®
Annual Report & Accounts
year ending 31 March 2020
Company Registration Number 01892751
Delivering
our strategy
To remain the technology leaders
in both enterprise real time digital
data collection and customer data
management solutions.
Customer Data Platform page 26
Customer Data Management page 30
Strategic Report
01 Headlines
02 Statement by the Chairman
06 Statement by the Chief Executive Officer
10 Statement by the Chief Financial Officer
12 Customer success story
14 Powering Digital Transformation
20 Mission and strategy
22 Our challenges
24 Business model
26 Our Intellectual Property
32 Growth plan
34 Key performance indicators
36 Principal risks and uncertainties
39 Corporate social responsibility and sustainability
Corporate governance
40 Board of Directors
42 Chairman’s introduction to governance
43 Statement of corporate governance
53 Audit Committee report
54 Nomination Committee report
55 Remuneration Committee report
56 Directors’ Remuneration report
61 Directors’ report
64 Statement of Directors’ responsibilities
Financial statements
65 Independent auditors report
69 Consolidated income statement
70 Consolidated statement of changes in equity
71 Consolidated statement of financial position
72 Consolidated cash flow statement
73 Company statement of changes in equity
74 Company statement of financial position
75 Company cash flow statement
76 Notes to the financial statements
100 Corporate information
Headlines
Revenue
(£m)
2020
2019
2018
2017
ARR
(£m)
2020
21.75
9.55
25.24
2019
7.57
18.43
2018
6.46
17.67
2017
4.75
Down by £3.49m
Up by 26.2%
Adjusted profit before tax *
(£m)
Gross profit margin
(%)
2020
2019
2018
2017
5.05
2020
60.75
6.02
2019
4.07
4.22
2018
2017
56.69
56.66
55.82
Down by £0.97m
Up by 4.06%
* Before amortisation of intangibles, share based payment charges, foreign exchange gains/(losses)
and one-off restructuring costs as per note 13
1
Statement by the Chairman
Peter Simmonds
Chairman
2019/20 Performance
have closed on the existing perpetual licence basis were deferred
The year ended 31 March 2020 was a year of excellent progress
into 2020/21 as a result of multiple stakeholders in client and
against our key strategic objectives which are:
partner organisations needing to review and approve new recurring
1. To increase revenues from our Celebrus software family of
revenue based contractual terms.
products which include both our CDP (Customer Data
One of the perhaps lesser known aspects of transitioning large
Platform) and our CDM (Customer Data Management) hybrid
complex deals to a recurring revenue basis is the sometimes
cloud platform with a focus on growing high margin recurring
unforeseen complexities of redrafting contracts, aligning goals
revenue from our enterprise class clients.
2. To transition the business to a term-based recurring revenue
with strategic partners and ensuring risk and reward remains as
intended during contract variations over a multi-year term.
model as the long-term value created from recurring
During the year significant progress has been made in deepening
revenue is generally significantly greater than one-off,
and expanding our relationships with strategic partners and the
perpetual contracts.
Board is optimistic the results of this will be seen in the growth of
I am particularly pleased to report that revenues of a recurring
nature grew from 29% to 45% of Group revenues and that the
forward-looking measure of Annual Recurring Revenues (ARR)
grew by 26.2%. These were achieved despite the considerable
disruption from Covid-19 during the last few weeks of our
financial year.
In the short term there is a well known consequence of
transitioning from perpetual to recurring licence models in that
revenues recognised in the year are lower, hence the reported
revenues fell from £25.2m to £21.7m in the period. The Group’s
Executive Directors were working extremely hard during the
second half of the year to close recurring revenue based contracts
and the Board is confident that had the majority of these new
contracts closed on a perpetual licence basis then there would
have been significant top line revenue growth in the year.
introductions during 2020/21.
Raised awareness of our
CDP software (Celebrus)
amongst the technical
analyst communities
One of our goals for 2019/20 was to raise awareness of our CDP
software (Celebrus) amongst the technical analyst communities
and I am pleased to report a growing level of coverage from
organisations such as Forrester as well as an appreciation by CIOs
in organisations with a mature and sophisticated data strategy
Although it is close to impossible to put an exact figure on the
of the value that can be derived from the real time (instant) data
impact in the year, several large contracts that probably would
capture capabilities of the product.
2
Covid-19
As a new Board member with “fresh eyes” I asked Monika to run
In common with so many businesses, we closed our offices.
the Board effectiveness process this year. I am pleased to report
All staff were able to work from home with little to no impact on
that overall this process identified no major shortcomings and a
customer service, data security or productivity.
few areas where the Board could improve its overall effectiveness
On behalf of the Board, I am grateful to our global workforce for
the manner in which they have responded to these challenges. I
would like to take this opportunity to thank all of the staff for their
hard work and commitment – it is thanks to you that the business
has made such good progress throughout the year and particularly
during the last few months.
The Board reviewed the impact on all roles across the business.
Although a small number of roles were identified as being not
required during the office closures, the Board took the view that it
would not claim on the taxpayer funded furlough scheme as the
which are now being implemented.
Deepening and expanding
our relationships with
strategic partners
business was able to bear this small cost without recourse to the
Dividend
public purse.
Board Appointments
In October 2019 we appointed Charles Irvine as CFO and,
following successful completion of his probationary period, Charlie
was formally appointed to the Board on 30 April 2020. I am
delighted to welcome Charlie and thank him for his contributions
so far.
We were also delighted to strengthen the Non-Executive team with
the appointment of Monika Biddulph in December 2019. Monika
was a member of the leadership team at Arm Holdings and brings
The Board has carried out a detailed review of the Group’s
dividend policy. Historically there has been a balance between a
progressive dividend and the requirement to invest in growth.
This year we had two additional factors to consider, the short-term
reduction in profitability as we transition to a recurring revenue
model and the need to preserve cash because of the uncertainties
surrounding Covid-19.
Taking account of all these factors the Board has recommended
(subject to shareholder approval) a final dividend of 1.9p per share
(2019: 2.3p).
significant experience from the International Technology Sector.
A progressive dividend policy will be reinstated once the transition
Monika chairs the Nomination Committee and is a member of the
to recurring revenues has progressed sufficiently that revenues are
Audit Committee and the Remuneration Committee.
again moving upwards.
3
Annual Report & Accounts 2020Strategic report Outlook
At this early stage of the year and with the long term impact of the pandemic on the global economy not yet fully known, it is difficult to
assess the impact on the Group’s financial performance for the current financial year. However, our high level of customer retention and
increasing recurring revenue visibility are expected to mitigate any material impact.
Our customers are experiencing a wide range of challenges. Due to the increase in online transactions, the majority of clients in the financial
community are more than ever involved in improving customer experience by treating their customers individually or in detecting and
preventing fraud and evaluating credit risk to an even greater degree. Our consumer sector customers are experiencing a very mixed set
of results.
The one certainty is that digital transformation remains at the forefront of most people’s minds and our products and services play firmly in
that area.
We are seeing a continued increase in our recurring revenue visibility. The pipeline of major new contracts remains strong and a high
proportion of these new deals, which are likely to be of a recurring revenue nature, are expected to be signed in the 2020/21 financial year.
Contracts are not being cancelled albeit that some are being deferred or slower to close and we are continuing to win new contracts.
Despite Covid-19, we remained focused on our transition from perpetual / capex sales to recurring revenue sales. This year will be key to
that transition.
Notably the Group has strong cash reserves and no debt.
Taking these factors into account, including some very positive initiatives with our existing strategic partners and the excellent progress
with product development, the Board remains upbeat about the future prospects for the business through 2020/21 and beyond.
2020 has started promisingly and in line with the Board’s expectations, with strong levels of both existing and new client activity.
Peter Simmonds
Chairman
29 June 2020
4
“Digital transformation
remains at the forefront
of most people’s minds,
and our products and
services play firmly in
that area”
Peter Simmonds
Chairman
5
Annual Report & Accounts 2020Strategic report
Statement by the Chief Executive Officer
Peter Kear
Chief Executive Officer
Strategy and position
Sales overview
During the year we took the strategic decision to switch from an
Throughout the year we announced the successful closure of a
unpredictable perpetual licence (capital expenditure) based sales
number of new global customer contracts in the UK, mainland
model to a predominantly term / recurring revenue model. This
Europe, the Pacific Rim and North America into sectors ranging
shift will provide us with increased forward visibility and quality of
from financial services to telecommunications and consumer
future revenues.
organisations. 2019/20 was a year of change and we successfully
At the same time we are focused on increasing revenues from our
Celebrus software family of products. We remain a leader in both
real time digital data collection and customer data management
and our products and services are used by many of the world’s
largest financial services and consumer organisations. We have
continued to capitalise on our technology leadership position and
grow our presence in those target sectors, while at the same time
managed to convert a high proportion of net new sales to
term / recurring style revenue contracts. These new client
contracts were evenly spread across Europe, Asia and North
America. We also extended our relationship with many of
our existing clients globally with sales of increased capacity,
geographic extensions, additional digital collection channels and
multiple third party integration adapters.
exploring new industry areas where our technology can provide
Sales for the year were £21.75m (2019: £25.24m), the change
similar value and business advantage.
due in main to the move from perpetual / capital sales to term /
Our solutions provide our customers with confidence in the depth
and quality of their data, safe in the knowledge that they can
collect all relevant data from every customer interaction across all
annual recurring contracts. Sales of our Celebrus product family of
software and services now make up 80% of total Group revenue
(2019: 71%).
digital channels in real time.
As a result of the change in product mix we were able to improve
Our technology ensures that digital channel data can be easily
combined with any other customer data that exists in their
environment – enabling customer analytics, optimised customer
experiences and more accurate targeted marketing, all in real time.
our gross profit margin levels to 60.7% (2019: 56.7%). This was
through a combination of our own software (own IP), our hybrid
cloud Customer Data Management platform and our delivery
services with the associated increase in our term / recurring
revenues. This resulted in an adjusted pre-tax profit for the Group
The Group’s focus is to empower clients to maximise the value
of £5.05m (2019: 6.02m).
gained from their customer data, delivering major uplifts in terms
of their revenue and profitability. Our real time data collection and
Customer Data Management platforms are well positioned as
leading offerings for financial and consumer markets as companies
We finished the year in a strong cash position at £12.77m (2019:
£11.00m) and due to strong sales in the final quarter trade debtors
stood at £7.97m (2019: £4.06m).
look to accelerate their move towards a digital transformation, fuelled
As mentioned previously we have started on the journey to a
by the continuing shift online by consumers and businesses alike.
more predictable recurring revenue business and I am pleased to
Improved our gross profit
margin levels to 61%
announce that we grew those recurring / term based revenues by
33% during the year to be 45.2% of our total revenue for 2020
(2019: 29.2%). Moving forward, and in line with this transition, we
will measure our Annual Recurring Revenues (ARR) exit rate as an
additional KPI.
6
Celebrus product family
now accounts for 80%
of Group sales
Partnerships
Our strategic partnerships remain a major focus for our business
and we recognise that the geographical reach and business
diversity that our partners bring to us is key to our own future
growth. During the year we have successfully continued to
promote and enhance our relationships with Teradata, SAS,
Pegasystems and Adobe both directly and via their partners.
Our channel partner sales continue to contribute a major
proportion of our revenues and as can be seen in recent
announcements we will be working even more closely with our
partner base.
We have recently commenced work on a number of new partner
initiatives which should provide significant returns over the coming
one to two years.
Markets and opportunities
Although the Covid-19 pandemic has brought considerable
uncertainty, the one thing that remains unchanged is the need
for companies, both old and new, to complete the digital
transformation of their business.
Our products and services are key to many companies’ digital
transformation plans and working with both industry analysts and
our partners we continue to extend our reach and improve market
awareness.
cash balance we believe we are well placed to make the most of
these opportunities this year.
The opportunity to work more closely with our partners has never
been greater and many of our sales are made possible as a result
of the extended reach and penetration into enterprise accounts
that our business partners provide.
Technology platform leadership
Our Celebrus Customer Data Platform has matured over a period of
20 years and represents the best in class globally for real time omni-
channel data collection. The recent launch of Celebrus 9.2, with the
introduction of machine learning and Natural Language Processing
(NLP) capabilities, has significantly enhanced our offering.
Our hybrid cloud Customer Data Management platform continues
to gain traction with companies who need to combine their multi
siloed customer data sources into one real time environment to
gain true advantage from their historical customer data assets
for risk, fraud or customer experience applications and now with
the introduction of a Platform as a Service option (PaaS) for on-
premise deployments we see more opportunity for growth.
Our growing research, development and testing teams across
Europe and India have enabled us to move significantly ahead of
our competitors in the market. With further planned new releases
due in the autumn, we will continue to deliver market leading
technology in both our data collection and data management
platform products.
To date, we have presented the business under two divisions:
Celebrus Customer Data Platform (CDP) and hybrid cloud
Customer Data Management (CDM). Going forward, we will fold
hybrid cloud CDM into Celebrus and it will be presented as part of
the Celebrus family of data products, which will now include data
Throughout the year we will continue to invest in the geographies
capture, data migration and data management & monitoring. We
where we see the greatest opportunity and take advantage of
are making this change in order to simplify the business and
the increased availability of highly skilled individuals. We see
align our focus on the full Celebrus suite of products and
significant opportunities to invest in growth and with our strong
supporting services.
7
Annual Report & Accounts 2020Strategic report “We have seen continued
blue chip contract wins
throughout the year”
Peter Kear
Chief Executive Officer
8
Celebrus - Customer Data Platform (CDP)
The opportunities that we currently see in our sales pipeline
We recently announced the release of Celebrus Version 9.2 (our
are increasing and our customers are asking to consume this
enterprise real-time Customer Data Platform) with new embedded
on a Platform-as-a-Service (PaaS) basis which gives us further
machine learning and NLP capabilities. Celebrus captures and
opportunity to increase our term based recurring revenues.
instantly activates data across all digital channels to enable
customer analytics and hyper-personalisation through one-to-one
Notable wins in this area include:
marketing in real-time.
Celebrus is the first CDP solution in the industry to use machine
learning to deliver Automated Marketing Signals. Automated
Marketing Signals enable enterprises to better understand
Multiple contract extensions with a major US bank
A new contract win with a digital lending provider *
An extension to an existing contract with a global nuclear
fuel company
customer interest, life events, subscriptions and customer
Creating notable customer references in the market is key to
experience. These preconfigured signals reveal new revenue
sustainable future growth and the advocacy of our customers is
generating opportunities and dramatically limit customer churn.
therefore of paramount importance to us.
The value of the new NLP functionality lies in the ability for
Summary
enterprises to immediately understand ‘customer sentiment’ in all
digital channels including online chatbots, complaints feedback
and product review forums. This speed is significant because it
allows clients to make meaningful interventions ‘in the moment’ to
safeguard customer relationships and reinforce their brand values.
Notable wins in this area during 2019/20 included:
A new multi-year contract with a major UK high street bank
A new multi-year contract with a major US bank
A capacity extension and a new data collection channel
contract with a major financial services customer in the US
A significant multi-year capacity extension and multiple
country expansion contract with a major European financial
services customer
An extension of an existing contract with a major US bank
An extension of an existing contract with a global
telecommunications company headquartered in APAC
Customer Data Management (CDM) - Hybrid Cloud
We have had considerable success with our hybrid cloud
Customer Data Management platform solution in a number of
sectors including financial services, automotive, retail and health.
We are seeing an increased requirement to combine our Celebrus
(Customer Data Platform) digital data, collected in real-time,
with historical data held in multiple siloed locations. By bringing
together those disparate historical data siloes into one real-time
data platform we enable better decisions to be made for customer
experience, next best offers, risk and fraud applications.
Our data migration, data management and data monitoring
software is being used in many organisations where combining and
managing very large historical data sets at scale is the challenge.
There have been a number of notable developments throughout
the year, underpinned by a solid financial performance.
D4t4 has made good progress in transitioning away from a
perpetual licence model to a recurring revenue model, which will
allow more forward visibility and better quality of earnings over the
long term. This current year will be key to that transition.
We saw continued blue chip contract wins throughout the year,
both with new and existing customers across our extended
Celebrus product family.
Our sales pipeline was strengthened by our strategic global
partnerships which remain a major focus for our business and we
successfully continued to promote and enhance our relationships
with Teradata, SAS, Pegasystems and Adobe.
We made significant enhancements to our enterprise software
technology with the launch of Celebrus 9.2. This latest version
introduced machine learning and NLP to our capabilities, which will
facilitate new revenue generating opportunities for customers and
will dramatically limit customer churn.
Overall, we have maintained our position as a leading data
software and solutions provider across our key markets, we have
continued to focus on growing our presence in target geographies,
particularly the US, and have made huge strides in enhancing our
Celebrus products with the introduction of machine learning and
NLP capabilities.
* Customer success story page 12
Peter Kear
Chief Executive Officer
29 June 2020
9
Annual Report & Accounts 2020Strategic report
Statement by the Chief Financial Officer
Charlie Irvine
Chief Financial Officer
I am delighted to deliver my first D4t4 Annual Report, having joined the Group on 1 October 2019.
It has been another very successful year for the Group, with the transition to a recurring revenue model well under way. This change puts
us in a strong position, with much improved visibility of future revenues and cashflows – more important than ever in these uncertain times.
Revenue
We report today total sales for the year ended 31 March 2020 of
£21.75m (2019: £25.24m). This reduction reflects the move to
providing annual recurring contracts rather than one-off perpetual
licence sales and the transitioning of our hybrid cloud Customer
Data Management platform business to “as a Service.”
Products - Own IP
Products - 3rd party
Delivery services
Support & maintenance
2020
£’000
7,658
4,362
3,629
6,099
2019
£’000
9,198
7,349
3,132
5,560
We successfully converted a high proportion of net new sales to
Revenue
21,748
25,239
recurring revenue contracts. This resulted in our recurring revenues
growing to 45.2% of our total revenue (2019: 29.2%). The recurring
Gross Profit
Gross Profit was £13.21m (2019: £14.31m), reflecting the lower
revenues. However, as a result of a change in product mix, we
improved our gross profit margin to 60.7% (2019: 56.7%). This
is due to the primary reduction in sales being in the low-margin
“Products – 3rd Party” segment.
Change in product mix
improves gross profit margin
Administration Expenses
Administration costs increased slightly to £8.34m (2019: £8.02m)
with continued investment in growing our US business largely
offset by a reduction in Head Office costs. We shall continue to
invest in growing the business where it makes sense to do so in
the coming year.
revenue being the proportion of 2019/20 sales which are of a
recurring, rather than perpetual or one-off, nature.
Recurring revenues
growing to 45.2% of our
total revenue
ARR as at 31 March 2020 was £9.55m (2019: £7.57m), an increase
of 26.2%. This is our key forward-looking metric of revenue at a
point in time that is reasonably expected to recur in the next twelve
months. We are confident of continued growth in this number as
we continue the transition.
Sales of our Celebrus product family of software and services
now make up 80% of total Group revenue (2019: 71%).The
switch in business model resulted in our own Products – Own IP
sales being down some 16.7%. Products – 3rd Party revenue
was also reduced significantly. Delivery services and Support &
maintenance revenues increased, by 15.9% and 9.7% respectively,
as these revenue streams are less impacted by the transition.
10
Net Profit and Earnings per Share
Current assets increased by £7.50m to £24.82m (2019: £17.32m).
Adjusted Profit before Tax (before amortisation of intangibles,
Driving this was a £3.86m increase in Trade and other receivables
share based payment charges, foreign exchange gains/(losses)
together with a £1.22m uplift in inventories and £1.77m increase
and one-off restructuring costs) for the year was £5.05m (2019:
in the closing cash balance to £12.77m (2019: £11.00m). The
£6.02m), with the variance driven almost entirely by the reduction
increase in receivables was due to particularly strong sales in the
in sales. Statutory Profit before Tax was £4.97m (2019: £6.34m).
final quarter and the inventory variance is because we acquired
A net taxation charge of £522k (2019: £511k) gives a Profit after
Tax of £4.45m (2019: £5.83m).
Earning per Share on an Adjusted, fully-diluted basis, was 11.19p
(2019: 13.89p) whilst Statutory EPS was 11.12p (2019: 14.78p).
Balance Sheet
some stock in March for a sale due to complete in the first quarter
of the current year.
Total liabilities at year-end were £9.59m (2019: £7.12m), an
increase of £2.47m driven by a £2.60m uplift in Trade and other
payables. The increase in Trade payables at year-end was linked
to the strong sales in the final quarter mentioned above. The
The Balance Sheet remains strong, with Net Assets up 17.8% at
Group remains debt-free.
£29.26m (2019: £24.84m).
Dividends
Non-current assets reduced by £613k to £14.03m (2019: £14.65m)
principally due to a reduction in the deferred tax asset as a result
of utilising US tax losses in the year and a number of share
options being exercised during the year. Also included within Non-
current assets are £188k of Celebrus-related Development costs
capitalised during the year.
The Board is recommending a reduced final dividend of 1.9p
(2019: 2.3p) which brings the total dividend for the year to 2.67p
(2019: 3.0p). This reduction is to reflect the lower profit level this
year due to the recurring revenue transition. If approved at the
Annual General Meeting, which is to be held on 6 August 2020, the
final dividend will be paid on 28 August 2020 to shareholders on
the Register at the close of business on 24 July 2020.
Balance Sheet remains
strong and debt-free
We continue to expense the majority of R&D costs, only
capitalising where we are very confident that all of the IAS 38
criteria are met. R&D costs expensed in the year amounted to
£784k (2019: £576k) as we continue to invest in further developing
our software.
Charlie Irvine
Chief Financial Officer
29 June 2020
11
Annual Report & Accounts 2020Strategic report Customer success story
KEY FACTS AT A GLANCE
Small and medium enterprises (SMEs) are the growth engine
the project to build up their team’s own skills and capabilities. John
for any economy. According to the Bank of England, they are
Pillar, CTO of NatWest Ventures, commented “it is crucial that our
responsible for 60% of all private sector employment in the
platform is always one step ahead of our business. So we worked
UK. Yet despite their importance to the British economy, they
with partners, like D4t4, who are capable of accelerating our time to
often struggle to get access to the finances they need to grow
market and removing friction from the lending process”.
their businesses. The strain on them is further exacerbated by a
convoluted and unnecessarily lengthy process which stifles their
The D4t4 Value
ability to grow and expand. Enter Esme Loans.
D4t4 have built robust data models and unlocked insights on the
Esme is NatWest’s standalone digital lending platform which
customer journey that have helped Esme prepare and scale their
launched in February 2017 to address this yawning gap and to
business to handle ten times the volume of loan applications and
offer SMEs and scale-ups a fresh new way to have fairer and faster
become truly data driven. Fully automated pipelines refresh the
access to funds in the market.
The Challenge
Esme Loans’ ambition was to leverage technology to provide the UK
SME marketplace with an easy, secure and fast way of accessing
unsecured loans ranging from £10,000 to £250,000 through a
simplified application process with the promise of a prompt decision
at a fair price. They defined their business model and set about
building the plan for the infrastructure and business processes
to realise their vision. Finding the right technology and business
data from the key loan platform and an external web analytics tool
to allow the full end-to-end customer journey to be mapped. From
the first ad campaign through approval stages and on to the current
payment status, Esme now have new levels of visibility and continue
to refine and optimise the customer journey.
a significant contribution
to the growth and success
partners to support them on this journey was critical.
The project has also provided Esme with an analytics workbench.
The Solution
Esme set out to build a data-driven business. They recognised the
value early on of choosing the best technologies and partners to
build a robust platform alongside their team. Esme were committed
to leveraging the power of machine learning and predictive analytics
to ensure they could achieve the rapid growth they anticipated. The
first step on this journey was to create a Cloud-based customer
data management solution using Microsoft’s Azure. This could
consolidate data from their lending platform, customer interactions,
digital marketing, CRM platforms and data sets from third parties
Think of this as ‘a single source of truth’ that is enabling business
managers to self-serve from a range of pre-canned reports within
Microsoft’s PowerBI tool. They require and create their own reports
and do vital investigative analytics using D4t4’s trusted tables.
The Results
When Esme entered this market just over three years ago, the
average time it took for an SME from loan application to acceptance
was two months and leveraging a combination of technology and
data, they have got it down to just a few hours in most cases.
that would improve the value of the customer insights e.g. credit
It is not an overstatement to say that Esme has revolutionised the
ratings. The search then moved to finding a trusted partner who
unsecured loans market for SMEs. The Esme digital platform now
had proven skills in Cloud, deep knowledge of banking security
offers SMEs a frictionless process to apply for unsecured loans to
processes, customer interaction tracking and the skill at creating the
grow their businesses. As of April 2020, Esme has processed
data models and insight reports to inform the business and allow
about £1 billion of loan applications and provided loans to c.2k
them to scale. D4t4 Solutions plc, a Microsoft accredited partner
SME customers.
and a company with a rich history implementing customer data
management platforms as well as a 30 year track record working
with some of the world’s largest financial services companies, were
judged to be the perfect partner to work with the Esme team.
Esme appointed D4t4 as their specialist data partner in December
2018 and have been working with their leadership team and
Peter Kear, CEO of D4t4 Solutions commented, “it was been an
absolute pleasure working with the founders and leadership team at
Esme and I am proud that the skills and expertise of the D4t4 team
has made a significant contribution to the growth and success of the
disruptive business model Esme is pursuing”.
technology providers since January 2019. It was important to Esme,
Looking ahead, Esme Chief Executive Richard Kerton stands ready
as it is to any new scale up organisation, that D4t4 could work in this
to significantly increase lending to UK SMEs and support them in
‘agile’ way and effect the appropriate knowledge transfer throughout
the post Covid-19 economy.
12
KEY FACTS AT A GLANCE
Esme Loans is part of the
NatWest Group
Target Market
SMEs trading for 3 years with a
£50,000+ turnover
Established
2016
Launched
2017
Product - Unsecured loans of
£10k - £250k
4
employees
at launch
70
employees
in 2020
£1 billion
of loan applications have
been processed since launch
Automated self-service
Digital Lending Platform
Traditional application times reduced
2 months to a few hours
“It is crucial that our platform is always
one step ahead of our business.
So we worked with partners, like D4t4,
who are capable of accelerating our time
to market and removing friction from the
lending process”
John Pillar
Chief Technical Officer
NatWest Ventures
13
Powering Digital Transformation with
Artificial Intelligence and Machine Learning
Organisations have become hyper-focused on building positive experiences for their customers across all the various
touchpoints of their business. Interactions, on a one-to-one level, not only require data fit for purpose on a timely basis,
but the sheer amount of data that is generally created about a customer becomes quite cumbersome to manage for
businesses looking for that next great idea. Layered on top of that data is a demand for brands to be good stewards of
customer data in a 100% compliant manner.
The challenges for brands today to maintain a competitive advantage is rooted in the ability to activate data in a meaningful way. The
only true way to activate customer data quickly, and to shorten the runway to value, is by harnessing Artificial Intelligence and Machine
Learning. Clients are under immense pressure to generate positive results in today’s marketplace, and the Board of D4t4 made solving this
problem a strategic focus in the prior year.
One of the most powerful and important datasets has undoubtedly become digital, and the challenges in today’s industry makes that a
difficult channel to cater for within the traditional world of marketing technology and tag-based solutions. In a world where marketing
technologies struggle to capture customer data, we are poised to excel. Throughout this report, we will detail the opportunity for D4t4
as well as our competitive positioning in the marketplace that puts us in prime position to be the partner that brands need in order to be
successful in today’s data-driven world.
Importance of Select Emerging Technologies in 2020 according
to Client-side Marketers and Agency Executives Worldwide
% of respondents
AI
36%
47%
18%
Enhanced payment technologies
35%
Live video/live streaming
31%
Chatbots/messenger apps
5G
30%
29%
Internet of things
26%
Voice interfaces
22%
VR/AR
17%
40%
43%
47%
180.708 mm
36%
180.708 mm
47%
180.708 mm
44%
180.708 mm
48%
Facial recognition
13%
32%
180.708 mm
Wearables
13%
35%
180.708 mm
25%
25%
24%
36%
27%
34%
35%
54%
52%
Market focus and growth
Artificial Intelligence is top of mind for Executives heading into 2020 and
beyond on both the Marketing and Technology sides of the house. The
reality is that this, combined with significant growth in the CDP sector,
means we are faced with an opportune moment to capitalize with our
core differentiators.
With our focus at D4t4 on capturing customer data in a compliant
manner, and also providing the hybrid cloud Customer Data
Management solutions to harness that data and get it to the right people
at the right time, we continue to be on the forefront of innovation and
helping brands evolve on their path of digital transformation.
Customer Data is Paramount
Our Customer Data Platform (CDP), Celebrus, is the gold standard for
digital customer data capture and connection to downstream systems
for activation. Recent data from MarketsandMarkets1 suggests the
global CDP market size is expected to grow from USD 2.4 billion in 2020
to USD 10.3 billion by 2025, at a Compound Annual Growth Rate (CAGR)
Very important
Quite important
Not important
of 34.0% during the forecast period. Celebrus continues to expand
Note: numbers may not add up to 100% due to rounding
Source: Warc, “The Marketer’s Toolkit 2020,” Dec 2, 2019
globally with a geographic representation to the right.
1. https://www.marketsandmarkets.com/Market-Reports/customer-data-platform-market-94223554.html
14
Global implementation of our
Celebrus CDP
With this heavy focus on connecting customer data across channels and devices comes the challenge of building environments that can
perform at scale for the analytical use cases across the business. This trend is further emphasised by MarketsandMarkets2 again who
suggests the global big data market size to grow from USD 138.9 billion in 2020 to USD 229.4 billion by 2025, at a Compound Annual
Growth Rate (CAGR) of 10.6% during the forecast period.
This positions D4t4 uniquely as not only are we solving for the digital customer data challenge, but we are also poised to build the hybrid
cloud architectures to ensure that organisations are able to capitalize on the better data they possess.
2. https://www.marketsandmarkets.com/PressReleases/big-data.asp
15
Annual Report & Accounts 2020Strategic report Market Opportunity
From our view, and recently outlined by a study we commissioned, there are five stages of Digital Transformation that organisations go
through as they mature.
The five stages of
Data-Driven Transformation
STAGE 1
STAGE 2
STAGE 3
STAGE 4
STAGE 5
Channel Centric
Customer Centric
Real Time
Enterprise
North Star
NPS
Business
Focus
Marketing focus on
customer acquisition &
sales. Digital focus on
channel performance
(clicks, page conversions)
Cross sales and loyalty
focus. Delivering a
consistent omni-channel
experience across
all touchpoints.
Customer value and
advocacy by optimising
customer journeys.
Digital & Customer
marketing merge.
Data as a strategic
asset: Now utilised
across Marketing, Risk,
Fraud, Product, Pricing,
Digital business model
with virtual agents
augmenting complex
advice processes
and decisions.
and more
Outbound marketing
Customer centric
Hyper-personalisation
Data captured once
Data driven AI including
Achieved
by
& paid advertising.
Vanilla web/mobile
marketing. Automated
event triggers,
of content and decisions
using contextual real
and connected to all
analytic & decisioning
deep learning and
knowledge based
experience. Analytics
focus on volumes and
personalisation & multi-
channel orchestration.
time data plus a blend
of AI and rules. Fully
platforms, to support
widest range of
decisions powered
by real-time data and
sales conversion.
Marketing optimisation.
automated operation
analytics & decisioning
use cases
intelligent bots
Outcomes
($ estimates for
organisations with
10m customers)
Low Marketing ROI
Medium Marketing ROI
Highest Marketing ROI
Maximise Business
Market leading
due to poor response
& conversion rates
plus labour intensive
as automation drives
improve response &
as hyper-personalisation
delivers 10-50x uplift
in sales conversion
Outcomes across
all lines of business,
channels and analytic
across
all customer facing
business functions.
processes. $10-$20m
conversion. $100m+
rates, better CX, and
lowest operating costs.
functions (Risk, Fraud,
etc.). $500m+
data driven sustainable
competitive advantage.
$250m+
$bns
Based on our analysis of the market, approximately 60% of organisations are working towards Stage 2, and the single biggest gap to them
getting there is the missing integration between digital channels and their customer data platform. Of the organisations fully at
Stage 2, roughly 50% are on the way to Stage 3.
Our target opportunity is highlighted by any organisations trying to get to Stage 2 and any organisation already in Stage 2 - 5. This
represents roughly 70% of organisations in our key verticals.
16
Industry Sectors
D4t4 is focused on the finance and consumer sectors, with a strong track record of delivering on over 300+ use cases for our customers
with a combination of our Celebrus Data Capture and Customer Data Management solutions. Over the past financial year, we have come
to recognise that many of the use cases we have solved for in the finance sector, as well as many of the challenges, mirror those in the
Insurance and Healthcare spaces in the US. In addition, the Telco sector is also one that we are investigating for opportunities globally.
Celebrus provides a complete, digital customer profile instantly to downstream applications to deliver a hyper-personalised experience
for our clients. The customer and one-to-one personalisation are key focal points across many industries in today’s marketplace, and our
differentiators uniquely position us as the partner for true digital transformation within our clients’ organisations.
While we remain focused on the finance sector, we feel that many of the industry challenges and trends play to the strengths of our
offerings in several potential sectors.
D4t4 Solutions is leading the artificial intelligence revolution
Digital disruption in the finance sector has been, and will continue to be, a growth focus for us. The backbone to digital disruption is the
activation of data and Executive adoption of a view towards the North Star in the previous table.
Looking out to the marketplace as a whole portrays an industry where many of the traditional marketing clouds and various pieces of
financial technology (Fintech) are unable to accurately create a view of a customer that can be built upon over time and integrated with
other key first-party datasets.
Web browser changes, including Apple’s Intelligent Tracking Prevention (ITP), in the past year are designed to limit the ability for traditional,
tag-based marketing technologies to identify and persist an individual identifier over time and track the full journey that those individuals
are taking.
Celebrus, due to the nature of the technology and product innovation, is not impacted in any way by these changes in the digital industry.
Our tagless implementation, combined with our ability to create a customer profile for instant use across the enterprise, allows us to truly
be the “single source of truth” for digital data to power high-value use cases in Marketing, Customer Experience, Advanced Analytics, Risk,
and Fraud.
The Board of D4t4 has further emphasised the development of Artificial Intelligence and Machine Learning solutions as a core focus of both
our Celebrus CDP and Customer Data Management solutions. This focus ensures we remain on the forefront of innovation for the top-of-
mind use cases of our customers.
D4t4 Solutions continues to excel with growth in the consumer sector
Compliant consumer data with the right depth, breadth, consistency, and accuracy can be applied across the enterprise for use cases in
Marketing, Customer Experience, Data Science, Risk, and Fraud.
With the launch of version 9 of our Celebrus CDP came the release of Automated Marketing Signals to harness the power of Machine
Learning, Legitimate Interest to empower fraud detection in a GDPR-compliant manner, and expanded connection capabilities downstream
for our core partners as well as new potential growth-focused partnerships in this financial year.
We are relentlessly focused on helping our customers march towards the North Star of Digital Transformation.
Geographic Reach
We are currently able to provide 24/7 support for our customers as a result of our existing geographic reach. We continue to bring in the
necessary skills and people in each market to ensure both our current ability to service our customers as well as the ability to scale to meet
the new demands as our business continues to expand in key markets such as the US.
The largest global market remains the US, and this accounts for over 60% of D4t4 sales.
Revenue by region Note 5 page 82
17
Annual Report & Accounts 2020Strategic report The Regulatory Opportunity
As organisations march towards the North Star of Digital Transformation, privacy and compliance continue to be paramount to continued
success. Many 3rd party marketing technologies are unable to truly capture and store customer data at the level of granularity needed
to power one-to-one marketing. Celebrus, as a true first-party solution installed in a client-controlled environment, future-proofs an
organisation’s ability to mature along their journey towards transformation. Combining that with our Celebrus Control module, which
has been vetted by many of the world’s largest global banks, ensures that our customers can confidently capture 100% compliant data
adhering to the regulatory requirements around the globe.
Furthermore, the risk and liability of digital fraud in the financial sector, and the launch of our fraud-specific features in version 9 of
Celebrus, has created a new set of use cases and opportunity for our CDP.
A selection of regulations impacting
D4t4 Solutions’ customers
PIPEDA
HIPPA
CalOPPA
CCPA
LGPD
PoPI
GDPR
Chinese Cybersecurity Law
Indian Information Technology
Acts 2000 and 2011
APP
New Zealand Privacy Act 1993
Our hybrid cloud Customer Data Management business is also further enhanced by the regulatory challenges in the finance sector.
Regulations such as Comprehensive Capital Analysis and Review (CCAR) and the Current Expected Credit Loss (CECL) framework in the
US require highly performant environments to run several models on extremely large data sets, which is a key differentiator of our hybrid
cloud Customer Data Management platform.
18
18
Key New Trends
New trends and challenges continue to seemingly appear daily, and we continue to innovate to ensure we can capitalise on these trends
for our customers. The themes that remain consistent from the previous year include a desire to be data-driven, the development of cloud
strategies, the rise of open source software, and the focus on collecting and harnessing the power of customer data.
From our perspective, there are a several new trends that we are focused on to drive further growth across our existing accounts and
new business:
Fraud / Risk
Our launch of Legitimate Interest in Celebrus and the additional Fraud features in version
9.2 and 9.3 of Celebrus in this financial year will be groundbreaking for our customers
and offer up new market opportunities for our business.
Artificial
Intelligence /
Machine Learning
The launch of Automated Marketing Signals in version 9.2 in Celebrus will be the first-
ever true deployment of Machine Learning in any marketing technology focused on
capturing customer data.
This module leverages our vast knowledge in the financial sector and can be easily
applied to other sectors under consideration.
Hyper-
Personalisation
Celebrus delivers a complete customer profile instantly to any downstream application
for data activation and personalisation.
Several innovations in 9.2, including HTTP 2.0, further expands our capabilities within the
arena of personalisation and offers significant functionality to guide our customers down
the path of digital transformation.
Digital Data
Challenges
Advertising
Cloud Ready
Apple Intelligent Tracking Prevention (ITP), and changes within Google Chrome, Firefox,
and Microsoft Edge, continue to limit the effectiveness of traditional marketing tag-based
technologies and their ability to capture and process customer data in a compliant way.
Celebrus is not impacted in any way by these changes as a result of being a true, 1st
party system and our IP.
Additionally, as a true 1st party system, Celebrus is also not impacted by the browser
restrictions on 3rd party cookies and cross-domain tracking, which brings us to the
next opportunity.
Advertising as a budget line-item tends to be the single largest investment in our
target customers
With the digital data challenges to cookies in this sector, and the IP we have within our
CDP, we are exploring the role we can play in solving for the challenges here and provide
a more complete view into the marketing journey of the consumer.
Celebrus has continued to innovate to support not only cloud deployments but also
many of the frameworks required to connect our data to platforms within Azure, AWS,
Snowflake, and others.
Our hybrid cloud Customer Data Management platform has been innovated to support
“burst to the cloud” capabilities and allow for open-source analytics within the cloud to
interface with our core platform.
19
19
Annual Report & Accounts 2020Strategic report Mission and strategy
Our Vision
To continually innovate and build a steadily growing business that earns high margins and recurring
revenues by partnering with our clients to drive maturity in their usage of data along their transformative
journey. We intend on leading digital disruption by powering artificial intelligence, machine learning,
advanced analytics, compliance, fraud, risk, marketing, and customer experience use cases with a
combination of a market-leading CDP and our hybrid cloud Customer Data Management platform.
Our Mission
To provide the two most critical components that drive Digital Transformation as an intersection within our
business. Powering the most granular, contextualised customer data at an individual level and the data
management platforms to operationalise that data throughout an enterprise for the use cases that matter.
Our Strategy
To deliver the vision our strategy is to continue to focus our activity on two complimentary areas that
financial services and consumer organisations are investing in today and expected to continue to invest in
for the foreseeable future:
1. Increasing revenues derived from our CDP, Celebrus, by leveraging our recent innovations in the
AI/ML and fraud sectors to create new opportunities while expanding our existing client relationships
with new use cases and upgrades. We will also use these new options to expand our partners with a
focus on marketplace differentiation.
2. Generating recurring revenue through developing, deploying, and managing hybrid cloud Customer
Data Management platforms that combine the intellectual property, services, software, and hardware
needed to help our clients evolve their Digital Transformation vision. Continue to offer the flexibility
and scalability of our environments to support artificial intelligence, advanced analytics, and
regulatory analyses on a scheduled and ad-hoc basis.
20
N
a
D
NOV A TI O
IN
T
t a Capture
R
U
S
T
INTEGRATED
CORE SERVICES
S
E
C
U
R
IT
D
ata Mana g e m e nt
C O
Y
N
B O RATIO
A
L
L
Our Tactics
This strategy will be executed by continuing to live our core values of innovation, trust, collaboration,
and security. We will continue to enhance and grow our capabilities across the two main pillars of our
business: Data Capture and Data Management. We have depth of expertise and wide connections
within the financial services and consumer sectors, and we will continue to further apply our learnings to
other verticals and partnerships.
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Annual Report & Accounts 2020Strategic report
Our challenges
Like any Group, D4t4 Solutions has several inherent challenges that it must overcome in order to execute its Strategy
successfully. The table below sets out these key challenges and the actions taken to ensure the Group continues to deliver
successful outcomes for all of our Stakeholders.
Covid-19
The coronavirus crisis has clearly had a major impact on many businesses across the world, with almost no industry isolated from this. The way
we do business has changed dramatically over the last few months and some of these impacts will be felt for a long time to come. The markets
in which D4t4 operates shouldn’t be impacted too significantly in the long term, and in fact the new environment presents the Group with an
opportunity given the renewed focus on the customer and reliance on data. There are clearly challenges nonetheless, not least of all a reluctance
on the part of some businesses to commit large funds at this time. Similarly, there is a challenge in terms of ensuring that all of our people and
products are still able to function for our clients at a time when most offices are closed and travel restrictions remain in place.
Management actions
All staff set-up for home-working and able to fulfil duties remotely
Investment has ensured good level of skills and experience in
all three main geographies, ensuring back-up in place if required
Board meetings and weekly Executive meetings held via
video conference
Stress-testing of forecast scenarios to confirm no cashflow issues.
Additional financing is in place with our Bank should this be required
Working with our Partners and end-user clients to ensure no
interruption to service levels
Continued focus on sales pipeline, supported by ability to
offer variety of contracts to suit e.g. SaaS, PaaS, term or
perpetual licences
Sales Cycle Management
The sales cycle for our products and services is typically greater than one year due to the cutting-edge nature of our products. There are also
typically multiple stakeholders within the client company that have to be addressed. Also, due to the size of projects, internal budgets have to
be planned far in advance. The challenge is to manage the sales pipeline so that investor expectations for steady, predictable growth are met.
Management actions
Bi-weekly sales reviews
Monthly Board review of the sales pipeline
Account plans for every major client are in place and
reviewed regularly
Relationship mapping is undertaken for major clients
Managing the recurring revenue transition
Flexible pilot project offerings to engage the client early in
the process are made available
Renewed focus on Partner education and activation in
the marketplace
The Board has announced previously a desire to move towards more of a recurring revenue model, with a more predictable revenue stream
allowing for improved revenue and cashflow forecasting. Over the long-term, this is seen as a clear opportunity to improve visibility of the
business and scale resources appropriately. That said, this transition away from the perpetual licence sales that we’ve recognised previously
can mean a reduction in short term revenues and profits.
Management actions
Regular internal and external communication as we move
through the transition
Regular agenda item at Board meetings and with
external advisers
Clearly defined KPIs around recurring revenues
Continued focus on cash as transfer Data Management
business to PaaS
Refresh of sales incentive schemes to ensure aligned
with new business model
Keep investors up to date as we move through the transition
E
N
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O
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T
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G
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H
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C
22
Expanding the relationship base
To grow the business faster and reduce risk the strategy calls for an increase in both the number of partners through which sales are made
and the number of direct client relationships the business has. To achieve our stated financial performance targets our financial resources
need to be carefully shared between sales, marketing and partnering activities.
Management actions
Additional sales and marketing investment
Growing partner base
Mix of direct and indirect commercial relationships
Developing the right talent
Deeper understanding of client data and analytics maturity and
how it evolves
In recent years, the Group has evolved into a data-focused technology organisation, therefore retraining and redeployment of existing
staff has been required. As always, the challenge is to create a balanced, flexible and highly motivated global team that can collaborate
successfully across three continents.
Management actions
Training investment is made as required
Increased number of Group-wide presentations and events to
develop greater team spirit. Regular online events and
presentations held during Covid-19 pandemic
Working location flexibility is offered to all
Refurbished offices to improve the working environment
Total remuneration, including share options, is reviewed annually
in light of the market
Creating the right products
Development resources are allocated based upon financial performance targets and consequently management prioritises product
development carefully. The challenge is to understand the market and make the right investment decisions which will deliver a return as well
as a clear value to our customers.
Management actions
Frequent client and partner engagement to understand
changing requirements
Interaction with industry analysts to understand current and
future trends
Attendance at industry events and seminars to widen
our knowledge
Growing the development team, especially in new areas such as
mobile and AI
Structured product planning meetings involving all stakeholders
Exploration of Customer Advisory Boards to generate more input
from our install base for our Product Planning team
R
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Annual Report & Accounts 2020Strategic report
Business model
The Board is confident that the D4t4 business model supports the business strategy of growing software and recurring revenues year-on-
year. This business model is continuously reviewed as the organisation grows and develops.
Our integrated core services
Data Capture
Capture all individual consumer data in a 100% compliant manner in the
most granular way possible in the industry today. Provide these digital
consumer profiles instantly to our partners downstream for data activation
in the realm of Marketing, Data Science, Customer Experience, Fraud,
and Risk.
t a Capture
a
D
INTEGRATED
CORE SERVICES
Data Management
Rapidly solving the issue of underperforming, multi-siloed, mixed-
technology data environments by consolidating them into a simple to use
customer data management solution. These solutions integrate data,
software and hardware using our own proprietary tools.
D
ata Mana g e m e nt
Our strengths
People
Our teams are at the heart of the business. They understand the markets we operate in, create innovative and adaptable solutions, write
complex product code, drive sales and deliver solutions and positive outcomes for our clients. In order to maintain and drive the business
forward, D4t4 seeks to attract and retain the best talent in our marketplace. Despite being spread across three continents, the business
is primarily organised as a single entity rather than divisions. As the business wins and delivers new contracts, this gives D4t4 the best
flexibility to deploy skilled staff on to the right projects at the right time.
Security
Data security is vitally important to both our clients and D4t4. Regulations such as the European General Data Protection Regulation (GDPR)
and the nature of the consumer data we handle 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.
2424
Our strengths
Value creation
D4t4 fundamentals create competitive advantage by enabling it 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, that deliver
capital growth and a progressive dividend policy.
For customers
D4t4 provides an end-to-end data service that is designed, from
the ground up, to be safe, secure and high quality, which result
in delivering exceptional value to our clients over many years.
For employees
D4t4 provides a flexible and secure working environment in
which staff can develop their own careers. As a global business
D4t4 aims to assist staff in gaining valuable international
experience as well as broad exposure to all the latest data tools
and technologies.
26.2%
increase in Annual recurring revenue
Customer success page 12
CSR for employees page 39
Partners
Our primary route to market is to sell our software and solutions in conjunction with other third party organisations, including SAS, Dell
EMC, Teradata, Pegasystems, Microsoft and Adobe. The solutions D4t4 deliver primarily contain components from SAS, 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 but continue to develop.
Intellectual property
To deliver the strategy, the business continues to invest in developing its intellectual property (IP). Competitive advantage is maintained
through investment in the core functionality of our Celebrus software, 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.
2525
Annual Report & Accounts 2020Strategic report
Our Intellectual Property
Product and technology innovation used to be the preserve of large enterprises, typically within their research
and development departments. But innovation can come from anywhere. This is very true of D4t4 and we are
proud of our product development team and the rich stream of technology innovations they are adding to the
Celebrus Customer Data Platform (CDP) solution every year. Most recently they have succeeded in embedding
both Machine Learning (ML) and Natural Language Processing (NLP) capabilities making it the first solution in
its category to offer enterprises this rich functionality out-of-the-box. These new pre-configured Automated
Marketing Signals (AMS) have the power to save enterprises millions of pounds of in-house development
costs and dramatically accelerate bottom line revenues as a result of being able to instantly detect and act on
customer intent data in real time.
Customer Data Platform (CDP) Market
Celebrus, acquired by D4t4 Solutions in 2015, is a data capture and customer profiling software solution which is positioned in the high
growth market category of Customer Data Platforms (The Forrester New Wave B2B Customer Data Platforms 2019). The Customer Data
Platform (CDP) market size is projected to grow from USD 2.4 billion in 2020 to USD 10.3 billion by 2025, at a Compound Annual Growth
Rate (CAGR) of 34.0% during the forecast period according to US market research by Reportlinker. The major growth factors of the CDP
include the proliferation of customer channels and the growth in the volume of transactions and interactions occurring online. It is believed
that the recent Covid-19 pandemic will further accelerate demand for CDPs. Drastic changes in customer buying behaviour and the need
for employees to work from home has highlighted the need for organisations to be able to effectively interact and deliver a frictionless,
personalised experience to all their customers, across every digital channel in real time. Celebrus is very well positioned to capitalise on
this demand.
Web
Mobile
ATM
Card Reader
Internet of Things
Internal data
Celebrus Data
External data
Commercial analytics
& decisions
Risk analytics
& decisions
Fraud analytics
& decisions
Compliance analytics
& decisions
Experience / marketing
analytics & decisions
26
The four core capabilities of
Celebrus
1. Capture
2. Create
3. Connect
all of a customer’s interaction and
behavioural data
a comprehensive digital profile
in milliseconds to an enterprise’s
that can be persisted across
analytics and decisioning platforms
every channel
4. Control - the privacy of all your customer data ensuring 100% ethical compliance to industry regulations like GDPR, CCPA
Celebrus is typically bought by enterprises and deployed in distinct stages, usually starting with one or two use cases to prove value. A
detailed insight study of Celebrus clients across many different industry segments revealed some very distinct phases and similarities of
approach in the process for our clients to becoming truly data-driven organisations.
We have codified these to produce a Five Stage Data-Driven Transformation Model to help other business leaders understand the journey.
While many clients are aiming for Stage 5 (which we call the ‘North Star’) none has achieved this yet, so there are many more opportunities
for Celebrus to expand its footprint in existing clients as well as acquire new ones.
Five Stages of Data-Driven Transformation page 16
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Annual Report & Accounts 2020Strategic report The Celebrus Impact
Because of the way Celebrus captures all interactions and behaviours for our clients, this has proved to be very valuable when something
unexpected such as the coronavirus pandemic occurs. This requires businesses to be agile, responsive and do swift additional analysis so
they can take prompt action to support both their customers and the business itself. Had our customers been relying on traditional tag-
based solutions, they would not have the ability or agility to support important ad-hoc requests such as these:
Major Banking Client
International Insurance Client
Used Celebrus data to measure interactions with their Covid-19
Captured web chat interactions in their overloaded call centres
initiatives and to better understand things like loan deferment and
to help prioritise responses, understand how supportive that
financial stability
channel had been and to identify opportunities for improvement
Illustrations of the business value and financial impact of the Celebrus CDP
UK Retail Bank with global network
Real time decisioning enabled
Year 1 Impact: Delivered >$50m incremental revenues
Significant improvements on customer engagement
50-70x increase in Click Through Rate (CTRs) on website
Predictive Analytics
$7.5m in new revenue from just one campaign
Leading European Insurance Group
Transformed their marketing attribution using highly
Achieved a 10% uplift in conversion rates
granular and contextualised Celebrus Data to do
advanced analytics
Improved retargeting visitors to the website
10% reduction in advertising saving millions each year
Financial calculators, abandoned applications and
$12m uplift in conversions in year 1
product browsing
Multi-Brand Online Retailer
Fraud Detection: Interaction data captured by Celebrus
£1m in customer fraud quickly identified and mitigated
was analysed to reveal patterns of account opening
activity revealing fraudulent behaviours enabling prompt
Cases of multiple identity theft traceable in minutes
intervention and millions of pounds in savings
28
28
One area that has benefitted from such
insights is the continued development of
DNB’s online and mobile digital services.
When looking at digital channel interaction
data to assess our customer journeys on our
digital channels we use a leading-edge
real-time digital capture solution,
‘Celebrus from D4t4 Solutions’..
We can assess whether our digital channels
are aligned to customer preferences and
continuously improve the digital experience.
The platform can also be easily optimised to
deliver highly tailored digital offerings to meet
anticipated customer needs and wants.
Our analytics capabilities are focused on
delivering the right product, at the right price,
through the right channel, at the right time.
Aidan Millar
Chief Data and Analytics Officer
DNB
DNB is Norway’s leading financial services provider with a market capitalisation of NOK 258 billion at year-end
2019 – it is not just leading in regard to size, but also with its progressive data driven digital transformation
program. Over the last 15 years, DNB has gone from having 550 branch offices to 57. The mobile bank has
gone from a hundred thousand visits a year in 2010, to almost a million daily customer interactions in 2019. The
success of the channel shift is remarkable. In a Finalta benchmark analysis of the international banking sector,
DNB was ranked number one in the world based on the efficiency of its branch network.
29
Annual Report & Accounts 2020Strategic report Customer Data Management
For 35 years D4t4’s work and solutions have been focused on helping companies get the best possible value from all their data assets.
We have expertise in solving the thorny technical challenges associated with managing and optimising complex data platforms and have
developed a proven methodology and suite of tools to deliver these. This is our Customer Data Management solution which is delivered as
a Platform-as-a-Service (PaaS) offering.
Our intellectual property comprises:
1. Development tools, database management, business analytics
Specialist tools for synchronising extremely large data volumes non-disruptively, taking across extended access control information
and converting data in the background between old and new formats
2. Operating systems
Configuration Control and Change Management
3. Servers and Storage
Monitoring and control of storage allocation and tuning synchronisation and backup through the use of snapshots to optimise usage
of storage and meet requirements known as RPO (recovery point objectives) and RTO (recovery time objectives) for big data platforms
4. Network Security and Firewalls
Proven process for vulnerability and threat management, roll-out of production environments; monitor and eliminate any security
weaknesses to safeguard the critical security infrastructure and ensure 100% compliance with industry and data privacy regulations
5. Data Centres
Physical facility
Development
tools, database
management
business analytics
30
PaaS
Operating systems
Servers and
storage
Networking
firewalls/security
Data centre
physical
plants/building
The Customer Data Management Impact
Covid-19 Resilience
Our Customer Data Management platform is built for scale and flexibility as a customer’s needs change. With the emergence of the
Covid-19 pandemic, our customers on the platform have a massively increased volume of requirements to run models and analyses
that were not foreseen in addition to the standard day-to-day. Our customers have experienced no issues with running thousands of
new advanced and regulatory analytics models on our platform which is testimony to the resilience and agility of our hybrid cloud
CDM solution.
Illustrations of the business value and financial impact of the Celebrus CDP
Top 3 US Retail bank
Hybrid Cloud Analytics & Business Intelligence
Deployed a fully remote-managed appliance in multiple
on-premise data centres with integration to off-premise
private clouds
500x Performance Improvements across various
analytics and data management areas
Drastic improvements in analytics processing times
freed up $100m+ liquidity to the bank
$10 million cost savings
60% reduction in total cost of ownership of the
analytics environment year-on-year
31
31
Annual Report & Accounts 2020Strategic report
Growth plan
Our business model and our chosen markets, together with our innovative technology and IP,
are all harnessed to grow the business through four key initiatives.
1. Regional growth
2. Additional use cases
Continued investment enables the business to access
market opportunities that are currently untapped.
In 2018/19 we increased our North American sales team
significantly and created a pipeline of new clients.
Use cases are the stories and wins needed to promote
and establish new applications of Celebrus data and
our hybrid cloud customer data management platform
in areas such as risk, fraud, advanced analytics, and
customer support.
In 2019/20 we supplemented this investment by adding in
US technical support and project management resources
to continue to drive growth in the largest and most
sophisticated market in the world. The US market
accounts for over 60% of Group sales.
During the current financial year, we are targeting growth
in the Asia Pacific region which is a clear opportunity for
the Group as currently around 95% of sales are to
customers in Europe and the US. We are considering ways
to invest in order to further support our existing clients and
current partners whilst also accessing new opportunities in
this fast-growing region.
In 2018/19 we created a knowledge bank of over 300 use
cases and started to use them as a tool to support and
engage existing clients and prospects. These same use
cases better enabled our partners to tell our story as well.
During 2019/20 we expanded our story and use cases into
risk, fraud and commercial decision making (e.g. pricing)
with the latest features of Celebrus.
In 2020/21 we’ll be continuing to expand upon our key use
cases, simplify our story, and align our messaging against
the challenges that our key markets are facing today. With
Celebrus, we are uniquely poised to provide data that can
power enterprise use cases across Marketing, Customer
Experience, Risk, Fraud, Compliance, and Data Science.
32
3. More engagement with clients
4. New partners
Investing in customer success teams to work more
closely with clients to help creating value from data
leads to cross-sell of services and expansion of
existing relationships.
In 2018/19 we started to engage more clients directly,
rather than through a partner, to enhance the quality of
service and advice available to the client.
Adding new partners gives access to more solution
sales opportunities that require the power of Celebrus
or our data management capabilities.
In 2019 /20 we cemented our new relationship with
Pegasystems, a leading decisioning software company,
that uses Celebrus data to power real-time personalisation.
We also further expanded relationships with Dell and SAS.
In 2019/20 we advanced our Celebrus customer success
capability by dedicating more time and resource to
In 2020 /21 we will develop new relationships with a
regional partner in Asia Pacific to support the regional
working in closer collaboration with our clients outside
growth goals and will extend our existing portfolio of
the usual project-based activity and closed a number of
systems integrators.
large direct accounts.
In 2020/21 we shall be continuing to develop both our
direct and partner relationships to ensure we’re well-
We will also seek new partners to support the new use
cases in areas such as risk and fraud as they are
developed. In addition, we are exploring partnerships with
placed for success with all opportunities in any market.
other key vendors such as Salesforce.
D4t4 has many potential growth areas; the Board ultimately makes the decisions regarding the balance of profit vs. growth
investment. It is the Group policy to ensure profitable growth in predominantly recurring business as a primary objective
balanced by an appropriate level of investment where required.
33
Annual Report & Accounts 2020Strategic report
Key performance indicators
Group’s financial key performance indicators
Revenue
Gross profit margin
Adjusted profit before tax
-13.83%
+4.06%
-16.1%
2020
2019
£21.75m
2020
60.75%
2020
£5.05m
£25.24m
2019
56.69%
2019
£6.02m
Short-term reduction due to
Unusually favourable product
Short-term reduction due to
transition to recurring revenue
mix with high proportion
transition to recurring revenue
business model
of celebrus software and
business model
services revenue
34
Group’s financial key performance indicators
Adjusted diluted EPS
Net cash
ARR
-19.4%
+16.1%
+26.2%
2020
2019
11.19p
2020
£12.77m
2020
£9.55m
13.89p
2019
£11.00m
2019
£7.57m
Short-term reduction due to
Strong balance sheet with no
Annually Recurring Revenue
transition to recurring revenue
external borrowings allows
expected to continue to grow
business model
further investment to fund
as continue transition in
future growth
2020/21
35
Annual Report & Accounts 2020Strategic report
Principal risks and uncertainties
D4t4 faces all of the standard economic, commercial and political risks facing a global technology business with employees, customers and suppliers
spread throughout the world. Whilst in the short term the extraordinary circumstances created by the Covid-19 pandemic have not negatively
impacted the business, clearly the uncertainty this crisis brings impacts the risk profile of the Group. As a result, the risk level of a number of the
principal risks mentioned below have increased since the last Annual Report. However, the Directors remain confident that the Group is well-placed
to mitigate these risks. As detailed below and elsewhere in the Annual Report, controls have been increased in light of the pandemic as have the
regularity of both Risk Committee and Main Board meetings, ensuring close monitoring of all issues as the situation develops.
The major risks to the Group that the Board focuses upon are shown below:
1
Execution timing
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.
Change in risk
Increase in risk level
Risk remains mitigated with ongoing
improvement to standardised
project delivery processes, though
Covid-19 has inevitably increased
the risk of delays in execution.
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. Collaboration tools are
being used whilst working from
home to maintain regular and
effective communication with
partners and clients.
h
g
H
i
Y
T
I
L
I
B
A
B
O
R
P
w
o
L
2
5
3
6
1
4
7
Low
IMPACT
High
Risk heat map
1 Execution timing
2 People risks
3 Market and regulatory changes
4 Client or partner loss
5 Foreign currency management
6 Competition
7 Data loss and reputational risk
36
Structure, remit and reporting of the Group’s Risk Committee page 47
2
People risks
3
Market and
regulatory changes
4
Client or
partner loss
A loss or severe issue with key
The Group is exposed to the risks
The loss of a key client or
personnel could impact the ability of
of changing regulations for the
significant sales partner would
the Group to execute on its strategy,
collection of consumer data. Some
impact the ability of the Group
causing severe reputational and
of these changes may be positive,
to meet its key business objectives.
operational challenges.
but others negative which can
impact on D4t4’s performance
and outlook.
Change in risk
Change in risk
Change in risk
Increase in risk level
No change in risk level
Increase in risk level
Increased risk that employees may
The Risk Committee have carefully
The Covid-19 pandemic has
be lost on a temporary basis at least,
considered this and deem there to
made it more likely that a client or
due to the Covid-19 pandemic.
be no change in risk.
partner could be lost, though this
risk is well mitigated.
Mitigation
Mitigation
Mitigation
Key individuals are identified,
D4t4 monitors the markets in which
The business has specific
succession plans put in place and
we operate by close collaboration
relationship management plans in
actions taken to spread the risk
with our clients, suppliers and
place for both clients and partners.
between more individuals. Covid-19
partners. We then plan product,
The status of the relationships is
risks are mitigated by existing and
project or operational changes to
reviewed by management on a
robust business continuity plans.
ensure we are minimising the impact
regular basis and actions put in
of changes. We follow proposed
place to reduce the risk of loss.
regulatory changes closely.
The risk is mitigated by the market
sector in which the majority of the
Group’s clients operate, the
broadening of sales partners and
the move to a higher recurring
revenue model with improved
visibility of future cash flows.
37
Annual Report & Accounts 2020Strategic report 5
Foreign currency
management
6
Competition
7
Data loss and
reputational risk
Changes in foreign exchange rates
New competitors or changes to
A significant IP, data loss, or
can result in reduced profitability
existing competitors’ products
security breach could impact the
due to cash collection values not
can significantly alter the market
brand and reputation of the Group.
matching transaction values and
dynamics, which in turn risks the
an increased potential for currency
position and standing that our own
losses in the income statement.
Intellectual Property has in the
banking, finance and financial and
consumer marketplace.
Change in risk
Change in risk
Change in risk
Increase in risk level
No change in risk level
No change in risk
As the Covid-19 crisis escalated
The Risk Committee have carefully
The Risk Committee have
during the first quarter of 2020,
reviewed this and consider the
considered this with respect to
the currency markets were
Group is ready for any opportunities
Covid-19 and conclude this is
particularly volatile and much
as they arise.
mitigated via existing information
uncertainty remains.
Mitigation
Mitigation
security controls.
Mitigation
Foreign currency fluctuation risks
The Group continually scans the
We are certified to ISO 27001
are mitigated via the use of
market for potential technology
and operate an information
financial instruments (eg forward
threats and has a development
security process that controls
contracts). In light of the
process in place to ensure its own
and minimises the risks. This
fluctuations in the currency
technology continues to evolve to
process is externally assessed
markets seen in March 2020, the
meet client needs, that cannot be
yearly. These risks are mitigated
finance team are meeting more
easily disrupted, and which can
via existing and established
regularly than before to review and
be protected by patents.
information security controls.
ensure currency risks are hedged
where necessary.
38
Corporate Social Responsibility and Sustainability
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.
Environment
Policy statement
Ethical Business Practices
Human rights
D4t4 Solutions fully supports the principles of, and is committed
D4t4 Solutions fully recognises and supports the protection of
to, promoting good environmental practice and sustainability in the
Human Rights, the UN Universal Declaration of Human Rights
conduct of its activities. It is our policy to ensure that any adverse
(UDHR) and the ten principles of the UN Global Compact.
effects on the environment are kept to a minimum.
D4t4 Solutions therefore:
Anti-corruption and bribery
It is our policy to conduct all of our business in an honest and
wholly supports the requirements of accepted international
ethical manner. We take a zero tolerance approach to bribery
standards and current EU environmental legislation and codes
and corruption and are committed to acting professionally, fairly
of practice.
minimises consumption through the reduction, reuse or
and with integrity in all our business dealings and relationships
wherever we operate, and implementing and enforcing effective
recycling of materials as much as possible.
systems to counter bribery.
encourages efficient use of energy, utilities and natural resources.
continually strives to improve environmental performance.
communicate our environmental commitment to clients and
suppliers and encourages their support.
We will uphold all laws relevant to countering bribery and
corruption in all the jurisdictions in which we operate. However,
we remain bound by the laws of the UK, including the Bribery Act
2010, in respect of our conduct both at home and abroad.
Carbon emissions
Modern slavery
Following on from our Head Office refurbishment last year for
improved standards in insulation, lighting, heating and energy
waste reduction, our electricity supply at our Head Office is now
based entirely on 100% renewable energy sources.
Enhanced collaboration software and flexible working
arrangements for our dynamic workforce continue to help reduce
travel and associated environmental impacts.
We have looked at the potential for carbon emission offsets for
flight travel but feel that the complexity and inconsistency of
standards in the industry does not currently make this viable, our
approach therefore is to minimise travel wherever possible and
make maximum use of our collaboration and conferencing facilities.
We will continue to explore other options available to further
reduce carbon emissions.
People
D4t4 Solutions 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.
We have a zero tolerance approach to Modern Slavery and will
act ethically and with integrity in all our business dealings and
relationships. Our approach is also underlined by our recognition
and support for UDHR and UN Global Compact.
Supplier engagement includes a check on approach to modern
slavery and a record is noted with respect to their statement on
modern slavery.
Equal opportunity
In order to provide equal employment and advancement
opportunities to all individuals, employment decisions at our
company will be based on merit, qualifications and abilities.
Except where required by law, employment practices are not be
influenced or affected by an applicant’s or employee’s race, colour,
religion, gender, national origin, age, political affiliation, marital
status, sexual orientation, age or any other characteristic protected
by law. This policy governs all aspects of employment, including
selection, job assignment, compensation, discipline, termination,
and access to benefits and training.
39
Annual Report & Accounts 2020Strategic report
Board of Directors
Peter Simmonds
Non-Executive Chairman
COMMITTEES
A
N
Re
Peter Kear
Chief Executive Officer
COMMITTEES
N
Peter was appointed to the Board as Chairman in April
Peter co-founded D4t4 Solutions in 1985. Prior to this he
2015. He was CEO of dotDigital Group plc for eight years
was a divisional director for Hawke Electronics, then a
and a major contributor to their success prior to stepping
subsidiary of Lex Service plc. He became CEO in 2016,
down. He is also Chairman of Cloudcall Group plc and is
having been responsible until then for both the sales
a Board member of the Quoted Company Alliance.
and business development aspects of the Company.
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.
Charles Irvine
Chief Financial Officer
COMMITTEES
Ri
Mark Boxall
Chief Operating Officer
COMMITTEES
None
Charlie was appointed as CFO in October 2019 and is a
Mark brings a wealth of knowledge and experience
member of the Risk Committee. He is responsible for all
in the areas of sales, delivery, operations and finance
of the Group’s financial functions including accounting,
having been both board director and senior manager at
audit, treasury, corporate finance and investor relations.
technology consultancies and product based technology
Since qualifying as a Chartered Accountant in 2006,
companies such as rbase, Morse, PTC and Siemens, and
Charlie has held senior finance positions in a number of
most recently Dell EMC.
companies including Alliance Boots, Bausch & Lomb and
most recently Ergonomic Solutions, where he is a
Non-Executive Director.
40
Jim Dodkins
Chief Technical Officer
COMMITTEES
Ri
Peter Whiting
Non-Executive Director
COMMITTEES
A
N Re
Jim is responsible for the Group’s strategic direction in
Over a 30-year career, Peter has gained extensive
technology, specialising in solution architecture for D4t4
financial and commercial experience. His core skills are
Solutions and its clients, and is a member of the Risk
centred around the financial services and technology
Committee. Prior to joining D4t4 Solutions he worked for
industries; he has the proven ability to quickly understand
Logica plc in various roles, where he gained wide industry
complex technologies and their applications and at the
experience and later managed the division responsible for
same time successfully developed strong interpersonal
projects in the broadcast and media sector.
and management skills which have enabled him to build
a technology-led NED portfolio. He is currently a Non-
Executive Director of Aptitude Software Group plc, FDM
Group plc and Keystone Law plc.
Monika Biddulph
Non-Executive Director
COMMITTEES
A
N Re
John Lythall
Non-Executive Director
COMMITTEES
Re
Ri
Monika has a wide range of experience in both the
John co-founded D4t4 Solutions in 1985 and was
commercial and technical aspects of an international
Managing Director from 1985 to 2016 when he retired
technology business. In over twenty years at ARM,
- handing over the reins to long term business partner
Monika held various General Manager, IP licensing and
Peter Kear - taking up a role as Non-Executive Director
technical roles in the business. Currently Monika is also
with the Group. Prior to forming D4t4 he was Managing
a Non-Executive Director on the board of Ilika Plc. She
Director of Hawke Electronics, a computer systems
was previously NED at Linaro Limited, and holds a PhD
distribution business which he and his partners sold to
in High Energy Particle Physics from the ETH Zurich. She
the Lex group. He has a wealth of experience in sales,
was appointed to the Board in December 2019.
operations and finance.
BOARD OF DIRECTORS KEY
EXECUTIVE
NON-EXECUTIVE
COMMITTEE MEMBERSHIP
A
N
Re
Audit Committee
Ri
Risk sub-Committee
Nomination Committee
Chair of Committee
Remuneration Committee
41
Annual Report & Accounts 2020Corporate Governance Chairman’s introduction to governance
The Board recognises the importance of high standards of
The incidence of the Covid-19 pandemic this calendar year
corporate governance for delivering long-term success to the
has resulted in unprecedented times. Noting that uncertainty is
Group and acknowledges its role in setting the culture, values and
commonplace in the world both economically and societally, the
ethics of the Group (as outlined in Principle 8) and communicating
Board of D4t4 has recognised that now more than ever there
these to all the Group’s stakeholders. This requirement is set
is a need for strong leadership. Since March 2020 the Board
out formally on the following page. The Board meets regularly
has embarked on holding additional meetings to coordinate the
to discuss the monitoring and promotion of a healthy corporate
operations of the business, whilst ensuring the safety and welfare
culture. The Chairman has ultimate responsibility for corporate
of its employees is of paramount importance.
governance matters and has overseen the preparation of this
governance statement accordingly.
Whilst the current composition of the Board demonstrates a wide
balance of skills, our Nomination Committee has been working
In March 2018, AIM Rule 26 was amended to require all AIM
to further strengthen the balance of independent Non-Executives
companies to disclose details of a recognised corporate
on the Board and good progress has been made in the last year
governance code that its Board of Directors has decided to apply,
towards achieving full compliance with the QCA Code.
how the Group complies with that code and, where it departs
from its chosen corporate governance code, an explanation of the
reasons for doing so.
Finally, the Board continues to engage with shareholders and
welcomes ongoing dialogue throughout the year. Due to the
pandemic, this year’s AGM will most likely have to be a closed
Since then and to assist the Board’s aim to operate as effectively
meeting but I welcome your participation in the accompanying
as possible, the Board has formally applied the principles of the
online investor meeting immediately afterwards.
Corporate Governance Code published by the Quoted Companies
Alliance (the QCA Code) to ensure compliance with AIM Rule
26 and for the production of the Group’s Annual Report and
Accounts.
A statement of the Directors’ responsibilities in respect of the
accounts is set out on page 64 of the 2020 Annual Report.
Board discussions are conducted openly and transparently,
By order of the Board
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 (page 36 of the 2020 Annual Report), 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.
Peter Simmonds
Non-Executive Chairman
29 June 2020
42
Statement of corporate governance
Section 172 Statement
The Board recognises the importance of setting high standards of corporate governance and complying with all legal requirements. In
particular, the Directors are required to act in accordance with a set of general duties as detailed within section 172 of the UK Companies
Act 2006. These duties are summarised as follows;
“A Director of a Company must act in a way they consider, in good faith, would be most likely to promote the success of the company for
the benefit of its shareholders as a whole and, in doing so, have regard (amongst other matters) to:
The likely consequences of any decisions in the long-term;
The interests of the Group’s employees;
The need to foster the Group’s business relationships with suppliers, customers and others;
The impact of the Group’s operations on the community and environment;
The desirability of the Group to maintain a reputation for high standards of business conduct; and
The need to act fairly as between shareholders of the Company.”
By formally applying the principles of the Corporate Governance Code published by the Quoted Companies Alliance, the Directors feel they
demonstrate compliance with the requirements of Section 172 of the UK Companies Act (2006).
The table below sets out how each of the specific matters mentioned in Section 172 is related to the principles of the QCA Code and the
relevant sections within the Statement of Corporate Governance.
The likely consequences of any decisions in
Please refer to Principle 1 – “Establish a strategy and business model which promote
the long-term
long-term value for shareholders” on page 45 and Principle 9 – “Maintain governance
structures and processes that are fit for purpose and support good decision-making by
the Board” on page 51.
The interests of the Group’s employees
Please refer to Principle 3 – “Take into account wider stakeholder and social responsibilities
and their implications for long-term success” on page 46. Particular attention is drawn to
the section on staff.
The need to foster the Group’s business
Please refer to Principle 3 – “Take into account wider stakeholder and social
relationships with suppliers, customers
responsibilities and their implications for long-term success” on page 46. Particular
and others
attention is drawn to the sections on clients, suppliers and industry bodies.
The impact of the Group’s operations on
Please refer to Principle 3 – “Take into account wider stakeholder and social
the community and environment
responsibilities and their implications for long-term success” on page 46. Particular
attention is drawn to the sections on communities and the environment.
The desirability of the Group to maintain a
Please refer to Principle 8 – “Promote a corporate culture that is based on ethical values
reputation for high standards of business
and behaviours” on page 50.
conduct
The need to act fairly as between the
Please refer to Principle 1 – “Establish a strategy and business model which promote
shareholders of the Group
long-term value for shareholders” on page 45 and Principle 2 – “Seek to understand and
meet shareholder needs and expectations”, also on page 45.
43
Annual Report & Accounts 2020Corporate Governance This statement explains how D4t4 Solutions plc has applied the main and supporting principles of corporate governance and describes the
Group’s compliance with the provisions of the QCA Corporate Governance Code (2018).
For the purposes of clarity and candour, the description of how the Group complies with the ten key principles of the QCA Code begins
with a summary of the two areas where the Group does not yet fully comply, followed by a review of each of the principles in turn.
No significant corporate governance matters arose during the period covered by the 2020 Annual Report nor subsequently to the date of
this statement on which it was considered necessary for the Board or any of its Committees to seek external advice.
The Board consults with its Nominated Adviser and other professional advisers on routine matters arising in the ordinary course of its business.
Exceptions to the application of the QCA Code
The following table summarises the specific areas within one of the principles where the Board considers that the Group does not fully
comply, or may be perceived as not fully complying, with the QCA Code.
Principle 5
(Maintain the Board as a well-functioning,
balanced team led by the Chair)
Exceptions and explanations
Application: The Board should
At the beginning of the period covered by the 2020 Annual Report, the Board consisted
have an appropriate balance
of eight members, five Executive and three Non-Executive. In the course of the year
between Executive and
Non-Executive Directors.
C Warren and M Tod resigned, whilst on 1 December 2019 M Biddulph was appointed
as a Non-Executive member. This meant that at the year end the Board comprised three
Executive and four Non-Executive members. This means that at 31 March 2020 the
general expectation that at least half of a Board should be independent Non-Executives
has been satisfied. It should be noted however that C Irvine was formally appointed to
the Board on 30 April 2020.
Principle 6
(Ensure that between them the Directors
have the necessary up-to-date experience,
skills and capabilities)
Exceptions and explanations
Application: The Board should contain the
The male to female ratio on the Board is presently 7:1 and there are currently no female
necessary mix of experience, skills, personal
Executive Directors. We believe that this reflects a strong gender bias in the technology
qualities (including gender balance) and
industry as a whole, and the Board remains confident both that the opportunities in the
capabilities to deliver the Group’s strategy
Group are not excluded or limited by any diversity issues (including gender) and that the
over the medium to long term.
Board nevertheless contains the necessary mix of experience, skills and other personal
qualities and capabilities necessary to deliver its strategy.
44
The Principles of the QCA Code
Principle 1 - Establish a strategy and business model which promote long-term value for shareholders
The Board’s shared view of the Group’s purpose, business model and strategy, and the values underpinning them, are detailed in the
Strategic Report within pages 14 to 33 of the 2020 Annual Report as follows:
“Powering Digital Transformation” (pages 14 to 19).
“Mission and strategy” (pages 20 to 21) considers how D4t4 Solutions seeks to realise its’ vision of earning high-margin, recurring revenues.
“Business model” (pages 24 to 25) reviews D4t4 Solutions’ key strengths, capabilities and values.
“Our Intellectual Property” (pages 26 to 31) explains what D4t4 Solutions’ services and products are.
The Group’s approach to delivering long-term value for shareholders is addressed in the Statement of the Chief Executive Officer on pages
6 to 9. Pages 32 to 33 set out the Group’s four-pronged “Growth acceleration plan” and pages 36 to 38 (“Principal risks and uncertainties”)
detail the key risks faced by the business and how these continue to be addressed.
Principle 2 – Seek to understand and meet shareholder needs and expectations
Relations with shareholders and 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.
Members of the Board meet with major shareholders on a regular basis, including presentations after the Group’s announcement of the
year-end results and at the half year.
In addition to regulatory news announcements the Directors have published the annual report and accounts, the annual results
presentation, the half year results and announcements on new contract wins as they arise.
In the period from 1 April 2019 to the date of this corporate governance statement, the following activities and events with stakeholders
have been arranged with the view to:
Communicating the Group’s business model, strategy and values,
Provide financial updates and explanations sought by shareholders, and
Engage with shareholders to fully understand their needs and expectations.
Date
Description of engagement
Group participants
Notes
June 2019
Preliminary results roadshow
P Kear, C Warren
August 2019
AGM
Directors
Shareholders invited to attend with Q&A session
November 2019
Interim results roadshow
P Kear, C Irvine
June 2020
Preliminary results roadshow
P Kear, C Irvine
August 2020
AGM (scheduled 6 August)
Directors
Shareholders invited to attend with Q&A session
Various
Shareholder/potential shareholder meetings
P Kear, C Irvine
The Board is kept informed of the views of shareholders and other stakeholders at each monthly Board meeting through a report from the
Chief Executive Officer together with formal feedback on shareholders’ views gathered and supplied by the Group’s advisers. The views of
private and smaller shareholders, typically arising from the AGM or from direct contact with the Group, are also communicated to the Board
on a regular basis.
45
Annual Report & Accounts 2020Corporate Governance P Simmonds is available to shareholders if they have concerns where contact through the normal channel of Chief Executive Officer has
failed to resolve or for which such contact is inappropriate. P Simmonds can be contacted through the UK head office contact information
shown on our website.
Constructive use of the AGM
The Board uses the AGM to communicate with private and institutional investors and welcomes their participation. At these meetings,
shareholders are asked to confirm that their questions have been successfully answered.
All members of the Board attended the Group’s AGM held on 23 August 2019 but in light of the Covid-19 pandemic, this year it will most
likely have to be a closed meeting. As mentioned on page 42, P Simmonds as Chairman is encouraging all shareholders to participate in
an online investor meeting immediately after the formal AGM to ensure they have the opportunity to ask questions.
After the year end and interim results roadshows, the Group’s Nominated Adviser consults with attendees for feedback to ensure that future
presentations encapsulate their requirements where possible.
Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board is fully aware that the long term success of the Group relies upon maintaining successful relationships with a range of different
stakeholders, both internal and external. The table below identifies who the key stakeholders are and how we engage with them.
Stakeholders
Reason for engagement
How we engage
Staff
Our ability to provide an industry
We have identified our internal values in order to recruit and maintain talented
leading software and services
and motivated staff. These values form the basis of all communications which
business is dependent upon
are sought through internal appraisals and regular cross-functional meetings.
good communications within our
There are also regular opportunities for the staff to engage with other parts
organisation.
of the organisation and recognise the successes of others. Examples include
fortnightly staff breakfasts and quarterly Group-wide “Town Hall” meetings,
which are held to provide staff with an operational and sales update on what
is happening within the business and ask any questions they may have of any
of the Executive Team.
Clients
Understanding current and
We have account managers and account directors whose primary
emerging requirements of clients
responsibility is to engage with our clients to understand and develop
enables us to develop new and
our products and services so that we can work with them to exceed their
enhanced services, together with
requirements.
software to support the fulfilment
of those services.
In relation to our own IP products we seek formal and informal feedback on
product roadmap and enhancements via our support offering and annual user
group meetings.
Suppliers
Our relationships with our
We treat all suppliers as individuals, build long term collaborative relationships
suppliers are key to the core
and where possible work within the local community. Our partnership and
success of our business.
purchasing teams seek to build ongoing communication with our suppliers
so that feedback can be received and acted upon. We seek to ensure that
supplier invoices are processed and paid promptly.
46
Stakeholders
Reason for engagement
How we engage
Shareholders
As a public company it is vital that
This is achieved in several ways:
we build relationships with our
shareholders so that we can both
inform them of our successes and
listen to their guidance.
Regulatory news releases
Investor relations section of the website
Annual and half-year reports and presentations
AGM
Capital markets and Technology demo events
Our intention is to engage with our shareholders to inform them of our
successes and to listen to the question and comments. This feedback is
usually received at the AGM and the investor presentations.
Industry bodies
Information security is fundamental
We have an established information security management system which
to our business, clients, partners,
encompasses independently audited ISO27001 and PCI DSS controls,
suppliers and associated data
industry best practices, as well as latest regulatory requirements including
subjects and so we ensure that our
General Data Protection Regulations (GDPR) and the UK Data Protection
policies and procedures provide
Act (2018). Our experienced Information Security Committee ensure that
a cohesive approach to this
governance, risk and compliance is actively managed and that our policies
important area.
and procedures evolve to meet ongoing requirements.
Communities
We consider that it is important
We look to recruit locally experienced staff and through the local universities,
to be a business that makes a
both in the UK and India. We employ local suppliers where possible and
positive contribution to local
throughout the year, we encourage staff to identify charities that they have an
economies and is attractive as an
affiliation with for the Group as a whole to support.
employer and partner.
Environment
Irrespective of our status as
We endeavour to use technology wherever possible such that meetings with
a public company, it is part of
both internal and external stakeholders can be held online, thus reducing the
our ethos to conduct business
need for travel.
operations that minimise any
adverse impact on the climate
these may have.
This further extends to allowing employees to work at home on occasion, further
reducing commuting costs on both economic and environmental grounds.
In addition, our HQ at Sunbury was recently refurbished using the latest
standards in insulation, lighting, heating and energy waste reduction and is
now fully powered using 100% renewable energy sources.
Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Board’s risk management controls and mitigation strategies are described in the 2020 Annual Report at pages 36 to 38 (“Principal risks
and uncertainties”) and page 51 (“Control environment”).
The Directors and operating Company management have a clear responsibility for identifying risks facing the business and for putting in
place procedures to mitigate and monitor risks. To this end the Company has a Risk sub-Committee appointed by, and reporting directly to,
the Board. It consists of one Non-Executive Director, two Executive Directors, a senior member of the finance team and a senior member of
the Operations team (the Information Security and Process Manager); other members of the Company can be seconded to the Committee
as required.
47
Annual Report & Accounts 2020Corporate Governance The remit of the sub-Committee is to examine the vulnerability of the Group to all types of risk, the mitigation of such risks, maintain
the risk register to properly reflect this and to report back to the Board with any changes in, or new areas of, vulnerability to risks and
recommendations for mitigation.
This is done at three levels:
A review of the risk register is included in the monthly Board pack
A quarterly report provided to the Board
A formal assessment of risks during the annual budget process
The Risk Committee meets every two months, or more often as required, and on each occasion reviews two areas of the corporate risk
register in detail to assess the vulnerability of the Group to risks under consideration and how to mitigate such risks. Employees from within
the relevant areas of the business are invited to help provide a more informed opinion of which risks are key and how they can be managed.
The Committee report back to the Board with any changes in, or new areas of, vulnerability to risks and recommendations for mitigation.
The Covid-19 pandemic is an example of an occasion when the Risk Committee has convened more frequently in order to review the
register for any changes to the level of risk due to the pandemic and the emergence of any new issues which may require mitigation.
Principle 5 – Maintain the Board as a well-functioning, balanced team led by the Chair
Composition
Directors’ biographies are shown both in the 2020 Annual Report on pages 40 to 41 and on the Group website.
At 31 March 2020, the Board comprises seven members, made up of three Executive Directors and four Non-Executive Directors. C Irvine
was appointed to the Board on 30 April 2020.
Having reviewed their respective lengths of service, the size of individual shareholdings where applicable and any prior roles or relationships
with the Group, the following Non-Executive Directors are considered independent at the date of this corporate governance statement:
P Simmonds (Chair)
P Whiting
M Biddulph
P Simmonds and P Whiting are considered independent, despite being shareholders of the Company, as their shareholdings are not deemed as
significant as defined by the AIM rules. J Lythall is not considered independent due to the fact that prior to 1 April 2016 he acted in the capacity
of Chief Executive Officer of the Group.
The Board does not consider it necessary to appoint an independent Director to a formal “Senior Independent Director” role.
All Directors are subject to election by shareholders at the first AGM immediately following their appointment and thereafter are subject
to re-election at intervals of no more than three years. All Non-Executive Directors are appointed for fixed terms in line with corporate
governance requirements, although those Non-Executive Directors whose independence may be called into question are subject to re-
election annually. The Non-Executive Director currently subject to annual re-election is J Lythall, as described above.
All of the Executive Directors are full-time employees of D4t4 Solutions plc.
Operation of the Board
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 64 and a statement of going concern is given on page 61.
The Board meets at least once a month. The formal schedule of matters specifically reserved to it for decision was reviewed and adopted
by the Board on 27 May 2020 and will be reviewed annually.
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 meeting by the Executive Directors and also on regular occasions by operational management.
48
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 Group maintains
appropriate insurance cover in respect of any legal action against the Group’s Directors and the Company Secretary, but no cover exists if a
Director is found to have acted fraudulently or dishonestly.
The Non-Executive Chairman and Non-Executive Directors are able to meet without Executives present prior to each Board meeting. The
agenda and relevant briefing papers are distributed in advance of each Board meeting.
When Directors have concerns which cannot be resolved about the running of the Group or a proposed action, these concerns are
recorded in Board minutes. Upon resignation, a Non-Executive Director is asked to provide a written statement to the Chairman for
circulation to the Board if there are any such concerns.
Commitment
All Directors are expected to attend the monthly meeting of the full Board, or to make themselves available to join the meeting by telephone,
and to attend all meetings of any Committee(s) of which they are members. In addition, the Directors are expected to attend strategy and
business planning meetings each year. The Non-Executive Directors are expected to make themselves available at all reasonable times for
consultation by other members of the Board.
Prior to each monthly Board meeting the Directors receive a detailed pack which includes:
Board meeting agenda
Minutes from previous Board meeting
Board pack which includes financial summary, update on each part of the business, strategy execution update and risk
assessment update
Papers as required for additional items requiring Board attention
Meetings and attendance
The following table summarises the number of Board, Audit Committee, Nomination Committee and Remuneration Committee meetings
held during the period covered by the 2020 Annual Report and the attendance record of individual Directors at those meetings:
MG Boxall
JL Dodkins
PJ Kear
J Lythall
PA Simmonds
PF Whiting
M Biddulph (appointed 1 December 2019)
MA Tod (resigned 30 September 2019)
CE Warren (resigned 3 July 2019)
Non-statutory director attendance
CC Irvine (appointed CFO 1 October 2019,
appointed statutory Director 30 April 2020)
Board
13/13
12/13
13/13
11/13
13/13
11/13
5/5
6/6
3/3
7/7
Audit
Nomination
Remuneration
-
-
-
-
1/1
1/1
-
-
-
-
-
-
2/2
-
2/2
2/2
1/1
-
-
-
-
-
-
3/3
3/3
2/3
-
-
-
-
The Board met monthly as in prior years but also had an additional meeting in March to discuss, amongst other matters,the Covid-19
pandemic and consider what actions the business should take to ensure its employees were as protected as possible whilst continuing to
execute the business strategy.
49
Annual Report & Accounts 2020Corporate Governance
Principle 6 – Ensure that between them the Directors have the
necessary up-to-date experience, skills and capabilities
The 2020 Annual Report includes, at pages 40 to 41 particulars of
the Directors who held office throughout the financial year to 31
March 2020 (apart from C Warren and M Tod who both resigned
earlier in the year).
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 their 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. More detail on
the experience and capability of the Directors is included in their
biographies on the corporate website.
On 1 December 2019 M Biddulph was appointed as an additional
independent Non-Executive Director and as a member of the
Board’s Nomination Committee (to which she was appointed Chair
in March 2020). Her biography can be found in the 2020 Annual
Report on page 41 and on the Group website.
External Advice
No significant matters of a corporate governance nature arose
during the period covered by the 2020 Annual Report nor
subsequently to the date of this statement 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.
Principle 7 – Evaluate Board performance based on clear and
relevant objectives, seeking continuous improvement
The Board annually reviews the effectiveness of 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 Nomination Committee.
In addition, a formal Board effectiveness evaluation process is
conducted biannually. The process involves all Directors completing
a detailed individual evaluation of Board performance, which covers
effectiveness in several areas including Board composition, Board
information, Board process, internal control and risk management,
Board accountability, CEO/Senior management and Standards of
conduct.
The results of these evaluations are interpreted by an independent
Non-Executive Director, with support from the Chairman, and
outputs plus any associated recommendations are reviewed by the
Board as a whole, with progress on any actions arising monitored at
the monthly Board meetings.
The results of the second evaluation, carried out during early 2020,
were interpreted by M Biddulph and presented to the Board at the
meeting held in April 2020. Improvements in a number of areas
were noted, for example Board composition and size, and risk
management. Areas were identified for action or closer monitoring,
with a focus on succession planning and long-term strategy.
As the business expands and as part of succession planning, the
Executive Directors will be challenged to identify potential internal
candidates who could potentially occupy Board positions and set
out development plans for these individuals.
Principle 8 – Promote a corporate culture that is based on ethical
values and behaviours
Our long-term growth strategy incorporates our objectives and
the business model set out in the strategic report. It is also
underpinned by our core values, which were redefined following
a staff consultation process and are split between client and
internal values.
Values
Innovation
D4t4 Solutions is dedicated to the development of innovative
technology that provides insight into your business, drives value
from your data and pragmatically addresses your challenges.
50
Security
D4t4 Solutions’ advanced technology collects, manages and
Ethical business practices
The Group is committed to corporate sustainability and to applying
enables analysis of your data, supporting it with the utmost care for
the highest standards of ethical conduct and integrity to its
its security.
Trust
D4t4 Solutions takes pride in its relationships with clients, working
hard to understand your business needs and developing trust
through professional and responsive service provision.
Collaboration
D4t4 Solutions augments its own technology by collaborating with
industry partners that provide further opportunities for engendering
the long-term success of your operation.
business activities in the UK and overseas. The Group does not
tolerate any form of bribery: the Directors and senior management
are committed to implementing and enforcing effective systems
throughout the organisation to prevent bribery in accordance with its
obligations under the Bribery Act 2010.
Principle 9 – Maintain governance structures and processes that are
fit for purpose and support good decision-making by the Board
Roles and Responsibilities of Directors
Pride
D4t4 Solutions will be a Group in which we can be proud of our
The 2020 Annual Report includes, at pages 40 to 41, descriptions
of the individual roles and responsibilities of the Chairman, Chief
achievements, delivering the highest standards of quality and being
Executive Officer and other Directors.
confident in our ability to satisfy our clients’ needs.
Recognition
D4t4 Solutions will acknowledge the value of all employees and
recognise their contribution to the Group’s ongoing success.
Teamwork
D4t4 Solutions will create an environment of innovation in which
The Board and its Committees composition
The Board is currently comprised of the Non-Executive Chairman,
four Executive Directors and three Non-Executive Directors.
The roles of Chairman and Chief Executive Officer 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
we work together as a team to develop pioneering technology that
shareholders, and the Chief Executive Officer is accountable for the
solves our clients’ challenges.
management of the Group.
Engagement
D4t4 Solutions will be a workplace in which all employees are
Non-Executive Directors constructively challenge and assist in
the development of strategy. They scrutinise the performance of
engaged with our business and are empowered to get involved with
management in meeting agreed goals and objectives and monitor
our communications and decision- making processes.
the reporting of performance.
The culture of the Group is characterised by these values which are
The Board has not appointed a Senior Independent Non-Executive
communicated regularly to staff through internal communications
Director, but currently this role is performed by the Chairman.
and forums. These core values are also communicated to
prospective employees in the Group’s recruitment programmes and
are further embedded within the induction process.
The Board believes that a culture that is based on the core values
is a competitive advantage and consistent with fulfilment of the
Group’s mission and execution of its strategy.
The Company Secretary is J Thorne, a solicitor of over 25 years
standing, who was appointed to the role on 27 July 2017. He is not
a Director of the Group.
To deal with specific aspects of the Group’s affairs, the Board has
formed certain Committees. Each of these Committees is
governed by terms of reference available upon request from the
The Board has a high proportion of Executive Director
Company Secretary.
representation which means communication and feedback between
the business and the Board is very well established. Recognition
and respect of appropriately ethical values and behaviours within
the organisation is therefore both well monitored and promoted.
Engagement between the Board and the organisation via these
Executive Directors is therefore deemed to be all-inclusive.
Details of the membership, roles, responsibilities and activities of
the Audit, Nomination and Remuneration Committees are described
in more detail in the individual Committee reports commencing on
page 53 of the 2020 Annual Report. The Chair of each Committee
reports to the Board on the activities of that Committee.
51
Annual Report & Accounts 2020Corporate Governance The terms of reference for each of the Audit, Nomination and Remuneration Committees can be found in the Annual Report on pages 53 to
55 and on the Group website.
Evolution of governance framework
In March 2018 the QCA Code was formally selected as the appropriate recognised corporate governance code to be applied for the
purposes of AIM Rule 26. The Board monitors the requirements of this code on an annual basis and revises its governance framework as
appropriate as the Group evolves.
As part of ongoing governance efforts, the Group decided in the year ended 31 March 2019 that an extra Committee should be formed to
review risk throughout the organisation. In March 2019, the first sitting of this Risk Committee took place. The Committee was formed to
establish and review that the Group are performing risk management throughout the organisation (and, to emphasise the point, not trying to
perform the risk management itself).
As the Group continues to grow the Board fully recognises both the importance and the need of the governance framework to continue to
evolve, as evidenced in very recent times by additional consideration of matters reserved for the Board, the newly created Risk Committee
and external advice being sought to assist the Remuneration Committee in making its decisions. Consideration of the need to further
enhance the governance framework will attract ongoing focus with the Group.
Principle 10 – Communicate how the Group is governed and is performing by maintaining a dialogue with shareholders and other relevant
stakeholders
A range of forums exist at which the functioning of the Group is critically appraised and where opportunities exist for stakeholders to
challenge management and hold them to account for the Group’s performance.
Board Committees
A description of the work of the Board’s Committees in the financial year to 31 March 2020, including a report from each of the Audit,
Nomination and Remuneration Committees, is set out at pages 53 to 55 of the 2020 Annual Report.
The work of the Nomination Committee resulted in the appointment on 1 December 2019 of Monika Biddulph as an independent Non-
Executive Director.
Votes at General Meetings
All resolutions put to the AGM held on 22 August 2019 were passed by majorities of not less than 90% of the votes cast.
The most recent results for the Group, together with Annual Reports for the preceding ten years and notices of all General Meetings, can be
found on the Group’s website.
52
Audit Committee report
Peter Simmonds
Chair
Audit Committee membership
Peter Simmonds (Chair)
Peter Whiting
Monika Biddulph (appointed 1 December 2019)
I am pleased to present the report of the Audit Committee for the
The two main issues that the Audit Committee are concerned with
year ended 31 March 2020.
The Audit Committee comprises three Non-Executive Directors
of the Company, Peter Whiting, Monika Biddulph and myself.
The Committee is chaired by myself and met once during the
year under review, prior to Monika Biddulph being appointed.
It operates under formal terms of reference, which are available
are in relation to revenue recognition and the carrying value of
goodwill. The Committee review the Group’s revenue recognition
policies to ensure they are compliant with current accounting
standards. They also review revenue streams in relation to various
customers to ensure that the carrying value of goodwill in the
financial statements remains supported.
on request from the Company Secretary or at the AGM. The
Auditor Independence
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.
To ensure auditor independence, consideration is given to their
integrity and the objective approach of the audit process. The
use of non-audit services is not considered to be significant and
The Audit Committee is responsible for reviewing a wide range of
amounts paid in respect of these are disclosed in note 6.
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.
I am satisfied that the Committee has satisfactorily discharged its
duties in the year in accordance with its terms of reference, which
are reviewed annually.
Peter Simmonds
Chair of the Audit Committee
29 June 2020
53
Annual Report & Accounts 2020Corporate Governance
Nomination Committee report
Monika Biddulph
Chair
Nomination Committee membership
Monika Biddulph (appointed 1 December 2019 and as Chair 26 March 2020)
Peter Simmonds (resigned as Chair 26 March 2020)
Peter Kear (CEO)
Peter Whiting
I am pleased to present the report of the Nomination Committee
In relation to succession planning, the Nomination Committee
for the year ended 31 March 2020.
keeps under review, and takes appropriate action to ensure,
The Nomination Committee comprises four Directors: three Non-
Executives Directors (myself, Peter Simmonds and Peter Whiting)
and one Executive Director, Peter Kear. In the performance of its
duties, the Committee held two meetings in the year.
orderly succession for appointments to the Board and to senior
management, thereby maintaining an appropriate balance of skills
and experience within the Group and on the Board. With regard
to Non-Executive Directors, the Committee considers, amongst
other factors, their other significant outside commitments prior to
The principal activity of the Nomination Committee in the year was
making recommendations. This is designed to ensure that they
leading the recruitment process for new directors. This ultimately led
have sufficient time to meet what is expected of them and keeps
to the appointment of a new Chief Financial Officer from 1 October
any changes to these commitments under review.
2019 (Charles Irvine) and myself as a new Non-Executive Director
from 1 December 2019.
I am satisfied that the Nomination Committee has satisfactorily
discharged its duties in the year in accordance with its terms of
The process included a merit-based assessment based on objective
reference, which are reviewed on an annual basis.
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 Nomination 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 13% of Board membership.
Monika Biddulp
Chair of the Nomination Committee
29 June 2020
54
Remuneration Committee report
Peter Whiting
Chair
Remuneration Committee membership
Peter Whiting (Chair)
John Lythall
Peter Simmonds
Monika Biddulph (appointed 1 December 2019)
I am pleased to present the report of the Remuneration Committee
For 2019/20, the Remuneration Committee has continued to
for the year ended 31 March 2020.
operate a simple remuneration structure made up of basic salary,
The Remuneration Committee consists of four Non-Executive
Directors; Peter Simmonds, John Lythall, Monika Biddulph and
me as Chair. The Committee’s terms of reference require it to meet
not less than once each year. The Committee met three times in
the year ended 31 March 2020. It is responsible for reviewing and
determining the policy of the Group on Executive remuneration
including specific remuneration packages for each of the Executive
members of the Board, pension rights and compensation
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 the following
financial period and made recommendations to the Board on the
overall package for Executive Directors.
payments. The Committee is also responsible for monitoring
I am satisfied that the Committee has appropriately discharged
compliance with the implementation by the Group of the legal
its duties in the year in accordance with its responsibilities and
requirements and, so far as reasonably practical, recommendations
encourage you to read the Directors Remuneration Report on the
and guidelines relating to Directors’ remuneration.
following pages.
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.
Peter Whiting
Chair of the Remuneration Committee
29 June 2020
55
Annual Report & Accounts 2020Corporate 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 Listing Rules.
The report is in two sections:
The Directors remuneration policy which sets out the Group’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 2020.
Directors’ remuneration policy
Executive remuneration packages are prudently designed to attract, motivate and retain Directors of the high calibre needed to maintain
the Group’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 Group’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 Group
Base salary is paid monthly
An Executive Director’s salary is determined by
can recruit and retain
and reviewed annually, with
the Remuneration Committee in March of each
high-quality Executives
any increases applying from
year and when an individual changes position or
to deliver on the Group
1 April.
responsibility. In deciding appropriate levels, the
strategy in the interest of
the shareholders.
Remuneration Committee considers the Group
as a whole and relies on objective research which
gives up to date information on a comparable
group of companies.
Benefits
Ensures that the Group
Benefits principally
In relation to health care and death in service
can recruit and retain
comprise private healthcare
benefits, premiums are paid by the Group to an
high-quality Executives
and death in service
external broker to arrange cover, in line with other
to deliver on the Group
insurance. In addition, two
Group employees. These benefits are standard
strategy in the interest of
Executive Directors receive
for all Group employees.
the shareholders.
company cars.
The Group offers company cars / car allowances
to a number of employees across the organisation.
Annual bonus
Rewards and incentivises
The Committee sets annual
The Remuneration Committee sets bonus plans
the Executive Directors
performance targets, linked
for Executive Directors based upon achieving a
for achievement of
to strategic objectives
number of pre-defined growth targets including
strategic objectives.
and risk management.
revenue and EPS.
Bonus payments in respect
of a year are made in June,
or later if any element is
deferred.
56
Element of remuneration
Link to Group strategy
Operation
Framework
Share option plan
Aligns the interests of the
The Remuneration
The share option plans are subject to rules
Executive Directors with
Committee has discretion
and limits approved by shareholders in general
the interest of the long
to make option grants
meeting. Options are granted at an exercise
term shareholders as the
to Executive Directors
price based on the mid-market price of ordinary
options only deliver value if
and other staff, subject
shares on the day prior to the date of grant. Any
the share price rises.
to the scheme rules, and
exercise is subject to satisfaction of the specified
to determine appropriate
performance conditions defined.
performance conditions.
Pension
Ensures that the Group
Pension contributions are
Executive Directors are members of the
can recruit and retain
made by the Group to a
Company Money Purchase pension scheme.
high-quality Executives
defined contribution scheme
to deliver on the Group
operated by third party
strategy in the interest of
providers.
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 their salary by way of salary sacrifice.
There are no unfunded pension promises or
similar arrangements for Directors. There were
two Directors in the scheme in 2020 (2019: four).
Chairman and Non-
Ensures that the Group
Fees for Non-Executive
A basic fee is set for normal duties,
Executive Director fees
can recruit and retain a
Directors are set by the
commensurate with fees paid for similar roles
high-quality Chairman and
Board (excluding Non-
in other similar companies, taking account of
Non-Executive Directors
Executive Directors). Fees
the time commitment, responsibilities, and
to deliver on the Group
are paid monthly or quarterly.
committee position(s). Supplementary fees
strategy in the interest of
the shareholders.
are paid for any 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 Group’s Nomination Committee is responsible for leading the process for Board appointments and making recommendations to
the Board. Refer to the report of the Nomination Committee for details.
Loss of office payments
In the event of early termination, all of 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 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.
57
Annual Report & Accounts 2020Corporate Governance Consultation with shareholders
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.
Consultation with employees
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
P Kear and J Dodkins have Directors’ service agreements which can be terminated on twelve months’ notice. These agreements were
dated 29 August 1997. M Boxall has a service agreement which can be terminated on 3 months’ notice dated 1 November 2015. C Irvine
has a service agreement which can be terminated on 3 months’ notice dated 1 October 2019.
Non-Executive Directors
P Simmonds, J Lythall, P Whiting and M Biddulph 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 Group has no policy on Director shareholdings.
Outside appointments
Executive Directors are entitled to accept appointments outside the Group providing that the Chairman’s permission is sought and fees
in excess of £20,000 from all such appointments are accounted for to the Group.
Aggregate Directors’ remuneration
The total amounts for Directors’ remuneration were as follows:
Emoluments (Fees / basic salary, benefits and annual bonus)
Money purchase pension contributions
IFRS 2 share-based payment charge
Employer’s National Insurance
Total
2020
£000
1,207
38
66
1,311
157
1,468
2019
£000
1,615
44
84
1,743
217
1,960
Three directors (2019: four) exercised 766,667 options during the year (2019: 1,388,864) with gains on exercise of share options during the
year totalling £1,184k (2019: £2,471k).
There are no other long term incentive schemes.
58
Single figure for the total remuneration (audited)
31 March 2020
Executives
P Kear
J Dodkins
M Boxall
C Warren (resigned 4/7/19)
M Tod (resigned 30/9/19)
Non-Executives
P Simmonds
J Lythall
P Whiting
M Biddulph (appointed 1/12/19)
R McDowell (resigned 31/3/19)
Total
Fees/basic
salary
£000
Benefits
Bonus
Sub total
Pension
£000
£000
£000
£000
Total
2020
£000
Total
2019
£000
210
160
180
39
88
50
20
45
13
-
805
27
17
3
1
1
-
7
-
-
-
138
92
90
26
-
-
-
-
-
-
375
269
273
66
89
50
27
45
13
-
10
10
11
2
5
-
-
-
-
-
385
279
284
68
94
50
27
45
13
-
390
299
319
244
281
50
27
34
-
15
56
346
1,207
38
1,245
1,659
Remuneration of highest paid Director
Remuneration
Company contributions to money purchase pension schemes
2020
375
10
385
2019
380
10
390
Emoluments for the highest paid Director for the year ended 31 March 2020 and 31 March 2019 are included in the table above.
The highest paid Director exercised no share options during the year (2019: 435,000 options exercised with a gain of £823k upon exercising
those options).
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.
Details of options for Directors who served during the year are as follows:
Number at
Number at
C Warren
M Boxall
M Tod
31 March 2019
31 March 2020
Option price
Expiry date
Exercisable from
50,000
300,000
166,667
166,667
166,666
250,000
-
-
-
166,667
166,666
-
90.5p
75.0p
149.0p
149.0p
149.0p
113.0p
22 Jan 2026
2 Nov 2025
13 Aug 2028
13 Aug 2028
13 Aug 2028
26 Jun 2026
22 Jan 2017
2 Nov 2016
1 Jul 2019
1 Jul 2020
1 Jul 2021
26 Jun 2017
P Kear, J Dodkins, P Simmonds, J Lythall, P Whiting and M Biddulph did not hold any share options during the year.
59
Annual Report & Accounts 2020Corporate Governance
All reductions in options held by Directors between 31 March 2019 and 31 March 2020 have arisen due to the exercising of options held at
31 March 2019 and were all exercised whilst in office. No options lapsed.
Three directors (2019: four) exercised 766,667 options during the year (2019: 1,388,864) with gains on exercise of share options during the
year totalling £1,184k (2019: £2,471k).
The market price of the shares at 31 March 2020 was 140.0p (257.0p at 31 March 2019) and the range in the period under review was
121.5p to 278.0p.
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 Earnings Per Share.
Directors shareholdings and dividends paid to Directors are disclosed in the Directors’ Report on page 62.
Performance graphs
Company share price
450
350
250
150
15
16
17
18
19
20
(INDEX) D4t4 Solutions plc - Price
(INDEX) FTSE AIM - Price
(INDEX) FTSE Small Cap - Price
The graph to the above 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’s opinion that they give a true comparison to its peers.
Peter Whiting
Chair of the Remuneration Committee
29 June 2020
60
Directors’ report
The Directors present their annual report and the audited financial
There are a number of agreements that take effect, alter or
statements for the year ended 31 March 2020, which should be
terminate upon a change of control of the Group such as
read in conjunction with the Strategic Report on pages 14 to 33.
commercial contracts, bank loan agreements, property lease
The Corporate Governance Statement set out on pages 43 to 52
arrangements and employees’ share plans.
forms part of this report.
Incorporation
D4t4 Solutions Plc is a company incorporated in the United
Kingdom under the Companies Act 1985.
Dividends
The Directors recommend a final dividend of 1.9p (2019: 2.3p)
per ordinary share to be paid on 28 August 2020 to ordinary
shareholders on the register on 24 July 2020.
Future outlook
The Group’s future outlook and opportunities are referred to in the
Chairman’s and CEO Statements on pages 2 to 9.
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 21. The Company has one class
None of these are considered to be significant in terms of
their likely impact on the business of the Group as a whole.
Furthermore, the Directors are not aware of any agreements
between the Group and its Directors or employees that provide
for compensation for loss of office or employment that occurs
because of a takeover bid.
Going Concern
The Group’s business activities, together with the factors likely to
affect its future development, performance and 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.
of ordinary shares which carry no right to fixed income. Each share
Having reviewed the impact of the Covid-19 pandemic on
(other than own shares held in treasury) carries the right to one
the business, and stress-tested the Group’s future plans and
vote at general meetings of the Company.
cashflow projections, the Directors are confident that the Group
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 26.
No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid.
With regard to the appointment and replacement of Directors,
the Company is governed by its Articles of Association, the
Companies Acts and related legislation. The Articles themselves
may be amended by special resolution of the shareholders. The
powers of Directors are described in the Main Board Terms of
Reference, copies of which are available on request, and the
Corporate Governance Statement on page 43.
Under its Articles of Association, the Company has authority to
issue 50,000,000 ordinary shares.
and Company and its subsidiary undertakings have adequate
resources to continue in operational existence for the foreseeable
future. It should be noted that the Group finished the year with
£12.77m net cash, no debt and has so far seen little material
impact on sales as a result of the pandemic. For this reason,
they continue to adopt the going concern basis in preparing the
financial statements.
In accordance with the Companies Act s414 c(11) information in
relation to the business and risks is shown in the Strategic Report.
Supplier Payment Policy
It is Group policy to pay all claims from suppliers according to
agreed terms of payment upon receipt of a valid invoice which is
materially correct. The Group does not follow a code on standard
payment practice. At 31 March 2020 the Group had 93 days
(2019: 71 days) of outstanding liabilities to creditors.
61
Annual Report & Accounts 2020Corporate Governance Directors and Directors’ Interests
The Directors who held office during the year and to the date of signing, unless otherwise stated, were as follows:
P J Kear
J L Dodkins
M G Boxall
C C Irvine (appointed 30 April 2020)
P A Simmonds
J Lythall
P Whiting
M Biddulph (appointed 1 December 2019)
At the AGM, M Boxall, C Irvine, J Lythall and M Biddulph 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:
P J Kear
J L Dodkins
M G Boxall
P A Simmonds
J Lythall
P Whiting
M Biddulph (appointed 1 December 2019)
* or date of appointment if later
Interest at
Interest at
31 March 2020
31 March 2019*
1,665,752
690,266
35,000
346,500
1,000,000
22,000
Nil
1,340,752
690,266
10,000
311,500
2,213,960
Nil
Nil
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 59.
Substantial Holdings
As far as the Directors are aware, as at 31 May 2020, the only holdings of 3% or more of the Company’s issued share capital were the following:
Number of
ordinary shares
6,291,600
3,550,461
2,724,800
2,500,000
1,665,752
1,369,273
1,283,532
%
15.63
8.82
6.77
6.21
4.14
3.40
3.19
Canaccord Genuity Wealth Management
Ennismore Fund Management
Herald Investment Management
Chelverton Asset Management
P Kear Esq
Otus Capital Management
M Ward Esq
62
Acquisition of the Company’s own shares
Financial Instruments
At the end of the year, the Directors had authority, under the
The Group’s financial risk management objectives and policies are
shareholders’ resolution of 22 August 2019, to purchase through
discussed on page 96 within note 29 to the accounts.
the market up to 4,024,363 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 6 August 2020. 45,208 shares were purchased
and 364,955 shares were sold in the year ending 31 March 2020.
Details of the sale and purchase of own shares are disclosed
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 (2019: nil).
within Note 22 on page 94.
Insurance
Own shares are ordinary 2p shares purchased in order to satisfy
outstanding option obligations. Sales from own shares are the
shares issued to option holders on exercise of their options. The
maximum number of own shares held in the year was 488,880
(2019: 478,880), which represents 1.21% (2019: 1.21%) of the
issued share capital.
Employees
The Group has a policy of offering equal opportunities to
employees at all levels in respect of the conditions of work.
The Group 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
Throughout the Group it is the Board’s intention to provide
any relevant audit information (as defined) and to establish that
employment opportunities and training for disabled people and
the Company’s auditor is aware of that information.
to care for employees who become disabled having regard to
This confirmation is given and should be interpreted in accordance
aptitude and abilities.
with the provisions of s418 of the Companies Act 2006.
Regular consultation and meetings, formal or otherwise, are held
Auditor
with all levels of employees to discuss problems and opportunities.
Information on matters of concern to employees is presented in
house.
In accordance with Section 489 of the Companies Act 2006, a
resolution for the re-appointment of RSM UK Audit LLP as the
auditor of the Company is to be proposed at the forthcoming
The Company operates share option Schemes which are open to
Annual General Meeting.
all employees. The two current Schemes are the D4t4 Solutions
Employee Share Options ‘A’ Scheme and the D4t4 Solutions EMI
Share Options Scheme. Details of the share options are laid out on
By order of the Board
page 94 within note 26 to the accounts.
Treasury Policy
The Group’s operations are funded by cash reserves. The policy of
the Group is to ensure that all cash balances earn a market rate of
interest. Bank relationships are maintained to ensure that sufficient
cash and unutilised facilities are available to the Group.
Peter Kear
Chief Executive Officer
Research and Development
29 June 2020
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.
Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, TW16 7EF
63
Annual Report & Accounts 2020Corporate Governance
Statement of Directors’ responsibilities
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.
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
29 June 2020
64
Independent auditors report to the members of D4t4 Solutions plc
Opinion
We have audited the financial statements of D4t4 Solutions plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year ended
31 March 2020 which comprise of the consolidated income statement, consolidated statement of comprehensive income, consolidated
and Company statements of changes in equity, consolidated and Company statements of financial position, consolidated and Company
cash flow statements, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting
framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the parent Company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
In our opinion:
the financial statements give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 March 2020 and
of the Group’s profit 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 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 and parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to SME listed entities and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Conclusions relating to going concern
We 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
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the
Group’s or the parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months
from the date when the financial statements are authorised for issue.
Summary of our audit approach
Key audit matters
Materiality
Group
Revenue recognition
Group
Overall materiality: £247,000 (2019: £515,000)
Performance materiality: £185,000 (2019: £386,000)
Parent Company
Overall materiality: £247,000 (2019: £480,000)
Performance materiality: £185,000 (2019: £360,000)
Scope
Our audit procedures covered 100% of revenue, total assets and profit before tax.
65
Annual Report & Accounts 2020Financial Statements
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the Group and parent
Company financial statements of the current period and include the most significant assessed risks of material misstatement (whether or
not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the Group and parent
Company financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition
Key audit matter description
The Group has several different revenue streams under product-own IP, product-3rd party, delivery
services and support & maintenance segments. See notes 2, 3, 4 and 5 for further details.
The product segments include revenue of one or more elements of hardware and software and
are often included in the same contract as delivery services and support & maintenance. These
transactions are often individually significant to the results of the Group and include an element
of judgement in allocating the transaction price between different performance obligations within
a contract. We consider there to be a significant risk around the completeness of some elements
of revenue as performance obligations within a contract often have different recognition periods.
We also 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). As such we have determined revenue recognition to be a key audit matter.
How the matter was
In order to address the risk of misstatement related to cut-off in revenue recognition and ensure
addressed in the audit
that the income recognition policy applied is in line with the Group’s policy, which complies with
IFRS 15, we performed testing, focusing in particular for a sample of contracts signed around both
the current year and prior year ends, we tested balances recognised in the Group’s statement of
financial position and tested individual transactions occurring either immediately before or after
the year end. Our tests of detail focused on transactions occurring within proximity of the year end
across these segments, obtaining evidence to support the appropriate timing of revenue recognition,
based on terms and conditions set out in sales contracts and delivery documents. We linked this to
both purchases cut off and revenue deferrals.
In addition, for material contracts arising during the year, which have with multiple performance
obligations, we assessed for a sample of contracts whether the transaction price had been
appropriately allocated to different performance obligations, by reference to underlying pricing
documentation. We also performed tests of details on accrued revenue, deferred revenue and trade
receivables balances recognised at 31 March 2020. We also reviewed disclosure in the financial
statements of the revenue recognition policies and key estimates and judgements in respect of
revenue recognition.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of our audit
procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as a whole, could
reasonably influence the economic decisions of the users we take into account the qualitative nature and the size of the misstatements.
Based on our professional judgement, we determined materiality as follows:
66
Group
Company
Overall materiality
£247,000 (2019: £515,000)
£247,000 (2019: £480,000)
Basis for determining overall
5% of profit before tax
5% of Group profit before tax
materiality
Rationale for benchmark applied
Profit measure used for the trading activities
Parent Company is the main trading
of the Group.
component therefore Group materiality
applied for the purpose of calculating an
appropriate component materiality.
Performance materiality
£185,000 (2019: £386,000)
£185,000 (2019: £360,000)
Basis for determining performance
75% of overall materiality
75% of overall materiality
materiality
Reporting of misstatements to the
Misstatements in excess of £12,300 and
Misstatements in excess of £12,300 and
Audit Committee
misstatements below that threshold that, in
misstatements below that threshold that, in
our view, warranted reporting on qualitative
our view, warranted reporting on qualitative
grounds.
grounds.
An overview of the scope of our audit
The Group consists of two components, located in the United Kingdom and the United States of America (“US”).
A full scope audit was performed on the component in the United Kingdom and specified audit procedures were applied to the US
component, achieving 100% coverage by our audit procedures.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report, other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears
to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
67
Annual Report & Accounts 2020Financial Statements Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the parent Company and their environment obtained in the course of the
audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in
our opinion:
adequate accounting records have not been kept 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 64, the Directors are responsible for the preparation of
the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at: 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.
David Clark
Senior Statutory Auditor
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
29 June 2020
68
Consolidated income statement
for the year ended 31 March 2020
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 equity holders of the parent
Earnings per share from continuing operations
attributable to the equity holders of the parent
Basic
Diluted
Notes
4,5
6
8
9
9
10
13
2020
£’000
21,748
(8,537)
13,211
(8,343)
58
4,926
43
-
4,969
(522)
4,447
11.12p
11.04p
Consolidated statement of comprehensive income
for the year ended 31 March 2020
Attributable to equity holders of the parent
Other comprehensive income:
Items that will not be reclassified to profit or loss
Gains on property revaluation
Exchange differences on translation of foreign operations
Total comprehensive income for the year attributable
to equity holders of the parent
2020
£’000
4,447
71
24
4,542
16
11
2019
£’000
25,239
(10,932)
14,307
(8,022)
57
6,342
9
(8)
6,343
(511)
5,832
14.78p
14.53p
2019
£’000
5,832
70
16
5,918
69
Annual Report & Accounts 2020Financial Statements
Consolidated statement of changes in equity
attributable to Equity Holders of the Parent
for the year ended 31 March 2020
Share
Share Merger Revaluation
Own
Equity
Retained
Notes
capital premium
reserve
reserve
shares
reserve
earnings
Total
£’000
Balance at 1 April 2018
765
1,972
5,917
1,029
(308)
133
10,606
20,114
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
Settlement of share
based payments
Share-based payment charge
Deferred tax on outstanding
share options
26
11
Transactions with
equity holders
Profit for the year
Other comprehensive income
Total comprehensive income
12
22
-
-
-
-
-
-
21, 23
29
652
60
-
-
-
-
-
-
-
-
-
29
652
60
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70
70
-
(1,469)
-
650
-
-
-
-
(26)
(48)
-
(49)
(980)
-
-
(351)
162
178
(980)
(1,469)
715
251
162
129
(819)
(123)
(991)
(1,192)
-
-
-
-
-
-
5,832
5,832
16
86
5,848
5,918
Balance at 1 April 2019
794
2,624
5,977
1,099
(1,127)
10
15,463
24,840
12
22
21
26
11
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
Settlement of share
based payments
Share-based payment charge
Deferred tax on outstanding
share options
Transactions with
equity holders
Profit for the year
Other comprehensive income
Total comprehensive income
-
-
-
-
14
741
-
-
-
-
-
-
14
741
-
-
-
-
-
-
-
-
-
4
-
-
4
-
-
-
-
-
-
-
-
-
-
-
71
71
-
(69)
-
856
-
-
-
-
-
(3)
-
(7)
(1,235)
(1,235)
-
-
(516)
97
(69)
755
341
97
-
(7)
787
(10)
(1,654)
(118)
-
-
-
-
-
-
-
4,447
4,447
24
95
4,471
4,542
18,280
29,264
Balance at 31 March 2020
808
3.365
5,981
1,170
(340)
70
Consolidated statement of financial position
as at 31 March 2020
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax assets
Current assets
Trade and other receivables
Tax receivables
Inventories
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Tax liabilities
Non-current liabilities
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger reserve
Revaluation reserve
Own shares
Equity reserve
Retained earnings
Attributable to the equity holders of the company
Notes
14
15
16
11
18
19
2020
£’000
8,696
956
4,099
283
14,034
10,137
649
1,266
12,772
24,824
38,858
20
(9,377)
-
(9,377)
(217)
(217)
(9,594)
29,264
808
3,365
5,981
1,170
(340)
-
18,280
29,264
11
21
21
23
24
22
25
These financial statements were approved by the Board of Directors and authorised for issue on 29 June 2020 and
were signed on its behalf by:
Peter Kear
Chief Executive Officer
Company registration number: 01892751 (England and Wales)
2019
£’000
8,696
1,014
4,106
831
14,647
6,275
-
45
10,996
17,316
31,963
(6,774)
(133)
(6,907)
(216)
(216)
(7,123)
24,840
794
2,624
5,977
1,099
(1,127)
10
15,463
24,840
71
Annual Report & Accounts 2020Financial Statements
Consolidated cash flow statement
for the year ended 31 March 2020
Operating activities
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance income
Finance expense
Share-based payments
Gain on sale of property, plant and equipment
Operating cash flows before movements in working capital
(Increase) / Decrease in receivables
(Increase) / Decrease 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
Capitilisation of development costs
Net cash used in investing activities
Financing activities
Dividends paid
Repayment of borrowings
Interest paid
Payments to finance lease creditors
Purchase of own shares
Exercise of share options
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
72
2020
£’000
4,969
327
246
(43)
-
97
-
5,596
(3,862)
(1,221)
2,603
3,116
(738)
2,378
43
(249)
(188)
(394)
(1,235)
-
-
-
(69)
1,096
(208)
1,776
10,996
12,772
2019
£’000
6,343
315
247
(9)
8
162
(3)
7,063
14,269
545
(11,811)
10,066
(983)
9,083
9
(459)
-
(450)
(980)
(763)
(8)
(17)
(1,469)
966
(2,271)
6,362
4,634
10,996
Company statement of changes in equity
attributable to Equity Holders of the Parent
for the year ended 31 March 2020
Share
Share Merger Revaluation
Own
Equity
Retained
Notes
capital premium
reserve
reserve
shares
reserve
earnings
Total
£’000
Balance at 1 April 2018
765
1,972
5,917
1,029
(308)
133
11,179
20,687
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
Settlement of share
based payments
Share-based payment charge
Deferred tax on outstanding
share options
26
11
Transactions with
equity holders
Profit for the year
Other comprehensive income
Total comprehensive income
12
22
-
-
-
-
-
-
21, 23
29
652
60
-
-
-
-
-
-
-
-
-
29
652
60
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
70
70
-
(1,469)
-
650
-
-
-
-
(26)
(48)
-
(49)
(980)
-
-
(351)
162
179
(980)
(1,469)
715
251
162
130
(819)
(123)
(990)
(1,191)
-
-
-
-
-
-
6,906
6,906
-
70
6,906
6,976
Balance at 1 April 2019
794
2,624
5,977
1,099
(1,127)
10
17,095
26,472
12
22
21
26
11
Dividends paid
Purchase of own shares
Issue of new shares -
exercise of share options
Settlement of share
based payments
Share-based payment charge
Deferred tax on outstanding
share options
Transactions with
equity holders
Profit for the year
Other comprehensive income
Total comprehensive income
-
-
-
-
14
741
-
-
-
-
-
-
14
741
-
-
-
-
-
-
-
-
-
4
-
-
4
-
-
-
-
-
-
-
-
-
-
-
71
71
-
(69)
-
856
-
-
-
-
-
(3)
-
(7)
(1,235)
(1,235)
-
-
(516)
97
(69)
755
341
97
-
(7)
787
(10)
(1,654)
(118)
-
-
-
Balance at 31 March 2020
808
3.365
5,981
1,170
(340)
-
-
-
-
3,676
3,676
-
71
3,676
3,747
19,117
30,101
73
Annual Report & Accounts 2020Financial Statements
Company statement of financial position
as at 31 March 2020
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Investment in subsidiaries
Deferred tax assets
Current assets
Trade and other receivables
Tax receivables
Inventories
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Tax liabilities
Non-current liabilities
Deferred tax liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Merger reserve
Revaluation reserve
Own shares
Equity reserve
Retained earnings
Attributable to the equity holders of the company
The Company’s profit for the year was £3.7m (2019: £6.9m).
Notes
14
15
16
17
11
18
19
2020
£’000
8,696
956
4,099
273
10
14,034
11,211
649
7
12,694
24,561
38,595
20
(8,277)
-
(8,277)
(217)
(217)
(8,494)
30,101
808
3,365
5,981
1,170
(340)
-
19,117
30,101
11
21
21
23
24
22
25
2019
£’000
8,696
1,014
4,106
273
347
14,436
8,441
-
13
10,996
19,450
33,886
(7,065)
(133)
(7,198)
(216)
(216)
(7,414)
26,472
794
2,624
5,977
1,099
(1,127)
10
17,095
26,472
These financial statements were approved by the Board of Directors and authorised for issue on 29 June 2020 and
were signed on its behalf by:
Peter Kear
Chief Executive Officer
Company registration number: 01892751 (England and Wales)
74
Company cash flow statement
for the year ended 31 March 2020
Operating activities
Profit before tax
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Finance income
Finance expense
Share-based payments
Gain on sale of property, plant and equipment
Operating cash flows before movements in working capital
(Increase) / Decrease in receivables
Decrease 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
Capitalisation of development costs
Net cash used in investing activities
Financing activities
Dividends paid
Repayment of borrowings
Interest paid
Payments to finance lease creditors
Purchase of own shares
Exercise of share options
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
2020
£’000
3,962
327
246
(43)
-
97
-
4,589
(2,770)
6
1,213
3,038
(738)
2,300
43
(249)
(188)
(394)
(1,235)
-
-
-
(69)
1,096
(208)
1,698
10,996
12,694
2019
£’000
7,676
315
247
(9)
8
162
(3)
8,396
13,017
577
(11,927)
10,063
(980)
9,083
9
(459)
-
(450)
(980)
(763)
(8)
(17)
(1,469)
966
(2,271)
6,362
4,634
10,996
75
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
1. General information
Adoption of new and revised standards
D4t4 Solutions plc is a public limited company incorporated and
domiciled in England and Wales and quoted on the AIM Market,
Standards, amendments and interpretations effective in the
hence there is no ultimate controlling party.
period to 31 March 2020 (all effective 1 January 2019, not early
Details of substantial shareholdings are shown in the Directors’
adopted last year):
report on page 62.
IFRS 16 (New Standard)
Leases
The address of its registered office, registered number and
Various
principal place of business is disclosed on the inside cover of the
financial statements.
The financial statements of D4t4 Solutions plc and its subsidiaries
(the Group) for the year ended 31 March 2020 were authorised
and issued by the Board of Directors on 29 June 2020 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.
IFRIC 23 (Interpretation)
IAS 28 (Amendment)
Annual improvements to IFRSs
2015-2017 Cycle
Uncertainty over Income
Tax Treatments
Investments in Associates and
Joint Ventures
IAS 19 (Amendment)
Employee Benefits
IFRS 16 is effective for the year ending 31 March 2020. Upon the
adoption of IFRS 16, lease arrangements give rise to a right-of-
use asset and a lease liability for future lease payables. The asset
is depreciated on a straight line basis over the life of the lease.
Interest is 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 does 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 27. The Directors have decided not to recognise the Right
of Use asset or corresponding liability associated with this lease
under IFRS 16 as this would not have a material impact on the
financial statements.
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 36 to 38. The Group and Company
have sufficient financial resources to cover budgeted future
Standards, amendments and interpretations to existing
standards that have not been early adopted by the Group (all
effective 1 January 2020):
IFRS 3 (Amendment)
Definition of a Business
IAS 1 (Amendment)
Definition of Material
cashflows, together with contracts with a number of customers
IFRS 9 (Amendment)
Interest Rate Reform
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 impact of the Covid-19 pandemic on the
business, and stress-tested the Group’s future plans and cash
flow projections, the Directors are confident 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.
IFRS 7 (Amendment)
Interest Rate Reform
The Directors do not expect the adoption of these amendments
in future periods to have any material impact on the financial
statements of the Group.
Basis of consolidation
The consolidated financial statements incorporate the financial
statements of the Company and its subsidiaries made up to the
reporting date.
76
Investees are classified as subsidiaries where the Company has
Acquisitions
control, which is achieved where the Company has the power to
On the acquisition of a business, net fair values are attributed to
govern the financial and operating policies of an investee entity,
the identifiable assets and liabilities acquired. Where the cost of
exposure to variable returns from the investee and the ability
acquisition exceeds this net fair value, the difference is treated
to use its power to affect those variable returns. All intra-group
as purchased goodwill and capitalised in the Group Statement of
transactions, balances, income and expenses are eliminated
Financial Position in the year of acquisition. If a subsidiary’s assets
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
are subsequently hived up into the parent then the corresponding
amount of goodwill is capitalised in the Company Statement of
Financial Position.
assets and liabilities are initially recognised at their fair values at
Goodwill
acquisition date. The results of acquired entities are included in the
Capitalised goodwill is shown in the Statement of Financial
Consolidated Statement of Comprehensive Income from the date
Position. Its carrying value is subject to annual review and any
at which control is obtained and are deconsolidated from the date
impairment is recognised immediately as a loss which cannot
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
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.
approved financial statements. The profit of the parent is disclosed
Goodwill has arisen from the acquisition of businesses.
in the Company Statement of Financial Position 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
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.
as necessary, and any impairment loss is recognised in the
Other intangible assets
income statement. Freehold land and buildings were last valued
Intellectual Property Rights (IPR)
professionally at 31 March 2018 but are valued by the Directors on
On the acquisition of a business, the fair value of IPR is estimated
an annual basis. The carrying values are reviewed for impairment
and capitalised taking into consideration the software development
when events or changes in circumstances indicate that the carrying
cycle and the amount of effort involved between updated versions
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
of the software. The fair value is amortised over the expected
development cycle which is estimated to be eight 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
Fixtures and equipment
- up to 4 years
of that business is estimated and capitalised. The fair value is
Motor vehicles
- up to 5 years
amortised over ten years.
Revaluation gains/losses are shown in the Statement of
Impairment of intangibles is reviewed annually with reference to
Comprehensive Income and recognised in Other comprehensive
future cash flows from the specific cash generating units to which
income. Where losses are greater than previously recognised
the intangible asset has been allocated.
gains, these are taken to the income statement.
77
Annual Report & Accounts 2020Financial Statements Notes to the financial statements
(continued)
Inventory policy
rental income arising from the short term operating lease at the
Inventories are stated at the lower of cost or net realisable value.
parent Company’s premises is credited to income on a straight-
The valuation method for each item of inventory remains consistent
line basis over the period of the lease. The Directors have decided
from one accounting period to the next.
Research and development costs
not to recognise the Right of Use asset or corresponding liability
associated with this lease under IFRS 16 as this would not have a
material impact on the financial statements.
To assess whether research and development expenditure has
Dividends
generated an intangible asset the Group classifies the expenditure
Final dividend distribution to the Company’s shareholders is
into two phases, the research phase and the development phase.
recognised as a liability in the Group’s financial statements in
Expenditure on the research phase is recognised as an expense
when it is incurred.
Expenditure on the development phase is recognised as an intangible
asset if, and only if, each of the following can be demonstrated:
(a) the technical feasibility of completing the asset;
the period in which the dividends are approved by the
Company’s shareholders.
Interim and prior period dividends paid are included in the
Statement of Changes in Equity.
Share-based payments
Periodically the Group offers share options (at the prevailing
(b) its intention to complete and use or sell the asset;
market price) to employees. The Group has conformed with the
(c) its ability to use or sell the asset;
requirements of IFRS2 “Share Based Payment” for share options
issued after 7 November 2002 and unvested at 31 March 2020.
(d) how the asset will generate future economic benefit;
Those options are measured at fair value (using the Black-Scholes
(e) the availability of sufficient resources to complete the
development and to use or sell the asset;
(f) the ability to measure reliably the expenditure incurred on the
asset during its development.
model and management’s best estimates) and are expensed on a
straight-line basis over their vesting period. Options vest only when
the 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
The intangible asset is recognised using the cost model and is
carried at its cost less any accumulated amortisation and any
to settle in cash.
Treasury shares
accumulated impairment losses.
Foreign currencies
In line with IAS 21, transactions denoted in foreign currencies
are recorded at an approximation of the exchange rate ruling
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.
on the date of the transaction. Monetary assets and liabilities
Own shares
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
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.
translated using the rate of exchange ruling at the balance sheet
Pension costs
date and the gains or losses on translation are included in Other
comprehensive income.
Profit from operations
Profit from operations is stated before investment income,
finance costs and other gains and losses. Other gains and losses
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.
principally include movements in property valuation and are
Taxation
included in Other comprehensive income.
Lease commitments
The Group has a rental lease for office space in India. Rentals
payable in respect of this short term lease are recognised as a
cost on a straight line basis over the life of the lease. Similarly,
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
78
for taxation and accounting purposes which have arisen but have
intelligence applications. Where these are on premise Customer
not reversed by the balance sheet date. It is recognised at the
Data Management platform solutions they will include both
expected prevailing rate at the time of reversal, and is recognised
hardware and third party software. The revenue for each product
as an asset only to the extent that it is probable that taxable profits
is recognised when the full performance obligation has been
will be available to utilise it. It is reviewed annually.
satisfied, typically this is when the hardware and associated third
Revenue recognition
party software is delivered to the customers designated premises.
This is when control passes to the customer.
Revenue is measured at the transaction price received or receivable
Delivery Services
from the sale of goods and services in the ordinary course of the
For delivery services work, revenue is recognised over time
Group’s activities. Revenue is shown net of value added tax, rebates
by comparing how much of the project has been completed
and discounts and after the elimination of intercompany transactions
versus total expected time required and also with reference to
within the Group.
The Group recognises revenue as it satisfies its performance
obligations by transferring promised goods and services to its
the completion of specific milestones. This is because costs are
incurred in proportion to the Group’s progress as it satisfies its
performance obligations.
customers. The Group bases its estimates on historical results, taking
into consideration the type of customer, the type of transaction and
In relation to time-based projects, time on projects is recoverable
on a time and expenses basis at an agreed daily rate and is
the specifics of each arrangement.
In the course of the year ended 31 March 2019 there was a change
in the segmental reporting information being used internally. This
change was made to better reflect the Group’s management reporting
based on the integrated core services of the business. In line with
invoiced to the customer in the month of performance and
an associated value is recognised. The Group has a right to
consideration from its customers in an amount that corresponds
directly with the value to the customer of the Group’s performance
completed on a daily basis.
the requirements of IFRS 8 Operating Segments, which requires the
Support & maintenance
disclosure of segmental reporting information that is actually being
Support & maintenance is typically of a recurring nature and is
used internally by management, the following segmental reporting is
made up of hosting, support services and maintenance. The
now in use:
Products – Own IP
D4t4 create, author, market and sell a software product, Celebrus,
Group’s efforts are expended evenly throughout the performance
period therefore revenue is recognised on a straight-line basis over
the period of the contract, normally 12 months.
focused on the capture of customer data from
Bundled goods and services
all digital channels. This data is then used in applications that
Products (software and hardware), delivery services and support &
deliver artificial intelligence, customer insight and analytics,
maintenance services are often bundled together in a contract.
personalisation, decisioning and customer relationship
management.
The products and the services are considered to be separate
performance obligations on the basis that the products can be
The Group has also created its own IP in order to create
delivered with or without the hosting and other services and
architecture and deployments for high performance on premise or
therefore the products and services are not interdependent or
cloud solutions that combine hardware, software and services.
interrelated with another good or service. Software and hardware
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
however require combined delivery to the customer to benefit
from them and are therefore considered to be interdependent and
interrelated and one performance obligation.
the software will be supplied as part of an ongoing maintenance
In allocating the consideration to the separate performance
contract that the customer may make. This maintenance contract
obligations, the standalone selling price is determined by reference
is covered under the hosting and support services policy below.
to an internal price book.
Term licences are recognised upon delivery at the commencement
of the term where the licence is not cancellable during the term.
Products – 3rd Party
The contracted invoice schedule does not always coincide with the
recognition of the income from the sale. Therefore management
have considered the time value of money and concluded that a
D4t4 services are focused on delivering data management using
financing benefit is provided to the customer. This is adjusted
public and private cloud infrastructure that is securely designed to
against revenue and recognised as interest income over the period
ensure our clients can operationalise data within their organisation.
of the contract using an effective interest rate.
In addition, we design and build performant platforms for critical
business, analytics, compliance, risk, marketing and artificial
79
Annual Report & Accounts 2020Financial Statements Notes to the financial statements
(continued)
Partnerships with third party organisations
Derecognition of financial assets (including write-offs) and
The Company sells both directly to the customer and through
financial liabilities
partnerships. There are two types of partnerships. The first is
where the Company acts as principal in the sale to the partner.
A financial asset (or part thereof) is derecognised when the
The partner then uses the products and services purchased
contractual rights to cash flows expire or are settled, or when
from the Company as part of their sale to their customer. The
the contractual rights to receive the cash flows of the financial
second is where the Company acts on an agency basis. Here
asset and substantially all the risks and rewards of ownership are
the Company acts as a supply channel on behalf of the software
transferred to another party.
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
When there is no reasonable expectation of recovering a financial
asset it is derecognised (‘written off’).
revenue recognition policy above, and hence is recognised as
The gain or loss on derecognition of financial assets measured at
defined there. In the second case, where the Company acts on an
amortised cost is recognised in profit or loss.
agency basis, revenue will be recognised at the point of sale to the
end customer.
A financial liability (or part thereof) is derecognised when the
obligation specified in the contract is discharged, cancelled or
Recognition of financial instruments
expires.
Financial assets and financial liabilities are recognised when
the Group becomes party to the contractual provisions of
the instrument.
Financial assets
Initial and subsequent measurement of financial assets
Cash and cash equivalents
Any difference between the carrying amount of a financial liability
(or part thereof) that is derecognised and the consideration paid is
recognised in profit or loss.
Impairment of financial assets
An impairment loss is recognised for the expected credit losses
on financial assets when there is an increased probability that the
Cash and cash equivalents comprise cash at bank and in hand
counterparty will be unable to settle an instrument’s contractual
and other short-term deposits held by the Group with maturities of
cash flows on the contractual due dates, a reduction in the
less than three months.
amounts expected to be recovered, or both.
Trade, Group and other receivables
Trade receivables are initially measured at their transaction price.
Group and other receivables are initially measured at fair value plus
transaction costs.
The probability of default and expected amounts recoverable are
assessed using reasonable and supportable past and forward-
looking information that is available without undue cost or effort.
The expected credit loss is a probability-weighted amount
determined from a range of outcomes and takes into account the
Receivables are held to collect the contractual cash flows which
are solely payments of principal and interest. Therefore, these
receivables are subsequently measured at amortised cost using
time value of money.
Trade and other receivables
the effective interest rate method.
Financial liabilities and equity
For trade receivables, expected credit losses are measured by
applying an expected loss rate to the gross carrying amount.
The expected loss rate comprises the risk of a default occurring
Financial liabilities and equity instruments are classified according
and the expected cash flows on default based on the ageing of
to the substance of the contractual arrangements entered into. An
the receivable. The Group has adopted a simplified approach to
equity instrument is any contract that evidences a residual interest
calculating its expected credit loss provision. For intercompany
in the assets of the company after deducting all of its liabilities.
loans that are repayable on demand, expected credit losses are
Initial and subsequent measurement of financial liabilities
Trade, Group and other payables
based on the assumption that repayment of the loan is demanded
at the reporting date. If the subsidiary does not have sufficient
accessible highly liquid assets in order to repay the loan if
Trade, Group and other payables are initially measured at fair
demanded at the reporting date, the parent Company assesses the
value, net of direct transaction costs and subsequently measured
expected manner of recovery.
at amortised cost.
Equity instruments
Borrowings
Interest bearing bank loans are recorded at the proceeds received,
Equity instruments issued by the Company are recorded at fair
net of direct issue costs. Finance charges, including premiums
value on initial recognition net of transaction costs.
payable on settlement or redemption and direct issue costs, are
80
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.
Borrowing costs
Borrowing costs are recognised as an expense in the period in which they arise.
Related party transactions
These are disclosed in note 28 of the financial statements.
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 the Directors
revise the estimate and in any future periods affected. It is considered that all judgements have an element of estimation.
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 of goodwill and intangible assets
The ongoing valuation of goodwill for the purposes of determining impairment requires the evaluation of future cash flows from the cash
generating unit to which the goodwill has been allocated. This is disclosed in note 14.
Revenue recognition for bundled goods and services
In determining revenue for each of the component elements of a bundled contract, consideration is given to price books which are
compiled following a review of standard industry practice and expected gross profit margins.
4. Business and geographical segments
IFRS 8 Operating Segments requires these 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 Group has four tightly integrated service lines that are offered to clients. These service lines combine one or more of four types of
revenue to deliver on our core services.
Information is presented to the Board on the revenue analysis below:
Product - Own IP
Product - 3rd party
Delivery services
Support & maintenance
All revenue streams are recognised on a point in time basis apart from Support & maintenance which is recognised over time.
No allocation of other income and costs to these categories is made because the Directors consider that any such allocation would be
arbitrary and contract sensitive, as would be any allocation of assets and liabilities.
The segmental reporting set out below is consistent with that provided to the Board of Directors.
81
Annual Report & Accounts 2020Financial Statements Notes to the financial statements
(continued)
The segmental reporting analysis is as follows:
Continuing operations 2020
Group
Products - Own IP
Products - 3rd party
Delivery services
Support & maintenance
Revenue
Cost of sales
Gross profit
Other operating costs and income
Investing and financing activities
Profit before tax
2020
£’000
7,658
4,362
3,629
6,099
21,748
(8,537)
13,211
(8,285)
43
4,969
2019
£’000
9,198
7,349
3,132
5,560
25,239
(10,932)
14,307
(7,965)
1
6,343
Major customers (partners) over 10% of revenue
Products - Own IP
Products - 3rd party
Delivery services
Support & maintenance
Total Revenue
2020
£’000
2020
£’000
2019
£’000
2019
£’000
Customer 1
Customer 2
Customer 1
Customer 2
3,855
3,401
1,515
2,616
11,387
1,363
-
2
1,767
3,132
5,576
6,774
1,055
2,206
15,611
1,581
-
48
1,102
2,731
The accounting policies of the reportable segments are the same as the Group’s accounting policies described in note 2.
5. Revenue
Geographical information
United Kingdom
Rest of Europe
United States of America
Others
Group
2020
£’000
4,158
3,162
13,327
1,101
21,748
2019
£’000
3,452
2,972
17,543
1,272
25,239
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 the United Kingdom.
These are not reported to management on a segmented basis.
82
Analysis of revenue
Continuing operations
Sale of goods
Rendering of services
Timing of transfer
Goods and services transferred at a point in time
Products - Own IP
Products - 3rd party
Delivery services
Goods and services transferred over time
Support & maintenance
Contract balances
Receivables included within Trade and other receivables
Contract assets
Contract liabilities
Group
Group
2019
£’000
4,196
21,043
25,239
2019
£’000
9,198
7,349
3,132
2020
£’000
4,472
17,276
21,748
2020
£’000
7,658
4,362
3,629
6,099
21,748
5,560
25,239
Group
2020
£’000
7,970
1,534
(4,057)
2019
£’000
4,064
1,210
(3,318)
Contract assets predominantly relate to fulfilled obligations in respect of Own IP and 3rd Party Products, Delivery services and Support &
maintenance which have not been invoiced.
At the point of invoice, the contract asset is derecognised and a corresponding trade receivable is recognised.
Contract liabilities relate to consideration received from customers in advance of work being completed.
83
Annual Report & Accounts 2020Financial 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 (see note 16)
Gain on disposal of property, plant & equipment
Auditor’s remuneration
- for audit services (Group and Company, the Company fee is not separately quantifiable)
- for other services
Impairment of trade receivables
Operating leases
Net foreign exchange gains
Other expenses
Total cost of sales and administration 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
84
2020
£’000
2019
£’000
9,720
9,598
246
784
1,030
327
-
327
54
9
63
57
58
247
576
823
315
(3)
312
47
10
57
-
58
(362)
5,987
16,880
(727)
8,833
18,954
Group
Company
2020
2019
2020
Number
Number
Number
2019
Number
90
27
15
132
£’000
8,341
870
412
97
88
24
10
122
£’000
8,181
873
382
162
84
23
15
122
£’000
6,856
779
357
97
87
20
10
117
£’000
7,108
806
345
162
9,720
9,598
8,089
8,421
Key management personnel consist of the Board of Directors and their remuneration (included in the totals above) was as follows:
Emoluments
Social security costs
Defined contribution costs
Share-based payments: equity settled
Group and Company
2020
£’000
1,287
167
42
66
2019
£’000
1,615
217
44
84
1,562
1,960
Details of Directors remuneration required by the Companies Act are set out in the audited information included in the Directors
Remuneration report on pages 56 to 60.
Other related party transactions including loans and dividends, involving Directors are disclosed in the Directors report on pages 56 to 60.
8. Other operating income
Analysis of other operating income
Operating lease receipts (see note 27)
9. Finance income and finance costs
Analysis of finance income
Bank interest received
Analysis of finance costs
Mortgage interest paid
Bank loan interest
Other
Group
2020
£’000
2019
£’000
58
58
57
57
Group
2020
£’000
2019
£’000
43
-
-
-
-
9
(2)
(5)
(1)
(8)
85
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
(continued)
10. Taxation
Current UK tax
Foreign tax
Less: double taxation relief
Over provision in prior year
Deferred tax
- temporary differences
- US tax charge / (credit)
Corporation tax
The charge for the year can be reconciled to the reported profit as follows:
Profit before tax
UK corporation tax at 19% (2019: 19%)
Research and development credit
Patent Box
Exercise of share options
Difference between writing-down allowances and depreciation
Other non-deductible expenses
Effect of different rates in other jurisdictions
Movement in US tax losses
Over provision in prior year
Tax charge as above
2020
£’000
142
60
(1)
(245)
(44)
331
235
566
522
4,969
944
(240)
(76)
34
17
10
33
45
(245)
522
Other timing
Equity Share based
differences
reserve
payments
Tax losses
Intangibles
£’000
(32)
£’000
56
£’000
131
£’000
202
£’000
(214)
-
(49)
(11)
(43)
-
(12)
(55)
-
7
(7)
-
-
178
31
340
17
265
484
-
41
(173)
-
24
-
17
(330)
10
(235)
273
11
(162)
(566)
66
11. Deferred tax
Group
Balance at 1 April 2018
Recognised within the
Statement of Changes
in Equity
(Charge) / credit to
Income Statement
Balance at 1 April 2019
Recognised within the
Statement of Changes
in Equity
(Charge) / credit to
Income Statement
Balance at 31 March 2020
86
2019
£’000
796
57
(10)
(6)
837
(61)
(265)
(326)
511
6,343
1,205
(142)
-
(610)
13
14
47
(10)
(6)
511
Total
£’000
143
146
326
615
Company
Balance at 1 April 2018
Recognised within the
Statement of Changes
in Equity
(Charge) / credit to
Income Statement
Balance at 1 April 2019
Recognised within the
Statement of Changes
in Equity
(Charge) / credit to
Income Statement
Balance at 31 March 2020
Other timing
Equity Share based
differences
reserve
payments
Intangibles
£’000
(32)
£’000
56
£’000
131
£’000
(214)
-
(49)
(11)
(43)
-
(12)
(55)
-
7
(7)
-
-
178
31
340
-
41
(173)
-
-
(330)
10
11
(162)
Total
£’000
(59)
129
61
131
(7)
(331)
(207)
A deferred tax rate of 19% (2019: 19%) has been used.
The financial statements include a deferred tax asset of £273k (2019: £484k) in respect of trading losses in the Group’s US subsidiary. In
accordance with the requirement of IAS 12 Income Taxes, the Directors have considered the likely recovery of this deferred tax asset. The
Directors have taken into account expected future taxable profits and expect an improvement in profitability and profits in future periods
and that this will be sustained. Accordingly the Directors have satisfied themselves that it is appropriate to recognise the above deferred
tax asset.
12. Dividends
Amounts recognised as distributions to equity holders:
Final dividend for the year ended 31 March 2019 of 2.3p
(for the year ended 31 March 2018: 1.875p) per share
Interim dividend for the year ended 31 March 2020 of 0.77p
(31 March 2019: 0.7p) per share
Proposed final dividend for the year ended 31 March 2020 of 1.9p
2020
£’000
2019
£’000
925
310
1,235
713
267
980
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 of the Group’s year-on-year performance.
87
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
(continued)
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 exercise 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 (see note 26)
Net foreign exchange differences
Restructuring costs
Tax on the adjustments
2020
£’000
4,447
246
97
(362)
96
(15)
2019
£’000
5,832
247
162
(727)
-
60
Adjusted profit attributable to owners of the parent
4,509
5,574
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
14. Goodwill
Cost of goodwill
Balance at 1 April 2018, 31 March 2019 and 31 March 2020
Accumulated impairment charge
Balance at 1 April 2018, 31 March 2019 and 31 March 2020
Carrying amount at year end
2020
No.
2019
No.
39,976,957
39,471,172
299,994
654,078
40,276,951
40,125,250
2020
2019
Pence per
Pence per
share
11.12
11.04
11.28
11.19
share
14.78
14.53
14.12
13.89
Group
Company
£’000
10,952
£’000
10,952
2,256
8,696
1,912
8,696
Allocation of goodwill (Group and Company)
Balance at 1 April 2018 and 31 March 2019
Integration with Speed-Trap goodwill
Balance at 31 March 2020
AXL
Chapter26 Speed-Trap
100
(100)
-
918
(918)
-
7,678
1,018
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 Directors have considered during the year whether the AXL and Chapter26 businesses continue to meet the definition of cash generating
units (CGUs). These businesses have been fully integrated into the Group’s operations for several years and it is no longer possible to
88
separately identify cash flows relating to these businesses and therefore the Directors do not believe it is appropriate to continue to disclose
these as separate CGUs. The goodwill attaching to these has therefore been combined with the goodwill relating to Speed-Trap. Prior to this
decision being taken the Directors carried out an assessment of potential impairment of these former CGUs and no impairment was required.
The recoverable amount of this CGU 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 2020. These are then extrapolated for five years with 2% (2019: 2%) growth rate
applied, and extended beyond five years at 2% (2019: 2%), which the Board considers conservative given the long-term opportunities that
exist in the regions that the CGU operates in. The discount rate applied to cashflow projections is 15% pre tax (2019: 15%).
Key assumptions used for the value-in-use calculations
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 the year ended 31 March 2021 approved by the Board;
growth rates in the current year budget which are based on individual customer contracts;
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;
the CGU gross margin achieved.
Sensitivity to changes in assumptions
The margins achieved are based on actual margins, the forecast revenues are based on budget for the current year and an ongoing 2%
growth rate has been used.
The discount rate is considered to be the variable with the maximum impact. Varying this by 20% would still allow the recoverable amount
to exceed the carrying value. Therefore management is confident in the assumptions used.
Management has considered the growth rates used in light of the Covid-19 pandemic and remains confident that they are reasonable.
Management are satisfied that a reasonable change in the key assumptions used in assessing the recoverable amounts of the cash
generating unit would not give rise to the recoverable amount exceeding the carrying value.
15. Other intangible assets
Group & Company
Cost
Balance at 1 April 2018 and 31 March 2019
Additions
Balance at 31 March 2020
Accumulated amortisation
Balance at 1 April 2018
Amortisation
Balance at 1 April 2019
Amortisation
Balance at 31 March 2020
Carrying amount
Balance at 1 April 2018
Balance at 31 March 2019
Balance at 31 March 2020
Development
Costs
Internally
generated IPR
Purchased
IPR
£’000
£’000
£’000
Trade
name
£’000
-
188
188
-
-
-
-
-
-
-
188
56
-
56
56
-
56
-
56
-
-
-
1,858
-
1,858
697
232
929
232
1,161
1,161
929
697
142
-
142
42
15
57
14
71
100
85
71
Total
£’000
2,056
188
2,244
795
247
1,042
246
1,288
1,261
1,014
956
89
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
(continued)
The amortisation charge for the year is booked to administration expenses.
The amortisation period for the Development Costs is 8 years commencing 1 April 2020.
The remaining amortisation period for the Purchased IPR is 3 years (2019: 4 years) and the Trade name is 5 years (2019: 6 years).
16. Property, plant & equipment
Group and Company
Cost or valuation
Balance at 1 April 2018
Additions
Disposals
Balance at 1 April 2019
Additions
Balance at 31 March 2020
Depreciation
Balance at 1 April 2018
Depreciation charge
Revaluation
Eliminated on disposals
Balance at 1 April 2019
Depreciation charge
Revaluation
Balance at 31 March 2020
Carrying amount
Balance at 1 April 2018
Balance at 31 March 2019
Balance at 31 March 2020
Allocation of depreciation charge
Cost of sales
Administration expenses
Charge for year
Tangible Assets held at valuation
Land &
buildings
Fixtures &
equipment
£’000
£’000
Motor
vehicles
£’000
3,300
1,222
-
-
3,300
-
3,300
-
70
(70)
-
-
71
(71)
-
3,300
3,300
3,300
436
-
1,658
249
1,907
674
225
-
-
899
230
-
1,129
548
759
778
106
23
(18)
111
-
111
62
20
-
(18)
64
26
-
90
44
47
21
2020
£’000
60
267
327
Total
£’000
4,628
459
(18)
5,069
249
5,318
736
315
(70)
(18)
963
327
(71)
1,219
3,892
4,106
4,099
2019
£’000
79
236
315
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:
Group and Company
Land and buildings
90
2020
£’000
1,753
2019
£’000
1,798
Included in land & buildings (valued in 2018) is freehold land at £1,230,000 (2019: £1,230,000) 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.
17. Investment in subsidiaries
Company
Cost of investment
Balance at 1 April 2019 and 31 March 2020
Accumulated provision for impairment
Balance at 1 April 2019 and 31 March 2020
Carrying amount at year end
IS Solutions Ltd (formerly Celebrus Ltd)†
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†
2020
£’000
273
-
273
2019
£’000
273
-
273
Proportion of
ownership of
ordinary shares
100%
100%
100%
100%
100%
100%
100%
100%
100%
Country of
Incorporation
England & Wales
England & Wales
England & Wales
Nature of business
Dormant
Dormant
Dormant
USA
Software & services
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
Dormant
Dormant
Dormant
Dormant
Dormant
* Owned by Speed-Trap Holdings Ltd.
† Registered address - Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, TW16 7EF, UK
§ Registered address - 2626 Glenwood Avenue, Suite 550, Raleigh, North Carolina 27608, USA
All UK subsidiaries individually prepare and file their own financial statements.
The principal place of business is considered to be the registered address.
18. Trade and other receivables
Trade receivables
Amounts due from Group undertakings
Other debtors
Prepayments
Accrued income
Group
Company
2020
£’000
7,970
-
66
567
1,534
10,137
2019
£’000
4,064
-
114
887
1,210
6,275
2020
£’000
7,241
1,811
61
564
1,534
11,211
2019
£’000
4,064
2,506
114
547
1,210
8,441
91
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
(continued)
Trade receivables
Ageing of receivables:
Less than 30 days
31 to 60 days
61 to 90 days
91 to 120 days
More than 120 days
2020
£’000
6,629
155
386
800
-
2019
£’000
3,703
97
3
186
75
2020
£’000
5,981
74
386
800
-
2019
£’000
3,703
97
3
186
75
7,970
4,064
7,241
4,064
The average credit period taken on sales of goods and services was 69 days (2019: 87 days).
In accordance with IFRS 9, the Group performed a year end impairment exercise to determine whether any write down in amounts
receivable was required, using an expected credit loss model. The expected loss rate for receivables less than 120 days old is 0% on the
basis of the Group’s history of bad debt write-offs and above 120 days has not been considered on the basis of immateriality.
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.
Definition of default
The loss allowance on all financial assets is measured by considering the probability of default.
Receivables are considered to be in default when the principal or any interest is significantly more than the associated credit terms past
due, based on an assessment of past payment practices and the likelihood of such overdue amounts being recovered.
Determination of credit-impaired financial assets
The Group considers financial assets to be ‘credit-impaired’ when the following events, or combinations of several events, have occurred
before the year end:
significant financial difficulty of the counterparty arising from significant downturns in operating results and/or significant unavoidable
cash requirements when the counterparty has insufficient finance from internal working capital resources, external funding and/or
group support;
a breach of contract, including receipts being more than materially past due;
it becoming probable that the counterparty will enter bankruptcy or liquidation.
Write-off policy
Receivables are written off by the Group when there is no reasonable expectation of recovery, such as when the counterparty is known
to be going bankrupt, or into liquidation or administration. During the year, one trade receivable was considered impaired and there was a
charge of £57k to the Income Statement as shown in note 6 (2019: £nil).
Additionally the recoverability of intercompany debts is considered. After review, the Directors believe that no further expected credit loss
provision is required. The policy of credit risk management is covered in note 29.
19. Inventories
Finished goods and goods for resale
There was no write down in the recognised value of inventories (2019: nil).
Group
Company
2020
£’000
1,266
2019
£’000
45
2020
£’000
7
2019
£’000
13
92
20. Trade and other payables
Trade payables
Amounts owed to Group undertakings
Other taxes and social security
Other creditors
Accruals
Deferred income
Group
Company
2020
£’000
3,403
-
531
22
1,364
4,057
9,377
2019
£’000
1,476
-
343
21
1,616
3,318
6,774
2020
£’000
2,208
465
487
22
1,098
3,997
8,277
2019
£’000
543
1,378
343
21
1,462
3,318
7,065
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
across the year is 46 days (2019: 57 days). Their carrying value approximates to their fair value.
21. Share capital
Ordinary shares of 2p each
Authorised
Issued and fully paid up
Balance at 1 April 2019
Issued during year
Balance at 31 March 2020
Share
capital
£’000
2020
Share
premium
£’000
Share
capital
£’000
Shares
2019
Share
premium
£’000
Shares
50,000,000
1,000
50,000,000
1,000
39,700,889
716,667
40,417,556
794
14
808
2,624
38,261,019
741
1,439,870
3,365
39,700,889
765
29
794
1,972
652
2,624
The Company issued 716,667 (2019: 1,439,870) Ordinary shares during the year to satisfy share option exercise requirements. These were
issued in one tranche at a price of 105.47p (2019: comprised two tranches, 184,388 shares at a price of 38.42p and 1,255,482 shares at a
price of 51.18p). This increased the share premium account by £741k (2019: £652k).
Any costs associated with the issue of new shares were less than £1k (2019: £1k) and are recognised in professional fees.
93
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
(continued)
22. Own shares
At the year end the Company held 159,133 (2019: 478,880) ordinary shares in Treasury, with Fair Value of £222,786 (2019: £1,230,722).
Details of purchases and sales are shown below.
Number of
Share price at point
Total Consideration
own shares
of transaction in pence
paid £’000
Balance of own shares at 1 April 2018
Shares acquired into Treasury reserve
Shares sold out of Treasury reserve
247,815
671,538
(440,473)
146.00 - 240.00
146.00 - 206.00
Balance of own shares at 31 March 2019
478,880
Total consideration paid in year end 31 March 2019
Shares acquired into Treasury reserve
Shares sold out of Treasury reserve
45,208
(364,955)
125.00 - 230.00
202.50 - 259.00
Balance of own shares at 31 March 2020
159,133
Total consideration paid in year end 31 March 2020
1,469
1,469
69
69
In the Statement of Changes in Equity (page 70) the value of Treasury shares is calculated on a First-In-First-Out (FIFO) basis, while the fair
value represents the value based on the year end share price.
23. Merger reserve
The merger reserve arose on the acquisition of Speed-Trap Holdings Ltd (23 January 2015) and represents the excess consideration paid
by the issue of shares over the share capital nominal value. Additions to this reserve of £4k (2019: £60k) are a result of the exercise of
options issued which have been held in the own shares and equity reserve accounts.
24. Revaluation reserve
This represents the gains on revaluation of the property in line with market valuations. The property was last professionally revalued as at
March 2018. The gain on revaluation was £71k (2019: £70k). This is a non-distributable reserve as it represents unrealised profits on the
revalued assets.
25. 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. As all options had been exercised by 31 March 2020, the fair value at the balance sheet date is nil (2019: £3,833).
The outstanding balance of these options is included in the balance at 1 April 2019 and 31 March 2020, as applicable, in note 26. There is
no deferred tax asset at the year end (2019: £6,994).
26. 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 based upon 10% growth. In relation to the share options
shown below the Board forecasts that the remaining share options will vest.
Options are granted at the closing price on the previous day and have a vesting period of between one and 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.
94
Balance at 1 April
Granted during the year
Exercised during the year
Balance at 31 March
2020
Weighted
2019
Weighted
No. of share
av. exercise No. of share
av. exercise
options
price
options
price
1,790,455
113.19p
3,140,798
70.11p
25,000
205.00p
530,000
149.20p
(1,081,622)
101.20p
(1,880,343)
51.38p
733,833
134.01p
1,790,455
113.19p
Exercisable at year end
106,500
120.95p
884,788
90.97p
The weighted average share price at the exercise date of the exercised shares was £2.562 (2019: £2.221). The weighted average
contractual life of the outstanding options was 7 years (2019: 7 years), exercisable in the range 90.5p to 205.0p.
1,081,622 share options were exercised in the year, 716,667 by way of issue of new shares (note 21) and 364,955 by issue of shares
from Treasury.
A summary of the option price ranges are as follows:
2020
Exercisable
Number of
price range share options
90.50p to 124.00p
136.00p to 152.50p
152.50p to 205.00p
335,500
343,333
55,000
733,833
The Group recognised £97k of expense related to equity-settled share-based payments in the year (2019: £162k).
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 in respect of options granted this year are as follows:
Date of Grant
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 (vested after one year)
Fair value of options (vested after two years)
Fair value of options (vested after three years)
8,334 options
8,333 options
8,333 options
14 Jan 2020
25,000
205.00p
205.00p
10
3.25%
38.50%
1.17%
32.79p
46.33p
56.36p
Expected volatility was determined by calculating the historical volatility of the Group’s share price for the five 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.
95
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
(continued)
27. Operating lease arrangements (Group and Company)
As lessee
Lease payments recognised as an expense during the year
Lease payments 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
2020
£’000
58
2020
£’000
61
278
32
2019
£’000
58
2019
£’000
58
260
105
As explained in note 2, the Directors have decided not to recognise the Right of Use asset or corresponding liability associated with this
lease under IFRS 16 as this would not have a material impact on the financial statements.
As lessor
Lease receipts recognised as income during the year
2020
£’000
57
2019
£’000
57
Lease receipts are for fixed-term sub-lets of parts of the parent Company’s premises bearing
no contractual right of renewal or extension.
28. Related party transactions
During the year the parent Company undertook the following transactions with D4t4 Solutions Inc., a wholly owned US subsidiary:
Sales to D4t4 Solutions Inc.
Purchases from D4t4 Solutions Inc.
Management charge to cover services provided (from D4t4 Solutions plc to D4t4 Solutions Inc.)
Management charge to cover services provided (from D4t4 Solutions Inc. to D4t4 Solutions plc)
Payments made by D4t4 Solutions plc on behalf of D4t4 Solutions Inc.
2020
£’000
1
2,905
35
2,261
4,008
2019
£’000
-
4,885
-
-
7,326
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
96
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 Group has no net debt (2019: nil).
Cash and cash equivalents
Net cash
Categories of financial instruments
Financial Assets at Amortised Cost
Cash and bank balances
Trade and other receivables
Financial Liabilities at Amortised Cost
Trade and other payables
Foreign currency risk management
The Group’s foreign currency exposure arises from:
Group
Company
2020
£’000
12,772
12,772
2020
£’000
12,772
9,570
2019
£’000
10,996
10,996
2019
£’000
10,996
5,388
2020
£’000
12,694
12,694
2020
£’000
12,694
10,647
2019
£’000
10,996
10,996
2019
£’000
10,996
7,894
4,789
3,113
3,793
3,404
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.
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
2020
£’000
2019
£’000
-
-
-
-
1,626
1,361
-
-
26
-
-
36
2020
£’000
2,907
6,464
-
167
26
-
2019
£’000
725
3,371
-
133
16
-
97
Annual Report & Accounts 2020Financial Statements
Notes to the financial statements
(continued)
The following table shows the effect on the Group’s result for the year of the £ 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 2020
Impact on profit/equity for the year
At 31 March 2019
Impact on profit/equity for the year
$
£’000
€
£’000
(367)
(138)
(8)
(5)
Total
£’000
(375)
(143)
The following table shows the effect on the Group’s result for the year of the £ 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 2020
Impact on profit/equity for the year
At 31 March 2019
Impact on profit/equity for the year
$
£’000
411
180
€
£’000
9
6
Total
£’000
420
186
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
two partners owed a total of £5,851,000 (2019: two partners owed £3,179,000) and no expected credit loss provision has been made in
relation to this balance. No other customers / partners owed more than 10% of the outstanding total. No expected credit loss provision has
been recognised for trade receivables at 31 March 2020 (2019: nil).
The Group’s customers primarily consist of banks, partners and other longstanding 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.
98
Maturity analysis of financial liabilities
In less than one year:
Trade payables
Amounts owed to Group undertakings
Other creditors
Accruals
Group
Company
2020
£’000
2019
£’000
2020
£’000
3,403
1,476
2,208
-
22
1,364
4,789
-
21
1,616
3,113
465
22
1,098
3,793
2019
£’000
543
1,378
21
1,462
3,404
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 is immaterial as the loan and mortgage were repaid during the year. 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 and there are no such financial liabilities at the year end.
Fair value measurement
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
2020. 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 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.
The Directors have considered the impact of Covid-19 and whether it has had any impact on the value of the land and buildings of the
Group. In their opinion, the property has not suffered any reduction in value on account of it’s accessibility, location and the internal
refurbishment works which commenced two years ago and which were not therefore not fully incorporated into the 2018 revaluation. The
building is also considered to be suitably arranged internally such that any modifications required to the workplace in order to allow for safe
working in light of the Covid-19 pandemic can be readily implemented.
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. Ten similar properties with sales within the last two years, and within ten 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.
The Directors are satisfied that the assumptions applied in the professional valuation at 31 March 2018 are still valid at 31 March 2020, and
as such have revalued the land and buildings in line with the 2018 valuation.
99
Annual Report & Accounts 2020Financial Statements
Company registration number
01892751
Bank
HSBC Bank plc
54 Clarence Street
Registrars
SLC Registrars
Elder House
Kingston Upon Thames
St Georges Business Park
Surrey
KT1 1NS
Brooklands Road
Weybridge, Surrey
KT13 0TS
Auditor
RSM UK Audit LLP
25 Farringdon Street
London
EC4A 4AB
Corporate information
Registered office
Windmill House
91-93 Windmill Road
Sunbury-on-Thames
Surrey
TW16 7EF
Solicitor
Barlow Robbins LLP
Concord House
165 Church Street East
Woking
Surrey
GU21 6HJ
Nominated Adviser & Joint Broker
Joint Broker
Canaccord Genuity Limited
88 Wood Street
London
EC2V 7QR
finnCap
60 New Broad Street
London
EC2M 1JJ
Financial PR
Instinctif Partners
65 Gresham Street
London
EC2V 7NQ
100
D4t4 Solutions plc
Windmill House
91-93 Windmill Road
Sunbury-on-Thames
TW16 7EF
www.d4t4solutions.com