ECSC GROUP PLC
ANNUAL REPORT 2016
A PROVEN PROVIDER OF
CYBER SECURITY
SERVICES
ECSC has over 15 years’ experience in the design, implementation and
management of cyber security solutions. Our consultancy-led approach,
and our combination of custom methodologies and in-house proprietary
technologies, enables us to provide individually tailored services to our
clients. We have significant intellectual property, including bespoke
products delivering remotely managed cyber security services and
custom-made internal support and delivery systems.
FINANCIAL HIGHLIGHTS
Revenue for the 15 months
ended December 2016
£4.51m
Adjusted EBITDA*
for the 15 months
ended December 2016
£630k
Adjusted profit before
tax** for the 15 months
ended December 2016
£458k
EBITDA for the 15 months
ended December 2016
£(345)k
(12 months 2015: £2.65m)
(12 months 2015: £542k#)
(12 months 2015: £455k#)
(12 months 2015: £542k profit#)
Loss before tax for
the 15 months
ended December 2016
£(517)k
Adjusted basic earnings
per share***
11.14
pence
Basic earnings per share loss of
IPO in December 2016 raised
new funds for the Company
(7.72)
pence
£5m
(12 months 2015: £518k profit)
(2015: profit of 9.00 pence)
(2015: profit of 9.00 pence)
(before IPO expenses)
ECSC Group plcAnnual Report and Accounts 201601IFC Financial Highlights01 Operational Highlights02 Business OverviewSTRATEGIC REPORT05 Chairman’s Statement06 Chief Executive Officer’s Statement08 Financial Review09 Principal Risks and UncertaintiesDIRECTORS’ REPORT14 Board of Directors16 Directors’ Report19 Directors’ Remuneration Report20 Directors’ Responsibility StatementFINANCIAL STATEMENTS21 Independent Auditor’s Report22 Statement of Comprehensive Income23 Statement of Financial Position24 Statement of Changes in Equity25 Cash Flow Statement26 Notes to the Financial Statements46 Corporate InformationIBC Notice of AGM* stated before charging IPO costs of £975k (see page 08)** adjusted profit before tax (see note 25)*** adjusted earnings per share (see note 9)****like for like revenue growth has been calculated by taking 2016 revenue pro-rated for 12 months as opposed to 15 months# 2015 excludes £63k R&D tax credit adjustmentOPERATIONAL HIGHLIGHTSStrong organic revenue growth across all operating divisionsScaling of business post-IPO proceeding well All targeted new staff in place and operationalLIKE FOR LIKE REVENUE GROWTH***CONSULTANCYMANAGEDSERVICESNEW VENDOR SALES DIVISION CREATEDHEADCOUNT INCREASED FROM 57 AT IPO (14 DECEMBER 2016)...... TO 98 (AT 20 MARCH 2017)NEW LEEDS FACILITY OPERATIONALAUSTRALIAN AND LONDON FACILITIES ON COURSE TO OPEN SUMMER 201735%24% ECSC Group plcAnnual Report and Accounts 201602BUSINESS OVERVIEWMANAGED SERVICESOur Managed Services division delivers outsourced cyber security management and threat intelligence from the PCI DSS certified Security Operations Centre (SOC). ECSC managed security solutions break down into two main areas:Protection – the effective blocking of cyber security attacks. This may start with a correctly configured firewall device, and move through to custom configured intrusion prevention devices protecting e-commerce systems.Detection – the discovery and alerting of cyber security breaches. This usually involves the management of data collection and analysis devices, such as network intrusion detection systems, and the collection of IT system logs and alerts.Each of the above can be achieved with a wide range of ECSC developed technology and selected vendor solutions.Our Divisions CONSULTANCYThe Consultancy division provides a wide range of consultancy and testing services. The primary function of this division is to help clients assess and develop their own internal cyber security capability and to meet the requirements of UK and international standards, such as the Payment Card Industry Data Security Standard (PCI DSS), ISO 27001 (Information Security Management), and Cyber Essentials.This division also houses our cyber security penetration testing team, helping clients to uncover technical weaknesses in their network, applications and coding systems. In addition, our consultants deliver assessments against the ECSC Cyber Security Review methodology, giving board-level managers clear risk-based information regarding their current protection levels and ability detect cyber security breaches. ECSC Group plcAnnual Report and Accounts 201603ECSC has developed a cyber security service model using a consultancy-led approach, which is summarised by our philosophy of ‘listen, understand, and deliver’. VENDOR PRODUCTSThe Vendor Products division supports client procurement of cyber security vendor products and services, either for client management or client outsourced to the ECSC SOC. In order to help our clients obtain the best cyber security vendor, and open source, solutions, the Vendor Products division is dedicated to product selection, and solution design and implementation. Our Vendor Products portfolio consists of carefully chosen vendor solutions that meet our exacting standards. Selection of products is based upon rigorous criteria, including:1. Feedback from ECSC consultants regarding the real success of solutions within our clients.2. An established track record, including vulnerability management by the vendor.3. Results from ECSC penetration testing engagements.RESEARCH AND DEVELOPMENTThe ECSC Research and Development division is our technical centre of excellence (COE), focused on the development and evaluation of cyber security technologies. Our Research and Development work can be categorised under three main areas:Threat Intelligence – Working with our SOC, the research and development team is constantly monitoring the global risk environment, analysing the latest vulnerabilities, and understanding each attack vector.Architecting Solutions – Designing protection solutions involves a combination of open source components, bespoke ECSC solution development, and the careful selection of suitable vendor products.Security Maintenance – Each component of our managed service security architecture is constantly monitored and updated to protect our clients from the latest threats.Revenue and segment information pages 30 - 31 BUSINESS OVERVIEW CONTINUED
Our History
2000
2001
2002
2003
2006
2007
2009
2010
2012
2014
2016
ECSC is founded by Ian Mann and Lucy Sharp
Creation of the ECSC Secure Platform to enable us to develop
key innovations in IT security
ECSC starts its Managed Services offering
ECSC wins ‘Best New Technology’ Award at the Yorkshire
Internet Awards
Certification of our whole operation to BS 7799
Achieved certification to ISO 27001 within a month of its release
Certification to ISO 9001, covering our consulting and security
management systems
Payment Card Industry (PCI) Qualified Security Assessor
(QSA) accreditation
Certification to ISO 20000, covering our managed security services
PCI DSS Level-1 Certified Managed Security Service Provider
CREST*
Member Company
ECSC releases the first method of blocking the Heartbleed Bug
to the security community, enabling protection to organisations
who have not yet carried out patching
ECSC Vendor Products division launched
Cardiff Office opened
ECSC Group plc is admitted to the London Stock Exchange’s AIM market
2017
ECSC wins a PCI Award for Excellence
Leeds Office opened
* CREST is a not-for-profit organisation that serves the needs of a technical information security marketplace
that requires the services of a regulated professional services industry.
04
ECSC Group plc
Annual Report and Accounts 2016
ECSC Group plcAnnual Report and Accounts 201605Financial statementsStrategic reportDirectors’ reportCHAIRMAN’S STATEMENTI am pleased to report that the Company is making first class progress in scaling its business.I am pleased to present this maiden set of results to our shareholders following the Company’s admission to AIM in December 2016. 2016 was a transformational year for ECSC, which saw the Company deliver record revenues and be admitted to AIM on 14 December 2016, raising £5.0m (excluding IPO expenses). The response to our admission has been very positive. The listing has provided us with an excellent register of new shareholders and a heightened industry profile which has helped facilitate the recruitment of a first-class group of new employees. I believe this demonstrates confidence in both the Company’s strategic plan, centred on strong organic growth and expansion of its business, together with the management team’s ability to deliver and generate returns for shareholders in what we see as an attractive and buoyant cyber security market. The Board joins me in welcoming all our new stakeholders to the Company. We believe there is an opportunity to substantially increase the scale of ECSC’s business to meet current demand and predicted market growth within the UK cyber security sector. The UK cyber security sector was worth approximately £3.3 billion in 2016, with the global opportunity predicted to grow to US$202 billion by 2021. Our vision and strategy is to build significantly upon our organic growth to date and blue-chip client base. Our listing provides us with working capital to execute our growth strategy. In this regard, I am pleased to report that the Company is making first-class progress in scaling its business. Since admission to AIM: headcount has increased from 57 to 98; all of the new sales and delivery employees targeted for this stage of our growth plan have been employed; all new sales staff have successfully completed their training and assessments; our new Leeds facility is already operational, having opened in January 2017; our new Australian support centre to help 24-hour service provision and our new London base are both targeted to open in the summer of 2017. The Board continues to believe that the market opportunity is robust, with the proliferation of cyber security breaches enhancing the importance of cyber security at board level and serving to increase our growth prospects. Furthermore, new legislation under consideration by the Information Commissioner’s Office will, we believe, bring cyber security prevention into even sharper focus. The European General Data Protection Regulations (“GDPR”) directive (expanded upon in the Business Review) intended to harmonise data protection regulations throughout the EU and to strengthen the enforcement regime is confirmed to become law in the UK in 2018. This legislation will make breach reporting mandatory and provide for fines of up to 4% of global turnover or up to $20m (whichever is the greater) for cases of serious non-compliance.With our expansion plans underway and with strong organic revenue growth, we believe that we are well positioned to increase our market share of the UK cyber security services market, a market which is presently somewhat fragmented. We believe that many of our peers only provide a small portion of what is required to meet clients’ needs and that, in contrast, ECSC provides a wide range of cyber and information security solutions, enabling us to capitalise on a buoyant market opportunity. Our first full year as a public company will see us tackle the many tasks involved in scaling up the business and delivering very significant revenue growth. The quality of our people and established momentum are good initial indicators that ECSC is well equipped to take advantage of the opportunities available to us in our chosen market.On behalf of the Board, I would like to thank all our employees and shareholders for their continued support over the last year. The Board looks forward to the forthcoming year with confidence.Nigel PayneChairman21 March 2017Nigel PayneChairmanDirectors’ Report pages 16 - 17 ECSC Group plcAnnual Report and Accounts 201606Building on its 16-year record of consistent organic growth and leveraging its reputation for quality and innovation, ECSC Group plc is transforming into a substantial cyber and information security service provider. Our strong organic revenue growth for the 15 months ended December 2016 is a further stepping stone on this journey. Our IPO facilitates the next step in our growth plan, enabling an accelerated recruitment and training plan to be put in place and a further and significant expansion of our infrastructure and facilities.The key mission of ECSC is to help secure networks and protect sensitive information. We do this through consultancy services and outsourced managed IT security services. In this regard, people are key to the ongoing success of the Company, particularly in our market sector, which is highly specialised. Over the past two years, ECSC has developed its own internal recruitment function, which continues to perform above our expectations. We are delighted with the volume and calibre of talented individuals, sourced by this department, who are looking to enhance their career through the training and support given to all ECSC employees. The Company’s aim is to establish ECSC as the employer of choice for all cyber and information security professionals.Strong Market for ECSC ServicesExtensive media coverage of cyber security incidents, both organisational and governmental, continues to raise awareness of the need for a developed cyber security plan at board level. This brings new opportunities for established and proven providers, such as ECSC. These opportunities are likely to be further augmented by the forthcoming EU GDPR, confirmed by the Information Commissioner’s Office (“ICO”) to become UK law in May 2018. GDPR significantly increases the legal backdrop concerning the security of personal data that businesses may process or store:• The maximum fine for non-compliance with GDPR increases from the current £500,000, up to 4% of global turnover. This change is likely to elevate cyber security to a key strategic risk for all boards.• Reporting a breach will become mandatory under GDPR as compared with the current voluntary reporting. GDPR also requires reporting to be made within 72 hours of any incident, placing significant challenges on organisations’ incident detection, analysis and reporting systems.Whilst the ICO accepts that a post-Brexit government could change this legislation, the Directors believe the continuing requirement to share personal data with the European Union as part of the United Kingdom’s ongoing trading relationship would make any significant change to GDPR very unlikely. ECSC is ideally placed to support organisations of all sizes in both their preparations for GDPR and their ongoing cyber security strategic requirements, whether through incident response, testing and assessment, standards compliance, or outsourced services.The Board believes that, as the cyber security market continues to expand, the need for businesses to focus their own internal IT resources on their own products and services will mean that organisations are likely to continue to outsource their technical requirements in this highly specialised field, and will increasingly gravitate towards outsourced managed service environments.Summary• Aim to establish ECSC as the employer of choice for cyber and information security professionals• Extensive media coverage of cyber security incidents continues to raise awareness of cyber security at board level• Incident Response Retainers introduced• Newly refurbished UK Security Operations Centre formally opened in March 2017Ian MannChief Executive OfficerCHIEF EXECUTIVE OFFICER’S STATEMENT Strategic report
Directors’ report
Financial statements
I would like to pass on my thanks to the capable and loyal
staff of the Company for their support, which has enabled
the Company to achieve the success it has to date.
Growing Range of ECSC Services
ECSC’s range of services continues to evolve to meet the changing cyber
and information security threat environment. Our experience derived
from 16 years of growth in the sector has demonstrated the need for ECSC
to provide a broad range of cyber security services, enabling clients to
migrate over time from initial consulting services to a fully outsourced
managed IT security environment with recurring revenues.
Incident Response services are growing in importance and the Board
believes that this may increase further still as we approach the GDPR
implementation date. In 2016, ECSC introduced incident response
retainers, enabling clients to benefit from a 24/7/365 guaranteed response
from the ECSC Security Operations Centre (SOC), by retaining ECSC as
their designated incident responder. In many cases, incident responses
lead to requests for additional services.
Cyber Security Reviews are designed, using ECSC’s own methodology,
to give board directors a high-level overview of their current protection
and detection capability from external cyber attack. This service is
expanding as board members look for expert third-party assurance
beyond the traditional technical testing services.
Technical Penetration Testing remains a fundamental pillar of cyber
security management, with most global standards requiring at least
annual third-party testing. Backed by its CREST accreditation, ECSC is
a proven provider of this service.
The global standards of ISO 27001 (information security management)
and the Payment Card Industry Data Security Standard (PCI DSS) (payment
card security) remain key organisational compliance requirements. ECSC
has an expanding team of industry experts with many years of experience
in the design and implementation of effective approaches to compliance.
Key elements of these global standards are directly related to other ECSC
services, such as testing and the provision of technologies delivered
through our managed services. We continue to see extensive cross-selling
opportunities in each of these engagements.
Cyber Essentials is a UK government-led initiative to promote basic cyber
security good practice
into small to medium sized organisations.
As a certifying organisation, ECSC supports organisations across all sectors.
2016 saw ECSC launch a new division to resell a range of vendor security
solutions. Included within this portfolio are a range of solutions already
integrated into the ECSC managed services support service, giving
enhanced opportunities to provide fully managed services.
The newly refurbished ECSC UK Security Operations Centre (“SOC”) was
formally opened in March 2017; this enhanced infrastructure provides
both new client-facing presentation facilities, together with significantly
augmented technical capabilities. The planned opening of the Australian
SOC extension in summer 2017 will further enhance our 24/7/365
capabilities, both for ongoing managed services and incident response.
Outlook
Following on from a strong 2016, our ongoing plan is to significantly scale
the business in 2017. The Board assesses the readiness of our clients to buy
our services and this, together with the growth in the sector generally,
make scaling the business at this time the right approach for ECSC. We are
mindful, however, of the degree of change being executed within the
business and we are approaching these significant scale changes with
appropriate care and attention. We have made a good start on our plan
following the IPO, and we have well worked out plans to carry through our
objectives. I would like to pass on my thanks to the capable and loyal staff
of the Company for their support, which has enabled the Company to
achieve the success it has to date.
Ian Mann
Chief Executive Officer
21 March 2017
ECSC Group plc
Annual Report and Accounts 2016
07
ECSC Group plcAnnual Report and Accounts 201608FINANCIAL REVIEWSummary• Total revenue of £4.51 million• Strong organic revenue growth across all operating divisions• Like for like revenue growth of 35%* in Managed Services and 24%* in Consultancy and Testing• Adjusted EBITDA was £630k (2015: £542k#)During 2016, ECSC Group plc changed its accounting year end from 30 September to 31 December. The trading results therefore cover the period of 15 months ended 31 December 2016. During the period, the Company delivered total revenue of £4.51m (2015: £2.65m). There was strong organic revenue growth across all operating divisions, with like for like revenue growth of 35%* in Managed Services (£1.33m) and 24%* in Consultancy and Testing (£2.80m).Growth in operating costs, now £3.2m (2015: £1.8m), has been mainly driven by the Board continuing to invest in the future of the business through staff recruitment and associated infrastructure.Adjusted EBITDA was £630k (2015: £542k#). Adjusted numbers are stated after excluding IPO costs of £975k.EBITDA for the 15 months ended December 2016 shows a loss of £(345)k (2015: £542k profit#). A reconciliation is set out below. Earnings per shareBasic earnings per share was minus (7.72p) (2015: 9.00p), and adjusted basic earnings per share was 11.14p (2015: 9.00p), stated before charging IPO costs of £975k.Balance sheetAs at 31 December 2016, the Company had net cash of approximately £5.0m, providing the Company with a sound financial platform to support its future investment plans.ReconciliationBy order of the BoardKeith KellyChief Financial Officer21 March 2017* like for like revenue growth has been calculated by taking 2016 revenue pro-rated for 12 months as opposed to 15 months# 2015 excludes £63k R&D tax credit adjustmentKeith KellyChief Financial Officer15 months endedYear ended31 December 201630 September 2015£k£k#Adjusted operating profit453455Depreciation6532Amortisation11255Total17787Adjusted EBITDA630542Exceptional IPO costs(975)—EBITDA(345)542 Strategic report
Directors’ report
Financial statements
PRINCIPAL RISKS AND UNCERTAINTIES
The Company is exposed to a number of operational,
reputational and financial risks. The Directors take a proactive
approach to the identification and management of these risks.
Principal Risks and Uncertainties
The summary below lists the principal risks to the Company. They do not include all the potential risks associated with the Company’s
activities and are not in any order of priority.
Risk
Mitigation
Ability to recruit and retain skilled personnel
Ongoing development of a wide range of employee benefits,
together with enhanced career progression and support
Reliance on key systems
ISO 27001 certification, including business continuity provision
Cyber security breach
Certifications to ISO 27001, PCI DSS and Cyber Essentials.
Avoidance of technologies associated with most security breaches
Funding continued growth
IPO proceeds
Client acquisition
New sales academy training to support 2017 sales team expansion
Client retention
Expanded service delivery function and service management layer
Key client dependency
No single client representing more the 10% of revenue
Litigation following client breach
Use of ECSC terms of engagement combined with professional
indemnity insurance
Dependence on key personnel
Continued expansion, particularly within the management team,
reduces the risks associated with any single person
ECSC Group plc
Annual Report and Accounts 2016
09
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Any interruption in the availability of the Company’s website,
core cloud-based software solution, support site or telephone
systems would create a business interruption and a large
volume of customer complaints. The Company has a well
considered, certified and
rehearsed business
continuity plan.
regularly
The Company’s products and the software on which they are
based are complex and may contain undetected defects when
first introduced and problems may be discovered from time to
time in existing, new or enhanced products. Undetected
defects could damage the Company’s reputation, ultimately
leading to an increase in the Company’s costs or reduction in
its revenues.
Cyber security breach
As with all providers in this sector, the potential embarrassment
of a major cyber security breach for ECSC itself is significant.
However, ECSC manages this risk in a number of ways:
•
•
•
External certification to international security standards,
such as ISO 27001 and PCI DSS.
Avoidance of technologies commonly targeted for attack.
ECSC makes extensive use of Linux-based technologies,
including all operational desktop PCs and laptops. ECSC
does not support Bring Your Own Device (BYOD) policies
for any company business, including for Associate Consultants.
Integration of ECSC security with that of our clients. The
Company directs the same level of security expertise at its
own security as to that of its clients, avoiding the common
issue with IT companies that their own internal IT is
managed by a less capable internal team than their client-
facing delivery team.
Business strategy
The value of an investment in the Company is dependent, inter
alia, upon the Company achieving its strategy and aims.
Although the Company has a clearly defined strategy, there
can be no guarantee that its objectives will be achieved or that
the Company will achieve the level of success that the Directors
expect. The Company’s ability to implement its business
strategy successfully may be adversely impacted by factors
that
foresee, such as
unanticipated costs and expenses or technological changes.
Should it be unsuccessful in implementing its strategy or
should it take longer than expected to implement, the future
financial results of the Company could be negatively impacted.
the Company cannot currently
Risks specific to the Company’s activities
Dependence on key executives and personnel
The Company’s performance is substantially dependent on
the continued services and performance of its Directors and
senior management and its ability to attract and retain
suitably skilled and experienced personnel.
Although certain key executives and personnel have entered
into service agreements or letters of appointment with the
Company, there can be no assurance that the Company will
retain their services. The loss of the services of any of the key
executives or personnel may have a material adverse effect
on the business, operations, relationships and/or prospects of
the Company. Keyman insurance has been put in place in
respect of Ian Mann.
Ability to recruit and retain skilled personnel
it has
The Company believes
the appropriate
that
incentivisation structures to attract and retain the calibre of
employees necessary to ensure the efficient management
and development of the Company. However, any difficulties
encountered in hiring appropriate employees and the failure
to do so may have a detrimental effect upon the trading
performance of the Company. The ability to attract new
employees with the appropriate expertise and skills cannot
be guaranteed.
Reliance on key systems
The Company’s dependency upon technology exposes it to
significant risk in the event that such technology or the
Company’s systems experience any form of damage, interruption
or failure. Any malfunctioning of the Company’s technology and
systems, or those of key third parties, even for a short period of
time, could result in a lack of confidence in the Company’s
services, the termination of customer contracts and potential
claims for damages, with a consequential material adverse effect
on the Company’s operations and results.
The Company’s systems are vulnerable to damage or
interruption from events including:
•
•
•
•
•
natural disasters;
power loss;
telecommunication failures;
computer hacking activities; and
acts of war or terrorism.
10
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
Future funding requirements
Litigation
Although not presently anticipated by the Directors, the Company
may in the future (more than twelve months hence), need to raise
equity or debt to fund any future acquisitions, expansion, activity
and/or business development. There can be no guarantee that the
necessary funds will be available on a timely basis, on favourable
terms, or at all, or that such funds, if raised, would be sufficient.
Debt funding may require assets of the Company to be secured in
favour of the lender, which security may be exercised if the
Company were to be unable to comply with the terms of the
relevant debt facility agreement. If the Company is not able to
obtain additional capital on acceptable terms, or at all, it may be
forced to curtail or abandon such planned acquisition opportunities,
expansion, activity and/or business development. The above could
have a material adverse effect on the Company.
Whilst the Company has taken such precautions as it regards as
appropriate to avoid or minimise the likelihood of any legal
proceedings or claims, or any resulting financial loss to the
Company, the Directors cannot preclude the possibility of litigation
being brought against the Company.
in any
litigation
There can be no assurance that claimants
proceedings will not be able to devote substantially greater
financial resources to any litigation proceedings or that the
Company will prevail in any such litigation. Any litigation, whether
or not determined in the Company’s favour or settled by the
Company, may be costly and may divert the efforts and attention of
the Company’s management and other personnel from normal
business operations.
Attracting new customers and retaining existing customers
Reputation
The Company’s future success depends on its ability to increase
sales of its services and products to new end customers, increase
sales of additional products to its existing end customers and
maintain historical subscription rates. The rate at which new and
existing end customers purchase products and existing customers
renew subscriptions depends on a number of factors, including the
efficacy of the Company’s products and the utility of the Company’s
new offerings, as well as factors outside of the Company’s control,
such as end customers’ perceived need for security solutions, the
introduction of products by the Company’s competitors that are
perceived to be superior to the Company’s products, end customers’
IT budgets and general economic conditions. A failure to increase
sales as a result of any of the above could materially adversely affect
the Company’s financial condition, operating results and prospects.
The Company’s success depends on
its ability to maintain
relationships and renew contracts with existing customers and to
attract and be awarded contracts with new customers. A substantial
portion of the Company’s future revenues will be directly or
indirectly derived from existing contractual relationships as well as
new contracts driven at least in part by the Company’s ability to
penetrate new verticals and territories. The loss of key contracts
and/or an inability to successfully penetrate new verticals or deploy
its skill sets into new territories could have a significant impact on
the future performance of the Company.
Key customer dependency
The Company currently generates a significant proportion of its
revenue from certain customers. In the 15 month period ended
31 December 2016 no single customer accounted more than 10%
of total revenue. The loss of all or a substantial proportion of the
business provided by one or more of the Company’s top customers
could have a material adverse effect on the Company’s business.
The Company’s reputation, in terms of the service it provides, the
way in which it conducts its business and the financial results which
it achieves, are central to the Company’s success.
The Company’s products and the software on which they are based
are complex and may contain undetected defects when first
introduced, and problems may be discovered from time to time in
existing, new or enhanced products. Undetected defects could
damage the Company’s reputation, ultimately
leading to an
increase in the Company’s costs or reduction in its revenues.
Other issues that may give rise to reputational risk include, but are not
limited to, failure to deal appropriately with legal and regulatory
requirements in any jurisdiction (as may result in the issuance of a
warning notice or sanction by a regulator or an offence (whether civil,
criminal, regulatory or other) being committed by a member of the
Company or any of its employees or directors), money-laundering,
bribery and corruption, factually incorrect reporting, staff difficulties,
fraud (including on the part of customers), technological delays or
malfunctions, the inability to respond to a disaster, privacy, record-
keeping, sales and trading practices, the credit, liquidity and market
risks inherent in the Company’s business.
Also, failure to meet the expectations of the customers, operators,
suppliers, employees and shareholders and other business partners
may have a material adverse effect on the Company’s reputation.
Intellectual property
In order to maximise its competitive advantage, the Company
needs to protect its intellectual property. Much of the Company’s
intellectual property is not of a nature that is capable of registration,
so protection of intellectual property relies on maintaining the
confidentiality of know-how, methodologies and processes which,
in turn, are largely dependent on people. There is a risk that if the
ECSC Group plc
Annual Report and Accounts 2016
11
PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
Technology
The markets in which the Company operates are characterised
by rapid technological change, changes in use and customer
requirements and preferences, frequent product and service
introductions employing new technologies and the emergence
of new industry standards and practices that could render the
Company’s existing technology and products obsolete.
In order to compete successfully, the Company will need to
continue to improve its products, and to develop and market
new products that keep pace with technological change. This
may place excess strain on the Company’s capital resources,
which may adversely impact the revenues and profitability of
the Company.
to
respond
The success of the Company depends on its ability to anticipate
technological changes and customer
and
preferences in a timely and cost-effective manner. There can be
no assurance that the Company will be able to effectively
anticipate and respond to technological changes and customer
preferences in the future.
Failure to develop, launch and market new products
The Company’s long-term growth and profitability is dependent
on its ability to develop and successfully launch and market
new products. The Company’s revenues and market share may
suffer if it is unable to successfully introduce new products in a
timely fashion or if any new or enhanced products or services
are introduced by its competitors that its customers find more
advanced and/or better suited to their needs.
While the Company continuously invests in research and
development to develop products in line with customer
demand and expectations, if it is not able to keep pace with
product development and technological advances, including
also shifts in technology in the markets in which it operates, or
to meet customer demands, this could have a material adverse
effect on the Company’s business, results of operations and
financial condition.
Competition
There can be no guarantee that the Company’s current
competitors or new entrants to the market will not bring
superior technologies, products or services to the market, or
equivalent products at a lower price which may have an
adverse effect on the Company’s business. Such companies
may also have greater financial and marketing resources than
the Company. Even if the Company is able to compete
Risks specific to the Company’s activities continued
Intellectual property continued
confidentiality of the Company’s intellectual property were
compromised, this could lead to a loss of competitive
advantage.
The Company’s software is largely created in house. However,
some aspects of it are based on open-source licences such as
the General Public Licence (a widely used form of licence
within the free and open-source code software domain),
which oblige ECSC to provide access to the source code of the
relevant software package if a client requests it. There is a
limited risk that ECSC could be pursued for enforcement
action in this way, which could result in repercussions for the
Company if practices are openly challenged.
Current operating results as an indication of future results
The Company’s operating results may fluctuate significantly
in the future due to a variety of factors, many of which are
outside its control. Factors that may affect the Company’s
operating results include increased competition, an increased
level of expenses,
technological change necessitating
additional capital expenditure, slower than expected sales
and changes to the statutory and regulatory regime in which
it operates. It is possible that, in the future, the Company’s
operating results may fall below the expectations of market
analysts or investors. If this occurs, the trading price of the
Ordinary Shares may decline significantly.
Sales and Marketing
The Company intends to continue investing in marketing and
distribution channels and its own sales functions to grow the
business. Success of the Company’s business will require the
continuation of existing, and establishment of additional, sales
channels. There is no certainty that the Company will be able to
attract new channel partners and retain existing channel
partners.
Penetration of new markets can be slow, expensive and
subject to delays, and ultimately may not be successful.
Significant delays in new contracts will result in working
capital strain for the Company. The Company is likely to incur
costs in these areas before anticipated benefits materialise.
The return on these investments may be lower or develop
more slowly than expected. There can be no guarantee that
the Company will be able to maintain, or increase its sales and
market share.
12
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
successfully, it may be forced to make changes in one or more of its
products or services in order to respond to changes in customers’
needs which may impact negatively on the Company’s financial
performance.
General risks
Economic conditions
The Company could be affected by unforeseen events outside its
control
including economic and political events and trends,
inflation and deflation, terrorist attacks or currency exchange
fluctuation. Any economic downturn either globally or locally in
any area in which the Company operates may have an adverse
effect on the demand for the Company’s products. A more
prolonged economic downturn may lead to an overall decline in
the volume of the Company’s activities and sales, restricting the
Company’s ability to realise a profit. The markets in which the
Company offers its services are directly affected by many national
and international factors that are beyond the Company’s control.
Market risks
The Company may be affected by general market trends which
are unrelated to the performance of the Company itself, including
without limitation the general market impact of the United Kingdom’s
decision to leave the European Union. The Company’s success will
depend on market acceptance of the Company’s products and
there can be no guarantee that this acceptance will be forthcoming.
Market opportunities targeted by the Company may change and
this could lead to an adverse effect upon its revenue and earnings.
Tax risk
Any change in the Company’s or its subsidiaries’ tax status (including
its EIS and/or VCT status) or a change in tax legislation could affect
the Company’s ability to provide returns to shareholders.
Enterprise investment scheme
The Company satisfies the conditions for being a qualifying
company for the purposes of the EIS provisions. The actual
availability of the relief under the EIS provisions will be contingent
upon certain conditions being met by the Company. Circumstances
may arise (which may include the sale of the company) where the
Board believes that the interests of the Company are not best
serviced by acting in a way that preserves EIS tax relief. In such
circumstances, the Company cannot undertake to conduct its
activities in a way designed to secure or preserve any EIS relief.
If the Company does not employ the proceeds of an EIS share issue
for qualifying purposes within two years of issue, the EIS shares
would cease to be eligible and all of the EIS tax reliefs of investors in
respect of the EIS shares would be withdrawn.
If the Company ceases to carry on an EIS qualifying business
or acquires or commences a business which is not insubstantial
to the Company’s activities and which is a non-qualifying trade for
EIS purposes, this could prejudice the qualifying status of the
Company under the EIS provisions, if this occurred during the
three-year period from the last issue of shares to the EIS investors.
Venture capital trust
Company Shares are eligible for the purposes of section 258(3A) of
the Income Tax Act 2007 (the ‘‘ITA’’) and are ‘‘qualifying holdings’’ for
the purposes of Chapter 4, Part 6, ITA. In order for Shares to be
‘‘qualifying holdings’’ for VCT purposes the Company must satisfy
and continue to satisfy the relevant requirements. Circumstances
may arise where the Board believe that the interests of the Company
are not best served by acting in a way which preserves its VCT-
related status.
In such circumstances, the Company cannot
undertake to conduct its activities in a way designed to secure or
preserve any such relief or status.
Exchange rate risk
it will be
As the Company grows and expands in both current and new
increasingly exposed to exchange rate
territories,
fluctuations which could have a material adverse effect on the
Company’s profitability or the price competitiveness of its products
and services. In addition, the likelihood of significant exchange rate
fluctuations may be increased by factors related to the United
Kingdom’s decision to leave the European Union. There can be no
guarantee that the Company would be able to compensate or
hedge against such adverse effects and therefore negative
exchange rate effects could have a material adverse effect on the
Company’s business and prospects, and its financial performance.
Force Majeure
The Company’s operations now or in the future may be adversely
affected by risks outside the control of the Company including
labour unrest, civil disorder, war, subversive activities or sabotage,
fires, floods, explosions or other catastrophes, epidemics or
quarantine restrictions.
Related Parties are considered to be related if one party has the
ability (directly or indirectly) to control the other party or exercise
significant influence over the other party in making financial and
operating decisions. Parties are also considered related if they are
subject to common control or common significant influence.
Related parties may be individuals or corporate entities.
ECSC Group plc
Annual Report and Accounts 2016
13
BOARD OF DIRECTORS
The Board currently comprises a Non-Executive Chairman, three
Executive Directors and two other Non-Executive Directors.
Nigel Payne
Non-Executive Chairman
Ian Mann
Chief Executive Officer
Lucy Sharp
Chief Operating Officer
Ian has over 15 years of experience in
the cyber-security sector having
founded ECSC. He was previously an
advisor for GCHQ, and established a
Cisco Networking Academy for Dixons
Ian’s
City
Technology
professional certifications
include
CISSP, PCI QSA, and ISO Lead Auditor.
Ian holds a B.Eng. in Electrical and
Electronic Engineering
the
University of Nottingham, and an
MBA from the Open University.
College.
from
Lucy has over 15 years of experience in
the cyber-security sector, having joined
ECSC at its inception. Lucy worked as an
ISO 27001 consultant, leading this area
prior to taking the position of Operations
Director in 2012. Lucy has held a number
of professional certifications, including
CISSP, PCI QSA, and ISO Lead Auditor.
Whilst working at ECSC, Lucy completed
a Masters in Business Management at
Leeds Metropolitan University.
Nigel has considerable experience as a
director of both publicly listed and
private companies. He has extensive
experience of listing companies and
fund raising, notably in his current
roles as non-executive chairman of
AIM traded Gateley plc, non-executive
chairman of AIM traded Stride Gaming
plc and non-executive chairman of
AIM traded EG Solutions plc. Nigel was
previously CEO of Sportingbet plc, one
of the world’s largest internet gambling
companies which made a number of
the
acquisitions whilst
London Stock Exchange (both Main
Market listed and AIM traded), and was
later bought by GVC plc. Nigel holds an
executive MBA from the IMD Business
School (Lausanne, Switzerland) and a
degree in Economics and Accounting
from Bristol University.
listed on
14
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
Keith Kelly
Chief Financial Officer
David Mathewson
Non-Executive Director
Steve Vaughan
Non-Executive Director
Keith joined ECSC in 2012. Keith has
over 30 years of experience in financial
management and accounting and
joining ECSC, Keith was
prior to
finance director at Pet Plas Packaging,
part of the Alcan Group. He is an ACCA
and FCCA qualified accountant.
Stephen has considerable experience
over the last 15 years as a director of
publicly listed and private companies.
He is currently a non-executive director
of Progressive Equity Research Limited
and was previously group chief
executive of publicly listed companies
Phoenix IT plc, Communisis plc and
Synstar plc as well as being chairman
of Charteris plc.
and
David is a Chartered Accountant who
in
has spent most of his career
merchant banking
a
as
non-executive director. He was an
Executive Director of Noble Grossart
Limited, Scotland’s premier merchant
bank,
for many years. Previous
non-executive roles include Chairman
of Sportech plc and he was a director
of Playtech Group plc. During his
tenure at Playtech he was appointed
chief financial officer and oversaw the
company move from AIM to the Main
Market of the London Stock Exchange.
is currently a non-executive
He
director of AIM traded SEC SPA plc, an
Italian company, and Chairman of
Veltyco Group plc, also traded on AIM.
ECSC Group plc
Annual Report and Accounts 2016
15
DIRECTORS’ REPORT
for the 15 months ended 31 December 2016
The Directors present their report
and financial statements for the
period ended 31 December 2016.
Principal activities and review of the business
The principal activity of the company during the period continued
to be the supply of information security professional services.
Future developments of the Company have been reviewed as part
of the Strategic Report.
Principal risks and uncertainties
For information on the principal risks and uncertainties of the
Company, please see pages 9 to 13 of the strategic report.
Results and dividends
The loss for the period, after taxation, amounted to £399,006
(2015: profit of £423,197). A dividend of £253,884 was paid out in
the year.
Research and development
Research and development activities are grouped into three broad areas:
•
•
•
core business systems;
technology for our managed service product lines; and
IT tools to support our consulting activities.
involved new
Key developments for core business systems
functions for our CRM/Client Management system, new internal
and external web sites to support marketing functions. Tools to
assist consultants with the development of reports were developed.
For the management services, developments range from new Web
Application Firewall systems, mechanisms for automated analysis
16
ECSC Group plc
Annual Report and Accounts 2016
and prioritisation of security events, to innovating functions to
support digital marketing functions through the development of a
system to perform transparent data acquisition of mobile user
browsing habits.
Corporate governance
There is no compulsory regime of corporate governance to which
the directors of a UK company admitted to AIM must adhere to over
and above the general duties imposed on such directors under
English law. However, the Directors acknowledge the importance of
the principles set out in the QCA Code. Although the QCA Code is
not compulsory for AIM quoted companies, the Directors apply its
principles to the Company, as far as they consider appropriate for
a company of its size and nature.
The Board comprises six directors, three of whom are Executive
Directors and three of whom are Non-Executive Directors, reflecting
a blend of different experience and backgrounds. The Board
considers Nigel Payne, David Mathewson and Stephen Vaughan to
be
independent Non-Executive Directors under the criteria
identified in the UK Corporate Governance Code (September 2014).
The Board meets regularly and
is responsible for strategy,
performance, approval of any major capital expenditure and the
framework of internal controls.
To enable the Board to discharge its duties, all directors receive
appropriate and timely information. Briefing papers are distributed
to all directors in advance of Board meetings. The Board has
established audit, remuneration, nomination and disclosure
committees with formally delegated duties and responsibilities and
with written terms of reference. Each of these committees meet
regularly and at least twice a year. From time to time, separate
committees may be set up by the Board to consider specific issues
when the need arises.
Audit Committee
The duties of the Audit Committee are to consider the appointment,
re-appointment and terms of engagement of, and keep under
review the relationship with, the Company’s auditor, to review the
integrity of the Company’s financial statements, to keep under
review the consistency of the Company’s accounting policies and to
review the effectiveness and adequacy of the Company’s internal
financial controls. In addition, it will receive and review such reports
as it from time to time requests from the Company’s management
and auditor.
The Audit Committee meets at least twice a year and has
unrestricted access to the Company’s auditor. The Audit Committee
comprises David Mathewson and Steve Vaughan and is chaired by
David Mathewson.
Strategic report
Directors’ report
Financial statements
ECSC Group plc Board
Chairman: Nigel Payne
Independent NEDs: Steve Vaughan,
David Mathewson
CEO: Ian Mann
COO: Lucy Sharp
CFO: Keith Kelly
Audit Committee
Remuneration Committee
Nomination Committee
Chairman: David Mathewson
Chairman: Steve Vaughan
Chairman: Nigel Payne
Steve Vaughan
Nigel Payne
David Mathewson
Remuneration Committee
The Remuneration Committee has responsibility for reviewing and
determining, within agreed terms of reference, the Company’s
policy on the remuneration of senior executives, directors and
other key employees and specific remuneration and benefits
packages for executive directors, including pension rights and
compensation payments. It is also to be responsible for making
recommendations for grants of options under the New Share
Option Scheme. It meets not less than twice a year. The remuneration
of Non-Executive Directors is a matter for the Board and no Director
may be involved in any discussions as to his or her own remuneration.
The Remuneration Committee comprises Steve Vaughan and
Nigel Payne and is chaired by Steve Vaughan.
Nomination Committee
The duties of the Nomination Committee are to consider the
structure, size and composition of
the board and make
recommendations to the Board with regard to any changes. It is
also responsible for identifying and nominating candidates to fill
Board vacancies as and when they arise. The Nomination Committee
also makes recommendations to the Board concerning, among
other things, plans
for both executive and
Non-Executive directors. It meets at least twice a year. The
Nomination
and
David Mathewson and is chaired by Nigel Payne.
for succession
Committee
comprises
Payne
Nigel
Disclosure Committee
The Disclosure Committee is the first point of contact with the
NOMAD for all routine and non-routine matters which the NOMAD
wishes to discuss with the Board and shall carry out duties to ensure
the Company’s compliance with the AIM Rules and MAR.
The Disclosure Committee meets twice a year and comprises
David Mathewson and Keith Kelly, and is chaired by David Mathewson.
Directors and Directors’ interests
The Directors who held office during the period were as follows:
Nigel Payne
Ian Mann
Lucy Sharp
Keith Kelly
David Mathewson
Stephen Vaughan
The following Directors at 31 December 2016 had interests in
the Ordinary Shares of 1p each as follows:
Name of holder
Nigel Payne
Ian Mann
Lucy Sharp
Keith Kelly
Stephen Vaughan
Number of
Ordinary Shares
% of
Ordinary Shares
29,940
1,698,690
301,560
20,068
29,940
0.3%
18.9%
2.6%
0.2%
0.3%
ECSC Group plc
Annual Report and Accounts 2016
17
ECSC Group plcAnnual Report and Accounts 201618Directors and Directors’ interests continued Substantial InterestsAt 31 December 2016, the Company had been notified under the Disclosure and Transparency Rules of the following major shareholdings and the percentages of voting rights represented by such holdings, excluding the shareholdings and associated voting rights of the Directors noted above.Number of% ofName of holderOrdinary Shares Ordinary SharesRavinder Mann1,719,06819.1%Unicorn AIM VCT plc1,526,94617.0%Artemis Investment Management LLP508,9835.7%Phil McLear472,2905.3%Hargreave Hale Limited407,1864.5%Malcolm Hoare300,3003.3%John Leach282,9203.2%Annual General MeetingThe next Annual General Meeting will take place on 22nd June 2017.Statement of disclosure of information to AuditorsThe Directors of the Company who held office at the date of approval of this Annual Report as set out above each confirm that:• so far as each Director is aware, there is no relevant audit information of which the Company’s auditors are unaware; and• each Director has taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Company’s auditors are aware of that information.AuditorsBDO LLP has indicated its willingness to continue as auditor. Accordingly a resolution proposing its reappointment as auditor will be put to the members at the next Annual General Meeting.By order of the BoardNigel PayneChairman21 March 2017DIRECTORS’ REPORT CONTINUEDfor the 15 months ended 31 December 2016 Strategic report
Directors’ report
Financial statements
DIRECTORS’ REMUNERATION REPORT
Directors’ service agreements and letters of appointment
Stephen Vaughan
Nigel Payne
Mr Payne has entered into a letter of appointment with the Company
dated 30 November 2016 for his appointment as a Non-Executive Director
and Chairman. The appointment is terminable by either party giving
three months’ notice and summarily by the Company in certain limited
circumstances. The letter provides for appointment as Non-Executive
Director of the Company for an initial term of two years to be reviewed
thereafter. The letter provides for payment of a director’s fee of £40,000
per annum. Mr Payne has given certain non-compete undertakings which
apply during his engagement.
Ian Mann
Mr Mann has entered into a service agreement with the Company dated
30 November 2016 for his appointment as full time Chief Executive Officer.
The appointment is terminable on six months’ notice given by either party
and summarily by the Company in certain limited circumstances.
Mr Mann’s annual salary is £225,000 and he is entitled to various customary
benefits. Mr Mann has given certain non-compete and non-solicitation
undertakings which apply during his engagement and in respect of the
period of eighteen months post termination.
Lucy Sharp
Ms Sharp has entered into a service agreement with the Company dated
30 November 2016 for her appointment as full time Executive Director.
The appointment is terminable on six months’ notice given by either party
and summarily by the Company in certain limited circumstances.
Ms Sharp’s annual salary is £100,000 and she is entitled to various
customary benefits. Ms Sharp has given certain non-compete and
non-solicitation undertakings which apply during her engagement and in
respect of the period of eighteen months post termination.
Keith Kelly
Mr Kelly has entered into a service agreement with the Company dated
30 November 2016 for his appointment as full time Executive Director.
The appointment is terminable on six months’ notice given by either party
and summarily by the Company in certain circumstances. Mr Kelly’s
annual salary is £80,000 and he is entitled to various customary benefits.
Mr Kelly has given certain non-compete and non-solicitation undertakings
which apply during his engagement and in respect of the period of
eighteen months post termination.
David Mathewson
Mr Mathewson has entered into a letter of appointment with the Company
dated 30 November 2016 for his appointment as a Non-Executive Director.
The appointment is terminable by either party giving three months’
notice and summarily by the Company in certain limited circumstances.
The letter provides for appointment as non-executive director of the
Company for an initial term of two years to be reviewed annually
thereafter. The letter provides for payment of a director’s fee of £32,000
per annum. Mr Mathewson has given certain non-compete undertakings
which apply during his engagement.
Mr Vaughan has entered into a letter of appointment with the Company
dated 7 December 2016 for his appointment as a Non-Executive Director
for an initial term of two years unless the appointment is terminated
sooner by either party. The appointment is terminated by either party
giving three months’ notice and summarily by the Company in certain
limited circumstances. The letter provides for payment of a director’s fee
of £32,000 per annum. Mr Vaughan has given certain non-compete
undertakings which apply during his engagement.
All of the aforementioned service agreements and letters of appointment
are governed by English law.
There are no existing or proposed service contracts between any Director
and the Company.
There are no existing or proposed arrangements which provide for benefits
or additional payment upon any Director’s termination of employment.
There are no existing or proposed arrangements under which any Director
has agreed to waive further emoluments nor has there been any waiver of
emoluments during the financial period ended 31st December 2016.
Remuneration and share incentives in the 15 months
ended 31 December 2016
Name of Director
Nigel Payne
Ian Mann
Lucy Sharp
Keith Kelly
David Mathewson
Steve Vaughan
Period ended
31 December 2016
Year ended 30
September 2015
Salary or fees related bonuses Total emoluments Total emoluments
Period ended
31 December 2016
Period ended
31 December 2016
Performance
2,000
64,483
130,474
111,596
2,941
2,667
—
50,000
17,500
49,583
—
—
2,000
114,483
147,974
161,179
2,941
2,667
—
27,480
61,191
41,593
—
—
ECSC Group plc
Annual Report and Accounts 2016
19
ECSC Group plcAnnual Report and Accounts 201620DIRECTORS’ RESPONSIBILITY STATEMENTThe Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the EU. 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 Company and of the profit or loss of the Company for that period. In preparing these financial statements, the Directors are required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.Financial information is published on the Company’s website. The maintenance and integrity of this website is the responsibility of the Directors; the work carried out by the Company’s auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may occur to the financial statements after they are initially presented on the website.It should be noted that legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.By order of the BoardKeith Kelly David MathewsonChief Financial Officer Non-Executive Director21 March 2017 ECSC Group plcAnnual Report and Accounts 201621Financial statementsStrategic reportDirectors’ reportINDEPENDENT AUDITOR’S REPORTto the members of ECSC Group plcWe have audited the financial statements of ECSC Group plc for the 15 month period ended 31 December 2016 which comprise the statement of financial position, the statement of comprehensive income, the cash flow statement, the statement of changes in equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.Respective responsibilities of directors and auditors As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council’s (FRC’s) Ethical Standards for Auditors. Scope of the audit of the financial statementsA description of the scope of an audit of financial statements is provided on the FRC’s website at: www.frc.org.uk/auditscopeukprivate.Opinion on financial statementsIn our opinion the parent company financial statements: • give a true and fair view of the state of the company’s affairs as at 31 December 2016 and of its profit for the 15 month period then ended;• have been properly prepared in accordance with IFRSs as adopted by the European Union; and • have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matters prescribed by the Companies Act 2006In our opinion:• the information given in the strategic report and directors’ report for the financial period for which the financial statements are prepared is consistent with the parent company financial statements. Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion;• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or• the financial statements are not in agreement with the accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.Mark Langford (Senior Statutory Auditor)for and on behalf of BDO LLP, Statutory AuditorLeedsUnited Kingdom21 March 2017BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127). STATEMENT OF COMPREHENSIVE INCOME
for the 15 months ended 31 December 2016
Revenue
Cost of sales
Gross profit
Other income
Selling and distribution costs
Administrative expenses
Operating profit
Finance income
Exceptional items – IPO costs
(Loss)/profit before taxation
Taxation
(Loss)/profit for the period
Other comprehensive income
Total comprehensive income for the period
15 months ended
Year ended
31 December 2016
30 September 2015
Note
£
£
4
5
6
26
8
4,510,419
2,650,395
(1,014,688)
(453,583)
3,495,731
2,196,812
157,660
(380,098)
89,973
(176,381)
(2,820,699)
(1,592,230)
452,594
5,146
(974,876)
(517,136)
118,130
518,174
—
—
518,174
(94,977)
(399,006)
423,197
—
—
(399,006)
423,197
Attributable to equity holders of the Company
(399,006)
423,197
Earnings per share
Basic earnings per share
Diluted earnings per share
9
9
(0.08)
(0.08)
0.09
0.09
22
ECSC Group plc
Annual Report and Accounts 2016
ECSC Group plcAnnual Report and Accounts 201623Financial statementsStrategic reportDirectors’ reportAs atAs atAs at31 December 201630 September 20151 October 2014Note£££ASSETSNon-current assetsIntangible assets10363,244253,964166,507Property, plant and equipment11297,94667,08684,451Total non-current assets661,190321,050250,958Current assetsInventory123041,038603Trade and other receivables131,032,883695,698602,976Corporation tax recoverable181,92835,998—Cash and cash equivalents144,986,596323,543238,367Total current assets6,201,7111,056,277841,946TOTAL ASSETS6,862,9011,377,3271,092,904Current liabilitiesTrade and other payables151,262,887620,198517,762Corporation tax payable——27,290Total current liabilities1,262,887620,198545,052Non-current liabilitiesDeferred tax1649,34258,29343,301Total non-current liabilities49,34258,29343,301TOTAL LIABILITIES1,312,229678,491588,353NET ASSETS5,550,672698,836504,551EQUITYEquity attributable to owners of the Parent:Share capital1789,94122,38122,381Share premium account5,512,17575,00975,009Retained earnings(51,444)601,446407,161TOTAL EQUITY5,550,672698,836504,551The financial statements were approved and authorised for issue by the Board of Directors on 21 March 2017 and were signed on its behalf by:Keith KellyDirectorECSC Group plc Registered number: 03964848STATEMENT OF FINANCIAL POSITIONas at 31 December 2016 STATEMENT OF CHANGES IN EQUITY
for the 15 months ended 31 December 2016
Balance at 30 September 2014
Profit and total comprehensive income for the year
Transactions with owners:
Dividends
Share capital
£
22,381
Share
premium
£
75,009
Retained
earnings
£
407,161
Total
£
504,551
—
—
—
423,197
423,197
—
(228,912)
(228,912)
Balance at 30 September 2015
22,381
75,009
601,446
698,836
Profit and total comprehensive income for the period
(399,006)
(399,006)
Transaction with owners:
Issue of shares
Bonus issue
Issue of shares at IPO
Exercise of share options
Share issue costs
Dividends
1,569
26,345
29,940
9,706
—
—
83,188
(26,345)
4,970,058
723,470
(313,205)
—
—
—
—
—
—
(253,884)
84,757
—
4,999,998
733,176
(313,205)
(253,884)
Balance at 31 December 2016
89,941
5,512,175
(51,444)
5,550,672
24
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
CASH FLOW STATEMENT
for the 15 months ended 31 December 2016
Cash flow from operating activities
(Loss)/profit for the period/year before taxation
Exceptional items – IPO listing costs
Adjustment for:
Amortisation of intangibles
Depreciation of property, plant and equipment
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
(517,136)
974,876
518,174
—
112,458
64,816
54,873
32,774
Cash from operating activities before changes in working capital
635,014
605,821
Change in inventory
Change in trade and other receivables including tax
Change in trade and other payables
734
(410,395)
642,689
(435)
(159,860)
102,436
Cash generated from operating activities
868,042
547,962
Income tax received/(paid)
Net cash flow from operations
Acquisition of property, plant and equipment
Development costs capitalised
36,459
(76,136)
904,501
471,826
(295,676)
(221,738)
(15,409)
(142,330)
Net cash flow used in investing activities
(517,414)
(157,739)
Dividends paid
Proceeds from issuance of shares
Exceptional items – IPO listing costs
(253,884)
5,817,931
(1,288,081)
(228,911)
—
—
Net cash used in financing activities
4,275,966
(228,911)
Net increase in cash & cash equivalents
4,663,053
85,176
Cash and equivalent at beginning of period
323,543
238,367
Cash and equivalent at end of period
4,986,596
323,543
ECSC Group plc
Annual Report and Accounts 2016
25
NOTES TO THE FINANCIAL STATEMENTS
for the 15 months ended 31 December 2016
The financial statements of ECSC Group plc for the 15 months ended 31 December 2016 were authorised for issue in accordance with a
resolution of the directors on 21 March 2017. ECSC Group plc was incorporated in England and Wales on 5 April 2000, with the registered
number 03964848. The address of the registered office is 28 Campus Road, Listerhills Science Park, Bradford, West Yorkshire, BD7 1HR.
For years up to and including 30 September 2015, the Company has prepared its financial statements under UK GAAP. These financial
statements for the 15 months ended 31 December 2016 are the first that the Company has prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Note 24 explains how the Company
has applied IFRS on transition. The Board made the decision to change the year end to 31 December 2016. These financial statements
therefore present a fifteen month period, meaning the two periods are not entirely comparable.
The principal activity of ECSC Group plc is the supply of information security professional services.
1. Presentation of financial statements
The financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively “IFRSs”) issued by the International Accounting Standards Board (“IASB”) as adopted by the
European Union (“adopted IFRSs”). Consolidated financial statements are not prepared as the subsidiary of the company, ECSC Australia
Limited, is dormant and immaterial.
The financial statements have been presented in Pound Sterling (£, GBP) as this is the currency of the primary economic environment that
the Company operates in.
2. Accounting policies
The principal accounting policies applied in the preparation of the financial statements are set out below. These policies have been consistently
applied to all periods presented, unless otherwise stated.
Basis of Accounting
The financial statements have been prepared on the historical cost basis except as stated. The results presented are for those of the parent
only. Consolidated financial statements have not been prepared on the grounds of immateriality.
New standards, amendments to and interpretations to published standards not yet effective
A number of new standards and amendments to standards and interpretations have been issued but are not yet effective and in some
cases have not yet been adopted by the EU.
The Directors do not expect that the adoption of these standards will have a material impact on the financial statements of the Company
in future periods, except that IFRS 9 may impact both the measurement and disclosures of financial instruments, IFRS 15 may have an
impact on revenue recognition and related disclosures and IFRS 16 will have an impact on the recognition of operating leases. At this point
it is not practicable for the Directors to provide a reasonable estimate of the effect of these standards as their detailed review of these
standards is still ongoing.
Going concern
The financial statements have been prepared on the basis that the Company will continue as a going concern.
After making enquiries, the Directors consider that the Company has adequate resources and committed borrowing facilities to continue
in operational existence for the foreseeable future. Consequently, they have adopted the going concern basis in preparing the financial statements.
Revenue
Revenue comprises revenue recognised by the Company in respect of goods and services supplied during the year, exclusive of Value
Added Tax and trade discounts. Revenue from the sale of products is recognised when the significant risks and rewards of ownership have
been transferred, which is considered to occur when title passes to the customer. Revenue from provision of consultancy services is
recognised as services are rendered, generally based on the negotiated daily rate in the consulting arrangement and the number of days
worked during the period. Revenue from management and support services is deferred and recognised on a straight line basis over the
service period.
26
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
Interest income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest rate.
Government grants
Government Grants are recognised in the Statement of Comprehensive Income on a systematic basis over periods in which the entity
recognises expenses for the related costs for which the grants are intended to compensate.
Operating profit
Operating profit is stated after all expenses, including those considered to be exceptions, but before finance income or expenses.
Exceptional items are items of income or expense which because of their nature or size require separate presentation to allow shareholders
to better understand the financial performance of the period and allow comparison with prior years.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions
in foreign currencies are translated into sterling at the rate of exchange ruling at the date of the transaction. Exchange differences are
taken into account in arriving at the operating profit.
Employee benefits
(i) Short-term benefits
Wages, salaries, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the period in which the associated
services are rendered by employees of the Company.
(ii) Defined Contribution plans
The Company operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those
of the Company. The annual contributions are charged to the Statement of Comprehensive Income. The Company also contributes to the
personal pension plans of the Directors at the Company’s discretion.
(iii) Employee share incentive plans
The Company issues equity-settled share-based payments to certain employees (including Directors). These payments are measured at
fair value at the grant date by use of a Black-Scholes model.
Operating lease agreements
Rentals applicable to operating leases where substantially all of the benefits and risks of ownership remain with the lessor are charged
against profits on a straight line basis over the full period of the lease. Any lease incentives are spread on a straight line basis over the full
period of the lease.
Property, plant and equipment
All additions are initially recorded at cost.
Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset
as follows:
Leasehold property
Office furniture and equipment
Computer equipment
Motor vehicles
–
–
–
–
20% reducing balance
20% reducing balance
33% straight line
20% straight line
ECSC Group plc
Annual Report and Accounts 2016
27
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
2. Accounting policies continued
Research and development expenditure
Expenditure on research activities is recognised as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from development (or from the development phase of an internal project) is recognised if
all of the criteria set out in IAS 38 are met. Once the criteria are met, the development expenditure is capitalised and amortised over its
useful life, included in the administrative costs in Statement of Comprehensive Income.
The useful life of development costs is considered to be five years.
Inventories
Inventories are carried at the lower of cost or net realisable value.
Net realisable value is calculated based on the revenue from sale in the normal course of business less any costs to sell. Due allowance is made for
obsolete and slow moving items.
Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of
another entity.
Financial assets
•
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets on loans and receivables, or derivatives designated as hedging
instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets
not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.
The Company’s financial assets include cash and cash equivalents, trade and other receivables and non-derivative financial assets.
The Company’s financial assets include cash and cash equivalents, trade and other receivables and non-derivative financial assets.
• Subsequent measurement
Loans and receivables
Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in active market are classified
as loans and receivables. Loans and receivables are measured at amortised cost, using the effective interest method less impairment.
Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would
be immaterial.
• Derecognition of financial assets
The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Company neither transfers nor
retains substantially all the risks and rewards of ownership of the financial asset and continues to control the transferred asset, the
Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains
substantially all the risks and rewards of ownership of a transferred financial asset, the Company continues to recognise the financial asset
and also recognises a collateralised borrowing for the proceeds receivables.
Financial liabilities and equity instruments
• Classification as debt or equity
Financial liabilities and equity instruments issued by the Company are classified according to the substance of the contractual arrangements
entered into and the definitions of a financial liability and an equity instrument.
• Equity instruments
An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
28
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
Equity instruments are recorded at the proceeds received, net of direct issue costs.
• Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost.
• Trade and other payables
Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost,
where applicable, using the effective interest method, with interest expense recognised on an effective yield basis.
• Derecognition of financial liabilities
The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position if there is a currently
enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle
the liabilities simultaneously.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments which are readily
convertible to known amounts of cash and are subject to insignificant risk of changes in value.
Impairment of assets
Financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is
considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of
that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and present
value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial
asset is calculated by reference to its fair value.
Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics.
An impairment loss is recognised in the profit or loss. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in
equity is transferred to the statement of comprehensive income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial
assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in the profit or loss. For
available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity.
Non-financial assets
The carrying amounts of the Company’s non-financial assets, other than deferred tax assets, are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and risk specific to the asset. For the purpose of impairment testing, assets are grouped together into
the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets
or groups of assets. The goodwill acquired in a business combination, for the purpose of impairment testing, is allocated to cash-generating
units that are expected to benefit from the synergies of the combination. An impairment loss is recognised if the carrying amount of an asset
or its cash generating unit exceeds its estimated recoverable amount. Impairment losses are recognised in the profit or loss. Impairment
losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units
and then to reduce the carrying amount of the other assets in the unit (or group of units) on a pro rata basis.
ECSC Group plc
Annual Report and Accounts 2016
29
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
2. Accounting policies continued
Impairment of assets continued
Non-financial assets continued
An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at
each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in
the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does
not exceed the carrying amount that have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Income tax
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive
income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable
or tax deductible.
The Company’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the
financial period.
Credit available on eligible Research and Development expenditure and not reclaimable through other means is included within Grant income.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or
events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax.
Deferred tax assets are recognised only to the extent that the directors consider that it is more likely than not that there will be suitable taxable profits
from which the future reversal of the underlying timing differences can be deducted.
Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse,
based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Contingent liabilities and contingent assets
A contingent liability is a possible obligation that arises from past events and whose existence will only be confirmed by the occurrence or
non-occurrence of one or more uncertain future events not wholly within the control of the Company. It can also be a present obligation arising from
past events that is not recognised because it is not probable that outflow of economic resources will be required or the amount of obligation cannot
be measured reliably.
A contingent liability is not recognised but is disclosed in the notes to the accounts. When a change in the probability of an outflow occurs so that
the outflow is probable, it will then be recognised as a provision.
A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence
of one or more uncertain events not wholly within the control of the Company. Contingent assets are not recognised but are disclosed in the notes
to the accounts when an inflow of economic benefits is probable. When inflow is virtually certain, an asset is recognised.
Share capital
Ordinary Shares are recorded at nominal value and proceeds received in excess of nominal value of shares issued, if any, are accounted for as share
premium. Both Ordinary Shares and share premium are classified as equity. Costs incurred directly to the issue of shares are accounted for as a
deduction from share premium, otherwise they are charged to the Statement of Comprehensive Income.
Operating segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses,
including revenues and expenses that relate to transactions with any of the Company’s other components.
An operating segment’s operating results are reviewed regularly by the Chief Operating Decision Maker (“CODM”) (which takes the form of the
directors of the Company) to make decisions about resources to be allocated to the segments and assess its performance, and for which discrete
financial information is available.
The Board considers that the Company’s activity now constitutes three operating and three reporting segments, as defined under IFRS 8.
30
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
Parties are considered to be related if one party has the ability (directly or indirectly) to control the other party or exercise significant influence over
the other party in making financial and operating decisions. Parties are also considered related if they are subject to common control or common
significant influence. Related parties may be individuals or corporate entities.
3. Critical accounting estimates and sources of estimation uncertainty
In applying the accounting policies, the directors may at times require to make critical accounting judgements and estimates about the carrying
amount of assets and liabilities. These estimates and assumptions, when made, are based on historical experience and other factors that the directors
considers are relevant.
The key estimates and assumptions concerning the future and other key sources of estimation uncertainty at the end of the financial year, that have
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as stated below.
Revenue recognition
Management considers the nature of the Company’s contracts with customers and recognise revenue on an appropriate basis in accordance with
IFRS. This process involves the use of judgements and estimates. Revenue is recognised when the service is completed or the goods delivered to the
customer. Appropriate deferrals are made to revenue when services are being delivered over time.
Development costs – capitalised
Management estimate the percentage of development staff time used to enhance and improve the Company’s software asset/process to capitalise
a proportion of salary costs each period.
Research and development tax claim
A credit has been recognised as a result of an R&D tax credit claim being made in 2016 in respect of the FY14, FY15 and FY16 periods.
4. Revenue and segment information
The Company’s principal revenue is derived from the supply of information security professional services.
During this period, the CODM received information on financial performance on a divisional basis. The Directors consider that there are three
reportable operating segments: Consultancy, Managed Services, and Vendor Products. There were a small number of other transactions recorded
during each period which are not considered to be part of either of the three reportable operating segments. These are presented below within the
‘Other’ caption and are not significant.
The CODM does not receive any information on the financial position of each segment, including information on assets and liabilities. Accordingly,
such information has not been presented. The Company’s revenue and gross profit by operating segment for the year ended 30 September 2015
and the 15 months ended 31 December 2016 were as follows:
Revenue
Consultancy
Managed services
Vendor products
Other
Gross profit
Consultancy
Managed services
Vendor products
Other
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
2,803,611
1,330,372
376,136
300
4,510,419
2,211,541
1,241,187
42,704
299
1,806,838
787,749
55,808
—
2,650,395
1,454,768
738,161
3,883
—
3,495,731
2,196,812
For the purpose of financial reporting, certain operating expenses were allocated to cost of sales at each period end. The way that these
costs are recorded is such that it was not possible to allocate them to a reporting segment, and as a result these are all shown within the
ECSC Group plc
Annual Report and Accounts 2016
31
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
4. Revenue and segment information continued
‘Other’ caption above. The above presentation shows that gross margin per reportable segment was 100% in each period. Whilst gross
margins are high in these segments (see 2016 information later) it should be noted that some relevant cost of sales to these reportable
segments is included in the ‘Other’ caption as explained above.
The Company’s results by segment for the period ended 31 December 2016 were as follows:
Revenue – external
Gross profit
Operating expenses
Segment result – operating profit
Consultancy
£
Managed services
£
Vendor products
£
2,803,611
2,211,541
(2,009,940)
201,601
1,330,372
1,241,187
(1,163,548)
77,639
376,136
42,704
(90,199)
(47,495)
Other
£
300
299
220,550
220,849
Total
£
4,510,419
3,495,731
(3,043,137)
452,594
The Vendor Products revenue above represents the only revenue of the sale of goods in any of the periods.
All the non-current assets of the Company are located in the United Kingdom.
The Company had the following customer who contributed more than 10% of revenue:
Customer 1
Revenue by country was as follows:
Channel Islands
Egypt
France
Ireland
USA
South Africa
United Kingdom
5. Other income
Grant income
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
—
256,000
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
15,130
15,187
32,199
58,380
91,166
64,786
4,233,571
4,510,419
13,675
14,523
22,449
102,290
100,068
—
2,397,390
2,650,395
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
157,660
89,973
A credit has been recognised within grant income as a result of an R&D tax credit claim being made in 2016 in respect of the FY14, FY15 and
FY16 periods. A credit of £134,745 (2015: £63,404) is included within grant income in respect of these claims.
32
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
6. Operating profit
Operating profit is stated after charging:
Depreciation of owned assets
Amortisation of intangibles – development costs
Expenditure on research activities
Allowance provision on trade receivables
Auditors’ remuneration – audit services
– Non-audit services:
– Taxation compliance services
– Other taxation services
– Other non-audit services
Operating lease charge
– Property
– Other
Inventories expensed
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
64,816
112,458
323,738
5,011
23,000
5,450
13,650
112,435
56,250
78,144
234,739
32,774
54,873
103,505
8,384
—
—
—
—
40,500
39,018
—
The statutory financial statements for previous periods were unaudited. These figures have been subject to audit for the purpose
of preparing these financial statements and therefore all audit fees have been incurred in the current period.
7. Employee benefit expense
Employee costs (including Directors) during the periods amounted to:
Wages and salaries
Social security costs
Pension contributions
Directors’ and key management remuneration is as follows (and is included above also):
Wages and salaries
Social security costs
Pension contributions
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
2,385,511
1,213,697
249,652
70,265
143,712
48,505
2,705,428
1,405,914
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
596,080
74,250
70,265
740,595
306,993
35,590
31,656
374,239
Key Management are considered to be the directors and senior management disclosed in The Board section on pages 18 and 19. Details
of total directors’ remuneration can be found in the Remuneration Report on page 20. Amounts paid to the highest paid director in the
period were as follows:
Wages and salaries
Pension contributions
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
155,277
9,100
164,377
60,000
1,200
61,200
ECSC Group plc
Annual Report and Accounts 2016
33
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
7. Employee benefit expense continued
The average number of employees during the year was:
Directors
Operational
8. Taxation
Recognised in the Statement of Comprehensive Income
UK corporation tax – current tax on profit for the year
Over/under provision in prior period
Deferred tax
Reconciliation of effective tax rate
(Loss)/profit before tax
Tax at the UK corporation tax rate of 20.0%/20.5%
Expenses not deductible for tax purposes
Exercise of share options
Marginal relief and tax rate adjustment
Ineligible depreciation
Adjust closing deferred tax to average rate of 20%
Over/under provision in prior period
Other
Deferred tax
Origination and reversal of timing differences
34
ECSC Group plc
Annual Report and Accounts 2016
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
7
34
7
27
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
(127,164)
83
8,951
(118,130)
79,999
(14)
14,992
94,977
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
(517,136)
(11,687)
77,245
(174,981)
—
—
(8,707)
—
—
518,174
93,228
1,581
—
(1,315)
1,070
—
(14)
427
(118,130)
94,977
15 months ended
31 December 2016
£
Year to
30 September 2015
£
8,951
8,951
14,992
14,992
Strategic report
Directors’ report
Financial statements
9. Earnings per share
Basic earnings per share amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by the
weighted average number of Ordinary Shares outstanding during the period.
Diluted earnings per share amounts are calculated by dividing the profit for the year attributable to equity holders of the Company by
the weighted average number of Ordinary Shares outstanding during the period plus the weighted average number of Ordinary Shares
that would be issued on conversion of all the dilutive potential Ordinary Shares into Ordinary Shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
Net profit attributable to equity holders of the Company
Add back exceptional items – IPO costs
Adjusted profit
Initial weighted average number of Ordinary Shares
Adjusted to reflect Split into 100 1p shares
Bonus Issue
Weighted average of shares issued in period
Adjusted weighted average number of Ordinary Shares
Basic earnings per share
Diluted earnings per share
Adjusted earnings per share
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
(399,006)
974,876
575,870
22,381
2,238,100
2,461,910
445,217
5,167,608
(0.08)
(0.08)
0.11
423,197
—
423,197
22,381
2,238,100
2,461,910
—
4,700,010
0.09
0.09
0.09
On 28 October 2016 the Company passed a resolution to re-designate all the Ordinary Shares of £1 each in issue as a single class of shares.
A resolution was then passed to sub-divide every existing Ordinary Share of £1 each in issue into 100 Ordinary Shares. The Company then
passed a resolution to issue 110 Ordinary Shares of £0.01 each by way of a bonus issue pro rata to the Shareholders. In accordance with
IFRS this has been reflected in weighted average number of Ordinary Shares above.
The dilution arising as a result of the share options in the prior year is considered to be immaterial and so therefore no adjustment has
been made.
Adjusted earnings per share are stated before charging IPO costs of £975k.
ECSC Group plc
Annual Report and Accounts 2016
35
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
10. Intangible assets
Goodwill
The Company made an acquisition in the year ended 30 September 2003 and goodwill of £20,250 was recognised in accordance with UK GAAP at
that time. The goodwill was fully amortised under UK GAAP as at 1 October 2012, the date of transition to IFRS. As permitted by IFRS 1, the carrying
value of goodwill has not been restated on transition to IFRS. In addition, IFRS 3 has not been retrospectively applied to acquisitions prior to the
transition date.
£
203,201
142,330
345,531
345,531
221,738
567,269
36,694
54,873
91,567
91,567
112,458
204,025
166,507
253,964
363,244
Development costs
Cost
As at 1 October 2014
Additions
As at 30 September 2015
As at 1 October 2015
Additions
As at 31 December 2016
Amortisation
As at 1 October 2014
Amortisation charge for the year
As at 30 September 2015
As at 1 October 2015
Amortisation charge for the period
As at 31 December 2016
Net book value
As at 1 October 2014
As at 30 September 2015
As at 31 December 2016
36
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
11. Property, plant and equipment
Cost
At 1 October 2014
Additions
At 30 September 2015
Additions
Disposals
At 31 December 2016
Depreciation
At 1 October 2014
Charge for the year
At 30 September 2015
Charge for the period
Disposals
At 31 December 2016
Net book value
At 1 October 2014
Leasehold
property
£
Office furniture and
equipment
£
Computer
equipment
£
45,947
—
45,947
—
—
45,947
9,952
7,199
17,151
7,199
—
24,350
19,381
—
19,381
32,743
—
52,124
5,203
2,836
8,039
3,767
—
11,806
79,356
15,409
94,765
181,457
(27,212)
249,010
45,078
22,739
67,817
45,313
(27,212)
85,918
35,995
14,178
34,278
At 30 September 2015
28,796
11,342
26,948
Motor
vehicles
£
—
—
—
81,476
—
81,476
—
—
—
8,537
—
8,537
—
—
Total
£
144,684
15,409
160,093
295,676
(27,212)
428,557
60,233
32,774
93,007
64,816
(27,212)
130,611
84,451
67,086
21,597
40,318
163,092
72,939
297,946
At 31 December 2016
12. Inventory
Inventory
13. Trade and other receivables
Trade receivables
Other receivables
Prepayments and accrued income
The carrying amount of trade and other receivables approximates to their fair value.
14. Cash and cash equivalents
Cash and bank balance
31 December 2016
£
30 September 2015
£
1 October 2014
£
304
1,038
603
31 December 2016
£
30 September 2015
£
1 October 2014
£
928,020
8,300
96,563
1,032,883
598,954
8,300
88,444
695,698
522,813
9,300
70,863
602,976
31 December 2016
£
30 September 2015
£
1 October 2014
£
4,986,596
323,543
238,367
ECSC Group plc
Annual Report and Accounts 2016
37
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
15. Trade and other payables
Trade payables
Corporation tax
Other taxation and social security
Other payables
31 December 2016
£
30 September 2015
£
1 October 2014
£
483,948
—
211,381
567,558
1,262,887
93,513
—
137,278
389,407
620,198
89,233
27,290
141,557
286,972
545,052
Total
£
43,301
14,992
58,293
(8,951)
49,342
The carrying amount of trade and other payables approximates to their fair value due to their short-term nature.
16. Deferred tax
As at 1 October 2014
Movement through income statement for the period
As at 30 September 2015
Movement through income statement for the period
As at 31 December 2016
Deferred tax
Deferred tax
£
43,301
14,992
58,293
(8,951)
49,342
The deferred tax liabilities arose on the timing difference between the carrying values of the certain the Company’s assets for financial
reporting purposes and for income tax purposes. These will be released to the income statement as the fair value of the related assets are
depreciated or amortised.
17. Share capital
Allotted, called up and fully paid:
Ordinary A Shares:
At 1 October 2014
At 30 September 2015
Ordinary B Shares:
At 1 October 2014
At 30 September 2015
Authorised number
of shares
16,178
16,178
Number of
shares issued
and fully paid
16,178
16,178
Ordinary Share
capital
£
16,178
16,178
Authorised number
of shares
6,203
6,203
Number of
shares issued
and fully paid
6,203
6,203
Ordinary Share
capital
£
6,203
6,203
Total
£
16,178
16,178
Total
£
6,203
6,203
Total A and B Shares as at 14 October 2015
22,381
22,381
22,381
22,381
The A and B Shares were split on 30 March 2011 and rank equally in all respects. Subsequently it was identified by the Company that this share split
was not transacted correctly. This has subsequently been rectified in October 2016 and has been presented throughout as though this was treated
correctly at the initial date.
On 14 October 2015, 1,569 shares were issued for £84,757, resulting in the recognition of share premium of £83,188.
On 28 October 2016 the Company passed a resolution to re-designate all the Ordinary Shares of £1 each in issue as a single class of shares.
38
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
Ordinary Shares
Issued
Ordinary Shares after re-designation as per table above
Sub-division into 100 shares
Bonus issue
IPO issue
At 31 December 2016
Authorised number
of shares
1,569
22,381
23,950
2,395,000
2,634,500
3,964,631
8,994,131
Number of
shares issued
and fully paid
1,569
22,381
23,950
2,395,000
2,634,500
3,964,631
8,994,131
Ordinary Share
capital
£
1,569
22,381
23,950
23,950
26,345
39,646
89,941
Total
£
1,569
22,381
23,950
23,950
26,345
39,646
89,941
The Ordinary Shares have a par value of £0.01 (2015: £1) per Ordinary Share and are fully paid. These Ordinary Shares carry no right to fixed
income and have no preferences or restrictions attached to them. Consideration of £5,817,931 was received in respect of the above
transactions in the period ended 31 December 2016.
On 28 October 2016 the Company passed a resolution to sub-divide every existing Ordinary Share of £1 each in issue into 100 Ordinary Shares. The
Company then passed a resolution to issue 110 Ordinary Shares of £0.01 per 100 shares held each by way of a bonus issue pro rata to the shareholders.
On 14 December 2016, 970,620 new Ordinary Shares were issued immediately prior to Admission to satisfy the exercise of share options.
Then, as part of the Placing (and in accordance with the terms of the Placing Agreement) 299,401 shares were allotted and issued.
Share premium account
The balance on the share premium account represents the amounts received in excess of the nominal value of Ordinary Shares.
Retained earnings
The balance held on this reserve is the accumulated retained profits of the Company.
18. Financial instruments and financial risk management
The Company’s principal financial instruments comprise cash and cash equivalents, trade and other receivables and trade and other
payables. The Company’s accounting policies and method adopted, including the criteria for recognition, the basis on which income
and expenses are recognised in respect of each class of financial asset, financial liability and equity instrument are set out in note 3 to
the financial statements. The Company does not use financial instruments for speculative purposes.
The principal financial instruments used by the Company, from which financial instrument risk arises, are as follows:
Financial assets
Loans and receivables:
Trade receivables
Other receivables
Cash and cash equivalents
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Total financial liabilities
There are no fair value adjustments to assets or liabilities through profit and loss.
31 December 2016
£
30 September 2015
£
1 October 2014
£
928,020
8,300
4,986,596
5,922,916
663,613
663,613
598,954
8,300
323,543
930,797
350,212
350,212
522,813
9,300
238,367
770,480
231,035
231,035
ECSC Group plc
Annual Report and Accounts 2016
39
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
18. Financial instruments and financial risk management continued
Capital management
The Company manages its capital to ensure that it will be able to continue as a going concern while attempting to maximise the return to stakeholders
through the optimisation of the debt and equity balance. The capital structure of the Company consists of issued capital and retained earnings.
The Company’s financial instruments, which are recognised in the statement of financial position, comprise cash and cash equivalents, receivables
and payables. The accounting policies and methods adopted, including the basis of measurement applied are disclosed above, where relevant. The
information about the extent and nature of these recognised financial instruments, including significant terms and conditions that may affect the
amount, timing and certainty of future cash flows are disclosed in the respective notes above, where applicable.
The Company does not generally enter into derivative transactions (such as interest rate swaps and forward foreign currency contracts) and it is, and
has been throughout the period covered by these financial statements, the Company’s policy that no trading in financial derivative instruments shall
be undertaken.
Credit risk
Credit risk is the risk that a counter-party will cause a financial loss to the Company by failing to discharge its obligations to the Company.
The Company manages its exposure to this risk by applying limits to the amount of credit exposure to any one counterparty and employs
strict minimum credit worthiness criteria as to the choice of counterparty. The maximum exposure to credit risk for receivables and other
financial assets is represented by their carrying amount. The company considers credit risk to be low due to its processes and the nature
of its customers, being mainly large corporates.
The Company establishes an allowance for impairment that represents its estimate of incurred losses in respect of the trade and other
receivables as appropriate. The allowance comprises a provision against individually significant exposures.
Ageing analysis
The ageing analysis of the Company’s trade receivables is as follows:
Current
Up to 30 days
30 to 60 days
90 days and older
Bad debt provision
31 December 2016
£
30 September 2015
£
1 October 2014
£
499,479
228,256
113,492
91,804
(5,011)
928,020
278,510
144,689
96,469
79,286
—
598,954
248,239
215,290
36,495
45,842
(23,053)
522,813
These receivables are not secured by any collateral or credit enhancement. Normal credit terms are 30 days.
Receivables past due total £205,296 (2015: £175,755, 2014: £82,337), of which £5,011 (2015: £Nil, 2014: £23,053) have been impaired.
The Company only holds cash at banks with a credit rating of A to mitigate the credit risk on cash deposits.
Fair values
The directors have assessed that the fair values of cash and short-term deposits, trade receivables, trade payables and other current
liabilities approximate to their carrying amounts largely due to the short-term maturities of these instruments.
Interest rate risk
The Company’s policy is to fund its operations through the use of retained earnings and equity.
The Company’s exposure to changes in interest rates relates primarily to cash at bank. Cash is held either on current or short term deposits
at a floating rate of interest determined by the relevant bank’s prevailing base rate.
40
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
Interest rate sensitivity
When reviewing the sensitivity to movement in interest rates it is noted that the majority of the cash as at 31 December 2016 was
received as a result of listing in the year. An average taken throughout the year would be significantly lower than this and it is therefore
considered that even if interest rates increased 1% there would be no material impact.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk:
• commodity price risk;
•
interest rate risk; and
• foreign currency risk.
Financial instruments affected by market risk include deposits, trade receivables, trade payables and accrued liabilities.
Foreign currency exchange risk
Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of the changes in foreign
exchange rates. The Company’s exposure to the risk of changes in foreign exchange rates relates primarily to the Company’s operating
activities when revenue or expense is denominated in a foreign currency.
The Company does not hedge its foreign currencies. Transactions with customers are mainly denominated in GBP.
The Company has suppliers that invoice in US dollars. The balances exposed to credit risk at year end are as follows:
US Dollars
31 December 2016
$
30 September 2015
$
1 October 2014
$
13,932
84,882
26,319
A sensitivity analysis has not been presented as the potential impact is not considered to be material.
Liquidity risk
Liquidity risk arises from the Company’s management of working capital. It is the risk that the Company will encounter difficulty in
meeting its financial obligations as they fall due.
The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due.
The maturity profile of the Company’s financial liabilities at the reporting dates, based on contractual undiscounted payments, are
summarised below:
Due within 3 months
Trade and other payables
19. Related party transactions
31 December 2016
£
30 September 2015
£
1 October 2014
£
1,045,339
563,756
448,742
Directors and key management personnel compensation has been disclosed in note 7.
In addition to the related party information disclosed elsewhere in the financial statements, the following were significant related party
transactions during the year/period under review and at terms and rates agreed between the parties:
ECSC Group plc
Annual Report and Accounts 2016
41
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
19. Related party transactions
During the years, dividends were paid to directors and their close family members as follows:
Dividends paid to Directors and their close family members
Total
Bank facilities of up to £250,000 are secured personally by one of the directors.
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
253,885
253,885
220,367
220,367
In October 2015, loans amounting to £84,757 were granted to two directors to enable them to exercise share options. The loans are
interest free and are repayable on a sale or flotation of the Company or earlier, at the borrowers’ discretion. The loans were discounted to
£79,611 and were fully repaid in the period ended 31 December 2016.
An additional loan of £12,547 was made to a director in the period ended 31 December 2016. This loan is interest free and was repaid in
the period ended 31 December 2016.
20. Share based payments
Equity-settled share based payments
The Company operates an Enterprise Management Incentive Share Scheme. At the end of the previous period seven employees and
directors held options.
Unapproved options have also been granted to non-qualifying individuals and at the end of the previous period one employee held these options.
The options are subject to criteria set by the Board, including the option holder’s continuing employment. The options are not transferable
and have a life of ten years.
Details of the number of share options and the weighted average exercise price (WAEP) outstanding during each period are as follows:
Exercise price
£
2015
No.
Expired
No.
Granted
No.
Bonus
No.*
Exercised
No.
2016
No.
Expiry date
31 October 2015
30 March 2018
31 March 2019
31 March 2020
28 February 2021
31 March 2021
31 March 2023
19 November 2025
12 September 2026
Outstanding at end of period
Weighted average exercise price
54.02
75.24
97.09
103.54
133.94
163.06
179.35
197.00
233.0
1,569
536
676
134
418
218
615
—
—
4,166
(1,569)
—
—
—
—
—
—
—
—
(1,569)
—
—
—
—
—
—
—
1,400
625
2,025
—
590
743
146
460
240
677
1,540
688
5,084
—
(1,126)
(1,419)
(280)
(878)
(458)
(1,292)
(2,940)
(1,313)
(9,706)
—
—
—
—
—
—
—
—
—
—
2016
£
—
2015
£
97.56
* On 28 October 2016, the Company passed a resolution to issue to shareholders 110 Ordinary Shares of £0.01 each for every 100 existing
Ordinary Shares of £0.01 each held by them by way of a bonus issue.
In accordance with the requirements of IFRS 2, the Company calculated the fair value of the share options at the date of grant using a Black
Scholes option pricing model.
42
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
The following inputs were made into the model for each grant of options:
• Share price – estimated based on a multiple of adjusted earnings
• Risk free rate – based on 10 year UK Government Bond yields
• Volatility – estimated at 20%
• Option life and vesting period – 10 years
Based on these calculations, the fair value of the share options at each grant date was not material and therefore no share based payment
charge has been recorded.
All share options were exercised on listing, with none carried forward into 2017.
21. Dividends
Dividends paid
A shares
B shares
Total
Dividend per share (unadjusted)
A shares
B shares
Dividend per share (adjusted to reflect the subdivision and bonus issues described in Note 17)
A shares
B shares
22. Commitments
The Company had not entered into any material capital commitments as at 31 December 2016.
The Company’s future minimum lease payments under non-cancellable operating leases are as follows:
Not later than one year
Later than one year and not later than five years
More than five years
23. Control
There is no overall controlling party.
15 months ended
Year ended
31 December 2016
£
30 September 2015
£
166,796
87,089
253,885
205,091
23,820
228,911
10.31
14.04
0.48
0.48
12.68
3.84
0.06
0.02
15 months ended
Year ended
31 December 2016
£
30 September 2015
£
140,732
207,718
72,099
420,549
110,826
346,903
218,860
676,589
ECSC Group plc
Annual Report and Accounts 2016
43
Strategic report
Corporate governance
Financial statements
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
for the 15 months ended 31 December 2016
24. Transition to IFRS
The financial statements prepared for the period ended 31 December 2016 is the first the Company has prepared in accordance with IFRS.
For periods up to and including the year ended 30 September 2015, the Company prepared its financial statements in accordance with
generally accepted accounting principles in the United Kingdom (UK GAAP), and under the Financial Reporting Standard for Smaller
Entities (“FRSSE”).
Accordingly, the Company has prepared financial statements which complies with IFRS applicable for periods ending on or after
31 December 2016, as described in the summary of significant accounting policies. In preparing the financial statements, the Company’s
opening statement of financial position was prepared as at 1 October 2014, the date of transition to IFRS.
In restating its UK GAAP financial statements, the Company has made adjustments to:
• Recognise operating lease incentives over the full lease term,
• Discount interest free loans to amortised cost; and
• Capitalise and amortise development costs.
Although the date of transition to IFRS was 1 October 2014 the opening balance sheet has been restated to capitalise development costs
from 1 October 2012. This is the earliest point at which reliable data on development activities was available and prior to this date
development costs/effort was minimal. Software development costs have been capitalised on a consistent basis from this point onwards.
A summary of the impact of transition to the statement of financial position is as follows:
30 September 2015
1 October 2014
£
£
508,041
379,220
(12,375)
345,531
(91,568)
(50,793)
(7,875)
203,201
(36,694)
(33,301)
698,836
504,551
Year ended
30 September 2015
£
Year ended
30 September 2014
£
357,732
326,185
(4,500)
142,330
(54,874)
(17,491)
423,197
(4,500)
121,330
(28,507)
(18,565)
395,943
Equity reported in accordance with UK GAAP and FRSSE
Transition adjustments:
Operating lease incentives
Capitalisation of development costs
Amortisation of development costs
Capitalisation and amortisation
Equity reported in accordance with IFRS
A summary of the impact of transition to the Statement of Comprehensive Income is as follows:
Profit after tax reported in accordance with UK GAAP
Transition adjustments:
Operating lease incentives
Capitalisation of development costs
Amortisation of development costs
Capitalisation and amortisation
Total comprehensive income reported in accordance with IFRS
44
ECSC Group plc
Annual Report and Accounts 2016
Strategic report
Directors’ report
Financial statements
25. Adjusted profit before tax
(Loss)/profit before taxation
Exceptional IPO costs
Adjusted profit before taxation
26. Exceptional costs
15 months ended
31 December 2016
£
Year ended
30 September 2015
£
(517,136)
974,876
457,740
518,174
—
518,174
As part of the costs of the admission to trading on AIM for the first time, costs of £1,288,081 were incurred. Costs of £313,205 have been
allocated against share premium, being the costs associated with share listing. The remaining £974,876 has been expensed in the year.
27. Subsidiary undertakings
The Company currently has the following wholly-owned subsidiary, which is incorporated and registered in England and Wales, of which
ECSC Group plc holds 100% of the £1 share capital:
Name of Subsidiary
Registered Office
Date of Incorporation
Principal Activity
ECSC Australia Limited
28 Campus Road
Listerhills Science Park
Bradford
BD7 1HR
29 September 2016
Dormant
ECSC Group plc
Annual Report and Accounts 2016
45
CORPORATE INFORMATION
Financial PR
Yellow Jersey PR
7th Floor, 22 Upper Ground
London
SE1 9PD
Auditors
BDO LLP
1 Bridgewater Place
Water Lane
Leeds
LS11 5RU
Solicitors
Freeths LLP
One Vine Street
Mayfair
London
W1J 0AH
ECSC Group plc
Registered number 03964848
Registered Office
28 Campus Road
Listerhills Science Park
Bradford
BD7 1HR
Company Secretary
Keith Kelly
Nominated Adviser & Broker
Stockdale Securities Ltd
Beaufort House
15 St Botolph Street
London
EC3A 7BB
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing Business Park
West Sussex
BD99 6DA
46
ECSC Group plc
Annual Report and Accounts 2016
NOTICE OF AGMAs a Board, we believe that the delivery of our strategy, particularly through the aggressive scaling of our business that we are presently embarking on, should be based on strong governance. We also believe that good governance is essential to the way in which we run our business on a day-to-day basis, and we aim to operate to the governance standards required of much larger listed companies, where appropriate.Annual General MeetingThis year, our Annual General Meeting will be held at 2.00pm on 22 June 2017 at the Company’s Head Office; 28 Campus Road, Listerhills Science Park, Bradford, BD7 1HR. I would like to invite all our shareholders to attend; myself and the rest of the Board look forward to meeting you.Nigel PayneChairman21 March 2017EffectivenessThe Company continues to evolve and expand its scale of operations. The Board recognises that managing such growth requires clear oversight by the Board, and our evaluation of effectiveness of the Board and its Committees is rigorous to ensure that we identify those areas for continued focus and development for the year ahead. AccountabilityThe Board recognises its responsibility to present a fair, balanced and understandable assessment of the Company’s position and prospects in this Annual Report, to assess the principal risks of the business, to ensure that reliable systems of risk management and internal control are in place, and to provide a statement as to the Company’s long-term viability. Relations with shareholdersThe Board recognises and values the importance of maintaining healthy and open communication with our shareholders to ensure mutual understanding of our strategy, objectives, governance and performance. The Board receives regular investor reports which detail the feedback from investor meetings. This helps inform Board discussion on the views of investors and analysts on strategy.RemunerationWhilst the Board recognises that its employees are working in a sector that demonstrates both high demand for talent and associated rising labour costs, the Board’s remuneration policy will seek at all times to be within acceptable boundaries. One of the Remuneration Committee’s principal areas of focus for this year will be to review the policies put in place as part of our recent admission to AIM and to engage with stakeholders to consider changes should they be required.LeadershipAn effective Board is essential to a successfully run company. We have a strong group of Directors with a broad range of relevant public company, finance and information technology experience, a balance that results in effective collective decision making. The balance between Executive and Independent Directors was considered during the formation of the Board, with appointments made based on management’s desire to add complementary skills and independent perspective to the Board. Brief biographies of all Directors can be found on pages 18 to 19.CultureThe Board closely monitors developments in corporate governance and assesses how these can be applied to ECSC and how we can embed them within the culture of the Company. The Board believes that sound governance is essential to protecting shareholder value and the sustainable growth of the business. Strong governance is also a foundation stone for a healthy corporate culture of values, attitudes and behaviours, not only within an organisation’s daily operations, but also in its relations with its all of its stakeholders. As a Board, we recognise that standards are set from the top and that the Directors must lead by example to ensure that excellent standards permeate throughout all levels of the Company. @