D4t4 Solutions Plc
Annual Report 2022

Plain-text annual report

D4t4 Solutions plc Annual Report and Accounts 2022 Unlock new possibilities with limitless, compliant first-party data 1 D4t4 Solutions plc Annual Report and Accounts 2022We capture and connect the data that activates cross-channel experiences and powers customer analytics Celebrus Customer Data Platform Capture, contextualise, and activate data in real-time Harness the most advanced cross-channel, first party data collection to create meaningful, data-driven experiences. Celebrus Fraud Data Platform Don’t just manage fraud – prevent it Catch the Fraudster before the fraud by activating contextualised identity and biometric data instantly. Celebrus Customer Data Management Turn raw data into actionable insight Automate the intake, integration, transformation, and delivery of customer data effectively with Celebrus CDM. CONTENTS STRATEGIC REPORT 1 Highlights 2 Investment case GOVERNANCE 50 Board of Directors FINANCIAL STATEMENTS 84 Independent auditor’s report 52 Chairman’s introduction to governance 88 Group statement of comprehensive income 4 Our products and services 53 Corporate governance statement 89 Group statement of financial position 6 Our strategy 58 QCA Corporate Governance Code 90 Group statement of changes in equity 8 Product development 68 Report of the audit committee 91 Group statement of cash flow 10 Information and cyber security 70 Report of the nomination committee 92 Company statement of financial position 12 Strategy in action 72 Report of the remuneration committee 93 Company statement of changes in equity 14 Chairman’s statement 74 Directors’ remuneration report 94 Notes to the financial statements 79 Directors’ report 124 Shareholder information 83 Statement of Directors’ responsibilities 16 CEO’s statement 19 Q&A with the CEO 20 KPIs 22 CFO’s statement 25 Q&A with the CFO 26 Principle risks and uncertainties 30 Stakeholder engagement 36 Our people 38 ESG report STRATEGIC REPORT Highlights Operational • Launch of Celebrus FDP to address the needs of customers in protecting their end-customers against fraud. • Key wins and upsells in the period including; • A new win in the Healthcare sector. • An upsell of an existing banking customer of our CDM business to both the FDP and the CDP which marks our first paying customer of the FDP. • Continued conversion of existing customers onto ARR based contracts. • Prickly Cactus acquisition fully integrated and assisting in bringing stronger account management disciplines and relationships with customers. • Started building a direct sales channel, and investing in the marketing automation to support, whilst also seeking new strategic partnerships for sales. • Continued development of the pipeline of CDP/FDP opportunities with a strong year end position. • Valuable enhancements to CDP product during the year including the Identity Graph and 100 new marketing signals. • Numerous key hires at senior level to strengthen the management team, including in Sales, Marketing, HR and Information Security. • Investment into a group-wide systems infrastructure to better support scalability and growth. • Restructured plc board and newly formed Operations Board working effectively, with a clear separation between strategy, operations and execution. • Improvements to corporate governance and publication of the Group’s first ESG report including a carbon audit. Financial • Annual recurring revenue* (ARR) up 32% to £14.0 million (2021: £10.6 million). • Revenues up 7.3% to £24.5 million (2021: £22.8 million). • ARR as percentage of total revenue increased to 57% (2021: 47%), delivering significant progress against medium term target of 65%. • Gross profit margin of 51.9% (2021: 62.4%). • Adjusted profit before tax** of £3.3 million (2021: £4.4 million), and statutory profit before tax of £1.8 million (2021: £3.0 million). • Diluted Adjusted EPS of 7.1p (2021: 9.5p), and Diluted Basic EPS of 4.1p (2021: 6.75p). • Proposed final dividend of 2.07p (2021: 2.00p), making a total dividend for the year of 2.92p (2021: 2.81p), an increase of 3.9%. • Year-end cash position £11.4 million (2021: £14.2 million), increased to free cash of £26.5 million as at 30 June 2022. • Proposed special dividend of 12.5p per share. Outlook • Delivering ARR growth remains our key strategic focus. • Trading during the new financial year has been in line with the Board’s expectations with good levels of both existing and new client activity. • Strong pipeline of sales opportunities at last year end has continued to build in FY23. • Market conditions are moving in the Group’s favour, with growing distrust and reduced usage of third-party cookies, and tighter regulation of financial institutions to enforce better management of fraud • Continued investment, into marketing, sales, and product development to grow ARR and maintain the Group’s competitive advantage. • Board is highly confident in the Group’s strategy and ability to deliver results and create significant shareholder value in the coming years. • After the period, we secured another FDP win in the Retail sector. * ARR (Annual Recurring Revenue) is the amount of revenue currently contracted at a point in time that is expected to recur within the next twelve months. ** Adjusted profit before tax is calculated before amortisation of intangibles, restructuring costs, acquisition costs, foreign exchange gains/losses and share based payment charges. D4t4 Solutions plc Annual Report and Accounts 2022 1 STRATEGIC REPORT Investment case Delivering sustainable value Market-leading proprietary software Presence in growth sectors D4t4 has unique proprietary software: • Celebrus Customer Data Platform (CDP), • Celebrus Fraud Data Platform (FDP), and • Celebrus Customer Data Management (CDM) and the know-how to enable customers around the globe to better use and manage their data. D4t4 operates in growth sectors: • Fraud Detection and Prevention via our FDP: providing granular, real-time, individual level data and evidence to reduce the fraud losses within an organisation and protect its customers. • Digital Transformation via our CDP: providing the right data and contextualisation to enable organisations to better understand their customers and provide a tailored experience for each customer across all channels and devices to derive more value. • Data Activation and Management via our CDM: building hybrid cloud platforms focused on data ingestion, integration and transformation to provide actionable insights to benefit our customers’ business. Find out more about our products on pages 4, 5, 8, 9, 12-13 Hear from the CEO on our growth sectors on pages 16 to 19 2 D4t4 Solutions plc Annual Report and Accounts 20222022 WINNER Technology Company of the Year Blue-chip customer base Proven management team Profitable with a strong balance sheet D4t4 has a blue-chip international customer base located in 27 countries, with high customer satisfaction, and a very low customer churn rate of less than 2% pa. The company has a strong management team with a track record of success in growing software businesses. The company is profitable, cash generative, and dividend paying. It has a strong balance sheet with ample cash to fund investment into revenue growth. Find out how our customers benefit from our products on pages 12-13 See the structure of our Group Operations Board on page 56 See our results for the year on pages 88-89 3 D4t4 Solutions plc Annual Report and Accounts 2022Our products and services Unlock new possibilities with limitless, compliant first-party data Transform experiences with more complete data sets - captured, contextualised, and activated with Celebrus. For over 23 years, Celebrus has delivered data-first innovation. Borrowing from its Latin meaning of “rich in something,” Celebrus strives to provide the most abundant individual-level engagement and behavioral data technology available. In response to a desire to expand data capabilities, Celebrus was acquired by parent company, D4t4 Solutions plc, global leaders in data management in 2015. This acquisition bridged innovation such as automated patching, advanced monitoring scripts, and performance management and optimisation with the advanced data management capabilities of a customer data platform. D4t4 Solutions has since consolidated data products under the Celebrus product suite to include Celebrus Customer Data Platform and Celebrus Customer Data Management. In mid-2021, D4t4 Solutions added Celebrus Fraud Data Platform as a data-first solution to combat the global fraud pandemic. D4t4 Solutions continues to invest heavily in developing new data solutions and innovations to ensure clients are well-placed to leverage their data assets. Customer Data Platform Data and marketing professionals don’t have the whole story – they use third- party systems with limited data capture capabilities and long lag times to make decisions centered around the customer experience. They jeopardise, and sometimes violate compliance regulations without access to the data resources they need to create truly personalised experiences. As a result, they don’t actually know who their customer is, jeopardising conversion rates and revenues. Celebrus CDP simplifies the process with first-party data capture and identity tracking technology built to adhere to evolving, complex compliance standards that reduce costs and fuel identity-based personalised experiences. Never having to hear “we didn’t tag for it,” gives data and marketing professionals the ability to provide a relevant customer experience and an enhanced corporate reputation. 4 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT"Accuracy and transparency at scale, in our view, is only achievable with true first-party  solutions like Celebrus that have a long and impressive history of solving large, complex digital data problems...." Nicholas Gent, CEO, Future Proof AI Fraud Data Platform Security and data professionals have been focused on managing scams and fraud – but the third-party systems they’ve been using have sub-par prevention capabilities. They risk jeopardising relationships with legitimate customers with their use of limited, one-size-fits-all solutions that lack advanced behavioral biometrics, sense and trace, and data contextualisation capabilities. These solutions often cause false positives and unnecessary interruptions for legitimate customers, damaging reputation. Celebrus FDP is the world’s most advanced, comprehensive solution that captures real-time, first-party behavioural biometrics and PII across the entire customer journey – not just on the payment page. Instant availability to contextualised data transforms the prevention of scams and financial fraud such as new account creation, account takeover, and payment fraud. The ability to intervene to catch the fraudster before the fraud provides a more seamless customer experience, streamlines resource management, and reduces fraud expense to the organisation. Customer Data Management Organisations looking to utilise customer data effectively across the business struggle with data silos, underperforming environments, cumbersome datasets, and compliance challenges. To reach maximum efficiency, organisations need a high-performing on-premise, cloud or hybrid-cloud environment that bridges necessary data across the business in a compliant manner, easily accessible by analysts and data scientists. Underperforming data environments disrupt commerce and ultimately jeopardise earnings and reputation, giving way to incomplete data stories and inefficient processes which are unable to create the experiences customers expect. Celebrus CDM provides an enterprise platform that automates the integration and transformation of customer data from all relevant data sources, whether on-premises or cloud, to power efficient and effective data science, modelling, and regulatory analytics. 5 D4t4 Solutions plc Annual Report and Accounts 2022 Our strategy Whether we are building high-performing analytic environments or capturing and contextualising the data that becomes the backbone for Marketing and Fraud, our goal is to continue to challenge organisations to think differently about data and ultimately accelerate their digital transformation goals. As a business, this past year has been the beginning of our transformational journey driven by a new management team and a renewed focus on driving more aggressive growth in our key markets. Annual Recurring Revenue (ARR) Building for scale Culture Annual Recurring Revenue has been a focus for the business to drive more value for our shareholders. Our goal, given the nature of our business, is to get to the point where ARR comprises roughly 65% of our total revenues. The management team has spent a considerable amount of their careers in high-growth businesses, and we understand the importance of systemisation and automation to aid scalability during rapid growth. By ensuring that we are automating manual processes we free up our resources to focus on higher-value tasks. A business can only go as far as the people within it. D4t4 has a team of incredibly talented people, and we want to be able to support and develop them, to deliver greater shareholder value. What We Did in FY21/22 What We Did in FY21/22 What We Did in FY21/22 For the first time since we announced our transition to an ARR business, our ARR was more than 50% of our total revenues. This year’s level of 57% is an important milestone towards our 65% goal as we continue to deliver new contracts on an ARR basis wherever possible. In the year, we; • implemented a new HR system to assist in employee engagement and process automation • a new CRM and Marketing Automation platform to support our direct sales and better enable our partners • a license management system to better scale our delivery and management of our CDP, FDP, and CDM licenses. As a global business, bringing our people together is extremely important. During the year we; • invested in a new HR system to improve employee engagement, develop a culture of open communication, and facilitate ESG initiatives • restructured our leadership team to create an Operations Board, to empower leaders across the business and improve accountability and understanding of expectations for all roles and levels. What We’re Doing in FY22/23 What We’re Doing in FY22/23  What We’re Doing in FY22/23 We will continue to; • focus on converting legacy customers and ensuring that most, if not all, new customers for the Celebrus CDP and FDP contract on an ARR basis. • drive more ARR revenue in CDM in the form of our Software and IP as well as our Managed Services that also now underpin our cloud deployments of the CDP and FDP. We will; • continue to focus on various systems and processes to create efficiencies, allowing our teams across the business to focus on more high-value activities that will ultimately help us achieve the goals we are setting internally. • implement a new Finance system to increase scalability and improve processes, and build out better reporting and analysis to support the Operations Board in the daily management of the business. We will continue to; • invest in our people and their development, while also leveraging our global HR function to bring people togther across the globe to drive more innovation and opportunity. • evolve the culture, during this year of transition, to foster innovation, creativity, and productivity. • utilise ESG to play a key role in bringing people together Links to KPIs Links to risks Links to KPIs Links to risks Links to KPIs Links to risks A B C D E F G H 1 5 2 6 3 7 4 8 A B C D E F G H 1 5 2 6 3 7 4 8 A B C D E F G H 1 5 2 6 3 7 4 8 6 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTLinks to KPIs A B C D Revenue ARR Adjusted profit before tax ARR as a % of total revenue E F G H Adjusted diluted earnings per share Dividend Net assets Cash Links to risks 1 2 3 4 Global economy Execution and sacalability Regulatory changes Competition 5 6 Customer and partner loss Information and cyber security 7 People 8 Foreign exchange losses Learn more about our KPIs on pages 20-21 Learn more about how we manage risk on pages 26 to 29 Grow CDP and FDP revenues Innovate and differentiate Diversify our revenue streams With the launch of our Celebrus FDP, we now have two technologies on the forefront of digital transformation. By focusing on these two products we can continue to drive ARR growth, increasing shareholder value, and continue to build upon our favorable customer retention rates across the business to support organic growth. What We Did in FY21/22 • We continued to onboard new partnerships and extend existing ones. • We won our first paying FDP customer. • Our acquisition and successful integration of Prickly Cactus has resulted in deepening relationships with existing customers resulting in higher utilisation of our core products. • We’ve also invested in a direct sales team and have restructured the Marketing team to focus on growth and brand visibility. • We pride ourselves on building upon our IP to solve for the key challenges customers are facing in the marketing and fraud worlds. • We continue to innovate our platforms with a view of launching new features twice a year. What We Did in FY21/22 • We launched versions 9.4 and 9.5 of the platform and continued to innovate our product roadmap based upon the challenges brands face in the marketplace today. • We focused on various research projects that will play into future releases, as well as the continued use of our Customer and Partner Advisory Boards. • We launched our Customer and Partner Portal, to create channels of feedback that are crucial to our product development and growth. • We see clear opportunities in the market, based on industry changes and new legislation; we will seek to fully capitalise on those. • We will continue to grow our existing partnerships, and develop new ones, but we want to bring our products direct to new customers and control our own destiny. What We Did in FY21/22 • We built our Sales and Marketing teams around this core concept, which started as a “Go Loud” campaign and continued with our investment in a new CRM and Marketing Automation platform. • Our PR initiative created quality brand exposure, and also resulted in several bylines being published from our key thought leaders across the business. What We’re Doing in FY22/23 What We’re Doing in FY22/23 What We’re Doing in FY22/23 We will; • Have a continued focus on direct sales and innovation of both platforms to ensure we maintain our core differentiators in the market. • explore new partnerships that can increase the market exposure of our brands. • bring PR in-house to build upon the successful strategy from last year and take more control of our messaging. We will continue to; • incentivise our product and engineering teams to find opportunities to identify and protect Intellectual Property • invest in key research projects that are driven by where we see the market going and the challenges that we see on the horizon. Links to KPIs Links to risks Links to KPIs Links to risks A B C D E F G H 1 5 2 6 3 7 4 8 A B C D E F G H 1 5 2 6 3 7 4 8 We will; • continue our mission of improving our visibility in the market by updating our branding and positioning in the marketplace. • continue to revamp our digital and social presence and bring our PR in- house to take the next steps in our “Go Loud” campaign. • simplify our messaging to better explain the products to our prospects and investors. • further build out our direct sales toolkit to support our global sales team. Links to risks 1 5 2 6 3 7 4 8 7 D4t4 Solutions plc Annual Report and Accounts 2022Product development Intelligence is the ability to adapt to change Fraud Prevention The launch of the Celebrus Fraud Data Platform in June 2021 was the Kubernetes also promises to become the platform for moving workloads between on-premise and cloud environments. Kubernetes most exciting step we’ve taken in several years. It is a product uniquely is born from the DevOps movement where building for scale is a key well placed to address the issues we see in society today. Widespread focus and this drive to automate is something we are focusing on this scams and identity theft have created huge losses for companies and year so that the business can grow quickly and efficiently. Increasing huge distress for individuals, on a worldwide scale, and there are no automation means we can service existing customers more efficiently signs of this epidemic slowing down. Celebrus FDP utilises the world’s most accurate customer insights technology and focuses it on a range of real-time fraud detection use cases. These use cases include Scams, New Account Fraud, Remote Account Takeover Fraud and Payment Fraud. The feedback we have garnered from customers and partners has been fantastic and really motivates us to continue to build further functionality into the platform. Infrastructure The world of data platforms continues to evolve with new generation technology stacks starting to take shape. First amongst equals in this world is Kubernetes. Kubernetes is quickly becoming the dominant system for the deployment, scaling and management of applications. and onboard new customers more quickly than ever before. It also means that traditional challenges around compliance, such as ensuring security vulnerabilities in servers are patched quickly, can be done with less manual work and therefore less cost to the business. Privacy The ever-changing story of Intelligent Tracking Protection (ITP) rolled on through 2021 with Apple releasing new privacy features including Private Relay. These technologies limit the ability that marketers have to understand their customers and communicate with them. AdTech and MarTech companies continue to build workarounds to ensure their technology still works in Safari, albeit in a limited capacity. These workarounds have not gone unnoticed by Apple. In response, Apple implemented changes to its privacy features to shut down many of these workarounds. Google also announced a delayed timeline for phasing out third-party cookies from 2022 to 2023. Google’s decision to extend its timeline to 2023 appears to be based on its objective to move to privacy- compliant alternatives including their recently announced Topics API. These privacy changes define an industry where Celebrus is uniquely well placed to help marketers. Celebrus is a first party real-time solution which enables us to provide the granular and timely understanding of activity on digital channels which our customers require. 8 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTA strong identity resolution solution built on a foundation of concrete first party data and resilient identifiers such as account number and Engagement One of my favourite features this year is the work we have done with email address, not IP addresses or cookies, is the key requirement. To one of our business partners, Pegasystems. Pega provides a range of support these requirements we released the world’s first real-time, first applications for customer relationship management, which we work party, Identity Graph. This unique feature enables our customers to with including Customer Decision Hub (CDH). CDH is the tool of choice understand who their visitors are even after third party cookies have for personalised customer experiences. CDH relies on Celebrus CDP as disappeared from the industry. being the sensory network understanding visitors on web and mobile. Compliance Privacy regulations accelerated during 2021 with a host of US states bringing new data privacy regulations forward. The pioneer of these in the US, the California Consumer Privacy Act (CCPA, and subsequently CPRA) is moving forwards with the introduction of a new enforcement agency, the California Privacy Protection Agency (CPPA). The measures and protections afforded by CPRA are now looking remarkably similar to the EU GDPR. We have taken our integration with Pega to the next level by helping CDH understand not just what interests visitors but also measure their engagement and intensity. This deep understanding of visitor behaviours is how Celebrus enables Pega to deliver the very best offers and messages to visitors. Teamwork No update would be complete without a big note of thanks to my team. I am lucky enough to lead a hugely talented and committed Following the lead of Colorado and Virginia, numerous legislatures team of people who deliver world class products and services. I fully throughout the United States introduced their own data privacy bills expect the year ahead to challenge us as we move forwards together. modelled off the CPRA. This momentum has carried forward into 2022, with thirteen states already introducing, or reintroducing, privacy legislation since the beginning of the new year: Alaska, Florida, Hawaii, Kentucky, Indiana, Nebraska, New Jersey, New York, Oklahoma amongst others. Away from the US, enforcement teeth are sharpening in France, Turkey, China and Europe. Compliance is one of our strongest feature areas and has underpinned the product since its inception. This is an area where we see great opportunity and we expect to announce exciting new product innovations later this year. We also have new patent applications in flight to make sure these innovations deliver us valuable intellectual property for years to come. Ant Phillips Chief Technology Officer 9 D4t4 Solutions plc Annual Report and Accounts 2022Information and cyber security Staying ahead of evolving risks As the recently appointed Chief Security Officer it is encouraging to join an organisation with a strong security culture which permeates our products, people and organisational culture. A key part of this culture is our security framework and certification to ISO 27001, which is globally recognized as a strong independently audited Information Security standard. This standard is currently being strengthened and the new version is expected to be published in Oct 2022. At D4t4 we aim for best practice in this field, and so we welcome the standards evolving in response to changes in the Information Security landscape. Through our analysis of the changes expected, we have already started preparations for the transition to ISO 27001:2022. It’s important to highlight that an implementation of such a standard goes far beyond a once-per-year external audit. D4T4 commits resource, thought leadership and effort throughout the year to ensure we are continuously improving our application of ISO 27001. Analysing trends, scope review, reviewing controls, internal auditing and a strong risk management process all form part of this process. Cyber Operations Staying in front of evolving cyber risks is something the business has achieved comfortably over the past year with strong reactions to Log4J and other threats. Global events such as these provide the impetus to drive further improvement across the business and signify the importance of attack planning whether pre-, during and post- attack, to ensure we are resilient to such threats. With our standards-based approach, our strong risk management processes form the foundation of this robustness. In order to build strong cyber operations, you must first know the risks which the business faces and the context in which it operates. Technology and services play a role in ensuring we are appropriately resilient to current and emerging threats, and at D4t4 we deploy technology to this effect. Cyber-attacks are getting smarter and the threat landscape of the workplace is changing with a strong shift to hybrid working across many industries. D4t4 has coped well with these shifts in the past twelve months. Looking to the future the organisation will continue to evolve its cyber operations skills and capabilities and over the next twelve months and we will deploy a dedicated Security Operations Centre to further strengthen our capabilities. Product Security The security of our Celebrus product has been a key focus for the team. As a product, Celebrus is tested both internally and externally with excellent results achieved. D4t4’s secure development lifecycle provides the foundation for these strong results. In turn this has provided the foundation for a product that can be deployed in secure environments and highly regulated industries. 10 Certificate Number 8869 ISO 27001 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT OUR PEOPLE Rebecca Hairfield Project Manager, Cary, North Carolina, USA Joined D4t4 2019 What was your degree or initial qualification? Bachelor’s in Politics, and a background in Project Management Legislation and regulatory framework Operating in a secure and compliant manner requires understanding of multiple legislative and compliance frameworks. Operating in regulated industries, such as banking, insurance, and healthcare How did you get into data and tech? I was specifically looking for a change in field to a new and has been a strong part of the business for D4t4. Having healthcare growing industry. customers has meant that we have put in place processes to meet complex compliance requirements such as HIPAA, (the Health Insurance Portability and Accountability Act) applicable in the United States which sets out extensive regulations for the processing of Personal Health Data within this jurisdiction. In what has been an exciting challenge, the organisation has What attracted you to D4t4? The size of the company means there’s effective, interpersonal connections and the team seemed to actively work against the disconnect you experience at a large company. This, partnered with my desire to change fields, been through a process of review to ensure compliance with made D4t4 the perfect fit. these requirements, which enables our clients to be confident in processing this type of data within our products. We will continue to work diligently to ensure we remain in the top tier as far as information and cybersecurity are concerned. Tony Bennett Chief Security Officer What do you like about working at D4t4? The team is willing and eager to teach, something I was looking for when I joined the company. I find fulfilment in a working environment where I continue to learn and grow in my knowledge base. How have you grown professionally while working at D4t4? I have grown both in my capacity as a Project Manager as well as in my knowledge of tech. It is incredibly gratifying to have a solid understanding of the tech behind what I manage on a day-to-day basis, having started out just three years ago for the first time in this field. What would you say to people who might be thinking about wanting to work in data and tech and at D4t4? Especially for those who are looking to change fields, who have a hunger to learn and develop, this is a great place to work. D4t4 Solutions plc Annual Report and Accounts 2022 1111 D4t4 Solutions plc Annual Report and Accounts 2022Strategy in action How a multinational retail bank increased revenue by $12M from a single campaign using personalisation 85% $3m $12m reduction in time to deploy personalisation incremental profit from additional sales incremental revenue from a single campaign Challenges Millions of visitors come to the bank's websites and repeatedly Solution Celebrus CDP was chosen because it addressed all the challenges view specific products every day, but don't progress to a purchase. the bank had, simply and cost effectively. The solution delivers a fully Before deploying the Celebrus Customer Data Platform (CDP), their compliant collection of visitor and customer data across the bank’s tag-based solutions didn't allow them to act on this opportunity public and authenticated websites, including Accelerated Mobile because individual tags aren't able to see this complex sequence of Pages (AMP) and native mobile applications, in more than interactions. The bank wanted to retarget these potential customers - 15 countries. either in-session, or with outbound follow up. Celebrus CDP provides instant (milliseconds) delivery of data into The bank also wanted to get serious about rolling out real-time the bank’s real-time decisioning systems, with rapid and efficient personalisation, by creating thousands of new targeted, personalised implementation of data collection via a single line of code – no messages and offers on its web channel. The bank wanted to trial tagging required. The maintenance free solution offers data control, deploying new triggers to see if they could speed up what had been a access, and ease of use with a business-friendly data model that is laborious and lengthy process. Typically, when using their tag-based continuously loaded into the bank’s existing data platforms. solution, developing new triggers took weeks or even months! Celebrus CDP was rapidly deployed on all public and authenticated Finally, the bank wanted to increase sales by optimising loan websites as part of the bank’s major transformation program. conversions via intelligent retargeting. They knew that a large number of customers interacted with their online mortgage or loan calculator but didn’t convert. These were prime targets for intelligent retargeting. Celebrus has enabled us to transform the depth of our personalisation, achieve true real-time website personalisation, and deliver a consistent cross-channel customer experience. 12 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTHow first-party, tag-free data capture increased conversion by 24% for a leading European health insurer 24% increase in conversion rates $↓ ↑CX significant call centre cost reductions improved customer experience Challenges Faced with growing competition in a multi-channel marketplace, process to provide the data for actuaries to determine the insurance premium. Layering Celebrus on top of the existing process enabled the a leading Dutch health insurance company understood that being insurer to optimise customer personalisation in real-time, and at scale. relevant is critical to creating a successful website. For them, every visitor to the site has specific insurance requirements based on age, gender, occupation, and parenthood. All customers initially see the same banner when they arrive on the health insurance site. After completing the first step in the five- stage process, the company then tailors the banners to reflect each They saw a clear opportunity to improve the relevance of their online customer’s different life stage – from age, to whether they have children. content for each visitor through effective real-time personalisation. The insurer decided to explore the opportunities this approach could deliver. Solution Celebrus CDP was adopted to take advantage of the tag-free, multi- channel 1st party data capture. This solution enabled them to execute real-time website personalisation while simultaneously testing the wide range of new banners, ads, and campaigns they created. After conversion, the company can see which banner the customer saw, compare it to their life stage, and draw a relevant conclusion from the data. Information is presented to the company via dashboards, enabling easy and rapid assessment of the performance of each new banner or campaign. The solution provided instant and low-cost deployment with a single line of code - no tagging required. The data collected is instantly contextualised and written into a business-friendly data model in the The company embarked on a program of delivering personalised insurer's existing data, providing instant and low-cost access. online banners and advertisements to customers based on life stage information. This information is captured online during a five-stage Celebrus enabled us to extract an unprecedented granular level of detail from each of those campaigns. It enables us to look back at every single customer visit to the web site step by step and analyse behavior. 13 D4t4 Solutions plc Annual Report and Accounts 2022Chairman’s statement Transitional year whilst delivering market expectations I’m very pleased with the progress that we have made over the last this year. I would personally like to take this opportunity to thank Jim year. This has seen a transition to a restructured board, a strengthened and Mark for all their hard work and support over the years. management team, improvements to our corporate governance and the production of our first ESG report. It has also seen investment into a new product launch, an acquisition and significant ARR growth, all whilst delivering market expectations for revenue and adjusted profit before tax. As I outlined in last year’s statement, during this past year we have restructured the board to create a leaner board focused on strategy and governance, with the creation of an Operations Board to focus on execution of the strategy. We believe this is the right structure to deliver growth in future periods. The board now consists of three non- executive directors and two executive directors. Peter Kear stepped down from the board on 31 March 2022 and left the Group on 30 June 2022, after a successful handover of the CEO role to Bill Bruno. We thank Peter for his contribution to the Group’s success over the last 37 years and wish him well for his retirement. In June 2021, Jim Dodkins and Mark Boxall stepped down from the D4t4 Board. Jim continues to work for D4t4 on a part-time basis whilst Mark left the Company earlier The Nominations Committee undertook two major searches last year for the roles of CEO and CFO and we are delighted to have chosen Bill Bruno, as CEO, who was previously our VP North America, and Ash Mehta as CFO who has a track record in growing public companies. Since his appointment in August 2021, Bill has created a Group Operations Board with the successful recruitment of key talent into vital roles such as VP Global Sales, VP Marketing, Head of HR People and Culture and most recently a Chief Security Officer. The latter role signifies the importance we place on information security and the trust our multinational customers place in us in helping them manage their critical data. With this management team in place, I am confident we have the right people to drive future growth. With the change in board structure, we have taken the opportunity to review and strengthen our corporate governance with the adoption of new Terms of Reference for our Board committees as well as a new Matters Reserved for the Board schedule, in line with current best practice. This clarifies the split of responsibilities between the main Board and the Operations Board ensuring firm oversight of operational matters. I’m pleased to report that we have produced our first ever ESG report, having appointed consultants to undertake a carbon audit. The report provides a valuable insight into our carbon footprint and actions we plan to take to reduce our impact on the environment, as well as outlining how we interface with our communities and protect and support our employees. During the year, we launched a new product, the Celebrus Fraud Data Platform, to address the needs of our customers in protecting their end-customers in real-time across all digital devices, using automated behavioural touchpoints. Fraud is an ever-growing threat causing distress and financial loss to a growing number of victims, 14 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT"We have successfully executed a year of transition which positions us well for future growth" and the current regulatory focus on addressing this problem creates Therefore, I’m delighted to announce that as a result of the Group’s a strong opportunity for our product especially as regulators move healthy cash balance, the board is also proposing a special dividend of towards holding banks fully responsible for compensating customers 12.5p per share payable to shareholders on the register as at the close who become victims of fraud. This provides an impetus to banks to of business on 7 October 2022. The special dividend is expected to be address the issue to avoid such losses. Our first sale of FDP was made paid on 27 October 2022. in December 2021 and with several organisations currently trialling the product, we anticipate further contract wins in the coming months. The Group’s significant progress in the year is a testament to our many staff across our four locations around the world and I thank them As well as launching FDP, during the year we have made numerous for their efforts, especially during a period when we have had the product developments to our CDP product to maintain our competitive instability of intermittent coronavirus lockdowns still ongoing. We are advantage in the market and add further value to our customers. increasing our focus on our people. The new Executive team is evolving Against this backdrop of significant change within the business, we have successfully met market expectations delivering on Revenue and Adjusted Profit before Tax, as well as growing ARR by 32%, generating cash and paying a growing dividend. the Group culture to be one which is more empowered, accountable and enjoyable, as we aim to become an even better company to work for. This is vital in a global economy, post-lockdown, in which there is a shortage of talent and intense competition for good people. The Board is today proposing a final dividend, subject to shareholder approval at the 2022 AGM, of 2.07p per share which along with the Outlook We start the new financial year in a good position with products interim dividend paid of 0.85p per share in January 2022 brings the full well aligned with market requirements and trends, a strengthened year dividend to 2.92p per share, an increase of 3.9% over last year. The management team, a healthy cash balance, and most importantly a final dividend is expected to be paid on 24 August 2022 to shareholders strong pipeline of sales opportunities. I’m delighted to say that the on the register as at the close of business on 15 July 2022. Board is highly confident in the Group’s strategy and our ability to deliver Whilst the Group has increased investment in recent years, cash generation continues to be strong. The board has considered uses for the cash, and although the search for acquisition opportunities is an ongoing one, with no such opportunities in sight the board will focus investment on organic growth, in the knowledge that our product set is market-leading, and the market opportunity is large. We will maintain a regular dialogue with shareholders on potential uses for the cash, but even after allowing for all investments that may be required as we continue to grow, the Board is of the view that we are in a position to return some excess cash to shareholders. results and create significant shareholder value in the coming years. Therefore, we will continue to invest wisely where we see opportunities for good returns on investment. Peter Simmonds Chairman 6 July 2022 15 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT Chief Executive Officer’s statement Building blocks to drive and manage growth I’m delighted to present my first annual statement to shareholders since taking on the CEO role in October 2021, and I’d like to thank Peter Kear, Strategy and Market trends Our strategy remains unchanged, with the key objective being to grow the outgoing CEO, for his contribution to building the company we ARR through increased sales of CDP and FDP to customers. The market have today. We have market-leading products which can form the basis trends during the year have been in our favour and we aim to capitalize of a sizeable business, creating significant shareholder value over the on these in the coming year through our strengthened Sales and coming years. Marketing teams. Since my appointment, our Chief Financial Officer and I have been For the CDP product, the trends towards greater control of privacy focused on implementing the building blocks to drive and manage the of data are evidenced by the deprecation of third-party cookies, growth we anticipate. Core to this has been ensuring that the business the impacts of Apple Intelligent Tracking Prevention (ITP) and other is scalable and that we minimise the growing pains that arise during browser changes relating to privacy for consumers. Celebrus CDP is not periods of growth. This covers ongoing investment into a number impacted by any of these as we help our clients collect first-party data, of areas including internal systems, processes, reporting, employee utilising our IP, which is not affected by these trends in the way that our empowerment and accountability and not least company culture. competitors’ products are. Our approach to compliance, identity, and This is being undertaken in parallel with ensuring that the day-to-day business continues to perform, and I’m pleased to report a good set of financial results for the year ended 31 March 2022 (“FY22”) with Revenue up by 7.3% during the year and a very healthy growth in ARR of 32%. 16 instant data activation provides us with a strong go-to-market strategy. This ultimately has allowed us to retain and upsell our existing account base, while also building significant pipeline activity through both key partners and our direct sales capacity. On the fraud side, there are two key trends: the speed at which fraud occurs and the ongoing regulatory discussions in many jurisdictions about reimbursing consumers who are victims of scams. This regulatory trend is strongest in Europe, and like GDPR which was a European initiative, we believe best practice will quickly be adopted around the world. With millisecond data capture and contextualization, our Celebrus FDP ultimately helps brands catch the fraudster before the fraud. The data that we capture offers unique and differentiated solutions for preventing scams, saving banks millions of pounds and ultimately protecting consumers. Products and technologies Of course, despite market trends being in our favour we continue to develop functionality to maintain our market leading position in the realm of data capture, data contextualization, and data management. During the year, we added another 100+ automated marketing signals to CDP providing customers with greater ability to identify and convert valuable potential end-customers, as well as adding the world’s only first-party real-time Identity Graph to better identify end-customers across a range of devices they might be using. D4t4 Solutions plc Annual Report and Accounts 2022We have continued our commitment of providing two major platform updates each year for the Celebrus CDP and FDP, which is driven by our product roadmap. That roadmap has several inputs: our experience and expertise, feedback from our customers during Advisory Board meetings, our Partners, and research projects within our Engineering team which we continue to grow. Our technology focus is on innovation and differentiation and the ability to cater for the ever-growing needs of our customers. Most recently, this was demonstrated by our ability to rapidly establish CDP to be HIPAA compliant in the United States. HIPAA is a series of regulations covering the use and disclosure of health information in the United States, and CDP compliance is a requisite for our healthcare customers. In June 2022, our technologies received recognition from The Global InfoSec Awards in the categories of “Most Comprehensive in Identity Management” and “Most Comprehensive in Account Takeover Protection”, as well as from IDC MarketScape which named Teradata Vantage (powered by Celebrus CDP) as a “Leader” in the CDP market. We will continue to innovate our Celebrus CDP and FDP to ensure we remain differentiated and are able to solve some of the most complex data challenges in the industry today. "Our strategy remains unchanged, with the key objective being to grow ARR through increased sales of CDP and FDP to customers. The market trends during the year have been in our favour and we aim to capitalise on these in the coming year through our strengthened Sales and Marketing teams." We believe that the industry trends described above make this an opportune time to build up the direct sales channel, to supplement our partner’s efforts with our own direct approach. This will support our objective of accelerating sales growth by building as many revenue streams as possible to create a stronger pipeline for better, sustained growth in the coming years. Route to market This past year had some great wins for our business, including our first contracted customer for FDP just six months after its launch in June 2021. This was an existing customer: a major financial institution in the United States, and they upsold to both our CDP and FDP in addition to our existing CDM relationship with the bank. We are in dialogue with other existing customers, particularly in the Financial Services and retail sectors, and we have built up our partner program in the fraud sector to build a healthy pipeline of FDP opportunities. Partners We have had some great success in our key markets with technology partners including Teradata, Pega, SAS, Quantexa, and Dell. We have deepened our relationships with partners at a corporate level but also at a local level across all territories to reinforce the value-add that CDP and FDP provide to partner offerings. This is illustrated by the announcement, in May 2022, that CDP will be integrated into Always- On Insights, a new offering combining the capabilities of Pegasystems' Customer Decision Hub™ with Celebrus CDP. Our customer success team, boosted by the addition of the Prickly Cactus team acquired in August 2021, has done a great job instilling new account management disciplines and focus and expanding our relationships with existing accounts, while our new business team has continued to win in our core markets of Financial Services, Insurance, Healthcare, and Telcos. We launched our API connector in v9.5 of our CDP and FDP product last November, and at that time we signaled to the market that we would focus on bringing our data together with leading technology across the globe in a meaningful and simple way that creates a synergistic offering for our customers. I’m pleased to say that we are in discussions about new partner opportunities that bring a unique offering to our customers, and we look forward to further progress on We continue to focus on driving pipeline and measuring what is this in the coming year. working and what isn’t in the market so that we can learn and adapt rapidly around the globe. Traditionally our business has gone to market exclusively via partners. While that continues to be a strategic pillar of our business, during the year we began to build a direct sales channel. This has already yielded success in the United States, and we are now supporting a global rollout of direct sales via our restructured and better-aligned Sales and Marketing teams. In addition to technology partners, we continue to seek opportunities to expand our Solution Integrator (SI) partnerships. While we focus on innovating our software and IP, we need partners that can efficiently implement these platforms to assist our objective of building a scalable business and minimising growing pains. This approach will also help us manage costs as we grow. We are building a partner toolkit encompassing training and certifications for SI partners for rapid onboarding and success. 17 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT Chief Executive Officer’s statement continued Branding Since the year-end, we have revamped the branding not only of our The role of Head of HR, People, and Culture is a crucial one because we regard an effective culture established and created by our talent Celebrus product family, but also of the D4t4 brand. The new branding throughout the business as critical in building high-performance is the work of our Marketing team led by our new VP Marketing teams to drive our growth plans. That culture will be one of openness, based in the United States and is more representative of our ethos, empowerment, and accountability. messaging, and approach to the market. The message is simpler, conversationally sophisticated, and focuses on being a disruptor in the market. The new branding has enabled us to align Marketing and Sales more closely around the globe to ensure better coordination and success in the coming year. The Chief Security Officer role is also a vital part of our strategy in the coming year. Whilst the Group has always placed data and cybersecurity high on its priorities the increasing complexity in this area demands a role dedicated to this activity. I’d like to thank all our employees around the world, who have Robust systems to support growth We have been busy in the year improving transparency, accountability helped us deliver great results in this past year, during a time of global economic uncertainty, and internal transformation and change. and reporting whilst establishing greater automation with a view to creating a group-wide systems infrastructure to better support scalability and growth. We recognise the competitive global environment for talent, and we believe that the new culture will provide greater engagement and job satisfaction for our employees which we will consider supplementing We have implemented a new Customer Relationship Management with further enhancements to remuneration and benefit packages system to support our Sales Strategy. This system will manage our where appropriate. customer lifecycle all the way from lead generation to winning new customers through to customer satisfaction and advocacy. Outlook We are also implementing an HR system which will enable us to automate and better manage key HR processes, and most importantly better engage and communicate with our employee base in four countries and time zones. We have started to implement a new Finance system which will provide us with better visibility and granularity into our performance to support our initiative of increased empowerment and accountability for our teams. These systems will set up our teams for better, measurable success and create transparency for our teams globally to better understand what we are trying to do as a business and the role they play in helping us achieve our goals. These systems and processes will also help us create better accountability amongst our leaders across the business, a key Our goal in the year ahead will be to continue to improve our go-to- market approach, rapidly develop new partners, and ensure our brand platform and market share continues to grow. These targeted measures are what we believe will deliver ARR growth and shareholder value. We will also continue to invest into sales and marketing activities and product development whilst ensuring we can still generate healthy profits and cash for future investment. It’s important that we look ahead, as part of our three-year plan, to ensure we are investing in the right places now to support that desired growth. As well as seeking organic growth, we will continue to monitor the space for potential acquisition opportunities to grow the business or bring bolt-on technology into our CDP or FDP products. value of our culture, so that we can make efficient decisions globally. We have started the new financial year with a stronger pipeline, Our employees From a people perspective, we have restructured the business and brought in top talent to drive growth in our key markets. We formalized the Operations Board, established our Leadership Team, brought in new talent to the global roles of VP-Marketing and VP-Global Sales both in the United States, as well as creating new roles such as Head of HR, People, and Culture and Chief Security Officer both in the UK. 18 revenue already committed to the current financial year, solid growth in ARR. I believe we have an experienced team that can deliver, and I am optimistic about the year ahead. Bill Bruno Chief Executive Officer 6 July 2022 D4t4 Solutions plc Annual Report and Accounts 2022Q&A with Bill Bruno, CEO You’ve strengthened your team significantly over the last year. What attracts a new joiner to D4T4? When people see the technology we have, they are blown away. They realise the potential for the business immediately because of the competitive advantage our products have over competitors. Also we have a virtuous circle of good people attracting more good people to the company, that can capitalise on the potential of the products. Since I became CEO, we have been fortunate to have recruited top talent into Sales, Marketing, Finance/HR, Security, Fraud, and Delivery Services to carry the business forward to the next level. What have been your biggest challenges since becoming CEO and how are you addressing these? I don’t think the challenges are any different for me than anyone else who has come in as CEO to a business with the legacy that D4t4 has. To be honest, I welcomed the challenge and joined this business years ago because I believed in its potential. So, for me, it’s less about the challenges and more about the opportunity. That being said, every business has its challenges, and as CEO the most important thing to do is figure out the right balance for bringing change into an organisation rapidly when you see the opportunity in front of you and know you don’t have unlimited time to go through that door. What are the current industry trends and how do they affect D4t4? This answer could be a thesis if I wrote them all out, but let’s give you a quick read on the Marketing and Fraud side. On the Marketing side, the main topics you hear about are the deprecation of third-party cookies, the impacts of Apple Intelligent Tracking Prevention (ITP) and other browser changes, and privacy/compliance for consumers. I’m happy to report that the Celebrus CDP is not impacted by any of these and offers a market-leading solution for compliance. On the Fraud side, there are two trends: the speed at which fraud occurs and the ongoing regulatory discussions in the UK (and eventually globally just like GDPR) about reimbursing consumers who are victims of scams. With millisecond data capture and contextualisation, our Celebrus FDP ultimately helps brands catch the fraudster before the fraud and the data that we capture ultimately offers unique and differentiated solutions for preventing scams as well. What has been the response of existing Celebrus clients to the fraud product launch? It’s easy to forget that we launched this platform from scratch, not long ago, in June 2021. We had our first paying customer in December 2021, a mere six months post-launch. We now have a good number of existing accounts in conversations and various stages of testing the new platform. We have new partners on board that believe in our product and speak highly of it. It’s easy to get impatient, because you want to see quick results and payoffs, but I’m extremely happy with the pipeline and opportunity in front of us in the coming year for Celebrus FDP. What USPs does D4t4’s product have as compared with other anti-fraud offerings? I’m not going to give away our entire sales approach, but many of the solutions we come up against are third-party in nature. This means the brands don’t own the data and therefore can’t retain it for as long, and so they lose the ability to identify the customer when they come back to the website, say, a few months later. They also don’t capture anywhere near the level of data and granularity that we do, and so only provide a “black box” approach to fraud scoring, and ultimately are unable to truly manage digital identity. Is the selling process different between the CDP and FDP products? The process is different in that it’s a different business language, talking to a different team in the customer organisations we work with. Marketing teams which buy CDP are primarily driven by competitive pressure to improve customer experience and increase revenues, whereas Fraud teams are primarily concerned about reducing losses to their business of their customers whilst not undermining the customer experience, and increasingly they are also under regulatory pressure to reduce fraud. In response to the difference, we’ve been fortunate to bring on Fraud expertise in the US and the UK to drive our global positioning and support our sales teams in key markets. And finally, what do you do when you’re not working? I’m a big proponent of ensuring that you have hobbies and outlets to balance out life. It can’t always be about work. Semi-related to our industry, I have a podcast called Analytics Neat which I suppose also highlights my love of a good bourbon. I play golf quite a bit and enjoy woodworking as a hobby as well. For those that have been on camera with me, you’ve also probably noticed that I collect action figures and other collectibles. D4t4 Solutions plc Annual Report and Accounts 2022 19 19 D4t4 Solutions plc Annual Report and Accounts 2022Key performance indicators Measuring our performance Revenue £24.5m ARR £14.0m 2022 2021 2020 24.5 22.8 21.8 2022 2021 2020 14.0 10.6 9.6 Revenue is a KPI because it reflects the work we are doing, ARR is an important metric as it is an indicator of valuation of and the monies received over a period of time for that work. software companies. Investors value the certainty of knowing It is driven by new sales, renewals, and upsell/cross-sell to that there is revenue which will recur year after year from existing customers and includes licenses, hosting, support and customers who derive benefit from D4t4’s products. maintenance, as well as one-off project work and third-party hardware and software sales. Links to strategy A B C D E F Links to strategy A B C D E F Adjusted profit before tax £3.3m ARR as % of total revenue 57% 2022 2021 2020 3.3 4.5 5.1 2022 2021 2020 57 47 44 Adjusted profit before tax is a key indicator because it ARR as a % of total revenue indicates our progress to improve approximates to the cash generation of the ongoing operations. the quality of revenues by making a higher percentage of them It excludes non-cash items such as amortisation, foreign recurring revenues. This includes converting existing customers exchange gains/losses, and share-base payment charges etc, from perpetual licenses to term licenses as well as adding new as well as exceptional one-off costs. See note 5 on page 102 for customers on a term license ARR basis. reconciliation of Adjusted profit before tax. Links to strategy A B C D E F 20 Links to strategy A B C D E F D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTLinks to strategy A B C ARR Building for scale Culture D E Grow CDP and FDP revenues Innovate and differentiate F Diversify revenue streams Adjusted diluted EPS 7.1p 7.1 9.5 11.2 2022 2021 2020 2022 2021 2020 Learn more about our strategy on pages 6-7 Dividend 2.92p 2.92 2.81 2.67 Adjusted diluted EPS is driven from the Adjusted profit before The Dividend is a key metric, as many shareholders value the tax figure and indicates the adjusted profit per share to provide a cash payment to them, but this metric is one that is considered like-for-like calculation of value creation per share per year. extensively by the board balanced against the need to invest surplus cash into growing the business. Links to strategy A B C D E F Links to strategy A B C D E F Net assets £31.9m Cash £11.4m 2022 2021 2020 31.9 30.9 29.3 2022 2021 2020 11.4 14.2 12.8 The net assets indicate the net value of the assets and liabilities Cash is a key metric as it provides assurance on our ability to of the business and are important as a key metric to illustrate the invest to grow the business as well as make dividend payments impact of profits and dividend payments on the value retained to shareholders. It also provides comfort to customers from a by the company. vendor risk perspective. Links to strategy A B C D E F Links to strategy A B C D E F 21 D4t4 Solutions plc Annual Report and Accounts 2022Chief Financial Officer’s review Delivering results in a year of change Overview This has been a year of strong financial performance which is all the Income Statement Group Revenue grew 7.3% to £24.5m (FY21: £22.8m) during a year more pleasing given the significant organizational change we have when the ongoing impact of the pandemic along with the global been making over the same period. economic situation continued to slow down buying decisions by our Whilst investing significantly in our new FDP product we have delivered against expectations on Revenue and Adjusted PBT, as well as increasing Annual Recurring Revenue by 32%. The overall performance and financial position of the Group provides us with ample comfort to be able to increase the full year dividend by 3.9% prospective customers. However, the quality of revenues increased significantly, with ARR growing 32% to £14.0m (FY21: £10.6m) and now accounting for approximately 57% (FY21: 47%) of revenues. We expect this ratio to continue to increase up to a level of around 65% in the medium term. over last year, as well as propose a special dividend of 12.5p per share. The gross margin was 51.9% (FY21: 62.4%) due to a change in mix During the year, we also strengthened the business by an acquisition which provides us with improved account management expertise to better service, maintain and grow share of wallet with our new and existing customers alike. We undertook a share buyback programme to hold shares in Treasury to mitigate the dilutive effect of future share option exercises. We believe that all these measures along with additional steps described below put us on a strong footing for future growth. of revenues. In the year there was a higher proportion of third-party products supplied to customers which have a much lower gross margin than the other revenue streams. We expect this to revert in the current year to a figure in line with historic levels. Operating expenses reduced during the year to £11.0 million (FY21: £11.2 million). This includes restructuring charges of £0.4m (FY21: £0.1 million) arising from the board changes and creation of the Operations Board. The average number of employees increased during the year to 149 (FY21: 139) primarily due to investment into Sales and Marketing and addition of staff with domain expertise in the fraud space. The adjusted profit before tax was £3.3 million (FY21: £4.4 million), whilst the unadjusted profit before tax was £1.8 million (FY21: £3.0 million). The increased difference between the adjusted and unadjusted figures is due to a higher non-cash charge for share-based payments arising from share option grants during the year of £0.7 million (FY21: £0.3 million) and restructuring costs of £0.4 million (FY21: £0.1 million). 22 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT"The Group ARR grew by £3.4m to £14.0 million... for the first time... the ARR value accounts for more than 50% of Revenues, with a value of 57%" Foreign currency risk There was a high degree of volatility during the last few months of the Trade debtors were high at £25.0m (FY21: £10.2m) due to two of our major partners paying just after the year end. Both of these partners year. This impacts the Group which has around 70% of revenues in US account for a number of end clients and the payments were received Dollars, but just 37% of Group expenses. The Group’s tighter policies during April. and management of foreign currency risk meant that the foreign currency loss was £0.1 million (FY21: £0.7 million). Taxation Taxable profits were lower for the year and the tax charge is also lower for the year at an effective rate of 3.9% (FY21: 9.0%). This low level is assisted by our significant investment into research and development, much of which qualifies for R&D and Patent Box tax credits in the UK. Proposed changes to qualifying costs under the UK R&D tax credit scheme may result in smaller claims being made in future, and a higher effective tax charge. The cash balance at the year-end was £11.4 million (FY21: £14.2 million) for the reasons described above. Due to the size and financial strength of our end customers, credit risk is not a major risk for the Group and bad debt write-offs during the year were nil (FY21: nil). Following the partner payments mentioned above the free cash balance had increased to £26.5]million as at 30 June 2022. Cashflow and funds The Group used net cash in operations of £0.7 million (FY21: net cash generated £3.3 million) primarily due to movements in working capital from the delayed payment of debtors as described above. Financial position The Intangibles balance of £10.3 million (FY21: £9.6 million) is Financing activities in the year were £1.5 million (FY21: £1.7 million) comprised mainly of dividends paid of £1.1 million (FY21: £1.1 million) comprised of Goodwill of £9.4 million (FY21: £8.7 million) from the and a net purchase of own shares of £0.4 million (FY21: £0.9 million). acquisition of Celebrus in 2015, and £0.7 million from the acquisition of Prickly Cactus during 2021. The balance of £0.8 million (FY21: £0.9 million) is comprised of purchased IPR, trade names and capitalised development costs. The Group expenses the majority of its R&D costs The Group continues to be debt free and maintains a robust financial position whilst having claimed no funds from any government support schemes. and capitalized just £0.2 million in the year (FY21: £0.2 million). The healthy cash balance is important not just to enable the Group Trade creditors decreased to £0.8 million (FY21: £1.4 million); this was due to normal operating cycles. The Group seeks to pay all suppliers within terms and the supplier payment days at the year-end were 25 days (FY21: 40 days). Deferred revenue increased to £14.2 million (FY21: £6.3 million) partly due to a number of three-year contracts signed during the year, as to invest in future growth as appropriate, but also to counter any concerns about vendor risk from our customers, who are typically large multinational businesses. Annual Recurring Revenue We define ARR as the amount of revenue contracted with a customer, at a given point in time, that is expected to recur within the next well as payment for services due to be delivered in the first half of the twelve months. As a recognised driver of shareholder value in software current year. businesses we use this as one of our primary metrics. 23 D4t4 Solutions plc Annual Report and Accounts 2022Chief Financial Officer’s review continued Group ARR grew by £3.4m to £14.0 million (FY21: £10.6 million) during the year. The current ARR is comprised of Licenses of £6.3 million Dividend The Board is today proposing a final dividend, subject to shareholder (FY21: £3.0 million) and Support and Maintenance of £7.7 million approval at the 2022 AGM, of 2.07p per share (2021: 2.0p), which along (FY21: £7.6 million). Therefore, for the first time since the Group with the interim dividend paid of 0.85p per share (2021: 0.81p) in announced the move to an ARR model the ARR value accounts for January 2022 brings the full year dividend to 2.92p per share (2021: more than 50%, with a value of 57% (FY21: 47%). 2.81p), an increase of 3.9%. The final dividend is expected to be paid We see future growth in ARR coming primarily from CDP and FDP sales and expect that the ARR/Revenue ratio could reach around 65% in on 24 August 2022 to shareholders on the register as at the close of business on 15 July 2022. the medium term. We have some existing CDP customers still under The board is also proposing a special dividend of 12.5p per share, perpetual license that we will seek to convert to term licenses with subject to shareholder approval at the 2022 AGM, payable to ARR. Moreover, all new proposals to prospective customers are being shareholders on the register as at the close of business on 7 October issued as term licenses. 2022. The special dividend is expected to be paid on 27 October 2022. Acquisition of Prickly Cactus In August 2021, the Company acquired Prickly Cactus Limited Purchase of own shares In December 2021, the Company commenced a share buyback ("Prickly Cactus"), a UK data and analytics consultancy, for up to programme to acquire up to 200,000 ordinary shares of 2p in the £0.75 million. The Prickly Cactus team is experienced in product capital of the Company. The shares will be held for the purpose of management having previously worked with several of D4t4's partners satisfying future obligations in relation to its employees' or other share and customers in the key markets of Financial Services, Telecoms schemes, thereby mitigating dilution for existing investors. By 31 March 2022, 64,434 shares had been acquired at an average price of 291p bringing the number of shares held in Treasury to 224,932. Since the year end, the programme has continued and the shares held in Treasury now total 268,936. Equity At the year end, the Group had £31.9 million (FY21: £30.9 million) attributable to the shareholders of the company. The increase in the year was mainly due to retained earnings in the year of £1.7 million (FY21: £2.8 million) set off against dividends paid during the year of £1.1 million (FY21: £1.1 million), and share buybacks of £0.4 million (FY21: £0.9 million). Ash Mehta Chief Financial Officer 6 July 2022 and Insurance. Since the acquisition the Prickly Cactus team has been instrumental in deepening our relationships with existing customers identifying opportunities for greater customer engagement and satisfaction as well as helping develop relationships with new customers and partners. A sum of £0.5 million is held as Deferred Consideration payable to the Prickly Cactus vendors (all of whom have been retained by D4t4) in the Statement of Financial Position contingent upon the team’s contribution to existing customer growth and the acquisition of new customers for the CDP and FDP product groups, in the period from acquisition to September 2023. Earnings per share Basic EPS for the year was 4.21p (2021: 6.88p) and diluted basic EPS was 4.14p (2021: 6.75p). The basic figure has been calculated using the weighted average number of shares in issue being 40,240,799 (2021: 40,235,856) and the diluted figure using 40,966,020 (2021: 41,007,252). Adjusted basic EPS was 7.24p (2021: 9.72p) and adjusted diluted EPS was 7.11p (2021: 9.53p) following adjustments for amortisation, share based payments, exceptional items, foreign exchange expense and tax on these adjustments. 24 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT Q&A with Ash Mehta, CFO Your business has traditionally been very second half weighted. Is there an opportunity to balance this out more? Yes there is and we’re working on it. Historically, the H2 weighting has been due to our partners having December year ends and closing deals in December, which is in our H2 (October to March). As we expand our direct sales efforts, the phasing should spread out more than before. Having said that potential customers with December year ends might wait until a new budget year to sign with us in January to March, which is still our H2. So, we’ll probably always have an H2 weighting but in the long run we’d like to see the H1:H2 ratio move to be around 40:60. Why did you choose the key metrics you use? For D4t4, the most important key metric is Annual Recurring Revenue because it’s a commonly used metric for the valuation of software companies. This year we’ve been able to drive it up by 32% to £14 million. We define ARR as the total of all live contracts and the annual license, maintenance and hosting value of those contracts at a point in time; it is revenue which we can generally depend upon as a baseline. The ultimate aim is to get the cost base of the company covered by ARR so that anything more in terms of professional services effectively flows down to the profit line. How far along are you on the journey to transition your business to a more recurring revenue model and what could be long-term targets here? We’ve made great progress this year, moving the percentage of revenues which are ARR from 44% to 57%. That’s the first time we’ve gone above 50% and we’re now aiming to get to at least 65% in the long term. How has the Prickly Cactus acquisition performed? We’re very pleased with the acquisition. The Pricky Cactus guys have not just helped us deepen relationships with existing customers, they’ve also put in place processes for that type of engagement to become the norm across all our customer interactions. This results in closer relationships with customers helping us ensure customer satisfaction, greater engagement and more revenue opportunities, and that churn levels remain very low. What are your intentions for the group cash balance? The cash serves a number of purposes. As most of our customers are large multinationals signing up for multi-year contracts, it mitigates any vendor risk concerns they might have. Secondly, we will continue to pay dividends as they are expected by many of our shareholders. And thirdly, it is available if we need it for acquisition opportunities. How do you manage the balance between increased investment and continued profitability? This is a continuous discussion between me, and the board. It’s a delicate balance between investing into initiatives that will accelerate revenue growth, whilst also wanting to remain profitable and cash generative. Unsurprisingly, as a business we’re very data driven and so the new systems we implement will help guide us in our decision making and getting the balance right! D4t4 Solutions plc Annual Report and Accounts 2022 25 25 D4t4 Solutions plc Annual Report and Accounts 2022Principal risks and uncertainties Undertaking insightful risk management D4t4 faces the normal economic, commercial and political risks facing a global technology business with employees, customers and suppliers spread across the world. To manage these risks, the Group has a Risk Committee with a regular and detailed process to address the identification of new risks and monitor development of existing risks and their mitigation. This Committee is comprised of the Chief Technology Officer, Chief Financial Officer, the Chief Security Officer, Director of Managed Services and the Manager of Information Security. Other employees of the Group are invited to Committee meetings as required, depending upon the topic being discussed. Further detail on the structure, remit and reporting of the Group’s Risk Committee is explained on page 62 of this Annual Report. During the year, the risk level of a number of the principal risks and uncertainties mentioned below has changed from the last Annual Report for the reasons given in the table. The Board is confident that it has the appropriate people, processes and reporting to continue to manage risks effectively. Principle risks The Group’s principal risks are identified as those risks which have the potential for the highest impact on the Group. The Board reviews the principal Global economy Execution and scalability Regulatory changes risks annually along with the mitigation Competition Client or partner loss Information and cyber security People Foreign exchange losses measures in place. 26 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTDecrease Increase No change Global economy Execution and scalability Regulatory changes Changes in the global economy can have an impact on the business. The rate of inflation has increased around the world, and this has implications for costs in our customers’ and prospective customers’ businesses. Consequently, they might be slower to commit to new projects or renew existing projects. As the Group has a plan to accelerate Sales and Revenue growth, there are risks of not being able to achieve appropriate Sales levels, as well as the risk of not being able to deliver projects which are signed up. There is also the risk of the Group’s back-end infrastructure not being able to support the growth. The Group is exposed to the risks of changing regulations for the collection of consumer data. Some of these changes may be positive, but others negative which could impact on D4t4’s performance and outlook. Risk level Risk level This is a new risk after many years of low inflation, and the full effects are not yet known. Inflation could have an impact on the Group’s cost base resulting in lower profitability. The plans for accelerated growth will require every department to function more effectively and this may cause growing pains, resulting in lower quality of execution and delivery. Risk level No change Mitigation Mitigation Mitigation The Group will monitor the market for price sensitivity amongst prospective customers and engage more closely with existing customers to demonstrate value for their spend on our products. It will also engage with suppliers more closely to manage cost increases. The Group has increased the size and capability of its Sales and Marketing teams during the year. It is also investing into internal systems to better manage and support the business. Finally, we are examining the possibility of appointing delivery partners who could manage project implementations. D4t4 closely monitors the markets in which it operates with enhanced collaboration with our clients, suppliers and partners. We then plan product, project or operational changes to ensure we are minimising the impact of changes. We follow proposed regulatory changes closely and where necessary adapt our processes and policies. Links to strategy A B C D E F Links to strategy A B C D E F Links to strategy A B C D E F Links to strategy A B C ARR Building for scale Culture D E Grow CDP and FDP revenues Innovate and differentiate F Diversify revenue streams Learn more about our strategy on pages 2 to 13 27 D4t4 Solutions plc Annual Report and Accounts 2022 Principal risks and uncertainties continued Decrease Increase No change Competition Client or partner loss Information and cyber security New competitors or changes to existing competitors’ products can significantly alter the market dynamics, which in turn risks the position and standing that our own Intellectual Property has in the financial and consumer marketplace. The loss of a key client or significant sales partner would impact the ability of the Group to meet its key business objectives. A significant IP, data loss, or security breach could impact the brand and reputation of the Group, as well as cause the Group to spend a great deal of time in rectifying the loss or breach. Risk level No change Risk level No change Risk level From our own assessments, along with industry and governmental publications it is clear that information and cybersecurity risk is growing worldwide. Mitigation Mitigation Mitigation The Group continually scans the market for potential technology threats and has a development process in place to ensure its own technology continues to evolve to meet client needs. We are seeking to develop technology that cannot be easily disrupted, and which can be protected by patents. During the year we have deepened relationships with existing partners. We have also brought new partners on board thereby reducing the dependence on any single partner. Moreover, our efforts on building a direct sales channel will, over time, further reduce dependence on any individual partner. Following the year end we appointed a Chief Security Officer, Tony Bennett, to a new dedicated CSO role in the Group. Mr Bennett is now a member of the Operations Board to ensure that security is high on the Group’s agenda. In addition, we are certified to ISO 27001 and operate an information security process that controls and minimises the risks. This process is externally assessed yearly. These risks are mitigated via existing and established information security controls. Links to strategy A B C D E F Links to strategy A B C D E F Links to strategy A B C D E F 28 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT People Foreign exchange losses A loss of or failure to attract key personnel could impact the ability of the Group to execute on its strategy, causing adverse reputational, operational and financial challenges. Significant changes in foreign exchange rates can result in reduced profitability due to cash collection values not matching transaction values and an increased potential for currency losses in the income statement. Risk level Risk level This is an increased risk due to the global shortage of talent. This might make it more difficult to recruit and retain talent to support our growth plans. In the last six months, there has been increased volatility in currency markets. As the Group reports in GBP but has a high proportion of revenues in USD, this could lead to financial losses on conversion of USD to GBP. Mitigation Mitigation D4t4 is acknowledged as a great place to work. Our staff are engaged, motivated and enjoy working with market leading software, and having responsibility they might not get in larger companies. We have also enlarged our benefits package during the year and will continue to do so to ensure we remain competitive on remuneration. The Group has taken steps during the year to mitigate risk. A new tighter Treasury policy was adopted by the Board. There is a monthly meeting to review and discuss cashflows, which covers foreign exchange exposure, as well as cash holdings, deposits, funding of subsidiaries, and trade debtor aging and bad debt risk. Links to strategy A B C D E F Links to strategy A B C D E F Links to strategy A ARR D B C Building for scale Culture Grow CDP and FDP revenues Innovate and differentiate F Diversify revenue streams E Learn more about our strategy on pages 2 to 13 29 D4t4 Solutions plc Annual Report and Accounts 2022Stakeholder engagement Connecting with our key stakeholders The Board considers the interests of its key stakeholders when making decisions. This ensures that the Directors are fulfilling their duties under Section 172 (s.172) of the Companies Act 2006, to ensure the long-term success of the Company. These duties are summarised as follows; A Director of a Company must act in a way they consider, in good faith, These pages outline the priorities of customers, partners, employees would be most likely to promote the success of the company for the and shareholders, and how the Board engages with these groups. benefit of its shareholders as a whole and, in doing so, have regard Further information is available in the rest of this Strategic Report on (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. pages 2 to 29 and Corporate Governance Report on pages 52 to 82. Throughout the year, the Group Operations Board updated the Board with information on important areas of business focus, and in particular those relating to our key stakeholders as well as environmental, social and governance (ESG) matters. This ensured that the Board had a good understanding of the priorities of each stakeholder group to aid decision making. More information on the Group’s ESG activities can be found in the ESG report on pages 38 to 49. Topics considered by the Board during the year are shown in the table on page 55. From a stakeholder perspective the key considerations for the board during the year were; Stakeholder group Consideration and action The Group consulted widely with customers and partners on future development of our products. This assists the board in ensuring that our products continue to meet customers’ ever growing needs to support their stakeholders, whether end-customers, employees or shareholders. This consultation resulted in new features in the CDP and FDP products as well as an enhanced customer and partner portal. We consulted widely with employees on an ongoing basis about a post-Covid-19 hybrid working policy to ensure that employees were able to maintain a balance between work and home life. For our ESG programme, we also consulted them on their preferences for local charitable initiatives, and their choices for our UN SDG objectives. We have ongoing feedback from shareholders on the balance between financial investment for growth and the healthy cash balance held by the Group. These considerations have led the board to continue strong investment into growth, including an acquisition during the year, and investment into core systems, whilst also being able to announce a 3.9% increase in the dividend and a special dividend. Following other feedback from shareholders, the board decided to strengthen its focus on governance by reshaping the board composition and adopting new Matters Reserved for the Board and Terms of Reference for its committees. Customers and Partners Employees Shareholders 30 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT Mark Krebs VP, Global Sales For new business, we are actively simplifying our approach to Sales and putting the automation in place to build for scale in partnership with Marketing. For existing customers, our focus is on listening to customer needs and pain points to build a value-based story to drive growth in our key accounts. Customers What is important to them • Reliable technology that adds value to their business • Ongoing product development to meet their future needs • Customer satisfaction with our products and support service How we engage • Good relationships as a trusted supplier • Integrations with key technology • Input into the future features of the products Customer Advisory Board (CAB) Creation of a CAB with a global remit to ensure Service reviews Internal service reviews are conducted daily proper flow of information from our key based upon client communication and support customers to our engineering teams. This is requests, which are managed on a 24/7 basis for also used to vet and adjust upcoming product most customers. Regular service reviews with roadmaps to ensure we are solving for the key customers are held to ensure we continue to issues in the marketplace, and also provides a add value across our customer base. sounding board for our CTO and Product Teams as they evaluate various research projects and roadmap items. Customer and partner portal Our Customer and Partner Portal has the goal of streamlining communication, providing better support, and offering a variety of self-service options to customers and partners. This also ensures we are able to communicate openly and effectively, while also providing a central location for all the latest information about our products and services. Further plans are Key resources We make investments in key resources around the globe to continue to support our growth and existing customers. Marketing and messaging A primary focus of ours as part of our “go loud” campaign is to provide our customers and prospects with a better understanding of our product, core use cases, and differentiators. This will also further enhance our partner engagement and onboarding as well as our in place to enhance the portal and continue direct sales initiatives. to make this a key relationship driver for our existing customers and partners. Customer success meetings Our Account Management teams regularly hold Customer Success meetings with our existing Case studies Inclusion of key customer case studies as part of our PR campaign to raise awareness of the value of the Celebrus family of products. We have also introduced PR bylines to exhibit expertise in our customers and build strategic plans for existing relevant fields for our key stakeholders. customers that are reviewed quarterly. We also ensure that all customers are communicated with during the product updates that we generally release twice annually. 31 D4t4 Solutions plc Annual Report and Accounts 2022Stakeholder engagement continued Partners What is important to them • Good sales and marketing support and information regarding our products • Understanding of our products and product development pipeline • Continued onboarding of front-line teams and strategic account mapping How we engage • Strong relationships between our sales teams and partners’ sales teams, in order to work effectively with mutual customers Simon Burton VP, Alliances Alliances have always relationships with partners, which are crucial to to our success. As we continue to innovate our Trusted partnerships The Board is committed to building trusted Partner portal Partner onboarding and engagement is crucial delivering many of our customer commitments product, the Partner portal has better enabled and growing the business. These partnerships and engaged our partners around the globe will continue to be expanded in the coming for the Celebrus family of products. We will year to ensure that our platform is getting the continue to drive adoption of this as a core recognition it deserves in the marketplace, communication channel. and we will continue to innovate our partner messaging to drive more engagement from the channel. Engagement and communication Our Global Partner team fosters a strong relationship between our partners and our field sales and account management teams. The strategy is set annually, revisited quarterly, and discussed weekly around the globe. been important for our business and we continue to innovate with them in the market. We are focused on expanding our existing partnerships, building new partnerships for both the CDP and FDP, and building out a new set of consulting partners to build for scale. 32 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTEmployees What is important to them • Feeling engaged with the business and its overall purpose, especially during lockdown and hybrid working, and understanding their roles within the organisation clearly Vicky Baker Head of HR, People and Culture How we engage • Feeling valued, trusted and empowered • Wellbeing and work-life balance • Being fairly rewarded and incentivised for their contribution Making the business scalable is a key objective, and so the HR team is engaging with employees to drive empowerment and job satisfaction. Employees tell us D4t4 is a good place to work and we’re striving to make it great! Employee briefings Bi-monthly Town Hall meetings are held ESG During the year we set up an ESG committee enable colleagues to engage with the board and sub-teams. This has proven to be very and leadership team to ask questions, raise valuable allowing employees to influence issues and to be provided with updates on the the Group’s and each location’s ESG activities business. During the year, each non-executive specially in relation to the Social aspects. director gave a brief presentation of their role and answered questions from employees. Performance updates Key performance information such as trading Improved communication During lockdown and more recently during updates and financial results are always promptly communicated to employees. hybrid working we have effectively used systems such as Microsoft Teams to not only increase verbal communication but short messaging reducing the number of emails. Share schemes The Group has in place Share Option Plans to enable employees to become personally These systems have also allowed us to share invested as shareholders of the Group. documents and build accessible repositories of information, thereby improving efficiency. 33 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT Stakeholder engagement continued Shareholders What is important to them • Shareholder value • Timely, clear and relevant communication • Staying up to date with Group strategy and • Understanding the remuneration policy and business performance management incentivisation Ash Mehta Chief Financial Officer How we engage Annual General Meeting (“AGM”) The AGM is a key opportunity for engagement Group website Presentations and announcements and other between the Board and shareholders. key shareholder information is available on the investor section of the Group’s website. Analysts and investor meetings The Executive directors hold broker, analyst The investor section of the website has recently been updated making it more and investor roadshows meetings throughout engaging and informative. the year, particularly following the release of the Group’s interim and full year results and feedback from those meetings is shared with the Board. Annual Report and Accounts The Group’s Annual Report and Accounts is made available to all shareholders both online and in hard copy where requested. Capital Markets Day This is an opportunity for investors to meet with management and for management to go into more detail about aspects of the business. An event was held in December 2021 and the video recording is available on the Group website. We value our engagement with shareholders and so we are increasing the volume and quality of our communication by using investor meeting tools, social media as well as our new investor website. 34 D4t4 Solutions plc Annual Report and Accounts 2022What our partners say about us... “Celebrus' commitment to development and investment in graph technology, advanced machine learning and extensive API capabilities underpins its ability to operate at scale as part of a sophisticated customer engagement, personalisation and decisioning ecosystem of technologies. These combine with our leading-edge business thinking and practice to  secure the huge value improvements available. The partnership between Optima Partners and Celebrus will go from strength to strength." Alan Crawley, CEO, Optima Partners “Our partnership with D4T4  is one of the strongest in our portfolio – together Teradata and Celebrus have forged a relationship to target the largest enterprises in the world with a robust and powerful enterprise offering.  The value delivered from this partnership to our joint customers can be measured in the billions of dollars across the very largest enterprises in retail, financial services, telcos,  transportation and healthcare.” Yasmeen Ahmad, SVP, WW Industry, Teradata “With EY as lead advisory  partner and D4t4/Celebrus as the behavioural biometrics and analytics technology vendor, we believe this approach can disrupt existing fraud solutions that fail to deliver effective and efficient outcomes, and  significantly enhance Financial Institutions’  capabilities to prevent scam fraud.” Patrick Craig, FSO UK Consulting Partner, EY “In addition to better insights in marketing spend and the customer journey, our customers have achieved substantial gain in conversion and revenue/margin improvement due to  advanced personalisation. Celebrus’  unique tag-free collection mechanism is the foundation for a unique set of business applications.” Gerard Brinkman, CEO, Onmarc NL “Accuracy and transparency at scale in our view is only achievable with true first-party solutions like Celebrus  that have a long and impressive history of solving large, complex digital data problems. Celebrus provides rich intent analysis from inside Celebrus' internal analytics capabilities and a constant stream of site analytics from which we can build predictive, feature rich data models to better deliver personalised experiences at scale for our clients." Nicholas Gent, CEO, Future Proof AI 35 D4t4 Solutions plc Annual Report and Accounts 2022 STRATEGIC REPORT Our people A challenging environment that feels like home What have been your biggest accomplishments at D4t4? We support one of the largest analytic environments at one of the top tier financial institutions in North America. Our team has taken the lead on the design and support of this environment, I’m very proud of what we have built so far, and of the things to come in the near future. What aspirations do you have to develop further at D4t4? New technologies excite me. We continue to update and augment our customers environments with cloud and other related technologies, to improve their value to our customers. There is no shortage of things to learn and skills to develop. What would you say to people who might be thinking about wanting to work in data technology and at D4t4? In larger companies you don’t always feel you make an impact. Smaller companies are a great place to learn all aspects of the business. It also gives you a great sense of pride to be close to the life blood of the organisation. Also, it’s nice to like the people you work with!!! Tell us something most people don’t know about you? I have a 65 Gallon Saltwater fish tank (I love to scuba dive). Tom Keefer Senior Architect & pre-sales engineering, Cary, NC, USA Joined D4t4 2018 What was your degree or initial qualification? B.S. Computer Science How did you get into data and tech? Started my Career at NASA Langley Research as Unix System Administrator What attracted you to D4t4? I was impressed with the knowledge and leadership of the management. After working with them and their teams while I was at a large bank, I wanted to work more closely with them and their teams. For more on our people see pages 11, 45 and 49 36 D4t4 Solutions plc Annual Report and Accounts 2022Kumar Duvvuri R & D Manager, Andhra Pradesh, India Joined D4t4 2007 What was your degree or initial qualification? Bachelor of Technology (Civil) How did you get into data and tech? I was always fascinated with Software development, and started off by learning Unix, C, Oracle, and Java. What attracted you to D4t4? A D4t4 employee introduced me to the company in 2007. For me, it was basically the technology and the projects that interested me. Thangam Natarajan Professional Services Consultant, Chennai, India Joined D4t4 2015 What was your degree or initial qualification? Master Of Computer Applications How did you get into data and tech? While studying for my masters I had developed an interest in data analytics and visualisation. It was so fascinating to see how people bring insights & statistics from the raw data. That made me hooked into data-science and related technologies. What do you like about working at D4t4? D4t4 has a friendly ecosystem with cultural diversity and most welcoming place to work. I like the fact that D4t4 believes in developing talent. What have been your biggest accomplishments at D4t4? Development and delivering the Celebrus Dashboard. This work was especially fascinating due to the fact we started the project from scratch using the latest technical building blocks. How have you grown professionally while working at D4t4? I have had the opportunity to work with various technologies and applications at D4t4. I joined as a Senior developer and moved on to become Tech Lead and Manager. What would you say to people who might be thinking about wanting to work in data and tech and at D4t4? D4t4 is more jeans and tee-shirts, than suits and ties. We are smart on the inside! People with the right skills are always encouraged and supported. Tell us something most people don’t know about you? I am believer and practitioner of natural remedies. What attracted you to D4t4? My real passion is data and I also enjoy solving issues using an analytical approach. I believe that my passion and skills match the D4t4's drive and capabilities. What do you like about working at D4t4? The work culture is good across all the locations of D4t4. Friendlier employees and the work-life balance here is what attracted me the most, along with the opportunities it provides to get exposed to multiple trending technologies. How have you grown professionally while working at D4t4? I joined D4t4 as a junior product support professional and became a Technical leader of my team within 3 years. Tell us something most people don’t know about you? In spite of the appreciation for my quick turnaround at work, I am an extremely slow person when it comes to cooking and cleaning at home. Sometimes, I have my sparks of inspiration for work things, while spending endless hours of time in the kitchen. 37 D4t4 Solutions plc Annual Report and Accounts 2022ESG report Conducting business to the highest ethical standards D4t4 conducts its business activities to the highest ethical standards and expects clients and suppliers to embrace these same principles. This report outlines how we conduct our activities and should be read in conjunction with other sections of the Annual Report, notably the Corporate Governance section. Introduction and Overview How we incorporate ESG into what we do In last year’s report, we announced the formalisation of our ESG Impact of the global pandemic The coronavirus pandemic has had a dramatic impact on efforts. At that time, as well as the involvement of an Executive people’s lives and has caused us to consider more urgently and a Non-Executive director we also had the engagement of nine what we can do to support our employees and colleagues from across our four locations. This initiative has clearly our communities. It has also highlighted, more than ever, the need for businesses to operate in a socially responsible and environmentally sustainable way and to look after their staff by providing a safe operating environment, whether in the office, while travelling, or working from home. caught the imagination of our employees as we have had as many as twenty colleagues involved in committee and sub-committee meetings and many more engaging in our initiatives. Therefore, on behalf of the board and all the employees who have contributed and engaged with this initiative, we’re delighted to present D4t4’s first ESG Report. The first section describes our Environmental impact with data on our carbon usage and our initiatives to reduce our impact on the environment. The second section focusses on the social impact we have been able to have on our communities but also on our employees and their safety and wellbeing. The third section discusses our approach and initiatives to being a good corporate, and ensuring we treat all our stakeholders fairly, including policies covering matters such as tax fairness, bribery and whistleblowing. 38 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTEnvironmental D4t4 cares about the environment and fully supports, and is committed to, the principles of promoting good environmental practice and sustainability in the conduct of its activities. The Group wants to ensure that any adverse effects on the environment are kept to a minimum. tCO2 comsumption Scope 1 (2.4%) Scope 2 (23.8%) Scope 3 (73.8%) It aims to do this by: • wholly supporting the requirements of accepted international standards and current EU environmental legislation and codes of practice. • minimising consumption through the reduction, reuse, or recycling of materials as much as possible. • encouraging efficient use of energy, utilities, and natural resources. • continually striving to improve environmental performance. • communicating its environmental commitment to clients and suppliers and encouraging their support. Carbon Audit 2021 For the first time ever, D4t4 appointed an external consultant, Alectro LLP, to perform a carbon audit for the calendar year 2021. Whilst there are no comparisons with previous years, this report sets out a baseline of understanding about the Group’s carbon impact and makes recommendations for reducing our carbon impact. During the year, the Group’s activities including our facilities, operations and transport generated 334 tonnes of CO2 with Facilities and Transport each accounting for 129t and Operations accounting for 76t. These figures include Scope 1,2 and 3 emissions as defined under the Greenhouse Gas (GHG) Protocol, and the breakdown is shown below; Category tCO2e tCO2e per employee % of total Scope 1 Scope 2 Scope 3 Total 8.16 79.49 246.82 334.47 0.06 0.54 1.69 2.4% 23.8% 73.8% Of the Facilities figure of 129t, an amount of 79t was due to purchased electricity for the India offices. Whilst we have taken steps to move to green electricity tariffs in our US and UK offices which produce no CO2, this is more difficult to do in India where in the Chennai area 76% of electricity is coal, diesel or gas, with 24% being nuclear, hydro or other renewables, and no purely green tariffs are available. On a positive note, over the last few years we have been working on reducing our consumption of natural gas and this year, for the first time, we brought it down to zero. Due to the disruption of the pandemic, the report considered the excess energy use caused by employees working from home. This increases the emissions from facilities for two reasons: • Not all employees use low-carbon/renewable electricity. • Employees use natural gas for heating their home, and home setups tend to be less optimized for working and cost-saving. The additional working-from-home emissions are still comparatively lower than the alternative of having all staff commute to the office five days a week. 39 D4t4 Solutions plc Annual Report and Accounts 2022ESG report continued Purchased Electricity 79.49 FACILITIES WFH heating 23.46 WFH electricity 12.47 Purchased Goods 56.30 OPERATIONS Employee Commute 58.43 TRANSPORT Business Travel 64.64 Emissions summary Total emissions 334 tCO2e Emissions per employee 2.29 tCO2e Transport 129 tCO2e 38.64% of total Facilities 334 tCO2e 38.48% of total Operations 76 tCO2e 22.87% of total Reproduced from a report produced by Alectro LLP The Transport emissions of 129t were generated by business travel Of the Operations figure of 76t, the largest component was Purchased (64.6t) and employee commute (58.4t). Flying was a large contributor goods, resulting from physical technology emissions (14% of overall), as the total impact created by flights was 59.6 tonnes. Due to different embodied emissions in vehicles and general purchased goods such national lockdowns in the US, India and UK, working patterns were as stationery and office items. There also were small amounts of different in each country. The commute was lower than in a typical stationery and home office equipment purchased for employees, year because of these lockdowns, and so it only contributed to but these are likely to have been one-off purchases made to support the impact on days where staff came to the office. A proportion of employees working from home during COVID. employees did not travel to their respective office at all in 2021, and it is expected in coming years there could be increased commuting and higher emissions. The impact from cloud infrastructure is largely low carbon, based on the offsetting undertaken by Microsoft Azure, one of our cloud computing suppliers. However, AWS isn’t as far along as Azure, and so The impact of the employee commute will be considered in the still contributes to the overall impact. coming periods, as new working patterns are introduced in each of the offices post-pandemic. Additionally, we recognise that flights will likely be a large contributor to carbon footprint in the coming year, as with the relaxing of lockdown rules we expect there to be more flights than in the previous year. 40 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT2020 177,533 2019 342,783 2018 275,041 3,692 39,673 99,227 Category Electricity (kWh) Impact (tCO2) Gas (kWh) Impact (tCO2) Diesel (litres) Impact (tCO2) 2021 311,472 79.5 0 0 747 2.0 Emissions per employee Based on 146 full-time employees on average in 2021, the Group’s total impact of 334t results in a value of 2.29t CO2/employee. This is above an interim target of 1.5t CO2e/employee needed to reach UK domestic targets by 2030. The largest single contributing factor to this high number is the electricity usage in India, which will be a major area of focus for the Group in the coming year. However, making a significant reduction will be difficult due to the lack of green energy in the Chennai region. Waste and recycling kg IT recycling General recycling Total recycling General waste 2021 710 563 1,273 1,804 2020 282 624 906 3,158 2019 480 922 1,402 3,664 2018 557 1,521 2,078 963 All our offices have recycling stations to recycle key materials such as glass, plastics, and paper. UK waste and recycling data In the UK the Group recycles IT hardware and other waste using a third-party company. The level fluctuates year to year but in 2021 1,077kg of hardware was recycled ensuring that metals and plastics are not sent to landfill, and 563kg of general waste was recycled. This includes paper, plastic, and glass. The amount of general waste in the UK was 1,804 kg. Data is not currently available for the US and India offices but will be sought for future reports. 41 D4t4 Solutions plc Annual Report and Accounts 2022ESG report continued Employee insights As mentioned above, we have been delighted by the level of employee engagement in our ESG initiative. This engagement is based on the shared beliefs amongst employees as evidence by an Environmental survey undertaken during the year, the results of which are shown in the chart below. Summary 1 2 3 4 5 Our climate is changing 2% 1% 5% 31% 61% Humans have had an appreciable contribution to climate change 2% 2% 13% 28% 55% I’m confident in quantifying carbon emissions resulting from my lifestyle choices and actions 5% 15% 35% 29% 15% Climate change is an important issue in my life 5% 4% 25% 40% 26% It is important for me to be working for an organisation that takes responsibility for its actions relating to climate change 2% 4% 20% 37% 37% Opinion categories: 1 = Strongly disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 =- Strongly agree 92% of employees agree that the climate is changing 44% of employees agree that they were confident quantifying emissions resulting from lifestyle choices and actions 74% of employees agree that it’s important to be working for a company that takes responsibility for its actions relating to climate change We were pleased with the suggestions received from employees for how we can reduce our carbon impact, and we will be considering these during the current year. The suggestions included matters such as; • A formalised Work From Home (“WFH”) policy to counter carbon emissions relating to daily commuting • An electric car scheme and the installation of more electric chargers in our UK office car park. • Automatic lighting to be extended across the whole of the group offices. • Workshops on how employees can reduce carbon emissions at home as well as in the office. 42 We care about the environment, fully support and are committed to, the principles of promoting good environmental practice and sustainability D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTUN Sustainable Development Goals As part of our ESG initiative, D4t4 will look to support the United Future progress The baseline created by the carbon audit provides useful pointers Nations Sustainable Development Goals through carbon emission for actions we can take in the coming year to manage our carbon offsets. These are a blueprint to achieve a better and more sustainable footprint. Some of the challenges we will face will be a likely increase in travel and a lack of influence over the energy sources for our Chennai office. However, we will continue to investigate our energy efficiency and consumption, on matters such as: • Employee education and supporting individual responsibility • Office efficiencies eg. automatic sensor lighting • Ongoing review of office supplies and consumables Business travel will inevitably increase as our customers value face- to-face engagement with our project and delivery teams. However, we will test more rigorously the need to travel, especially by air, and we will encourage the use of public transport whenever it is a suitable mode of transport and consider hiring personnel closer to key customer locations to reduce transcontinental flights. We will aim to launch an electric car scheme and install more electric car chargers in our offices where practical. In the UK, electric car lease schemes are very attractive due to the use of salary sacrifice schemes and the low tax rate on the car benefit. future for all. We asked employees to vote for their top three goals for guidance on which projects to support. The top goals were SDG13 (Climate Action), SDG3 (Good Health and Well-Being), SDG2 (Zero Hunger) and SDG4 (Quality Education). We will consider offset projects to best reflect these choices. 2 Zero Hunger End hunger, achieve food security and improved nutrition and promote sustainable agriculture. 3 Good Health and Well-Being Ensure healthy lives and promote well-being for all at all ages. 4 Quality Education Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all. 13 Climate Action Take urgent action to combat climate change and its impacts. 43 D4t4 Solutions plc Annual Report and Accounts 2022ESG report continued Social Our employees As a technology business, the Group’s success is built on the intellectual Inevitably, such changes take time to permeate through the capital of our people, and the pride they feel in working for the Group. organisation to change ways of working, but we have already The aim of the leadership team and the HR function is to enable, seen some very positive outcomes from improved employee empower and strengthen this drive through the creation of a positive communication and employee engagement. working culture in which employees feel engaged and motivated. Coronavirus This has been assisted by the recent implementation of an HR portal enabling employees to improve communication and relationships amongst themselves, as well as manage their own personal The most important employee aspect in the Group over the last two development plans whilst being supported by their line managers. years has been our response to COVID with a view to protecting our employees and their families. Our leadership team and staff across the world displayed outstanding commitment to the business and the way they responded to the challenges of the pandemic. During the closure of our offices at short notice, our staff have been able to work from home with little interruption and have maintained the highest levels of customer service. Whilst we are a technology driven company, we are also a people led business and innovation is driven from personal interaction across the firm and with customers, so we look forward to returning to a more hybrid working model. We envisage this as a combination of home and office working, whilst Diversity of employee base, equal opportunities, inclusion  and treating people fairly With employees in four countries and coming from many different backgrounds, D4t4 is proud to have a diverse workforce. Nevertheless, we recognise that more can always be done, and we accept the need to ensure that the management team becomes more diverse. During the year we have added more women into key roles such as VP-Marketing, Head of Public Relations, and Head of HR, People and Culture. optimising opportunities for creative interaction, communication, and We treat individuals openly and fairly with dignity and respect, and efficient working. we value their contribution towards providing a quality service to our customers. Resetting culture and values, and Appointment of Head of HR, People and Culture To support our ambitious growth plans and following a review of Employee nationalities company culture and values, the new CEO and CFO decided to expand the HR role identifying a need for the culture to focus more on accountability and empowerment, and to create a more vibrant working environment. In November 2021 we decided to expand the HR role and appointed our first Head of HR, People and Culture, Vicky Baker. Vicky has a British Indian American Hungarian Irish Polish strong background in technology companies and is putting in place Portuguese effective organisational structures and cultural change to facilitate improved operational performance. She is engaging with all of our employees to evolve our culture to one of individual empowerment, openness and communication across all divisions and locations. Romanian Swedish Australian Czech 2% 2% 2% 1% 1% 1% 1% 1% 44% 32% 13% 44 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORT Our focus on diversity and inclusion extends to treating all our employees and job applicants fairly and equally. It is our policy not to discriminate based on gender or gender identity, sexual orientation, marital or civil partner status, gender reassignment, race, religion or belief, colour, nationality, ethnic or national origin, disability or age, pregnancy, or trade union membership or the fact that they are a part-time worker or a fixed-term employee. The equal opportunities policy operated by the Group ensures all workers have a duty to act in accordance with this. As part of our investment into a new HR portal, we will be in a stronger position to review HR analytics to be able to provide detailed information regarding this in future ESG reports. OUR PEOPLE Esther Craddock-Taylor Data Analytics Project Manager, London, UK Joined D4t4 2020 What was your degree or initial qualification? Sociology & Philosophy, University of Exeter (if only data analytics was an option for a degree back then!). How did you get into data and tech? I got into this space when working at Nielsen (a global data and measurement company) executing discrete choice modelling, to analyse vast sets of market data to advise leading CPG clients on how to optimise their Marketing, Advertising, CRM, GoToMarket and Pricing & Promotion strategies. I learnt early on in my career how much I love working with the wonderful world of data and tech and I would never want to divert away from this in my career. What attracted you to D4t4? The broad range of clients and industry leading software, as well as the international presence working across a variety of different teams. I also liked that I could work specifically within the data analytics team as that is where my expertise lies. What do you like about working at D4t4? The people - I have a great team who are always supportive and we have a great collaborative, non- hierarchical way of working which encourages everyone to thrive. I really am not just saying that - a day in the life at d4t4 is a great place to be! I am a member of Richmond kayaking club and tennis club and I also have a paddleboard which I use regularly, even in the winter!!! Tell us something most people don’t know about you? I am studying for a degree in interior design for fun! D4t4 Solutions plc Annual Report and Accounts 2022 45 45 D4t4 Solutions plc Annual Report and Accounts 2022ESG report continued Employee Reward and Recognition Health and Safety The company recognises the need to reward and recognise our It is our policy that all of the Group’s facilities, products and services employees for their contribution to the Group’s success as well as comply with applicable laws and regulations governing safety and supporting their overall wellbeing. We provide an attractive range of quality, so that we can maintain a safe working environment for our benefits tailored to each location. employees, customers, partners, and visitors. In both the UK and the US, we offer a company pension contribution During the year there were no major injuries reported under the higher than the statutory minimum, and during the year we improved Reporting of Injuries, Diseases, and Dangerous Occurrence Regulations. our pension plan in the US, moving to a provider with lower costs for employees whilst retaining a good range of investment choices. Employee engagement We also offer a company-funded healthcare scheme and in the UK we Employee engagement is a critical feature to any successful business. upgraded the scheme to include mental health, better cancer cover During the past two years of substantial lockdown, it has been even and 24/7 online access to a GP. We also offer a comprehensive Employee Assistance Program to assist employees with issues of any kind, including problems at home, issues with work, housing concerns, legal problems etc. There is also support for face-to-face counselling in complex cases, as well as online live-chat counselling. The group has an employee share option scheme to motivate and retain key staff and allow them to share in the success of the Group. Non-financial benefits include the ability to work on a hybrid basis and on a flexible basis if required, allowing employees to work from home on a regular basis to cater, for example, for family obligations etc. This is a core component of building a culture of accountability and empowerment throughout the organization with clear goals and expectations for every role. Employee development In a technology business which prides itself on market-leading technologies, it is essential that our employees stay up to date with technical developments and we support them in doing that through targeted training and on-the-job support. We are supplementing more important. The principal tool of engagement has been our quarterly Town Hall meetings at which all employees across four time zones are invited to join a company update and hear from management, meet new employees, and hear about business progress and initiatives. Due to their success, we have now increased their frequency to bi-monthly and have got considerably more engagement from the team. We have also held “drop-in” meetings under the Brew Monday initiative by the Samaritans in UK, and similar get togethers during Mental Health Awareness Week. Over this period, we have strongly encouraged staff to use Microsoft Teams for internal communication, for video calls but also for messaging and team discussions, enabling better relationship building between colleagues, and reducing the stress of overflowing email inboxes. We have also invested in conferencing tools and systems to better connect our offices and remote employees around the globe. We are increasing our engagement by commencing regular employee surveys to identify areas for improvement across the various locations and for granularity into different departments across the business. Communities this currently with greater business and line manager training. This Charitable initiatives is positive for employee development and satisfaction, but also important for the Group as it continues to build the “infrastructure” for scalable growth. We expect to add an e-learning platform to our employee development tools in the coming year. As part of our ESG initiatives, we undertook an employee survey around community engagement and philanthropic causes. This showed that employees were very keen on supporting local causes and initiatives, and have collective participation in fundraising and volunteering, with hands-on face-to-face interaction rather than behind the scenes. 46 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTLands End to John O’Groats cycle ride In November 2021, a team of UK employees cycled on Gym bikes or through local neighbourhoods to raise funds in aid of Woking Hospice, a patient-led charity providing palliative care and end of life care to people who have advanced life-limiting illnesses. One of our colleagues spent time at this hospice before he passed away in early 2021. The original target was to cover the 1,748 miles distance from John O’Groats to Land’s End and back again by Christmas. The results were outstanding, with the team not only passing the target but then going on to complete an amazing distance of 3,333 miles. That’s just short of cycling by road from London to Cairo via Istanbul! This raised £1,637 for the hospice, in memory of our colleague. johno’groats D4t4 TAKE ON A VIRTUAL LANDS END TO JOHN 0’GROATS and back again... SPONSORED CYCLE by 21st december In memory of our dear friend and colleague Russell Tewkesbury, the team are tackling a virtual journey of over 1,700 miles to support the Woking and Sam Beare Hospice To sponsor the D4t4 team or to find out more information please visit https://www.justgiving.com/fundraising/d4t4Charityride S D D N N E A L 3,333 miles cycled £1,637 raised for charity Polio vaccination UK food bank collection A team from our Indian office collaborated with The Rotary The recent increase in the cost of living and energy around the Foundation in Chennai, India which gave us the opportunity world prompted our UK Team to coordinate a collection for to contribute towards administering polio vaccine to 3,347 a UK food bank run by the Trussell Trust. The company and children across 14 booths. We called it “2 Dollars 2 Drops” employees made financial donations and donations of daily because it costs about 2 USD (150 INR or 1.50 GBP) to vaccinate essential food and household products to the food bank for a child. Thanks to our employees, we were able to collect onward distribution to people squeezed by price rises. The total 10,250 INR for this cause and vaccinate 68 children. sum raised was approx. £600. 10,250INR collected for cause 68 children vaccinated D4t4 have joined forces with the Rotary Club of Chennai Titans to raise vital funds for the eradication of polio As little as $2* can save a child from polio 2 Drops Polio Stops. £600 worth of daily essential foods and financial donations Developments This was a good start in the first year of our ESG initiative. The Group is in the process of considering further initiatives including time-off for pro-bono and voluntary work. Each office now has plans to complete a number of direct fundraising and volunteering initiatives across the year including setting up an apprentice scheme, and community outreach to schools and colleges to promote data analytics as a career option to young adults. 47 D4t4 Solutions plc Annual Report and Accounts 2022ESG report continued Governance Corporate governance is described in detail on pages 50 to 83. The Employee Code of conduct section below outlines other aspects of governance and best practice D4t4 has a Code of Conduct policy covering all internal and external within the Group. Tax fairness and COVID support schemes D4t4 is committed to being a responsible taxpayer, acting in a fair interactions by our employees covering work activities but also activities in their private lives which might fall below the standards we expect of our employees. and legal manner at all times. During the year we implemented the Bribery and corruption final stage of our intragroup trading agreements ensuring that costs D4t4 has an anti-bribery and corruption policy designed to ensure that are passed into the tax jurisdiction to which they relate and out of we conduct our business in an honest and ethical manner. We have jurisdictions where there were originally incurred, typically in the UK identified our principal risks as being corporate hospitality and gifts, but for the benefit of our overseas operations. These agreements are facilitation payments and operations in India. The policy covers all made available to tax authorities as requested to support recharging members of staff worldwide, and training is provided to all employees between group companies and demonstrate that recharges are fair, on an annual basis. legitimate and reflect the commercial substance of the activities to which they relate. Modern slavery In FY22, our total tax contribution was £4.7m (FY21: £4.3m). Taxes borne D4t4 is committed to acting ethically and with integrity in all our by the Group totalled £0.9m (FY21: £0.9m) and consist of corporation business dealings and relationships, and ensuring that modern slavery tax, employer’s NICs and stamp duty. Taxes collected by the Group is not taking place anywhere in our own business or, as far as possible, totalled £3.8m (FY21: 3.4m) and consist of PAYE deductions, employees’ in any companies in our supply chain. Our Modern Slavery Statement NICs and net VAT collected. Over the last two years of COVID-19, the Board has decided to not claim is available on our website. We have a zero-tolerance approach to modern slavery and expect the same high standards from all our contractors and suppliers. All counterparties are notified of this policy any COVID-19 grants, loans or furlough payments. This decision was made on the basis that the business was not materially impacted by on a regular basis. the pandemic and whilst claims could have been made under various scheme criteria this was not felt to be appropriate from the viewpoint of Whistleblowing business ethics. Good Corporate Conduct D4t4 has policies in place to help ensure that the company is a good corporate citizen, in its own right and through the actions of its employees. These policies are reviewed regularly and the next review will be a comprehensive one to ensure consistency across our offices and ensuring we are in line with current best practice. The key policies are outlined below; At D4t4, we are actively developing a more transparent and open culture, which encourages our employees to speak up whenever they have concerns about or encounter poor practice or wrongdoing in our business. Our whistleblowing policy is vital to ensure we maintain high ethical standards in our organisation and operations. We have an internal anonymous reporting facility for employees to raise concerns which are directed to the Group Company Secretary, who is not an employee, to raise with the board. Corporate governance is described in detail on pages 50 to 83 48 D4t4 Solutions plc Annual Report and Accounts 2022STRATEGIC REPORTOUR PEOPLE Supplier code of conduct Our Supplier Code of Conduct outlines what we expect of suppliers and includes reference to our other policies such as those on Modern Slavery and Fraud. James Deadman Account Executive, London, UK Joined D4t4 2021 Data security Data security is core to our business, with our multinational customers How did you get into data and tech? Initially through eLearning and then secure comms for entrusting us with access to their data and information systems. supporting IP based live broadcasting and situational We handle this through a range of initiatives and we have recently invested further into this critical function by the appointment of a Chief Security Office. This is detailed in the Data security section on pages 10 to 11. awareness for first responders. What attracted you to D4t4? A friend’s recommendation, telling me that Celebrus was head and shoulders above the rest of the market. Executive remuneration The board considers ESG to be an important part of its oversight and activities and seeks to ensure that ESG is a consideration across the whole business. Therefore, this year for the first time the remuneration of the executive directors has a proportion related to the ESG objectives. In the current year this relates to an element of their What do you like about working at D4t4? The team-work, depth of skill/knowledge and can do attitude, and a collaborative approach. The strength of the relationships with our partners and end customers, we and Celebrus really add value and underpin all variable remuneration being linked to the set-up and updating of our other martech investments. ESG infrastructure. Future ESG developments This first ESG report demonstrates the status and development of ESG activities across the D4t4 business. Based on benchmarking discussions with advisers and consultants we believe we are in a strong position relative to our peer group of smaller quoted public companies. Our efforts will continue and this coming year we expect to make good progress across a number of areas. We look forward to reporting on that progress periodically in results announcements and on an ongoing basis through the ESG section of our website. Ash Mehta Chief Financial Officer Monika Biddulph Non-executive Director Could you describe your typical day at D4t4? Lots of partner and customer engagements, some of which are beginning to be face to face which really helps with building strong relationships. What do you like to do when you’re not working? Renovating a Grade II listed, Georgian town house. Tell us something most people don’t know about you? Had trials for the England rowing squad. What would you say to people who might be thinking about wanting to work in data and tech and at D4t4? Don’t hesitate to join…it’s a great place to be. What’s your favourite bit of tech or software? Celebrus obviously... D4t4 Solutions plc Annual Report and Accounts 2022 49 49 D4t4 Solutions plc Annual Report and Accounts 2022 Board of Directors The D4t4 Solutions’  Board of Directors  is comprised of a Non-executive  Chairman, two Executive Directors and two  independent Non- executive Directors Peter Simmonds Non-executive chairman Bill Bruno Chief Executive Officer Ash Mehta Chief Financial Officer APPOINTED April 2015 APPOINTED August 2021 APPOINTED September 2021 BOARD COMMITTEES BOARD COMMITTEES BOARD COMMITTEES A N Re N Ri BIOGRAPHY BIOGRAPHY BIOGRAPHY Peter was CEO of dotDigital Bill joined D4t4 in 2018 as the VP Ash is an experienced public Group plc for eight years and of North America and became company finance director a major contributor to their CEO in October 2021. He has having previously served on success prior to stepping down. over 19 years of experience in the boards of a number of AIM Peter is FCCA qualified and has the media, data, and analytics and full-list businesses. He has 45 years business experience in sectors and has a passion for also held senior financial roles FMCG, insurance, banking and fostering a culture of innovation in a variety of private growth software. He is also Chairman while working with brands to companies, as well as a number of Gresham Technologies plc drive transformational change. of non-executive director roles. and was Chairman of Cloudcall Prior to D4t4, Bill spent many Ash qualified as a chartered Group plc until its sale to private years as CEO (North America) accountant with KPMG and has equity in January 2022. Peter is for an AIM listed company upon extensive experience in investor an advocate of high standards leading his consulting business relations, strategic finance, of corporate governance In through a successful acquisition managing growth, fundraisings, public companies and has been by that company in 2013. and M&A. a deputy chair of the Quoted Company Alliance since 2019. 50 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022Board of Directors key Executive Non-executive Board tenure 7-9 years: 1 4-6 years: 1 0-3 years: 3 Committee membership A N Audit committee Nominations committee Monika Biddulph Non-executive Director Peter Whiting Non-executive Director APPOINTED December 2019 APPOINTED July 2018 BOARD COMMITTEES BOARD COMMITTEES A N Re A N Re BIOGRAPHY BIOGRAPHY Monika has a wide range Over a 30-year career, Peter has Re Remunerations committee of experience in both the gained extensive financial and commercial and technical commercial experience. His core aspects of an international skills are centred around the technology business. In over financial services and technology twenty years at ARM, Monika industries; he has the proven held various General Manager, IP ability to quickly understand licensing and technical roles in complex technologies and their the business. Currently Monika applications and at the same is also a Non-Executive Director time successfully developed on the board of Ilika plc. She strong interpersonal and was previously NED at Linaro management skills which Limited, and holds a PhD in High have enabled him to build a Ri Risk sub-committee Chair of committee Summary of skills Strategy Change management Growth companies Energy Particle Physics from the technology-led NED portfolio. Corporate transactions ETH Zurich. He is currently Chair of Kooth plc and a Non-Executive Director of FDM Group plc. Software and technology Sales and marketing Finance HR, legal and insurance Risk management D4t4 Solutions plc Annual Report and Accounts 2022 51 51 D4t4 Solutions plc Annual Report and Accounts 2022GOVERNANCE Chairman’s introduction to governance Corporate governance for the next stage of growth Dear Shareholder I am pleased to report on the corporate governance procedures Exceptions to the application of the QCA Code The QCA Code requires the Board to have an appropriate balance undertaken by D4t4 for the financial year 2022, and I’m particularly between Executive and Non-Executive Directors. At the start of the year pleased that this year’s report sees an increase in our reporting to the board contained a majority of executive directors and the board provide stakeholders with greater visibility into the workings of the felt this was no longer the appropriate balance. The restructuring board, its committees and the Group overall. of the board in June 2021, to create a smaller board focussed on corporate governance and strategy, means that we now have a majority of non-executive directors on the board. The QCA Code also requires the Board to contain the necessary mix of experience, skills, personal qualities (including gender balance) and capabilities to deliver the Group’s strategy over the medium to long term. We believe our restructured board has a strong mix of experience as evidenced in the table on page 51. In the technology industry there is a longstanding gender bias which is changing slowly. For our part, during the year we have appointed women in key roles such as VP Marketing, Head of Fraud, Finance Director, and Head of HR, People and Culture. By order of the Board Peter Simmonds Non-executive Chairman 6 July 2022 The role of the board in good governance and business success The Board recognises the importance of high standards of corporate governance for delivering long-term success to the Group and acknowledges its role in setting the culture, values and ethics of the Group (as outlined in Principle 8) and communicating these to all the Group’s stakeholders. This requirement is set out formally on page 30. The Board meets regularly to discuss the monitoring and promotion of a healthy corporate culture. The Chairman has ultimate responsibility for corporate governance matters and has overseen the preparation of this governance statement accordingly. AIM Rule 26 requires all AIM companies to disclose details of a recognised corporate governance code that its Board of Directors has decided to apply, 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. The Board believes the Quoted Companies Alliance Corporate Governance Code 2018 (“QCA Code”) is the most applicable set of principles for governance considering the size, resource and current development stage the Company is in. Board discussions are conducted openly and transparently, which creates an environment for sustainable and robust debate. In the year, the Board has constructively and proactively challenged management on Group strategies, proposals, operating performance and key decisions, as part of its ongoing work to assess and safeguard the position and prospects of the Group. 52 D4t4 Solutions plc Annual Report and Accounts 2022Corporate governance statement Board operation The Board’s principal role is to provide effective leadership of the Group and to establish and align the Group’s purpose, strategy, values and culture. It is responsible to shareholders for delivering to deal with those matters in detail and report back to the board with their considerations and outputs. The Board has three principal committees: the audit committee, the remuneration committee and the nomination committee. Their responsibilities are set out in formal terms of reference for each committee, which are reviewed annually and are available on the Group’s website at www.d4t4solutions.com/ shareholder value by developing the overall strategy and supporting investors/corporate-governance. the development of the direction of the Group. The Board is also responsible for overseeing the Group’s external financial and other Audit committee reporting and for ensuring that appropriate risk management and internal control systems are implemented and maintained. During the year we reviewed afresh the Matters Reserved for the Board as well as the Terms of reference for our three board committees covering Audit, Nominations and Remuneration. The committee is responsible for overseeing the Group’s external financial reporting and associated announcements, considering risk management, internal controls procedures and the work of the external and internal auditors. Full details of the work of the committee are set out in the audit committee report on pages 68-69. • Strategy and long-term objectives; • Financial statements, dividend payments and accounting policies and practices; • Approval of the Group budget; • Capital structure; • Internal controls and risk management; • Acquisitions and disposals; • Major capital expenditure; • Legal (including major contracts), health and safety and insurance issues; • Approval of policies adopted by the Group; and • Board structure and the appointment of advisers. These matters must come to the board for formal approval. However, the board delegates certain powers to its committees allowing them Nominations committee The nomination committee is responsible for leading the Board appointments process and for considering the size, structure and composition of the Board. Full details of the work of the committee are set out in the nomination committee report on pages 70-71. Remuneration committee The main role of the remuneration committee is to set the company’s remuneration policy, determine each executive director’s total individual remuneration package and set the targets for performance- related pay, such as to be able to recruit, retain and motivate individuals of the highest calibre. The details of the committee’s work are set out on pages 72 to 73. The Board meets as often as necessary to discharge its duties and the number of Board meetings held during the year, together with the Directors’ attendance records, is set out on page 49. Details on the number of committee meetings held during the year together with the Directors’ attendance records can be found on page 63. 53 D4t4 Solutions plc Annual Report and Accounts 2022 Corporate Governance Statement continued Board meetings are in person at the company’s offices in Sunbury whenever possible, or alternatively held by video conference. The Directors have access to the advice and services of the Company Secretary, James Thorne, who have over xx years’ experience, and is responsible for ensuring that the Board and its committees’ procedures and applicable rules and regulations are met. The Directors all have access to the Group’s key advisers. If required in the performance of their duties, Directors may take independent The Chair’s responsibilities include:  • chairing the Board, the nomination committee and shareholder meetings (including the AGM); • providing leadership of the Board and ensuring the effectiveness of all aspects of the Board’s role; • providing challenge to the Executive Directors and working closely with the Chief Executive Officer on key professional advice at the Company’s expense. strategic decisions; Appropriate insurance cover is in place in respect of legal action against the Directors. The Group has adopted and maintained a share dealing code for Directors and employees in accordance with the Market Abuse Regulations. • maintaining a dialogue with major shareholders on governance and other strategic matters, as appropriate; • setting the Board agenda and ensuring all Directors have the opportunity to maximise their contribution to the Board Board and committee papers are circulated approximately one week by encouraging open and honest debate and constructive in advance of meetings to enable the Board to review and consider the challenge of the Executive Directors; and materials provided. The Chair ensures that input is sought and obtained from any Director who is unable to attend a Board meeting and provides a verbal update following the meeting to complement the minutes. There is ongoing contact between the Chair, Executive Directors and Non-executive Directors between Board meetings. A Board calendar is prepared on an annual basis, and Operations Board members and other staff are regularly invited to attend to present an update on their areas of the business. This is highly valuable in providing further detail to support strategic decisions. In addition, the Board meets on an ad hoc basis as necessary to consider specific issues, such as potential corporate activity, supported by detailed Board papers circulated in advance analysing relevant aspects of the topic under discussion. Board Roles and Responsibilities The roles of the Chair and the Chief Executive Officer are separate and • undertaking the annual evaluation of the Board and the Directors and building an effective Board. The Chief Executive Officer and Chief Financial Officer are responsible for the implementation of the approved strategic and financial objectives of the Group. The Chief Executive Officer’s responsibilities include:  • the day-to-day running of the business, accountable for the Group’s financial and operational performance • developing and reviewing the Group strategy; • maintaining close contact with major customers, suppliers and shareholders • chairing the Group Operations Board to direct and co-ordinate the management of the Group’s business generally, including sales and marketing, customer delivery defined in writing. This provides a clear division of responsibilities and satisfaction and product development; between the running of the Board and the executive responsibility for running the business. The key responsibilities of the Chair, the Chief Executive Officer and Non-executive Directors are set out below: • with the Chief Financial Officer, approving the divisional budgets; • monitoring the performance of senior managers; and 54 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022 The Chief Financial Officer responsibilities include:  • Supports the Chief Executive in developing and implementing the Group strategy; Operations Board for managing the business on a day-to-day basis. From 1st July 2021 the Board has been made up of a majority of independent Non-executive Directors, and is comprised of the roles of Chief Executive Officer, the Chief Financial Officer, the Non-Executive • Produces the annual budget and long-term strategic and Chairman, and two Non-Executive Directors. financial plan; and • Analyses operations and performance to ensure maximisation of shareholder value over the long term • Ensures effective financial reporting, processes and controls are in place; • Leads the finance and admin function; • Monitoring the Group’s principal financial risks, and safeguarding its assets. • Oversees the Company’s relationships with the investment community. The Non-executive Directors provide independent, constructive challenge and insight to the executive team forming an integral part of the Board’s decision-making process together with the monitoring of management and business performance. The Non-executive Directors play a key role in developing and reviewing proposals on strategy, actively participating in the regular strategy forums. They strengthen governance through leading and participating in the Board committees, providing a wide range of experience and independence. This aids the Board in developing a broader understanding and in evaluating the implications, risks and consequences of decisions. Board effectiveness The board undertakes a periodic assessment of its effectiveness. Further information is shown under Principle 7 of the Corporate Governance statement. Board composition and changes The Board is satisfied that the size of the Board and its committees and the balance of Executive and Non-executive members is such that no individual or small group of individuals can unduly influence its decisions. As mentioned in my statement on page 14 various Board changes have occurred during the financial year. These changes gave us the opportunity to streamline the main D4t4 Board to allow increased focus on corporate governance, group strategy formulation as well as investor and wider stakeholder relations, whilst creating a Group When considering Board appointments, a wide variety of factors is taken into account, including the balance of skills, experience, independence, knowledge of the Group and diversity, including gender. The directors have a broad range of international business knowledge and experience, as well as specific skills in the digital technology, growth companies, finance, corporate transactions, investor relations, and risk management. A skills matrix reflecting this experience is included in the Directors’ biographies on page 51. KEY TOPICS CONSIDERED BY THE BOARD IN 2021/22 • Review, debate and challenge of the corporate strategy and plan • Improvement to Management information and KPIs • Presentations on product roadmap, information security, tech strategy and cybersecurity • Review of Marketing and relaunch of corporate and product branding • HR improvements including employee engagement and culture • ESG Reporting and Carbon Footprint Audit • Acquisition of Prickly Cactus • Board restructuring and new organisation structure • Approval of appointments of B Bruno and A Mehta • Risk management and internal controls, including a robust assessment of the principal risks • Updated Treasury Policy • Review and update or Matters Reserved for the Board and Terms of Reference of board committees • Group Business Plan and Budget • Review of Covid status and hybrid policy to safeguard staff • Financial results announcements, presentations, report and accounts and market updates • Investor engagement and analyst coverage • The Group’s going concern statement, profitability and dividend policy • Change of auditor, and corporate lawyers 55 D4t4 Solutions plc Annual Report and Accounts 2022 Corporate Governance Statement continued Group Operations Board Following the restructuring of the plc board in June 2021, the Board Internal control The Board has ultimate responsibility for the Group’s internal created a Group Operations Board to focus on day-to-day operations control arrangements and for reviewing their effectiveness, which and delivery. This meets weekly and is now comprised of the guide and direct the Group’s activities to support delivery of its following roles; • Chief Executive Officer • Chief Financial Officer • Chief Technical Officer • VP – Marketing • VP – Global Sales • Chief Security Officer • Director of Managed Services strategic, financial, operational and other objectives and safeguard shareholders’ investment and the Group’s assets. The Board recognises that a system of internal control reduces, but cannot eliminate, the likelihood and impact of poor judgement in decision making, human error, deliberate circumvention of control processes by employees and others, management override of controls and the occurrence of unforeseeable circumstances. The Board sets policies and seeks and obtains on an ongoing basis, both directly and through the audit committee, assurance regarding the existence and operation of appropriate internal controls to mitigate key strategic, financial, operational, compliance and reputational risks. Risk management Key risks and uncertainties affecting the business are regularly The Board and audit committee consider any significant control matters raised in reports from management, and the external auditor assessed and updated. The Board challenges management to ensure and they monitor the progress of remedial actions. appropriate risk mitigation measures are in place. An outline of the Group’s key risks and uncertainties is shown on pages 26 to 29. The key features of the Group’s overall control frameworks, all of which were in place throughout the year and up to the date of approval of In light of the new and emerging risks or uncertainties arising from the this report, are set out below: Group’s strategic growth plans and the wider economic, political and market conditions, a rolling risk review process has been implemented which seeks to ensure that risks are constantly monitored, assessed • Delegated limits of authority in place; • An appropriate finance function across the Group with suitably and quantified, so that action may be prioritised by the Board qualified and experienced professionals; accordingly. This process is undertaken by the Risk Committee which reports to the board on a monthly basis. • Segregation of duties, authorisation limits and other key internal controls are designed into both system-based and The incidence of the global pandemic over the last two years, coupled manual processes. with increasing global economic and political volatility, has resulted in unprecedented times. The Group continues to monitor closely risks affecting the business and seeks to mitigate them as far as possible. • A comprehensive monthly financial and operational performance reporting system which covers, amongst other things, operating results, cash flow, balance sheet information, forecasts and comparisons against budgets; • A risk committee meeting on a regular basis to review and monitor risk and mitigating controls across the Group; and • Regular updates to the Board from management on insurance, litigation, human resources, sustainability and health and safety matters. 56 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022These arrangements are reviewed periodically by management to The Group whistleblowing procedures include a confidential reporting ensure they remain appropriate. The Group has extensive internal quality assurance processes in critical areas of the business and there are functions within the Group that provide assurance and advice covering specialist areas, such as information security. The Group’s businesses hold an ISO certifications for ISO 27001: hotline operated by an external, independent service provider. The policy and reporting hotline continue to be internally promoted. All employees are required to acknowledge that they have read and understood the policy and procedures. Directors’ responsibilities A statement of the Directors’ responsibilities in respect of the accounts Information Security. Throughout 2021, the Group maintained the is set out on page 83 of the Annual Report. Stakeholder engagement The Board continues to engage with stakeholders and welcomes ongoing dialogue throughout the year. Further information is contained in our Stakeholder Engagement report on pages 30 to 34. Conflicts of interest Directors have a legal duty to avoid conflicts of interest. Prior to appointment, conflicts of interest are disclosed and assessed to ensure that there are no matters which would prevent that person from taking on the appointment. Disclosure of directors interests is a standing item on the board meeting agenda and any new interests, whether conflicting or not, are disclosed during that item. If any potential conflict arises subsequently, the Articles of Association permit the Board to authorise the conflict, subject to such conditions or limitations as the Board may determine. In situations where a potential conflict arises, the Director concerned will not be permitted to remain present in any meeting or discussion concerning that conflict, and all material in relation to that matter will be restricted, including Board papers and minutes. ISO certifications for all our UK, US and India locations. The Group continues to review and make improvements to the implementation of these standards. Financial planning and monitoring The Group sets annual budgets, which are subject to Board approval. Financial information, including actual performance versus budget and expected future performance, is provided to all Board members as part of the Board papers. The monthly reporting cycle includes a rolling forecast. Policies, procedures and authorisation limits The key policies and documented procedures in place include: • Group delegated authority limits; • Group treasury policy; • Group share dealing code; • Group anti-bribery and corruption policy; • Group human resource and staff welfare policies; • Group health, safety and environmental policies; • Group code of ethics and standards of business conduct; • Group data governance policy; • Group information security policy; • Group anti-fraud policy; and • Group whistleblowing policy. 57 D4t4 Solutions plc Annual Report and Accounts 2022Application of the QCA Corporate Governance Code This section describes how D4t4 Solutions plc has applied and complied with the main and supporting principles of the QCA Corporate Governance Code (2018). In last year’s Statement of Corporate Governance there were two areas where the Group was not fully compliant with the ten key principles of the QCA Code. These have been addressed as far as possible during the year. These are shown below followed by a review of each of the principles in turn. No significant corporate governance matters arose during the period covered by the Annual Report 2022, 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. The following table summarises the specific areas within one of the principles where the Board considers that the Group did not fully comply, or may be perceived as not fully complying, with the QCA Code, throughout the year. Principle 5 -Maintain the Board as a well-functioning, balanced team led by the Chair Application Exceptions and explanations The Board should have an appropriate balance between Executive and Non- Executive Directors. At the start of the 2021/22 financial year, the Board consisted of seven members, three Non-Executive (all of whom were considered independent) and four Executive. On 28 April 2021, C Irvine resigned from the Board. On 30 June 2021 J Dodkins and M Boxall resigned from the Board. On 27 August 2021 and 01 September 2021, B Bruno and A Mehta respectively were appointed to the board. On 31 March 2022, P Kear stepped down from the board, which now consists of two Executive and three Non-Executive members, all of whom are considered independent. The general expectation that at least half of a Board should be independent Non-Executives has been satisfied since 1 July 2021. Principle 6- Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities) Application Exceptions and explanations The Board should contain the necessary mix of experience, skills, personal qualities (including gender balance) and capabilities to deliver the Group’s strategy over the medium to long term. The male to female ratio on the Board is presently 4:1 and there are currently no female Executive Directors. We believe that this reflects a strong gender bias in the technology industry as a whole, and the Board remains confident both that the opportunities in the Group are not excluded or limited by any diversity issues (including gender) and that the Board nevertheless contains the necessary mix of experience, skills and other personal qualities and capabilities necessary to deliver its strategy. This is better reflected amongst the leadership team where we have women in key roles such as VP Marketing, Head of Fraud, Finance Director, and Head of HR, People and Culture, and members of the leadership team being located across all three of our main locations. 58 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022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, opportunities and strategy, and the values underpinning them, are detailed in the Strategic Report within pages 4 to 49 of the Annual Report as follows: • “Our products and services” (pages 4-5) explains what D4t4 Solutions’ services and products are. • “Our strategy” (pages 6-7) describes how D4t4 Solutions seeks to transform the business to create shareholder value. • “Strategy in action” (pages 12-13) illustrates, with case studies, how our customers use and benefit from our products and services. The Group’s approach to delivering long-term value for shareholders is addressed in the Statement of the Chief Executive Officer on pages 16 to 19. Pages 26 to 29 (“Principal risks and uncertainties”) detail the key risks faced by the business and how these continue to be addressed. Pages 38 to 49 describe how we are embedding ESG into our business. 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 2021 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 2021 Preliminary results roadshow P Kear, B Bruno August 2021 AGM Directors Shareholders invited to attend online and in person Q&A session December 2021 Interim results roadshow B Bruno, A Mehta December 2021 Capital Markets Day B Bruno, A Mehta Various Shareholder & potential P Kear, B Bruno, A Mehta shareholder meeting 59 D4t4 Solutions plc Annual Report and Accounts 2022Application of the QCA Corporate Governance Code continued The Board is kept informed of the views of shareholders and other stakeholders at each monthly Board meeting through a report from the Chief Financial 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. The Chairman, P Simmonds, is available to shareholders if they have concerns where contact through the normal channel of Chief Executive Officer or Chief Financial 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; all members of the Board are usually present at the AGM. Capital Markets Day In December 2021, we held a Capital Markets Day alongside the release of our interim results. This was a good opportunity for our new Executive team to meet with shareholders and vice versa. It was also an opportunity to showcase our Celebrus FDP fraud product and for shareholders to put questions directly to our Head of Fraud, Serpil Hall and our Chief Technology Officer, Ant Philipps. A recording of the day is available on our website. At all investor meetings, shareholders are asked to confirm that their questions have been successfully answered. At the year end and interim presentations to shareholders, the Group’s Nominated Advisor 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 are business is dependent upon sought through internal appraisals and regular cross-functional meetings. good communications within our organisation. There are also regular opportunities for the staff to engage with other parts of the organisation and recognise the successes of others. Examples include staff brunches and bi-monthly 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 leadership team. Since the year-end we have launched an HR system which facilitates more effective employee engagement and communication across our various locations. This is particularly important in a world where, post-Covid, employees will probably never return to being in the office every day. This system has already proven to be every effective. 60 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022Stakeholders Reason for engagement How we engage Clients & Partners Understanding current and We have account managers and account directors whose primary responsibility is to emerging requirements of clients engage with our clients and partners to understand and develop our products and enables us to develop new and services so that we can work with them to exceed their requirements. enhanced services, together with 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 suppliers We treat all suppliers with respect and care, building long term collaborative are key to the core success of our relationships and where possible working within the local community, and ensuring business. ongoing communication so that feedback can be received and acted upon. We seek to ensure that supplier invoices are processed and paid promptly. 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 Group’s website • Annual and half-year reports and presentations • AGM • Capital Markets day 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, industry suppliers and associated data best practices, as well as latest regulatory requirements including General Data subjects and so we ensure that our Protection Regulations (GDPR) and the UK Data Protection Act (2018). Our experienced policies and procedures provide Information Security Committee ensure that governance, risk and compliance is a cohesive approach to this actively managed and that our policies and procedures evolve to meet ongoing important area. requirements. Communities We consider that it is important to We look to recruit locally experienced staff and through the local universities, in all of be a business that makes a positive our locations. We employ local suppliers where possible and throughout the year, we contribution to local economies and is encourage staff to identify charities that they have an affiliation with for the Group as a attractive as an employer and partner. whole to support. Further information is available in the ESG Report on pages 38 to 49. Environment Irrespective of our status as a public We endeavour to use technology wherever possible such that meetings with both company, it is part of our ethos to internal and external stakeholders can be held online, thus reducing the need for conduct business operations that travel. This further extends to allowing employees to work at home, further reducing minimise any adverse impact on the commuting costs on both economic and environmental grounds. In addition, our HQ climate these may have. at Sunbury uses the latest standards in insulation, lighting, heating and energy waste reduction and is now fully powered using renewable resources. During the year we appointed an external consultancy to conduct a carbon audit. Further details are given in the ESG report on pages 38 to 49. 61 D4t4 Solutions plc Annual Report and Accounts 2022Application of the QCA Corporate Governance Code continued 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 Annual Report at pages 26 to 29 (“Principal risks and uncertainties”) and pages 52 to 57 outline the control environment the Board has put in place – as per Principles 8 and 9 of the QCA Code – to promote a corporate culture based on ethical values and behaviours and to maintain governance structures and processes that are fit for purpose and support good decision-making by the Board. The Directors and management have a clear responsibility for identifying risks facing each of the businesses 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’s membership includes the Chief Technology Officer, the Chief Financial Officer, the Director of Finance and the Chief Information Security Officer; other members of the Company are seconded to the Committee as required. The remit of the 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. • 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 with 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 global 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 and on the Group’s website. The Board is currently comprised of the Non-Executive Chairman, two Executive Directors and a further two Non-Executive Directors. At the date of this corporate governance statement, all of the Non-Executive Directors are considered to be independent. 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 any Non-Executive Director whose independence may be called into question is subject to re-election annually. Both of the Executive Directors are full-time employees of the Group. 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 83 and a statement of going concern is given on page 82. The Board meets at least eleven times a year, and more often if required. The formal schedule of matters specifically reserved to it for decision was reviewed and adopted by the Board on 24 May 2022 and is reviewed annually (see Group’s website). 62 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022Other matters are delegated to the Executive Directors, supported of which they are members. In addition, the Directors are expected to by policies for reporting to the Board. Presentations are made to the attend strategy and business planning meetings each year. The Non- main Board at each monthly meeting by the Executive Directors and Executive Directors are expected to make themselves available at all also on regular occasions by operational management. reasonable times for consultation by other members of the Board. The Company Secretary is responsible for ensuring that Board Prior to each monthly Board meeting the Directors receive a detailed procedures are followed, and that applicable rules and regulations pack which includes: are complied with and for advising 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. • Board meeting agenda • Minutes from previous Board meeting • Board pack which includes financial summary, update on each part of the business, an operations update and risk assessment The Non-Executive Chairman and Non-Executive Directors are able update to meet without Executives present prior to each Board meeting. The agenda and relevant briefing papers are distributed in advance of each • Papers as required for additional items requiring Board attention 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 or online, and to attend all meetings of any Committee(s)** 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 Annual Report 2022 and the attendance record of individual Directors at those meetings: PA Simmonds PF Whiting M Biddulph B Bruno (appointed 27 August 2021) A Mehta (appointed 1 September 2021) PJ Kear (resigned 31 March 2022) JL Dodkins (resigned 30 June 2021) MG Boxall (resigned 30 June 2021) CC Irvine (resigned 28 April 2021) Board 17/17 17/17 17/17 10/10* 10/10** 17/17 5/5 5/5 2/2 Audit Remuneration Nomination 3/3 3/3 3/3 – – – – – – 4/4 4/4 4/4 – – – – – – 5/5 5/5 5/5 1/1 – 2/4 – – – * also attended 7 as an observer; ** also attended 1 as an observer The Board met monthly as in prior years but also had additional ad-hoc meetings to discuss, amongst other matters, the global pandemic, business strategy and board changes. 63 D4t4 Solutions plc Annual Report and Accounts 2022 Application of the QCA Corporate Governance Code continued Principle 6 – Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities Principle 7 – Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement The Annual Report 2022 includes, at pages 50-51, biographies of the The Board periodically reviews the it’s own effectiveness, as well current Board of Directors, details of their experience including a as that of its Committees and individual Directors in the following skills matrix. manner: This information is also on the Group’s website. The range of skills (i) The role of the Committees is considered by the Executive at the board is also considered by the Nominations Committee in its Directors without the presence of the Non-Executive Directors. assessment of board requirements. (ii) The Chairman and CEO examine the contribution and All Directors are expected to keep their skills up to date, and it is Board effectiveness of the individual Directors with regard to their line policy that Executive Directors receive suitable ongoing training for role and contribution at Board meetings. their position. The Chairman ensures that all 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 and Nominated Adviser on changes to the AIM rules, requirements under the Companies Act and other regulatory matters. Directors may consult with the Company (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 Secretary or Nominated Adviser at any time on matters related to their Nomination Committee. role on the Board. External advice In addition, a formal Board effectiveness evaluation process is conducted biannually. The process involves all Directors completing a detailed No significant matters of a corporate governance nature arose during individual evaluation of Board performance, which covers effectiveness the period covered by the Annual Report 2022 nor subsequently to in several areas including Board composition, Board information, Board the date of this statement on which it was considered necessary for process, internal control and risk management, Board accountability, the Board or any of its committees to seek external advice. The Board CEO/Senior management and Standards of conduct. consults, on an ongoing basis, with its Nominated Adviser and other professional advisers on routine matters arising in the ordinary course of its business. The results of these biennial 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 last 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 have been challenged to identify potential internal candidates who could potentially occupy Board positions and set out development plans for these individuals and these are in progress. 64 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022 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. Security D4t4 Solutions’ advanced technology collects, manages and enables analysis of your data, supporting it with the utmost care for its security. Trust D4t4 Solutions takes pride in its relationships with customers, working hard to understand their 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 our customers. Pride D4t4 Solutions will be a Group in which we can be proud of our achievements, delivering the highest standards of quality and being confident in our ability to satisfy our customers’ 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 we work together as a team to develop pioneering technology that solves our clients’ challenges. Engagement D4t4 Solutions will be a workplace in which all employees are engaged with our business and are empowered to get involved with our communications and decision- making processes. The culture of the Group is characterised by these values which are communicated regularly to staff through internal communications 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 Board believes that the Executive Directors represent these values and convey them effectively throughout the organisation. Ethical business practices The Group is committed to corporate sustainability and to applying the highest standards of ethical conduct and integrity to its 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. 65 D4t4 Solutions plc Annual Report and Accounts 2022Application of the QCA Corporate Governance Code continued 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 The Annual Report 2022 includes, at pages 50-51, descriptions of the individual roles and responsibilities of the Chairman, Chief Executive Officer and other Directors. The Board and its Committee composition The Board is currently comprised of the Non-Executive Chairman, two Executive Directors and a further two 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 shareholders, and the Chief Executive Officer is accountable for the management of the Group. Non-Executive Directors constructively challenge and assist in the development of strategy. They scrutinise the performance of management in meeting agreed goals and objectives and monitor the reporting of performance. The Board has not appointed a Senior Independent Non-Executive Director. 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 Company Secretary. Details of the membership, roles, responsibilities and activities of the Audit, Remuneration and Nomination Committees are described in more detail in the individual Committee reports commencing on page 68 of the Annual Report 2022. The Chair of each Committee reports to the Board on the activities of that Committee. The terms of reference for each of the Audit, Remuneration, Nomination can be found on the Group’s 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 revise its governance framework as appropriate as the Group evolves. As part of ongoing governance efforts, the Group decided last year that an additional sub-committee should be formed to focus on ESG (environmental, social & governance). This committee is comprised mainly of staff members who volunteered for the role due to a particular interest in driving the Group’s ESG agenda. In March 2021, the first sitting of this ESG Committee took place. The Committee was predominantly formed to focus on the Group’s environmental and social initiatives, as governance is clearly a focus of the whole Board and all committees. As the Group continues to grow the Board fully recognises both the importance and the need of the governance framework to continue to evolve. This has been evidenced over the last two years by the formation of the Risk and ESG sub-committees and the external advice sought regarding the new executive LTIP scheme. 66 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022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 2022, including a report from each of the Audit, Remuneration and Nomination Committees, is set out at pages 68 to 73 of the Annual Report 2022. Votes at General Meetings All resolutions put to the AGM held on 26 August 2021 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 years and notices of all General Meetings, can be found on the Group’s website. 67 D4t4 Solutions plc Annual Report and Accounts 2022Report of the audit committee Reviewing of financial performance and controls Dear Shareholder I am pleased to present the report of the Audit Committee for the year ended 31 March 2022. The Audit Committee comprises three Non-Executive Directors of the Company, all of whom served for the entirety of the year. By invitation, the meetings are also attended by the CEO and CFO of the Company. The Audit Committee includes one financially qualified member as recognised by the Consultative Committee of Accountancy Bodies, but all Audit Committee members are expected to be financially literate. The Committee is chaired by myself and met three times during the year under review. It operates under formal terms of reference, which were reviewed and updated during the year and are now available on our website. The Audit Committee is responsible for reviewing a wide range of financial matters including ensuring that the financial performance of the Group is adequately measured and controlled, correctly represented, reported to and understood by the Board. 68 The Audit Committee advises the Board on the appointment of external auditors and on their remuneration and independence, both for audit and non-audit work, and discusses the nature and scope of their audit. If required, the Audit Committee meets the auditors at least once a year without any Executive Directors present. 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 amounts paid in respect of these are disclosed in note 6. With RSM UK Audit LLP and its predecessor firms having been in the role since 2010, during the year the Committee undertook a thorough review of the auditor function and ran a selection process for the auditor role for the Group. The process identified five audit firms that were invited to submit proposals and the Committee proposed to the Board that Haysmacintyre LLP (“Haysmacintyre”) be appointed as the Group’s new auditor. Haysmacintyre acts for a number of public companies, both fully listed and AIM, operating across a number of sectors, and has a strong presence in the technology sector. The Committee was very impressed throughout the process with the Haysmacintyre account team, their approach, and their references. I’d like to thank RSM for their work over the last ten years. RSM have confirmed that there are no circumstances which they consider should be brought to the attention of shareholders. I am satisfied that the Committee has satisfactorily discharged its duties in the year in accordance with its terms of reference. The Audit Committee has recommended to the Board that Haysmacintyre LLP is re-appointed at the forthcoming AGM. Peter Simmonds Chair of the audit committee 6 July 2022 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022COMMITTEE MEMBERS Peter Simmonds (Chair) Monika Biddulph Peter Whiting Key issues considered during the recent audit Revenue recognition • This is a key issue in all audits due to historic misstatement by companies over the years. The Committee review the Group’s revenue recognition policies to ensure they are compliant with current accounting standards and applied consistently. Carrying value of goodwill • The Committee monitors the intangible carrying value in the Group for any indications of impairment and undertakes impairment test calculations to support decisions to not impair goodwill. Management override of controls • This is the risk of misappropriation of assets and the risks of misrepresentation of financial information, in particular in relation to revenue and associated asset and Valuation of share options liability accounts. • The Committee receives updates on internal controls and any instances of management override. • This is the risk of incorrect pricing of share options vesting under market conditions, non-market conditions and LTIP schemes, and hence an incorrect charge being made to the income statement. This is a complex area and so the Group appointed the Valuations department of RSM UK Corporate Finance LLP to value the share options under a Black- Scholes and a Monte Carlo basis. Capitalisation of development costs • This is the risk of incorrect capitalisation of research and development costs which do not fall in line with IAS 38. The Committee reviewed the basis and assumptions for the capitalisation. Accounting for the acquisition of Prickly Cactus Limited • This is the risk of incorrect accounting for the acquisition of Prickly Cactus Limited, including the recognition of contingent consideration and subsequent goodwill under IFRS 3. • The Committee reviewed the calculations and is satisfied that the contingent consideration will become payable and therefore should be recognised in the Consolidated statement of financial position. D4t4 Solutions plc Annual Report and Accounts 2022 69 69 D4t4 Solutions plc Annual Report and Accounts 2022Report of the nomination committee A focus on succession planning Dear Shareholder I am pleased to present the report of the Nomination Committee for the year ended 31 March 2022. The Nomination Committee comprises four Directors: three Non- Executives Directors (myself, Peter Simmonds and Peter Whiting) and one Executive Director, which was Peter Kear until February 2022, Bill and Peter had been working closely together over the first six months of the financial year and in October 2021, Bill was appointed CEO, with Peter moving to the role of Deputy CEO and providing continuing support until June 2022. I would like to thank Peter Kear for his dedication and continuing support during the transition. and Bill Bruno from February 2022. In the performance of its duties, In addition to CEO succession, the nomination committee actively the Committee held three meetings in the year. The principal activity engaged in the CFO succession, where a specialist recruiter was of the Nomination Committee in the year was overseeing the CEO used to assemble a high calibre shortlist. Following a thorough transition, the appointment of a CFO successor as well as succession interview process and deliberations, in September 2021 Ash Mehta planning , and board composition. was appointed as CFO. Ash is an experienced public company I’m delighted to report that in April 2021, following a thorough selection process, Bill Bruno was appointed as CEO designate to succeed Peter Kear. Bill has an in-depth understanding of the digital data industry and has played an active role in shaping the future finance director and has extensive experience in investor relations, strategic finance, managing growth, fundraisings, and M&A. Myself, the Nomination Committee and the Board are very pleased having Ash on board and look forward to working with him! strategy at D4t4 since he joined the Group in 2018. He is well placed to The Nomination Committee further considers the Board composition drive D4t4’s next phase of growth. 70 and the balance between Non-Executive and Executive Directors as well as the mix of skills amongst the independent Non-Executive Directors and decide on appropriate actions to be taken. Following on from the CEO and CFO appointments, and as a result of the main Board reorganisation, Mark Boxall, Chief Operating Officer and Jim Dodkins, Chief Technology Officer, stepped down from the main Board in June 2021 to serve D4t4 on the new Group Operations Board below the main D4t4 Board. The Group Operations Board will be focused entirely on the execution and delivery of Group strategy, and will, in addition to the CEO, CFO, COO and CTO, include a small number of other senior individuals. On behalf of the Nominations Committee and the board I would like to thank Jim and Mark for their many years of service on the board. I am confident that the new Group Operations Board will provide added focus and efficiency for the delivery of shareholder returns. GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022COMMITTEE MEMBERS Monika Biddulph (Chair) Peter Kear + Bill Bruno ++ Peter Simmonds Peter Whiting + Peter Kear left from the Committee on 24 February 2022 ++ Bill Bruno joined the Committee on 24 February 2022 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 20% of Board membership. In relation to succession planning, the Nomination Committee keeps under review, and takes appropriate action to ensure, orderly succession for appointments to the Board and to senior management, thereby maintaining an appropriate balance of skills and experience within the Group and on the Board. With regards to Non-Executive Directors, the Committee considers, amongst other factors, their other significant outside commitments prior to making recommendations. This is designed to ensure that they have sufficient time to meet what is expected of them and keeps any changes to these commitments under review. I am satisfied that the Nomination Committee has satisfactorily discharged its duties in the year in accordance with its terms of reference, which are reviewed on an annual basis. Monika Biddulph Chair of the nomination committee 6 July 2022 D4t4 Solutions plc Annual Report and Accounts 2022 71 71 D4t4 Solutions plc Annual Report and Accounts 2022Report of the remuneration committee Determining executive remuneration Dear Shareholder I am pleased to introduce the Directors’ Remuneration Report for the year ended 31 March 2022. The Committee has consisted throughout the entire year of three Non- 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. Executive Directors; Peter Simmonds, Monika Biddulph and me. For the financial year to 31 March 2022, the Remuneration Committee The Committee’s terms of reference require it to meet not less than once each year. The Committee met four times in the year ended 31 March 2022. 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 payments. The Committee is also responsible for monitoring compliance with the implementation by the Group of the legal requirements and, so far as reasonably practical, recommendations and guidelines relating to Directors’ remuneration. None of the Committee has any personal financial interest (other than as shareholders or as noted in the Directors’ report), conflicts of interests arising from cross- directorships or day-to- day involvement has continued to operate a remuneration structure made up of basic salary, pensions and benefits, annual performance-related bonuses, and a long-term incentive plan (LTIP). As in prior years, a significant proportion of executive remuneration has been 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 against the targets set a year ago, set performance targets for the following financial year and made recommendations to the Board on the overall packages for the Executive Directors. The committee believes that a combination of Total Shareholder Return (TSR) and growth in EPS provides an optimal alignment with shareholders over the medium term, and these remain the basis of the vesting criteria of the LTIP grants made during the year. A significant management transition took place during the year, with the roles of both the Chief Executive Officer and Chief Financial Officer being assumed by new incumbents, namely Bill Bruno and Ash Mehta respectively. In the case of Bill, this was by internal promotion, whilst Ash was recruited externally. The Remuneration Committee worked 72 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022closely with the Nomination Committee and the wider Board during the period of selection and thereafter. In particular, we wished to ensure that the packages offered to Bill and Ash were appropriate to the nature and complexity of the specific roles, align with the wider COMMITTEE MEMBERS Peter Whiting (Chair) recruitment market, and encourage the building-up of meaningful Peter Simmonds shareholdings in the Group. We also set personal objectives for all of the executive directors including retiring CEO Peter Kear designed to Monika Biddulph ensure that the transition of internal reporting lines and external client and supplier relationships took place as smoothly as possible. I am satisfied that the Committee has appropriately discharged its duties in the year in accordance with its responsibilities and encourage you to read the Directors Remuneration Report on the following pages. Peter Whiting Chair of the remuneration committee 6 July 2022 D4t4 Solutions plc Annual Report and Accounts 2022 73 73 D4t4 Solutions plc Annual Report and Accounts 2022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 2022. Directors’ remuneration policy Executive remuneration packages are prudently designed to attract, motivate and retain Directors of the high calibre needed to maintain the Company’s position as a market leader and to reward them for enhancing value to shareholders. The performance measurement of the Executive Directors and key members of senior management, and the determination of their annual remuneration package are undertaken by the Committee. The remuneration of the Non-Executive Directors is determined by the Board within limits set out in the Articles of Association. The Company’s policy is that a substantial proportion of the potential remuneration of the Executive Directors should be performance related. The performance criteria set should motivate the Executive Directors to create value for the shareholders. There are five main elements of the remuneration package for Executive Directors and senior management: Element of remuneration Link to Group strategy Operation Framework Base salary Ensures that the Company Base salary is paid monthly An Executive Director’s salary is determined by can recruit and retain and reviewed annually, with the Remuneration Committee in March of each high-quality Executives to any increases applying from year and when an individual changes position or deliver on the Company 1 April. responsibility. In deciding appropriate levels, the strategy in the interest of the shareholders. Remuneration Committee considers the Company as a whole and relies on objective research which gives up to date information on a comparable group of companies. Benefits Ensures that the Company Benefits principally In relation to health care and death in service can recruit and retain comprise private healthcare benefits, premiums are paid by the Company to an high-quality Executives to and death in service insurance. external broker to arrange cover, in line with other deliver on the Company strategy in the interest of the shareholders. Group employees. These benefits are standard for all Group employees. The Company offers company cars / car allowances to a number of employees across the organisation. Annual bonus Rewards and incentivises the The Committee sets annual The Remuneration Committee sets bonus plans for Executive Directors performance targets, linked to Executive Directors based upon achieving a number for achievement of strategic strategic objectives of pre-defined growth targets including ARR and objectives. and risk management. Bonus Adjusted Profit before tax. payments in respect of a year are made in June, or later if any element is deferred. 74 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022Element of remuneration Link to Group strategy Operation Framework Share option plan (LTIP) Aligns the interests of the The Remuneration Committee The share option plans are subject to rules and Executive Directors with the has discretion to make limits approved by shareholders in general meeting. interest of the long term option grants to Executive Any exercise is subject to satisfaction of the specified shareholders. Directors and other staff, performance conditions. subject to the scheme rules, and to determine appropriate performance conditions. Pension Ensures that the Company Pension contributions are Executive Directors are members of the Company can recruit and retain high- made by the Company to a Money Purchase pension scheme. quality Executives to deliver defined contribution scheme on the Group strategy in the operated by third party interest of the shareholders. providers. 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 3 Directors in the scheme in 2022 (2021: 4). Chairman and Non-  Executive Director fees Ensures that the Group can Fees for Non-Executive A basic fee is set for normal duties, commensurate recruit and retain a high- Directors are set by the Board with fees paid for similar roles in other similar quality Chairman and Non- (excluding Non- Executive companies, taking account of the time commitment, Executive Directors to deliver Directors). Fees are paid responsibilities, and committee position(s). on the Group strategy in the monthly or quarterly. Supplementary fees are paid for any additional interest of the shareholders. duties at fixed day rates. Non-Executive Directors are not eligible for pensions, incentives, bonus or any similar payments other than normal out-of-pocket expenses incurred on behalf of the business. Compensation for loss of office is not payable to Non-Executive Directors. Remuneration policy considerations Recruitment The Company’s Nomination Committee is responsible for leading the process for Board appointments and making 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. 75 D4t4 Solutions plc Annual Report and Accounts 2022Directors’ remuneration report continued 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  Bill Bruno has a Directors’ service agreement dated 27 August 2021 which can be terminated on six months’ notice. Ash Mehta has a Directors’ service agreement dated 12 May 2021 which can be terminated on three months’ notice. Non-Executive Directors  P Simmonds, 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 Company has no policy on Director shareholdings. Outside appointments Executive Directors are entitled to accept appointments outside the Company providing that the Chairman’s permission is sought and fees in excess of £20,000 from all such appointments are accounted for to the Company. Aggregate Directors’ remuneration  The 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 76 £000 2022 1,232 39 1,271 537 129 1,937 2021 1,352 39 1,391 194 183 1,768 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022 Single figure for the total remuneration (audited) 31 March 2022 Fees/basic Benefits Bonus Sub total Pension Executives Bill Bruno (appointed 27 August 2021) Ash Mehta (appointed 1 September 2021) Peter Kear (resigned 31 March 2022) Mark Boxall (resigned 30 June 2021) Jim Dodkins (resigned 30 June 2021) Charlie Irvine (resigned 28 April 2021) Non-Executives Peter Simmonds Peter Whiting Monika Biddulph John Lythall (resigned 31 March 2021) Total salary £000 149 100 229 46 41 11 69 48 47 – 740 £000 £000 £000 £000 3 1 6 1 4 1 – – – – 270 131 75 – – – – – – – 422 232 310 47 45 12 69 48 47 – 9 6 10 3 10 1 – – – – Total 2022 £000 431 – 238 320 50 55 13 69 48 47 – Total 2021 £000 – 422 345 318 146 50 45 40 25 16 476 1,232 39 1,271 1,391 Remuneration of highest paid Director Remuneration Company contributions to money purchase pension schemes 2022 422 9 431 2021 412 10 422 Emoluments for the highest paid Director for the year ended 31 March 2022 and 31 March 2021 are included in the table above. The highest paid Director exercised no share options during the year (2021: nil options exercised). Annual bonus payments for executive directors are typically paid 70% in cash and 30% in shares deferred for two years. To ensure a period of ongoing alignment with shareholders beyond his retirement date, the committee considered it appropriate to pay Peter Kear's bonus for the year entirely in shares deferred for one year. 77 D4t4 Solutions plc Annual Report and Accounts 2022 Directors’ remuneration report continued 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: B Bruno A Mehta P Kear J Dodkins M Boxall Number at Number at 31 March 2021 31 March 2022 Option price Expiry date Exercisable from 54,000 – – 138,591 105,593 118,792 166,666 54,000 115,823 58,290 138,591 – – – 2.0p 2.0p 2.0p 2.0p 2.0p 2.0p 8 January 2031 15 July 2023 28 October 2031 28 October 2024 28 October 2031 28 October 2024 10 August 2030 10 August 2023 10 August 2030 10 August 2023 10 August 2030 10 August 2023 149.0p 13 August 2038 1 July 2021 The awards made during the year were made in two tranches as set out below under the terms of the D4t4 Long Term Incentive Plan (“LTIP”). These awards have been made following the recent appointment of the two directors to their respective roles: Director/PDMR Position Tranche A (Shares) Tranche B (Shares) B Bruno A Mehta Chief Executive Officer Chief Financial Officer 66,185 34,974 49,638 23,316 The awards are all exercisable at a price of two pence per Share and No directors (2021: one) exercised options during the year (2021: will vest three years after the grant date of 28 October 2021, subject to 166,667) with gains on exercise of share options during the year totalling the continued employment of the relevant director. £nil (2021: £227,000). No director’s options lapsed during the year. Vesting of awards in Tranche A is also subject to the satisfaction over The market price of the shares at 31 March 2022 was 262.5p (31 March the three-year period from the date of grant of specified performance 2021: 302.5p) and the range in the period under review was 262p to 400p. conditions, based on the Company’s relative Total Shareholder Return (TSR) in respect of half of the award, and growth in Annual Recurring Revenue (ARR) in respect of the other half. Vesting criteria have been set as follows: • 15% compound growth in ARR to achieve minimum award vesting, with a sliding scale above this level, up to full vesting at 27.5% compound growth; and • TSR of no less than median performance against the selected benchmark for minimum vesting, with a sliding scale above this level, up to full vesting for top-quartile performance. There have been no variations to the terms and conditions or performance criteria for share options during the financial year. Directors shareholdings and dividends paid to Directors are disclosed in the Directors’ Report on page 79. Advisers The Committee receives independent advice from FIT Remuneration Consultants LLP when required. Tranche B represents a one-off award, without performance conditions. P Simmonds, C Irvine, P Whiting and M Biddulph did not hold any share options during the year. Peter Whiting Chair of the remuneration committee 78 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022 Directors’ report The Directors present their annual report and the audited financial At the AGM, P A Simmonds will offer himself for re-appointment in statements for the year ended 31 March 2022, which should be accordance with the Articles. Additionally, B Bruno and read in conjunction with the Strategic Report on pages 4 to 49. The A Mehta will be proposed for re-appointment, each having been Corporate Governance Statement set out on pages 50 to 78 forms appointed a Director since the last Annual General Meeting. part of this report. Incorporation D4t4 Solutions Plc is a company incorporated in the United Kingdom under the Companies Act 1985. 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: Adoption of new Articles of Association The Articles may be amended by special resolution of the shareholders. At the forthcoming Annual General Meeting, a special resolution will be proposed to adopt new Articles of Association. This is to update the Articles in line with best practice. B Bruno A Mehta P A Simmons P Whiting M Biddulph * or date of appointment if later Interest at Interest at 31 March 2022 31 March 2021* 13,000 80,000 346,500 22,000 – – 24,000 346,500 22,000 – Directors and Directors’ Interests The Directors who held office during the year and to the date of signing, unless otherwise stated, were as follows: 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 78. B Bruno (appointed 27 August 2021) A Mehta (appointed 01 September 2021) P A Simmonds P Whiting M Biddulph P J Kear (resigned 31 March 2022) J L Dodkins (resigned 30 June 2021) M G Boxall (resigned 30 June 2021) C C Irvine (resigned 28 Apr 2021) With regard to the appointment and replacement of Directors, the Company is governed by its Articles of Association, the Companies Acts and related legislation. Such appointments are overseen by the Nominations Committee. The powers of Directors are described in the Main Board Terms of Reference, copies of which are available on request, and in the Corporate Governance Statement on page 52. In accordance with our Articles of Association and to the extent permitted by law, Directors are granted an indemnity from the Company in respect of liability incurred as a result of their office. In addition, we maintained a Directors’ and officers’ liability insurance policy throughout the year. Neither our indemnity nor the insurance provides cover in the event that a Director is proven to have acted dishonestly or fraudulently. 79 D4t4 Solutions plc Annual Report and Accounts 2022 Directors’ report continued Capital structure Under its Articles of Association, the Company has authority to issue No person has any special rights of control over the Company’s share 50,000,000 ordinary shares. Details of the authorised and issued share capital and all issued shares are fully paid. capital, together with details of the movements in the Company’s issued share capital during the year are shown in note 22. The Company has one class of ordinary shares which carry no right to fixed income. Each share (other than own shares held in treasury) carries the right to one vote at general meetings of the Company and an entitlement to any dividend announced by the board. There are a number of agreements that take effect, alter or terminate upon a change of control of the Company such as commercial contracts, bank loan agreements, property lease arrangements and employees’ share plans. None of these are considered to be significant in terms of their likely impact on the business of the Group as a whole. Furthermore, the Directors are not aware of any There are no specific restrictions on the size of a holding nor on the agreements between the Company and its Directors or employees transfer of shares, which are both governed by the general provisions that provide for compensation for loss of office or employment that of the Articles of Association and prevailing legislation. The Directors occurs because of a takeover bid. 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. Substantial holdings As far as the Directors are aware, as at 6 July 2022, the only holdings of 3% or more of the Company’s issued share capital were the following: Canaccord Genuity Wealth Management Ennismore Fund Management Herald Investment Management Investec Wealth & Management Chelverton Asset Management P Kear Esq Number of ordinary shares 7,491,155 3,641,798 2,974,800 2,816,511 2,065,000 1,270,752 % 18.64 9.06 7.40 7.01 5.14 3.16 Acquisition of the Company’s own shares At the end of the year, the Directors had authority, under the Treasury shares are ordinary 2p shares purchased in order to satisfy shareholders’ resolution of 26 August 2021, to purchase through the outstanding option obligations. Sales from Treasury shares are the shares market up to 4,023,342 of the Company’s shares at a maximum price issued to option holders on exercise of their options. The maximum of 105% of the average middle market price for the five business days number of own shares held in the year was 224,932 (2021: 199,113), immediately preceding the date of purchase and a minimum price of which represents 0.56% (2021: 0.49%) of the issued share capital. 2p per share. This authority expires at the AGM to be held on 03 August 2022. 120,934 shares were purchased and 87,500 shares were sold in the year ending 31 March 2022, as shown in note 23. 80 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022 Share option schemes The Company operates share option Schemes which are open Research and Development The Group has continued to attach a high priority to research and to employees. The three current Schemes are the D4t4 Solutions development throughout the year aimed at the development of new Employee Share Options ‘A’ Scheme, the D4t4 Solutions EMI Share products and maintaining the technological excellence of existing Options Scheme, and the D4t4 Long Term Incentive Plan. Details of the products. share options are laid out on page 117 within note 27 to the accounts. Dividends The Directors recommend a final dividend of 2.07p (2021: 2.0p) per 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. ordinary share to be paid this year. Thr directors also recommend a Bank relationships are maintained to ensure that sufficient cash and special dividend of 12.50p (2021:nil) per ordinary share to be paid later unutilised facilities are available to the Group. The Group also has this year. exposure to foreign currency rate fluctuations and undertakes hedging contracts to mitigate potential currency losses. Financial instruments The Group’s financial risk management objectives and policies are discussed on page 120 within note 30 to the accounts. Branch operations The Group has branch operations located in Chennai, India. Political and Charitable contributions The Group made no political contributions during the year (2021: nil), and charitable donations of £625 (2021: nil). Sustainability Information about the Company’s approach to sustainability risks and opportunities is set out on pages 38 to 49. Also included on these pages are details of our greenhouse gas emissions. Employees The Group has a policy of offering equal opportunities to employees at all levels in respect of the conditions of work. Throughout the Group it is the Board’s intention to provide employment opportunities and training for disabled people and to care for employees who become disabled having regard to aptitude and abilities. Regular consultation and meetings, formal or otherwise, are held with all levels of employees to discuss problems and opportunities. System of risk management and internal control The Board is responsible for maintaining a risk management and internal control system and for managing principal risks faced by the Group. Such a system is designed to manage rather than eliminate business risks and can only provide reasonable and not absolute assurance against material mistreatment or loss. 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 Company policy to pay all claims from suppliers according to agreed terms of payment upon receipt of a valid invoice which is materially correct. The Company does not follow a code on standard payment practice. At 31 March 2022 the Company had 25 days (2021: 40 days) of outstanding liabilities to creditors. 81 D4t4 Solutions plc Annual Report and Accounts 2022Directors’ report continued Auditor During the year, Haysmacintyre LLP was appointed as auditor Going Concern The Group’s business activities, together with the factors likely to affect following a thorough review and RFP process of the auditor role its future development, performance and position are set out above for the Group, involving five audit firms that were invited to submit and the risks and uncertainties summarised. The Group and Company proposals. RSM UK Audit LLP and its predecessor firms had been in has sufficient financial resources to cover budgeted future cash-flows the role since 2010. In accordance with Section 489 of the Companies Act 2006, a resolution for the re-appointment of Haysmacintyre LLP as the auditor of the Company is to be proposed at the forthcoming Annual General Meeting. 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: and has contracts in place with customers and suppliers across different geographic areas and industries. As a consequence of these factors, the Directors believe that the Group is well placed to manage its business risks successfully. Having reviewed the future plans and projections for the business, the Directors believe that the Group and Company and its subsidiary undertakings have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. • 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 By order of the Board Company’s auditor is unaware; and • each of the Directors has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information (as defined) and to establish that the Company’s auditor is aware of that information. Bill Bruno Chief Executive Officer Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, TW16 7EF This confirmation is given and should be interpreted in accordance 6 July 2022 with the provisions of s418 of the Companies Act 2006. Future outlook The Group’s future outlook and opportunities are referred to in the Chief Executive Officer report on page 16. 82 GOVERNANCED4t4 Solutions plc Annual Report and Accounts 2022Statement of Directors’ responsibilities The Directors are responsible for preparing the Strategic Report, the d. prepare the financial statements on the going concern basis Directors’ Report and the Financial Statements in accordance with unless it is inappropriate to presume that the group and the applicable law and regulations. company will continue in business. Company law requires the Directors to prepare group and company The Directors are responsible for keeping adequate accounting financial statements for each financial year. The Directors have records that are sufficient to show and explain the group’s and the elected under company law and the AIM Rules of the London Stock company’s transactions and disclose with reasonable accuracy at Exchange to prepare the group financial statements in accordance any time the financial position of the group and the company and with international accounting standards in conformity with the enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006 and to prepare the company requirements of the Companies Act 2006. They are also responsible for financial statements in accordance with international accounting safeguarding the assets of the group and the company and hence for standards in conformity with the requirements of the Companies Act taking reasonable steps for the prevention and detection of fraud and 2006 and applicable law. other irregularities. The group and company financial statements are required by law The Directors are responsible for the maintenance and integrity of the and international accounting standards in conformity with the corporate and financial information included on the D4t4 Solutions requirements of the Companies Act 2006 to present fairly the financial plc 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 Bill Bruno Chief Executive Officer Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, TW16 7EF 6 July 2022 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 each of 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 international accounting standards in conformity with the requirements of the Companies Act 2006; 83 D4t4 Solutions plc Annual Report and Accounts 2022 Independent auditor’s 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 2022 which comprise the consolidated statement of comprehensive loss, the consolidated statement of financial position, the parent company statement of financial position, the consolidated statement of changing in equity, the parent company statement of changes in equity, the consolidated statement of cash flows 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/ UK adopted international accounting standards. 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 2022 and of the group’s loss for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the European Union/ UK adopted international accounting standards; and • have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. An overview of the scope of our audit Our audit scope included all components and was performed to component materiality. Our audit work therefore covered 100% of Group profit and total Group assets and liabilities. It was performed to the materiality levels set out below. Key audit matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 84 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Key Audit Matter Revenue Recognition Included in the Group Statement of Comprehensive Income is revenue of £24.459m. Revenue is derived from the sale of own IP, the sale of 3rd party IP, the provision of delivery services and of support and maintenance. How our scope addressed the matter We agreed a number of revenue transactions to cash receipts and appropriate evidence of customer acceptance in order to gain comfort over occurrence, completeness and satisfaction of the performance obligations per the underlying revenue agreements. We have reviewed and challenged management’s judgment in applying relevant requirements of IFRS 15, specifically around the See revenue accounting policy note for further details around revenue timing of software license sales. recognition. As a result of our procedures we conclude that the Group’s revenue is There is a risk that revenue has not been recognised in line with IFRS stated accurately in all material aspects. 15 in relation to ongoing contracts with customers. Our application of materiality We apply the concept of materiality both in planning and performing Conclusions relating to going concern In auditing the financial statements, we have concluded that the our audit, and in evaluating the effect of misstatements on our audit director's use of the going concern basis of accounting in the and on the financial statements. For the purposes of determining preparation of the financial statements is appropriate. Our evaluation whether the financial statements are free from material misstatement of the director’s assessment of the entity’s ability to continue to adopt we define materiality as the magnitude of misstatement that makes it the going concern basis of accounting included: probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced. We determined overall materiality for the Group financial statements as a whole to be £250,000 being 8.75% of adjusted EBITDA for the year. We considered it appropriate to determine our materiality based on adjusted EBITDA as we consider this to be the key metric in assessing the financial performance and position of the Group given its primary purpose is to generate positive EBITDA for the Groups shareholders. On the basis of our risk assessments, together with our assessment of the overall control environment, we apply a different • We reviewed cash flow forecasts prepared by management and assessed their adequacy, and also challenged the assumptions and judgements inherent within them. • We have corroborated cash levels after the reporting date to consider whether they are in line with forecasts and investigated the reasons for any significant discrepancies. • We reviewed prior period budgets and forecasts against actual performance to consider management’s ability to accurately level of materiality, performance materiality, to determine the extent forecast and budget. of our testing and this was set at 75% of the overall audit financial statements’ materiality, being £187,500. • We have considered pipeline income and contracts to understand the uncertainty in management’s budgets. We agreed with management that we would report to the Audit Committee all audit differences in excess of £12,500 as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. 85 D4t4 Solutions plc Annual Report and Accounts 2022Independent auditor’s report continued Other information The directors are responsible for the other information. The other • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been information comprises the information included in the annual report, received from branches not visited by us; or 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, • 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 consider whether the other information is materially inconsistent require for our audit. with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the group and the parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors’ report. Responsibilities of directors As explained more fully in the directors’ responsibilities statement set out on page 83, 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 We have nothing to report in respect of the following matters in relation influence the economic decisions of users taken on the basis of these to which the Companies Act 2006 requires us to report to you if, in our financial statements. opinion: 86 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022Irregularities, including fraud, are instances of non-compliance with laws of instances of non-compliance. The risk is also greater regarding and regulations. We design procedures in line with our responsibilities, irregularities occurring due to fraud rather than error, as fraud outlined above, to detect material misstatements in respect of involves intentional concealment, forgery, collusion, omission or irregularities, including fraud. The extent to which our procedures are misrepresentation. capable of detecting irregularities, including fraud is detailed below: Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Based on our understanding of the company and industry, we identified that the principal risks of non-compliance with laws and regulations related to regulatory requirements for the company. We considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, income tax and payroll taxes. We evaluated management’s incentives and opportunities for A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. Use of our report This report is made solely to the 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 fraudulent manipulation of the financial statements (including the permitted by law, we do not accept or assume responsibility to anyone risk of override of controls), and determined that the principal risks other than the company and the company's members as a body, for our were related to posting inappropriate journal entries to areas subject audit work, for this report, or for the opinions we have formed. to significant judgement and management bias through accounting estimates. Audit procedures performed by the engagement team included: • Discussions with management including consideration of known or suspected instances of non-compliance with laws and regulation and fraud; Jon Dawson Senior Statutory Auditor For and on behalf of Haysmacintyre LLP, Statutory Auditors 6 July 2022 • Evaluating management’s controls designed to prevent and detect 10 Queen Street Place, London, EC4R 1AG irregularities; • Identifying and testing journals, in particular journal entries posted with large values, round sum values, significant impact on profit, dated ahead of the date which they were posted and posted to suspense accounts; • Challenging assumptions and judgements made by management in their critical accounting estimates. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware 87 D4t4 Solutions plc Annual Report and Accounts 2022Group statement of comprehensive income for the year ended 31 March 2022 Continuing operations Revenue Cost of sales Gross profit Administration expenses Other operating income Profit from operations Finance income Financing costs Profit before tax Tax Notes 4,5 7 8 9 9 10 Attributable to equity holders of the parent Earnings per share from continuing operations attributable to the equity holders of the parent 13 Statutory Basic Diluted 2022 £’000 2021 £’000 24, 459 (11,755) 12,704 (11,000) 58 1,762 22 (21) 1,763 (68) 1,695 22,792 (8,566) 14,226 (11,234) 58 3,050 25 (32) 3,043 (274) 2,769 4.21p 4.14p 6.88p 6.75p Group statement of comprehensive income for the year ended 31 March 2022 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 The notes on pages 94 to 123 form part of these financial statements. Notes 16 2022 £’000 1,695 2021 £’000 2,769 70 (21) 70 (11) 1,744 2,828 88 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Group statement of financial position as at 31 March 2022 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 Lease obligations Non-current liabilites Lease obligations Deferred tax liabilities Total liabilities Net assets Equity Share capital Share premium account Merger reserve Revaluation reserve Treasury shares Retained earnings Notes 14 15 16 11 18 19 20 21 21 11 22 22 24 25 23 Attributable to equity holders of the parent These financial statements were approved by the Board of Directors and authorised for issue on 6 July 2022 and were signed on its behalf by: Bill Bruno Director Company registration number: 01892751 (England and Wales) The notes on pages 94 to 123 form part of these financial statements. 2022 £’000 9,446 808 4,012 232 – 2021 £’000 8,696 872 4,141 14,498 13,709 27,385 13,362 573 – 11,430 39,388 53,886 414 129 14,241 28,146 41,855 (21,344) (10,691) (54) (83) (21,398) (10,774) (146) (457) (603) (22,001) 31,885 809 3,365 6,031 1,310 (670) 21,040 31,885 (194) (1) (195) (10,969) 30,886 808 3,365 5,981 1,240 (542) 20,034 30,886 89 D4t4 Solutions plc Annual Report and Accounts 2022 Group statement of changes in equity for the year ended 31 March 2022 Share capital Share premium Merger reserve Revaluation Treasury shares reserve Retained earnings Total £’000 Notes 808 3,365 5,981 1,170 (340) 18,280 29,264 Balance at 1 April 2020 Dividends paid Purchase of own shares Issue of new shares - exercise of share options Settlement of share-based payments Share-based payment charge Transactions with equity holders Profit for the year Other comprehensive income Total comprehensive income Balance at 1 April 2021 Dividends paid Purchase of own shares 12 23 22 27 12 23 Issue of new shares - exercise of share options 22, 24 Settlement of share-based payments Share-based payment charge 27 Transactions with equity holders Profit for the year Other comprehensive income Total comprehensive income Balance at 31 March 2022 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 70 70 – (1,090) (1,090) (868) – 666 – – – (262) 276 (868) – 404 276 (202) (1,076) (1,278) – – – 2,769 2,769 61 131 2,830 2,900 808 3,365 5,981 1,240 (542) 20,034 30,886 – – 1 – – 1 – – – – – – – – – – – – – – 50 – – 50 – – – – – – – – – – 70 70 – (1,147) (1,147) (377) – 249 – (128) – – – – – (140) 619 (668) (377) 51 109 619 (745) 1,695 1,695 (21) 49 1,674 1,744 809 3,365 6,031 1,310 (670) 21,126 31,885 The notes on pages 94 to 123 form part of these financial statements. 90 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Group statement of cash flow for the year ended 31 March 2022 Operating activities Profit before tax Adjustments for: Depreciation of property, plant and equipment Amortisation of intangible assets Finance income Finance expense Share-based payments Settlement of share-based payments Gain on sale of property, plant and equipment Operating cash flows before movements in working capital Increase in receivables Decrease in inventories Increase in payables Cash (used in)/generated from operations Tax received Net cash (used in)/generated from operating activities Investing activities Interest received Purchase of property, plant and equipment Acquisition of subsidiary, net of cash acquired Capitalisation of development costs Net cash used in investing activities Financing activities Dividends paid Lease repayments Interest paid Purchase of own shares Exercise of share options Net cash used in financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at start of year Cash and cash equivalents at end of year Notes 2022 £’000 2021 £’000 1,763 3,043 391 306 (22) 21 619 – (16) 3,062 (14,023) 129 10,671 (661) 1 (660) 22 (197) (200) – (242) (617) 395 279 (25) 32 276 42 (8) 4,034 (3,225) 1,137 1,312 3,258 80 3,338 25 (34) (195) (204) (1,147) (1,090) (98) (21) (377) 109 (1,534) (2,811) 14,241 11,430 (79) (32) (868) 404 (1,665) 1,469 12,772 14,241 30 30 91 D4t4 Solutions plc Annual Report and Accounts 2022 Company statement of financial position as at 31 March 2022 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 Lease obligations Non-current liabilites Lease obligations Deferred tax liabilities Total liabilities Net assets Equity Share capital Share premium account Merger reserve Revaluation reserve Treasury shares Retained earnings Attributable to equity holders of the parent The Company’s profit for the year was £0.8m (2021: £2.0m). Notes 14 15 16 17 11 18 19 20 21 21 11 22 22 24 25 23 2022 £’000 8,696 808 3,996 1,023 232 – 2021 £’000 8,696 872 4,100 273 14,755 13,941 25,754 322 – 4 11,387 37,463 52,218 13,835 414 14,133 28,386 42,327 (20,335) (11,193) (48) (45) (20,383) (11,238) (145) (457) (602) (20,985) 31,233 809 3,365 6,031 1,310 (670) 20,388 31,233 (191) (34) (225) (11,463) 30,864 808 3,365 5,981 1,240 (542) 20,012 30,864 These financial statements were approved by the Board of Directors and authorised for issue on 6 July 2022 and were signed on its behalf by: Bill Bruno Director Company registration number: 01892751 (England and Wales) 92 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Company statement of changes in equity for the year ended 31 March 2022 Share capital Share premium Merger reserve Revaluation reserve Own shares Retained earnings Total £’000 Notes 808 3,365 5,981 1,170 (340) 19,117 30,101 Balance at 1 April 2020 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 Balance at 1 April 2021 Dividends paid Purchase of own shares 12 23 22 27 11 12 23 Issue of new shares - exercise of share options 22, 24 Settlement of share-based payments Share-based payment charge 27 Transactions with equity holders Profit for the year Other comprehensive income Total comprehensive income Balance at 31 March 2022 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 70 70 – (1,090) (1,090) (868) – 666 – – – – (262) 276 – (868) – 404 276 – (202) (1,076) (1,278) – – – 1,988 1,988 – 70 1,988 2,058 808 3,365 5,981 1,240 (542) 20,012 30,864 – – 1 – – 1 – – – – – – – – – – – – – – 50 – – 50 – – – – – – – – – – 70 70 – (1,147) (1,147) (377) – 249 – (128) – – – – – (140) 619 (668) (377) 51 109 619 (745) 1,065 1,065 (21) 49 1,044 1,114 809 3,365 6,031 1,310 (670) 20,388 31,233 The notes on pages 94 to 123 form part of these financial statements. 93 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements for the year ended 31 March 2022 1. General information D4t4 Solutions plc is a public limited company incorporated and The Directors have reviewed stress tests for future cashflows over the 18 months to 30 September 2023 to ensure there are sufficient domiciled in England and Wales and quoted on the AIM Market. There financial resources, together with income from existing contracts with is no ultimate controlling party. a number of customers, to cover budgeted future cashflows. Details of substantial shareholdings are shown in the Directors’ report On this basis, the Directors have adopted the going concern basis in on page 79. preparing these accounts. The address of its registered office, registered number and 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 2022 were authorised and issued by the Board of Directors on 6 July 2022 and the Consolidated Statement of Financial Position was signed on the Board’s behalf by Bill Bruno. 2. Significant accounting policies Basis of preparation The financial statements have been prepared in accordance with International Accounting Standards adopted by the Companies Act 2006 applicable to companies reporting under International Accounting Standards. The financial statements have been prepared under the historical cost convention, with the exception of land and buildings which is held at valuation. The presentation and functional currency of the financial statements is British Pounds and amounts are rounded to the nearest thousand pounds. Going concern The Group and Company’s business activities, together with the Adoption of new and revised standards The only new accounting standard applied during the year is shown below. There was no material impact to the accounts. • Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform – Phase 2 (issued on 27 August 2020 and effective for years commencing on or after from 1 January 2021) Standards, amendments and interpretations to existing standards that have not been early adopted by the Group: Certain new accounting standards and interpretations have been published that are not mandatory for 31 March 2022 reporting periods and have not been early adopted by the Group. These standards – outlined below – are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. • Amendments to IFRS 3 Business Combinations; IAS 16 Property, Plant and Equipment; IAS 37 Provisions, Contingent Liabilities and Contingent Assets; and Annual Improvements 2018-2020 (all issued on 14 May 2020 and effective for years commencing on or after 1 January 2022) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to the reporting date. factors likely to affect its future development, performance and Investee companies are classified as subsidiaries where the Company position and the risks and uncertainties are presented in the Strategic has control, which is achieved where the Company has the power Report on pages 2 to 49. The Group and Company have considered these risks and uncertainties along with any impact from the global economic situation and any further impact of coronavirus. to govern the financial and operating policies of an investee entity, exposure to variable returns from the investee and the ability to use its power to affect those variable returns. All intra-group transactions, balances, income and expenses are eliminated on consolidation. 94 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022The consolidated financial statements incorporate the results of Acquisitions business combinations using the acquisition method. In the statement On the acquisition of a business, net fair values are attributed to of financial position, the acquiree’s identifiable assets and liabilities the identifiable assets and liabilities acquired. Where the cost of are initially recognised at their fair values at acquisition date. The acquisition exceeds this net fair value, the difference is treated as results of acquired entities are included in the Consolidated Statement purchased goodwill and capitalised in the Group Statement of of Comprehensive Income from the date at which control is obtained Financial Position in the year of acquisition. If a subsidiary’s assets and are deconsolidated from the date control ceases. are subsequently hived up into the parent then the corresponding In accordance with Section 408 of the Companies Act 2006 D4t4 Solutions plc is exempt from the requirement to present its own income statement and related notes that form a part of these approved financial statements. The profit of the parent is disclosed at the foot of the Company Statement of Financial Position and Statement of Changes in Equity for the year. Property, plant and equipment amount of goodwill is capitalised in the Company Statement of Financial Position. Goodwill Capitalised goodwill is shown in the Statement of Financial Position. Its carrying value is subject to annual review and any impairment is recognised immediately as a loss which cannot subsequently be reversed. Goodwill arising on acquisitions made before the date of transition to IFRS has been retained at the previous UK GAAP amount The carrying value of these assets is stated at cost or valuation, less subject to being tested annually for impairment. accumulated depreciation and any impairment loss. Freehold land is not depreciated. The estimated lives of assets are reviewed annually by the Board, the lives and values are adjusted as necessary, and any impairment loss is recognised in the income statement. Freehold land Goodwill has arisen on the acquisition of Speed-Trap Holdings Limited and Prickly Cactus Limited. and buildings were last valued professionally at 31 March 2018 but are Investments in subsidiaries reviewed by the Directors on an annual basis. The carrying values are considered for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. 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 Group makes provision for depreciation so that the cost less estimated residual value of each asset is written off by equal the investment. instalments over its estimated useful economic life as follows: Other intangible assets Intellectual Property Rights (IPR) Buildings - up to 35 years Leasehold improvements - up to 10 years Fixtures and equipment - up to 4 years Motor vehicles - up to 5 years The directors have assessed that no impairment is required in the current period. Revaluation gains/losses are shown in the Statement of Comprehensive Income and recognised in Other comprehensive On the acquisition of a business, the fair value of IPR is estimated and capitalised taking into consideration the software development cycle and the amount of effort involved between updated versions of the software. The fair value is amortised over the expected development cycle which is estimated to be 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. income. Where losses are greater than previously recognised gains, Trade names these are taken to the income statement. On the acquisition of a business, the future value of the trade name of that business is estimated and capitalised. The fair value is amortised over ten years. 95 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 Impairment of intangibles is reviewed annually with reference to Similarly, for translation of foreign operations, transactions are future cash flows from the specific cash generating units to which the recorded at an approximation of the exchange rate ruling in the period intangible asset has been allocated. of consolidation. Inventory Inventories are stated at the lower of cost or net realisable value. The valuation method for each item of inventory remains consistent from one accounting period to the next. Research and development costs To assess whether research and development expenditure has generated an intangible asset the Group classifies the expenditure into two phases, the research phase and the development phase. Monetary assets and liabilities are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in 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 principally include movements in property valuation and are included in Other comprehensive income. Expenditure on the research phase is recognised as an expense when Leases and Lease commitments 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; b. its intention to complete and use or sell the asset; c. its ability to use or sell the asset; d. how the asset will generate future economic benefit; Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease e. the availability of sufficient resources to complete the payments: development and to use or sell the asset; f. the ability to measure reliably the expenditure incurred on the asset during its development. The intangible asset is recognised using the cost model and is carried at its cost less any accumulated amortisation and any accumulated impairment losses. • fixed payments (including in-substance fixed payments), less any lease incentives receivable • variable lease payment that are based on an index or a rate • amounts expected to be payable by the lessee under residual value guarantees The useful economic life of development costs capitalised is deemed to be 8 years and capitalised costs are amortised over 8 years. • the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and Foreign currencies In line with IAS 21, transactions denoted in foreign currencies are recorded at an approximation of the exchange rate ruling on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated using the rate of exchange ruling at the balance sheet date and the gains or losses on translation are included in the profit and loss account. • payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. 96 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Right-of-use assets are measured at cost comprising the following: Treasury shares • the amount of the initial measurement of lease • any lease payments made at or before the • date less any lease incentives received • any initial direct costs, and • restoration costs. Payments associated with short-term leases and leases of low- value assets are recognised on a straight-line basis as an expense in the 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. Pension costs The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. The amount charged against profits income statement. Short-term leases are leases with a lease term of 12 represents the contributions payable to the scheme in respect of the months or less. accounting period. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not Taxation impose any covenants, but leased assets may not be used as security for borrowing purposes. Dividends Final dividend and special dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders. Current tax (UK and foreign) is calculated on the profit for the year (adjusted for appropriate tax reliefs, allowances, non-deductible expenses and timing differences) using the appropriate tax rates and laws that have been enacted or substantively enacted by the balance sheet date. Deferred tax is recognised in respect of all material temporary differences in the treatment of certain items for taxation and accounting purposes which have arisen but have not reversed by the balance sheet date. It is recognised at the expected prevailing rate at the time of reversal, and is recognised as an asset only to the extent Interim and prior period dividends paid are included in the Statement that it is probable that taxable profits will be available to utilise it. It is of Changes in Equity. Share-based payments reviewed annually. Revenue recognition Periodically the Group offers share options to employees. The Revenue is measured at the transaction price received or receivable Group has conformed with the requirements of IFRS 2 “Share Based from the sale of goods and services in the ordinary course of the Payment” for share options issued after 7 November 2002 and Group’s activities. Revenue is shown net of value added tax, rebates unvested at 31 March 2022. Those options are measured at fair value and discounts and after the elimination of intercompany transactions (using the Black-Scholes model and management’s best estimates) within the Group. and are expensed on a straight-line basis over their vesting period. Options with market-based performance conditions, such as Total Shareholder Performance compared to a peer group of companies, are fair valued using a Monte Carlo model and also 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 to settle in cash. The Group recognises revenue as it satisfies its performance obligations by transferring contracted goods and services to its customers. The principle revenue streams are described below: Products – Own IP D4t4 creates, authors, markets and sells software products within the Celebrus family of products (e.g., CDP, FDP, and CDM). The Group’s products are licensed predominantly on a term basis and revenue is recognised on an annual basis for each year of that term, upon delivery of the license(s) to the customer, for the whole year in the month of sale or on each successive anniversary for multi-year contracts. 97 D4t4 Solutions plc Annual Report and Accounts 2022Notes to the financial statements continued for the year ended 31 March 2022 Perpetual licence revenue is recognised in full upon delivery as the are evenly spread over the term of the hosting period. Therefore, a company has no further obligations to the customer once the non- proportion of the fees for hosting are recognised during the set-up phase, refundable licences have been delivered. Any upgrade to the software with the balance being recognised evenly over the term of the period. on a perpetual basis will be supplied as part of an ongoing maintenance contract that the customer may make. This maintenance contract is covered under the ‘Support and maintenance’ section below. Products – 3rd Party Partnerships with third party organisations The Company sells both directly to the customer and via partnerships. The Company acts as principal in the sale to the partner. The partner then uses the products and services purchased from the Company D4t4 also provides services that are focused on delivering data as part of their sale to their customer. The revenue will consist of a management solutions using public and private cloud infrastructure combination of licence, delivery and support and maintenance as which is securely designed to ensure our clients can operationalise defined in the revenue recognition policy above, and recognised as data within their organisation. defined in those sections. D4t4 design and build performant platforms for critical business, analytics, compliance, risk, marketing and artificial intelligence applications. Customer Data Management platform solutions may include both third-party hardware and software (as well as our own IP software described above). The revenue for each component of the product is recognised when Initial and subsequent measurement of financial assets Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and other short-term deposits held by the Group with maturities of less the full performance obligation has been satisfied. Typically, this is than four months. when the hardware is delivered to the customers designated premises, and for the software upon delivery to the customer. Delivery Services 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 For fixed-price delivery services work, revenue is recognised over time transaction costs. 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 the effective interest rate method. by comparing how much of the project has been completed versus total expected time required and also with reference to the completion of specific milestones. This is because costs are incurred in proportion to the Group’s progress as it satisfies its performance obligations. In relation to time-based projects, revenue is recognised based on time spent on a project at an agreed rate on a monthly basis. Support and maintenance Support and maintenance is typically of a recurring nature, over the term of a license, and is made up of hosting, support services and product maintenance. For support services and maintenance, the 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. This reflects the even nature of the Group’s obligations to the customer over the duration of the agreement. In the case of hosting, an amount of effort is required up front to create the environment for hosting. Thereafter, the Group’s obligations 98 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022Financial liabilities and equity The probability of default and expected amounts recoverable are Financial liabilities and equity instruments are classified according to assessed using reasonable and supportable past and forward- looking the substance of the contractual arrangements entered into. An equity information that is available without undue cost or effort. The expected instrument is any contract that evidences a residual interest in the credit loss is a probability-weighted amount determined from a range assets of the company after deducting all of its liabilities. of outcomes and takes into account the time value of money. Initial and subsequent measurement of financial liabilities Trade and other receivables Trade, Group and other payables For trade receivables, expected credit losses are measured by applying Trade, Group and other payables are initially measured at fair value, an expected loss rate to the gross carrying amount. The expected loss net of direct transaction costs and subsequently measured at rate comprises the risk of a default occurring and the expected cash amortised cost. Equity instruments flows on default based on the ageing of the receivable. The Group has adopted a simplified approach to calculating its expected credit loss provision. For intercompany loans that are repayable on demand, Equity instruments issued by the Company are recorded at fair value expected credit losses are based on the assumption that repayment on initial recognition net of transaction costs. of the loan is demanded at the reporting date. If the subsidiary does Derecognition of financial assets (including write-offs) and financial liabilities A financial asset (or part thereof) is derecognised when the contractual rights to cash flows expire or are settled, or when the contractual rights to receive the cash flows of the financial asset and substantially all the risks and rewards of ownership are transferred to another party. When there is no reasonable expectation of recovering a financial asset it is derecognised (‘written off’). The gain or loss on derecognition of financial assets measured at amortised cost is recognised in the income statement. not have sufficient accessible highly liquid assets in order to repay the loan if demanded at the reporting date, the parent Company assesses the expected manner of recovery. Related party transactions These are disclosed in note 29 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 A financial liability (or part thereof) is derecognised when the during the year. However, the nature of estimations means that actual obligation specified in the contract is discharged, cancelled or expires. outcomes could differ from those estimates. These judgements are 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 counterparty will be unable to settle an instrument’s contractual cash flows on the contractual due dates, a reduction in the amounts expected to be recovered, or both. 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. a. Judgements Capitalisation of development costs The Group is required by accounting rules to capitalise certain development costs. However, the Group almost always expenses a significant percentage of research and development in the period it is incurred. 99 D4t4 Solutions plc Annual Report and Accounts 2022Notes to the financial statements continued for the year ended 31 March 2022 Internal activities are continually undertaken to enhance and Directors. This review was based on the valuation per square foot maintain our products in a bid to stay ahead of our competition. of similar office buildings, as well as the valuation based on a rental Whether this expenditure is an internally generated intangible asset income and yield basis for the Group’s property. The result of the requires management to make judgements, especially with respect review was that the valuation as at 31 March 2022 was not materially to whether the asset created will generate future economic benefit. different to the carrying value. This is a key judgement in this respect as the time between development and any income can be considerable and often the income-generating asset may have considerably evolved from the asset originally created. b. 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. 4. Business and geographical segments IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the management team to allocate resources to the segments and assess their performance. Whilst having three product groups, the Group operates the business as a single business with no separation into divisions or allocation or people or assets to a particular division. The management team is responsible for all three product groups with no individual having responsibility for a particular product group. This is consistent with the internal reporting for management purposes. Management does Share-based compensation however monitor revenues by revenue type. Information is presented to the Board on the revenue analysis below: • Product - Own IP • Product - 3rd party • Delivery services • Support and maintenance The revenue analysis set out below is consistent with that provided to the Board of Directors. Management believes that there will not be only one acceptable choice for estimating the fair value of share based payment arrangements. The judgements and estimates that management apply in determination of the share-based compensation are detailed further in note 27. 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. Lease accounting Lease payment accounting rules require lease payments to be discounted using the lessee’s incremental borrowing rate as required by IFRS 16 “Leases”. The Group’s incremental borrowing rate has been based on local commercial or bank loan rates. Therefore, the specific cost of borrowing has been applied to each lease as this reflects the different economic conditions within each geography and is therefore more representative of the funding facilities available in those countries. Valuation of freehold land and building The valuation of freehold land and buildings is reviewed by the Directors on an annual basis. During the year, no professional valuation was undertaken, and so a review was undertaken by the 100 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022Continuing oprations 2022 Products - Own IP Products - 3rd party Delivery services Support and maintenance Revenue Major customers (partners) over 10% of revenue Products - Own IP Products - 3rd party Delivery services Support & maintenance Total revenue Group 2021 £’000 9,005 4,403 2,886 6,498 2022 £’000 6,137 7,001 4,194 7,127 24,459 22,792 2022 £’000 2022 £’000 2021 £’000 2021 £’000 Customer 1 Customer 2 Customer 1 Customer 2 2,086 7,001 2,337 2,538 13,962 1,577 – 17 1,159 2,753 3,682 3,775 769 2,764 10,990 1,154 – – 1,663 2,817 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 2021 £’000 2,983 2,396 16,699 714 22,792 2022 £’000 3,962 2,421 16,859 1,217 24,459 The geographical revenue analysis 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. 101 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 Analysis of revenue 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 2021 £’000 5,964 16,828 22,792 Group 2021 £’000 9,005 4,403 2,886 2022 £’000 5,548 18,911 24,459 2022 £’000 6,137 7,001 4,194 7,127 24,459 6,498 22,792 Group 2022 £’000 24,452 1,657 14,200 2021 £’000 10,165 2,554 6,288 Contract assets predominantly relate to fulfilled obligations in respect of Own IP and 3rd Party Products, Delivery services and Support and 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. Adjustments to profit before tax Group Profit before tax Amortisation of intangible assets Share-based payment Net foreign exchange differences Costs related to acquisition during the year Restructuring costs Adjusted profit before tax 102 2022 £’000 1,763 306 678 93 36 – 390 3,266 2021 £’000 3,043 279 318 746 58 4,444 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 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 and equipment (see note 16) Gain on disposal of property, plant and 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 loss Other expenses Total cost of sales and administration expenses 2022 £’000 2021 £’000 12,036 11,393 306 1,743 2,049 279 913 1,192 391 (16) 375 85 – 85 – – 93 8,117 22,755 395 (8) 387 57 – 57 – – 746 6,025 19,800 7. Staff costs The average number of employees (including directors) during the year was: Number Number Number Number Group Company 2022 2021 2022 2021 Product and support Distribution Administration Their aggregate remuneration comprised: Wages and salaries Social security costs Defined contribution costs Share-based payments: equity settled 99 33 17 149 £’000 9,953 951 455 677 94 30 15 139 £’000 9,632 1,025 418 318 88 27 16 131 £’000 7,678 833 367 677 86 25 15 126 £’000 7,924 924 359 318 12,036 11,393 9,555 9,525 Included in staff costs is £242k (2021: £195k) which were not recognised through the statement of profit and loss, but rather capitalised and form part of development costs. 103 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 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 & Company 2022 £’000 1,315 129 38 537 2021 £’000 1,352 183 39 194 2,019 1,768 Details of Directors remuneration required by the Companies Act are set out in the audited information included in the Directors Remuneration report on pages 74 to 78. Other related party transactions including loans and dividends, involving Directors are disclosed in the Directors’ report on pages 79 to 82. 8. Other operating income Analysis of other operating income Operating lease receipts (see note 28) 9. Finance income and finance costs Analysis of finance income Bank interest received Other Analysis of finance costs Lease interest Other 104 Group 2022 £’000 58 58 2021 £’000 58 58 Group 2022 £’000 2021 £’000 22 – 22 (20) (1) (21) 23 2 25 (24) (8) (32) FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 10. Taxation Current UK tax Foreign tax Less: double taxation relief Over provision in prior year Deferred tax - change in rate - temporary differences - US tax charge / (credit) 2022 £’000 – 67 – (225) (158) 55 138 33 226 2021 £’000 101 109 (3) – 207 22 (196) 241 67 Corporation tax 68 274 The charge for the year can be reconciled to the reported profit as follows: Profit before tax UK corporation tax at 19% (2021:19%) Research and development credit Patent Box Exercise of share options Shore-based payments Difference between writing-down allowances and depreciation Amortisation of intangibles - ineligible Other non-deductible expenses Effect of different rates in other jurisdictions Movement in US tax losses Over provision in prior year Effect of change in tax rates on deferred tax opening balance Foreign tax charge - India Foreign tax charge - USA Double tax relief brought forward - India Current year loss carried forward Tax charge as above 1,763 335 (431) – (32) 131 – 3 183 33 (132) 33 (225) 55 9 58 – 48 - 68 3,043 578 (225) (70) (182) 24 (3) (14) – 38 – 22 60 49 (3) 274 105 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 11. Deferred tax Other timing differences Equity Share based payments reserve Tax losses Intangibles Total £’000 £’000 £’000 £’000 £’000 £’000 Group Balance at 1 April 2020 Recognised within the Statement of Changes in Equity (Charge) / credit to income statement Balance at 1 April 2021 (Charge) / credit to income statement Balance at 31 March 2022 Company Balance at 1 April 2020 Recognised within the Statement of Changes in Equity (Charge) / credit to income statement Balance at 1 April 2021 (Charge) / credit to income statement Balance at 31 March 2022 Comprised of: Deferred tax assets Deferred tax liabilites A deferred tax rate of 25% (2021: 19%) has been used. (55) – 10 (45) (21) (66) (55) – 10 (45) (21) (66) – – – – – – – – – – – – 10 – 166 176 53 229 10 – 166 176 53 229 273 – (240) 33 (33) – – – – – – – (162) – (3) (165) (223) (388) 66 – (67) (1) (224) (225) (162) (207) – (3) (165) (223) (388) – 173 (34) (191) (225) 232 (457) (225) The financial statements include a deferred tax asset of nil (2021: £33k) in respect of trading losses in the Group’s US subsidiary. 12. Dividends Amounts recognised as distributions to equity holders Final dividend for the year ended 31 March 2021 of 2.0p (for the year ended 31 March 2020: 1.9p) per share Interim dividend for the year ended 31 March 2022 of 0.85p (31 March 2021: 0.81p) per share 2022 £’000 805 342 1,147 2021 £’000 765 325 1,090 There is a proposed final dividend for the year ended 31 March 2022 of 2.07p, and a special dividend of 12.50p The proposed final dividend, and special dividend are subject to shareholders’ approval at the AGM and have not been included as a liability in these financial statements. 106 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 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. 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 the 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 Share-based payment Net foreign exchange differences Costs related to acquisition during the year Restructuring costs Tax on the adjustments Adjusted profit attributable to owners of the parent Basic weighted average number of shares, excluding own shares, in issue Dilutive effect of share options Diluted weighted average number of shares, excluding own shares, in issue Basic Earnings per share Diluted Earnings per share Adjusted Basic Earnings per share Adjusted Diluted Earnings per share 2022 £’000 1,695 306 677 93 36 390 (284) 2,913 2022 No. 2021 £’000 2,769 279 318 746 – 58 (260) 3,910 2021 No. 40,240,799 40,235,856 725,221 771,396 40,966,020 41,007,252 2022 pence per share 2021 pence per share 4.21 4.14 7.24 7.11 6.88 6.75 9.72 9.54 107 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 14. Goodwill Cost of goodwill Balance at 1 April 2020 and 31 March 2021 Goodwill acquired on acquisition of subsidiary (see note 26) Cost at 31 March 2022 Accumulated impairment charges Balance at 1 April 2020, 31 March 2021 and 31 March 2022 Carrying amount at year end Allocation of goodwill Speed-Trap Prickly Cactus (see note 26) Balance at 1 April 2020 and 31 March 2021 Balance at 31 March 2022 Group £’000 Company £’000 10,952 750 10,608 – 11,702 10,608 2,256 9,446 1,912 8,696 8,696 749 8,696 9,446 8,696 – 8,696 8,696 Goodwill acquired in a business combination is allocated at acquisition to the cash-generating units (CGUs) that are expected to benefit from that business combination. Goodwill is not amortised but tested annually for impairment with the recoverable amount being determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rate, growth rates, pre-tax cash flow and forecasts of income and costs. The Group assessed whether the carrying value of goodwill was supported by the discounted cash flow forecasts of the Group based on financial forecasts approved by management covering a one-year period, taking into account both past performance and expectations for future market developments. Management estimates the discount rate using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to each separate business unit if applicable. The impairment charge was £nil (2021: £nil). The recoverable amount of the CGU is determined from value in use calculations. Key assumptions used for the value-in-use calculations Value in use was determined by discounting future cash flows generated from the continuing use of the titles and was based on the following most sensitive assumptions: • cash flows for 2022/23 were projected based on the forecast for 2022/23, using the budget as a base and sensitising in light of the current environment; • forecasts based on current customer contracts and gross margins being achieved; • cash flows for year ending 31 March 2023 were projected based on the Group forecast for that year based on the current economic environment in respect of the global pandemic. For years ending 31 March 2024 onwards, cash flows were prepared using underlying growth rates of 2% based on a conservative view; • cash flows were discounted using the CGU’s pre-tax discount rate of 14.7% (2021: 11.6%). 108 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Based on the above sensitivity assumptions the calculations disclosed headroom against the carrying value of goodwill for the CGU. Management carried out several sensitivity scenarios on the data. These were based on best estimates under the current economic environment created by the global pandemic. 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. 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 global pandemic and macroeconomic conditions, 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 and Company Cost Balance at 1 April 2020 Additions Balance at 1 April 2021 Additions Balance at 31 March 2022 Accumulated amortisation Balance at 1 April 2020 Amortisation Balance at 1 April 2021 Amortisation Balance at 31 March 2022 Carrying amount Balance at 1 April 2020 Balance at 31 March 2021 Balance at 31 March 2022 Development costs Iternally generated IPR Purchased IPR £’000 £’000 £’000 188 195 383 242 625 – 33 33 59 92 188 350 533 56 – 56 – 56 56 – 56 – 56 – – – 1,858 – 1,858 – 1,858 1,161 232 1,393 233 1,626 697 465 232 Trade name £’000 142 – 142 – 142 71 14 85 14 99 71 57 43 The amortisation charge for the year is booked to administration expenses. Development Costs are amortised over 8 years. The remaining amortisation period for the Purchased IPR is 1 year (2021: 2 years) and for the Trade name is 3 years (2021: 4 years). Total £’000 2,244 195 2,439 242 2,681 1,288 279 1,567 306 1,873 956 872 808 109 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 16. Property, plant and equipment Group Cost or valuation Balance at 1 April 2020 Additions Disposals Balance at 1 April 2021 Additions Disposals Balance at 31 March 2022 Depreciation Balance at 1 April 2020 Depreciation charge Revaluation Eliminated on disposals Balance at 1 April 2021 Depreciation charge Revaluation Eliminated on disposals Balance at 31 March 2022 Carrying amount Balance at 1 April 2020 Balance at 31 March 2021 Balance at 31 March 2022 Allocation of depreciation charge Cost of sales Adminstration expenses Charge for year Tangible Assets held at valuation Land & buildings Fixtures & equipment £’000 £’000 Motor vehicles £’000 Right of use assets £’000 3,300 – – 3,300 – – 3,300 – 70 (70) – – 70 (70) – – 3,300 3,300 3,300 1,907 34 (1) 1,940 197 (790) 1,347 1,129 241 – – 1,370 229 – (790) 809 778 570 538 111 – (46) 65 – (65) – 90 10 – (46) 54 6 – (60) – 21 11 – – 334 – 334 – – 334 – 74 – – 74 86 – – 160 – 260 174 2022 £’000 37 354 391 Total £’000 5,318 368 (47) 5,639 197 (855) 4,981 1,219 395 (70) (46) 1,498 391 (70) (850) 969 4,099 4,141 4,012 2021 £’000 51 344 395 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: Land & buildings 2022 £’000 1,753 2021 £’000 1,753 Included in land & buildings (valued in 2018) is freehold land at £1,230,000 (2021: £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 30. 110 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Company Cost or valuation Balance at 1 April 2020 Additions Disposals Balance at 1 April 2021 Additions Disposals Balance at 31 March 2022 Depreciation Balance at 1 April 2020 Depreciation charge Revaluation Eliminated on disposals Balance at 1 April 2021 Depreciation charge Revaluation Eliminated on disposals Balance at 31 March 2022 Carrying amount Balance at 1 April 2020 Balance at 31 March 2021 Balance at 31 March 2022 Land & buildings Fixtures & equipment £’000 £’000 Motor vehicles £’000 Right of use assets £’000 3,300 – – 3,300 – – 3,300 – 70 (70) – – 70 (70) – – 3,300 3,300 3,300 1,907 33 – 1,940 186 (790) 1,336 1,129 241 – – 1,370 228 – (790) 808 778 570 528 111 – (46) 65 – (65) – 90 10 – (46) 54 6 – (60) – 21 11 – – 264 – 264 – – 264 – 45 – – 45 51 – – 96 – 219 168 Total £’000 5,318 297 (46) 5,569 186 (855) 4,900 1,219 365 (70) (46) 1,469 355 (70) (850) 904 4,099 4,100 3,996 111 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 17. Investment in subsidiaries Cost of investment Balance at 1 April 2021 and 1 April 2020 Additions in year (see Note 26) Balance at 31 March 2022 and 31 March 2021 Accumulated provision for impairment Balance at 1 April 2021 and 1 April 2020 Carrying amount at year end IS Solutions Limited (formerly Celebrus Limited)† Celebrus Technologies Limited*† Chapter26 Limited† D4t4 Solutions Inc§ D4t4 Solutions Pty Limited‡ Internet Service Solutions Limited† Internet Systems Solutions Limited† Internet Site Solutions Limited† Magiq Limited*† Prickly Cactus Limited Speed-Trap Holdings Limited† Company 2022 £’000 273 750 – 1,023 – 1,023 2021 £’000 273 273 – 273 Nature of business Proportion of ownership of ordinary shares Country of Incorporation England & Wales England & Wales England & Wales Dormant Dormant Dormant USA Software & services Australia Software & services England & Wales England & Wales England & Wales England & Wales England & Wales England & Wales Dormant Dormant Dormant Dormant Dormant Dormant 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% * Owned by Speed-Trap Holdings Limited † Registered address - Windmill House, 91-93 Windmill Road, Sunbury-on-Thames, TW16 7EF, UK § Registered address - 215 E Chatham Street, Suite 215, Cary, North Carolina 27511, USA ‡ Incorporated 12 January 2021. Registered address - Level 19, 207 Kent Street, Sydney, NSW 2000, Australia All UK subsidiaries individually prepare and file their own financial statements. The principal place of business is considered to be the registered address. 112 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 18. Trade and other receivables Trade receivables Amounts due from Group undertakings Other debtors Prepayments Accrued income Trade receivables Ageing of receivables; Less than 30 days 31 to 60 days 61 to 90 days 91 to 120 days Group Company 2022 £’000 24,992 – 66 670 1,657 27,385 2,699 52 14 22,227 24,992 2021 £’000 10,165 – 48 595 2,554 13,362 7,070 126 2,099 870 10,165 2022 £’000 23,782 – 63 666 1,243 25,754 1,500 28 2 22,252 23,782 2021 £’000 9,553 1,096 40 592 2,554 13,835 6,458 126 2,099 870 9,553 The average credit period taken on sales of goods and services was 111 days (2021: 80 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% 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. 113 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 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, no trade receivables were considered impaired (2021: none) and there was a charge of £nil to the Income Statement as shown in Note 6 (2021: £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 30. 19. Inventories Finished goods and goods for resale There was no write-down in the recognised value of inventories (2021:nil). Group Company 2022 £’000 – 2021 £’000 129 2022 £’000 – 2021 £’000 4 20. Trade and other payables Trade payables Amounts owed to Group undertakings Other taxes and social security Other creditors Contingent consideration Accruals Deferred income Group Company 2022 £’000 840 – 396 1,239 500 4,169 14,200 21,344 2021 £’000 1,450 – 274 36 – 2,643 6,288 10,691 2022 £’000 403 3,163 356 1,236 – – 1,565 13,612 20,335 2021 £’000 588 1932 242 36 2,216 6,179 11,193 There is no material difference between the fair value of payables and their carrying value. Trade payables comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 25 days (2021: 40 days). Their carrying value approximates to their fair value. Contingent consideration relates to the acquisition of Prickly Cactus Limited as described in note 26. 114 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 21. Lease Liabilities Lease obligations Opening Balance Additions during the period Interest expense Repaid during the year Closing Balance Repayable within one year Repayable within more than one year Group Company 2022 £’000 200 200 2021 £’000 277 277 2022 £’000 193 193 2021 £’000 236 236 Group Company 2022 £’000 2021 £’000 2022 £’000 2021 £’000 277 – 21 (98) 200 54 146 – 333 23 (79) 277 83 194 236 – 20 (63) 193 48 145 – 264 22 (50) 236 45 191 At 31 March 2022 there were no undrawn facilities (2021: nil). The Group applied IFRS 16 Leases for the first time for the year commencing 1 April 2020. 22. Share capital Ordinary shares of 2p each Authorised Issued and fully paid up Balance at 1 April 2021 Issued during year Balance at 31 March 2022 Share capital £’000 2022 Share premium £’000 Shares Share capital £’000 2021 Share premium £’000 Shares 50,000,000 1,000 50,000,000 1,000 40,417,556 13,897 40,431,453 808 1 809 3,365 40,417,556 – – 3,365 40,417,556 808 – 808 3,365 – 3,365 The Company issued 13,897 (2021: nil) Ordinary shares during the year which constituted part of the consideration to be paid for the acquisition of Prickly Cactus Limited. These were issued in one tranche at a price of 359.8p. This increased the share premium account by nil (2021: nil). Costs associated with the issue of new shares were nil (2021: less than £1k) and are recognised in professional fees. 115 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 23. Own shares At the year end the Company held 224,932 (2021: 191,498) ordinary shares in Treasury, with fair value of £590,447 (2021: £579,281). Details of purchases and sales are shown below. Balance of own shares at 1 April 2020 Shares acquired into Treasury reserve Shares sold out of Treasury reserve Balance of own shares at 31 March 2021 Total consideration paid in ye 31 March 2021 Shares acquired into Treasury reserve Shares sold out of Treasury reserve Balance of own shares at 31 March 2022 Total consideration paid in ye 31 March 2022 Number of own shares Share price at point of transaction in pence 159,133 335,032 (302,667) 191,498 120,934 (87,500) 224,932 219.27 - 285.00 230.00 - 285.00 260.00 - 340.00 295.00 - 340.00 £’000 868 (666) 868 377 (249) 377 In the Statement of Changes in Equity (page 90) 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. 24. Merger reserve The merger reserve originally 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 in the year of £50k are a result of the issue of shares as part consideration for the acquisition of Prickly Cactus Limited. 25. 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. During the year, a valuation review was undertaken by the directors, as described on page 123. The gain on revaluation was £70k (2021: £70k). This is a non-distributable reserve as it represents unrealised profits on the revalued assets. 26. Acquisition of Prickly Cactus Limited On 2 August 2021, the Group acquired Prickly Cactus Limited (“Prickly Cactus”). Prickly Cactus provides digital transformation consulting to companies across the globe and has had a strategic relationship with D4t4 for some time. The Prickly Cactus team are experienced in product management and customer relationships, and have previously worked with several of D4t4’s partners and customers. Within D4t4, they are focused on driving customer success in the key markets of Financial Services, Telecoms and Insurance and building a stable of new Celebrus customers via partners and direct relationships. The acquisition was part of D4t4’s investment in specialist resources to capitalise on the market opportunity for both its Celebrus Customer Data Platform (CDP) and Fraud Data Platform (FDP). The addition of the Prickly Cactus team was to have a positive impact on the Group’s performance in the coming periods. 116 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 The total consideration comprised an initial consideration of £0.25 million which was satisfied by £0.2 million in cash (funded from current cash reserves) and by the allotment of 13,897 new ordinary shares of 2p each in D4t4 and an earn-out of up to approximately £0.5 million over the period to 31 December 2023 tied to both existing customer growth and the acquisition of new customers for the CDP and FDP. The earn-out will also be satisfied by a mixture of cash and shares at the Company’s election. Details of the fair value of identifiable assets and liabilities acquired, and the purchase consideration are as follows: Balance sheet on acquisition £’000 Fair value adjustment £’000 Fair value of assets and liabilities acquired £’000 Trade receivables and other assets Net assets acquired Amount settled and to be settled in cash and shares to the sellers 1 1 (1) (1) Total consideration Goodwill – – 750 750 Prickly Cactus contributed £nil to Group revenues and £275,000 to Group loss between the date of acquisition and 31 March 2022. 27. Share-based payments The Company has share option schemes for various 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 forecast that the remaining share options will vest. Options are granted at the closing price on the previous day and typically have a vesting period of three years. If the options are not exercised within ten years of the grant date, or if employees leave before their options vest then those options are forfeited. Vested options are settled subsequently by a combination of equity shares in the parent company and cash at Board discretion. Balance at 1 April Granted during the year Forfeited during the year Exercised during the year Balance at 31 March Number of Weighted average Number of Weighted average share options exercise price share options exercise price 2022 2021 1,026,342 191,113 (267,736) (87,500) 862,219 57.65p 2.00p – 124.12p 23.52p 733,833 595,176 – (302,667) 1,026,342 134.01p 2.00p – 133.34p 57.65p Exercisable at year end 152,000 112.92p 119,750 120.02p The weighted average share price at the exercise date of the exercised options was £3.364 (2021: £2.660). The weighted average contractual life of the outstanding options was 8 years (2021: 9 years), exercisable in the range 2.00p to 205.00p. 87,500 share options were exercised in the year, by way of issue of shares from Treasury. 117 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 A summary of the option price ranges is as follows: Exercisable price range Number of share options 2022 2.00p 90.50p - 114.00p 205.00p 701,886 152,000 8,333 862,219 The Group recognised £6777k (2021: £318k) of expense related to equity-settled share-based payments in the year. This comprised £619k (2021: £276k) as share-based payments and £58k (2021: £42k) as Ers NI. The fair value of options granted during the year is determined by applying the Monte Carlo 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 models in respect of options granted this year are as follows: Date of Grant 28-Oct-21 28-Oct-21 Model Type Monte Carlo Black Scholes Vesting Date 28-Oct-24 28-Oct-24 Number of options granted Share price at date of grant Exercise price Option life in years Risk-free rate 118,159 72,954 383.50p 383.50p 2.00p 10 0.61% 2.00p 10 0.61% 44.40% Expected volatility 44.40% Expected dividend yield 0.00% 0.00% Fair value of options 650.00p 382.00p The inputs into the models of options previously granted which have contributed to the share based payment arising this year are: Date of Grant 13-Aug-18 14-Jan-20 14-Jan-20 10-Aug-20 08-Jan-21 08-Jan-21 08-Jan-21 25-Jan-21 Model Type Black Scholes Black Scholes Black Scholes Monte Carlo Monte Carlo Monte Carlo Monte Carlo Black Scholes Vesting Date 01-Jul-21 14-Jan-22 14-Jan-23 09-Aug-23 15-Jul-22 15-Jul-23 15-Jul-24 10-Aug-23 166,666 8,333 8,333 362,976 59,400 59,400 59,400 54,000 205.00p 205.00p 10 3.25% 38.50% 1.17% 46.33p 205.00p 205.00p 10 3.25% 38.50% 1.17% 56.36p 302.5p 2.00p 10 0.01% 47.50% 302.5p 2.00p 10 0.01% 46.50% 302.5p 2.00p 10 0.01% 43.90% 302.5p 2.00p 10 0.01% 47.30% 0.00% 1.00% 1.00% 1.00% 392.00p 150.00p 151.00p 152.00p 302.5p 2.00p 10 0.01% 44.60% 0.00% 283.00p Number of options granted Share price at date of grant Exercise price Option life in years Risk-free rate 149.00p 149.00p 3 3.18% Expected volatility 40.90% Expected dividend yield 2.11% Fair value of options 40.37p 118 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Expected volatility was determined by calculating the historical volatility of the Group’s share price for the 5 year period prior to the date of grant of the share option. The expected life used in the model is based on management’s best estimate. The Group did not enter into any share-based payment transactions with parties other than employees during the current or previous period. 28. Operating lease arrangements (Group and Company) As lessor Lease receipts recognised as an income during the year Lease receipts are for fixed-term sub-lets of parts of the parent company’s premises bearing no contractual right of renewal or extension. 2022 £’000 58 2021 £’000 58 29. Related party transactions During the year the 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) Interest charged on Intercompany loan (from D4t4 Solutions plc to D4t4 Solutions Inc.) Payments made by D4t4 Solutions plc on behalf of D4t4 Solutions Inc. 2022 £’000 116 6,129 47 1,936 42 5,545 During the year the Company undertook the following transactions with D4t4 Solutions Pty Ltd, a wholly owned Australian subsidiary: Management charge to cover services provided (from D4t4 Solutions Pty Ltd. to D4t4 Solutions plc) Interest charged on Intercompany loan (from D4t4 Solutions plc to D4t4 Solutions Pty Ltd.) Payments made by D4t4 Solutions plc on behalf of D4t4 Solutions Pty Ltd. Details of any intercompany balances outstanding are shown in Notes 18 and 20. 2022 £’000 164 2 152 2021 £’000 1 3,837 30 2,481 67 5,517 2021 £’000 – – – The Group incurred costs with CV & Background Check Limited, a business controlled by the wife of Peter Kear, a director of the Company during the year and previous year. During that time, the Group made purchases of services totalling £9,000 (FY21: £6,000). At 31 March 2022, CV & Background Check Limited was no longer a related party. The Group has assessed that the terms of these transactions took place at arm’s length. At the end of the year, the Company entered into an arm’s length transaction with J Dodkins, who had served as a director in the year, relating to the disposal of a vehicle. The Company had the asset valued at £13k and it was sold to J Dodkins for £13k. The Company had fully depreciated the asset to £nil on the date of the transaction. The balance outstanding on this transaction at the year end is £13k and is included within Other Debtors. Other than the payment of remuneration, there have been no related party transactions with the Directors. 119 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 30. 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 its operations are adequately provided for, while maximising the return to shareholders through effective management of its resources. The principal financial risks faced by the Group are liquidity risk, interest rate risk and foreign exchange rate risk. The Directors review and agree policies for managing each of these risks. These policies remain unchanged from previous years. The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern and to 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 (2021: 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 120 Group Company 2022 £’000 11,430 11,430 2021 £’000 14,241 13,964 2022 £’000 11,387 11,387 2021 £’000 14,133 13,897 Group Company 2022 £’000 11,430 26,715 2021 £’000 14,241 12,767 2022 £’000 11,387 25,088 2021 £’000 14,133 13,243 6,663 4,084 6,283 4,772 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 Foreign currency risk management The Group’s foreign currency exposure arises from: • Transactions (sales/purchases) denominated in foreign currencies; and • Monetary items (mainly cash and receivables) denominated in foreign currencies The exposure to transactional foreign exchange risk is monitored and managed at a Group level. Natural hedging is employed, to the extent possible, to minimise net exposures; however, where significant exposures arise it is Group policy to enter into formal hedging arrangements. Carrying amounts of the Group’s financial assets and liabilities denominated in foreign currencies was as follows: Categories of financial instruments US Dollars - cash - receivables - payables Euros - cash - receivables - payables Australian Dollars - cash - receivables - payables Liabilities Assets 2022 £’000 – – 437 – – 29 – – 2 2021 £’000 – – 1,511 – – 35 – – – 2022 £’000 1,115 24,224 – 86 36 – – – – – – – 2021 £’000 530 8,903 – 178 36 – The value of foreign currency hedge instruments outstanding at the year end was US$21,500,000 (2021: US$6,000,000). The following table shows the effect on the Group’s result for the year, of £ strengthening by 5% against debtor, creditor and cash balances denominated in foreign currencies, with all other variables held constant. 5% represents management’s assessment of the reasonably possible change in exchange rates. As at 31 March 2022 Impact on profit / equity for the year As at 31 March 2021 Impact on profit / equity for the year USD $ £’000 (1,226) (377) € £’000 AUD $ £’000 (4) (9) – – Total £’000 (1,230) (386) 121 D4t4 Solutions plc Annual Report and Accounts 2022 Notes to the financial statements continued for the year ended 31 March 2022 The following table shows the effect on the Group’s result for the year, of £ weakening by 5% against debtor, creditor and cash balances denominated in foreign currencies, with all other variables held constant. 5% represents management’s assessment of the reasonably possible change in exchange rates. As at 31 March 2022 Impact on profit / equity for the year Aa at 31 March 2021 Impact on profit / equity for the year USD $ £’000 1,226 417 € £’000 AUD $ £’000 5 9 – – Total £’000 1,271 426 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 partners owed a total of £22.334m (2021: two partners owed £9.020m) and no expected credit loss provision has been made in relation to this balance (2021: nil). 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 2022 (2021: 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. Maturity analysis of financial liabilities: In less than one year: Trade payables Amounts owed to Group undertakings Other creditors Accruals 122 Group Company 2022 £’000 840 – 1,239 4,584 6,663 2021 £’000 1,450 – 36 2,598 4,084 2022 £’000 403 3,163 1,236 1,481 6,283 2021 £’000 2,055 465 36 2,171 4,772 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022 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 there were no borrowings 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 2022. 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 the global economic situation whether they have 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 three 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 two tests. Firstly, a market approach based on three properties of broadly similar size available for purchase in the same area, and secondly a yield-based valuation based on the current rental value of one quarter of the property which is currently available for let, divided by the average yield for office buildings in the area. Both tests indicated that the current carrying value of the property was still appropriate as at 31 March 2022. The Directors are satisfied that the assumptions applied in the professional valuation at 31 March 2018 are still valid at 31 March 2022, and as such have revalued the land and buildings in line with the 2018 valuation. 123 D4t4 Solutions plc Annual Report and Accounts 2022 Shareholder information REGISTRAR SLC Registrars Limited Highdown House Yeoman Way Worthing West Sussex, BN99 3HH NOMINATED ADVISOR AND JOINT BROKER finnCap 1 Bartholomew Close London, EC1A 7BL JOINT BROKER Canaccord Genuity Limited 88 Wood Street London, EC2V 7QR BANK HSBC Bank plc 54 Clarence Street Kingston Upon Thames Surrey, KT1 1NS SOLICITOR Shakespeare Martineau LLP 1 Colmore Square Birmingham, B4 6AA AUDITOR Haysmacintyre LLP 10 Queen Street Place London, EC4R 1AG OFFICES UK HQ and Registered office D4t4 Solutions plc Windmill House 91-93 Windmill Road Sunbury-on-Thames, TW16 7EF US office D4t4 Solutions Inc. 215 E Chatham Street Suite 115 Cary North Carolina 27511, USA India office D4t4 Solutions plc First Floor, RR Tower IV T.V.K. Industrial Estate Guindy, Chennai – 600 032 Tamil Nadu, India COMPANY REGISTERED NUMBER 01892751 124 FINANCIAL STATEMENTSD4t4 Solutions plc Annual Report and Accounts 2022

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