when the Group or Company becomes a
party to the contractual provisions of the instrument.
Trade and other receivables
Trade and other receivables are recognised and carried at
the lower of their original invoiced value and recoverable
amount. A provision is made against a trade receivable only
when there is objective evidence that the Group may not
be able to recover the entire amount due under the original
terms of the invoice. The carrying amount of the receivable
is reduced through the use of a provisional for doubtful
debts account. Impaired debts are derecognised when they
are assessed as uncollectable.
Trade and other payables
Trade and other payables are recognised and carried at the
higher of their original invoiced value and payable amount.
Cash and cash equivalents
Cash and cash equivalents comprise cash in hand
and deposits repayable in less than three months, less
overdrafts payable on demand.
Borrowings
Interest-bearing bank loans are recorded at the proceeds
received, net of direct issue costs. Finance charges,
including premiums payable on settlement or redemption
and direct issue costs, are charged to profit or loss over
the period using the effective interest rate method and
are added to the carrying amount of the instrument to the
extent that they are not settled in the period in which
they arise.
entities that are wholly owned subsidiary undertakings of
the D4t4 Solutions plc Group.
Company accounts
The separate financial statements of the Company are
presented as required by the Companies Act 2006.
As permitted by that act these have been prepared
in accordance with International Financial Reporting
Standards. The principal accounting policies adopted are
the same as those set out above in respect of the Group.
As permitted in section 408 of that act the company has
elected not to present its own statement of comprehensive
income for the year.
3. Critical accounting judgements and key sources of
estimation uncertainty
In applying the accounting polices described in note 2
the directors are required to make judgements, estimates
and assumptions of the carrying values of assets and
liabilities as at the statement of financial position date
and the amounts reported for revenues and expenses
during the year. However, the nature of estimations means
that actual outcomes could differ from those estimates.
These judgements are reviewed on an ongoing basis, and
recognise revisions to accounting estimates in the period
in which we revise the estimate and in any future periods
affected. It is considered that all judgements have an
element of estimation.
The Company secured two large contracts close to the
year end leading to a significant increase in year end
trade receivables. The Directors’ consider that as its
customers principally consist of banks, partners and other
longstanding customers, primarily blue-chip companies
they are deemed to have a low credit risk. As a result, the
Directors consider the year end trade receivables to be
recoverable, and not impaired.
Estimates and assumptions
The key assumptions concerning the future and other
key sources of estimation uncertainty at the statement of
financial position date that have a significant risk of causing
material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Valuation and asset lives of separately identifiable
Borrowing costs
intangible assets
Borrowing costs are recognised as an expense in the period
in which they arise.
Related party transactions
The Company has taken advantage of the exemption
under IAS24 from disclosing related party transactions with
The ongoing valuation of goodwill for the purposes of
determining impairment requires the evaluation of future
cash flows from the cash generating units to which the
goodwill has been allocated. Note 14 shows the carrying
values of the components of goodwill.
60
61
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
4. Revenue
Group
Analysis of revenue
Continuing operations
Sale of goods
Rendering of services
2018
£’000
2,905
17,187
20,092
2017
£’000
3,716
13,954
17,670
5. Business and geographical segments
IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components
of the Group that are regularly reviewed by the chief operating decision maker to allocate resources to the segments and
assess their performance.
The information presented to the Board of Directors for the purpose of resource allocation and assessment of segment
performance is focused on the type of product sold. The principal activity of the Group is split into three categories of
product and services sold:
Licence sales
Project work
Recurring revenues
No allocation of other income and costs, including depreciation and amortisation, to these categories is made because the
Directors consider that any such allocation would be arbitrary. Any allocation of assets and liabilities to these categories
would also be arbitrary. The reporting below is consistent with that provided to the Board of Directors.
Continuing operations 2018
Licence
Project
Recurring
Total
Sale of goods
Services
Adjustment for agency basis
Reported revenue
Segment result (gross profit)
Other operating costs and income
Investing and financing activities
Profit before tax
sales
£’000
2,905
-
-
2,905
work
£’000
-
12,407
-
12,407
revenues
£’000
-
5,012
(232)
4,780
£’000
2,905
17,419
(232)
20,092
2,186
6,869
2,460
11,515
(7,084)
(30)
4,401
Major customers (over 10% of revenue)
Customer 1
-
10,659
1,737
12,396
The adjustment for agency basis relates to arrangements where the company acts as a supply channel on behalf of a
software supplier. This software supplier dictates the sell and buy price and provides details of the customer.
The group has a customer relationship with a number of partners and customers. One partner accounted for over 10% of
revenue totalling £12,396k (2017: £9,802k). This revenue is in relation to a number of end user customers and falls primarily
into the Project work and Recurring revenues segments.
Continuing operations 2017
Sale of goods
Services
Adjustment for agency basis
Reported revenue
Segment result (gross profit)
Other operating costs and income
Investing and financing activities
Profit before tax
Major customers (over 10% of revenue)
Customer 1
Customer 2
Licence
sales
£’000
3,716
-
-
3,716
Project
work
£’000
-
9,467
-
9,467
Recurring
revenues
£’000
-
4,825
(338)
4,487
3,179
4,339
2,346
Total
£’000
3,716
14,292
(338)
17,670
9,864
(5,576)
(45)
4,243
-
7,935
1,144
-
1,867
700
9,802
1,844
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2.
Geographical information
England
Europe
United States of America
Others
Group
2018
£’000
3,586
2,409
12,636
1,461
20,092
2017
£’000
2,012
4,021
10,947
690
17,670
The geographical revenue segment is determined by the domicile of the external customer.
Non current assets, including Property, Plant & Equipment, Goodwill and Intangibles, are all located in England.
62
63
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
6. Analysis of expenses by nature
The breakdown by nature of expenses is as follows:
Employee remuneration
(see note 7)
Intangible assets
Amortisation of intangible assets (see note 15)
Research and development costs expensed
Property, plant and equipment
Depreciation of property, plant & equipment
Loss on disposal of property, plant & equipment (see note 16)
Auditor’s remuneration
- for audit services (Group and Company, the Company fee is not separately quantifiable)
- for tax compliance
- for tax advisory services
- for other services
Inventories recognised as an expense during the year
Write-off and provision of doubtful receivables
Operating leases
Net foreign exchange differences
Other expenses
Total cost of sales and administrative expenses
7. Staff costs
The average number of employees (including directors)
during the year was:
Production and support
Distribution
Administration
Their aggregate remuneration comprised:
Salaries
Social security costs
Defined contribution costs
Share-based payments: equity settled
Group
Company
2018
Number
90
22
10
122
£’000
6,982
729
341
100
8,152
2017
Number
88
27
9
124
£’000
6,272
679
344
86
7,381
2018
Number
2017
Number
90
20
10
120
£’000
6,390
701
327
100
7,518
88
26
9
123
£’000
6,022
666
334
86
7,108
2018
£’000
2017
£’000
8,152
7,381
246
474
720
251
-
251
45
-
5
14
64
341
2
44
402
4,717
15,728
247
469
716
221
1
222
39
3
10
22
74
-
-
29
(357)
4,360
13,437
Other related party transactions including loans and dividends, involving directors are disclosed in the directors’ report on
page 42.
The Group has taken advantage of the exemption in IFRS 24 from reporting related party transactions between members of
the group because they are wholly owned subsidiaries
The Group has taken advantage of the exemption in IFRS 24 from reporting related party transactions between members of
the group because they are wholly owned subsidiaries.
8. Other operating income
Analysis of other operating income
Operating lease receipts (see note 28)
9. Investment income and finance costs and other gains and losses
Analysis of investment income
Bank interest received
Analysis of finance costs
Mortgage interest paid
Bank loan interest
Directors’ loan interest
Other
Group
2018
£’000
67
67
2017
£’000
55
55
Group
2018
£’000
2017
£’000
1
(3)
(21)
(6)
(1)
(31)
1
(9)
(29)
(7)
(1)
(46)
Details of directors’ remuneration required by the Companies Act are set out in the audited information included in the
Directors’ remuneration report on pages 36 to 40. For the purposes of IAS 24 “Related Party Disclosures” these figures also
equate to the salary disclosure required of the key management personnel.
64
65
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
10. Taxation
Current UK tax
Foreign tax
Less: double taxation relief
Deferred tax
- change in tax rates
- temporary differences
- US tax losses current year
- US tax losses prior year
Corporation tax
The charge for the year can be reconciled to the reported profit as follows:
Profit before tax
UK corporation tax at 19% (2017: 20%)
Research and development credit
Relief for exercising of share options
Difference between writing-down allowances and depreciation
Amortisation of intangibles
Other non-deductible expenses
Effect of higher rates in other jurisdictions
Shared based payments
Utilisation of tax losses
Recognition of US tax losses prior year
Tax charge as above
2018
£’000
2017
£’000
806
68
(22)
852
-
(21)
(129)
(74)
628
-
65
(25)
40
15
285
-
-
340
4,401
4,243
836
(117)
(81)
25
-
12
33
-
(6)
(74)
628
849
(122)
(214)
-
42
14
40
17
(286)
340
66
At 31 March 2018 a deferred tax asset for all US tax losses in the Group of £203k (2017:nil) was created since the Board are
confident that they will be recovered, and hence it is appropriate to carry a deferred tax asset for these. In the US losses
can be carried forward for at least 20 years, hence losses have been recognised to the extent that they are recoverable in the
11. Deferred tax
Group
Balance at 1 April 2016
Change to opening
balance tax rate assumed
Recognised within the
Statement of Changes
in Equity
(Credit) / charge to
income statement
Balance at 1 April 2017
Recognised within the
Statement of Changes
in Equity
(Credit) / charge to
income statement
Balance at 31 March 2018
foreseeable future.
Company
Balance at 1 April 2016
Change to opening
balance tax rate assumed
Recognised within the
Statement of Changes
in Equity
(Credit) / charge to
income statement
Balance at 1 April 2017
Recognised within the
Statement of Changes
in Equity
(Credit) / charge to
income statement
Balance at 31 March 2018
Other timing
difference
Equity Share based
payments
reserve
£’000
40
£’000
297
£’000
155
Tax
losses
£’000
300
Intangibles
Total
£’000
(351)
£’000
441
53
(15)
-
42
(256)
-
42
(214)
(177)
(275)
(26)
(54)
223
143
-
-
(300)
-
-
202
202
-
-
(34)
6
(45)
(23)
(138)
(39)
-
114
-
(58)
(38)
(32)
-
56
17
110
4
17
131
17
110
4
17
131
Other timing
difference
Equity Share based
payments
reserve
£’000
40
£’000
297
£’000
155
-
-
(34)
6
(45)
(23)
(138)
(39)
-
114
-
(58)
(38)
(32)
-
56
Tax
losses
£’000
300
-
-
(300)
-
-
-
-
Intangibles
Total
£’000
(351)
£’000
441
53
(15)
-
42
(256)
-
42
(214)
(177)
(275)
(26)
(54)
21
(59)
67
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
12. Dividends
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 31 March 2017 of 1.70p
(2016: 1.50p) per share
Interim dividend for the year ended 31 March 2018 of 0.625p
(31 March 2017: 0.55p) per share
Proposed final dividend for the year ended 31 March 2018 of 1.875p
2018
£’000
2017
£’000
645
239
884
574
206
780
The proposed final dividend is subject to shareholders’ approval at the AGM and has not been included as a liability in these
financial statements.
13. Earnings per share
The calculation of earnings per share is based on profit attributable to owners of the parent and the weighted average
number of ordinary shares in issue during the year.
The adjusted earnings per share figures have been calculated based on earnings before adjusted items. These have been
presented to provide shareholders with an additional measure on the groups year-on-year performance.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares arising from share options granted to employees where the excise price is less than
market price of the Company’s ordinary shares at the year end.
Details of the adjusted earnings per share are set out below:
Profit attributable to owners of the parent
Amortisation of intangible assets (see note 15)
Share-based payments
Net foreign exchange differences
Tax on the adjustments
Adjusted profit attributable to owners of the parent
Basic weighted average number of shares, excluding own shares, in issue
Dilutive effect of share options
Diluted weighted average number of shares, excluding own shares, in issue
Basic Earnings per share
Diluted Earnings per share
Adjusted Basic Earnings per share
Adjusted Diluted Earnings per share
68
2018
£’000
3,773
246
100
402
(142)
4,379
2017
£’000
3,903
247
86
(357)
5
3,884
2018
Number
38,104,967
1,670,139
39,775,106
2017
Number
37,193,118
1,767,183
38,960,301
2018
2017
Pence per
share
Pence per
share
9.90
9.49
11.49
11.01
10.49
10.02
10.44
9.97
14. Goodwill
Cost of goodwill
Balance at 1 April 2016 and 31 March 2017
Balance at 1 April 2017 and 31 March 2018
Accumulated impairment charges
Balance at 1 April 2016 and 31 March 2017
Balance at 1 April 2017 and 31 March 2018
Carrying amount at year end
Allocation of goodwill
AXL customers
Chapter26 customers
Speed-Trap customers
Balance at 31 March
Group
£’000
Company
£’000
10,952
10,608
10,952
10,608
2,256
1,912
2,256
8,696
100
918
7,678
8,696
1,912
8,696
100
918
7,678
8,696
The carrying amount of goodwill represents the balance of the original cost of goodwill attached to the subsidiary
companies on acquisition. The Group is required to test this value at least annually for impairment.
The extant customers of the subsidiaries (all of whom are now customers of the parent company) continue to form
identifiable cash generating units (CGU’s). For AXL and Chapter 26, all the CGUs are within the United Kingdom, while for
Speed-Trap the CGUs are spread globally.
The recoverable amount of these CGU’s has been determined based on a value-in-use calculation. To calculate this, pre-
tax cashflow projections are based on financial budgets calculated using both current year and prior year knowledge of
customer contracts and approved by the Board for the year ended 31 March 2019. These are then extrapolated for five
years with 2% (2017: 10-14%) growth rate applied, and extended beyond five years at 2%, which the Board considers
conservative given the long-term opportunities that exists in the regions that the CGU’s operate in. The discount rate
applied to cashflow projections is 15% pre-tax (2017: 10%). Using a 2% long-term growth rate (2017: 2%) considered a
prudent approximation to the long-term average growth rate for the region in which the CGU operates.
The same growth and discount rate assumptions have been applied to each CGU due to the fact that they are the same
class of business and same type of customer.
The growth rates have been reduced from the 10-14% to 2% for years after 31 March 2019 (31 March 2018) this year in
order to ensure prudent testing of the carrying value of the goodwill. £7,678k of the carrying value of the goodwill relates to
Speed-Trap customers and the recoverable amount of the goodwill significantly exceeds the carrying value.
69
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
Key assumptions used in the value-in-use calculations
16. Property, plant & equipment
Key assumptions are made by management based on past experience taking into account external sources of information
around gross margins, growth rates and discount rates for similar businesses.
The calculation of value in use is most sensitive to assumptions around:
operating cashflows, based on financial budgets for year ended 31 March 2019 approved by the Board;
growth rates in the current year budget of 10%;
growth rates in year 2 onwards, which we have maintained at a conservative 2%;
the discount rate, based on the pre-tax weighted average cost of capital of the Group of 10%;
the CGU gross margins achieved.
Sensitivity to changes in assumptions
A change in our key assumptions in respect to operating cashflows could cause the carrying value of the goodwill to exceed
the recoverable amount, resulting in an impairment charge.
Management are satisfied that a reasonable change in the key assumptions used in assessing the recoverable amounts
of the cash generating units, would not give rise to the recoverable amount exceeding the carrying value of each cash
generating unit.
15. Other intangible assets
Group & Company
Cost
Balance at 1 April 2016 and 31 March 2017
Balance at 1 April 2017 and 31 March 2018
Accumulated amortisation
Balance at 1 April 2016
Amortisation
Balance at 1 April 2017
Amortisation
Balance at 31 March 2018
Carrying amount
Balance at 1 April 2016
Balance at 31 March 2017
Balance at 31 March 2018
Internally Purchased
IPR
generated IPR
£’000
£’000
Trade
name
£’000
Total
£’000
56
56
56
-
56
-
56
-
-
-
1,858
142
2,056
1,858
142
2,056
232
233
465
232
697
1,626
1,393
1,161
14
14
28
14
42
128
114
100
302
247
549
246
795
1,754
1,507
1,261
The amortisation charge for the year is booked to administration expenses.
The remaining amortisation period for the Purchased IPR is 5 years and the Trade name is 7 years. The internally generated
IPR has been fully amortised.
70
Group and Company
Cost or valuation
Balance at 1 April 2016
Additions
Disposals
Balance at 1 April 2017
Additions
Revaluation
Disposals
Balance at 31 March 2018
Depreciation
Balance at 1 April 2016
Depreciation charge
Revaluation
Eliminated on disposals
Balance at 1 April 2017
Depreciation charge
Revaluation
Eliminated on disposals
Balance at 31 March 2018
Carrying amount
Balance at 1 April 2016
Balance at 31 March 2017
Balance at 31 March 2018
Land &
buildings
Fixtures &
equipment
£’000
£’000
Motor
vehicles
£’000
2,200
-
-
2,200
442
658
-
3,300
-
48
(48)
-
-
47
(47)
-
-
2,200
2,200
3,300
803
120
-
923
402
-
(103)
1,222
446
148
-
-
594
182
-
(102)
674
357
329
548
100
42
(36)
106
-
-
-
106
42
25
-
(27)
40
22
-
-
62
58
66
44
The net book value of assets held under finance lease or hire purchase contracts, included above, are as follows:
Group and Company
Motor vehicles
Allocation of depreciation charge
Cost of sales
Administration expenses
Charge for year
2018
£’000
19
2018
£’000
78
173
251
Total
£’000
3,103
162
(36)
3,229
844
658
(103)
4,628
488
221
(48)
(27)
634
251
(47)
(102)
736
2,615
2,595
3,892
2017
£’000
28
2017
£’000
62
159
221
71
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
Tangible Assets held at valuation
In respect of tangible assets held at valuation, the comparable carrying amount that would have been recognised if the
assets had been carried under the historical cost model are as follows:
18. Trade and other receivables
Group and Company
Land and buildings
2018
£’000
1,842
2017
£’000
1,887
Included in land & buildings (valued this year by De Souza & Co) is freehold land at £1,230,000 (2017: £800,000) which is not
subject to depreciation. The land and buildings original purchase cost was £2,224,000.
For detail on the fair value measurement of the freehold land and buildings see note 29.
Freehold land and buildings with carrying values as noted above have been pledged to secure borrowings of the Group (see
the borrowings note 21).
17. Investment in subsidiaries
Cost of investment
Balance at 1 April 2017 and 31 March 2018
Accumulated provision for impairment
Balance at 1 April 2017 and 31 March 2018
Carrying amount at year end
Country of Incorporation
Nature of business
IS Solutions Ltd (formerly Celebrus Ltd)†
England & Wales
Celebrus Technologies Inc.*‡
Celebrus Technologies Ltd*†
Chapter26 Ltd†
D4t4 Solutions Inc.§
Internet Service Solutions Ltd†
Internet Systems Solutions Ltd†
Internet Site Solutions Ltd†
Magiq Ltd*†
Speed-Trap Holdings Ltd†
USA
England & Wales
England & Wales
Dormant
Non-trading
Dormant
Dormant
USA
Software & services
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Dormant
Dormant
Dormant
Dormant
Dormant
Company
2018
£’000
273
2017
£’000
273
-
273
-
273
Proportion of
ownership of
ordinary shares
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
* Owned by Speed-Trap holdings
† Registered address - Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, TW16 7EF, UK
‡ Registered address - 38 Kaybe Court, San Jose, California 95139, USA
§ Registered address - 327 Hillsborough Street, Raleigh, North Carolina 27603-1725, USA
All subsidiaries individually prepare and file their own financial statements.
The principal place of business is considered to be the registered address.
Celebrus Technologies Inc was non-trading and the company was closed on 6 April 2018.
Trade receivables
Amounts due from Group undertakings
Other debtors
Prepayments
Accrued income
Trade receivables
Ageing of past due but not impaired receivables:
Overdue 1 month
Overdue 2 months
Overdue 3 months and more
Group
Company
2018
£’000
19,530
-
63
480
471
20,544
2018
£’000
264
47
237
548
2017
£’000
3,659
-
35
152
423
4,269
2017
£’000
159
174
22
355
2018
£’000
19,530
917
60
480
471
21,458
2018
£’000
264
47
237
548
2017
£’000
3,659
317
30
152
423
4,581
2017
£’000
159
174
22
355
The Company secured two large contracts close to the year end leading to a significant increase in year end trade
receivables. A proportion of this was reflected in the 2017/18 financial year with the remainder to be recognised in 2018/19
and subsequent years, which has also led to a significant increased in deferred income as reflected in note 20.
The Board considers that the recoverable value of the trade receivables, after considering any credit risk, does not differ
materially from their carrying value. In particular those amounts past due are assessed to be fully recoverable and are not
considered to be impaired. The average credit period taken on sales of goods and services was 67 days (2017: 67 days).
In determining the recoverability of a trade receivable the Group considers any change in the credit quality of the trade
receivable from the date credit was initially granted up to the reporting date. After review, the Directors believe that no
further credit provision is required. The policy of credit risk management is covered in Note 29.
During the year one trade receivable was considered impaired and there was a £2k charge to the income statement as
shown on Note 6 (2017: £Nil).
For ease of understanding and fair disclosure prepayments and accrued income are now being shown as two distinct
balances.
19. Inventories
Finished goods and goods for resale
Group & Company
2018
£’000
-
2017
£’000
341
The amount of inventories recognised as an expense during the year amounted to £341k (2017: Nil). There was no write-
down in the recognised value of inventories (2017: Nil).
72
73
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
20. Trade and other payables
At 31 March 2018 there were no undrawn facilities (2017: nil).
Trade payables
Loans from directors
Amounts owed to Group undertakings
Other taxes and social security
Other creditors
Accruals
Deferred income
Group
Company
2018
£’000
2,609
-
-
772
12
1,591
12,421
17,405
2017
£’000
999
119
-
294
127
755
2,628
4,922
2018
£’000
481
-
2017
£’000
538
119
2,753
1,042
772
12
1,377
12,421
17,816
292
72
657
2,628
5,348
There is no material difference between the fair value of receivables and their carrying value.
Trade payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for
trade purchases is 53 days (2017: 65 days). Their carrying value approximates to their fair value.
For ease of understanding and fair disclosure accruals and deferred income are now being shown as two distinct balances.
21. Borrowings
Obligations under finance lease and hire
purchase agreements
Bank loans and mortgages (see Borrowings below)
Group
Company
2018
£’000
17
763
780
2017
£’000
24
1,177
1,201
2018
£’000
17
763
780
2017
£’000
24
1,177
1,201
Borrowings (Group and Company)
Finance Leases Bank loans and mortgage
Balance at 1 April 2017
Taken out in year
Repaid during the year
Balance at 31 March 2018
Repayable within one year
Repayable within one to two years
Repayable within two to five years
2018
£’000
2017
£’000
24
-
(7)
17
8
9
-
32
-
(8)
24
8
16
-
2018
£’000
1,177
-
(414)
763
687
76
-
2017
£’000
1,580
-
(403)
1,177
413
426
338
The finance lease was taken out in 2016 in respect of a motor vehicle.
The mortgage of £1.2m was drawn on 3 September 2009 and is repayable over 10 years in equal instalments. Interest is
charged monthly on the outstanding amount and the rate is fixed at 2.10% over base rate. The outstanding amount at 31
March 2018 was £190k (2017: £301k).
The loan of £1.5m was drawn on 22 January 2015 and is repayable over 5 years in equal instalments. Interest is charged
monthly on the outstanding amount and the rate is fixed at 2.50% over base rate. The outstanding amount at 31 March
2018 was £573k (2017: £876k.)
Long-term borrowings (bank loans and mortgage) £76k (2017: £764k) are secured by way of a fixed and floating charge over
the Company’s assets.
22. Share capital
Ordinary shares of 2p each
Authorised
Issued and fully paid up
Share
capital
£’000
2018
Share
premium
£’000
Share
2017
Share
capital
premium
Shares
£’000
£’000
Shares
50,000,000
1,000
50,000,000
1,000
Balance at 1 April 2017
Issued during year
Balance at 31 March 2018
37,954,318
306,701
38,261,019
759
6
765
1,923
49
1,972
36,583,020
1,371,298
37,954,318
732
27
759
1,893
30
1,923
The Company issued 306,701 (2017: 1,371,298) Ordinary shares during the year to satisfy share option exercise
requirements, at a price of 54.67p (2017: 40.65p) increasing the share premium account by £49k (2017: £30k).
Any costs associated with the issue of new shares were less than £1k (2017: £1k) and are recognised in professional fees.
23 Own shares
At the year end the company held 247,815 (2017: 3,399) ordinary shares in Treasury, with fair value of £293,661 (2017:
£4,742). Details of purchases and sales are shown on page 44.
24. Merger reserve
The merger reserve arose on the acquisition of Speed-Trap Holdings Ltd (23 January 2015) and represents the excess
consideration paid by issue of shares over the share capital nominal value. Additions to this reserve of £113k (2017: £579k)
are a result of the exercise of options issued which have been held in the contingent shares and equity reserve account.
In prior years these values had been included in share premium but have been restated for ease of understanding and fair
disclosure (see note 30).
25. Revaluation reserve
This represents the gains on revaluation of the property following the latest professional revaluation as at 31 March 2018.
The gain on revaluation was £706k (2017: £47k). This is a non-distributable reserve as it represents unrealised profits on
the revalued assets.
26. Equity reserve
This is in relation to the options issued following the Speed-Trap acquisition in 2015 and represents the fair value less the
cash received to exercise those options of £77,098 (2017: £128,318). The outstanding balance of these options is included
in the balance at 1 April 2017 and 31 March 2018, as applicable, in note 27. In addition the total includes the deferred tax
asset on these options of £55,649 (2017: £114,770).
74
75
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
27. Share-based payments
The Company has a share option scheme for all employees of the Group, a combination of both EMI and non-EMI schemes.
Share options vest in equal instalments over three years based on previously set EPS targets. In relation to the share options
shown below the Board forecast that the remaining share options will vest.
Options are granted at the closing price on the previous day and have a vesting period of three years. If the options are not
exercised within ten years of the grant date, or if employees leave before their options vest then those options are forfeited.
Vested options are settled subsequently by a combination of equity shares in the parent company and cash at Board
discretion.
Balance at 1 April
Granted during the year
Forfeited during the year
Exercised during the year
Balance at 31 March
Exercisable at year end
2018
2017
Weighted
Weighted
No. of share av. exercise No. of share av. exercise
options
price
options
3,096,872
45.73p
3,688,117
price
49.42p
424,500
114.00p
320,000
117.00p
(55,000)
(325,574)
3,140,798
99.47p
41.02p
70.11p
(72,000)
(839,245)
3,096,872
82.17p
27.40p
61.56p
1,791,681
56.26p
1,396,305
45.73p
The weighted average share price at the exercise date of the exercised shares was £1.715 (2017: £1.57). The weighted
average contractual life of the outstanding options was 7 years (2017: 7 years), exercisable in the range 18.5p to 136.0p.
325,574 share options were exercised on 10 August 2017, 306,701 (note 22) by way of issue of new shares, 18,873 by cash
settlement.
A summary of the option price ranges
2018
Exercisable
price range
18.50p to 27.85p
51.00p to 90.50p
113.00p to 136.00p
No. of share
options
451,114
1,966,184
723,500
3,140,798
The weighted average exercise price of all outstanding share options was 70.11p (2017: 61.56p).
The Group recognised £100k of expense related to equity-settled share-based payments in the year (2017: £86k).
The fair value of options granted during the year is determined by applying the Black-Scholes model. The expense is
apportioned over the vesting period of the option and is based on the number which are expected to vest and the fair value of
those options at the date of grant.
The inputs into the Black-Scholes model are as follows:
Number of options granted
Share price at date of grant
Exercise price
Option life in years
Risk-free rate
Expected volatility
Expected dividend yield
Fair value of options
15 Dec 2017
424,500
114.00p
114.00p
3
3.10%
37.00%
1.75%
28.87p
Expected volatility was determined by calculating the historical volatility of the Group’s share price for the 5 year period prior
to the date of grant of the share option. The expected life used in the model is based on management’s best estimate. The
Group did not enter into any share-based payment transactions with parties other than employees during the current or
previous period.
28. Operating lease arrangements (Group and Company)
As lessee
There are no outstanding non-cancelled leases (2017: nil).
Lease payments recognised as an expense during the year
Lease payments are for rental of premises in India
Total value of future minimum lease payments committed under
non-cancellable operating leases:
Not later than one year
Later than one year and not later than five years
Later than five years
As lessor
There are no outstanding non-cancelled leases (2017: nil)
Lease receipts recognised as income during the year
Lease receipts are for fixed-term sub-lets of parts of the parent company’s
premises bearing no contractual right of renewal or extension.
2018
£’000
44
2018
£’000
50
225
159
2017
£’000
34
2017
£’000
9
-
-
67
55
76
77
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
29. Financial instruments and risk management
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and,
whilst retaining responsibility for them, it has delegated the authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the executive team.
The Board receives monthly reports from the executives through which it reviews the effectiveness of the processes put in
place and the appropriateness of the objectives and policies it sets.
Capital Management policy
Management considers capital to comprise issued share capital, reserves and borrowings, along with cash and cash
equivalents.
The Group manages its capital to ensure it operations are adequately provided for, while maximising the return to
shareholders through effective management of its resources. The principal financial risks faced by the Group are liquidity
risk, interest rate risk and foreign exchange rate risk. The Directors review and agree policies for managing each of these
risks. These policies remain unchanged from previous years.
The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and so provide
returns for shareholders. The Group meets its objectives by aiming to achieve growth which will generate regular and
increasing returns to shareholders.
The Group manages the capital structure and makes changes in light of changes in economic conditions. In order to
maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders.
Capital risk management
The Group and Company’s capital structure, as defined above, is managed by the board to ensure that the Group and
Company continues as a profitable going concern. There are no externally imposed capital requirements.
The company has no net debt
Borrowings
Cash and cash equivalents
Net cash
Categories of financial instruments
Financial Assets at Amortised Cost
Cash and bank balances
Loans and receivables
Financial Liabilities at Amortised Cost
Trade and other payables
Borrowings
Group
2018
Company
2018
2017
£’000
(780)
4,634
3,854
2018
£’000
4,634
20,064
4,212
780
2017
£’000
(1,201)
6,290
5,089
2017
£’000
6,290
4,117
2,000
1,201
£’000
(780)
4,634
3,854
2018
£’000
4,634
20,978
4,623
780
£’000
(1,201)
6,290
5,089
2017
£’000
6,290
4,429
2,428
1,201
Reconciliation of liabilities arising from financing activities
Finance leases
Bank loans and mortgages
Group and company
2017 Cashflows
£’000
£’000
24
(7)
1,177
1,201
(414)
(421)
2018
£’000
17
763
780
Foreign currency risk management
The Group’s foreign currency exposure arises from:
Transactions (sales/purchases) denominated in foreign currencies; and
Monetary items (mainly cash and receivables) denominated in foreign currencies
The exposure to transactional foreign exchange risk is monitored and managed at a Group level. Natural hedging is
employed, to the extent possible, to minimise net exposures; however, where significant exposures arise it is group policy to
enter into formal hedging arrangements where these can be shown to be effective.
Carrying amounts of the Group’s financial assets and liabilities denominated in foreign currencies was as follows:
US Dollars
- cash
- receivables
- payables
Euros
- cash
- receivables
- payables
Liabilities
Assets
2018
£’000
-
-
2,762
-
-
46
2017
£’000
2018
£’000
-
-
353
-
-
98
644
19,077
-
85
100
-
2017
£’000
1,123
2,918
-
70
86
-
The following table shows the effect on the Group’s result for the year, of £ strengthening by 5% against debtor, creditor
and cash balances denominated in foreign currencies, with all other variables held constant. 5% represents management’s
assessment of the reasonably possible change in exchange rates.
At 31 March 2018
Impact on profit/equity for the year
At 31 March 2017
Impact on profit/equity for the year
$
£’000
€
£’000
Total
£’000
(805)
(155)
(5)
(3)
(810)
(158)
78
79
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
The following table shows the effect on the Group’s result for the year, of £ weakening by 5% against debtor, creditor and
cash balances denominated in foreign currencies, with all other variables held constant. 5% represents management’s
assessment of the reasonably possible change in exchange rates.
At 31 March 2018
Impact on profit/equity for the year
At 31 March 2017
Impact on profit/equity for the year
$
£’000
€
£’000
Total
£’000
890
171
5
3
895
174
In management’s opinion the sensitivity analysis is unrepresentative of the inherent foreign exchange risk because the
year end exposure was abnormally high and does not reflect the regular exposure levels during the year.
Credit risk management
The Group uses credit reference agencies to determine and monitor the credit limits of new and existing customers. At the
end of the year one partner owed a total of £16,375,000 (2017: one partner owed £2,315,000) and no provision has been
made in relation to this balance. No other customers / partners owed more than 10% of the outstanding total. No provision
for doubtful debts has been made (2017: nil).
The Group’s customers primarily consist of banks, partners and other long-standing customers, primarily blue-chip
companies that are deemed to have a low credit risk. As a result, the credit quality of trade receivables that are neither past
due nor impaired has been assessed by the Directors to be relatively high, taking account of a low historic experience of
bad debts and relatively good ageing profiles.
The Group controls its exposure to credit risk by setting limits on its exposure to individual customers, compliance is
monitored by the Credit Control Team. As part of the process of setting customer credit limits, different external credit
reference agencies are used, according to the country of the customer. The Group has a policy of dealing only with
creditworthy counterparts.
The Group manages the credit risk and quality of cash balances by holding balances with reputable banks.
Liquidity risk management
The Board manages liquidity risk by maintaining adequate reserves of cash and banking facilities to cover day-to-day
trading. The Group’s policy is to pay creditors in full as and when they become due, which for all practical purposes is at
latest by the end of the month following the invoice date. The Board believes that there is little liquidity risk since the Group
has adequate cash balances to satisfy its creditors.
Long-term borrowings are secured by way of a mortgage on the freehold property and their repayment schedule is shown in
note 21.
80
Maturity analysis of financial liabilities
Group
Company
In less than one year:
Borrowings
Trade payables
Loans from directors
Amounts owed to Group undertakings
Other creditors
Accruals
In more than one year:
Borrowings
2018
£’000
713
2,609
-
-
12
1,591
4,925
2017
£’000
449
999
119
-
127
755
2,449
2018
£’000
713
481
-
2,753
12
1,377
5,336
2017
£’000
449
538
119
1,042
72
657
2,877
85
85
798
798
85
85
798
798
All of the financial liabilities above are recorded in the financial statements at amortised cost. The above maturity analysis
amounts reflect the contractual undiscounted cash flows, including future interest charges, which may differ from the
carrying values of the liabilities at the reporting date.
Interest rate risk management
The Group’s exposure to changes in interest rate risk primarily relates to interest bearing financial liabilities. The loan bears
interest at the rate of 2.50% over base rate and the mortgage at 2.10% over base rate. The Board of Directors monitor
movements in interest rates and have not prepared sensitivity analysis in relation to interest rates as they do not believe that
any reasonable variance would have a material impact on the Group.
Financial facilities
Secured bank overdraft facility (unused)
Fair value measurement
2018
£’000
-
2017
£’000
250
Financial instruments that are measured subsequent to initial recognition at fair value, are grouped into Levels 1 to 3 based
on the degree to which the fair value is observable:
Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 fair value measurements are those derived from inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and
Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data (unobservable inputs).
The freehold land & buildings are observable at level 2.
The Group’s freehold land and buildings are stated at their revalued amounts, being the fair value at the date of the revaluation at 31
March 2018. The fair value measurements of the Group’s freehold land and buildings as at 31 March 2018 were performed by De Souza
& Co, independent valuers not related to the Group. De Souza & Co are members of the Royal Institution of Chartered Surveyors, and
they have appropriate qualifications and recent experience in the fair value measurement of properties in the relevant location. The
81
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Notes to the financial statements (Continued)
valuation was prepared in accordance with the RICS Valuation - Global Standards 2017 and the International Valuation Standards and
was based on recent market transactions on arm’s length terms for similar properties.
In order to improve ease of understanding in relation to the types of exercise of options the presentation of the movements
on both the cashflow and the statement of changes in equity have been further analysed as shown above. The 2018
The fair value of the freehold land and buildings were determined based on the market comparable approach that reflects recent
transaction prices for similar properties. 10 similar properties with sales within the last two years, and within 10 miles were used as the
basis for comparison using both sales value and letting rates to determine the valuation.
In order to determine the apportionment of the fair value between land and buildings, firstly the value of industrial development land in
the broad area of the property was assessed, and secondly an allowance for age and obsolescence was applied to the likely rebuilding
costs of a modern equivalent.
30. Presentation changes in the financial statements
Following detailed technical review of disclosures relating to share options, the disclosures for the cash flow statement and
statement of changes in equity table have been updated as per below:
Cashflow statement
(Consolidated and company)
Purchase of own shares
Sale of own shares
Settlement of share based payments
Operating activities total
Financing activities total
Statement of changes in equity
(Consolidated and company)
Balance at 1 April 2016
Dividends paid
Sale of own shares
Issue of new shares - exercise of share options
Settlement of share based payments
Issue of shares from equity reserve
Issue of contingent shares
Transaction with owners
Rate change on deferred tax
Deferred tax on outstanding share options
Balance at 31 March 2017
2017
£’000
Revised
disclosure
As
presented
previously
(175)
162
(172)
(185)
2,362
(1,223)
(400)
215
-
(185)
2,534
(1,395)
2017
Equity Reserve
£’000
Revised
disclosure
As
presented
previously
940
940
6
-
(53)
(68)
(400)
(515)
(45)
(138)
242
6
(121)
-
-
(400)
(515)
(45)
(138)
242
accounts are prepared on the revised basis.
Following the detailed review above, the share and share option movements in relation to the Speed-Trap acquisition have
been removed from share premium and included in a new merger reserve. The comparison of the disclosures last year and
as presented this year are as below. The 2018 Statement of changes in equity and Statement of financial position have been
prepared on the revised basis.
Statement of changes in equity and statement of financial position
(Consolidated and company)
Share
premium
£’000
Revised
disclosure
Balance at 1 April 2016
Dividends paid
Sale of own shares
Issue of new shares - exercise of share options
Issue of shares from equity reserve
Issue of contingent shares
Transaction with owners
Balance at 31 March 2017
1,893
-
30
-
30
1,923
2017
Merger
reserve
£’000
Share
premium
£’000
As presented
previously
5,225
20
175
384
579
5,804
7,118
20
205
384
609
7,727
The balance on the merger reserve has been moved from the share premium account and represents the fair value of the
consideration given in excess of the nominal value of the ordinary shares issued the acquisition of Speed-Trap Holdings Ltd.
Cashflow statement
Profit before tax
Profit for year
Income tax expanse
This adjustment has been made in line with current best practice.
Consolidated statement of comprehensive income
2017
Consolidated
£’000
£’000
Revised As presented
previously
disclosure
Company
£’000
£’000
Revised As presented
previously
disclosure
4,243
4,411
3,903
340
4,243
4,411
4,071
340
4,411
4,243
2017
£’000
£’000
Revised As presented
previously
disclosure
The group has not presented a statement of financial position as at 31 March 2016 since all changes arising from this
reclassification at that date are disclosed in the consolidated and parent company statements of changes in equity.
Distribution costs
Administration expenses
This adjustment has been in line with management internal reporting.
82
5,631
5,631
3,797
1,834
5,632
83
D4t4 Solutions plc Annual Report & Accounts 2018Financial Statements
Corporate information
Registered office
Windmill House
91-93 Windmill Road
Sunbury-on-Thames
Surrey
TW16 7EF
Auditor
RSM UK Audit LLP
25 Farringdon Street
London
EC4A 4AB
Solicitor
Barlow Robbins LLP
Concord House
165 Church Street East
Woking
Surrey
KY10 9AD
Bank
HSBC Bank plc
54 Clarence Street
Kingston Upon Thames
Surrey
KT1 1NS
Nominated advisor & broker
finnCap
60 New Broad Street
London
EC2M 1JJ
Registrars
SLC Registrars
Thames House
Portsmouth Road
Esher
Surrey
KY10 9AD
84
®
D4t4 Solutions plc
Windmill House
91-93 Windmill Road
Sunbury-on-Thames
TW16 7EF
www.d4t4solutions.com