Our Expertise,
Your Peace of Mind
G
R
C
I
n
t
e
r
n
a
t
i
o
n
a
l
G
r
o
u
p
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
1
We believe we are
a global leader
in integrated cyber
and privacy solutions
Annual Report and Accounts 2021
CONTENTS
INTRODUC TION
We believe we are the only global
cyber security and privacy Group
that provides a united and
world-class one-stop shop which
delivers off-the-shelf and tailored
solutions for organisations looking
to seamlessly manage the
increasingly complex cyber and
privacy challenges all organisations
face today.
Our in-depth and diverse range of products and
services holistically addresses the IT governance,
risk management and compliance requirements for
organisations of every shape, size and geography.
As a Group we have the most comprehensive and
integrated global portfolio of cyber and privacy
solutions. Our joint expertise means we are succeeding
in our mission to be the business world’s go-to resource
for robustly managing cyber threats alongside meeting
global regulatory requirements.
Strategic Report
1-27
Highlights
At a Glance
Chairman’s Statement
Chief Executive Officer’s Review
Market Overview
Business Model
Our Strategy
Our Strategy in Action
Financial Review
Risk Management
Key Performance Indicators
Stakeholder Engagement
Corporate Governance
28-43
Governance Report
Application of the QCA Code
Board of Directors
Audit Committee Report
Remuneration Committee Report
Directors’ Report
Statement of Directors’
Responsibilities
Financial Statements
44-94
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flows
Nature of Operations and General
Information
Notes to the Financial Statements
Company Balance Sheet
Company Statement of
Changes in Equity
Notes to the Company Financial
Statements
1
2
4
6
9
10
12
14
18
22
24
26
28
30
34
36
40
42
43
44
50
50
51
52
53
54
65
84
85
86
Our Expertise,
Your Peace of Mind
HIGHLIGHTS
We have focused on steadily navigating the effects
of the pandemic by concentrating on securing
recurring revenue and producing higher gross
margins across all three of our divisions:
e-Commerce, SaaS and Professional Services.
This solid foundation and increasingly robust infrastructure has enabled us to
move into an exciting new period of growth.
We have continued investing in infrastructure and product
development across all divisions and regions. Exciting new
product launches have been driven both by market
demand and how our experts see the future of cyber
compliance developing, and these include:
– Cyber Security as a Service, Privacy as a Service, Remote
Working Security Assessment Service, EU-US Data
Transfers Assessment and Action Plan, Certified ISO
27701 PIMS Lead Auditor Training Course, and
improved penetration testing and vulnerability scanning
for remote working
– Our growth has been driven by the changing threat
landscape caused by the emergence of hybrid working;
and all of the Group’s services and products can now
be deployed remotely to suit the evolving needs of
organisations across the globe
– We have seen significant organic growth across website
traffic in our fledgling businesses IT Governance EU and
USA, indicating that our tried and tested, established
UK growth strategy is working effectively across new
jurisdictions which puts us in a strong position for
significant future growth
– 2019’s data privacy acquisition, DQM GRC, has been
firmly embedded within the Group and it is now
effectively offering a wide range of our Group’s cyber
security services to its own customers
– We have unified the Group's marketing under one value
proposition and developed our brand strategy to
ensure companies work more seamlessly together to
further increase up and cross selling within the Group
– The Group has clearly demonstrated resilience and
success through uncertain times which we now plan to
build on as we look forward to developing further
opportunities in the cyber and compliance markets
FINANCIAL HIGHLIGHTS
Revenue (£’000)
£11,760
2020: £14,146
(17)%1
EBITDA2 (£’000)
£(1,131)
2020: £(1,859)
52%1
Loss before tax (£’000)
£(2,835)
2020: £(3,651)
22%1
Loss1 after tax (£’000)
Earnings per share (undiluted)
£(2,571)
2020: £(3,206)
20%1
(2.58)p
2020: (4.67)p
45%1
OPERATIONAL HIGHLIGHTS
Total billings3 (£’000)
Average FTE headcount
Billings per month per FTE
£12,252
2020: £14,027
(13)%1
149
2020: 187
(20)%1
£9,988
2020: £6,307
58%1
Website visits (‘000)
Website revenue (£’000)
Net customer additions
3,691
2020: 3,552
4%1
£4,002
2020: £2,293
74%1
3,477
2020: 3,864
(11)%1
1 Year-on-year: 2021 compared with 2020.
2 EBITDA (“Earnings Before Interest, Tax, Depreciation, Amortisation”) excludes share-based payment expenses (which are excluded as they are a
non-cash expense).
3 The relationship between billings and revenue is explained on page 24.
GRC International Group plc Annual Report and Accounts 2021
1
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT AT A GL ANCE
A comprehensive suite of
quality services and products
We are a global cyber security and privacy business that uses our wide-ranging and
in-depth expertise to build and package comprehensive solutions for our clients,
regardless of the organisation’s size, maturity or business sector.
The simplest and most effective solution for organisations worldwide is access to a supplier that can address all of their IT
governance, compliance and risk management needs with an integrated and comprehensive product and service portfolio.
We are that solution.
We work with customers across the globe to address their unique cyber and compliance challenges. This includes:
– Helping to ease the strain from the shortage of skilled cyber and privacy resources that are required to deliver and maintain
quality improvements, modifications and general operations
– Helping organisations successfully manage the increasing global compliance, regulatory and legislative burden
– Firstly ensuring organisations get basic cyber hygiene right and then helping them to advance their strategies and practices in
a world of ever-increasing cyber-criminal activities
WE DO THIS THROUGH
OUR SUITE OF LEADING SERVICES AND PRODUCTS
Training
We offer classroom and web-based
training courses, both trainer-led and
self-paced, which cover the A-Z of
cyber security and data protection
practices. Topics include the GDPR,
Privacy by Design, risk management,
business continuity, ISO 27001
certification and related topics.
Publishing and Distribution
We sell books, documentation
templates and software via the Group’s
websites, both those which we at GRC
have written ourselves, and those
supplied by expert third party authors
who are authorities in their field.
Consultancy
On-site and remote support to help
organisations design and implement
data protection, privacy and cyber
security policies and procedures. This
includes penetration testing, Payment
Card Industry Data Security Standard
(‘PCI DSS‘) compliance and Cyber
Essentials certification and consultancy.
Software
Our software solutions include a range
of ‘software-as-a-service‘ products
such as e-learning, risk assessment
and data flow mapping tools, data
monitoring and data watermarking
solutions. We have also released two
innovative and flagship products this
year that help organisations manage
and meet their cyber and privacy
needs all in one simple, affordable
solution: Cyber Security-as-a-Service,
and Privacy-as-a-Service.
A leading, global, ‘one-stop shop‘ supplier of cyber
security and privacy solutions that deliver great
value to clients. We provide a variety of services
including consultancy and certification, technical
security, software tools, books and toolkits and
training and qualifications. Our areas of expertise
include:
– Cyber Security as a Service
– Cyber resilience
– Governance and risk management
– Data protection compliance, GDPR
– Privacy as a Service
– EU/UK representative services
– Cyber security and ISO 27001
– IT Governance and COBIT®
– Service management
– Risk management
– PCI DSS
– Cyber Incident Response
– BCM and ISO 22301
– Penetration testing
– Cyber Essentials
– ISO 9001, ISO 14001, ISO 45001
– ITIL® and ISO 20000
– Cloud and PCI training
– SOC2 Consultancy
– Cloud Consultancy
– Project management, PRINCE2®
2
GRC International Group plc Annual Report and Accounts 2021
OUR DIVISIONAL STRUCTURE
Over the past three years we have evolved from a Governance,
Risk and Compliance consultancy into a cyber security and privacy
business that is split into three divisions: e-Commerce, SaaS and
Professional Services.
Across our three divisions, we work to improve our customers’ cyber
resilience and compliance postures. We use our expertise to deliver
comprehensive and robust solutions that are tailored to our customers’
risk appetites, budgets and business goals. This gives them peace of
mind and allows them to focus on what their business does best.
E-Commerce division
Software-as-a-Service division
Professional Services division
– 8 B2B ecommerce websites
– ‘Learn from Anywhere’ instructor led
and self-paced courses leading to
essential professional qualifications in:
– Cyber security
– Privacy/data protection
– ISO/IEC 27001
– Wide range of toolkits, books,
standards and software
– Risk assessment
– Data flow mapping
– DPIAs
– Data breach reporting
– Data watermarking and monitoring
– Vulnerability scanning
– Staff awareness e-learning
– GDPR as a Service
– Documentation toolkits
We help organisations meet their
compliance and cyber risk management
objectives with the appropriate cyber
security, data protection, and privacy by
design policies and procedures.
Other consultancy services:
– Penetration testing
– PCI DSS compliance
– Cyber Essentials certification
– Legal, GDPR and DPO services
Our customers include:
BAE Systems, Barclays, BBC, BT, Carlsberg,
Dominoes, Dun and Bradstreet, Freshfields
Bruckhaus Deringer, Grant Thornton,
Halfords, HSBC, John Lewis, Kubota,
National Health Service, Next, Inmarsat,
Royal Mail, Sipchem, Slaughter & May,
Thames Water, The Bank of England, UK
national and local government departments,
Vodafone, Volkswagen, US Army, PwC.
Where we are:
We are a global group of companies that
offers in-country delivery tailored to local
needs and cultures.
Physical offices: UK, Ireland and the
United States.
Website: 11 country websites, with interfaces
to all 27 non-UK member states buying from
one or another of those websites.
21%
E-Commerce
Division
Training.
Distribution.
UK Digital Marketing.
Cloud and PCI training.
1
2
19%
SaaS Division
Cyber Essentials.
GRC e-Learning,
(incl. Bespoke).
GDPR.co.uk.
Vigilant Software.
EU/UK Rep and CSaaS.
60%
3
Professional
Services Division
GDPR and GRC Consultancy.
Technical Services.
GRCI Law.
DQM GRC.
Cloud Consultancy, SOC2 Consultancy,
Cyber Incident Response.
CROSS SALES / DIVISION
1
2
3
– Service Centre
– Websites
– CRM System(s)
– ITGP Books
& Toolkits
– EU and USA
– Channel Team
GRC International Group plc Annual Report and Accounts 2021
3
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT CHAIRMAN’S S TATEMENT
The Group operates in global markets that are set
to grow significantly over the medium and long
term, with increasingly important short-term
demand as we move into a world where hybrid
working becomes the norm and organisations
become even more reliant on the adoption of
technology
Overview
I am delighted to contribute to GRC International’s
Annual Report for the year ended 31 March 2021, the
Group’s fourth Annual Report since admission to the
London Stock Exchange’s AIM market in March 2018.
GRC International strives to provide a ‘one-stop shop‘
for cyber security and data compliance products and
services delivered via a variety of channels. Whilst the
Group is UK-headquartered, its clients are global, and
its strategic ambition is to become an international
‘one-stop shop‘, expanding its geographic footprint
with overseas revenues exceeding domestic sales.
Developments over the last year have reinforced the
Group’s belief that cyber security, business continuity
and privacy compliance issues are critical for the
sustainability of ongoing business operations. Your
Board is confident that the Group is well positioned to
deliver the products and services its clients will require
to address these issues.
Performance
FY20 was a challenging year for the Group following the
fall off of GDPR activity, and the implementation of the
necessary reductions in staff. FY21 was of course even
more challenging, given the global impact of COVID-19.
Management reacted swiftly to the restrictions posed by
COVID-19, and driven by the need to protect our
employees, was able to establish a working-from-home
model in short order. The Group put in place a pandemic
response plan which embraced a significant drop in
revenues and cash receipts, utilising government help
and implementing exceptionally tight cost controls.
As a result, revenues declined by 16% to £11.8 million,
but the loss for the year was reduced from £3.2 million to
£2.6 million due to the annualised effect of FY20 cost
reductions and restructuring and due to management's
close attention to cost control in FY21. Within these
numbers, I am pleased to note that the H2 performance
was excellent with positive EBITDA in Q4 following a
small EBITDA loss in Q3. The improvement in results
began in November 2020 and has continued to the end of
Q1 and into Q2 FY22.
ANDREW STEPHEN BRODE
NON-EXECUTIVE CHAIRMAN
The Group’s strategic ambition
is to become an international
‘one-stop shop‘ under the
umbrella of governance, regulation
and compliance, expanding into
other forms of compliance and
new jurisdictions.
4
GRC International Group plc Annual Report and Accounts 2021
OUR S TORY SO FAR
HISTORY
Cyber security and privacy are two sides of the same
coin – organisations must demonstrate appropriate
security measures in order to demonstrate compliance.
We are an established cyber security and privacy
business, and we believe we are uniquely positioned
to help our clients achieve cyber resilience and
regulatory compliance through our range of
innovative and integrated solutions.
1997 Alan Calder and Steve Watkins become the first
people in the UK to successfully implement an
Information Security Management System (‘ISMS‘)
compliant with BS 7799 (the precursor to ISO 27001).
2006 IT Governance Ltd co-founds Vigilant Software Ltd
and subscribes to 50% of the equity. Vigilant develops
software programme to help organisations assess risks to
information and select appropriate controls to reduce risks.
2009 The Group acquires control of 80% of Vigilant
Software Ltd.
2019 Acquisition of DQM Group Holdings Ltd, a
provider of data consulting and technology solutions.
2020 Pivot to online delivery and remote working.
OUR MISSION
We serve an international customer base and deliver a
broad range of integrated, high-quality solutions that
meet the real-world needs of today’s organisations,
directors and practitioners.
Our mission is to use our Group’s united expertise to
deliver peace of mind to organisations across the globe,
and to help them:
Protect
their business
assets and
intellectual capital
Comply
with the
worldwide
increase in
regulation and
legislation
Thrive
as they use improved
cyber and privacy
practices to achieve
their business goals
OUR VALUES
GRC International Group is a dynamic and
fast-paced business that is dedicated to:
1. Solving our clients’ real business problems.
2. Being open and transparent with our clients, partners and
other stakeholders.
3. Being honest, responsible and accountable for the work
we do.
4. Collaborating with our colleagues and stakeholders.
5. Showing leadership and initiative both within the business
and externally.
6. Delivering results and exceeding our clients’ expectations.
People
In February 2021 Neil Acworth, the Group Chief
Information Officer, left the Board. Since the year end, in
May 2021 Steve Watkins, an Executive Director, also left
the Board. Steve will continue thereafter as a special
Board advisor providing ongoing insight into
developments in international standards.
The Board thanks Neil and Steve for all their hard work
and considerable contributions over many years. Their
responsibilities have been assumed by our experienced
management team.
The extraordinary impact of the pandemic on the global
economy has placed significant pressures upon our staff,
who have performed exceptionally well in largely
unfamiliar circumstances. GRC is essentially a people
business and depends upon the skills, passion and
commitment of the entire workforce to provide the
quality of service our clients demand. On behalf of the
Board I would like to place on record our thanks to all of
our employees for rising to the many challenges they
encountered.
Outlook
Whilst the Group continues to be unable to provide
financial guidance for FY22, the results for Q1 of FY22
are encouraging and in line with management’s
expectations. We are managing our cash position
within agreed parameters, and look forward to a
post- pandemic business environment confident that
our global markets will grow significantly over the
medium to long term.
Andrew Brode
Chairman
GRC International Group plc Annual Report and Accounts 2021
5
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
CHIEF E XECUTIVE OFFICER ’S RE VIE W
Our performance in FY21 is testament to
the Group’s inherent agility and foresight
which has enabled us to swiftly develop
new and innovative solutions, while also
focusing on securing recurrent revenue
and producing higher gross margins across
all of our three divisions
A year of two halves
After the Coronavirus-induced economic uncertainty
and commercial retraction that heavily impacted H1
FY21, the Group saw significant improvements in
performance across all areas of its business in H2,
culminating with strong Q4 revenue that generated
positive EBITDA and positive cash flow for the quarter.
The performance improvement started at the end of
November 2020, continued through Q4 into the new
financial year and is reflected in all our key performance
indicators:
H1 FY21
H2 FY21
Change
ALAN PHILIP CALDER
CHIEF EXECUTIVE OFFICER
Our expertise, and how we deliver
peace of mind to our customers, is
made possible by our people and
our commitment to retaining our
experienced core staff throughout
the pandemic.
Total revenue
Total billings*
Total billings per
FTE
Cyber security
billings
Recurring and
£5.4m
£5.6m
£6.4m
£6.7m
+18%
+20%
£39k
£46k
+18%
£3.6m
£4.5m
+25%
contracted billings
Website billings
Website visits
£3.0m
£1.5m
1.7m
£3.6m
£2.5m
1.9m
+20%
+67%
+12%
(The ’Cyber security’, ’Recuring and contracted’ and
’Website’ categories in the table above are non-
exclusive. An invoice or web sale can feature in more
than one category.)
– The March 2021 total monthly billings figure was the
strongest achieved by the Group in the two years
since March 2019.
– 45% of transactions in Q4 were from new customers,
with the balance from returning existing customers.
– 15 months after launching the first Group subscription
service, there were a cumulative 3,600 subscribers to
recurring revenue lines of business in Vigilant
Software, GRC e-Learning, IASME Cyber Essentials,
ITGP Toolkits, and GRCI Law, with a combined rolling
annual churn rate of only 2.2%.
* Billings equate to the total value (net of VAT) of invoices raised and cash sales through the Group's websites. This figure does not take account of
accrued or deferred income adjustments that are required to comply with UK-adopted International Financial Reporting Standards ("IFRS") but is
considered to provide useful information to the users of the Group's financial information. Billings is considered by the Board to be a key metric for
managing the business due to its direct relationship with cashflow. Cash receipts are driven by billings achieved each month rather than by revenue
recognised in accordance with IFRS.
6
GRC International Group plc Annual Report and Accounts 2021
OUR VALUE PROPOSITION
Our Expertise, Your Peace of Mind.
GRC International Group has the most comprehensive suite of
cyber security and privacy products and services in the world.
Our mission is to use our cohesive and in-depth expertise as a
Group to give our customers complete peace of mind for every
unique cyber and privacy challenge they face, with a holistic
approach to cyber security and compliance.
We have focused this year on developing and improving our
products and services to meet the needs of organisations that
are facing new challenges in uncertain territories around hybrid
working, Brexit and the significant rise in cyber criminal activity.
This includes the creation of our new COVID-secure training
centre, our new suite of ransomware and Cyber Incident
Response services, our EU and UK Representative Services, and
our Cyber Security as a Service and Privacy as a Service
solutions.
Our Expertise Recognised
We have won several awards recognising the Group’s expertise
this year, including;
• UK’s Top Cyber Security Solution Provider (Enterprise
Security Magazine)
• Best Privacy by Design Award (DMA Awards)
• Best Privacy and Data Ethics Initiative Award (DataIQ
Cost management across the year
Although we pivoted, in March 2020, to delivering 98%
of our services online, the COVID-19 recession meant
that our billings and revenues dipped significantly in
April 2020 before turning up again in May and June.
Cost and cash management therefore remained key
areas for the management team throughout the year,
during which we reduced Group overheads by £2.3
million (21%) from £11.2 million in FY20 to £8.9 million in
FY21 £1.4 million (61%) of this saving was in staff costs
and, although we drew to a limited extent on the UK
Government furlough scheme receiving a total of £0.1
million in payments (with a peak of less than 10% of our
staff on furlough in May 2020), we finished the year with
148.5 FTEs (Full Time Equivalents), which is where we
started FY20.
Cash management was aided by the deferral of certain
HMRC liabilities, as is fully explained in the Financial Review.
Awards)
GRC International
Group
TOP
CYBER
SECURITY
2020
SOLUTION PROVIDERS
IN UK
Our Expertise in the Media
Our experts are thought-leaders who are constantly future-
gazing and analysing the threat landscape. Our Group has
some of the best minds in compliance and cyber security that
are regularly asked for commentary within the media on key
industry topics.
CNBC, The Daily Telegraph, The Financial Times, MSN,
Business Insider, TechRadar Pro, Computer Weekly,
Compliance Week, SC Media.
Our expertise, and how we deliver peace of mind to our
customers, is made possible by our people.
Two key factors that helped us handle the trading upturn
in H2 were our commitment to retaining our experienced
core staff throughout the pandemic, and investing in
automation and customer-facing software solutions.
Divisional overview
The Group has three operating divisions: e-Commerce,
Software as a Service (’SaaS’) and Professional Services.
e-Commerce division (21% of Group billings –
(35)% YoY change)
The Group operates multiple business-to-business
(’B2B’) e-commerce websites, which provide market-
leading information across the broad range of cyber
security and privacy issues that concern today’s
organisations, and which also provide a route to market
for the majority of products and services. The IT
Governance-branded One-Stop Shop is, for a growing
number of organisations, their single source for
information, products and services that help them
survive today’s cyber threats, comply with a growing
range of privacy regulations and build thriving,
successful businesses.
The key products sold through our IT Governance
e-commerce websites are:
– Instructor-led professional training and qualifications
(58% of Division billings)
– Self-paced (distance) learning courses and
qualifications (13% of Division billings)
– e-books, audio books and international standards
(29% of Division billings)
GRC International Group plc Annual Report and Accounts 2021
7
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT CHIEF E XECUTIVE OFFICER ’S RE VIE W CONTINUED
SaaS division (19% of Group billings – (12)%
YoY change)
The SaaS division contains our high-volume, high-margin
software-enabled or software-as-a-service platforms.
While the gross margin achieved on our IASME Cyber
Essentials certification service is relatively low, the gross
margin on the other lines of business is in excess of 90%.
The SaaS division consists of:
– Vigilant Software’s CyberComply Risk and Compliance
management platform (14% of Division billings)
– The IASME Cyber Essentials certification service (43%
of Division billings)
– The GRC e-Learning Staff Awareness platform (43% of
Division billings
Professional Services division (60% of Group
billings – (1)% YoY change)
Our Professional Services division delivers high-value
consultancy services that help clients tackle their cyber
security and privacy governance and compliance
challenges.
The Professional Services division consists of:
•
IT Governance consulting services (48% of Division
billings)
– ISO27001 and information security management
systems
– Cyber security consultancy
– Penetration testing
– PCI DSS consultancy
• DQM GRC consulting services (33% of Division
billings)
– Privacy and GDPR
– Data quality management
– Data compliance and licence management
• GRCI Law (13% of Division billings)
– Privacy as a Service
– Legal and contract services
– EU and UK Rep services
– Data breach response services
Repeat and contracted billings, across the Group,
totalled £6.6 million, or 54% of total billings; this is an
increase of 4% on FY20 and reflects our ongoing
investment in improving the visibility and resilience of
our revenues.
Our businesses in the EU and the USA both made steady
progress through the year. Whilst both are still small
businesses and do not yet offer the full range of
products and services that are available through our UK
websites, encouragingly they both won new clients, and
became EBITDA positive in the year.
Carbon footprint
Our pivot, shifting the majority of our staff to permanent
home-working contracts, and delivering the majority of our
services online, has enabled us to complete the shift to a
virtually paper-free operation, as well as almost eliminating
the more substantial areas of our carbon footprint. Our
offices, and travel for work, were both important carbon
contributors and we have largely eliminated travel for work
while also reducing our office space by approximately 40%.
These three changes – paperless office, travel reduction
and office space reduction, take us as an organisation to
having a very low carbon footprint.
Summary
Our continued progress through FY21 is testament to
GRC International’s inherent nimbleness in swiftly
developing new products and solutions that can service all
of our clients’ cyber security and data protection needs.
One of our key competitive advantages is utilising the skill
and deep industry knowledge of our management team to
identify emerging trends in the market and consequent
client needs. Furthermore, we continue to be the only
organisation in the market that can deploy a full suite of
services that can help clients respond to proliferating
cyber security and privacy threats.
Product and service development remains at the heart
of what we do and is fundamental to our business model.
The market we operate in changes very quickly and we
are agile in launching new products and services on a
regular basis.
The cyber security market continues to be driven by a
mounting pressure on companies to have in place data
protection, privacy and cyber security systems and
procedures. It is this fundamental trend – one that we
see globally – that is driving the performance of our
cyber security-related products and services across all
three of our divisions.
The trajectory of the recovery from the Coronavirus
crisis remains unclear; we nevertheless believe we are
well-placed to serve the growing, and global, cyber
security market. In FY22, we intend to scale up our
business to better service clients and enable us to grow
margin-accretive, recurring revenues. The fundamentals
of our strategy remain unchanged, with investment in
our product and service offerings, across both new and
existing jurisdictions, coupled with continued growth in
cyber security demand, driving profitable growth for our
shareholders.
8
GRC International Group plc Annual Report and Accounts 2021
Alan Calder
Chief Executive Officer
MARK E T OVERVIE W
A global market driven by the growing volume
and scale of cyber security threats
The market for cyber security solutions and services is driven
predominantly by the rising number of cyber-attacks globally, which
are becoming increasingly sophisticated, coupled with increased
regulatory pressure for privacy and data security and a growing
demand for data processing transparency.
In addition to laws and regulations, companies are increasingly
required to provide assurance to their customers, regulators and
stakeholders that their data protection and cyber security systems
are adequate for the current risk environment.
Although data protection complaints received by the Information
Commissioner’s Office in the UK decreased marginally from 38,514
in 2019/20 to 36,607 in 2020/21,the FBI’s IC3 2020 Internet Crime
Report shows 791,790 suspected internet crime reports (an increase
os 300,000 on the prior year) costing, globally, more than $4.2
billion.
Businesses, therefore, require evidence of adequate security from all
the entities in their supply chains. For example, the payment card
brands, through their acquiring banks, require businesses (and their
suppliers) that process payment cards to meet the Payment Card
Industry Data Security Standard (’PCI DSS’) and the UK Government
already requires that organisations supplying it directly or indirectly
should comply with Cyber Essentials (its own standard).
We operate in a growing and global market
Due to the ’one-stop shop’ nature of GRC International’s business,
it is difficult to confirm the exact size of the global market for the
Group’s products and services. However, there are a number of
research reports that indicate the size and growth rate of this
market:
– The global cyber security market is predicted to be worth
US $243.6 billion by 2025, equating to a CAGR of 11.7% between
2020 and 2025 (according to VynZ Research).
– Cybersecurity Ventures predicted cybercrime will continue rising
and would cost businesses globally more than US $5.2 trillion over
the next five years.
– Average total to identify and contain a breach in 2019: 280 days
(Accenture-Ponemon Institute Cost of Cybercrime Study 2020).
– Average total cost of a cyber breach in 2019: US $3.86 million
(Accenture-Ponemon Institute Cost of Cybercrime Study 2020).
– Where cyber security skills were concerned, 82% of employers
report a shortage of cyber security skills and 61% of companies
thought their cyber security applicants weren’t adequately
qualified.
GRC International offers a unique proposition to
the market
In response to market trends in cyber security, there is a rising
number of consultancies, including the six major accountancy firms,
who now offer cyber security services. However, the Board maintains
that there are no other companies offering the wide range of
products and services that GRC International provides, either in the
UK or elsewhere.
Furthermore, the Board believes that no other company is able to
offer a bespoke solution for clients seeking to address their IT
governance, risk management and compliance requirements.
The COVID-19 pandemic accelerated corporate technology-
enablement and digitalisation as organisations were forced to rely
heavily on digitally-stored information, shared in vast quantities both
internally and externally. This increases the opportunity for data to
fall victim to a cyber-attack, resulting in potentially devastating
impacts to an organisation’s bottom line and reputation.
Although businesses around the world are recognising the criticality
of taking action, the pandemic created conflicting priorities in which
cyber security activity sometimes took a back seat. 81% of executives
said that the pandemic forced them to bypass cyber security
processes (Ernst & Young 2018-19 Global Information Security
Survey (’GISS’)). Cyber security, nevertheless, is still a ”high priority”
for 77% of company senior managements (UK Government Cyber
Security Breaches Survey 2021). Many organisations are currently
outsourcing cyber security functions, including functions of their
security operations centres.
Ernst & Young also reported that 77% of organisations had seen a
clear increase in cyber attacks in comparison with the previous year,
while threat actors have hit a new level of maturity and went on to
say: “Attackers are targeting a growing surface area and their tactics
are increasingly unpredictable. Just one in three respondents is
confident in their ability to make the supply chain suitably robust or
water-tight”.
The need for end-to-end compliance across the
supply chain with legal and regulatory obligations
is further increasing demand for our products
and services
All organisations have a legal and regulatory obligations to have in
place data protection and cyber security systems and procedures in
place. These laws and regulations (for example, EU GDPR and,
since Brexit, UK GDPR as well as a patchwork of state-level laws in
the USA) often have international reach outside of the countries
in which they are enacted.
The Board continues to believe that the most prominent legal,
regulatory and commercial standards relating to these areas will
continue to be adopted more widely across the globe. Organisations
will need to implement procedures and practices that will enable
them to demonstrate their compliance with the standards.
GRC International Group plc Annual Report and Accounts 2021
9
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT BUSINESS MODEL
Our core proposition is built around
our ability to provide a full range of
integrated services to clients
WHAT WE DELIVER
HOW WE DELIVER
PROFESSIONAL SERVICES
Consultancy
Our comprehensive and diverse range of
consultancy services and products has grown over
the years to meet the increase in customer
demand. Our two service offerings are:
We provide on-site and remote support, helping organisations to design and
implement data protection and cyber security policies and procedures.
Through GRCI Law, we also provide specialist legal privacy advice, and annual
support packages like Privacy as a Service and DPO as a Service.
– Consultancy
– Technical services
“Great product, always gives
out clear results.”
Vulnerability Scanning Service
SOFTWARE-AS-A-SERVICE
We create and sell software solutions, including a
range of ’software-as-a-service’ products such as
e-learning, risk assessment and data flow mapping
tools, data seeding and watermarking solutions, all
on an annual subscription basis.
Our in-house development team is able to deliver
continual improvements on the basis of customer
feedback and our own subject matter expertise.
E-COMMERCE
Our e-Commerce division is made up of the
Group’s training, publishing and distribution
services
“Fantastic must-have product
for anyone looking to
introduce or maintain an IT
Governance environment
within an organisation.”
Our newest acquisition, DQM GRC, is the leading data protection and Privacy by
Design consultancy.
The Group attracts most of its consultancy customers via online searches carried
out by the customer, through attendance on training courses, recommendation
or as a result of relationships that have developed over time.
We are successfully delivering 98% of our cyber security, privacy and continuity
services remotely to customers across the world.
We create and sell software solutions through our subsidiary, Vigilant
Software Ltd, including:
– vsRisk: Provides a programme for identifying and recording management
decisions relating to information security risk levels within an organisation.
– Compliance Manager: Assists with identifying the legal, contractual and
regulatory obligations to meet the Interested Parties clause 4.2 of ISO
27001.
– The Data Flow Mapping Tool: The quick, easy and affordable way for
organisations to map personal data.
Training
Instructor-led courses range from one to five days with typically 8-20
delegates:
– Our classroom training business is now completely online, with a bio
secure training centre that has opened in Cambridgeshire with an
innovative ’Learn from Anywhere’ multi-channel delivery model.
We also hold courses at:
– Hired premises.
– Customers’ premises (for organisations that require training for a large
number of their employees).
– Via live webinars to domestic and international audiences.
– Self-paced courses enable learners to acquire new skills at their own pace
ISO 27001 Toolkit
and in their own time.
10
GRC International Group plc Annual Report and Accounts 2021
Technical Services
Through this line we provide:
– Penetration testing: we carry out an authorised simulated
attack on a customer’s IT systems to test the effectiveness of
the systems and procedures and to identify any weaknesses.
We also offer simulated phishing attacks and a broad range
of security testing services.
– PCI DSS assessments: in line with contractual payment card
industry requirements, we regularly test organisations’ data
protection and cyber security systems.
– Cyber Essentials certification and consultancy: we provide
an accredited certification service that helps organisations of
all sizes become certified to the UK Government’s Cyber
Essentials scheme.
– GCRI Law is growing rapidly – revenues went up 99% from FY
2019/2020 £461,000 to FY2020/2021 £916,000. We have
focused on recurrent revenue and now have a growing list of
clients buying our DPOaaS and Privacy as a Service offerings
on annual contracts, which brings in 79% of our revenue.
– Our newest acquisition, DQM GRC, has been firmly
embedded into our Group, and is now selling a variety of the
Group’s original cyber security products to their client base,
such as the Group’s Cyber Health Check, whilst continuing to
retain key clients such as Royal Mail with their data
governance programme – which is now in its 15th year.
– We’ve been a leading Cyber Essentials certification body for
more than five years and have issued more than 5,500
certificates with our one-to-one consultancy support and
certification guarantee service.
– Clients now signing multi-year contracts, with a view to
secure £600,000 in revenue within the next 12 months.
– Custom views and reporting now available in new formats.
– Better integration with our other product lines (document
– Live chat now embedded within the tools to offer immediate
toolkits).
– All new design to Getting Started Welcome page. This will
help the users get to grips with all CyberComply has to offer
in a progression-based scoring system.
assistance to users.
– New help section baked into the tool – it is no longer
necessary for users to physically download manuals.
– Implemented additional control frameworks and regulations
– ISO 27701, NIST SP 800-171, ISO 27017 & 27018, UK-GDPR.
– Risk libraries baked into vsRisk, allowing a user to select from
a pre-defined library of risks to speed up the risk assessment
process.
Publishing and Distribution
Books
We commission authors to write books on the basis of feedback
from clients or knowledge of the markets in which the Group
operates. Most of the books we sell relate to how organisations
should manage their IT risk exposures or standards published
by various bodies.
Documentation templates
We create and sell 37 sets of documentation templates, the
most important of which are now sold through a cloud-based
subscription service.
– Number of IT Governance Publishing subscriptions grew by
343.75% YoY in Q4, with over 1,100 new users and an average
churn rate of just 0.99% throughout the year.
– IT Governance Publishing has sold more than 130,000 books
and pocket guides, 12,000 toolkits and templates, 9,500
audiobooks, and the company now has over 250 titles in
our portfolio.
– IT Governance Publishing published over 200 content updates
within the DocumentKits platform.
– GRC eLearning hit an exciting new milestone of hosting over
100,000 users on its corporate Learning Management System
(’LMS’) between 1,036 companies.
– Opened a new bio secure training centre in Cambridgeshire
with an innovative ’Learn from Anywhere’ multi-channel
– We ran 243 courses this year and secured £1.8million in
delivery model.
training revenue.
PROFESSIONAL SERVICES
Consultancy
Our comprehensive and diverse range of
We provide on-site and remote support, helping organisations to design and
consultancy services and products has grown over
implement data protection and cyber security policies and procedures.
HOW WE DELIVER
the years to meet the increase in customer
demand. Our two service offerings are:
– Consultancy
– Technical services
Through GRCI Law, we also provide specialist legal privacy advice, and annual
support packages like Privacy as a Service and DPO as a Service.
Our newest acquisition, DQM GRC, is the leading data protection and Privacy by
Design consultancy.
The Group attracts most of its consultancy customers via online searches carried
out by the customer, through attendance on training courses, recommendation
or as a result of relationships that have developed over time.
We are successfully delivering 98% of our cyber security, privacy and continuity
services remotely to customers across the world.
We create and sell software solutions through our subsidiary, Vigilant
Software Ltd, including:
– vsRisk: Provides a programme for identifying and recording management
decisions relating to information security risk levels within an organisation.
– Compliance Manager: Assists with identifying the legal, contractual and
regulatory obligations to meet the Interested Parties clause 4.2 of ISO
27001.
– The Data Flow Mapping Tool: The quick, easy and affordable way for
organisations to map personal data.
SOFTWARE-AS-A-SERVICE
We create and sell software solutions, including a
range of ’software-as-a-service’ products such as
e-learning, risk assessment and data flow mapping
tools, data seeding and watermarking solutions, all
on an annual subscription basis.
Our in-house development team is able to deliver
continual improvements on the basis of customer
feedback and our own subject matter expertise.
E-COMMERCE
Our e-Commerce division is made up of the
Group’s training, publishing and distribution
services
Training
delegates:
Instructor-led courses range from one to five days with typically 8-20
– Our classroom training business is now completely online, with a bio
secure training centre that has opened in Cambridgeshire with an
innovative ’Learn from Anywhere’ multi-channel delivery model.
We also hold courses at:
– Hired premises.
– Customers’ premises (for organisations that require training for a large
number of their employees).
– Via live webinars to domestic and international audiences.
– Self-paced courses enable learners to acquire new skills at their own pace
and in their own time.
STRATEGIC REPORT
“I cannot think of a better way to start
understanding ISO 27001 and
information security management
systems.”
Certified ISO 27001 ISMS Lead Implementer
Training Course
Technical Services
Through this line we provide:
– Penetration testing: we carry out an authorised simulated
attack on a customer’s IT systems to test the effectiveness of
the systems and procedures and to identify any weaknesses.
We also offer simulated phishing attacks and a broad range
of security testing services.
– PCI DSS assessments: in line with contractual payment card
industry requirements, we regularly test organisations’ data
protection and cyber security systems.
– Cyber Essentials certification and consultancy: we provide
an accredited certification service that helps organisations of
all sizes become certified to the UK Government’s Cyber
Essentials scheme.
– GCRI Law is growing rapidly – revenues went up 99% from FY
2019/2020 £461,000 to FY2020/2021 £916,000. We have
focused on recurrent revenue and now have a growing list of
clients buying our DPOaaS and Privacy as a Service offerings
on annual contracts, which brings in 79% of our revenue.
– Our newest acquisition, DQM GRC, has been firmly
embedded into our Group, and is now selling a variety of the
Group’s original cyber security products to their client base,
such as the Group’s Cyber Health Check, whilst continuing to
retain key clients such as Royal Mail with their data
governance programme – which is now in its 15th year.
– We’ve been a leading Cyber Essentials certification body for
more than five years and have issued more than 5,500
certificates with our one-to-one consultancy support and
certification guarantee service.
– Clients now signing multi-year contracts, with a view to
secure £600,000 in revenue within the next 12 months.
– Custom views and reporting now available in new formats.
– Better integration with our other product lines (document
– Live chat now embedded within the tools to offer immediate
toolkits).
assistance to users.
– New help section baked into the tool – it is no longer
necessary for users to physically download manuals.
– Implemented additional control frameworks and regulations
– ISO 27701, NIST SP 800-171, ISO 27017 & 27018, UK-GDPR.
– Risk libraries baked into vsRisk, allowing a user to select from
a pre-defined library of risks to speed up the risk assessment
process.
Publishing and Distribution
Books
We commission authors to write books on the basis of feedback
from clients or knowledge of the markets in which the Group
operates. Most of the books we sell relate to how organisations
should manage their IT risk exposures or standards published
by various bodies.
Documentation templates
We create and sell 37 sets of documentation templates, the
most important of which are now sold through a cloud-based
subscription service.
– All new design to Getting Started Welcome page. This will
help the users get to grips with all CyberComply has to offer
in a progression-based scoring system.
“vsRisk is an excellent product.”
vRisk
– Number of IT Governance Publishing subscriptions grew by
343.75% YoY in Q4, with over 1,100 new users and an average
churn rate of just 0.99% throughout the year.
– IT Governance Publishing has sold more than 130,000 books
and pocket guides, 12,000 toolkits and templates, 9,500
audiobooks, and the company now has over 250 titles in
our portfolio.
– IT Governance Publishing published over 200 content updates
within the DocumentKits platform.
– GRC eLearning hit an exciting new milestone of hosting over
100,000 users on its corporate Learning Management System
(’LMS’) between 1,036 companies.
– Opened a new bio secure training centre in Cambridgeshire
with an innovative ’Learn from Anywhere’ multi-channel
delivery model.
– We ran 243 courses this year and secured £1.8million in
training revenue.
GRC International Group plc Annual Report and Accounts 2021
11
FINANCIAL STATEMENTSGOVERNANCE
OUR S TR ATEGY
We have four strategic priorities
that enable us to grow our
’one-stop shop’
EXPAND EXISTING SERVICES
IN EXISTING MARKETS
We aim to deliver consistently high-quality, integrated solutions
that give our customers privacy and cyber peace of mind, fully
utilising our global capability and the world-class expertise of our
employees and consultants.
DELIVERING AGAINST OUR STRATEGY
– GRC e-Learning hit an exciting milestone of hosting over
100,000 users on its corporate Learning Management System
(’LMS’) between 1,036 companies.
– IT Governance Publishing has sold more than 130,000 books
and pocket guides, 12,000 toolkits and templates, 9,500
audiobooks, and the company now has over 250 titles in our
portfolio.
– GCRI Law had a rapid period of growth – revenues went up 99%
from FY2019/2020 £461,000 to FY2020/2021 £916,000. We have
focused on recurrent revenue and now have a growing list of
clients buying our DPOaaS and Privacy as a Service offerings on
annual contracts, which brings in 78% of our revenue.
– Our team issued 1,144 Cyber Essentials certificates this year.
With just over 30,000 Cyber Essentials certificates being issued
since its release in 2014, and with cyber crime continuing to rise
and the threat landscape changing to accommodate hybrid
working, we see this as a significant growth market and an
exciting opportunity for the Group to strongly position itself as
the go-to Cyber Essentials consultancy and certification body.
– The Group ran 243 cyber security and privacy training courses
this year. This is another avenue where we see customer demand
increasing over the next few years, as there currently aren’t
enough cyber security workers out there to meet the growing
demand, and things are getting worse. It is estimated that 3.5
million cyber security jobs are unfilled, and of the candidates
who apply, fewer than one in four are even appropriately
qualified.
– We have focused significantly on pushing organic growth
through our websites; and our established UK business model
has proven this growth converts into web sales and long-term
relationships with clients. In Q1 2021 we had over 1 million visits
to our IT Governance UK website (1,034,610) – an 18% increase
YoY. This resulted in web revenue increasing by a significant
140% to almost £1.3 million. Our conversion rate has also
increased to 0.25% – a 25.06% increase on Q1 2020.
There is a global demand for cyber
resilience and regulatory compliance
– COVID-19 has only intensified the
cyber threat landscape. As we move
into a world where hybrid working
becomes the norm, we will become
even more reliant on our connected
devices and the adoption of
technology – which creates an even
bigger playing field for cyber threat
actors, and speeds up the increase in
regulatory requirements, with the cost
of compliance failure mounting even
higher.
OUR MISSION
We exist to give cyber and privacy peace of mind
to all organisations through our Group’s united
expertise and comprehensive range of integrated,
world-class solutions.
OUR VISION
To be the business world’s go-to resource for
managing and mitigating both cyber and privacy
risk with integrated solutions – all deployed from
one place and one organisation.
DELIVERING OUR VISION THROUGH
FOUR STRATEGIC PILLARS
“The integrated governance service DQM
GRC provide to us is invaluable in the fight
against data misuse and protection of
our valuable data assets. The DQM
team always go the extra mile required
to exceed our expectations. We consider
them a valuable extension to our
knowledgeable team and a trusted partner.”
Royal Mail
12
GRC International Group plc Annual Report and Accounts 2021
EXPAND EXISTING SERVICES
INTO NEW JURISDICTIONS
ADDING NEW SERVICES
FOR EXISTING AND NEW CLIENTS
MAKE SELECTIVE ACQUISITIONS
The Group is rolling out its established
and successful business model and
infrastructure to the EU and USA, but
with appropriate adjustments to reflect
local cultures and market dynamics. We
have identified these areas as clear
growth markets for cyber compliance
activities.
DELIVERING AGAINST OUR STRATEGY
– Web traffic for IT Governance EU
increased by 23% YoY in Q1 2021. This
converted into a 23% increase in web
transactions and a significant 103%
increase from web revenue.
– Web traffic for IT Governance USA
increased by 21% YoY in Q1 2021. This
converted into a 21% increase in web
transactions and a 21% increase from
web revenue.
– Key client wins for IT Governance EU
include Equinor and Swift Soft
Computers.
– Key client wins for IT Governance USA
include Vanran Communications Inc
and LDAR Tools.
The global cyber and privacy markets
have continued to evolve rapidly
throughout the pandemic. This year we
have focused on securing recurring
revenue, increasing our gross margins
and growing our current capabilities –
with a specific focus on ensuring our
newest acquisition, DQM GRC, has been
successfully and fully embedded within
the Group. This has put us in a strong
position to make selective and strategic
acquisitions after the uncertainty
surrounding the pandemic has lifted,
where we will continue to invest to
enhance our proposition and create
growth opportunities from changing
market dynamics.
DELIVERING AGAINST OUR STRATEGY
– DQM GRC has been firmly embedded
into our Group, and is now selling a
variety of the Group’s original cyber
security products to their client base,
such as the Group’s Cyber Health
Check, whilst continuing to retain key
clients such as Royal Mail with their
data governance programme – which
is now in its 15th year.
We continue to evaluate market demand
for new services, products and
propositions to deliver to both existing
and new customers in both existing and
new jurisdictions. Agile and innovative, this
year, we launched 45 new products and
services specifically focused on serving the
cyber security and training needs of
organisations rapidly shifting to a remote
working model, along with a specific suite
of services designed to help organisations
manage and navigate the compliance
challenges resulting from Brexit.
We have proactively planned our future
business around COVID-19 restrictions –
all of our products and services can be
deployed remotely to suit our clients
and the changing business landscape.
DELIVERING AGAINST OUR STRATEGY
Product development is fundamental to
what we do. We are agile in launching
new products and services to match
customer demands and swift market
changes. We have successfully launched
a diverse variety of new cyber security
and compliance products and services
in all regions and divisions, including:
– Cyber Security as a Service
– Privacy as a Service
– UK GDPR and DPA 2018 Data
Protection Assessment Service
– Remote Working Security Assessment
Service
– Cyber Security for Remote Workers
Staff Awareness e-Learning Course
– Privacy by Design Foundation
Instructor-led Training Course
– GDPR RADAR Tool (GDPR Compliance
Tool)
– GDPR EU Representative, UK
Representative & Combined Service
– California Consumer Privacy Act –
Compliance Gap Assessment Tool (ITG
USA)
– EU-US Data Transfers Assessment and
Action Plan
– Privacy Essentials for Marketers
Training Course
– CCPA Gap Compliance Assessment Tool
GRC International Group plc Annual Report and Accounts 2021
13
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
OUR S TR ATEGY IN AC TION
1
Expand existing services
in existing markets
Expanding our comprehensive training portfolio to help ease
the strain from the global shortage of skilled cyber and
privacy resource.
THE TREND
OUR SOLUTION
Cyber security expertise and services
have never been needed more, as
workforces remain remote through the
rest of the year, and cyber threats
continue to rise and grow more
powerful. But while cybercrime grows
exponentially, businesses are facing a
severe cyber security talent drought.
The supply of available, qualified
security professionals is insufficient
and the competition for services has
dramatically increased – there are an
estimated 3.5 million cyber security jobs
that are currently unfilled in 2021.
Expanding and Delivering Our
Comprehensive Training
Portfolio
We have a vast portfolio of 48 cyber
security and privacy training courses
that can be deployed in classroom
environments and remotely, with a live
tutor or self-paced. We regularly refresh
and update our diverse range of courses
in line with customer demand and the
market landscape.
We added eight new courses to our
training portfolio this year – including a
Cyber security for Remote Workers Staff
Awareness e-Learning Course and a
Cyber Security Practitioner Instructor-led
Course.
– We ran 243 courses this year and
secured £1.8 million in training revenue.
– GRC e-Learning hit an exciting new
milestone of hosting over 100,000 users
on its corporate Learning Management
System (’LMS’) between 1,036
companies.
– Planning ahead for the aftermath of
the pandemic, we constructed a
new bio secure training centre in
Cambridgeshire with an innovative
’Learn from Anywhere’ multi-channel
delivery model.
“The Instructor clearly had an
extensive wealth of knowledge
and experience within this field,
and the training venue used was
excellent, so I can very easily
recommend this course to
anyone needing a starting point
into a Cyber Security career.”
\
Certified Ethical Hacker (’CEH’) Training
Course and CEH Practical Exam
“Thoroughly enjoyable course –
brilliant trainer – insightful,
useful and informative –
thoroughly recommended
– 5 stars!”
Certified Data Protection Officer
(’C-DPO’) Training Course
14
GRC International Group plc Annual Report and Accounts 2021
Helping organisations get the basics of cyber hygiene right in a
world of increasing cyber-criminal activity.
THE TREND
OUR SOLUTION
One of the Largest Cyber
Essentials Certification Bodies
in the UK
– Our Group issued 1,144 Cyber
Essentials certificates this year.
– We’re one of the founding Cyber
Essentials certification bodies and
remain one of the largest in the UK.
– We’ve issued more than 5,500
certificates to date and have helped
thousands more become cyber secure.
– Our Cyber Essentials services have
received an excellent NPS (Net
Promoter Score) of +68.
– Our Cyber Essentials packages include
cyber insurance, one-to-one
consultancy support and a certification
guarantee to bolster an organisation’s
commitment to baseline cyber security.
Cyber criminals have taken advantage
of a fractured workforce landscape,
launching phishing campaigns that have
exploited the fear and uncertainty
about the pandemic, and targeting
vulnerabilities in popular software.
Perhaps most disruptively of all, there
was a huge increase in ransomware
attacks with a 65% year-on-year increase
globally.
The need to defend critical
infrastructure from Advanced Persistent
Threats (’APTs’) has encouraged
governments across the globe to reform
their cyber security strategies, creating
a pool of opportunities for industry
participants.
Cyber Essentials is one of the most
cost-effective ways of bolstering an
organisation’s information security.
The UK government-backed scheme is
designed to help organisations address
common weaknesses without having to
spend a fortune overhauling their cyber
security practices. With just over 30,000
certificates being issued since its release
in 2014, we see this as a significant
growth market as organisations look to
improve security practices following the
aftermath of the pandemic and the shift
to hybrid working.
“From ease of ordering the
audit to continual
communication throughout the
process. What can be a
challenging audit was made to
run smoothly throughout. All
was managed remotely
including Audit and testing.”
Cyber Essentials and Cyber Essentials
Plus Certification
“Amazing service, very friendly
throughout and willing to help
you at every step throughout
the process.”
Cyber Essentials Certification and
Precheck
GRC International Group plc Annual Report and Accounts 2021
15
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT OUR S TR ATEGY IN AC TION
2
Expand existing services
into new jurisdictions
Helping organisations across the globe successfully manage
their increasing security and legislative burdens with the
Group’s proven ’tried and tested’ growth strategy.
THE TREND
OUR SOLUTION
ENISA has listed malware as the top
cyber threat in the EU this year, with
significant increases in phishing, identity
theft, and ransomware attacks. An ETL
report warns that there is a long road
ahead in order to reach a more secure
digital environment globally – which is
largely due to the weakening of existing
cyber security measures through
changes organisations have had to
make regarding both working and
infrastructure patterns that have arisen
due to the COVID-19 pandemic. This
global phenomenon has led to a surge
in cyber criminals’ personalised cyber
attacks, where they continue to use
more advanced methods and
techniques.
The Group has rolled out its ‘tried and
tested’ successful business model and
infrastructure to the EU and USA, but with
appropriate adjustments to reflect local
cultures and market dynamics. We are
now starting to see significant growth in
our EU region and the grassroots are
beginning to emerge in the US – these
are both identified as clear growth
markets for cyber compliance activities.
– Web traffic for IT Governance EU
increased by 23% YoY in Q1 2021. This
converted into a 23% increase in web
transactions and a significant 103%
increase from web revenue.
– Web traffic for IT Governance USA
increased by 21% YoY in Q1 2021. This
converted into a 21% increase in web
transactions and a 21% increase from
web revenue.
16
GRC International Group plc Annual Report and Accounts 2021
STRATEGIC REPORT
3
Adding new services for
existing and new clients
Making cyber security and regulatory compliance easy and
affordable for organisations of every shape and size.
THE TREND
OUR NEW, INNOVATIVE SOLUTIONS
90% of organisations intend to shift to a
hybrid working model where possible
after the pandemic. However, more than
a third of employees have picked up
bad security habits while working from
home during the pandemic, and cyber
crime levels continue to rise – with
ransomware attacks alone increasing by
65% year-on-year globally.
Implementing suitable technical and
organisational security measures is
especially important when it comes
to compliance with data protection law.
UK regulators such as the Information
Commissioner’s Office have made
allowances for the pressure the
pandemic put organisations under. Now
that restrictions are being lifted,
however, they will be less lenient, so it is
essential to act without delay if
organisations are making hybrid
working permanent.
The industry is also facing a huge talent
drought. According to Cybersecurity
Ventures, there are currently 3.5 million
unfilled cyber security jobs globally.
However, businesses must still defend
against threats in real-time, and the need
to recruit for a 24x7x365 cyber security
team is growing. Cyber criminals do not
take breaks, nights off or even holidays,
and filling positions with a work schedule
across all hours of the day, weekends and
holidays is incredibly challenging.
Our newest services have been designed
to address the fractured workforce along
with the rise in cyber crime and tougher
global regulatory action. They make
cyber compliance easy and affordable for
organisations of all sizes in two simple
packages and affordable subscription
services.
Cyber Security as a Service: Delivered
through IT Governance, this is a cost-
effective solution that offers
organisations an outsourced, pre-
packaged and comprehensive cyber
security department that works 24x7x365
to ensure they are, and continue to
remain, cyber secure – both at home and
in the office. It includes everything an
organisation needs to cover staff,
processes and infrastructure in one
simple package – and comes with a cyber
insurance package of up to £500,000 to
cover any worst-case scenarios.
Privacy as a Service: Delivered through
GRCI Law, this solution is the simplest,
fastest and most affordable way to
comply with the GDPR. It reduces an
organisation’s privacy risks with one
simple and affordable subscription
service – enabling organisations to enjoy
peace of mind with their own dedicated,
outsourced DPO or data privacy
manager for guidance, training and
support.
Our product deployment is now 100%
remote in order to suit the needs of our
clients and the future working landscape.
GRC International Group plc Annual Report and Accounts 2021
17
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT FINANCIAL RE VIE W
Strong momentum throughout the year has led
to a leaner and fitter business that has returned
to an EBITDA positive performance in Q4 and
built a solid foundation for future growth
The Group’s H1 performance very much followed the
mood of the nation. The national lockdown imposed at
the end of March 2020 closed significant parts of the
economy, and those businesses that were operational
focused on short-term survival. This led to an immediate
reduction in monthly billings as customers delayed
projects and cut back on spend not deemed to be
immediately business critical. The Group initially saw a
strong V-shaped recovery followed by a summer of
mixed results as the economy struggled to keep up with
regularly changing restrictions and government
guidance, along with the realisation that the pandemic
was set to last longer than most had initially expected.
However, from the end of November the Group
evidenced that customers had begun to have confidence
in the roadmap back to economic recovery and/or had
simply accepted that they had to get on with doing
business in an uncertain environment, recognising that
dealing with their cyber risks was a key part of that. The
Group built strong positive momentum through the
remainder of the year, delivering consistently EBITDA
positive results through the tail end of FY21 and
continuing into FY22.
Revenue
Overall revenue in FY21 was down 16% to £11.8 million
(FY20: £14.1 million). Revenue was significantly impacted
by the pandemic in H1, with revenue down 24% vs H1
FY20 at £5.4 million (H1 FY19: £7.1 million). H2 revenue
of £6.4 million showed somewhat of a return towards
normalised trading. Significantly, revenue of £3.5 million
in Q4 (up 21%) compared to £2.9 million in Q3
demonstrates the momentum as the year ended.
Additionally, February and March 2021 saw a significantly
higher value of invoices raised for future delivered work
than had typically been seen in the year. Although these
invoices do not aid the FY21 revenue result they will be
released as revenue in H1 FY22, a further sign of
business and economic recovery.
The Group has four key revenue streams:
– Consultancy
– Publishing and Distribution
– Software
– Training
CHRIS HARTSHORNE, FCCA
FINANCE DIRECTOR
Following a year of restructuring and
rebuilding in FY20 the Board were
looking forward to a year of profitable
growth in FY21 and were encouraged
by the EBITDA positive Group
performance in Q4 of FY20.
Unfortunately, the onset of the global
COVID-19 pandemic in the first quarter
of calender year 2020 and its
unprecedented impact on daily life and
the economy meant that plans and
expectations needed to be substantially
revised. Nevertheless, I’m delighted to
report that the Group has not only
navigated the pandemic but has built
strong momentum in FY21 H2,
returning to EBITDA positive
performance in Q4.
18
GRC International Group plc Annual Report and Accounts 2021
As shown in the tables below, whilst all revenue streams were impacted by the pandemic it was the training revenue
that declined most significantly, being the typical type on non-contracted, short-term 'discretional' spend that
customers delayed. The continually improving levels of recurring revenue and longer-term contract revenue in other
revenue streams ensured that the overall decline was not as severe as it otherwise could have been. The training
business has seen solid improvement through H2 and into FY22.
£’000
FY17
FY18
FY19
FY20
FY21
Consultancy
Publishing and
Distribution
Software
Training
2,898
5,274
7,228
8,635
8,106
1,042
1,649
1,337
977
750
410
399
1,513
1,356
1,147
2,483
8,366
5,771
3,178
1,757
Period-on-period
%
Consultancy
Publishing and
Distribution
Software
Training
FY18
FY19
FY20
FY21
£’000
FY17
FY18
FY19
FY20
FY21
82%
37%
19%
(6)%
58%
(19)%
(27)%
(23)%
(3)%
279%
(10)%
(15)%
237%
(31)%
(45)%
(45)%
UK
Non-UK
5,525
12,666
12,886
11,680
9,667
1,308
3,022
2,962
2,466
2,093
Total
6,833
15,688
15,849
14,146
11,760
Total
130%
1%
(11)%
(16)%
Non-UK
%
19%
19%
19%
17%
18%
Gross profit
Gross profit was down 25% to £6.1 million (FY20: £8.1 million) compared with the prior year. Gross profit as a
percentage of sales is down 500 basis points on the prior year at 52% (FY20: 57%). The majority of the Group's direct
cost base relates to headcount costs for consultants and client delivery staff. The sudden and dramatic revenue
drop in the early part of the year meant that sales revenue was temporarily out of alignment with the Group's costs.
Where possible, the Group took advantage of government furlough schemes to reduce the impact of staff
underutilisation to a manageable level, whilst also retaining and supporting the staff resource it needed as the
extraordinary trading circumstances experienced through H1 began to normalise and revenue returned towards
pre-COVID-19 levels. The Group received a total of £0.1 million in government furlough scheme payments during
the period. Whilst gross margin for the year as a whole was lower than usual, the margins achieved in Q4 were much
more in line with management expectations at above 60% and improving month on month.
Operating expenses
Other operating expenses (excluding share-based payment expenses and exceptional costs) decreased by £2.3
million to £8.9 million, down 21% (FY20: £11.2 million).
The Group worked hard in FY20 to restructure and reduce overhead spend. The cost reduction in H1 FY21 was the
result of action taken in FY20 combined with management retaining a strong focus on cost reduction into FY21.
Whilst management held back on discretional spend through the pandemic, the significant reduction in costs is not
a reaction to the COVID-19 trading environment but a pre-planned part of the FY21 finance strategy.
By the end of FY21 overheads were running at an annualised run rate a further £0.5 million lower than the full year
FY21 figure.
EBITDA
Although EBITDA is not a statutory measure, it is considered by the Board to be an important Key Performance
Indicator that is helpful to investors. This is considered to be a more accurate measure of underlying business
performance as it removes the impact of non-cash accounting adjustments.
Notwithstanding the 16% reduction in revenue impacted by the COVID-19 global pandemic, EBITDA loss reduced
by 42% to £1.1 million (FY20: £1.9 million loss).
GRC International Group plc Annual Report and Accounts 2021
19
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT FINANCIAL RE VIE W CONTINUED
Notably the EBITDA loss for the period was significantly smaller than
the reduction in revenue. Since the reduction in revenue was caused
by unusual trading circumstances and much of the Group's costs are
fixed, the Board believes that a positive EBITDA would have been
expected on a normalised level of revenue. This belief is supported
by the Q4 performance where the Group delivered EBITDA positive
results for February and March, and was EBITDA positive for the
quarter as a whole.
£’000
Operating loss
Depreciation
Amortisation
EBITDA
Unaudited
H1 FY21
Unaudited
H2 FY21
FY21
FY20
(1,427)
157
502
(768)
(1,161)
193
605
(363)
(2,588)
350
1,107
(1,131)
(3,425)
386
1,180
(1,859)
Finance expense
The net finance expense of £247k (FY20: £222k) relates mainly to
interest on the Group’s borrowings (£187k) and the IFRS 16 treatment
of leases (£60k).
Loss before tax
Loss before tax was £2.8 million (FY20: £3.7 million). Normalised loss
before tax (defined as loss before tax excluding share-based
payment expenses and exceptional costs) was £2.8 million (FY20:
£3.3 million).
Taxation
A tax credit of £264k has been recognised in the period (FY20: £445k
credit). The tax credit recognised relates primarily to the unwinding
of deferred tax on the acquisition of DQM and a Research and
Development tax credit. The Group has derecognised a deferred tax
asset of £138k in IT Governance Europe Ltd to bring the accounting
treatment in line with the rest of the Group. The Group has £1.3
million of deferred tax assets that are due to lack of uncertainty over
the timing of future profits. As clarity on the timing of future profits
crystallise the Group will look to recognise those assets and will
utilise them as part of its overall tax planning approval.
Earnings per share
Loss per share was 2.58 pence (FY20: loss per share of 4.67 pence).
Statement of financial position
Net assets were £6.9 million (31 March 2020: £9.4 million).
Net current liabilities at year end were up by £2.5 million from the
prior year to £5.2 million (31 March 2020: £2.7 million).
The main factors in the overall increase in net current liabilities are
the reduction in trade receivables of £0.6 million and the increase in
trade and other payables of £2.6 million. The other payables increase
arose mainly from the deferred HMRC liabilities through the
pandemic, as explained in the Going Concern section below.
Included within the current liabilities balance of £7.2 million
(31 March 2020: £5.4 million) is a deferred income balance of
£1.1 million (31 March 2020: £0.9 million), relating to training and
consultancy projects due to be delivered after the statement of
financial position date.
The Board continues to pay close attention to the working capital
management of debtors and creditors.
Intangible assets
The Group’s accounting policy is that only directly attributable staff
costs of the technical teams developing the assets are capitalised.
No management time is capitalised, and neither is any proportion of
overheads.
Additions of £1.2 million largely relate to software development of
£0.9 million and consultancy and courseware products of £0.2 million.
Cash flow and cash/debt
The Group’s closing cash position was £0.2 million (FY20: £0.2 million).
The significant reduction in operating cash outflows before changes
in working capital (FY21: £1.1 million, FY20: £1.9 million) is a reflection
of the improvement in trading result during the period. The increase
in trade and other payables during the year of £2.6 million largely
relates to loans and payment deferrals associated with government
support through the COVID-19 pandemic.
The Group has banking facilities to provide adequate headroom for
unforeseen working capital requirements by way of an uncommitted
invoice discounting facility that was inherited as part of the
acquisition of DQM. In addition, the unsecured loan facility provided
to the Company by Andrew Brode for the amount of £700k at an
interest rate of 5% above the Bank of England base rate to provide
additional working capital is available to the Company until at least
31 December 2022 and shall automatically renew for a further 12
months unless terminated by either party. At the year end the loan
facility was 50% drawn (31 March 2020: 100% drawn).
Borrowings (excluding lease obligations) at period end were £1.4
million (31 March 2020: £1.8 million) a decrease on the previous
period as loans to support the working capital requirements during
the restructuring in FY20 are paid down. A full schedule of
borrowings and terms are disclosed in note 9.
Going concern
The Group has recorded a loss for the year of £2.6 million (FY20: £3.2
million) and at 31 March 2021 its current liabilities exceeded its
current assets by £5.2 million (FY20: £2.7 million). Notwithstanding
this, the Directors consider it appropriate to prepare the financial
statements on a going concern basis. The key considerations
relating to this judgement are described below.
As set out above, the Group went through a transitional year of
restructuring in FY20 and was looking forward to a strong FY21,
continuing its H2 FY20 momentum and anticipating profitable
results for the year. However, the global COVID-19 pandemic led to
an immediate reduction in monthly billings as customers delayed
projects, reduced spend seen as not immediately critical to
day-to-day operations and focused on establishing new business
processes and procedures to survive the short term. This
unprecedented trading environment resulted in a reduction in
revenues for April and May 2020, followed initially by a strong
V-shaped recovery, but then a period of mixed results through the
summer as the economy stuttered in an environment of ever-
changing regulations and guidance. From late in Q3 the Group saw
genuine performance improvements with momentum building
through the rest of the year, and performance back to consistently
positive monthly EBITDA before the year end and into the new
financial year.
20
GRC International Group plc Annual Report and Accounts 2021
In response to the pandemic the Board revisited its FY21 and FY22
forecasts, increased the regularity of its short and medium-term
cash flow planning, implemented a number of key cost reduction
measures and took advantage of government initiatives that have
been introduced in the geographies that the Group operates in
order to preserve liquidity, supplemented by deferring the payment
of certain liabilities to HMRC which amounted to approximately £1.6
million. Additionally, in March 2021 certain subsidiaries of the Group
joined the HMRC VAT deferral scheme to defer repayment of VAT
liabilities totalling £0.4 million falling due in FY21 until FY22.
Notwithstanding some easing of trading conditions and subsequent
improvement in performance since the outbreak of the global
pandemic reached the United Kingdom (which represents around
82% of the Group’s revenue in FY21), the Directors acknowledge that
trading conditions will remain uncertain for the foreseeable future.
Those uncertainties include:
– The possibility of further local or national restrictions.
– The lack of visibility over future levels of revenue in the context of
weakened demand for the Group’s products and services.
– Should the Group need to further reduce its scalable cost base, its
ability to make those adjustments and realise the benefits from
doing that on a timely basis.
– The continued availability of existing financing, including HMRC
arrangements (see below), existing borrowings and flexibility
allowed by suppliers.
– The ability to access new financing, including further government
support in its various forms, sufficient to fund any further cash
requirement over the foreseeable future.
To assess going concern the Directors prepared an integrated profit
and loss, balance sheet and cash flow forecast by month to 31 March
2023. The Group’s base case forecast identifies that through the
going concern review period the Group is able to meet its liabilities
as they fall due and make settlement of the outstanding HMRC
liabilities through FY22 in equal monthly instalments. The majority of
the deferred payroll tax liabilities owed are now covered by formal
‘time to pay’ repayment plans agreed with HMRC. The repayment
plans differ across the trading entities within the Group, but all split
the deferred balance into equal monthly instalments, with the full
balance being repaid by September 2022, and the balance owing
as at the date of this report being £1.0 million. The Directors are
in discussions with HMRC to agree the repayment plan for the
remainder of the balance not yet covered by formal ‘time to pay’
arrangements and expect this to be formalised imminently.
Additionally, the Directors prepared a sensitised forecast to the base
case forecast where the COVID-19 pandemic was more prolonged
than envisaged by the Directors at the time (the ‘worst-case
forecast’). This worst-case forecast assumes that revenues until
March 2023 are 40% below the base case (marginally below those
actually achieved in FY21) and that cost reduction measures, to
reflect the reduced level of billings, have been effected. The
sensitised forecast does not identify a potential cash flow shortfall
in any month and includes the same assumptions for settlement of
the outstanding HMRC liabilities as in the base case forecast.
The Directors are monitoring actual business performance and cash
flow against the base case forecast and the worst-case forecast.
Encouragingly, the Group has traded ahead of the revenue,
EBITDA and cash flow expectations set out in the base case and
the sensitised forecast. Furthermore, in the view of the Directors
any temporary cash flow shortfall can be mitigated through the
deferment or removal of selected planned marketing, capital
expenditure and other scheduled cash outflows.
Based on the forecasts and the medium and longer-term planning
in place, the Directors have identified that they have a reasonable
expectation of being able to reduce costs sufficiently in the required
timeframe should revenue levels cause this to be necessary, and that
the Group will remain within its currently available facility levels, none
of which has any financial covenant compliance requirements. Central
to those facilities is the £700,000 unsecured loan facility provided by
Andrew Brode which is at present 50% utilised, and which remains in
place until at least 31 December 2022, although the Group does also
have access to additional liquidity through its uncommitted invoice
discounting facility, which is not currently utilised.
The Directors have reviewed the Group’s forecasts and projections
to 31 March 2023 which, taking account of reasonably possible
changes in trading performance, show that the Group is able to
generate sufficient liquidity to continue in operational existence for
the foreseeable future. On this basis, the Directors believe that the
Group will be able to generate sufficient cash through its normal
business trading to enable it to continue its operations, and
continue to meet, as and when they fall due, its planned and
committed liabilities for at least the next 12 months from the date
of this report. For this reason, the Directors continue to adopt the
going concern basis in the preparation of its financial statements.
However, should the Group not be able to generate cash inflows
sufficient to meet its current operational obligations and legacy
deferred obligations as they fall due, it would need to secure
additional funding with no guarantee such funding would be
secured. These circumstances indicate the existence of a material
uncertainty which may cast significant doubt over the Group’s ability
to continue as a going concern.
The financial statements do not include the adjustments that would
be required should the going concern basis of preparation no longer
be appropriate.
Capital structure
The issued share capital at 31 March 2021 was 99,931,509 ordinary
shares of £0.001 each (31 March 2020: 99,577,589). There were no
share options granted in the period to 31 March 2021, and the total
number of unexercised share options at 31 March 2021 was 426,760
(31 March 2020: 780,680).
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the
business. The key risks that could affect the Group’s performance,
and the factors which mitigate these risks, are set on pages 22 to 23.
The one exception is an additional point regarding liquidity risk and
the Group’s recognition of the need to regularly review and monitor
the Group’s financing. Further information is provided above under
’Cash flow and cash/debt’.
Chris Hartshorne
Finance Director
GRC International Group plc Annual Report and Accounts 2021
21
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT RISK MANAGEMENT
Our principal risks and uncertainties
The Group is exposed to a number of potential risks which may have a material effect on our
reputation, financial or operational performance. The Board is aware that the nature and scope
of risks can evolve and that there may be further risks to which GRC International is exposed.
While this list is not intended to be exhaustive, the Directors consider the below to be the
principal risks and uncertainties faced by the Group. The Board has overall responsibility for risk
management and internal control and is fully supported by the Audit Committee.
Risk
Mitigation
c
i
m
o
n
o
c
E
t
n
e
m
n
o
r
i
v
n
e
Our operations are affected by overall economic conditions in
the key geographic markets it operates in. The Group could be
affected by unforeseen events outside of its control including:
– Economic and political events, such as Brexit and COVID-19
– Inflation or deflation
– Currency exchange fluctuation
While the increasing geographic diversity of GRC provides some mitigation
from individual country economic fluctuations, we continue to review and
monitor our economic environment and will continue to consult widely to
better understand any economic uncertainty and associated impacts.
GRC operates on a basis of natural hedging to help minimise exposure to this
risk.
The COVID-19 disruption has led to reduced sales in the short term
and deferred projects. It has also disrupted daily business life with
remote working instigated wherever possible and a shift to remote
working and delivery.
With the continued uncertainty associated with the virus it is too
early to assess the impact on the Group’s operational and financial
performance in FY22 and beyond.
Business Continuity: GRC has executed its UK business continuity plan in
response to the UK Government’s instruction that where possible and as far
they are able to, all employees should work from home. The Company is able to
confirm that by 25 March all our staff across the Group in the UK, USA and EU
were successfully working from home and carrying out business as usual.
Encouragingly, to date this approach has meant that the Group has suffered
minimal disruption as a result of staff having to self-isolate.
9
1
-
D
V
O
C
I
t
n
e
m
n
o
r
i
v
n
e
g
n
i
t
a
r
e
p
O
Customer Focus: During March 2020, we successfully shifted almost all of our
client service delivery across our continuity, security and privacy compliance
services worldwide, online. With very minor exceptions, we are now able to
meet all our clients’ delivery needs – including classroom training, consultancy,
audit, testing and legal compliance services, on a remote basis to clients across
the world.
Privacy Management: While executing our continuity plan and completing our
pivot to comprehensive online service delivery, we were also successfully
audited against ISO/IEC 27701, the new privacy management extension to ISO/
IEC 27001. It is another standard for which we provide training and
implementation services.
The Group has adequate cash resource and committed undrawn debt facilities
available to ensure that the immediate impact of the disruption can be
managed. The business has a proven track record of disciplined cost control
which will continue to be vital in the current trading environment. We are
continuing to take action to reduce costs and preserve cash and, where
possible, will take advantage of emerging Government support schemes in all
of the geographies in which we operate including deferral of tax payments and
furloughing of some staff.
Competition: The Group's current competitors, or new entrants to
the market, particularly the data protection and cyber security
market, might bring superior technologies, products or services to
the market, or equivalent products or services at a lower price
which may have an adverse effect on the Group's business.
We believe that the best way to mitigate this risk is to continue to deliver and
maintain high-quality products and services to our customers. We continually
review and monitor competitive activity in all our markets to ensure GRC
remains innovative, competitive and attractive in the markets in which we
operate.
Customers: Loss of key customers has the potential to materially
impact Group revenue.
We have adapted to the COVID-19 pandemic by moving to remote working and
delivery of some of our services.
Compliance environment: Customer activity is to a significant
extent driven by their fear of a data or cyber security breach and
the regulatory and commercial consequences thereof. A reduction
in external compliance pressure on the Group's clients may have
an adverse effect on the Group's business.
Suppliers: We have a strategic relationship with Xanthos Ltd, a key
supplier of digital marketing and website services, and a related
party. If Xanthos Ltd were to withdraw provision of these services,
it may have an adverse impact on the business, results of
operations and financial condition of the Group.
In addition to the above, we seek to balance our exposure to customer
dependency across all our geographic markets.
We monitor customer demand and, in the event of a reduction in demand,
would take steps to reduce delivery capacity and overheads.
We maintain close working and contractual relationships with key suppliers and
endeavour to limit those services for which we have a single point of failure.
22
GRC International Group plc Annual Report and Accounts 2021
The markets in which the Group operates are subject to legal and
regulatory changes and the emergence of new industry standards.
To compete successfully, the Group will need to continue to
improve its products and services, and to develop and market new
products and services that keep pace with changes in legislation,
regulation and commercial practices.
d
n
a
n
o
i
t
a
l
s
i
g
e
L
n
o
i
t
a
l
u
g
e
r
We monitor developments and proposed changes in Government policies,
legislation, regulation and other factors that may impact our business and our
customers’ businesses. Our strategy is kept under close review to ensure we
respond to any such impact.
We have well-developed IT systems, operational controls, comprehensive
training and a rigorous compliance monitoring programme in order to maintain
adherence to legislation.
n
o
i
s
n
a
p
x
e
l
a
n
o
i
t
a
n
r
e
t
n
I
l
a
c
i
n
h
c
e
t
d
n
a
m
e
t
s
y
S
l
e
p
o
e
P
s
e
i
t
i
l
i
c
a
f
g
n
i
c
n
a
n
i
F
The continued expansion of the Group into new countries brings
associated risks. With a number of offices located outside the UK,
there is a risk that the Group’s growth overseas may result in a
reduction in the quality of control and oversight provided by senior
management.
The Board and senior management review international activity on a regular
basis and consider both strategic and operational issues that may impact
performance.
The Board has full oversight of UK and overseas operations through regular
management meetings, both remotely and in person.
Factors such as different time zones, languages, regulatory
regimes and working cultures may all reduce the efficacy of the
oversight provided by senior management.
The financial performance of the Group may be impacted by
changes to taxation regulation and the repatriation of profits, as
the UK has now left the EU.
The nature of the Group’s business means that it is exposed to a
number or risks associated with information technology which have
the potential to cause a significant impact on operational
performance, Company reputation and financial performance.
These risks include:
– Cyber security breach
– Data breach
– Reliance on key systems, including defects in software
We manage this risk in a number of ways, including external certification to
international security standards, such as ISO/IEC 27001 and UK standards such
as Cyber Essentials Plus.
Our GDPR compliance management system is externally audited to comply
with BS 10012.
A business continuity plan is in place to minimise the impact to the business
should IT systems fail. The internal IT team assesses risks associated with
potential cyber threats on a regular basis and uses antivirus software, amongst
other controls, to protect the integrity of systems. We also undertake regular
penetration testing to assess infrastructure and data security.
In the event that an IT incident does occur, back-up facilities are in place to
ensure business interruptions are minimised and internal and customer data is
protected from corruption or unauthorised access. GRC also has cyber
insurance appropriate to its risk profile.
We continue to invest in cyber security measures, tools and infrastructure, as
well as seeking to develop and upgrade systems in line with the Group’s plans
for significant expansion.
The Group's future will be greatly influenced by the continued
services and performance of its Directors and senior management.
GRC takes pride in creating a positive and exciting workplace environment,
through training, engagement, rewards and values.
Furthermore, failure to recruit and retain skilled personnel at all
levels across the business could also have an adverse impact.
The Remuneration Committee seeks to ensure that rewards correspond with
performance and retention.
With a strategy for the Group of significant growth, including
further international expansion, the Board recognises the
importance of regular review and monitoring of the Group’s
financing.
The Group maintains a short-term invoice discounting facility and
has an unsecured loan facility provided by Andrew Brode to
provide additional working capital. The Group only has a limited
forward order book for its services, creating unpredictability in
revenues and cash, hence impacting on the level of liquidity.
Further details are included on page 20 of this Annual Report in
the Financial Review under Going concern.
Keyman insurance has been put in place in respect of the Chief Executive
Officer, Alan Calder, for £750,000.
The Group maintains regular and transparent dialogue with its facility lenders
to ensure they are aware of developments in the business and reviews the level
of facilities required based on the Group’s forecasts.
The Board receives weekly and monthly information to enable it to consider the
Group’s short and medium-term performance. If performance is not in line with
forecast, the Group has a number of mitigating actions that could be
implemented.
GRC International Group plc Annual Report and Accounts 2021
23
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
K E Y PERFORMANCE INDIC ATORS
How we measure our performance
Billings
Billings equates to the total value of invoices raised and cash sales through
Group websites.
This figure does not take account of accrued or deferred income adjustments that
are required to comply with accounting standards.*
Total billings (£000s)
£12,253
(13)%
2020: £14,026
* Billings equate to the total value (net of VAT) of invoices raised and cash sales through the Group's websites.
The figure does not take account of accrued or deferred income adjustments that are required to comply with
UK-adopted International Financial Reporting Standards ("IFRS") but is considered to provide useful information
to the users of the Group's financial information. Billings is considered by the Board to be a key metric for
managing the business due to its direct relationship with cash-flow. Cash receipts are driven by billings achieved
each month rather than by revenue recognised in accordance with IFRS
Average FTE headcount
While the number of full-time equivalent (’FTE’) employees is not a KPI in itself, the
decrease demonstrates the scale of the Group’s restructure over the course of the
financial year.
Monthly billings divided by FTE employees
This is an internal target given to the Group’s sales and marketing teams.
16,260
15,833
14,026
12,253
20,000
15,000
10,000
5,000
0
2018
2019
2020
2021
Average FTE headcount
149
(20)%
FTE as at 31 March 2021: 149
FTE as at 31 March 2020: 187
300
250
200
150
100
50
0
270
177
187
149
2018
2019
2020
2021
Billings per FTE (£)
£9,988
58%
2020: £6,307
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
9,988
7,465
6,307
4,881
2018
2019
2020
2021
24
GRC International Group plc Annual Report and Accounts 2021
Website visits
The Group invests significant funds into digital marketing in order to maintain our
dominance of certain web search term results. There is a distinct correlation between
website visits and sales, however, we remain careful to use the term ’correlation’ rather
than ’causation’.
Website visits (000s)
3,691
4%
2020: 3,552
4,902
3,107
3,552
3,691
5,000
4,000
3,000
2,000
1,000
0
2018
2019
2020
2021
Website revenue
This equates to debit and credit card sales via the website that turn into cash
immediately. This is an important KPI as it is a key driver of the Group’s working capital.
Furthermore, the Group refers to website sales trends to estimate the returns generated
through digital marketing campaigns and, therefore, how to prioritise these accordingly.
Website revenue (£000s)
£4,002
74%
2020: £2,293
Underlying EBITDA
EBITDA (“Earnings Before Interest, Tax, Depreciation, Amortisation”) excludes share-
based payment expenses (which are excluded as they are a non-cash expense) and
exceptional costs in relation to acquisitions made in the year.
4,683
4,002
3,374
2,293
5,000
4,000
3,000
2,000
1,000
0
2018
2019
2020
2021
Underlying EBITDA (£000s)
£(1,131)
25%
2020: £(1,501)
2,000
1,000
0
-1,000
-2,000
-3,000
-4,000
-5,000
1,662
(1,501)
(1,131)
(4,336)
2018
2019
2020
2021
The Strategic Report was approved by the Board of Directors and signed on its behalf.
Alan Calder
Director
28 September 2021
GRC International Group plc Annual Report and Accounts 2021
25
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT S TAK EHOLDER ENGAGEMENT
We engage with our stakeholders to
develop effective relationships and
improve business decisions
By understanding our stakeholders
and listening to their views and
feedback, we can factor into
Board discussions the potential
impact of our decisions on each
stakeholder group and consider
their needs and concerns.
OUR STAKEHOLDERS
MATERIAL TOPICS
EMPLOYEES
Engaging with our people enables us to
create an inclusive company culture and a
positive working environment.
– Opportunities for
development and
progression
– Opportunity to share ideas
and make a difference
– Diversity and inclusion
S172 Statement
As required by s172 of the Companies Act 2006, a
director of a company must act in the way he
considers, in good faith, would most likely promote
the success of the company for the benefit of its
shareholders. In so doing, the director must have
regards amongst other matters to the:
– Likely consequences of any decision in the long
term
– Interests of the company’s employees
– Need to foster the company’s business
relationships with suppliers, customers
and others
– Impact of the company’s actions on the
community and environment
– Desirability of the company maintaining
a reputation for high standards of business
conduct
– Need to act fairly between members of
the company
CUSTOMERS
Listening to our customers helps us to
better understand their needs and provide
suitable and reliable products and services.
SHAREHOLDERS
Our shareholders are vital to the future
success of our business, providing funds
which aid business growth and the
generation of sustainable returns.
– Help customers make better
decisions
– Personalised customer
propositions
– Leveraging a deep
understanding of their needs
and views to create
innovative solutions
– Financial performance
– Strategy and business model
– Proactive approach to
communication
THIRD PARTY SUPPLIERS
Interaction with our suppliers and treating
our suppliers fairly allows us to drive higher
standards and reduce risk in our supply
chain whilst benefiting from cost
efficiencies and positive environmental
outcomes.
– Long-term partnerships
– Collaborative approach
– Open terms of business
– Fair payment terms
26
GRC International Group plc Annual Report and Accounts 2021
HOW WE ENGAGE
OUTCOMES
We have an experienced, diverse and dedicated workforce which
we recognise as the key asset of our business. It is vital to the
success of the Group to continue to create the right environment
to encourage and create opportunities for individuals and teams
to realise potential. FY21 was a transition year for employees as
we moved to a remote working organisation. Throughout the
COVID-19 lockdown daily employee briefings have been held.
Employees have been consulted on some very difficult decisions
facing the Group during the COVID-19 crisis. We have had an
overwhelming level of support throughout the organisation.
The majority of our previously office-based staff in all our
geographic locations are now permanently home-based.
Following the introduction of the HR Software tool in the later part
of FY19 we have much greater data accuracy, increased over data,
improved efficiency and a modern employment experience.
Social media is a key channel for mobilising customer engagement.
During the COVID-19 crisis we have actively supported many of our
customers with payment holidays and flexible approaches on
delivering our products.
Our classroom training business is now completely online, with a
bio secure training centre that has opened in Cambridgeshire with
an innovative ’Learn from Anywhere’ multi-channel delivery model.
We are successfully delivering 95% of our cyber security, privacy
and continuity services remotely to customers across the world.
During the year the primary mechanism for engaging with
shareholders in more depth was via meetings with the largest
shareholders following the financial results for the half and full year.
In addition, in FY21, additional areas of discussion with the largest
shareholders were focused on the future development of the Group.
Investors showed their support for the Board and the Company’s
strategy by passing all resolutions at the Annual General Meeting
and the general meetings to approve the raising of additional
funds to complete the purchase of DQM and additional working
capital requirements.
We operate in a way that safeguards against unfair business
practices and encourages suppliers and contractors to adopt
responsible business policies and practices for mutual benefit.
We recognise that we must, where possible, integrate our business
values and operations to meet the expectations of our
stakeholders, including customers, suppliers, the community and
environment.
We regularly monitor the relationship and engagement approach
with our third-party suppliers.
GRC International Group plc Annual Report and Accounts 2021
27
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT GOVERNANCE REPOR T
ANDREW STEPHEN BRODE
NON-EXECUTIVE CHAIRMAN
On behalf of the Board of Directors, I am pleased to introduce the
Group’s Corporate Governance Statement for the year ended
31 March 2021.
Introduction
This statement of the report sets out GRC International Group plc’s
approach to corporate governance and intends to provide
information on how the Board and its Committees operate. As a
Board, we take corporate governance very seriously, and I will
continue to ensure that we maintain high standards throughout
my tenure.
As a company whose shares are traded on the AIM market of the
London Stock Exchange, GRC International has chosen to monitor
and report its compliance with the Quoted Companies Alliance
(’QCA’) Corporate Governance Code (’the Code’) and its Statement
of Compliance with the same can be found with information on
governance arrangements on the Company website (https://www.
grci.group/corporate-governance).
Further information is provided in the table on pages 30-33.
This report seeks to inform shareholders about how it complies with
the QCA Code, and where it departs from the QCA Code the Board
will provide an explanation of the reason(s) for doing so.
The role of the Board
The Board is collectively responsible for GRC International’s
performance and creating value for shareholders. The Board meets
as often as required to effectively conduct its business. The Board is
responsible for overseeing the management of the Group and
approving the strategic direction of GRC International.
Composition of the Board and meetings
The QCA Code states that a company should have at least two
independent non-executive directors.
At the beginning of the year the Board comprised six Directors; four
Executive Directors and two independent Non-Executive Directors,
reflecting a blend of different experiences and backgrounds. On
17 February 2021 Neil Acworth (Executive Director) resigned his
position on the Board with immediate effect. On 13 May 2021 Steve
Watkins (Executive Director) resigned his position on the Board with
immediate effect. Both individuals continued to make themselves
available to the Board for a period to ensure smooth handover of
their responsibilities.
The Board believes that the current composition of the Board brings
a desirable range of skills and experience in light of the Company’s
challenges and opportunities following admission to AIM in March
2018, while simultaneously ensuring that no individual or group can
dominate the Board’s decision making.
The structure of the Board is designed to ensure that the Board
focuses on the strategic direction of the Group, monitoring its
performance, governance, risk and control issues.
The Board meets regularly to review, formulate and approve the
Group’s strategy, budgets, corporate actions and oversee the
Group’s progress towards its goals. The Company will continue to
appraise the structure of the Board on an ongoing basis.
28
GRC International Group plc Annual Report and Accounts 2021
The table below sets out the Directors’ attendance at scheduled
Board meetings during the period ended 31 March 2021, against the
number of meetings each Board member was eligible to attend:
The members of the Remuneration Committee include two
Non-Executive Directors. The Remuneration Committee comprises
Ric Piper (as Chairman) and Andrew Brode.
Andrew Brode
Alan Calder
Christopher Hartshorne
Stephen Watkins
Neil Acworth
Ric Piper
10/10
10/10
10/10
10/10
7/8
10/10
At each Board meeting, the Directors follow a formal agenda, which
is circulated in advance by the Company Secretary.
Board Committees
The Board has delegated specific responsibilities to the Audit
Committee and the Remuneration Committee, details of which are
set out below.
Each Committee has written Terms of Reference setting out
its duties, authorities and reporting responsibilities which can
be obtained from the Company Secretary on application via
https://www.grci.group/contact.
Audit Committee
The Audit Committee has the responsibility of reviewing and
reporting to the Board on the Group’s financial reporting, internal
control and risk management systems, the independence and
effectiveness of the external auditor.
The Audit Committee meets no less than two times in each financial
year and has unrestricted access to the Group’s external auditor. The
members of the Audit Committee comprise two Non-Executive
Directors: Ric Piper (as Chairman) and Andrew Brode.
More information about this Board Committee can be found in the
Remuneration Committee Report on pages 40 to 41.
Nomination Committee
No nomination committee has been established. Instead, decision-
making on matters of nomination and succession will be retained
with the Board as a whole. This approach is considered appropriate
considering the small size of the Board and is believed to enable all
Board members to take an active involvement in the consideration of
Board candidates and to support the Chair in matters of nomination
and succession.
Board effectiveness
In line with the requirements of the QCA Code, an annual evaluation
process is undertaken which considers the effectiveness of the
Board, its Committees and individual Directors. This review
identifies areas for improvement, informs training plans for Directors
and identifies areas of knowledge, expertise or diversity which
should be considered in the Group’s succession plans.
The evaluation did not take place on one specific date but via a
series of conversations, both during and outside regular Board
meetings. Conversations took place involving all members of the
Board together and as one on one conversations led by the
Chairman.
In addition to the annual evaluation exercise, there remains an
ongoing dialogue within the Board to ensure that it operates
effectively and that any matters raised are addressed in a timely
manner. The Board maintains strong relationships with external
advisers and has access to advice as required.
More information about this Board Committee can be found in the
Audit Committee Report on pages 36 to 39.
The performance of the Executive Directors is reviewed annually by
the Remuneration Committee in conjunction with their annual pay
review and the payment of bonuses.
Remuneration Committee
The Remuneration Committee reviews the performance of the
Executive Directors, Chairman of the Board and senior management
of the Group and makes recommendations to the Board on
matters relating to their remuneration and terms of service.
The Remuneration Committee also makes recommendations to the
Board on proposals for the granting of share options and other
equity incentives pursuant to any employee share option scheme
or equity incentive plans in operation from time to time.
The Remuneration Committee meets as and when necessary,
but at least once each year.
In exercising this role, the Directors have regard to the
recommendations put forward in the QCA Code and, where
appropriate, the QCA Remuneration Committee Guide and
associated guidance.
The Corporate Governance Statement was approved by the Board
of Directors and signed on its behalf.
Andrew Brode
Chairman
28 September 2021
GRC International Group plc Annual Report and Accounts 2021
29
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT APPLIC ATION OF THE QC A CODE
GOVERNANCE PRINCIPLE 1
Establish a strategy and business model which
promote long-term value for shareholders.
EXPLANATION
The Board is committed to delivering long-term
value for GRC International’s shareholders. The
Group’s business model and strategy is explained
fully within the Strategic Report on pages 12 to 13.
Details of the principal risks and uncertainties which
the Board considers to be associated with the
Group’s activities, together with the mitigating
actions which are being pursued in relation to them,
are set out on pages 22 to 23.
COMPLIANT
GOVERNANCE PRINCIPLE 2
Seek to understand and meet shareholder needs
and expectations.
EXPLANATION
The Board attaches great importance to
communication with all of GRC International’s
shareholders. We encourage all our shareholders to
attend our AGM, which provides a forum and time
for shareholders’ questions and open discussions.
Furthermore, feedback from investors is obtained
through direct interaction with the Chief Executive
Officer and Finance Director at meetings following
its interim full-year results, and certain other ad hoc
meetings that take place during the year.
There is a regular dialogue with shareholders
through the medium of the Company’s corporate
broker, Dowgate Capital Ltd.
The voting record at the Company’s general
meetings is monitored and we are pleased that all
resolutions proposed so far have been passed by
shareholders (with a great majority being passed by
100% of attending votes).
COMPLIANT
GOVERNANCE PRINCIPLE 3
Take into account wider stakeholder and social responsibilities
and their implications for long-term success.
EXPLANATION
As an international company, GRC International
places significant importance on understanding and
respecting different cultural and social values within
the international realm in which it operates.
The Group has adopted policies to encourage an
open and transparent corporate culture, including
policies addressing anti-slavery, anti-bribery and
whistleblowing. We continue to adopt new policies
and monitor existing policies on an ongoing basis.
Details of the stakeholder engagement which the
Board considers to be associated with the Group’s
activities are set out in the S172 disclosure on pages
26 to 27.
COMPLIANT
30
GRC International Group plc Annual Report and Accounts 2021
COMPLIANT
GOVERNANCE PRINCIPLE 4
Embed effective risk management, considering both opportunities
and threats, throughout the organisation.
EXPLANATION
Details of the principal risks and uncertainties which
the Board considers to be associated with the
Group’s activities, together with the mitigating
actions which are being pursued in relation to them,
are set out on pages 22 to 23.
The Company sets out in its annual report the steps
taken to ensure that effective risk management is
embedded within the Group's culture. The Board
has identified the principal business and financial
risks and has implemented control procedures. The
Group has an established framework of internal
financial controls which is subject to review by the
Directors and the Audit Committee considering the
ongoing risks faced by the Group.
The Board acknowledges its responsibility for
reviewing the effectiveness of the systems that are in
place to manage risk. However, no such system can
provide absolute assurance against misstatement or
loss. The Board considers that the internal controls
that are in place are appropriate for the size and
complexity of the Group. The key elements of the
Group’s internal control environment include:
– close involvement of the Executive Directors in the
day-to-day running of the Group;
– weekly Executive Committee meetings
– clear lines of authority and reporting established;
– centralised control and decision making over key
areas such as capital expenditure and financing; and
– a suite of daily and monthly reports focusing on
the key performance and risk areas. Such reports
include detailed annual budget setting with
monthly monitoring and daily reporting including
reports on sales, orders and cash balances
compared with budget.
The Board, with the advice of the Audit Committee,
has reviewed the effectiveness of the systems of
internal control for the year to 31 March 2021.
Given the current size of the Group and the close
involvement of the Executive Directors in the
day-to-day operations, the Group does not consider
it necessary to have a separate financial internal
audit function due to the Group’s size and its
centralised administrative function but keeps this
need under review. The Company receives regular
feedback from its external auditors on the
effectiveness of its internal controls and aims to
implement any improvements identified.
The Group undertakes regular updates and reviews
of its business processes, co-ordinated by the Group
quality function to ensure that it not only addresses
basic financial controls but that non-financial
controls are also in place over areas such as health
and safety, environmental issues and adherence to
law and regulations.
Mitigation can only provide reasonable, but not
absolute, assurance against material misstatement
or loss. As such the Group maintains appropriate
insurance cover for the Group’s activities, with the
types of cover and insured values being reviewed on
a periodic basis by the Board. The Group also has a
Business Continuity Plan to manage significant risks
such as the COVID-19 pandemic.
GOVERNANCE PRINCIPLE 5
Evaluate Board performance based on clear and relevant objectives,
seeking continuous improvement.
EXPLANATION
In line with the requirements of the QCA Code, an
annual evaluation process is undertaken which
considers the effectiveness of the Board, its
Committees and individual Directors. This review
identifies areas for improvement, informs training
plans for Directors and identifies areas of
knowledge, expertise or diversity which should be
considered in the Group’s succession plans.
The process of Board evaluation is a continuous one as
the Board communicates regularly as a group, picking
up on matters where a particular Director’s time and
efforts should be focused. Both the Chairman and the
CEO hold regular one-to-one conversations with other
members of the Board, with the Finance Director also
communicating regularly with the Chairman of the
Audit Committee. The Board is considered to be
operating effectively and appropriately for the size
and complexity of the Group.
COMPLIANT
GRC International Group plc Annual Report and Accounts 2021
31
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT COMPLIANT
APPLIC ATION OF THE QC A CODE CONTINUED
GOVERNANCE PRINCIPLE 6
Maintain the Board as a well-functioning, balanced
team led by the Chair.
EXPLANATION
The Board is responsible for taking all major
strategic decisions and also addressing any
significant operational matters. In addition, the
Board reviews the risk profile of the Group and
ensures that an adequate system of internal control
is in place.
The Board has a formal schedule of matters reserved
for its approval and is supported by the Audit and
Remuneration Committees. All Directors are
required to devote sufficient time to carry out their
role.
The Board believes that the current composition of
the Board brings a desirable range of skills and
experience in light of the Company’s challenges and
opportunities following admission to AIM in March
2018, while simultaneously ensuring that no
individual or group can dominate the Board’s
decision making.
Non-Executive Directors have a time commitment to
the Company of not less than eight days per annum
including the attendance of Board meetings and the
Company AGM. In addition, Non-Executive
Directors are expected to devote appropriate
preparation time ahead of each meeting.
The structure of the Board is designed to ensure that
the Board focuses on the strategic direction of the
Group, monitoring its performance, governance, risk
and control issues.
The Board has considered Mr Brode’s independence
and, notwithstanding his shareholding in the
Company and his position as a debt provider, the
Board considers that Mr Brode is of independent
mind in regards to his interactions with the Company.
Ric Piper is considered to be independent as
described on page 35.
The composition and experience of the Board is
shown on pages 34 to 35 of the Annual Report.
GOVERNANCE PRINCIPLE 7
Ensure that between them the Directors have the necessary
up-to-date experience, skills and capabilities.
EXPLANATION
The GRCI Board has, in its opinion, an appropriate
balance of sector, financial and public market skills
and experience, as well as an appropriate balance of
personal qualities including gender balance and
capabilities to successfully execute the Group’s
strategy. The Board fully supports and funds any
training, formally or otherwise, that is required by
any individual Board member so as to ensure that
their knowledge and experience remains relevant
and effective.
The Directors receive briefings at Board meetings on
regulatory and other issues relevant to the Group
and its business sector and may attend external
courses to assist in their professional development.
All Directors, the Audit Committee and
Remuneration Committee are able to take
independent professional advice in the furtherance
of their duties, if necessary.
A summary of the skills and experience of each
Board member is included in their biographies on
pages 34 to 35 of the Annual Report.
COMPLIANT
32
GRC International Group plc Annual Report and Accounts 2021
GOVERNANCE PRINCIPLE 8
Promote a corporate culture that is based on ethical
values and behaviours.
EXPLANATION
The Board believes that the promotion of a
corporate culture based on sound ethical values and
behaviours is essential to creating a workplace
environment that allows people to flourish and this
will contribute to enhancing shareholder value.
Each Director places great importance on
demonstrating ethical behaviours, both during the
decision-making process, and in the implementation
and communication of strategic decisions.
Senior managers are also encouraged to lead by
example in the promotion of ethical values and
behaviours.
So far as possible, we ensure that these values are
visible through our recruitment process, internal
communications and management style, corporate
reports and external announcements.
GOVERNANCE PRINCIPLE 9
Maintain governance structures and processes that are fit for
purpose and support good decision-making by the Board.
EXPLANATION
The Board meets regularly throughout the year to
consider strategy, performance and the framework
of internal controls. A scheduled meeting calendar is
arranged as far in advance as possible, and ad hoc
meetings are held in person or by telephone when it
is necessary for the Board to discuss specific issues.
To enable the Board to discharge its duties, the
Directors receive appropriate and timely
information. A formal agenda and briefing papers
are distributed to the Directors in advance of each
Board meeting.
The Directors have access to the advice and services
of the Finance Director and Company Secretary, who
is responsible for ensuring that the Board
procedures are followed, and that applicable rules
and regulations are complied with.
The Board reviews its governance structures regularly
to ensure they are fit for purpose and will carry out a
review of the terms of the Audit and Remuneration
Committees during financial year 2021.
Further details on our governance structure and the
role of our Board Committees are set out on pages
28 to 29.
COMPLIANT
COMPLIANT
Communicate how the Company is governed and is performing by maintaining
a dialogue with shareholders and other relevant stakeholders.
GOVERNANCE PRINCIPLE 10
COMPLIANT
EXPLANATION
The Board attaches great importance to
communication with shareholders. Regular
communication is maintained with our shareholders
primarily through:
– our Annual General Meeting;
– our website (www.grci.group);
– meetings and conversations between the Chief
Executive Officer and shareholders, both on an ad
hoc basis, and following publication of the interim
and final results; and
– Company announcements.
Our Group website (www.grci.group) sets out details
of the Group and its activities, regulatory
announcements and Company press releases,
annual reports, half-year reports, notices of general
meetings and information required by the AIM Rules
for companies and the QCA Code.
The ’Investors’ section of the Group website includes
a dedicated ’Corporate Governance’ section, where
our annual Corporate Governance Statements can be
found (www.grci.group/corporate-governance).
Further information can also be found in the Audit
Committee report on pages 36 to 39 and the
Remuneration Committee report on pages 40 to 41.
GRC International Group plc Annual Report and Accounts 2021
33
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT BOARD OF DIREC TORS
Bringing a broad range of skills
and a depth of experience
The existing Directors of GRC International Group
plc are listed below. The Directors’ Report on
page 42 sets out details of the Directors who
served during the year ended 31 March 2021. The
Board is committed to maintaining high standards
of corporate governance.
The Company has adopted policies and
procedures which reflect the principles of the
QCA’s Corporate Governance Guidelines for
Smaller Quoted Companies (’QCA Code’) as
appropriate to a company whose shares are
admitted to trading on AIM.
ANDREW STEPHEN BRODE
NON-EXECUTIVE CHAIRMAN
A R
ALAN PHILIP CALDER
CHIEF EXECUTIVE OFFICER
APPOINTMENT TO THE BOARD
APPOINTMENT TO THE BOARD
November 2012
April 2002
KEY SKILLS AND EXPERIENCE
KEY SKILLS AND EXPERIENCE
In 2012, Andrew acquired an initial shareholding in IT
Governance Ltd before later joining the Board as a
Non-Executive Director in November 2012. In 2014,
Andrew subscribed for further shares in IT Governance Ltd,
increasing his shareholding to 22% (of the issued share capital
of the Company prior to Admission). Andrew was appointed
Non-Executive Chairman of the Company in February 2018.
As well as being a Chartered Accountant, Andrew has gained
significant leadership experience on the boards of several listed
companies. He was Chief Executive of Wolters Kluwer (UK) plc
between 1978 and 1990 and Andrew is currently Chairman of
RWS Holdings plc and Learning Technologies Group plc. These
roles together with his extensive executive experience, ensure
he is well placed to lead the Board of GRC International plc
effectively.
PRINCIPAL EXTERNAL APPOINTMENTS
– Chairman of RWS Holdings plc
– Chairman of Learning Technologies Group plc
– Non-Executive Director of a number of private equity-backed
media companies
As CEO and founder of IT Governance Ltd, Alan leads the senior
team and is responsible for delivering GRC International plc’s
strategy.
Prior to founding IT Governance Ltd in 2002, Alan held a
number of roles including the position of CEO of Business Link
London City Partners, CEO of Focus Central London, CEO of
Wide Learning, the Outsourced Training Company and was
Chairman of CEME.
Alan graduated from the University of Witwatersrand in 1978
before moving to the UK. Alan has written a number of books
about IT management including the definitive compliance guide
“IT Governance: An International Guide to Data Security and
ISO27001/ISO27002” (co-written with Steve Watkins), which is in
its sixth edition and is the basis for the UK Open University’s
postgraduate course on information security and “IT
Governance – Guidelines for Directors”.
With his significant executive experience and expertise in the
field of IT governance, risk management and compliance, Alan
is well placed to lead the senior team of GRC International
plc effectively.
PRINCIPAL EXTERNAL APPOINTMENTS
– None
34
GRC International Group plc Annual Report and Accounts 2021
BOARD COMMITTEE MEMBERSHIP
A
R
Audit Committee member
Remuneration Committee member
Chair
CHRISTOPHER JOHN HARTSHORNE, FCCA
FINANCE DIRECTOR
RICHARD JOHN PIPER, ACA
INDEPENDENT NON-EXECUTIVE DIRECTOR
A R
APPOINTMENT TO THE BOARD
APPOINTMENT TO THE BOARD
April 2017
February 2018
KEY SKILLS AND EXPERIENCE
KEY SKILLS AND EXPERIENCE
Chris joined the Group in April 2017 as Finance Director.
Prior to this, Chris qualified as a Chartered Certified Accountant
with Deloitte in 2007 and subsequently worked
for PwC. In 2015, Chris joined MM (UK) Limited as Financial
Controller before leaving to take up his position with
GRC International.
PRINCIPAL EXTERNAL APPOINTMENTS
– None
Ric has over 40 years of experience as a Chartered Accountant,
including a number of senior finance roles at ICI, Citicorp and
Logica. He was also Group Finance Director at WS Atkins plc
from 1993 to 2002. Ric advises a number of businesses in the
Engineering and Technology sectors. He was a Member of the
Financial Reporting Review Panel for ten years until 2019.
PRINCIPAL EXTERNAL APPOINTMENTS
– Partner at Restoration Partners
– NED at Belluscura plc
GRC International Group plc Annual Report and Accounts 2021
35
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT AUDIT COMMIT TEE REPOR T
RICHARD JOHN PIPER, ACA
AUDIT COMMITTEE CHAIR,
REMUNERATION COMMITTEE CHAIR
As Chairman of the Audit Committee, I am pleased to present this
report of the Audit Committee (the ’Committee’) for the year ended
31 March 2021. This report is intended to explain how the
Committee has met its responsibilities.
I will be available at the Annual General Meeting (’AGM’) to respond
to any questions shareholders may raise on any of the Committee’s
activities.
Apart for the material uncertainty related to going concern in the
independent auditor’s report on page 44 and as further discussed
below under significant issues related to the financial statements –
Going concern, from a ’business as usual’ perspective, there is
nothing to bring to your specific attention.
Aims and objectives
The Committee has responsibility for monitoring the integrity of the
annual and interim financial statements and formal announcements
relating to the Group’s financial performance, including advising the
Board that the Annual Report is fair, balanced and understandable.
It reviews significant financial reporting issues and accounting
policies and disclosures in financial reports, the effectiveness of the
Group’s internal control procedures and risk management systems
and considers how the Group’s internal audit requirements shall be
satisfied, making recommendations to the Board. It reviews the
independent auditor’s audit strategy and implementation plan and
its findings in relation to the Annual Report and Interim Financial
Statements.
The main duties of the Committee are set out in its Terms of
Reference which are available from the Company Secretary on
application via https://www.grci.group/contact.
Committee membership, meetings and attendance
Membership
Throughout the year ended 31 March 2021, and since the year end to
the date of this Report, the Committee comprised two Non-
Executive Directors:
– Ric Piper (Chairman of the Committee and independent Non-
Executive Director); and
– Andrew Brode (Chairman of the Board).
Both Andrew Brode and Ric Piper are Chartered Accountants and
the Board considers them to have recent and relevant financial
experience. Further information on Mr Piper and Mr Brode can be
found in the Directors’ biographies on pages 34 to 35. The Board
considers that the Committee as a whole has competence relevant
to the sector in which the Group operates.
Meetings and attendance
The Audit Committee met two times during the year ended
31 March 2021.
The Committee has met with the external auditor to agree the Audit
Plan, including (as for the previous financial year) the likely impact of
COVID-19 working arrangements on the preparation and audit of the
financial statements.
The Chief Executive Officer and the Finance Director are also
routinely invited to Committee meetings.
The attendance at the Audit Committee meetings is set out in the
following table:
Andrew Brode
Ric Piper
2/2
2/2
36
GRC International Group plc Annual Report and Accounts 2021
Since the year end, the Committee met privately with the
independent auditor. Ric Piper, the Committee Chairman, also met
privately with the senior statutory auditor, Tim Neathercoat, outside
of the Committee meetings.
Operation of the Committee
Each year, the Committee works to a planned programme of
activities which are focused on key events in the annual financial
reporting cycle and other matters that are considered in accordance
with its Terms of Reference.
It provides oversight and guidance to contribute to the ongoing
good governance of the business, particularly by providing
assurance that shareholders’ interests are being properly protected
by appropriate financial management, reporting and internal
controls.
The main activities of the Committee in the year ended 31 March
2021 are as follows:
– Financial statements: The Committee reviewed the Annual
Report. Presentations were made by management and the auditor
about the key technical and judgemental matters relevant to the
financial statements. Further information is provided below in the
section ’Significant issues related to the financial statements’.
– Taxation: The Group operates under varied tax regimes. The
completeness and valuation of provisions to cover the range of
potential final determinations by the tax authorities of the Group’s
tax positions are the subject of judgement. Further information is
set out in note 7 to the financial statements. The provisions held
by the Group were reviewed by management as at 31 March 2021.
The Committee agreed with management’s assessment of the
Group’s tax provisions. The Committee notes that the Group is
committed to paying the correct amount of tax and receiving the
correct amount of research and development tax credits and will
only undertake transactions that have a genuine commercial
purpose.
– Fair, balanced and understandable: The content and disclosures
made in the Annual Report are subject to a verification exercise by
management to ensure that no statement is misleading in the
form and context in which it is included, no material facts are
omitted which may make any statement of fact or opinion
misleading, and implications which might be reasonably drawn
from the statement are true. The Committee was satisfied that it
was appropriate for the Board to approve the financial statements
and that the Annual Report taken as a whole is fair, balanced and
understandable such that it allows shareholders to assess the
Group’s performance against the Group’s strategy and business
model.
– Internal financial control systems: The Committee reviewed the
observations made by the independent auditor, as part of the
audit process, and management’s responses and actions. The
Committee was satisfied that it was appropriate for the Board to
make the statements regarding internal controls included in the
Corporate Governance Statement.
Compliance reviews, both of financial and operational activities,
were satisfactorily completed for the Group’s International
Organisation for Standardisation (’ISO’) accreditations.
Internal Audit is reported on below.
The Chairman of the Committee reported to the Board on the
Committee’s activities after each meeting, identifying relevant
matters requiring communication to the Board and
recommendations on the steps to be taken.
Significant issues related to the
financial statements
The Committee reviewed the key judgements applied to a number
of significant issues in the preparation of the financial statements.
The review included consideration of the following:
Revenue recognition and recoverability of accounts
receivables
The Group has well-developed accounting policies for revenue
recognition – see the ’Principal accounting policies’ section in the
financial statements. The Committee receives reports from
management and from the independent auditor to ensure that the
policies are complied with across the Group.
The Board also receives regular reports on the collectability of aged
accounts receivables, accrued income and deferred income. On the
basis of these reports, the Committee concluded that it was content
with the judgements that had been made.
Intangibles: accounting
As set out in the intangibles accounting policy in the financial
statements, the Group has significant unamortised intangibles.
As at 31 March 2021, the Committee agreed with the management’s
recommendation on capitalisation and that no impairment charge
was required.
Intangibles impairment assessments (including assumptions about
future performance) are carried out at least annually by management
and reviewed by the Board and the Committee.
Going concern
The Group has recorded a loss for the year of £2.6 million
(2020: £3.2 million) and at 31 March 2021 its current liabilities
exceeded its current assets by £5.2 million (2020: £2.7 million).
Notwithstanding this, the Directors consider it appropriate to
prepare the financial statements on a going concern basis. The key
considerations relating to this judgement are described below.
As set out above, the Group went through a transitional year of
restructuring in FY20 and was looking forward to a strong FY21,
continuing its H2 FY20 momentum and anticipating profitable
results for the year. However, the global COVID-19 pandemic led to
an immediate reduction in monthly billings as customers delayed
projects, reduced spend seen as not immediately critical to
day-to-day operations and focused on establishing new business
processes and procedures to survive the short term. This
unprecedented trading environment resulted in a reduction in
revenues for April and May 2021, followed initially by a strong
V-shaped recovery, but then a period of mixed results through the
summer as the economy stuttered in an environment of ever-
changing regulations and guidance. From late in Q3 the Group saw
genuine performance improvements with momentum building
through the rest of the year, and performance back to consistently
positive monthly EBITDA before the year end and into the new
financial year.
In response to the pandemic the Board revisited its FY21 and FY22
forecasts, increased the regularity of its short and medium-term
cash flow planning, implemented a number of key cost reduction
measures and took advantage of government initiatives that have
been introduced in the geographies that the Group operates in
order to preserve liquidity, supplemented by deferring the payment
of certain liabilities to HMRC which amounted to approximately £1.6
million. Additionally, in March 2021 certain subsidiaries of the Group
joined the HMRC VAT deferral scheme to defer repayment of VAT
liabilities totalling £0.4 million falling due in FY21 until FY22.
GRC International Group plc Annual Report and Accounts 2021
37
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT AUDIT COMMIT TEE REPOR T CONTINUED
Notwithstanding some easing of trading conditions and subsequent
improvement in performance since the outbreak of the global
pandemic reached the United Kingdom (which represents around
82% of the Group’s revenue in FY21), the Directors acknowledge that
trading conditions will remain uncertain for the foreseeable future.
Those uncertainties include:
– The possibility of further local or national restrictions.
– The lack of visibility over future levels of revenue in the context of
weakened demand for the Group’s products and services.
– Should the Group need to further reduce its scalable cost base, its
ability to make those adjustments and realise the benefits from
doing that on a timely basis.
– The continued availability of existing financing, including HMRC
arrangements (see below), existing borrowings and flexibility
allowed by suppliers.
– The ability to access new financing, including further government
support in its various forms, sufficient to fund any further cash
requirement over the foreseeable future.
The Directors have reviewed the Group’s forecasts and projections
to 31 March 2023 which, taking account of reasonably possible
changes in trading performance, show that the Group is able to
generate sufficient liquidity to continue in operational existence for
the foreseeable future. On this basis, the Directors believe that the
Group will be able to generate sufficient cash through its normal
business trading to enable it to continue its operations, and
continue to meet, as and when they fall due, its planned and
committed liabilities for at least the next 12 months from the date
of this report. For this reason, the Directors continue to adopt the
going concern basis in the preparation of its financial statements.
However, should the Group not be able to generate cash inflows
sufficient to meet its current operational obligations and legacy
deferred obligations as they fall due, it would need to secure
additional funding with no guarantee such funding would be
secured. These circumstances indicate the existence of a material
uncertainty which may cast significant doubt over the Group’s ability
to continue as a going concern.
As in the FY20 statutory accounts, the committee notes that the
Independent Auditor's Report contains a material uncertainty
related to going concern.
The financial statements do not include the adjustments that would
be required should the going concern basis of preparation no longer
be appropriate.
Independent auditor
The appointment of the independent auditor is approved by
shareholders annually. The independent auditor’s audit of the
financial statements is conducted in accordance with International
Standards on Auditing (UK) (’ISAs’), issued by the Financial
Reporting Council.
There are no contractual obligations that act to restrict the
Committee’s choice of external auditor.
BDO LLP became the Group's independent auditor for the financial
year ended March 2019.
This year, having considered the effectiveness and performance of
the independent auditor, the Committee has recommended to the
Board the appointment of BDO LLP as independent auditor of the
Company for the next financial year.
Services, independence and fees
The independent auditor provides the following:
– A report to the Committee giving an overview of the results and
judgements and observations on the control environment.
– An opinion on the truth and fairness of the Group financial
statements.
The Committee monitors the cost effectiveness of audit and any
non-audit work performed by the independent auditor and also
considers the potential impact, if any, of this work on independence.
It recognises that certain work of a non-audit nature may be best
undertaken by the independent auditor as a result of its unique
position and knowledge of key areas of the Company.
To assess going concern the Directors prepared an integrated profit
and loss, balance sheet and cash flow forecast by month to 31 March
2023. The Group’s base case forecast identifies that through the
going concern review period the Group is able to meet its liabilities
as they fall due and make settlement of the outstanding HMRC
liabilities through FY22 in equal monthly instalments. The majority of
the deferred payroll tax liabilities owed are now covered by formal
‘time to pay’ repayment plans agreed with HMRC. The repayment
plans differ across the trading entities within the Group, but all split
the deferred balance into equal monthly instalments, with the full
balance being repaid by September 2022, and the balance owing as
at the date of this report being £1.0 million. The Directors are in
discussions with HMRC to agree the repayment plan for the
remainder of the balance not yet covered by formal ‘time to pay’
arrangements and expect this to be formalised imminently.
Additionally, the Directors prepared a sensitised forecast to the base
case forecast where the COVID-19 pandemic was more prolonged
than envisaged by the Directors at the time (the ‘worst-case
forecast’). This worst-case forecast assumes that revenues until
March 2023 are 40% below the base case (marginally below those
actually achieved in FY21) and that cost reduction measures, to
reflect the reduced level of billings, have been effected. The
sensitised forecast does not identify a potential cash flow shortfall in
any month and includes the same assumptions for settlement of the
outstanding HMRC liabilities as in the base case forecast.
The Directors are monitoring actual business performance and cash
flow against the base case forecast and the worst-case forecast.
Encouragingly, the Group has traded ahead of the revenue, EBITDA
and cash flow expectations set out in the base case and the
worst-case forecast. Furthermore, in the view of the Directors any
temporary cash flow shortfall can be mitigated through the
deferment or removal of selected planned marketing, capital
expenditure and other scheduled cash outflows.
Based on the forecasts and the medium and longer-term planning
in place, the Directors have identified that they have a reasonable
expectation of being able to reduce costs sufficiently in the required
timeframe should revenue levels cause this to be necessary, and that
the Group will remain within its currently available facility levels,
none of which has any financial covenant compliance requirements.
Central to those facilities is the £700,000 unsecured loan facility
provided by Andrew Brode which is at present 50% utilised, and
which remains in place until at least 31 December 2022, although
the Group does also have access to additional liquidity through its
uncommitted invoice discounting facility, which is not currently
utilised.
38
GRC International Group plc Annual Report and Accounts 2021
Approval is required, prior to the independent auditor commencing
any material non-audit work, in accordance with a Group policy
approved by the Committee. Certain work, such as providing
bookkeeping services and taxation planning advice, is prohibited.
The Committee requires that non-audit fees do not have any
material negative impact on BDO’s independence.
Further, the Committee seeks positive evidence of the
independence of the independent auditor through its challenge to
management.
The Committee regularly reviews all fees for non-audit work paid to
the independent auditor. There were no fees paid to BDO LLP for
non-audit work in the year ended 31 March 2021.
The Committee will continue to keep the area of non-audit work
under close review, particularly in the context of developing best
practice on auditor’s independence.
The Committee regulates the appointment of former employees of
the independent auditor to positions in the Group. The independent
external auditor also operates procedures designed to safeguard its
objectivity and independence. These include the periodic rotation
of the senior statutory auditor, use of independent concurring
partners, use of a technical review panel (where appropriate) and
annual independence confirmations by all staff.
The independent auditor reports to the Committee on matters
including independence and non-audit work, on an annual basis.
Risk management and internal control
The Group holds weekly Executive Directors’ meetings to discuss all
business matters which includes risks and risk mitigation.
Depending on the nature of the risk, it is escalated to the Committee
and/or Board meetings for review.
The Group’s principal risks and uncertainties and the Board’s
approach to mitigation are set out on pages 22 and 23 of the
Annual Report.
Evaluation of the Committee
There are no matters to report to shareholders.
Approval
This report was approved by the Committee, on behalf of the Board,
and signed on its behalf by:
Ric Piper
Chair of the Audit Committee
GRC International Group plc Annual Report and Accounts 2021
39
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT REMUNER ATION COMMIT TEE REPOR T
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report for the year ended 31 March 2021. This report
is intended to explain how the Remuneration Committee (the
’Committee’) has met its responsibilities.
In exercising their roles, the Directors shall have regard to the
recommendations put forward in the QCA Code and, where
appropriate, the QCA Remuneration Committee Guide and
associated guidance.
Whilst there is no requirement for companies quoted on AIM to
produce a formal Remuneration Report, the Committee prepares
this Remuneration Report for information purposes in order to give
shareholders, and other users of the financial statements, greater
transparency about the way in which the Directors of GRC
International Group plc are remunerated.
This report sets out the remuneration paid to the Directors for the
year ended 31 March 2021 and sets out the remuneration policy for
the forthcoming financial year and beyond.
We value the views of our shareholders and guidance issued by
investor bodies. As Chair of the Committee, I will be available at the
AGM to respond to any questions shareholders may raise on any of
the Committee’s activities.
Aims and objectives
The Committee has responsibility for determining the overall
remuneration policies and practices within GRC International
Group plc, taking into account applicable laws, regulations and
the principles of good governance. In particular, the Committee
is responsible for:
– Setting the remuneration policy for all Executive Directors.
– Approving their remuneration packages.
– Reviewing the ongoing appropriateness and relevance of the
remuneration policy.
– Reviewing and approving the overall remuneration spend (fixed
and variable) to ensure that evidence exists to demonstrate that
awards have been adjusted where appropriate for risk and will not
limit the ability to strengthen the capital base.
– Approving the design of, and determining targets for, all
performance-related incentive plans operated by the Group and
approving the total annual payments made under such plans.
– Reviewing the design of all share incentive plans for approval by
the Board and shareholders. For plans such as these, the
Committee will make recommendations to the Board on proposals
for the granting of share options, and other equity incentives,
pursuant to any employee share option scheme or equity
incentive plans in operation from time to time.
The Committee’s Terms of Reference can be obtained from the
Company Secretary on application via https://www.grci.group/contact.
Committee membership, meetings and attendance
Membership
The Committee comprises two Non-Executive Directors:
– Ric Piper (Chairman of the Committee and independent Non-
Executive Director); and
– Andrew Brode (Chairman of the Board).
The Chief Executive Officer and the Finance Director only attend
meetings by invitation from the Committee. They are not present
when their own remuneration is being discussed.
Meetings and attendance
The Remuneration Committee met once during the year ended
31 March 2021. The attendance at the Remuneration Committee
meetings is set out in the following table.
Andrew Brode
Ric Piper
1/1
1/1
Remuneration policy objectives
The main objective of the Committee is to ensure that the
Company’s policy:
– Attracts, motivates and retains executives in order to deliver the
Group’s strategic goals and business outputs.
– Encourages and supports a high-performance sales and service
culture.
– Adheres to the principles of good corporate governance and
appropriate risk management.
– Aligns executives with the interests of shareholders and other key
stakeholders.
We remain committed to a remuneration policy that rewards high
individual performance to drive strong results.
Basic salary
The basic salaries of the Group’s Executive Directors will be
reviewed on an annual basis. The Committee seeks to establish a
basic salary for each position commensurate with the individual’s
responsibilities and performance, taking into account comparable
salaries for similar companies of a similar size in the same market.
Directors’ remuneration
The remuneration of each of the Directors during the year ended 31 March 2021 has been audited as part of the financial statements and is
set out in detail below:
Directors’ remuneration for the year ended 31 March 2021
£000s
Andrew Brode
Alan Calder
Christopher Hartshorne
Stephen Watkins
Neil Acworth – left the Board on 17/02/2021
Ric Piper
Salary
and fees
All taxable
benefits
Annual
bonuses
Pension
–
220
135
115
98
35
–
–
–
–
–
–
–
–
–
–
–
–
–
33
1
1
1
–
Total for the
year ended
31 March
2021
–
253
136
116
99
35
40
GRC International Group plc Annual Report and Accounts 2021
REMUNER ATION COMMIT TEE REPOR T CONTINUED
Directors’ remuneration for the year ended 31 March 2020
£000s
Andrew Brode
Alan Calder
Christopher Hartshorne
Stephen Watkins
Neil Acworth
Ric Piper
The Executive Directors have entered into a service agreement with
the Company. Each Director’s appointment will be terminable on six
months’ notice given by either party and summarily by the Company
in certain limited circumstances. Each Director has given certain
non-compete and non-solicitation undertakings which will apply
during his engagement and in respect of the period of 12 months
post termination.
Share-based incentive schemes
In order to align the interests of shareholders and employees
following admission, the Company adopted a new employee share
option scheme, as further detailed in the Group’s AIM admission
document which is available on the Group’s website at https://www.
grci.group/investors.
Share options held at 31 March 2021 are set out below:
Exercise
price (pence
per share)
Total
exercise
value
Shares
Chris Hartshorne
326,760
42.85714
£135,000
Neil Acworth exercised options over 353,920 ordinary shares of 0.1
pence in the Company (’Ordinary Shares’) at a price of 12.71474
pence per share, with 353,920 Ordinary Shares being immediately
sold at a price of 20 pence per Ordinary Share. These transactions
took place on 29 and 30 September 2020.
Following admission in March 2018 options were limited to a further
10% of the nominal value of the shares in issue at 6:00 p.m. (London
time) on the date which is three business days following Admission.
Options granted following Admission are subject to standard
performance conditions, as determined and recommended by the
Remuneration Committee in accordance with the plan rules.
Directors’ share interests at 31 March 2021 are set out
below:
Alan Calder
Calder family
(including Alan’s shares above)
Andrew Brode
Steve Watkins
Ric Piper
Chris Hartshorne
29,822,461 shares (29.84%)
31,049,218 shares (31.07%)
13,972,108 shares (13.98%)
3,727,082 shares (3.73%)
319,231 shares (0.32%)
11,760 shares (0.01%)
Salary and
fees
All taxable
benefits
Annual
bonuses
Pension
–
220
110
115
113
35
–
–
–
–
–
–
–
–
–
–
–
–
–
33
1
1
1
–
Total for the
year ended
31 March
2020
–
253
111
116
114
35
There has been no changes between 31 March 2021 and the date
that this Report was signed. (In the case of Steve Watkins; 13 May
2021, being the date he left the Board.)
Other benefits
Depending on the exact terms of each individual Executive
Director’s service contract with GRC International Group plc, they
are entitled to a range of benefits including contributions to pension
schemes.
Non-Executive Directors
The Group has two Non-Executive Directors: Andrew Brode, the
Chairman and Ric Piper. Both Non-Executive Directors have letters
of appointment. Initially for a three-year period from Admission to
AIM in March 2018, appointments are now reviewed annually.
The Non-Executive Directors’ letters of appointment do not provide
specifically for any termination payments, although the Group might
make payments in lieu of notice.
Non-Executive Director fees are determined by the Executive
Directors, having regard to the requirement to attract high-calibre
individuals with the right experience, the time requirements and the
responsibilities incumbent on an individual acting as a Non-
Executive Director for a company, such as GRC International Group
plc, admitted to trading on AIM. The Non-Executive Directors are
not eligible for annual discretionary bonuses and do not participate
in the Group’s long-term incentive plans.
At his request, the Chairman does not receive a Director’s fee or
other remuneration.
Ric Piper receives an annual fee of £35,000, paid monthly in arrears.
Evaluation of the Committee
There is nothing to report to shareholders.
Approval
This report was approved by the Committee, on behalf of the Board,
and signed on its behalf by:
Ric Piper
Chair of the Remuneration Committee
GRC International Group plc Annual Report and Accounts 2021
41
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT DIREC TORS’ REPOR T
The Directors present their annual report on the affairs of the Group,
together with the financial statements and Auditor’s Report, for the
year ended 31 March 2021. The Corporate Governance Statement
set out on pages 28 and 29 forms part of this report.
There have been no significant events since the balance sheet date.
An indication of likely future developments in the business of the
Company are included in the Strategic Report.
Directors
The Directors, who served throughout the year, are as follows:
– Andrew Brode – Non-Executive Chairman
– Alan Calder – Chief Executive Officer
– Christopher Hartshorne – Finance Director
– Stephen Watkins – Executive Director – Resigned 13 May 2021
– Neil Acworth – Chief Information Officer – Resigned 17 February 2021
– Ric Piper – Independent Non-Executive Director
Information about the use of financial instruments by the
Company and its subsidiaries is given in notes 19 and 20 to the
financial statements.
Capital structure and dividends
The Board is not proposing a dividend for the year.
Details of the authorised and issued share capital, together with
details of the movements in the Company’s issued share capital
during the year are shown in note 23 to the financial statements.
The Company has one class of ordinary shares which carry no right
to fixed income. Each share carries the right to one vote at general
meetings of the Company.
There are no specific restrictions on the size of a holding nor on the
transfer of shares, which are both governed by the general
provisions of the Articles of Association and prevailing legislation.
The Directors are not aware of any agreements between holders of
the Company’s shares that may result in restrictions on the transfer
of securities or on voting rights.
Details of employee share schemes are set out in note 26 to the
financial statements.
No person has any special rights of control over the Company’s
share capital and all issued shares are fully paid.
With regard to the appointment and replacement of Directors,
the Company is governed by its Articles of Association, the
Companies Act 2006 and related legislation. The Articles themselves
may be amended by special resolution of the shareholders. The
powers of Directors are described in the Main Board Terms of
Reference, copies of which are available on request, and the
Corporate Governance Statement on pages 28 and 29.
Under its Articles of Association, the Company has authority to issue
up to 10% of issued share capital.
Directors’ indemnities
The Company has made qualifying third-party indemnity provisions
for the benefit of its Directors which were made during the year and
remain in force at the date of this report.
Employee consultation
The Group places considerable value on the involvement of its
employees and has continued to keep them informed on matters
affecting them as employees and on the various factors affecting
the performance of the Group. This is achieved through formal and
informal meetings, the Company magazine and a special edition
for employees of the annual financial statements. Employee
representatives are consulted regularly on a wide range of matters
affecting their current and future interests. The employee share
scheme has been running successfully since its inception on
12 February 2018. Options can be granted to any employee or
Director within the Group. The Board may set performance or time
conditions for vesting. The option holder indemnifies the Company
against income tax and national insurance. Options are normally
exercisable after they have vested. In addition, all employees receive
an annual bonus related to the overall profitability of the Group.
R&D activity
Research activity is expensed through the income statement as it is
incurred. At the point where all relevant recognition criteria are met
the expenditure incurred on internally guaranteed intangible fixed
assets, where relevant to development activity, is capitalised in line
with the Group’s accounting policy.
Auditor
Each of the persons who is a Director at the date of approval of this
Annual Report confirms that:
– so far as the Director is aware, there is no relevant audit
information of which the Group’s auditor is unaware; and
– the Director has taken all the steps that he/she ought to have
taken as a Director in order to make himself/herself aware of any
relevant audit information and to establish that the Group’s
auditor is aware of that information.
The Directors’ Report was approved by the Board of Directors and
signed on its behalf.
Alan Calder
Director
28 September 2020
42
GRC International Group plc Annual Report and Accounts 2021
S TATEMENT OF DIREC TORS’ RESPONSIBILITIES
The 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 period. Under that law the Directors
have elected to prepare the Group’s Consolidated Financial
Statements in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006 and
the Company’s Financial Statements in accordance with United
Kingdom generally accepted accounting practice (United Kingdom
accounting standards and applicable law).
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and Company and of the
profit or loss of the Group for that period. The Directors are also
required to prepare financial statements in accordance with the rules
of the London Stock Exchange for companies trading securities on
the AIM.
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 requirements of the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Group, and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Group’s website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Group’s website is the responsibility of the Directors.
The Directors’ responsibility also extends to the ongoing integrity
of the financial statements contained therein.
In preparing these financial statements, the Directors are
required to:
– select suitable accounting policies and then apply them
consistently;
– make judgements and accounting estimates that are reasonable
and prudent;
– state whether they have been prepared in accordance with IFRS
as adopted by the European Union, 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 Group will continue in
business.
GRC International Group plc Annual Report and Accounts 2021
43
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT INDEPENDENT AUDITOR'S REPOR T TO THE
MEMBERS OF GRC INTERNATIONAL GROUP PLC
Opinion on the financial statements
In our opinion:
– the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2021 and
of the Group’s loss for the year then ended;
– the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006;
– the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
– the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of GRC International plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the year
ended 31 March 2021 which comprise the Consolidated Income Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows, the Company
Balance Sheet, the Company Statement of Changes in Equity and the notes to the financial statements, including a summary of significant
accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
international accounting standards in conformity with the requirements of the Companies Act 2006. The financial reporting framework that has
been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom Accounting Standards,
including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements‘ section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
Material uncertainty related to going concern
We draw attention to note 1 to the financial statements which states that the ability of the Group and Parent Company to continue as a
going concern is reliant upon both the continuing recovery of the Group’s trading performance following the effects of the COVID-19
pandemic and the ability of the Group to continue to meet its existing liabilities, as well as settlement of legacy liabilities that are past due,
some of which have no formal arrangement in place.
If the Group’s past-due current liabilities (not subject to payment plans) are demanded sooner than expected and the effect of COVID-19
on the Group’s future trading is more prolonged or severe than the Directors’ expectations, the two events combined would impact the
Group’s ability to generate sufficient positive cash flows and the Parent Company would be required to raise additional funding in order to
meet its and the Group’s liabilities, with no guarantee such funding would be secured.
These conditions indicate a material uncertainty exists that may cast significant doubt on the Group’s and Parent Company’s ability to
continue as a going concern. Our opinion is not modified in respect of this matter.
Given the conditions and uncertainties noted above, we considered going concern to be a key audit matter. Our response to the key audit
matter included:
– we examined the terms of the Group’s borrowing arrangements and made enquiries as to the Group’s repayment plans for HMRC
liabilities and certain other amounts which were due but had not been settled as at the year end;
– we critically assessed the Directors’ financial forecasts and the underlying key assumptions, including operating and capital expenditure
and forecast income. In doing so, we considered factors such as whether the forecast operating expenditure is reasonable in light of
historic levels of expenditure and reliability of revenue forecasting by reference to historic revenue generation run rates;
– we tested the mathematical accuracy of the going concern model prepared by management and the underlying calculations used
within it;
– we compared data on the Group’s expected cash outflows in relation to its liabilities as at the last practical date for which information was
available post year end to the forecast trading scenarios and sensitivity analysis used by the Directors to assess the Group’s and Parent
Company’s ability to meet its financial obligations over a period of at least 12 months after the approval of these financial statements;
– we gained an understanding of the Directors’ plans in relation to both the timing and quantum of cost reduction measures that could be
taken in the event that revenue levels were not sustained at a level that would enable the Group’s operations to generate sufficient
positive cash flows; and
– we evaluated the adequacy of disclosures made in the financial statements in respect of going concern.
44
GRC International Group plc Annual Report and Accounts 2021
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
Overview
Coverage1
82% (2020: 93%) of Group loss before tax, with a further 10% being covered through targeted audit procedures.
84% (2020: 92%) of Group revenue
90% (2020: 90%) of Group total assets, with a further 5% being covered through targeted audit procedures.
Key audit
matters
Going concern
Revenue recognition
Impairment of goodwill and intangible assets
2021
2020
Materiality
Group financial statements as a whole
£180,000 (2020: £230,000) based on 1.6% (2020: 1.6%) of revenue
1 These are areas which have been subject to a full scope audit or targeted audit procedures by the Group engagement team.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control,
and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal
controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement.
We identified three significant components (2020: three) in the Group, which were subject to full scope audits. Excluding dormant
subsidiaries, we assessed seven (2020: seven) Group companies (five UK subsidiaries and two overseas subsidiaries) as non-significant
components on the grounds of their size and assessed risk of material misstatement to the Group financial statements. We performed
targeted audit procedures on one overseas and one UK non-significant component according to our assessment of risk across the Group,
as well as analytical procedures on the remaining non-significant components.
The Group audit team was responsible for the component audits of all significant components and the procedures performed in relation to
non-significant components. The coverage we obtained over the Group’s loss before tax, revenue and total assets are summarised above.
GRC International Group plc Annual Report and Accounts 2021
45
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT INDEPENDENT AUDITOR'S REPOR T TO THE
MEMBERS OF GRC INTERNATIONAL GROUP PLC CONTINUED
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified,
including those which had the greatest effect on the overall audit strategy, the allocation of resources in the audit, and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue recognition
Key Audit Matter
The Group’s accounting policy for revenue recognition is disclosed on pages 55 to 57 and the financial
statements disclose further detail concerning the Group’s revenues in note 2.
The Group’s revenue of £11.8 million (2020: £14.1 million) is generated from a number of different revenue
streams. We evaluated in our planning the risks we expected would be present across revenue as a
whole, as well as the risks specific to each stream.
We considered that a significant risk of material misstatement existed in all revenue streams, in relation
to the possibility of overstatement. We formed this assessment having considered the susceptibility of
the financial statements to fraud risks, such as may arise in the posting of unauthorised entries and we
identified that the risk was most likely to present itself in the Consultancy and Software revenue streams
in the non-deferral of revenues invoiced pre year end but earned post year end, because of the nature of
the Group’s contracts and invoicing arrangements.
Whilst considered less susceptible to errors of judgement, we also considered cut off in other revenue
streams such as Learning to pose a significant risk of material misstatement.
How the scope of our
audit addressed the
key audit matter
Our procedures across revenues as a whole included testing of supporting documentation including
contracts, records of delivery or of performance of the service, from sources outside the Group or
from systems independent of the Group’s accounting systems.
Our work was planned to test both information in the accounting system as well as outside of the
accounting system in such a way as to ensure that revenues existed and were accurately recorded, and
where appropriate the relevant proportion of amounts invoiced prior to the year end were deferred
into future periods where the Group’s performance obligations had not been fully satisfied at the
reporting date.
For each stream we performed cut off testing, agreeing relevant documentation as set out above to
ledger entries, based on a representative sample of revenues invoiced pre year end and post year end.
Using data interrogation software, we conducted a targeted procedure on journal entries posted to
revenue to enable us to confirm that entries recorded in revenue arose from valid transactions
processed in line with the Group's accounting policies.
Key observations
Nothing has come to our attention as a result of performing the above procedures that causes us to
believe that a material misstatement is present in respect of revenue recognition.
46
GRC International Group plc Annual Report and Accounts 2021
Impairment of goodwill and intangible assets
Key Audit Matter
The Group’s accounting policy for impairment is disclosed on page 59 and the financial statements
disclose further detail concerning the Group’s impairment testing in notes 10 and 11.
In accordance with IAS 36, goodwill is tested for impairment annually and other non-current tangible
assets with finite lives are tested for impairment whenever an indicator of impairment arises.
The Group’s goodwill balance is included in the DQM cash-generating unit (’CGU’), along with the
Group’s acquired finite-lived intangible assets. The Group’s internally-generated intangible assets are
included in the GRC cash-generating unit.
Having identified indicators of impairment in the GRC CGU, management performed impairment tests
on a value in use basis in respect of both of the Group’s CGUs. The preparation of impairment tests
under IAS 36 requires significant management judgement over the timing and degree of certainty
attaching to forecast net cash flows and the rate at which those future cash flows should be discounted
to present value. The degree of management judgement involved and the sensitivity of the conclusion to
changes in key assumptions was the reason we assessed this area to be significant in our audit.
The recoverable amount of both of the Group’s CGUs was assessed as being higher than its carrying
value at the reporting date and therefore, management concluded that the goodwill and intangible
assets were not impaired.
How the scope of our
audit addressed the
key audit matter
Our work on the impairment tests prepared by management had a dual focus: firstly, to ensure the
models were mechanically accurate and prepared in accordance with the detailed requirements of IAS
36 and secondly, to ensure that the assumptions regarding future cash flows and the rate at which they
had been discounted were appropriate to the respective CGUs’ circumstances.
We used internal valuations specialists in order to assist with our interrogation of the impairment
testing models. This work also included evaluation of historic trading and macro-economic factors.
Our audit procedures relating to the operating cash flows included analysis of CGU performance
trends, post year end performance and key assumptions relating to revenue levels and projected
operating cost levels.
Having made enquiries of the Group’s development operations senior management personnel and
reviewed development projects undertaken in the year, we were able to assess whether any additional
impairment indicators in respect of specific internally-developed intangible assets within the CGU
were present.
Key observations
Nothing has come to our attention as a result of performing the above procedures that causes us to
believe that a material misstatement is present in respect of impairment of goodwill and intangible
assets.
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider
materiality to be the magnitude by which misstatements, including omissions, could influence the economic decisions of reasonable users
that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level,
performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be
evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their
occurrence, when evaluating their effect on the financial statements as a whole.
GRC International Group plc Annual Report and Accounts 2021
47
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT INDEPENDENT AUDITOR'S REPOR T TO THE
MEMBERS OF GRC INTERNATIONAL GROUP PLC CONTINUED
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance materiality as
follows:
Group financial statements
Parent Company financial statements
2021
£’000
180
2020
£’000
230
2021
£’000
140
2020
£’000
171
Set based on 1.6% of revenue
Set based on 1.7% of total assets capped at
a proportion of Group materiality
We considered revenue to be the most appropriate
performance measure as it reflects the volume of
business undertaken by the Group, which is a key
measure of performance for the Group at this
stage in its life cycle.
117
143
87
107
Set based on 65% (2020:62.5%) of materiality following evaluation inter alia of the expected total value of
known and likely misstatements and the nature of our planned testing.
Materiality
Basis for determining
materiality
Rationale for the
benchmark applied
Performance
materiality
Basis for determining
performance
materiality
Component materiality
We set materiality for each component of the Group based on a percentage of between 20% and 78% (2020: between 20% and 75%) of
Group materiality dependent on the size and our assessment of the risk of material misstatement of that component. Component
materiality ranged from £37,000 to £140,000 (2020: £46,000 to £171,000). In the audit of each significant component, we further applied
performance materiality levels of 65% (2020:62.5%) of the component materiality to our testing to ensure that the risk of errors exceeding
component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £4,500 (2020: £5,700).
We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the Annual Report other
than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our
responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in
the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the Companies
Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic
Report and
Directors’
Report
In our opinion, based on the work undertaken in the course of the audit:
– the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
– the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company and its environment obtained in
the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
Matters on
which we
are required
to report by
exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
– adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have
not been received from branches not visited by us; or
– the Parent Company financial statements are not in agreement with the accounting records and returns; or
– certain disclosures of Directors’ remuneration specified by law are not made; or
– we have not received all the information and explanations we require for our audit.
48
GRC International Group plc Annual Report and Accounts 2021
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, the Directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
The objectives of our audit, in respect to fraud, are: to identify and assess the risks of material misstatement of the financial statements due to
fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud through designing
and implementing appropriate responses; and to respond appropriately to fraud or suspected fraud identified in the audit. However, the
primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
– We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and the industries in which it
operates, and considered the risk of acts by the Group that would be contrary to applicable laws and regulations, including due to fraud.
We designed audit procedures at Group and significant component levels to respond to the risk. We performed procedures focused on
ensuring compliance with laws and regulations that could give rise to a material misstatement in the financial statements including, but
not limited to, the Companies Act 2006 and relevant tax legislation.
– We understood how the Group complies with legal and regulatory frameworks by making enquiries of management and those
responsible for legal and compliance procedures. We corroborated our enquiries through our review of Board minutes.
– We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by meeting
with management to understand where it is considered there was a susceptibility of fraud. We also considered potential fraud drivers
including financial or other pressures, opportunity, and personal or corporate motivations. We considered the programmes and controls
that the Group has established to address risks identified, or that otherwise prevent, deter and detect fraud and how senior management
monitors those programmes and controls. Where the risk was considered to be higher, we performed audit procedures to address each
identified fraud risk. These procedures included testing journals and challenging assumptions made by management in key areas of
estimation uncertainty or judgement, for example in revenue recognition policy application and in financial and non-financial asset
valuations, including but not limited to intangible assets and receivables. We refer to the key audit matters above in relation to revenue
recognition and non-financial asset impairment risks.
– We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members and remained
alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements, recognising that the risk of
not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery, misrepresentations or through collusion. There are inherent limitations in the audit
procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in
the financial statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Parent Company and the Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Tim Neathercoat (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London
28 September 2021
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
GRC International Group plc Annual Report and Accounts 2021
49
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT CONSOLIDATED INCOME S TATEMENT
FOR THE Y E AR ENDED 31 MARCH
Revenue
Cost of sales
Gross profit
Administrative expenses:
– Other administrative expenses
– Exceptional administrative expenses
Total administrative expenses
Other operating income
Operating loss
Net finance costs
Share of post-tax loss of equity-accounted joint ventures
Loss before taxation
Taxation
Loss for the financial year
Loss for the financial year attributable to:
Equity shareholders of the parent
Basic loss per share (pence)
Diluted loss per share (pence)
All of the Group’s loss relates to continuing operations.
Notes
2
4
3
4
4
6
7
8
8
2021
£’000
11,760
(5,614)
6,146
(8,882)
–
(8,882)
148
(2,588)
(247)
–
(2,835)
264
(2,571)
(2,571)
(2.58)
(2.58)
2020
£’000
14,146
(6,082)
8,064
(11,230)
(358)
(11,588)
99
(3,425)
(222)
(4)
(3,651)
445
(3,206)
(3,206)
(4.67)
(4.67)
The accompanying accounting policies and notes form an integral part of these financial statements.
CONSOLIDATED S TATEMENT OF COMPREHENSIVE INCOME
FOR THE Y E AR ENDED 31 MARCH
Loss for the year
Other comprehensive profit/(loss) – items that may subsequently be reclassified to profit/loss:
Exchange differences on translation of foreign operations
Other comprehensive profit/(loss) for the financial year
Total comprehensive loss for the financial year
Total comprehensive loss attributable to equity shareholders of the parent
The accompanying accounting policies and notes form an integral part of these financial statements.
2021
£’000
(2,571)
4
4
(2,567)
(2,567)
2020
£’000
(3,206)
(6)
(6)
(3,212)
(3,212)
50
GRC International Group plc Annual Report and Accounts 2021
CONSOLIDATED BAL ANCE SHEE T
A S AT 31 MARCH
Assets
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Investments in equity-accounted joint ventures
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash at bank
Current tax
Current liabilities
Trade and other payables
Borrowings
Contingent consideration
Lease liabilities
Current tax
Net current liabilities
Non-current liabilities
Borrowings
Lease liabilities
Deferred tax liability
Net assets
Equity
Share capital
Share premium
Merger reserve
Share-based payment reserve
Translation reserve
Accumulated deficit
Total equity
Notes
2021
£’000
2020
£’000
10
11
12
7
13
14
15
16
17
19
21
7
17
21
7
23
6,804
5,765
426
7
–
13,002
33
1,694
233
–
1,960
(5,986)
(863)
–
(197)
(127)
(7,173)
(5,213)
(460)
(83)
(340)
(883)
6,906
100
13,227
4,276
126
(8)
(10,815)
6,906
6,804
5,706
783
7
144
13,444
61
2,247
245
76
2,629
(3,629)
(1,446)
(100)
(201)
–
(5,376)
(2,747)
(401)
(286)
(582)
(1,269)
9,428
100
13,182
4,276
171
(12)
(8,289)
9,428
The financial statements were approved by the Board of Directors and authorised for issue on 28 September 2021 and were signed on its
behalf by:
Chris Hartshorne
Director
Company registration number: 11036180
The accompanying accounting policies and notes form an integral part of these financial statements.
GRC International Group plc Annual Report and Accounts 2021
51
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT CONSOLIDATED S TATEMENT OF CHANGES IN EQUIT Y
FOR THE Y E AR ENDED 31 MARCH
For the year ended 31 March 2021
Balance at 1 April 2020
Loss for the year
Foreign exchange difference on consolidation
Total comprehensive loss for the year
Shares issued
Transactions with owners
At 31 March 2021
For the year ended 31 March 2020
Balance at 1 April 2019
Loss for the year
Foreign exchange difference on consolidation
Total comprehensive loss for the year
Deferred tax on share-based payments
Shares issued
Cost of share issue
Transactions with owners
At 31 March 2020
Share
capital
£
100
–
–
Share
premium
£
13,182
–
–
–
–
–
–
45
45
Merger
reserve
£
4,276
–
–
–
–
–
Share-based
payment
reserve
£
Retained
earnings
£
Translation
reserve
£
171
–
–
(8,289)
(2,571)
–
–
(2,571)
(45)
(45)
45
45
(12)
–
4
4
–
–
Total
£
9,428
(2,571)
4
(2,567)
45
45
100
13,227
4,276
126
(10,815)
(8)
6,906
Share
capital
£
Share
premium
£
Merger
reserve
£
Share-based
payment
reserve
£
Retained
earnings
£
Translation
reserve
£
64
–
–
–
–
36
–
36
9,588
–
–
–
–
3,725
(131)
3,594
100
13,182
2,353
–
–
–
–
1,923
–
1,923
4,276
440
–
–
–
(269)
–
–
(269)
171
(5,083)
(3,206)
–
(3,206)
–
–
–
–
(6)
–
(6)
(6)
–
–
–
–
(8,289)
(12)
Total
£
7,356
(3,206)
(6)
(3,212)
(269)
5,684
(131)
5,284
9,428
The accompanying accounting policies and notes form an integral part of these financial statements.
52
GRC International Group plc Annual Report and Accounts 2021
CONSOLIDATED S TATEMENT OF C A SH FLOWS
FOR THE Y E AR ENDED 31 MARCH
Cash flows from operating activities
Loss before tax
Depreciation
Amortisation
Loss on disposal of fixed assets
Foreign exchange gains
Share of post-tax loss of equity-accounted joint ventures
Finance costs
Operating cash flows before changes in working capital
Net cash from operations
Taxation refund
Decrease in inventories
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Settlement of contingent consideration
Purchase of intangible assets
Purchase of plant and equipment
Net cash outflow from investing activities
Net cash flows from financing activities
Proceeds from issue of shares
Costs of share issue
Repayment of acquired contingent consideration liability
Proceeds from borrowings
Repayment of borrowings
Interest paid
Interest on lease liability on right-of-use asset
Payments of lease liabilities on right-of-use asset
Capital element of finance lease payments
Net cash (outflow)/inflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of financial year
Comprising
Cash at bank
The accompanying accounting policies and notes form an integral part of the financial statements.
Notes
11
19
11
24
19
17
17
17
21
21
15
2021
£’000
2020
£’000
(2,835)
350
1,107
4
(22)
–
247
(1,149)
187
28
588
2,560
2,214
–
(1,168)
(35)
(1,203)
–
–
(100)
710
(1,249)
(186)
(43)
(168)
–
(1,036)
(25)
245
13
233
233
(3,651)
386
1,180
–
(22)
4
222
(1,881)
–
3
625
(815)
(2,068)
(1,626)
(1,124)
(11)
(2,761)
3,750
(130)
(100)
2,356
(568)
(134)
(60)
(181)
(6)
4,927
98
147
–
245
245
GRC International Group plc Annual Report and Accounts 2021
53
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NATURE OF OPER ATIONS AND GENER AL INFORMATION
GRC International Group plc (GRC International Group or ’the Company’) is a public limited company limited by shares, incorporated and
domiciled in England and Wales. The registered company number is 11036180 and the registered office is Unit 3 Clive Court, Bartholemew’s
Walk, Cambridgeshire Business Park, Ely, Cambridgeshire, CB7 4EA.
The principal activities of GRC International Group plc and its subsidiary companies (together, the ’Group’) are those of a one-stop shop for
IT Governance including books, tools, learning and consultancy services.
The Directors of GRC International Group are responsible for the financial information and contents of the consolidated financial statements.
Principal accounting policies
Basis of preparation
The consolidated financial statements of GRC International Group plc and entities controlled by the Company (its subsidiaries) for the years
presented has been prepared in accordance with international accounting standards in conformity with the requirements of the Companies
Act 2006.
The consolidated financial statements have been prepared on a historical cost basis, except for the measurement of the contingent
consideration which is carried at its fair value.
Basis of consolidation
The results for the year ended 31 March 2021 and 31 March 2020 include the results of GRC International Group plc and its subsidiaries.
A subsidiary is a company controlled directly by the Group. Control is achieved where the Group has the power over the investee, rights
to variable returns and the ability to use the power to affect the investee’s returns.
Income and expenses of subsidiaries acquired during the year are included in the Consolidated Income Statement from the effective date
of control. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with
those used by the Group.
All intra-Group transactions, balances, income and expenses are eliminated in full on consolidation.
The principal accounting policies adopted are set out below. These accounting policies comply with each IFRS that is mandatory for
accounting periods ending on 31 March 2021.
Going concern
The Group has recorded a loss for the year of £2.6 million (2020: £3.2 million) and at 31 March 2021 its current liabilities exceeded its current
assets by £5.2 million (2020: £2.7 million). Notwithstanding this, the Directors consider it appropriate to prepare the financial statements on
a going concern basis. The key considerations relating to this judgement are described below.
As set out above, the Group went through a transitional year of restructuring in FY20 and was looking forward to a strong FY21, continuing
its H2 FY20 momentum and anticipating profitable results for the year. However, the global COVID-19 pandemic led to an immediate
reduction in monthly billings as customers delayed projects, reduced spend seen as not immediately critical to day-to-day operations and
focused on establishing new business processes and procedures to survive the short term. This unprecedented trading environment
resulted in a reduction in revenues for April and May 2020, followed initially by a strong V-shaped recovery, but then a period of mixed
results through the summer as the economy stuttered in an environment of ever-changing regulations and guidance. From late in Q3 the
Group saw genuine performance improvements with momentum building through the rest of the year, and performance back to
consistently positive monthly EBITDA before the year end and into the new financial year.
In response to the pandemic the Board revisited its FY21 and FY22 forecasts, increased the regularity of its short and medium-term cash
flow planning, implemented a number of key cost reduction measures and took advantage of government initiatives that have been
introduced in the geographies that the Group operates in order to preserve liquidity, supplemented by deferring the payment of certain
liabilities to HMRC which amounted to approximately £1.6 million. Additionally, in March 2021 certain subsidiaries of the Group joined the
HMRC VAT deferral scheme to defer repayment of VAT liabilities totalling £0.4 million falling due in FY21 until FY22.
Notwithstanding some easing of trading conditions and subsequent improvement in performance since the outbreak of the global
pandemic reached the United Kingdom (which represents around 82% of the Group’s revenue in FY21), the Directors acknowledge that
trading conditions will remain uncertain for the foreseeable future. Those uncertainties include:
– The possibility of further local or national restrictions.
– The lack of visibility over future levels of revenue in the context of weakened demand for the Group’s products and services.
– Should the Group need to further reduce its scalable cost base, its ability to make those adjustments and realise the benefits from doing
that on a timely basis.
– The continued availability of existing financing, including HMRC arrangements (see below), existing borrowings and flexibility allowed by
suppliers.
– The ability to access new financing, including further government support in its various forms, sufficient to fund any further cash
requirement over the foreseeable future.
54
GRC International Group plc Annual Report and Accounts 2021
To assess going concern the Directors prepared an integrated profit and loss, balance sheet and cash flow forecast by month to 31 March
2023. The Group’s base case forecast identifies that through the going concern review period the Group is able to meet its liabilities as they
fall due and make settlement of the outstanding HMRC liabilities through FY22 in equal monthly instalments. The majority of the deferred
payroll tax liabilities owed are now covered by formal ‘time to pay’ repayment plans agreed with HMRC. The repayment plans differ across
the trading entities within the Group, but all split the deferred balance into equal monthly instalments, with the full balance being repaid by
September 2022, and the balance owing as at the date of this report being £1.0 million. The Directors are in discussions with HMRC to agree
the repayment plan for the remainder of the balance not yet covered by formal ‘time to pay’ arrangements and expect this to be formalised
imminently.
Additionally, the Directors prepared a sensitised forecast to the base case forecast where the COVID-19 pandemic was more prolonged
than envisaged by the Directors at the time (the ‘worst-case forecast’). This worst-case forecast assumes that revenues between August
2021 and March 2023 are 40% below the base case (marginally below those actually achieved in FY21) and that cost reduction measures, to
reflect the reduced level of billings, have been effected. The worst-case forecast does not identify a potential cash flow shortfall in any
month and includes the same assumptions for settlement of the outstanding HMRC liabilities as in the base case forecast.
The Directors are monitoring actual business performance and cash flow against the base case forecast and the worst-case forecast.
Encouragingly, the Group has traded ahead of the revenue, EBITDA and cash flow expectations set out in the base case and the worst-case
forecast. Furthermore, in the view of the Directors, any temporary cash flow shortfall can be mitigated through the deferment or removal of
selected planned marketing, capital expenditure and other scheduled cash outflows.
Based on the forecasts and the medium and longer-term planning in place, the Directors have identified that they have a reasonable
expectation of being able to reduce costs sufficiently in the required timeframe should revenue levels cause this to be necessary, and that
the Group will remain within its currently available facility levels, none of which has any financial covenant compliance requirements. Central
to those facilities is the £700,000 unsecured loan facility provided by Andrew Brode which is at present 50% utilised, and which remains in
place until at least 31 December 2022, although the Group does also have access to additional liquidity through its invoice discounting
facility, which is not currently utilised.
The Directors have reviewed the Group’s forecasts and projections to 31 March 2023 which, taking account of reasonably possible changes
in trading performance, show that the Group is able to generate sufficient liquidity to continue in operational existence for the foreseeable
future. On this basis, the Directors believe that the Group will be able to generate sufficient cash through its normal business trading to
enable it to continue its operations, and continue to meet, as and when they fall due, its planned and committed liabilities for at least the
next 12 months from the date of this report. For this reason, the Directors continue to adopt the going concern basis in the preparation of
its financial statements.
However, should the Group not be able to generate cash inflows sufficient to meet its current operational obligations and legacy deferred
obligations as they fall due, it would need to secure additional funding with no guarantee such funding would be secured. These circumstances
indicate the existence of a material uncertainty which may cast significant doubt over the Group’s and Company's ability to continue as a
going concern.
The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be
appropriate.
Revenue
The type of products and range of services sold across the Group fall within the following four revenue streams:
– Consultancy
– Publishing/Distribution
– Learning
– Software
To determine whether to recognise revenue, the Group follows a five-step process:
1. Identifying the contract with a customer;
2. Identifying the performance obligations;
3. Determining the transaction price;
4. Allocating the transaction price to the performance obligations;
5. Recognising revenue when/as performance obligation(s) are satisfied.
Revenue is recognised either at a point in time or over time, when the Group satisfies performance obligations by transferring the promised
goods or services to its customer. The Group often enters into transactions involving a range of the Group’s products and services, for
example for the delivery of consultancy, training, software and related after-sales service. In all cases, the total transaction price for a
contract is allocated net of discounts amongst the various performance obligations based on their relative stand-alone selling prices. The
transaction price for a contract excludes any amounts collected on behalf of third parties.
GRC International Group plc Annual Report and Accounts 2021
55
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NATURE OF OPER ATIONS AND GENER AL INFORMATION CONTINUED
Revenue continued
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these
amounts as deferred income in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it
receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on
whether something other than the passage of time is required before the consideration is due. In practice, contract assets rarely arise due
to the timing of invoices raised under the terms of the Group’s contracts.
All material contracts which span a financial reporting period will be reviewed on an individual basis with the five-step application of IFRS 15
applied, based upon the type of product sold.
Customer rights to refunds are limited and are not considered material to the financial statements.
Products and services
Nature, timing of satisfaction of performance obligations and significant payment terms
Consultancy
– On-site and remote
support consulting services,
helping organisations to
design and implement data
protection and cyber
security policies and
procedures.
Publishing/Distribution
– The Group sells books,
documentation templates
and software via its
websites, both that it
publishes or writes itself,
and also supplied by third
parties. The Group also
creates and sells sets of
documentation templates
that are used by customers
to assist them to document
IT systems and procedures.
The Group recognises revenue over time as the services in the contract are performed, generally based on
the consultants’ estimates of the progress of the work. Revenue from consultancy services which are either a
performance obligation within a larger arrangement or are sold on a stand-alone basis is generally
recognised over time where the Group agrees to provide labour hours/days. Contracts state a broad list of
activities that the services may include. The contracts state daily/hourly rates and estimated amounts to be
billed. Contracts state that the Group will not exceed the total amount without prior written approval.
Where the performance obligations within an agreement are considered to represent services that are
substantially the same, these will form a single performance obligation with labour days/hours representing
the progress measure. Several contracts define the only obligation as support for customer-led projects, and
again in these cases it will be considered that there is one performance obligation with labour hours being
the progress measure.
Revenue is recognised over a time, when a) the Group’s performance does not create an asset with an
alternative use to the Group and b) the entity has an enforceable right for performance completed to date.
This is true for all services provided on a time basis.
The Group recognises revenue at the point in time when control of the asset is transferred to the customer.
The product becomes under the control of the customer when the book/software/toolkit is delivered to
them. This is when the customer has legal title to the asset or has physical possession of the asset.
For the sale of physical soft copy books and CD-ROMs, revenue is recognised when the goods are delivered.
For the sale of downloadable books, revenue is recognised when the goods are made available to download
by the customer.
Where a product with a subscription or licence is sold on behalf of a third party the revenue is recognised
straight away as the Group has completed its performance obligation. The full cost of the product sold by
the Group in respect of a third-party sale is charged to the Income Statement when the revenue is
recognised.
56
GRC International Group plc Annual Report and Accounts 2021
Products and services
Nature, timing of satisfaction of performance obligations and significant payment terms
Learning
– The Group sells ’in person’
classroom-based training
courses related to data
protection, cyber security,
ISO 27001 certification and
related topics. The courses
range from one to five days
in length and are held at
hired premises. The Group
also provides courses at
customers’ premises for
organisations that require
training for a number of
their employees. The
courses are aimed at various
different areas of IT
governance and at different
skill levels.
Software
– The Group creates and
sells software solutions.
Maintenance and Support
(’M&S’) arrangements are
usually sold on a stand-
alone basis as a renewal of
an existing arrangement
usually running over a
12-month period. Generally,
the first time M&S is sold is
when the customer initially
buys the software. There are
no material rights to
consider in connection with
renewal options.
Revenue is recognised on ‘Classroom Based Training Courses’ and ‘Online Training Courses’ over the
duration of the Training Course.
Revenue is recognised on ‘Distance Learning Based Training Courses,’ when the customer gains control of
the course material, at the date the online course is made available to them. Once the course is made
available the Group has fulfilled its contractual obligation to deliver. The date the user accesses and uses the
course is not considered relevant.
Revenue is recognised on ‘e-Learning Courses’ dependent on the type of service provided. ‘e-Learning’ is
split into four types:
– e-Learning Hosting Services – An additional annual fee for LMS (Learning Management System) hosting of
the e-learning courses. Customers are not obliged to but can buy our standard ‘off-the-shelf’ ‘Hosting’
area. All hosted client courses will be hosted on our LMS. Each client will be given their own space, which
can be branded with their logo and company colours. The e-learning course files hosted on our LMS will
be the same for all clients, and each client will have a space in the course layout to add any extra
information they need, such as documents, links and contact details. Revenue is recognised on ‘e-Learning
Hosting Services’ over time as the customer has access to the hosting area. Revenue is then pro-rated
equally over the period (normally 12 months) to which the service relates.
– Revenue is recognised on ‘e-Learning Courses’ when the customer obtains control. The course becomes
under the control of the customer when the online course is made available to access.
– e-Learning Set Up Costs – Organisations/customers can contract the Group to ‘customise’ the e-learning
courses to their organisation’s specifications (i.e. company logo/branding etc.). Revenue is recognised on
‘e-Learning Set Up Costs’ when the customer obtains control of the course material. The product becomes
under the control of the customer when the online courses are made available to access.
– e-Learning Training – Organisations/customers can contract the Group to provide training for the
e-learning courses. This is a one-off fee and the Training is a pre-agreed number of hours or days as
requested by the customer. Revenue is recognised on ‘e-Learning Training’ when the customer gains
control. The product comes under the control of the customer on the first day of the Training Course.
Revenue from the sale of software for a fixed fee is recognised when or as the Group gives access to the
customer to download the software.
Software revenue recognition:
– Performance obligations are satisfied at a point in time when the Group has a right to payment for the
software, the customer has legal right to use the software under the terms of the software licence
agreement, and the Group has physically transferred the software to the customer. These criteria are all
met at the point in time that the Group transfers the software. Where software in sold under a SaaS
arrangement, revenue is recognised evenly over the period of the arrangement as the Group fulfills its
performance obligations.
– The Group does not undertake activities which significantly affect the intellectual property post delivery
of the software which would prevent revenue being recognised at a point in time.
– The Group does not provide free Maintenance and Support type services as part of the licensing
arrangements. Revenue from the sale of Maintenance and Support arrangements are always sold on a
stand-alone basis or as a renewal of an existing arrangement usually running over a 12-month period, as
explained below. Furthermore the technical support and software updates are distinct. This is because the
customer can benefit from the licence with or without the Maintenance and Support contract.
– Technical support: the customer benefits from the technical support as that support is provided. The contracted
support period is generally 12 months, so the customer obtains the benefit over the 12-month period.
Accordingly, it is appropriate to recognise support revenue over a 12-month period.
– Software updates: all software updates are unspecified within Maintenance and Support arrangements
with updates being made as and when available. The customer will continue to receive updates during the
Maintenance and Support period and accordingly will benefit from the updates as they are provided.
Accordingly, it is appropriate to recognise revenue over a 12-month period.
Exceptional administrative costs
The Group presents separately those costs which, by their nature, are material and related to non-routine events such as business
combinations or capital transactions.
Finance income and costs
Interest income and expense is recognised using the effective interest method which calculates the amortised cost of a financial asset or liability
and allocates the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash receipts or payments through the expected life of the financial asset or liability to the net carrying amount of the financial asset or liability.
GRC International Group plc Annual Report and Accounts 2021
57
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NATURE OF OPER ATIONS AND GENER AL INFORMATION CONTINUED
Goodwill
Goodwill arising on business combinations is reviewed and tested on an annual basis or more frequently if there is indication that goodwill
might be impaired.
Goodwill is allocated to cash-generating units (’CGUs’), which are determined as the lowest level of detail available for the assets to
generate cash inflows relating to goodwill.
Goodwill represents the future economic benefits arising from business combinations which are not individually identified and separately
recognised.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest
over the net identifiable assets acquired and liabilities assumed. If the consideration is lower than the fair value of the net assets of the
subsidiary acquired, the difference is recognised in profit or loss.
Goodwill is carried at cost less any accumulated impairment losses until disposal or termination of the previous acquired business when the
profit or loss on disposal or termination will be calculated after charging the gross amount at current exchange rates of any such goodwill
through the income statement.
Intangible assets
Acquired intangible assets
An intangible asset is recognised if it is probable that the expected future economic benefits that are attributable to the asset will flow to
the Group and the cost of the asset can be measured reliably.
Internally developed intangible assets
Expenditure on research activities is recognised as an expense as incurred.
Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following
recognition requirements:
– the development costs can be measured reliably;
– the project is technically and commercially feasible;
– the Group intends to and has sufficient resources to complete the project;
– the Group has the ability to use or sell the software; and
– the software will probably generate future economic benefits.
Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include an
apportionment of employee costs incurred on internal development assets.
Internal development assets include software, website costs, courseware, marketing tools, consultancy products and publishing products.
Subsequent measurement
The useful lives of all intangible assets are assessed as finite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful
life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method prospectively.
The amortisation expense on intangible assets with finite lives is recognised in the income statement within administrative expenses.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
Amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Trademarks
Software
Website costs
Marketing tools
Courseware
Publishing products
Consultancy products
Customer relationships
10 years
5 years
5–10 years
3 years
10 years
4 years
10 years
12 years
Any capitalised internally developed intangible asset that is not yet complete is not amortised but is subject to annual impairment testing.
Subsequent expenditures on the maintenance of computer software are expensed as incurred.
58
GRC International Group plc Annual Report and Accounts 2021
Customer relationships
Acquired customer relationships comprise principally of existing customer relationships which may give rise to future orders (customer
relationships). Acquired customer relationships are recognised at fair value at the acquisition date and are expected to have a finite useful life of 12
years in line with the expected cash flows. Acquired customer relationships are stated at cost less accumulated amortisation and impairment.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less depreciation less any recognised impairment losses. Cost includes
expenditure that is directly attributable to the acquisition or construction of these items. Subsequent costs are included in the asset’s
carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the costs can be
measured reliably.
All other costs, including repairs and maintenance costs, are charged to the Income Statement in the period in which they are incurred.
Depreciation is provided on all property, plant and equipment and is calculated as follows:
Leasehold improvements
Computer equipment
Office equipment
10 years straight-line basis or the lease term if shorter
25–33% reducing balance basis
25% reducing balance basis
Depreciation is provided on cost less residual value. The residual value, depreciation methods and useful lives are annually reassessed.
Each asset’s estimated useful life has been assessed with regard to its own physical life limitations and to possible future variations in those
assessments. Estimates of remaining useful lives are made on a regular basis for all machinery and equipment, with annual reassessments
for major items. Changes in estimates are accounted for prospectively.
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets. However, when there
is no reasonable certainty that ownership will be obtained by the end of the lease term, assets are depreciated over the shorter of the lease
term and their useful lives.
The gain or loss arising on disposal or scrapping of an asset is determined as the difference between the sales proceeds, net of selling
costs, and the carrying amount of the asset and is recognised in the Income Statement.
Impairment of non-financial assets
For the purposes of impairment testing, goodwill is allocated to each of the Group’s CGUs that is expected to benefit from the synergies of
the combination. Each unit to which goodwill is allocated represents the lowest level within the Group that independent cash flows are
monitored. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is
indication that the unit may be impaired.
At each balance sheet date, the Directors review the carrying amounts of the Group’s non-current assets, other than goodwill, to determine
whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of
the asset is estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are
independent from other assets, the Directors estimate the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs of disposal and value in use. 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 the risks specific to the asset for which the estimated future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the
asset or cash-generating unit is reduced to its recoverable amount. The impairment loss is allocated first to reduce the carrying amount of
any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately. An impairment loss recognised for goodwill is not reversed in subsequent
periods.
Where an impairment loss on non-financial assets subsequently reverses, the carrying amount of the asset or cash-generating unit is
increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying
amount that would have been determined had no impairment loss been recognised for the asset or cash-generating unit in prior periods.
A reversal of an impairment loss is recognised in the Income Statement immediately.
Inventory
Inventory is stated at the lower of cost and net realisable value, being the estimated selling price less costs to complete and sell. Cost is
based on the cost of purchase on a weighted average basis.
At the balance sheet date, inventories are assessed for impairment. If inventories are impaired, the carrying amount is reduced to its selling
price less costs to complete and sell. The impairment loss is recognised immediately in profit or loss.
GRC International Group plc Annual Report and Accounts 2021
59
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT
NATURE OF OPER ATIONS AND GENER AL INFORMATION CONTINUED
Cash at bank
Cash at bank comprises cash on hand, deposits held at call with banks and other short-term highly liquid investments with original
maturities of three months or less from inception.
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are measured initially at fair value plus transaction costs. Financial assets and financial liabilities are
measured subsequently as described below.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial
instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset
and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. When a financial liability and a financial asset
relating to the same contract exist these are offset.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in
accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets are classified as ’Amortised cost’ financial assets.
In the periods presented the Group does not have any financial assets categorised as either FVTPL or FVOCI. The classification is
determined by both:
– The entity’s business model for managing the financial asset.
– The contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income
or other financial items, except for impairment of trade receivables which is presented within other administrative expenses.
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
– They are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows.
– The contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
Subsequent measurement of financial assets
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect
of discounting is immaterial. The Group’s cash and cash equivalents, trade and most other receivables fall into this category of financial
instruments.
Impairment of financial assets
IFRS 9’s impairment requirements use forward-looking information to recognise expected credit losses – the expected credit loss (’ECL’)
model. Instruments within the scope of these requirements include loans and other debt-type financial assets measured at amortised cost,
trade receivables and loan commitments.
The Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events,
current conditions, and reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
– Financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk (‘Stage
1’); and
– Financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low (‘Stage 2’).
Stage 3 would cover financial assets that have objective evidence of impairment at the reporting date.
12-month expected credit losses are recognised for the first category while ‘lifetime expected credit losses’ are recognised for the second
and third category.
Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the
financial instrument.
60
GRC International Group plc Annual Report and Accounts 2021
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for trade receivables as well as contract assets and records the loss allowance
as the lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at
any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-
looking information to calculate the expected credit losses using a provision matrix.
The Group assesses impairment of trade receivables on a collective basis and as they possess shared credit risk characteristics they have
been grouped based on the days past due. Refer to note 14 for further details.
Classification and measurement of financial liabilities
The Group’s financial liabilities include trade and other payables, borrowings and contingent consideration.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designates a
financial liability at fair value through profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for financial liabilities
designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within
finance costs or finance income.
Borrowings
Borrowings, including bank overdrafts, are classified as current liabilities unless the Group has an unconditional right to defer the
settlement of the liability for at least 12 months after the balance sheet date.
Contingent consideration
Contingent consideration is recognised at fair value at the acquisition date and subsequently at FVTPL. Changes in deferred consideration
arising from additional information, obtained within one year of the acquisition date, about facts or circumstances that existed at the
acquisition date, are recognised as an adjustment to goodwill.
Foreign currency
The presentational currency for the Group’s consolidated financial statements is Sterling. Foreign currency transactions by Group
companies are recorded in their functional currencies at the exchange rate at the date of the transaction. Monetary assets and liabilities
have been translated at rates in effect at the balance sheet date, with any resulting exchange adjustments being charged or credited to the
Income Statement, within administrative expenses.
On consolidation the assets and liabilities of the subsidiaries with a functional currency other than Sterling are translated into the Group’s
presentational currency at the exchange rate at the balance sheet date and the Income Statement items are translated at the average rate
for the period. The exchange difference arising on the translation from functional currency to presentational currency of subsidiaries is
classified as other comprehensive income and is accumulated within equity as a translation reserve.
The balance of the foreign currency translation reserve relating to a subsidiary that is disposed of, or partially disposed of, is recognised in
the Income Statement at the time of disposal.
Current taxation
Current taxation for each taxable entity in the Group is based on the local taxable income at the local statutory tax rate enacted or
substantively enacted at the balance sheet date and includes adjustments to tax payable or recoverable in respect of previous periods.
Deferred taxation
Deferred taxation is calculated using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. However, if the deferred tax arises from the initial recognition of an
asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss, it is not accounted for. No deferred tax is recognised on initial recognition of goodwill or on investment in subsidiaries.
Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are
expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are provided in full, and are not discounted.
Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary
differences can be utilised.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Income Statement, except where they relate
to items that are charged or credited directly to equity, in which case the related deferred tax is also charged or credited directly to equity.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the
same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
GRC International Group plc Annual Report and Accounts 2021
61
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NATURE OF OPER ATIONS AND GENER AL INFORMATION CONTINUED
Employment benefits
Provision is made in the financial statements for all employee benefits. Liabilities for wages and salaries, including non-monetary benefits
and annual leave obliged to be settled within 12 months of the balance sheet date, are recognised in accruals.
Contributions to defined contribution pension plans are charged to the Income Statement in the period to which the contributions relate.
Leases
For any new contracts entered into on or after 1 April 2019, the Group considers whether a contract is, or contains, a lease. A lease is
defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for
consideration’.
To apply this definition the Group assesses whether the contract meets three key evaluations which are whether:
– the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at
the time the asset is made available to the Group;
– the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract;
– the Group has the right to direct the use of the identified asset throughout the period of use. The Group assesses whether it has the right
to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet. The right-of use asset is
measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Group, an
estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease
commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. The Group also assesses the right-of-use asset for impairment when such
indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid at that date,
discounted using the interest rate implicit in the lease if that rate is readily available or, if not, the Group’s incremental borrowing rate.
Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the
following lease payments:
– fixed payments (including in-substance fixed payments), less any lease incentives receivable;
– variable lease payments that are based on an index or a rate;
– amounts expected to be payable by the lessee under residual value guarantees;
– the exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
– payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Right-of-use assets are measured at cost comprising the following:
– the amount of the initial measurement of lease liability;
– any lease payments made at or before the commencement date less any lease incentives received;
– any initial direct costs; and
– restoration costs.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any
reassessment or modification, or if there are changes in fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-
use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients available under IFRS
16. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or
loss on a straight-line basis over the lease term.
Equity
Equity comprises the following:
– ’Share capital’ represents the nominal value of equity shares issued.
– ’Share premium’ represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
– ’Merger reserve’ represents the excess of the fair value of the consideration received for the issue of shares over the nominal value of
shares issued in circumstances where the merger relief provisions of the Companies Act 2006 apply.
– ’Share-based payment reserve’ represents the accumulated value of share-based payments.
– ’Retained earnings’ represents the accumulated profits and losses attributable to equity shareholders.
– ’Translation reserve’ represents the exchange differences arising from the translation of the financial statements of subsidiaries into the
Group’s presentational currency.
62
GRC International Group plc Annual Report and Accounts 2021
Share-based payments
Equity-settled share-based payments to employees and Directors are measured at the fair value of the equity instrument. The fair value of
the equity-settled transactions with employees and Directors is recognised as an expense over the vesting period. The fair value of the
equity instruments is determined at the date of grant, taking into account vesting conditions. The fair value of goods and services received
is measured by reference to the fair value of options.
The fair values of share options are measured using the Black-Scholes model. The expected life used in the model is adjusted, based on
management’s best estimate of the effects of non-transferability, exercise restrictions and behavioural considerations.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award
(the ’vesting date’).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which
the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest.
The Income Statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and
end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition,
which are treated as vesting irrespective of whether or not the market condition is satisfied, provided that all other performance and/or
service conditions are satisfied. Where the terms of an equity-settled award are modified, the minimum expense recognised is the expense
as if the terms had not been modified. An additional expense is recognised for any modification which increases the total fair value of the
share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement
award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as
described in the previous paragraph.
Where an equity-settled award is forfeited, the cumulative charge expensed up to the date of forfeiture is credited to the Income Statement.
Segment reporting
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses
(including revenues and expenses related to transactions with other components of the same entity), whose operating results are regularly
reviewed by the entity’s Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its
performance, and for which discrete financial information is available. The Chief Operating Decision Maker has been identified as the Board
of Executive Directors, at which level strategic decisions are made.
Details of the Group’s reportable operating segments are provided in note 1.
New and amended International Financial Reporting Standards adopted by the Group
The following accounting standards, interpretations, improvements and amendments have become applicable for the current period and
although the Group has adopted them, they have had no material impact on the Group. These comprise:
– Amendments to IFRS 9, IAS 39 and IFRS 7: Interest Rate Benchmark Reform.
– Amendments to References to the Conceptual Framework for IFRS Standards.
– Amendments to IFRS 3: Definition of a Business.
– Amendments to IAS 1 and IAS 8: Definition of Material.
– Amendments to IFRS16: COVID-19 related Rent Concessions.
Endorsed accounting standards effective in future periods
The Directors considered the impact on the Group of other new and revised accounting standards, interpretations or amendments that are
currently endorsed but not yet effective. The Directors do not expect any other standards to have a significant impact on the Group’s results.
International Financial Reporting Standards in issue but not yet effective
At the date of authorisation of the consolidated financial statements, the IASB and IFRS Interpretations Committee have issued standards,
interpretations and amendments which are applicable to the Group.
The following accounting standards and amendments that are applicable to the Group have been issued by the IASB but had either not been
endorsed by the UK Endorsement Board or were not yet effective as at 31 March 2021.
– IFRS 17 Insurance Contracts. The current effective date is 1 January 2023. This is not expected to be applicable to the Group.
These amendments are not expected to be material to the Group, if adopted.
New/revised International Financial Reporting Standards which are not considered likely to have an impact on the Group’s financial
statements going forwards have been excluded from the above.
Management anticipates that all relevant pronouncements will be adopted in the Group’s accounting policies for the first period beginning
after the effective date of the pronouncement.
GRC International Group plc Annual Report and Accounts 2021
63
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NATURE OF OPER ATIONS AND GENER AL INFORMATION CONTINUED
Significant management judgements in applying accounting policies and key sources of estimation uncertainty
The preparation of the consolidated financial statements requires management to make judgements, estimates and assumptions that affect
the application of policies and reported amounts of assets and liabilities, income and expenses. These estimates, judgements and
assumptions are based on historical experience and other factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates. The areas which require the most use of management estimation and judgement are set out below.
The following are significant management judgements in applying the accounting policies of the Group that have the most significant effect
on the financial statements.
Capitalisation of internally developed intangible assets
Determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. Management
considers the criteria set out in IAS 38 in advance of capitalising any project costs. After capitalisation, management monitors whether the
recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. Should a
different judgement be taken, the amounts capitalised may differ from those presented in note 11, affecting administrative expenses and
the results for the year.
Recognition of deferred tax assets
The extent to which deferred tax assets can be recognised is based on an assessment of the probability that future taxable income will be
available against which the deductible temporary differences and timing differences on capital allowances can be utilised. In addition,
significant judgement is required in assessing the impact of any legal or economic limits or uncertainties in various tax jurisdictions.
Judgement is also applied in the recognition of deferred tax assets in respect of losses, based on management’s view of the availability of
future profits to offset such losses. The approach adopted in 2021 is that of not recognising any deferred tax asset.
Identification of performance obligations in customer contracts
The identification of performance obligations in customer contracts requires management to exercise judgement to determine both the
nature of the performance obligations and when those obligations are delivered in order to recognise revenue appropriately in the correct
amount and in the correct accounting period.
Level of expected credit loss provision to hold or not to hold (note 15)
The identification of any provision for any expected credit loss requires management to exercise judgement to determine the nature of the
recoverability of debts outside of the normal credit terms.
Going concern
The identification by management of the Group to continue as a going concern is a key judgement and has been explained further on
page 54.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities,
income and expenses is provided below. Actual results may be substantially different.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Estimates and assumptions
– Impairment testing of intangible assets acquired or internally generated (note 11):
The recoverable amounts of groups of CGUs have been determined based on value-in-use calculations. The principal assumptions used
to determine value-in-use relate to future cash flows and the time value of money. Further information is provided in the Intangible
Assets note.
– Impairment of goodwill and finite-lived intangible assets – estimate of future cash flows and determination of the discount rate (note 10):
Estimation is required in determining whether goodwill and finite-lived intangible assets are impaired or not. The Group tests annually
whether goodwill has suffered any impairment. The recoverable amounts of groups of CGUs have been determined based on value-in-
use calculations. The principal assumptions used to determine value-in-use relate to future cash flows and the time value of money.
Changes in the estimate of the weighted average cost of capital or future cash flows and growth rates over the assessment period could
reduce the level of headroom. The key assumptions used for the value-in-use calculations and sensitivity analysis are set out in note 10.
64
GRC International Group plc Annual Report and Accounts 2021
NOTES TO THE FINANCIAL S TATEMENTS
1. Segmental reporting
Operating segments
For the purposes of segmental reporting, the Group’s Chief Operating Decision Maker (’CODM’) is considered to be the Board of Executive
Directors. The Board identifies its operating segments based on the Group’s service lines, which represent the main product and services
provided by the Group. In the opinion of the Board therefore, the Group operates as a single operating segment.
Revenue by geographic destination
Revenue across all operating segments is generated from the UK but includes overseas sales:
UK
Non-UK
2021
£’000
9,666
2,094
11,760
2020
£’000
11,680
2,466
14,146
2021 Non-UK revenue includes Rest of Europe £698,000 (2020: £939,000), United States of America £764,000 (2020: £863,000), Australia
£84,000 (2020: £180,000) and Rest of the World £548,000 (2020: £484,000).
2021 Non-UK non-current assets includes Ireland £31,000 (2020: £33,000) and Germany £7,000 (2020: £7,000).
Information about major customers
No customers contributed 10% or more to the Group’s revenue in any period presented.
2. Revenue
Revenue is all derived from continuing operations.
Notwithstanding that the Group's revenues are often interdependent, the Group has disaggregated revenue into various categories in the
following tables which is intended to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by
economic date:
Consultancy
Publishing and Distribution
Software
Training
Total revenue
The Group’s revenue is analysed by timing of delivery of goods or services as:
Point in time delivery
Over time
Total revenue
The revenue is analysed as follows for each revenue category:
Sale of goods
Provision of services
Other operating Income
Total
2021
£’000
8,106
750
1,147
1,757
11,760
2021
£’000
8,434
3,326
11,760
2021
£’000
740
11,020
11,760
148
11,908
2020
£’000
8,635
977
1,356
3,178
14,146
2020
£’000
9,023
5,123
14,146
2020
£’000
976
13,170
14,146
99
14,245
Included in Other Operating Income are grant receipts totaling £85,000 (2020: £Nil) claimed under the Government furlough scheme.
GRC International Group plc Annual Report and Accounts 2021
65
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
2. Revenue continued
Contract liabilities: deferred income
At 1 April
Amounts included in deferred income that were recognised as revenue in the period from
the opening balance
Amounts invoiced in the period and not recognised as revenue until later periods
At 31 March
Deferred income
2021
£’000
952
(952)
1,114
1,114
2020
£’000
971
(971)
952
952
The Group recognises deferred income as a contract liability. This balance equates to the value of the remaining performance obligations
for revenue recognised over time, given the nature of the Group’s invoicing arrangements with customers.
Contract assets and contract liabilities are included within ’trade and other receivables’ and ’trade and other payables’ respectively on the
face of the Consolidated Balance Sheet. They arise from the Group’s contracts that cover multiple reporting periods as payments received
from customers at each balance sheet date do not necessarily equal the amount of revenue recognised on the contracts.
No material contract asset balances arise in the ordinary course of business.
3. Exceptional administrative costs
Expenses relating to the acquisition of DQM
2021
£’000
–
–
2020
£’000
358
358
The Group's exceptional administration costs comprise substantially of professional fees. These professional fees relate to the DQM deed
of variation of contract and also to the fundraise to settle the outstanding contingent consideration.
4. Operating profit
Operating profit is stated after charging:
Cost of sales
Wages and salaries
Other direct costs including consultancy and training costs, books and manuals
Other administration costs
Wages and salaries
Sales and marketing costs
Depreciation of property, plant and equipment
Loss of sale of fixed assets
Amortisation of intangible fixed assets
Auditor’s remuneration:
– Fees payable for the audit of the annual accounts
Foreign exchanges losses
Other costs including office administration, legal and professional, IT and website costs
2021
£’000
2020
£’000
4,110
1,504
5,614
5,501
438
350
4
1,107
120
6
1,356
8,882
3,533
2,549
6,082
6,935
634
386
–
1,180
141
1
1,953
11,230
No non-audit fees were payable to the auditor in respect of services rendered in the year.
Included in other operating income are grant receipts totalling £85,000 (2020: £Nil) under the Coronavirus Job Retention Scheme. The
group has also taken advantage of government VAT deferrals as referred to in note 1 and additional lending under the Coronavirus Business
Interruption Loan scheme as referred to in note 17.
66
GRC International Group plc Annual Report and Accounts 2021
5. Employees
The aggregate payroll costs of the employees were as follows:
Staff costs
Wages and salaries
Social security costs
Pension costs
Directors made gains of £26k on exercise of share options (2020: £364k).
The average monthly number of persons employed by the Group during the year was as follows:
By activity
Administration
Sales and distribution
Remuneration of Directors is disclosed in the Remuneration Committee Report.
Details of key management personnel and their remuneration are disclosed within note 26.
6. Net finance costs
Interest on overdrafts
Interest on loans
Interest on lease liabilities
Other interest
2021
£’000
8,769
938
207
9,914
2020
£’000
9,706
866
230
10,802
2021
68
81
149
2021
£’000
2
159
43
43
247
2020
92
95
187
2020
£’000
11
138
61
12
222
GRC International Group plc Annual Report and Accounts 2021
67
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
7. Taxation
Analysis of credit in the year:
Current tax – current period
Current tax – adjustment in respect of prior period
Deferred tax – current period movement
Deferred tax – adjustment in respect of prior period
Total tax credit
Loss before taxation
Loss by rate of tax (2021: 19%; 2020: 19%)
Expenses not deductible for tax purposes
Deferred tax asset not recognised
Deferred tax – current period movement
Adjustments to deferred tax in respect of prior period
Other adjustments to current tax in respect of prior period
Adjustment in respect of prior period: research and development tax credit
Effects of change in tax rate
Losses carried back
Total tax credit
Deferred tax in equity
Change in estimated excess tax deductions related to share-based payments
Total income tax recognised directly in equity
2021
£’000
–
(157)
(85)
(22)
(264)
2021
£’000
(2,835)
(539)
11
528
(85)
(22)
20
(177)
–
–
(264)
2021
£’000
–
–
2020
£’000
(60)
(427)
50
(8)
(445)
2020
£’000
(3,651)
(694)
33
640
–
(8)
(243)
(184)
(41)
52
(445)
2020
£’000
269
269
The March 2021 Budget announced a further increase to the main rate of corporation tax to 25% from April 2023. This rate has not been
substantively enacted at the balance sheet date. As a result deferred tax balances as at 31 March 2021 continue to be measured at 19%. If all
of the deferred tax was to reverse at the amended rate the effect on the closing deferred tax position would be to increase the deferred tax
liability by £1.3 million.
At the balance sheet date, the Group has the following unused tax losses for which no deferred tax asset has been recognised on the basis
that it is not considered probable that there will be future profits available to utilise the tax losses in the foreseeable future:
Trading losses (UK)
Trading losses (Ireland)
Trading losses (USA)
Non-trading loan relationship debits
2021
£’000
5,804
1,631
470
164
2020
£’000
4,901
1,446
232
2
At the balance sheet date, a deferred tax asset has not been recognised for excess unrelieved foreign tax of £20,435 (2020: £20,435) on the
basis that it is not considered probable that there will be future taxable profits available to utilise the double tax relief credit.
The group records tax credits for research and development tax credits in the financial statements when the claims have been quantified.
The amount receivable has been deducted from other amounts payable to HMRC in accordance with the expected method of settlement.
68
GRC International Group plc Annual Report and Accounts 2021
Deferred tax
The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and
prior reporting period.
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.
At 1 April 2019
Charge/(credit) to profit or loss
Credit direct to equity
Other differences
Deferred tax (asset)/liability at
31 March 2020
Charge/(credit) to profit or loss
Prior year adjustment
Foreign exchange
Deferred tax at 31 March 2021
Asset (Non-UK)
Liability (UK)
Deferred tax at 31 March 2020
Asset (Non-UK)
Liability (UK)
Fixed asset
timing
differences
£’000
Retirement
benefit
obligations
£’000
Share-based
payments
£’000
Short-term
timing
differences
£’000
Tax losses
(Ireland)
£’000
Tax losses
(UK)
£’000
Intangibles
£’000
113
103
–
(6)
210
(185)
(25)
–
–
–
–
210
–
210
–
(2)
–
–
(2)
(1)
1
–
(2)
–
(2)
(2)
–
(2)
(261)
(7)
269
(2)
(1)
–
–
–
(1)
–
(1)
(1)
–
(1)
(1)
(4)
–
–
(5)
1
4
–
–
–
–
(5)
–
(5)
(144)
–
–
–
(144)
138
(3)
9
–
–
–
(144)
(144)
–
1
–
–
(2)
(1)
–
1
–
–
–
–
(1)
–
(1)
421
(40)
–
–
381
(38)
–
–
343
–
343
381
–
381
Total
£’000
129
50
269
(10)
438
(85)
(22)
9
340
–
340
438
(144)
582
8. Earnings per share
Basic earnings per share is based on the loss after tax for the year and the weighted average number of shares in issue during each year.
Loss attributable to equity holders of the Group (£)
Weighted average number of shares in issue
Basic loss per share (pence)
2021
£’000
2020
£’000
(2,571)
99,754,064
(2.58)
(3,206)
68,689,792
(4.67)
Diluted earnings per share is calculated by adjusting the average number of shares in issue during the year to assume conversion of all
dilutive potential ordinary shares.
Taking the Group’s share options into consideration in respect of the Group’s weighted average number of ordinary shares for the purposes
of diluted earnings per share, is as follows:
Number of shares
Dilutive (potential dilutive) effect of share options
Weighted average number of ordinary shares for the purposes of diluted earnings per share
Diluted loss per share (pence)
2021
2020
99,754,064
–
99,754,064
68,689,792
–
68,689,792
(2.58)
(4.67)
Due to the losses incurred during the year, a diluted loss per share has not been calculated as this would serve to reduce the basic loss per
share. There were 426,760 (2020: 1,680,680) share options outstanding at the end of the year that could potentially dilute basic earnings per
share in the future.
GRC International Group plc Annual Report and Accounts 2021
69
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
9. Subsidiaries
Details of the Group’s subsidiaries are as follows:
Name of subsidiary and registered office address
Principal activity
IT Governance Limited*
Vigilant Software Limited*
IT Governance Europe Limited
6th Floor, South Bank House, Barrow Street, Dublin 4
IT Governance USA Inc
420 Lexington Avenue, Suite 300, New York, NY 10170, USA
IT Governance Publishing Limited*
GRCI Law Limited*
GRC Elearning Limited*
IT Governance Europe Limited*
IT Governance Consulting Limited*
IT Governance Franchising Limited*
IT Governance Sales Limited*
IT Governance Software Limited*
IT Governance Training Limited*
ITG Certifications Limited*
ITG Qualifications Limited*
ITG Security Testing Limited*
ITG Encryption Limited*
Data Quality Management Limited**
Data Quality Management Group Limited**
Data2 Limited**
DQM Group Holdings Limited**
Information technology
governance services
Information technology
Software development
Information technology
governance services
Information technology
governance services
Information technology
governance publication
Information technology
governance legal services
Information technology
governance internet-based
training
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Dormant company***
Information technology
governance services
Dormant company***
Holding company***
Place of
incorporation and
operation
England & Wales
England & Wales
Ireland
USA
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
England & Wales
% ownership held by the
Group
2021
£’000
2020
£’000
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Registered Office: Unit 3, Clive Court, Bartholomew’s Walk, Cambridge Business Park, Ely, Cambridgeshire CB7 4EA.
*
** Registered Office: DQM House, Baker Street, High Wycombe, Buckinghamshire HP11 2RX.
*** Dormant subsidiaries which have taken advantage of the s394A exemption from preparing individual accounts.
Vigilant Software Limited, company number 05985888, IT Governance Publishing Limited, company number 06082604, GRCI Law Limited,
company number 11311669, GRC Elearning Limited, company number 11247590 and DQM Group Holdings Limited, company number
10852386 which are included in the consolidated financial statements, are entitled to, and have opted to take, exemption from the
requirement for their individual financial statements to be audited under section 479a of the Companies Act 2006 relating to subsidiary
companies.
70
GRC International Group plc Annual Report and Accounts 2021
10. Goodwill
Cost and NBV
At 1 April
Measurement period adjustments
At 31 March
2021
Total
£’000
6,804
–
6,804
2020
Total
£’000
6,693
111
6,804
Goodwill arising from business combinations has been allocated to the Group’s DQM cash-generating unit (’CGU’). Goodwill is tested at
least annually for impairment and whenever there are indications that goodwill might be impaired.
For the DQM CGU, the carrying amount of goodwill has been assessed for impairment by comparing the carrying amount of the CGU in
which it is included to the recoverable amount based on value in use of the CGU. The value in use calculation for the cash-generating unit
uses: estimated future cash flows, for which the key assumptions are forecast revenue over the next five years, based on management’s
estimates; the terminal growth rate for revenues beyond that period, which reflects a cautious approach for the purpose of measuring a
value in use; and a pre-tax discount rate, which is based on management’s assessment of risk inherent in the estimated future cash flows.
The pre-tax cash flows for the forecast period are derived from the most recent financial budget for the year ending 31 March 2022
approved by the Board. The extrapolation for the period 2023 to 2026 is based on management estimates with an assumption of no growth.
The impairment model is built to take into account performance over a number of years. If FY22 were to be further impacted by COVID-19
into the second half of the year, and revenue dramatically reduced as a result, we would realistically expect a recovery to more normal levels
in FY23 and then growth in the future. Therefore the approach taken in terms of using the FY22 budget for each year in the model, without
any growth, is significantly more cautious in terms of an impairment model than using a very poor current year, a return to normal in FY23
and then growth going forwards.
As of 31 March 2021, the value in use of the cash-generating unit was greater by £591k than the CGU’s carrying amount. The key
assumptions used were the forecasts as explained above, the terminal growth rate of 2%, and the pre-tax discount rate of 6.49%.
The changes in key assumptions that would give rise to a material impairment loss are as follows:
a) The discount rate would have to increase by 0.3% to give rise to an impairment.
b) Operating costs would have to rise by 8% to give rise to an impairment, assuming that revenue levels remain constant.
c) If revenue was to fall by 4% (assuming margins remained the same) this would give rise to an impairment.
GRC International Group plc Annual Report and Accounts 2021
71
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
11. Intangible assets
Cost
At 1 April 2019
Additions
Foreign exchange movement
At 31 March 2020
Additions
Foreign exchange movement
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for year
Foreign exchange movement
At 31 March 2020
Charge for year
Foreign exchange movement
At 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
At 1 April 2019
Marketing
tools
£’000
Publishing
products
£’000
Consultancy
products and
courseware
£’000
Software and
website
costs
£’000
Trademarks
£’000
Customer
relationships
£’000
Total
£’000
7,695
1,124
1
8,820
1,168
(3)
287
46
–
333
67
–
698
182
1
881
158
(3)
4,340
894
–
5,234
943
–
464
2
–
466
–
–
1,843
–
–
1,843
–
–
400
1,036
6,177
466
1,843
9,985
203
31
–
234
32
–
266
134
99
84
253
73
(1)
325
90
(1)
1,420
854
–
2,274
783
–
4
50
–
54
46
–
–
166
–
166
154
–
1,935
1,180
(1)
3,114
1,107
(1)
414
3,057
100
320
4,220
622
556
445
3,120
2,960
2,920
366
412
460
1,523
1,677
1,843
5,765
5,706
5,760
63
–
–
63
–
–
63
55
6
–
61
2
–
63
–
2
8
Amortisation is included within administrative expenses.
Intangible assets includes capitalised related party costs incurred as further explained in note 26.
All intangible assets have been developed internally with the exception of those arising on the business acquisition in 2019. The recoverable
amounts of the CGUs for the purpose of monitoring impairment are determined from value-in-use calculations.
A review of the carrying amounts of the Group’s non-current assets to determine whether there is an indication that these assets have
suffered an impairment loss was carried out at the year-end.
Having identified indicators of impairment, management concluded an impairment test to determine recoverable amount of the
cash-generating unit, and conducted that no impairment of internally generated intangible had arisen as at 31 March 2021.
72
GRC International Group plc Annual Report and Accounts 2021
12. Property, plant and equipment
Leasehold
improvements
£’000
Computer
equipment
£’000
Office
equipment
£’000
Right-of-use
assets
– properties*
£’000
Cost
At 1 April 2019
Additions
IFRS 16 transition
At 31 March 2020
Additions
Disposals
Foreign exchange movement
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for year
Foreign exchange movement
At 31 March 2020
Charge for year
Disposal
Foreign exchange movement
At 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
At 31 March 2019
139
1
–
140
21
–
(1)
160
37
13
–
50
14
–
–
64
96
90
103
734
5
–
739
8
–
–
747
401
150
–
551
124
–
–
675
72
188
333
86
5
–
90
6
–
–
96
32
24
–
56
18
–
–
74
22
35
53
* Under the modified retrospective approach in IFRS 16 ‘Leases’, the 2019 numbers are not restated.
Depreciation is included within administrative expenses.
13. Inventories
Finished goods for resale
Amounts of inventories recognised as an expense during the period as cost of sales
Amounts of inventories impaired/(written back) during the period
–
–
664
664
–
(97)
(2)
565
–
199
(5)
194
194
(57)
(2)
329
236
470
–
2021
£’000
33
2021
£’000
76
2021
£’000
33
Total
£’000
959
11
664
1,633
35
(97)
(3)
1,568
470
386
(5)
851
350
(57)
(2)
1,142
426
783
489
2020
£’000
61
2020
£’000
83
2020
£’000
(8)
GRC International Group plc Annual Report and Accounts 2021
73
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
14. Trade and other receivables
Trade receivables
Less: provision for impairment of trade receivables
Net trade receivables
Other receivables
Prepayments
2021
£’000
1,186
–
1,186
78
430
1,694
2020
£’000
1,543
(15)
1,528
129
590
2,247
None of the Company’s trade and other receivables are secured by collateral or credit enhancements.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses on a collective basis. To measure expected credit
losses on a collective basis, trade receivables and contract assets are grouped based on a similar credit risk and ageing.
The Group’s policy for monitoring default risk over receivables is based on the ongoing evaluation of the collectability and ageing analysis
of trade and other receivables. Considerable judgement is required in assessing the ultimate realisation of these receivables, including
reviewing the potential likelihood of default, the past collection history of each customer and the current economic conditions.
The Group uses a third party credit scoring system to assess the creditworthiness of potential new customers before accepting them.
Credit limits are defined by customer based on this information. All customer accounts are subject to review on a regular basis by senior
management and actions are taken to address debt ageing issues.
The expected loss rates are based on the Group’s historical credit losses experienced over a two-year period prior to the period end.
The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s
customers. The Group has identified gross domestic product growth rates, employment rates and inflation rates as the key macroeconomic
factors in the countries in which the Group operates. The calculated expected credit loss allowance for the current and prior reporting
periods has not been included as an impairment provision as the Directors consider it to be immaterial.
The Directors consider that the carrying amount of trade and other receivables approximates to the fair value. Included in the Group’s trade
receivable balance as at the year end were customer balances with a carrying amount of £356,000 (2020: £1,197,000) which are past due at
the reporting date for which the Group has not recorded a provision as the Directors believe the amounts to be recoverable in full, with an
immaterial remaining exposure for amounts remaining uncollected at the date the financial statements were approved and authorised for issue.
The maturity profile of trade and other receivables is set out in the table below:
In one year or less, or on demand
The analysis of trade and other receivables by foreign currency is set out in the table below:
UK pound
US dollar
Euro
2021
£’000
1,694
2021
£’000
1,581
67
46
1,694
2020
£’000
2,247
2020
£’000
2,158
11
78
2,247
The Group’s foreign currency receivables are denominated in the functional currency of the subsidiaries in which they arise. There is no
impact on the loss for the year from foreign exchange rate movements on such financial instruments.
74
GRC International Group plc Annual Report and Accounts 2021
15. Cash and cash equivalents
Cash at bank (GBP)
Cash at bank (EUR)
Cash at bank (USD)
Cash at bank (AUD)
Cash at bank (other currencies)
2021
£’000
155
33
45
–
–
233
2020
£’000
221
20
–
3
1
245
All significant cash and cash equivalents were deposited with major clearing banks with at least ‘A’ rating. Details of bank overdrafts are
given in note 18.
16. Trade and other payables
Amounts falling due within one year:
Trade payables
Other taxation and social security
Other payables
Deferred income
Accruals
17. Borrowings
Secured
Bank loans (i)
Total secured borrowings
Unsecured
Bank loans
Loans from related parties*
Total unsecured borrowings
Total borrowings
2021
£’000
1,223
2,737
451
1,114
461
5,986
2020
Non-current
£’000
5
5
396
–
396
401
2020
£’000
1,220
1,043
204
855
307
3,629
Total
£’000
528
528
591
728
1,319
1,847
Current
£’000
2021
Non-current
£’000
266
266
229
368
597
863
–
–
460
–
460
460
Total
£’000
266
266
689
368
1,057
1,323
Current
£’000
523
523
195
728
923
1,446
* Further information relating to loans from related parties is set out in note 20.
GRC International Group plc Annual Report and Accounts 2021
75
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
17. Borrowings continued
(i) Secured liabilities and assets pledged as security
Of the bank loans, £260,000 (2020: £426,000) is secured against future receivables. The remaining secured bank loans and overdrafts are
secured against assets of the business.
Lease liabilities are secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default.
Secured bank loans
Unsecured bank loans
Loans from related parties
Total
Secured bank loans
Unsecured bank loans
Loans from related parties
Total
As at
1 April 2020
£’000
Cash proceeds
from borrowings
£’000
Repayments of
capital
£’000
Repayments of
interest
£’000
528
591
728
1,847
392
318
–
710
(654)
(217)
(378)
(1,249)
(71)
(70)
–
(141)
Interest
accruing
£’000
71
70
18
159
Foreign
exchange
£'000
As at
31 March 2021
£'000
–
(3)
–
(3)
266
689
368
1,323
As at
1 April 2019
£’000
Cash proceeds
from borrowings
£’000
Repayments of
capital
£’000
Repayments of
interest
£’000
Interest
accruing
£’000
As at
31 March 2020
£’000
–
31
–
31
889
767
700
2,356
(361)
(207)
–
(568)
(22)
(88)
–
(110)
22
88
28
138
528
591
728
1,847
The Group has a number of loans in the period presented, and they are summarised as follows:
Expiry/maturity date
Directors’ pension scheme loan
Paypal
Wesleyan
Wesleyan
Bute Capital
You Lend
LDF Finance No. 3 Ltd
Portman Asset Finance
Portman Asset Finance
Unsecured loan facility provided by Andrew Brode
Security pledged
Unsecured
Secured against
future receivables
Parent company
guarantee
Secured against
assets of business
Secured against
assets of business
Secured against
future receivables
Director’s Guarantee
Director’s Guarantee
Director’s Guarantee
Unsecured
Lloyds Bank – CBILS Loan
USA Coronavirus government loan
Unsecured
Unsecured
Term
60 Months
12 Months
60 Months
36 Months
14-16 Months
12 Months
36 Months
24 Months
60 Months
Available to the
Group until at
least
31 December 2022
and will
automatically
renew for a further
12 months unless
terminated by
either party
72 Months
12 Months
Effective interest rate
April 2020
9.5%
February 2022
4.26% – 10.49%
September 2024
14.32%
February 2022
22%
February 2021
6.65% – 10.36%
November 2021
August 2023
December 2021
December 2025
December 2022
16.67%
10.16%
29.28%
8.8%
5% above the
Bank of England
base rate
October 2026
March 2022
2.45%
0.00%
In addition, the Group has access to an invoicing discounting facility acquired within the DQM acquisition.
76
GRC International Group plc Annual Report and Accounts 2021
18. Financial instruments – risk management
The Group is exposed through its operations to the following financial risks:
– Credit risk
– Interest rate risk
– Foreign exchange risk
– Other market price risk
– Liquidity risk.
In common with all other businesses, the Group is also exposed to risks that arise directly from its use of financial instruments. This note
describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented throughout these financial statements.
I. Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
– Trade receivables
– Cash and cash equivalents
– Trade and other payables
– Bank overdrafts
– Floating rate bank loans
– Fixed rate bank loans
– Other loans
II. Financial instruments by category
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Fair value through profit or loss
Amortised cost
2021
£’000
–
–
–
2020
£’000
–
–
–
2021
£’000
233
1,186
1,419
All of the above financial assets’ carrying values are approximate to their fair values, as at each reporting date disclosed.
Financial liabilities
Trade and other payables
Borrowings
Lease payables
Contingent consideration
Total financial liabilities
Fair value through profit or loss
Amortised cost
2021
£’000
–
–
–
–
–
2020
£’000
–
–
–
100
100
2021
£’000
1,758
1,322
280
–
3,340
2020
£’000
247
1,528
1,775
2020
£’000
1,524
1,847
470
–
3,841
All of the above financial liabilities’ carrying values are considered by management to be approximate to their fair values, as at each
reporting date disclosed.
III. Financial instruments measured at fair value
Classification of financial instruments
The fair value hierarchy groups financial assets and liabilities into three levels based on the significance of inputs used in measuring the fair
value of the financial assets and liabilities.
The fair value hierarchy has the following levels:
– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
– Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value
measurement.
The Group did not hold any level 1 or 2 financial instruments in any of the periods presented.
GRC International Group plc Annual Report and Accounts 2021
77
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
18. Financial instruments – risk management continued
III. Financial instruments measured at fair value continued
The reconciliation of the opening and closing fair value balance of level 3 financial instruments which comprises the Group’s contingent
consideration liability is provided below:
At 1 April 2020
Repaid in cash
At 31 March 2021
Contingent
consideration
£’000
100
(100)
–
19. Financial instrument risk exposure and management
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining
ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure that effective
implementation of the objectives and policies to the Group’s finance function. The Board receives monthly reports from the Group Finance
Director through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets.
The Group’s internal auditors also review the risk management policies and processes and report their findings to the Audit Committee.
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s
competitiveness and flexibility. Further details regarding these policies are set out below:
Credit risk
The Group’s credit risk is primarily attributable to its trade receivables, which are presented in note 14.
In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any single counterparty; its
counterparties have similar characteristics being small to medium sized UK businesses as well as a number of blue-chip organisations. Trade
receivables consist of a large number of customers in various industries and geographical areas. Based on historical information about
customer default rates management considers the credit quality of trade receivables that are not past due or impaired to be good.
The credit risk on liquid funds is limited because the third parties are large international banks with a credit rating of at least A. The Group’s
total credit risk amounts to the total of the sum of the receivables and cash and cash equivalents. At the 2021 year end, this amounts to
£1,419k (2020: £1,773k; 2019: £2,625k).
Interest rate risk
The Group has secured and unsecured debt consisting of bank loans and other loans.
The interest on most of the loans is fixed, and therefore interest rate risk is considered to be limited. Interest rate risk arising from borrowing
at variable rates is not hedged.
Foreign exchange risk
Most of the Group’s transactions are carried out in GBP. Exposures to foreign currency exchange rates arise from the Group’s overseas sales
and purchases, which are denominated in a number of currencies, primarily USD, EUR and AUD. Cash balances held in these currencies are
relatively immaterial (see note 15) and transactional risk is considered manageable due to the values involved.
The Group does not hold material non-GBP balances and currently does not consider it necessary to take any action to mitigate foreign
exchange risk due to the immateriality of that risk.
Liquidity risk
Liquidity risk represents the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to
managing this risk is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both
normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
Prudent liquidity risk management includes maintaining sufficient cash balances to ensure the Group can meet liabilities as they fall due,
and ensuring adequate working capital using invoice financing arrangements.
Further details are provided on page 54 in the Going Concern section.
78
GRC International Group plc Annual Report and Accounts 2021
The table below shows the undiscounted cash flows on the Group’s financial liabilities as at 31 March 2021 and 2020, on the basis of their
earliest possible contractual maturity.
At 31 March 2021
Trade payables
Accruals
Lease liabilities
Other tax and social security
Other loans
At 31 March 2020
Trade payables
Accruals
Lease liabilities
Other tax and social security
Other loans
Contingent consideration
Total
£’000
1,243
461
280
2,737
1,258
5,979
Total
£’000
1,220
308
481
1,043
1,847
100
4,999
On
demand
£’000
1,122
–
–
–
368
1,490
On
demand
£’000
715
–
–
–
728
–
1,443
Within
2 months
£’000
Within
2-6 months
£’000
121
–
–
359
97
577
–
461
98
1,053
193
1,805
Within
2 months
£’000
Within
2-6 months
£’000
505
–
–
–
138
–
668
–
308
119
1,043
263
100
1,758
6-12
months
£’000
–
–
98
1,325
140
1,563
6-12
months
£’000
–
–
82
–
316
–
448
1-2 years
£’000
Greater
than 2 years
£’000
–
–
72
–
134
206
–
–
12
–
326
338
1-2 years
£’000
Greater
than 2 years
£’000
–
–
82
–
175
–
257
–
–
198
–
227
–
425
20. Capital management
The Group’s capital management objectives are:
– to ensure the Group’s ability to continue as a going concern; and
– to provide long-term returns to shareholders.
The Group defines and monitors capital on the basis of the carrying amount of equity plus its outstanding loans, less cash and cash equivalents
as presented on the face of the balance sheet as follows:
Equity
Borrowings (note 17)
Less: cash and cash equivalents (note 15)
2021
£’000
6,906
1,323
(233)
7,996
2020
£’000
10,378
1,847
(245)
11,980
The Board of Directors monitors the level of capital as compared to the Group’s commitments and adjusts the level of capital as is determined
to be necessary by issuing new shares or adjusting the level of debt. The Group is not subject to any externally imposed capital requirements.
GRC International Group plc Annual Report and Accounts 2021
79
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
21. Leasing arrangements
The following table outlines the maturity analysis of the lease liabilities:
Contractual discounted cash flows
Less than one year
Two to five years
More than five years
Lease liabilities at 31 March
Lease liabilities
Total lease liabilities
Lease liabilities
Total lease liabilities
1 April 2020
£’000
(487)
(487)
Net
cash flow
£’000
168
168
1 April 2019
£’000
(664)
(664)
Release of
liability
£’000
35
35
Net
cash flow
£’000
181
181
The following amounts have been included in the Income Statement:
Interest expense on lease liabilities (note 6)
Operating costs relating to short-term leases and low-value assets
Amounts recognised in the Income Statement
2021
£’000
197
83
–
280
Currency and
non-cash
movements
£’000
4
4
Currency and
non-cash
movements
£’000
(4)
(4)
2021
£’000
(43)
–
(43)
2020
£’000
201
286
–
487
31 March 2021
£'000
(280)
(280)
31 March 2020
£'000
(487)
(487)
2020
£’000
(60)
–
(60)
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases (i.e. lease term less than 12 months) or
low-value assets (i.e. under £5,000). The Group will continue to expense the lease payments associated with these leases on a straight-line
basis over the lease term. At 1 April 2020, this was less than £1,000.
The borrowing rate used on the lease liabilities is 10%.
Variable lease payments that depend on an index or a rate are also less than £5,000.
The Group subleases office space to Xanthos as outlined in note 26.
22. Retirement benefit plans
Benefits from the contributory pension schemes to which the Group contributes are related to the cash value of the funds at retirement
dates. The Group is under no obligation to provide any minimum level of benefits.
The assets of the schemes are administered by trustees in funds independent of the Group.
During the year £200,000 was recognised in the Income Statement in relation to pension contributions (2020: £230,000). As at 31 March
2021, £nil is payable to pension schemes (2020: £nil).
80
GRC International Group plc Annual Report and Accounts 2021
23. Share capital
Authorised share capital
The authorised share capital comprises 99,931,509 (2020: 99,577,589) ordinary shares of £0.001 each.
1 April 2019
64,484,172 ordinary shares of £0.001
Issued
1,680,000 ordinary shares of £0.001
1,288,910 ordinary shares of £0.001
3,278,353 ordinary shares of £0.001
28,846,154 ordinary shares of £0.001
31 March and 1 April 2020
99,577,589 ordinary shares of £0.001
353,920 ordinary shares of £0.001
31 March 2021
99,931,509 ordinary shares of £0.001
£’000
64
2
1
4
29
100
–
100
On 31 January 2020, 1,680,000 ordinary shares with a nominal value of 0.1p were issued at 0.003p per share as the result of the exercise of
employee share options.
On 18 February 2020, 28,846,154 ordinary shares with a nominal value of 0.1p were issued at 13p per share by way of a subscription and
placing. On 18 February 2020, 1,288,910 ordinary shares with a nominal value of 0.1p were issued at 116.5p per share by way of issue.
On 18 February 2020, 3,278,353 ordinary shares with a nominal value of 0.1p were issued at 13p per share by way of issue.
On 30 September 2020, 353,920 ordinary shares with a nominal value of 0.1p were issued at 13p per share by way of an exercise of share
options.
24. Share premium
1 April 2019
62,462,940 ordinary shares of £0.001
Issued
1,680,000 ordinary shares of £0.003
28,846,154 ordinary shares of £0.13 less issue costs
31 March and 1 April 2020
353,920 ordinary shares of £0.13
31 March 2021
£’000
9,588
4
3,589
13,181
45
13,226
Consideration received in excess of the nominal value of the 28,846,154 shares issued on 18 February 2020 as a result of the subscription
and placing has been included in share premium, less registration and commission of £131,000.
GRC International Group plc Annual Report and Accounts 2021
81
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
NOTES TO THE FINANCIAL S TATEMENTS CONTINUED
25. Share-based payments
The Group operates a share option scheme to which the employees of the Group may be invited to participate by the Remuneration Committee.
If the options remain unexercised after a period of ten years from the date of grant, the options expire. Options are forfeited if the
employee leaves the Group before the options vest. The options were granted on 12 February 2018.
Details of the number of share options and the weighted average exercise price (’WAEP’) outstanding during the year are as follows:
2021
Outstanding at the beginning of the year – vested and exercisable
Exercised
Outstanding at the year end
Number vested and exercisable at 31 March 2021
2020
Outstanding at the beginning of the year – vested and exercisable
Exercised
Outstanding at the year end
Number vested and exercisable at 31 March 2020
Number of
options
780,680
(353,920)
426,760
426,760
Number of
options
2,460,680
(1,680,000)
780,680
780,680
WAEP
£
0.27
0.13
1.64
1.64
WAEP
£
0.08
0.03
0.27
0.27
As all options had vested prior to 31st March 2020, there is no share option expense recorded in the year ended 31 March 2021 or
31 March 2020.
26. Related party transactions
Key management personnel are identified as the Directors, including non-statutory directors, and their remuneration is disclosed as follows:
Remuneration of key management
Remuneration
Social security costs
Pension contributions to defined contributions scheme
Other related party borrowings transactions are as follows:
Principal
At 1 April 2019
Loans advance
Loans repaid
At 31 March 2020
Loans advance
Loans repaid
At 31 March 2021
Interest
At 1 April 2019
Interest accrued
Interest paid
At 31 March 2020
Interest accrued
Interest paid
At 31 March 2021
2021
£’000
641
76
40
757
Directors’ pension
scheme
Andrew Brode
£'000
£70,000 loan
£'000
–
700
–
700
–
(350)
350
–
28
–
28
18
(28)
18
10
–
(10)
–
–
–
–
–
1
(1)
–
–
–
–
2020
£’000
558
73
37
668
Total
£'000
10
700
(10)
700
–
(350)
350
–
29
(1)
28
18
(28)
18
82
GRC International Group plc Annual Report and Accounts 2021
Alan Calder and his wife are the trustees of the IT Governance Pension Fund.
All loan notes terms are described in note 17. Interest is accounted for on an effective interest basis and included within borrowings on the
balance sheet.
Other related party transactions are as follows:
Xanthos Limited is considered a related party entity as Alan Calder is a co-owner of that company with his spouse (who runs the business).
Xanthos sub-leases office space from the Group, which is included within other income. During the year to 31 March 2021 this totalled
£16k (2020: £20k). Transactions were carried out on an arm’s length basis. Outstanding amounts due from Xanthos at 31 March 2021 totalled
£2k (2020: £2k).
The Group also makes purchases from Xanthos. During the year to 31 March 2021, the Group made purchases totalling £523k from Xanthos
(2020: £533k) of which £420k (2020: £420k) was capitalised. Outstanding amounts payable to Xanthos at 31 March 2021 totalled £103k
(2020: £96k).
27. Ultimate controlling party
In the opinion of the Directors, there is no one individual who exercises control over the Group.
GRC International Group plc Annual Report and Accounts 2021
83
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT COMPANY BAL ANCE SHEE T
FOR THE PERIOD ENDED 31 MARCH 2021
Assets
Non-current assets
Intangible assets
Investments in subsidiaries
Deferred tax asset
Current assets
Other receivables
Current liabilities
Trade and other payables
Contingent consideration
Borrowings
Net current assets
Net assets
Equity
Share capital
Share premium
Merger reserve
Share-based payment reserve
Retained earnings
Shareholders’ funds
Notes
2021
£’000
2020
£’000
3
4
5
6
7
8
9
10
11
607
10,817
2
11,426
6,629
6,629
(1,177)
–
(396)
(1,573)
5,056
16,482
100
14,553
4,276
126
(2,573)
16,482
452
10,817
2
11,271
6,682
6,682
(846)
–
(728)
(1,574)
5,108
16,379
100
14,508
4,276
171
(2,676)
16,379
As permitted by Section 408 of the Companies Act 2006, a separate income statement for the Company has not been presented. The
Company’s profit for the period ended 31 March 2021 was £58,000 (2020: loss £611,000).
Additionally, no cash flow statement is presented as permitted by FRS.101.8(L). The accompanying notes form part of the financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 28 September 2021 and were signed on its
behalf by:
Chris Hartshorne
Director
Company registration number: 11036180
84
GRC International Group plc Annual Report and Accounts 2021
COMPANY S TATEMENT OF CHANGES IN EQUIT Y
FOR THE PERIOD ENDED 31 MARCH 2021
At 1 April 2020
Profit for the period and total comprehensive income
Transactions with owners – shares issued
Share
capital
£'000
100
–
–
Share
premium
£'000
14,508
–
45
Merger
reserve
£'000
4,276
–
–
Share-based
payment
reserve
£'000
171
–
(45)
Retained
earnings
£'000
(2,676)
58
45
Total
£'000
16,379
58
45
At 31 March 2021
100
14,553
4,276
126
(2,573)
16,482
At 1 April 2019
Loss for the period and total comprehensive loss
Transactions with owners
Shares issued
Cost of share issue
Shares issued on the acquisition of DQM
Deferred tax on share-based payments
Total transactions with owners
At 31 March 2020
Share
capital
£'000
64
–
31
–
5
–
Share
premium
£'000
10,913
–
3,725
(130)
–
–
36
100
3,595
14,508
Merger
reserve
£'000
2,353
–
–
–
1,923
–
1,923
4,276
Share-based
payment
reserve
£'000
440
–
–
–
–
(269)
(269)
Retained
earnings
£'000
(1,951)
(725)
–
–
–
–
–
Total
£'000
11,819
(725)
3,756
(130)
1,928
(269)
5,285
171
(2,676)
16,379
GRC International Group plc Annual Report and Accounts 2021
85
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE COMPANY FINANCIAL S TATEMENTS
1. Principal accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the period.
General information
GRC International Group plc (the ‘Company‘) is a company incorporated in the United Kingdom under the Companies Act 2006. The
address of the Registered Office is given on page 70 of this Annual Report and Accounts. The Company is a holding company that manages
the other trading subsidiaries of the GRC International Group.
Basis of preparation
The financial statements have been prepared in accordance with Financial Reporting Standard 100 Application of Financial Reporting
Requirements (‘FRS 100‘) and Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101‘) and the Companies Act 2006
(the ‘Act‘). The Company is a qualifying entity for the purposes of FRS 101.
The financial statements have been prepared on a historical cost basis.
As permitted by FRS 101, no share-based payment disclosures have been included in these financial statements. Details of the share option
scheme can be found in note 25 of the Group financial statements.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
– The requirement in paragraph 38 of IAS 1 ‘Presentation of Financial Statements’ to present comparative information in respect of:
– paragraph 79(a)(iv) of IAS 1;
– paragraph 73(e) of IAS 16 ‘Property, Plant and Equipment‘;
– paragraph 118(e) of IAS 38 ‘Intangible Assets‘.
– IFRS 2, ‘Share-based Payment’.
– IFRS 7, ‘Financial Instruments: Disclosures‘.
– The requirements of paragraphs 10(d), 10(f), 16, 38A, 38B, 38C, 38D, 40A, 40B, 40C, 40D, 111 and 134-136 of IAS 1 ‘Presentation of
Financial Statements‘.
– The requirements of IAS 7 ‘Statement of Cash Flows‘.
– The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting Estimates and Errors‘.
– The requirements of paragraph 17 and 18A of IAS 24 ‘Related Party Disclosures‘.
– The requirements in IAS 24 ‘Related Party Disclosures‘ to disclose related party transactions entered into between two or more members
of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member.
– The requirements of the second sentence of paragraph 110 and paragraphs 113(a), 114, 115, 118, 119(a) to (c), 120 to 127 and 129 of IFRS 15
‘Revenue from Contracts with Customers‘.
Going concern
The Group has recorded a loss for the year of £2.6 million (2020: £3.2 million) and at 31 March 2021 its current liabilities exceeded its current
assets by £5.2 million (2020: £1.9 million). Notwithstanding this, the Directors consider it appropriate to prepare the financial statements on
a going concern basis. The key considerations relating to this judgement are described below.
As set out above, the Group went through a transitional year of restructuring in FY20 and was looking forward to a strong FY21, continuing
its H2 FY20 momentum and anticipating profitable results for the year. However, the global COVID-19 pandemic led to an immediate
reduction in monthly billings as customers delayed projects, reduced spend seen as not immediately critical to day-to-day operations and
focused on establishing new business processes and procedures to survive the short term. This unprecedented trading environment
resulted in a reduction in revenues for April and May 2020, followed initially by a strong V-shaped recovery, but then a period of mixed
results through the summer as the economy stuttered in an environment of ever-changing regulations and guidance. From late in Q3 the
Group saw genuine performance improvements with momentum building through the rest of the year, and performance back to
consistently positive monthly EBITDA before the year end and into the new financial year.
In response to the pandemic the Board revisited its FY21 and FY22 forecasts, increased the regularity of its short and medium-term cash
flow planning, implemented a number of key cost reduction measures and took advantage of government initiatives that have been
introduced in the geographies that the Group operates in order to preserve liquidity, supplemented by deferring the payment of certain
liabilities to HMRC which amounted to approximately £1.6 million. Additionally, in March 2021 certain subsidiaries of the Group joined the
HMRC VAT deferral scheme to defer repayment of VAT liabilities totalling £0.4 million falling due in FY21 until FY22.
Notwithstanding some easing of trading conditions and subsequent improvement in performance since the outbreak of the global
pandemic reached the United Kingdom (which represents around 82% of the Group’s revenue in FY21), the Directors acknowledge that
trading conditions will remain uncertain for the foreseeable future. Those uncertainties include:
– The possibility of further local or national restrictions.
– The lack of visibility over future levels of revenue in the context of weakened demand for the Group’s products and services.
– Should the Group need to further reduce its scalable cost base, its ability to make those adjustments and realise the benefits from doing
that on a timely basis.
– The continued availability of existing financing, including HMRC arrangements (see below), existing borrowings and flexibility allowed by
suppliers.
– The ability to access new financing, including further government support in its various forms, sufficient to fund any further cash
requirement over the foreseeable future.
86
GRC International Group plc Annual Report and Accounts 2021
To assess going concern the Directors prepared an integrated profit and loss, balance sheet and cash flow forecast by month to 31 March
2023. The Group’s base case forecast identifies that through the going concern review period the Group is able to meet its liabilities as they
fall due and make settlement of the outstanding HMRC liabilities through FY22 in equal monthly instalments. The majority of the deferred
payroll tax liabilities owed are now covered by formal ‘time to pay’ repayment plans agreed with HMRC. The repayment plans differ across
the trading entities within the Group, but all split the deferred balance into equal monthly instalments, with the full balance being repaid by
September 2022, and the balance owing as at the date of this report being £1.0 million. The Directors are in discussions with HMRC to agree
the repayment plan for the remainder of the balance not yet covered by formal ‘time to pay’ arrangements and expect this to be formalised
imminently.
Additionally, the Directors prepared a sensitised forecast to the base case forecast where the COVID-19 pandemic was more prolonged
than envisaged by the Directors at the time (the ‘worst-case forecast’). This worst-case forecast assumes that revenues until March 2023 are
40% below the base case (marginally below those actually achieved in FY21) and that cost reduction measures, to reflect the reduced level
of billings, have been effected. The sensitised forecast does not identify a potential cash flow shortfall in any month and includes the same
assumptions for settlement of the outstanding HMRC liabilities as in the base case forecast.
The Directors are monitoring actual business performance and cash flow against the base case forecast and the worst-case forecast.
Encouragingly, the Group has traded ahead of the revenue, EBITDA and cash flow expectations set out in the base case and the worst-case
forecast. Furthermore, in the view of the Directors any temporary cash flow shortfall can be mitigated through the deferment or removal of
selected planned marketing, capital expenditure and other scheduled cash outflows.
Based on the forecasts and the medium and longer-term planning in place, the Directors have identified that they have a reasonable
expectation of being able to reduce costs sufficiently in the required timeframe should revenue levels cause this to be necessary, and that
the Group will remain within its currently available facility levels, none of which has any financial covenant compliance requirements. Central
to those facilities is the £700,000 unsecured loan facility provided by Andrew Brode which is at present 50% utilised, and which remains in
place until at least 31 December 2022, although the Group does also have access to additional liquidity through its uncommitted invoice
discounting facility, which is not currently utilised.
The Directors have reviewed the Group’s forecasts and projections to 31 March 2023 which, taking account of reasonably possible changes
in trading performance, show that the Group is able to generate sufficient liquidity to continue in operational existence for the foreseeable
future. On this basis, the Directors believe that the Group will be able to generate sufficient cash through its normal business trading to
enable it to continue its operations, and continue to meet, as and when they fall due, its planned and committed liabilities for at least the
next 12 months from the date of this report. For this reason, the Directors continue to adopt the going concern basis in the preparation of
its financial statements.
However, should the Group not be able to generate cash inflows sufficient to meet its current operational obligations and legacy deferred
obligations as they fall due, it would need to secure additional funding with no guarantee such funding would be secured. These
circumstances indicate the existence of a material uncertainty which may cast significant doubt over the Group’s ability to continue as a
going concern.
As in the FY20 statutory accounts, the Board expects that the Independent Auditor’s Report will contain a material uncertainty related to
going concern.
The financial statements do not include the adjustments that would be required should the going concern basis of preparation no longer be
appropriate.
Investments
Investments in subsidiaries and associates are measured at cost less impairment. For investments in subsidiaries acquired as part of a Group
reorganisation for consideration, including the issue of shares qualifying for merger relief, cost is measured by reference to the nominal
value of the shares issued plus fair value of other consideration. Any premium is ignored.
For other acquisitions, investments in subsidiaries and associates are measured at fair value at the transaction date.
Intangible assets
Internally developed intangible assets
Expenditure on research activities is recognised as an expense as incurred.
Costs that are directly attributable to a project’s development phase are recognised as intangible assets, provided they meet the following
recognition requirements:
– the development costs can be measured reliably;
– the project is technically and commercially feasible;
– the Group intends to and has sufficient resources to complete the project;
– the Group has the ability to use or sell the software; and
– the software will probably generate future economic benefits.
GRC International Group plc Annual Report and Accounts 2021
87
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE COMPANY FINANCIAL S TATEMENTS CONTINUED
1. Principal accounting policies continued
Development costs not meeting these criteria for capitalisation are expensed as incurred. Directly attributable costs include an
apportionment of employee costs incurred on internal development assets.
Internal development assets include software, website costs, courseware, marketing tools, consultancy products and publishing products.
Subsequent measurement
The useful lives of all intangible assets are assessed as finite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful
life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method prospectively.
The amortisation expense on intangible assets with finite lives is recognised in the income statement as administrative expenses.
Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the income statement when the asset is derecognised.
Amortisation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
Software
Website costs
Courseware
Consultancy products
5 years
5–10 years
10 years
10 years
Financial instruments
Recognition and derecognition
Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial
instrument.
Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset
and substantially all the risks and rewards are transferred.
A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in
accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets are classified into the following categories:
– amortised cost;
– fair value through profit or loss (‘FVTPL‘);
– fair value through other comprehensive income (‘FVOCI‘).
In the period presented the Company does not have any financial assets categorised as FVOCI or FVTPL. The classification is determined by
both:
– the entity’s business model for managing the financial asset; and
– the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income
or other financial items, except for impairment of trade receivables which is presented within other administrative expenses.
Subsequent measurement of financial assets
Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions:
– they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows; and
– the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal
amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect
of discounting is immaterial. The Company’s cash and cash equivalents and most other receivables fall into this category of financial
instruments.
Classification and measurement of financial liabilities
The Company’s financial liabilities include trade and other payables and contingent consideration.
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Company designated
a financial liability at fair value through profit or loss.
88
GRC International Group plc Annual Report and Accounts 2021
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial
liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss.
All interest-related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are included within
finance costs or finance income.
Deferred consideration
Deferred consideration is recognised at fair value at the acquisition date and subsequently at FVTPL. Changes in deferred consideration
arising from additional information, obtained within one year of the acquisition date, about facts or circumstances that existed at the
acquisition date, are recognised as an adjustment to the investment value.
Impairment of assets
At each balance sheet date, the Directors review the carrying amounts of the Company’s non-current assets to determine whether there is
any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss, if any. Where the asset does not generate cash flows that are
independent from other assets, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the
asset or cash-generating unit is reduced to its recoverable amount. If the recoverable amount of a cash-generating unit is less than its
carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the
other assets of the unit pro rata based on the carrying amount of each asset in the unit.
An impairment loss is recognised as an expense immediately.
Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised
estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset or cash-generating unit in prior periods. A reversal of an impairment loss
is recognised in the Income Statement immediately.
Taxation
Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered) using the tax rates and
laws that have been enacted or substantively enacted by the balance sheet date.
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 that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the
balance sheet date.
Timing differences are differences between the Company’s taxable profits and its results as stated in the financial statements that arise
from the inclusion of gains and losses in tax assessments in periods different from those in which they are recognised in the financial
statements. Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available evidence,
it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing
differences can be deducted.
Foreign currency
The functional currency of GRC International Group plc is considered to be UK Sterling because that is the currency of the primary
economic environment in which the Company operates.
Transactions in foreign currencies are recorded at the rate of exchange at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies at the balance sheet date are reported at the rates of exchange prevailing at that date.
Exchange differences are recognised in profit or loss in the period in which they arise.
Share-based payments
The Company grants to its employees rights to its equity instruments of GRC International Group plc. The fair value of awards granted is
recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the
period during which the employees become unconditionally entitled to receive the awards. The fair value of the awards granted is
measured using a pricing model, taking into account the terms and conditions upon which the awards were granted. The amount
recognised as an expense is adjusted to reflect the actual value of share awards that vest except where forfeiture is only due to share prices
not achieving the threshold for vesting.
Where the Company grants awards over its own shares to the employees of its subsidiaries, it recognises an increase in the cost of
investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised in its subsidiaries’ financial
statements with the corresponding credit being recognised directly in equity.
GRC International Group plc Annual Report and Accounts 2021
89
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE COMPANY FINANCIAL S TATEMENTS CONTINUED
1. Principal accounting policies continued
Equity
Equity comprises the following:
– ‘Share capital‘ represents the nominal value of equity shares issued.
– ‘Share premium‘ represents amounts subscribed for share capital, net of issue costs, in excess of nominal value.
– ‘Merger reserve‘ represents the excess of the fair value of the consideration received for the issue of shares over the nominal value of
shares issued.
– ‘Share-based payment reserve‘ represents the accumulated value of share-based payments.
– ‘Retained earnings‘ represents the accumulated profits and losses attributable to equity shareholders.
Dividends
Dividends are recognised in the period in which they are approved by the Company’s shareholders, or in the case of an interim dividend,
when the dividend is paid. Dividends receivable from subsidiaries are recognised when either received in cash or applied to reduce a
creditor balance with a subsidiary.
Estimation uncertainty
Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities,
income and expenses is provided below. Actual results may be substantially different.
The Company makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based
on historical experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from these estimates and assumptions.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
Estimates and assumptions
– Level of expected credit loss provision to hold or not hold (note 6). Estimation is required in determining the extent of credit losses that
may be incurred in the future. The estimate is reviewed for circumstances present at each reporting date and the level of provision
adjusted accordingly.
– Impairment of investments (note 4). Estimation is required in determining whether investments are impaired or not. The Company tests
whether investments have suffered any impairment when indicators of impairment are identified. The recoverable amount of the
Company’s investments have been determined based on value in use calculations which incorporate elements of judgement and
estimation in relation to projected future cash flows and the discount rate applied.
90
GRC International Group plc Annual Report and Accounts 2021
2. Employees
Staff costs
Wages and salaries
Social security costs
Share-based payment charge
Pension costs
The average monthly number of persons employed by the Company during the year was as follows:
2021
£’000
2,796
297
–
85
3,178
2020
£’000
3,134
345
–
66
3,545
2021
2020
By activity
Administration
Sales and distribution
Remuneration of Directors is disclosed in the Remuneration Committee Report.
3. Intangible assets
Cost
At 1 April 2019
Additions
At 31 March 2020
Additions
At 31 March 2021
Accumulated depreciation
At 1 April 2019
Charge for year
At 31 March 2020
Charge for year
At 31 March 2021
Net book value
At 31 March 2021
At 31 March 2020
4. Investments in subsidiaries
Cost and net book amount
At 31 March 2020 and 31 March 2021
17
34
51
Consultancy
products and
courseware
£’000
Software and
website costs
£’000
75
–
75
105
180
–
8
8
7
15
165
67
267
162
429
124
553
–
44
44
67
111
442
385
40
4
44
Total
£’000
342
162
504
229
733
–
52
52
74
126
607
452
Investments in
subsidiaries
£’000
10,817
The carrying value of investments in subsidiaries relates to the Company’s directly held investments in IT Governance Limited and DQM
Data Quality Group Holdings Limited.
Further information about subsidiaries is provided in note 9 of the consolidated financial statements.
GRC International Group plc Annual Report and Accounts 2021
91
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE COMPANY FINANCIAL S TATEMENTS CONTINUED
5. Deferred tax
Deferred tax assets and liabilities are offset where the Group has a legally enforceable right to do so.
The deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the asset can
be utilised by way of parent company management services charges.
Deferred tax asset at 1 April 2019
Charge to profit and loss
Debit direct to equity
Deferred tax asset at 31 March 2020 and 31 March 2021
6. Other receivables
Amount owed by subsidiary undertakings
Provision for expected credit loss
Other receivables
Prepayments
Share-based
payments
£’000
261
10
(269)
2
2020
£’000
7,783
(1,167)
6,616
–
66
6,682
2021
£’000
7,712
(1,196)
6,516
45
68
6,629
The movement from changes in amounts owed to the Company from its subsidiary undertakings and has been debited to the Income
Statement. The provision is calculated based on a percentage of the balances outstanding at the period end according to the Directors'
estimate of the level of credit loss that may arise.
7. Trade and other payables
Trade payables
Other tax and social security
Accruals
Other payables
8. Contingent consideration
At 1 April 2019
Repaid in cash
Issue of ordinary shares
Adjustment to investment
At 31 March 2020 and 31 March 2021
2021
£’000
235
614
197
131
1,177
2020
£’000
305
266
227
48
846
Contingent
consideration
£’000
3,747
(1,626)
(1,928)
(193)
–
92
GRC International Group plc Annual Report and Accounts 2021
9. Borrowings
Unsecured
Loans from related parties
Total unsecured borrowings
Total borrowings
2021
Current
£’000
Non-current
£’000
396
396
396
–
–
–
Total
£’000
396
396
396
2020
Current
£’000
Non-current
£’000
728
728
728
–
–
–
Total
£’000
728
728
728
Further information relating to loans from related parties is set out in note 26 in the Group's financial statements.
Amount advanced
£'000
Security pledged
Term
Unsecured loan facility provided by Andrew Brode
700
Unsecured
Available to the
Group until at least
31 December 2022 and
will automatically
renew for a further 12
months unless
terminated by
either party
Effective
interest rate
5.0% above the Bank
of England
base rate
10. Share capital
Ordinary shares of £0.001 each
2021
Number
99,931,509
£’000
100
2021
Number
99,577,589
Authorised share capital
The authorised share capital comprises 99,931,509 (2020: 99,577,589) ordinary shares of £0.001 each.
1 April 2019
64,484,172 ordinary shares of £0.001
Issued
1,680,000 ordinary shares of £0.001
1,288,910 ordinary shares of £0.001
3,278,353 ordinary shares of £0.001
28,846,154 ordinary shares of £0.001
31 March and 1 April 2020
99,577,589 ordinary shares of £0.001
353,920 ordinary shares of £0.001
31 March 2021
99,931,509 ordinary shares of £0.001
£’000
100
£’000
64
2
1
3
29
100
–
100
On 31 January 2020, 1,680,000 ordinary shares with a nominal value of 0.1p were issued at 0.003p per share as the result of the exercise of
employee share options.
On 18 February 2020, 28,846,154 ordinary shares with a nominal value of 0.1p were issued at 13p per share by way of a subscription and
placing. On 18 February 2020, 1,288,910 ordinary shares with a nominal value of 0.1p were issued at 116.5p per share by way of issue.
On 18 February 2020, 3,278,353 ordinary shares with a nominal value of 0.1p were issued at 13p per share by way of issue.
On 30 September 2020, 353,920 ordinary shares with a nominal value of 0.1p were issued at 13p per share by way of an exercise of share
options.
GRC International Group plc Annual Report and Accounts 2021
93
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT NOTES TO THE COMPANY FINANCIAL S TATEMENTS CONTINUED
11. Share premium
1 April 2019
1,680,000 ordinary shares of £0.003
28,846,154 ordinary shares of £0.13 less issue costs
31 March and 1 April 2020
353,920 ordinary shares of £0.13
31 March 2021
£’000
9,588
4
3,589
13,181
45
13,226
Consideration received in excess of the nominal value of the 28,846,154 shares issued on 18 February 2020 as a result of the subscription
and placing has been included in share premium, less registration and commission of £131,000.
94
GRC International Group plc Annual Report and Accounts 2021
GRC International Group plc Annual Report and Accounts 2021
95
FINANCIAL STATEMENTSGOVERNANCESTRATEGIC REPORT 96
GRC International Group plc Annual Report and Accounts 2021
G
R
C
I
n
t
e
r
n
a
t
i
o
n
a
l
G
r
o
u
p
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
a
n
d
A
c
c
o
u
n
t
s
2
0
2
1
GRC International Group plc
Unit 3, Clive Court
Bartholomew’s Walk
Cambridgeshire Business Park
Ely CB7 4EA
T: 0330 999 0222
www.grci.group