iDE Group Holdings pic
Annual report and financial statements
Registered number SC368538
Year ended 31 December 2019
Contents
Directors and Advisers
Company Profile and Summary
Chairman's Statement
Financial Review
Strategic Report
Directors' Report
Remuneration Committee Report
Corporate Governance Statement
Statement of Directors' Responsibilities
Independent Auditors' Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Consolidated Financial Statements
iDE Group Holdings pic
Annual report and financial statements
31 December 2019
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iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Directors and Advisers
Directors
Andy Parker (Non-Executive Chairman)
Ian Smith (Executive Director)
Sebastian White (Non-Executive Director)
Company Secretary
Delgany Corporate Services Limited
Registered Office
24 Dublin Street
Edinburgh EH1 3PP
Company Number SC368538
Nominated Adviser and Broker
finnCap Limited
60 New Broad Street
London EC2M 1JJ
Solicitors
DAC Beachcroft LLP
25 Walbrook
London EC4N 8AF
Auditor
RSM UK Audit LLP
Portland
25 High Street
Crawley
West Sussex
RH10 1BG
Share Register
Computershare Investor Services PLC
44 North St Andrew Street
Edinburgh EH2 1HJ
Principal Banker
National Westminster Bank Pic
250 Bishopsgate
London EC2M 4AA
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Company Profile
The principal activities of iDE Group Holdings pic are the provision of network, hosting and managed services to public and private
companies.
The country of incorporation is Scotland; the Company's registered number is SC368538 and the Company is limited by shares.
The main country of operation is the United Kingdom.
Further information on the Company can be found at www.idegroup.com.
Summary
• Revenue of £28.2 million (2018: £41.1 million).
• Gross profit margins increased to 22.8% (2018: 16.1 % ). Gross profit margins before the impact of IFRS 16 are 22.1 %.
• Adjusted EBITDA** profit £1.1 million (2018: loss of £3.9 million). The adjusted EBITDA of £1.1 million has benefited by
£0.9 million due to the adoption of IFRS 16 with costs now taken in depreciation and finance costs.
• Additional funding raised of £11.5 million in the form of six-year secured loan notes from existing shareholders.
• No external debt other than with key shareholders.
• Stable leadership and consistent senior management team in place.
• Partnership channel delivering revenues from public sector.
• Strong partnership and direct customer pipeline of opportunities.
" Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, impairment charges, exceptional items, loss on
disposal of fixed assets and share-based payments
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iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Chairman's Statement
2019-a year of strategic realignment
This year has been pivotal for the Group, and whilst we saw a significant drop in revenues, we saw an increase in adjusted
EBITDA. This confirms that the cost reductions and rationalisation of loss-making business has moved the Group to a better
trading position from which to now grow.
After a period of consolidation and reflection we have embarked on a course for long term growth that will capitalise on our
strengths and develop propositions that meet client needs. We have a strong story to tell about how outsourced managed and
lifecycle services can bring value to organisations. We are also seeing increasing success when introducing clients to the
breadth of our services including datacentre, cloud and connectivity.
The Board decided that it is time for a more clearly articulated services offer and simplified business structure.
Our challenges in 2019
We had some major challenges to address during the year:
• Securing renewals of key customers
• Consolidating our data centre estate
• Developing a new strategy for Connect
• Rebuilding our partner and channel relationships
• Exploiting new sales opportunities
What has gone well?
Against a backdrop of economic and political uncertainty, we have secured some key customer renewals and won new clients
particularly in managed services.
We retained our profitable key direct customers to whom we provide user support desk, managed services, on-site and field
engineering.
On-going projects delivered by our lifecycle fulfilment centre were particularly strong and we have seen strong and consistent
improvements in that area, with our major customer for that service renewing mid-year.
We began a comprehensive review of the Connect business during the year in order to develop a new strategy for this division
after recent declines in revenue and complexities in its operations. I am pleased to provide an update that a major consolidation
of the network and datacentres in which we operate is underway. This is a significant project which will take time to conclude, but
we are confident that it will provide the foundations for profitable growth of our datacentre, cloud and connectivity business.
Our relationship with third party system integrators has both been refreshed and reinvigorated, and we have seen an increase in
opportunities both in service provision and project work through this channel particularly into the public sector; we are delivering
IT services into both a number of Central Government departments and Blue Light clients. We have ended the year with several
long-term partnerships which are providing us with new sales opportunities.
What has changed?
During 2018 a key focus was on reducing the Group's overheads, headcount, and infrastructure footprint in order to provide a
more sustainable cost base, and stabilising the business following a period of upheaval and uncertainty.
We did, unfortunately, see some customer losses during the year; lifecycle services are bolstered by project work which was
lower in 2019 than the prior year, and subsequent projects were delayed into 2020. In our Connect business the customer churn
was at an unacceptable level with some larger account losses in cloud services; this in part resulted in the programme to
consolidate the datacentre estate and review our pricing strategy for Connect services.
In 2019, whilst managing costs has remained a key driver, we have focussed attention onto customers. We gave focus to
individual customer and project profitability, continued to provide excellent service to existing customers as well as clearly
articulating our value propositions to win new business.
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Annual report and financial statements
Year ended 31 December 2019
Chairman's Statement (continued)
Securing and developing our partnership channels has proven to be successful with several new customer wins in the public
sector; and we have seen a positive affirmation in direct business with key account renewals.
COVID-19
The unprecedented and rapidly changing circumstances surrounding the COVID-19 outbreak provide an uncertain economic
landscape and increased risk aversion in the financial markets. Whilst it is difficult to predict accurately the potential long-term
consequences, we remain vigilant and, in common with all businesses, are closely monitoring the situation. The wellbeing of staff
and the customers with whom they interact is our overriding priority. We have instituted measures to ensure that our people can
work safely and, in most cases, remotely, ensuring the continuity of the business. We have rigorously stress tested our financial
forecasts for a range of potential outcomes associated with COVID-19 and we are confident that the Group is well positioned to
withstand any negative impact. To date there has been no material effect on the business.
Results
Revenue fell by 32% across the Group to £28.2 million for the full year (2018: £41.1 million), but significantly we have improved
gross profit margins to 23%, which before the impact of IFRS 16 are 22% (2018: 16%), and the resulting gross profit has
remained fiat year-on-year at £6.4 million (2018: £6.6 million).
The significant work undertaken to reduce the Group costs underpins the improvement in gross margins, and allied to a
reduction in overheads (excluding non-underlying costs, impairment, amortisation and depreciation) by some 50% to £5.3 million
(2018: £10 million) has resulted in the adjusted EBITDA moving from loss to profit of £1.1 million (2018: loss of £3.9 million).
Adjusted EBITDA
Exceptional items
Depreciation
Amortisation
Impairment charge on goodwill
Loss on disposal of fixed assets
Charges for share-based payments
Operating loss
Finance costs
Income tax
Year ended 31
December 2019
£000
Year ended 31
December 2018
£000
1,143
(588)
(3,241)
(3,289)
(3,000)
(86)
(9,061)
(1,827)
2,411
(3,886)
(2,368)
(2,848)
(3,290)
(17,528)
(441)
202
(30,159)
(389)
1,089
Loss for the year from continuing operations
(8,477)
(29,459)
The net loss for the year from continuing operations is £8.5 million (2018: loss £29.5 million), after a £3 million impairment charge
(2018: £17.5 million against goodwill and acquired intangible assets)
The Group continues to improve its cash generation and has maintained strong working capital management, this along with the
additional loan notes resulted in the Group paying off its third-party bank debt and finance lease commitments.
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Annual report and financial statements
Year ended 31 December 2019
Chairman's Statement (continued)
Profitability of divisions
Manage
Manage encompasses our service lines broadly covering field and site engineering, projects and lifecycle, network monitoring
and service desk support.
2019 saw revenues fall to £14.7 million (2018: £27.2 million), this was mostly down to novation of some £3.4 million of contracts
over to Connect, £4.9 million of lower project and lifecycle services, and a further £3.7 million reduction in engineering and
managed services; however, we have seen an improvement in gross profit margins to 31% (2018: 21%) and a reduction in
overheads by over 50%. The sum of these moved adjusted EBITDA from a loss in the prior year to a profit in 2019 of £1.1 million
(2018: loss of £3.1 million). The adjusted EBITDA of £1.1 million has benefited by £0.6 million due to the adoption of IFRS 16
with costs now taken in depreciation and finance costs.
This encouraging improvement underpins that this division is approaching the right-size, further consolidation of field engineering
is underway, and that profitable growth can be achieved in 2020.
Connect
Connect business services are broadly networking and connectivity, cloud and hosting, and voice/telephony.
Revenues in Connect were flat year-on-year at £14.6 million (2018: £14.6 million); whilst we were disappointed to lose some of
our larger cloud customers but benefited from contracts novated from Manage, and the net result was an improvement in gross
margins to 13% (2018: 5%). There has been an increase in overheads to £4.5 million (2018: £3.3 million), including a £0.3 million
benefit of adopting IFRS 16 in 2019. An impairment charge against intangible assets of £3.0 million (2018: £6.9 million) was
incurred following an annual impairment review which indicates that Connect is still underperforming. The resulting adjusted
EBITDA improved to £0.7 million (2018: loss £0.4 million). The adjusted EBITDA of £0.7 million has benefited by £0.3 million due
to the adoption of IFRS 16 with costs now taken in depreciation and finance costs.
Our objectives in 2020 are to further reduce costs through the datacentre and network consolidation and leverage these commercial
improvements into more competitive pricing to win new and extend existing business opportunities.
Central
There are £0.9 million of overhead costs attributable to group overheads (mainly relating to pic board and listing costs, associated
legal and professional fees, and share based payment charges), of which £0. 7 million reduce Group adjusted EBITDA
People
The management team made consistent progress in simplifying the structure of the business and aligning services better to
support our clients.
The Group executed on further headcount reductions during the year ending the period with 262 FTE (2018: 303 FTE).
The board would like to recognise and thank its employees who have worked hard to deliver excellent client service and retain
existing key clients.
What will we keep doing?
We are improving our customer and partner relationships and that has shown in our longer-term contracts and customer
renewals in 2019. Our focus for 2020 is on developing those relationships and the skills and processes needed to manage
accounts in a consistent and productive way by placing account management and service delivery at the heart of the business.
We will continue to generate revenue and cash but will also ensure that our business quality improves in terms of client fit,
margin and sustainability.
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Annual report and financial statements
Year en ded 31 December 2019
Chairman's Statement (continued)
What will we do better?
We have several priorities for the future, highlighted ones being:
• Improvements to our Governance in line with the Quoted Companies Alliance Corporate Governance Code.
• Complete our network and datacentre consolidation.
• Land and expand contracts through our partnership channel.
• Win more direct customers >£1m per annum contract value.
• Develop and deliver our datacentre, cloud and connectivity offering.
• Remove business and operational complexities thereby reducing overheads.
We are currently assessing the technology and market landscape and will evaluate our options in 2020. However, at our heart,
we are a business that depends on our own talented people delivering best-of-class technology solutions. We need to build a
strong sales force to support our group of knowledgeable experts.
Our strategy of a more integrated offering across service lines requires some investment in training and skills to ensure that we
can deliver for our clients and our investors.
Strategy
Having been greatly encouraged by the opportunities identified in the partnership channel & lifecycle businesses, and strong
direct customers the Board has outlined a strategy to provide better alignment between our operating businesses, customer
needs and driving competitive advantage as we widen the client base to which we offer the full portfolio of our services.
Additionally, changes to our internal operating model will assure consistent quality in our relationship and account management
whilst maintaining our strength in financial management.
Our aim is to drive further operating margin improvement and deliver consistent growth in earnings in the medium and long-term.
This will be supported by forthcoming developments in marketing and lead generation activities we plan to implement in 2020.
Financing and dividend
During the year, the Company issued £11.5 million of secured loan notes the proceeds of which were used to repay the Group's
debt facilities with National Westminster Bank, meet its finance lease obligations, and provide additional working capital.
Given the continued losses the Board is not proposing to declare a dividend at this time but will keep this policy under review.
Current trading and outlook
Trading in the current financial year remains broadly in line with management expectations, although the mix has changed due to
the current COVID-19 crisis. We have won and implemented additional projects in the Managed division supporting mobile
working across a number of our clients, offset by the expected pipeline of projects being deferred into the second half. The Board
is confident in its strategy and continues to enhance operational efficiency in our core services and strengthen the senior
management team in order to deliver an improved trajectory through 2020 and beyond.
•
Andy Parker
Non-Executive Chairman
13 July 2020
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Annual report and financial statements
Year ended 31 December 2019
Financial Review
The Group reported total revenues for the year to 31 December 2019 of £28.2 million, down from £41.1 million in 2018 and gross
profit of £6.4 million (2018: £6.6 million). The gross profit of £6.4 million has benefited by £0.2 million due to the adoption of IFRS
16 with costs now taken in depreciation and finance costs.
The Group uses Adjusted EBITDA which is a non-GAAP measure of performance as it believes this more accurately reflects the
underlying performance of the business. This is one of the key operational performance measures monitored by the Board.
Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, impairment charges, exceptional items,
loss on disposal of fixed assets and share-based payments.
The adjusted EBITDA for the year to 31 December 2019 was a profit of £1.1 million (2018: loss £3.9 million). The adjusted EBITDA
of £1.1 million has benefited by £0.9 million due to the adoption of IFRS 16.
A detailed review of the business is set out in the Chairman's Statement and this Financial Review. Included in these reviews are
comments on the key performance indicators that are used by the Board on a monthly basis to monitor and assess the performance
of the business. These indicators include the level of revenue, gross profit and Adjusted EBITDA together with net debt
Discontinued operations
In 2018, the Company sold the entire issued share capital of 365 ITMS Limited ("365 ITMS") and its subsidiaries to PTCA Newco
Limited ("PTCA"), a newly incorporated company, on a cash free, debt free basis with a normalised level of working capital (the
"Sale"). The consideration for the Sale was £2.8 million, payable in cash. The proceeds of the Sale were used to reduce the
Group's net debt.
In addition, as part of the Sale, certain assets relating to PACT, the Group's business unit focused on cyber security, including
contracts and staff, were transferred to 365 ITMS for cash consideration of £0.2 million which was paid to the Group by 365 ITMS
upon completion of the Sale.
The results for 2018 showed a loss on discontinued operations of £3.2m and a profit on disposal of subsidiary of £0.7 million.
Further losses of £0.2 million were identified in the current year on contracts novated as part of the disposal.
Manage
There was a decrease in revenues to £14.7 million (2018: £26.7 million), which is attributable to £3.4 million value of contracts
novated to Connect, £4.9 million of lower project and lifecycle services, and a further £3.7 million reduction in engineering and
managed services suffered from the loss of customer contracts or reduction in scope of services.
For the year we have seen an improvement in gross profit margins to 31%, which before the benefit of IFRS 16 is 28% (2018:
21 % ) as a result of the services mix and operational efficiencies, and a reduction in overheads by over 50% to £7.1 million (2018:
£15.5 million), which is the result of reduced headcount, costs moving to Connect alongside novated contracts, and stringent cost
saving initiatives.
Adjusted EBITDA attributable to Manage has moved from a loss in the prior year to a profit in 2019 of £1.1 million (2018: loss of
£3.1 million). The adjusted EBITDA of £1.1 million has benefited by £0.6 million due to the adoption of IFRS 16.
Connect
Revenues in Connect are flat year-on-year at £14.6 million (2018: £14.6 million). This net neutral position reflects additional
revenues from Manage contracts novated of £3.4 million against customer losses of a similar value.
However, there was an improvement in gross margins to 13% (2018: 5% ), owing to savings in infrastructure costs, and changes
in the customer and services mix.
There has been an increase in overheads to £4.5 million (2018: £3.3 million), and an impairment charge against intangible assets
of £3.0 million (2018: £6.9 million) was incurred following an annual impairment review. The overheads of £4.5 million have
benefited by £0.3 million due to the adoption of IFRS 16.
Adjusted EBITDA attributable to Connect has improved to £0.7 million (2018: loss £0.4 million). The adjusted EBITDA of £0.7
million has benefited by £0.3 million due to the adoption of IFRS 16.
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Annual report and financial statements
Year ended 31 December 2019
Financial Review (continued)
Exceptional items
Non-underlying items, relating to restructuring and reorganisation, and costs attributable to a premises break-in, amount to £0.6
million in the year (2018: £2.4 million).
Finance costs
After incurring net finance costs of £1.8 million relating to interest and arrangement fees for loan notes, leases and bank debt
(2018: £0.4 million), the loss before tax is £10.9 million (2018: loss of £30.5 million)
Taxation
The utilisation of tax losses and a deferred tax credit arising on the amortisation of intangible assets has resulted in a tax credit for
the year of £2.4 million (2018: £1.1 million)
The Group therefore reported a loss after tax from continuing operations of £8.5 million (2018: loss of £29.5 million), which equates
to a basic loss per share of 2.12 pence (2018: loss per share of 11.97 pence).
Statement of Financial Position
Non-current assets
The Group has property, plant and equipment of £9. 7 million (2018: £9.8 million) all of which are subject to depreciation as per the
policies set out in the accompanying financial statements. During the year there were additions of £3.1 million, £2.9 million of this
is in relation to the IFRS16 transition (2018: additions £0.6 million).
Further, intangible assets of goodwill, trademarks, capitalised technology and customer contracts are £21.1 million (2018: £27.4
million) and are subject to amortisation as per the policies set out in the accompanying financial statements. There was a goodwill
impairment charge of £3m in 2019 relating to the recoverability against future cashflows from iDE Group Connect (2018: £17.5
million). Details are shown in note 14.
Trade and other receivables
Trade and other receivables reflect revenue reductions in comparison to the previous year at £7.6 million (2018: £8.9 million)
including trade receivables of £5.4 million (2018: £6.4 million) after a credit loss provision of £0.6 million (2018: £0.7 million). Whilst
the overall reduction in trade receivables can be attributed to the fall in year-on-year revenues, there have been reductions resulting
from improved customer payments and an improvement in the aged profile resulting in lower credit loss provisions.
Trade and other payables
Trade and other payables amounted to £7.6 million (2018: £7.7 million), including trade payables of £5.6 million (2018: £4.9 million)
and accruals of £1.3 million (2018: £1.8 million). Third party suppliers' costs, which are being reduced where possible, remain fairly
fiat year-on-year.
Contract liabilities arise from customers being invoiced in advance of services delivered, in accordance with individual contractual
terms, at the balance sheet date this amounted to £1.9 million (2018: £3.0 million), the decrease reflects the reduction in overall
revenues as well as the mix of customers' contractual obligations for payment.
Cashflow and net debt
Cash generated from operating activities during the year was £0.4 million (2018 cash used £5.8 million). Losses for the year saw
a material improvement to £8.7 million loss (2018: loss of £32.6 million), and working capital reduced to £0.3 million (2018: £3.2
million).The Group invested £0.2 million (2018: £0.3 million) in fixed assets and net new financing amounted to £3.7 million (2018:
£4.2 million). The net result is that as at 31 December 2019 there were no bank borrowings or overdraft debt and the cash balance
was £0.7 million (2018: overdraft of £2.9 million).
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iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Financial Review (continued)
Cashflow and net debt (continued)
During the year the Company raised £11.5 million by way of an issue of secured loan notes ("Loan Notes") in three tranches: one
in January 2019, the second in March 2019 and the third in December 2019. The Loan Notes have a term of 6 years and an annual
coupon of 12% which is compounded and payable at the end of the term. The proceeds of the issue of the Loan Notes were used
to fully repay the revolving credit facility of £4.75 million and overdraft of £3.5 million provided by Natwest and provide additional
working capital for the Group.
With the issue of the Loan Notes, the Group now has no external debt other than with its major shareholders and has longer-term
funding, thereby affording security for all the Group's stakeholders.
Dividend
The Directors do not propose a dividend in respect of the current financial year (2018: £nil).
Update and outlook for 2020
Following the cost reduction programme started in 2018, and a renewed focus on customer retention and service delivery, in order
to drive increased profitability and cash generation; the Group ended the year in a much stronger position than it started it, with a
strong and consistent leadership team, an appropriate cost base and clear focus on operational execution and customer service.
The additional refinancing has provided long term funding and means that the Company has no external debt, as the Loan Notes
are held solely by shareholders, and predominantly by the largest shareholders. Since the year end there has been an improvement
in the pipeline of opportunities across the business both with existing and new customers and the Group has been trading at
acceptable levels of profitably in the year to date.
The COVID-19 outbreak has presented the Group with an unexpected new set of challenges. On a macroeconomic level, it is too
early to predict the medium-term impact on global and regional economies. The UK government has announced an unprecedented
£100 billion+ fiscal benefits package to help cushion the impact on jobs and public and private sector industries. Although, as yet,
the consequences of COVID-19 on the Group have been limited, it does have the potential to impact the UK economy, with the
continued closure of 'non-essential' businesses, although with the easing of the COVID-19 lock down seen in early July the impact
on the Group has been temporary and limited; to date IT managed services have remained buoyant during the UK-wide lock down,
with increased reliance on mobile working and the need to facilitate customers' staff working remotely.
The Board remains confident of the Group's future prospects.
Going concern
The Directors have taken advantage of the Government's Job Retention Scheme to furlough some staff members during the
COVID-19 lockdown period, as well as senior staff taking a short-term 20% salary reduction, and also deferment of PAYE and
VAT liabilities. There has been increased demand for lifecycle services which necessitated an increase in shifts and production,
and this has offset minor reductions in user support desk activities.
The Directors have prepared detailed cash flow projections; these projections, considering reasonably possible changes in trading
performance and the timing of key strategic events, including COVID-19, show the Group expects to operate within the level and
conditions of available funding. The directors note, however, that although the cash flow projections show that the group expects
to have sufficient cash resources throughout the forecast period, the levels of cash fluctuate and at times in the forecast period are
relatively low. The continuing Covid-19 pandemic creates added uncertainties for the Group. Any reasonably possible deviation
from the forecast cash inflows could result in the Group requiring additional funding.
The directors have discussed the future cashflows with two of the Group's major shareholders who are represented on the Board
and, furthermore, note the continued support of these shareholders, as demonstrated by the refinancing during the year. In
reaching their conclusion on the going concern assumption, the directors note and rely on the letter of support provided by MXC
Capital Limited, in which they undertake to continue to provide such financial support needed for continued operations for a period
not less than one year from the date of approval of these financial statements. The directors having made the necessary inquiries,
have satisfied themselves of MXC Capital's ability to provide such finance if necessary. After making enquiries and having regard
to the FRC's Guidance to Companies on COVID-19 issued in March 2020, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Group continues
to adopt the going concern basis in preparing its consolidated financial statements.
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iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Strategic Report
Review of the Business
A detailed review of the business is set out in the Chairman's Statement and the Financial Review. The year under review was a
challenging one for the business with overall revenues declining year-on-year, however gross margin improved and adjusted
EBITDA* moved from a loss to a profit. Future developments and current trading and prospects are set out in the Chairman's
Statement and the Financial Review. These reports together with the Corporate Governance Statement are incorporated into this
Strategic Report by reference and should be read as part of this report. The Group's strategy is focused on maximising value for
stakeholders by increasing revenues and profits by upselling to our current customer base as well as by bringing new customers
on board.
At 31 December 2019, the Board comprised 3 Directors (2018: 3); all of which are male (2018: all of which were male). At 31
December 2019, the Group had 262 employees (including Directors) (2018: 303), of which 202 (2018: 232) are male and 60 (2018:
71) are female.
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, impairment charges, exceptional items,
loss on disposal of fixed assets and share-based payments
Principal Risks and Uncertainties
Identifying, evaluating and managing the principal risks and uncertainties facing the Group is an integral part of the way the Group
does business. There are policies and procedures in place throughout the operations, embedded within our management structure
and as part of our normal operating processes.
The Group maintains a business risk register which is reviewed by the Board on a bi-annual basis. Each risk has an owner on the
Group's executive committee and is assigned a consequence and probability value, multiplied to give a risk value. The impact,
measures in place and tactics to mitigate risks are assessed on a regular basis. The risk categories, set out below, have been
identified by the Board as those currently considered to potentially have the most material impact on the Group's future
performance. In addition to these risks, note 23 contains details of financial risks.
COVD-19
The COVID-19 outbreak has the potential to cause significant disruption to the UK economy and, while the financial impact of the
Group is difficult to quantify, several scenarios have been examined in respect of the financial impact of the COVID-19 outbreak
on the businesses. During the lock-down period the Group saw some reductions in user support desk activities, which were
mitigated by furloughing staff through the Job Retention Scheme. However, data centre and connectivity business remained at
expected levels, and we saw a significant increase in lifecycle services as certain customers ramped up deployment of equipment
to facilitate their own staff working remotely,
We have continued to see new opportunities during lock-down, and believe that the demand for centralised managed services,
cloud, user support desk, mobile working & collaboration, and over-arching business continuity solutions will provide good
opportunities during the remainder of 2020. However, the Board continues to monitor the situation and act to mitigate any financial
impact which arises from delays to projects or possible reduction in IT managed services provision.
Market and Economic Conditions
Market and economic conditions are recognised as one of the principal risks in the current trading environment. The risk is
mitigated by the monitoring of trading conditions and changes in government legislation, the development of action plans to address
specific legislative changes and the constant search for ways to achieve new efficiencies in the business without impacting service
levels.
Exit of UK from European Union
The UK left the European Union post the Group's year end and entered a 12-month transition period (commonly referred to as
"Brexit"). Whilst negotiations between the UK and the European Union continue the impact of Brexit is not yet clear, but it may
significantly affect the fiscal, monetary and regulatory landscape in the UK, and could have a material impact on its economy and
the future growth of its various industries. Depending on the exit terms negotiated between EU Member States and the UK following
Brexit, the UK is likely to lose access to the single European Union market and the global trade deals negotiated by the European
Union on behalf of its members.
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Annual report and financial statements
Year ended 31 December 2019
Strategic Report (continued)
Exit of UK from European Union (continued)
The UK could, however, correspondingly acquire the right to secure additional trade deals with non-EU countries and with the EU
itself. Such a change in trade terms could affect the attractiveness of the UK as an investment centre and, as a result, could have
a detrimental or positive effect on UK companies and financial markets. Although it is not possible to predict fully the effects of an
exit of the UK from the European Union, it could have a material effect on the business, financial condition and results of operations
of the Group. The Group pays attention to the progress and direction of the negotiations and will take any actions open to it to
mitigate any risk as the impact becomes clearer. The Group has also discussed the potential impact of "Brexit" with a number of
key clients who will be directly affected, to ensure its services are relevant in the future economic environment, however, from
these discussions, the Group does not expect to have to make significant changes or incur significant disruption as a consequence.
Reliance on Key Personnel and Management
The success of the Group is dependent on the services of key management and operating personnel. The Directors believe that
the Group's future success will be largely dependent on its ability to retain and attract highly skilled and qualified personnel and to
train and manage its employee base. During the year, the restructuring programme continued which resulted in more members of
staff being made redundant and other members of staff moving into new roles. For those who remain there are several employee
benefits and active communication is encouraged within the business to mitigate the risk of losing skilled and qualified individuals.
Furthermore, there is an apprenticeship scheme which the Group believes will assist in training and retaining younger individuals
going forward.
Competition
The Group operates in a highly competitive marketplace and while the Directors believe the Group enjoys certain strengths and
advantages in competing for business, some of the competitors are much larger with considerable scale that could allow them to
offer similar services for lower prices, thus impacting the Group's ability to win new business. The Group monitors competitors'
activity and constantly reviews its own services and prices to ensure a competitive position in the market is maintained.
Technology
The market for the Group's services is in a state of constant innovation and change. The Group devotes significant resource to
the development of new service lines, ensuring new technologies can be incorporated and integrated with the Group's core
services. The nature of the Group's services means that they are exposed to a range of technological risk, such as viruses, hacking
and an ever-changing spectrum of security risk. The Group maintains constant pro-active vigilance against such risks and
maintains membership of some of the highest levels of security accreditation as part of the service it offers its customers.
Infrastructure Failure
The Directors believe that one of the key differentiators the Group offers is that its services are provided over its own controlled
and managed infrastructure, such as its own networks and data centre. Whilst this provides customers with comfort over the
resilience and reliability, the Group is also exposed to risks of infrastructure failure. A critical element of the Group's operating
methodologies and procedures is to mitigate such risks through the careful construction, maintenance and management of its
infrastructure. All networks and the data centre have fully resilient fail-over procedures with regular testing of back-up and recovery
plans.
11
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Strategic Report (continued)
s.172 Companies Act 2006: Statement of Directors' Duties to Stakeholders
The Directors of the company have a duty to promote the success of the company. A director of the company must act in the way
they consider, in good faith, to promote the success of the company for the benefit of its members, and in doing so have regard
(amongst other matters) to:
the likely consequences of any decision in the long term;
the interests of the Company's employees;
the need to foster the Company's business relationships with suppliers, customers and others;
the impact of the Company's operations on the community and the environment;
the desirability of the Company to maintain a reputation for high standards of business conduct; and
the need to act fairly between members of the Company.
The Directors are committed to developing and maintaining a governance framework that is appropriate to the business and
supports effective decision making coupled with robust oversight of risks and internal controls.
Fairness
The Board's policy is to behave responsibly, ethically and fairly at all times towards shareholders and other external stakeholders,
in line with our Company values, and to ensure that our management teams operate the business in a responsible and fair manner
and to the highest standards of business conduct and good governance.
Engagement with Employees
The company continues to focus on building channels that ensure the company is effectively listening and responding to
employees. In doing so, the company can identify opportunities to better meet employee needs, help them with their career
progression and build the skills required to continue helping our business thrive. During the period, the company focused on internal
performance management and development to ensure employees have clear objectives and an understanding of their contribution
to our overall business success and goals.
The company strives to create a diverse and inclusive working environment where every employee feels welcome and can do their
best work. We believe in the benefits of diversity and the importance of bringing a wide range of skills, experience and perspectives
into our business. The directors continually work with senior management to promote the Company's values and to monitor
attitudes and behaviours to ensure that they are consistent with our culture.
Engagement with suppliers, customers and others in a business relationship with the Company
Suppliers
As a company dependent on suppliers and partners to deliver services for all of our stakeholders, we strive to manage these
relationships as closely as possible to ensure they meet our standards. The Company is committed to ensuring the highest
standards and quality across our operations and require both our suppliers and partners to operate to the same high standards.
Customers
Our goal is to deliver best-in-class service for all of our customers and to be a genuine managed services provider by seamlessly
acting as the outsourced provider of services to our customers and their staff.
Environment
The Group acknowledges its responsibilities for environmental matters and where practicable adopts environmentally sound
policies in its working practices, such as recycling paper and packaging waste and using specialist recyclers of scrap
telecommunications and IT equipment. A major consideration when replacing company vehicles is their impact on the environment.
The Group also makes use of in-house collaboration tools to reduce the need for travel to meetings and operates flexible working
practices where possible, reducing the environmental impact of commuting. Positive experience of an increase in these activities
during the COVID-19 pandemic suggests these will continue at a higher level after the end of the pandemic than before.
12
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Strategic Report (continued)
Strategy
The market for network, cloud and IT managed services in the United Kingdom is highly fragmented and is served by a broad
spectrum of businesses from global telecommunication companies through hardware and software providers, system integrators
and a range of independent managed service providers of varying sizes through to companies providing individual elements of the
IT managed services spectrum. The market is growing, driven by the continued move towards off-premise solutions and mobile
access to secure services.
The Group positions itself in the market as being able to combine the benefits of its network and data centre with a flexible and
technically skilled workforce able to deliver and support critical services and solutions in a highly secure environment. The Group
seeks to differentiate itself in three distinct ways:
• Innovation - innovation in the design and delivery of services;
• Reliability - the right technical skills organised in the right way, to give predictable high quality results; and
• Value - service offerings that are designed to offer value for money to mid-market customers.
Through these differentiators, the Group aims to attract new customers and to deepen and broaden the relationship with existing
customers. The Board's strategy for growth comprises:
• Ongoing investment in expanding and enhancing our own infrastructure so that we can provide our customers with the
very highest level of security and service;
• Maximise the levels of revenue from our wide ranging customer base through high levels of service and a varied product
and service set; and
• Efficient use of our scale and resources to explore and invest in new technologies so that our customers can benefit from
the high levels of innovation across the whole industry.
The Group would also consider acquisition opportunities within the sector which would offer synergies and complementary or
additive products and services. Our acquisition criteria are strict and mean that we would only consider buying a business whose
operating model is similar to our own, would increase earnings, have high recurring revenues and would not over-leverage the
Group.
Despite the challenges we met in 2019, the Board believes that the Group's position between the very large system integrators
and network operators and the smaller competitors that may lack delivery structure, reputation, reliability and financial strength
remains a very compelling one.
The Group has a strong and reliable set of core infrastructure and has developed a delivery model that provides assurance and
certainty for customers. This underlying platform is the core strength of the Group and the Group will continue to consider
augmenting its underlying organic growth with acquisitions to leverage this platform, should there be a compelling strategic and
financial case.
On behalf of the Board
Ian Smith
Executive Director
13 July 2020
24 Dublin Street
Edinburgh EH1 3PP
13
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Directors' Report
The Directors present their report together with the audited consolidated financial statements for the year ended 31 December
2019 for iDE Group Holdings pic ("iDE" or the "Company") and its subsidiaries (together, the "Group").
Principal Activity
The principal activity of the Group during the year was to supply network, cloud and IT managed services. The Company is a holding
company.
Review of the Year
The review of the year and the Directors' strategy are set out in the Strategic Report.
Dividends
The Company did not pay a dividend during the year ended 31 December 2019 (2018: £nil). The Directors do not recommend the
payment of a dividend at 31 December 2019 (2018: £nil).
Directors
The Directors who held office during the period and up to the date of the Annual Report are as follows:
Ian Smith
Andy Parker
Matthew ("Max") Royde (resigned 13 November 2019)
Sebastian White (appointed 12 November 2019)
Company Secretary
Delgany Corporate Services Limited
A brief biography of the current Directors can be found below:
Andy Parker - Non-Executive Chairman
On 10 August 2018 Andy was appointed as Non-Executive Director, on 5 October 2018 was appointed as Non-Executive Chairman
and for the period 15 October 2018 to 21 May 2020 held the position of Executive Chairman. On 21 May 2020 Andy took the role
of Non-executive Chairman.
Andy is an experienced commercial, operational and financial professional. A chartered accountant, Andy has held a wide range
of commercial and finance roles culminating most recently in his tenure as Chief Executive Officer of Capita Group pic, the FTSE
350 professional support services company. Andy has held a number of finance director roles during his career and is a highly
experienced public markets board director.
Andy is the Chair of the Audit Committee and a member of the Remuneration Committee.
Ian Smith - Executive Director
On 1 June 2018, Ian was appointed as Executive Director.
Ian has an extensive track record of investing in and managing technology companies and is co-founder and CEO of MXC Capital
Limited. Ian has sat on numerous boards and either led or been involved in a large number of transactions in the TMT sector. Ian
led strategic change and value accretion at Redstone pic and Accumuli pic and was previously deputy executive chairman and
CEO at Castleton Technology pic.
Ian holds no direct beneficial interest in iDE Group, however, is CEO and a substantial shareholder of MXC Capital Limited, a
substantial shareholder and loan note holder in the Company.
Ian is a member of the Remuneration Committee and the Audit Committee.
14
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Directors' Report (continued)
Sebastian White - Non-Executive Director
On 12 November 2019, Sebastian was appointed as Non-Executive Director.
Sebastian is an experienced investment and company director at Kestrel Partners LLP, a London based fund management
business whose clients are significant shareholders of iDE Group. He has deep experience of the communications and hosting
sector following 14 years as head of corporate development in a mid-market AIM listed pic.
Sebastian is a member of the Remuneration Committee and a member of the Audit committee.
As permitted by the Articles of Association, the Directors have the benefit of an indemnity which is a qualifying third-party indemnity
provision as defined by Section 234 of the Companies Act 2006. The indemnity was in force throughout the last financial year and
is currently in force. The Company also purchased and maintained Directors' and Officers' liability insurance throughout the
financial year in respect of itself and its Directors.
Andy Parker, Ian Smith and Sebastian White retire in line with the terms of the articles of the Company and being eligible, offer
themselves for re-election at the forthcoming Annual General Meeting.
Directors' Service Contracts
Details of the Directors' service contracts and their respective notice terms are detailed in the Remuneration Committee report.
Directors' Interests
The interests of the Directors at the end of the year in the ordinary shares of the Company at 31 December 2019, together with
their interests at 31 December 2018 were as follows:
Number of ordinary shares
31 December
2019
31 December
2018
Andy Parker
Ian Smith*
Sebastian White"
* Ian Smith is Chief Executive Officer and a substantial shareholder of MXC Capital Limited which as at 31 December 2019 held
172,951,125 ordinary shares (31 December 2018: 172,811,125 ordinary shares)
** Sebastian White is the Investment Director of Kestrel Partners LLP, whose clients held in total 32,627,340 ordinary shares as
at 31 December 2019 (31 December 2018: 36,497,252 ordinary shares)
15
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Directors' Report (continued)
Substantial Shareholders
At 31 December 2019 and at 27 March 2020, being the latest practicable date before the publication of the Annual Report, the
Company is aware of the following significant interests in its ordinary, voting share capital:
Shareholder name
MXC Capital Limited'
Bill Dobbie?
Richard Griffiths
Kestrel Partners LLP3
LMS Capital
Matt Hawkins4
31 December 2019
Number
31 December 2019
%
27 March 2020
Number
27 March 2020
%
172,951,125
55,476,117
34,022,561
32,627,340
18,161,835
16,370,627
43.2
13.8
8.5
8.1
4.5
4.1
172,931,125
55,486,117
32,772,561
32,628,810
18,161,835
16,370,627
43.1
13.8
8.2
8.1
4.5
4.1
1. MXC Capital Limited is a related party; Ian Smith, Executive Director, is Chief Executive Officer and a substantial shareholder of MXC
Capital Limited
Former Director of the Company
Sebastian White, Non-Executive Director of the Company, is Investment Director of Kestrel Partners LLP
Former Director of the Company
2.
3.
4.
Political Donations
The Group and Company have not made any political donations in the year ended 31 December 2019 (2018: nil).
Auditor
RSM UK Audit LLP were appointed as auditor during the year. A resolution is to be proposed at the forthcoming AGM for the re
appointment of RSM UK Audit LLP as auditor to the Company, at a rate of remuneration to be determined by the Audit Committee.
Financial Risk Management Objectives and Policy
The Company's financial risk management objectives and policies are described in note 24 to the financial statements. The key
objectives are:
Cash flow risk
The Group receives interest on cash and cash equivalents and pays interest on its borrowings.
The impact on post-tax profit and equity of a +/-1 % shift in the interest rate would not be material.
Price risk
The Group is not exposed to significant commodity or security price risk.
Credit risk
Credit risk is managed at a subsidiary level. Credit risk arises from cash and cash equivalents as well as credit exposures to
customers, including outstanding receivables. Individual risk limits are set based on internal and external ratings and reviewed by
management. The utilisation of credit limits is regularly monitored with appropriate action taken by management in the event of
the breach of a credit limit. The Group has applied the simplified approach applying a provision matrix based on number of days past
due to measure lifetime expected credit losses and after taking into account customers with different credit risk profiles and current
and forecast trading conditions. The Group has recognised a provision in respect of trade receivables of £0.6 milion (2018: £0.7
million).
16
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Directors' Report (continued)
Financial Risk Management Objectives and Policy (continued)
Liquidity risk
Management reviews cash forecasts of trading companies of the Group in accordance with practice and limits set by the Group.
The Group's liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to
meet these.
Employee involvement
The flow of information to staff has been maintained by our staff email bulletins and staff meetings. Members of the management
team regularly discuss matters of current interest and concern to the business with members of staff; in particular in regard to
providing information on performance indicators, encouraging employee participation and engendering a common awareness of
financial and economic factors which affect the company's performance
The company continues to focus on building channels that ensure the company is effectively listening and responding to
employees. In doing so, the company can identify opportunities to better meet employee needs and interests, reflecting these
where possible in the principal decisions taken by the company.
Disabled persons
The company is committed to a policy of recruitment and promotion on the basis of aptitude and ability without discrimination of
any kind. Management actively pursues both the employment of disabled persons whenever a suitable vacancy arises and the
continued employment and retraining of employees who become disabled whilst employed by the company. Particular
attention is given to training, career development and promotion of disabled employees with a view to encouraging them to play
an active role in the development of the company.
Disclosure of Information to the Auditor
Each of the Directors who was in office on the date of approval of these financial statements, having made enquiries of the fellow
Directors, confirms that
• To the best of each Director's knowledge and belief, there is no information relevant to the preparation of their report of
which the Group's auditor is unaware; and
• Each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant
audit information and to establish that the Group's auditor is aware of that information.
Subsequent Events
Full details of post balance sheet events are included in note 30 to the consolidated financial statements.
Future Developments
Future developments and current trading and prospects are set out in the Chairman's Statement and the Financial Review.
On behalf of the Board
Ian Smith
Executive Director
13 July 2020
24 Dublin Street
Edinburgh
17
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Remuneration Committee Report
Remuneration Committee
At 31 December 2019, the Remuneration Committee comprised Andy Parker (Chair), Ian Smith and Seb White
The Remuneration Committee is responsible for determining and agreeing with the Board the framework for the remuneration of
Executive Directors and other designated senior executives and, within agreed terms of reference, determining the total individual
remuneration packages of such persons, including, where appropriate, bonuses, incentive payments and share options or other
share awards. The remuneration of Non-Executive Directors is a matter for the Executive Directors. No director is involved in any
decision as to his or her own remuneration or benefits.
Remuneration Policy
The Remuneration Committee is aware that the remuneration package should be sufficiently competitive to attract, retain and
motivate individuals capable of achieving the Group's objectives and thereby enhancing shareholder value.
Basic Salary and Benefits
Basic salaries for the Executive Directors are reviewed in January each year. The benefits provided to the Executive Directors
may include contributions to a Group defined contribution pension scheme, private medical insurance for themselves, their spouse
and their children, life assurance cover of 4 times salary, critical illness and income protection cover, a company car allowance
and annual leave of 25 days.
Performance Related Bonus
The Remuneration Committee determines the criteria for the award of performance bonuses for the Executive Directors in advance
of each year. The bonuses are pensionable. Non-Executive Directors do not receive a bonus.
Fees
The Board, within the limits stipulated by the Articles of Association and following recommendations by the Executive Directors,
determines Non-Executive Directors' fees. The annual fees are £30,000 (2018: £30,000) for a Non-Executive Director and £50,000
for a Non-Executive Chairman. Jonathan Watts stepped down from the board in January 2018 and was paid in lieu of notice.
Directors' emoluments
For Directors who held office during the year, emoluments for the year ended 31 December 2019 were as follows:
Salary/fees
£
Benefits
£
Pension
£
2019 total
£
2018 total
£
Executive
Andy Ross
Julian Phipps
Ian Smith1
Andy Parker
Non-Executive
Jonathan Watts
Bill Dobbie
Katherine Ward
Max Royde?
Sebastian White?
Total
50,000
150,000
26,048
3,952
230,000
141,144
92,870
29,167
38,469
16,668
20,000
23,334
7,177
50,000
150,000
26,048
3,952
230,000
368,829
1.
2.
Directors' emoluments in respect of Ian Smith were paid to MXC Advisory Limited, a subsidiary of MXC Capital Limited
Directors' emoluments in respect of Max Royde and Sebastian White were paid to Kestrel Partners LLP
18
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Remuneration Committee Report (continued)
The Executive Directors' salaries are paid by subsidiary companies within the Group. The Non-Executive Director fees and the
fee to MXC Advisory Limited for Ian Smith's services are paid by the Company.
Andy Parker
Chair, Remuneration Committee
On behalf of the Board
13 July 2020
19
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Corporate Governance Statement
Since September 2018 all AIM companies have been required to comply with a recognised Corporate Governance Code and to
disclose how the governance code has been implemented or to explain any areas of departure from its requirements. iDE carefully
reviewed and then resolved to apply the Quoted Companies Alliance Corporate Governance Code ("QCA Code") published in April
2018 which is constructed around 1 O broad principles. This report sets out our approach to the QCA Code and governance. Our
compliance with the 10 principles is also available to view on the Company's website: www.idegroup.com.
Principle 1 - Establish a strategy and business model which promote long-term value for shareholders.
The Board undertook a strategic and operational review in 2018 (the "Strategic and Operational Review"). This resulted in a revised
business model and strategy, followed by a period of strategic realignment in 2019. The Group's strategy is set out in the Strategic
Report on page 1 O. The Chairman's Statement on page 3 and Financial Review on page 7 provide information of how the Company
performed against its stated strategy. The Strategic Report includes information on the Principal Risks and Uncertainties faced by
the Company in 2019 and how the Company has acted to reduce its exposure to risk. The Board's objective is to secure the long
term success of the Company by establishing a sustainable and profitable operating model with an appropriate underlying cost
base in order to create long-term value for shareholders and stakeholders alike.
The Group's trading companies are iDE Group Manage Limited, which provides outsourced IT services, including 1st, 2nd and 3rd
line IT support and network-based solutions, and iDE Group Connect Limited, which provides network services and data centre
hosting services. Work has continued on a cost reduction programme within these operations with a focus on right-sizing the Group
to enable it to trade profitably. With this substantially complete the Company is focused on growing its existing businesses in order
to increase value for shareholders. The Board will continue to monitor its progress against its revised stated strategy.
Principle 2 - Seek to understand and meet shareholder needs and expectations.
iDE is committed to open communication with all its shareholders.
Copies of the Annual Report and Accounts are issued to all shareholders who have requested them, and copies are available on
the Group's investor website www.idegroup.com. The Group's interim results are also made available on the Group's website. The
Group makes full use of its investor website to provide information to shareholders and other interested parties.
The Board reviews proxy voting reports and any significant dissent is discussed with relevant shareholders and, if necessary,
action is taken to resolve any issues. In compliance with best practice, the level of proxy votes (for, against and vote withheld)
lodged on each resolution is declared at all general meetings and in future will be announced.
Andy Parker, Non-Executive Chairman, and Ian Smith, Executive Director, are primarily responsible for communicating with
investors. Meetings via the Company's broker are offered to major institutional shareholders to discuss strategy, financial
performance and investment activity immediately after the full year and interim results announcements. The Non-Executive Director
is also available to meet with other major shareholders if such meetings are requested. Feedback from such meetings with
shareholders is provided to the Board to ensure the Directors have a balanced understanding of the issues and concerns of major
shareholders.
Shareholders are given the opportunity to raise questions at the Annual General Meeting and the Directors are available both
before and after the meeting for further discussion with shareholders. Representatives of two of the largest shareholders are on
the board, being Ian Smith for MXC Capital Limited and Sebastian White (Non-Executive Director) for Kestrel Partners LLP. Both
Ian and Sebastian have had influence over the restructuring of both the Board and the Group as a whole which has taken place in
the year under review and, together with Andy Parker, have lead the strategic direction of the Group since their respective
appointments.
The Board receives share register analysis reports to monitor the Company's shareholder base and help identify the types of
investors on the register.
20
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Corporate Governance Statement (continued)
Principle 3 - Take into account wider stakeholder and social responsibilities and their implications for long-term
success.
The Group recognises its employees, customers, suppliers, advisors, banks and shareholders as forming part of the wider
stakeholder group. Management identifies key relationships within the business and effort is directed to ensuring these
relationships are managed appropriately. Regular reviews are undertaken to ensure any issues are addressed promptly.
The Board reviews its largest clients and suppliers in its Board meetings, and these are identified in packs provided to the Board.
The Company has a good relationship with its NOMAD, broker and other advisers. Feedback from investors is provided by the
broker as well as through direct engagement with investors by the Board.
The Group meets frequently with customers and communicates regularly with suppliers. There is a feedback system in place and
issues raised can be addressed.
The Group has adopted a Modern Slavery Policy as part of its larger commitment to encourage ethical, social and environmental
responsibility. The policy is available to view on the Company's website.
The Group's internal stakeholders are its employees. The Group is committed to employment policies which follow best practice,
based on equal opportunities for all employees, irrespective of ethnic origin, religion, political opinion, gender, marital status,
disability, age or sexual orientation.
Staff policies
The Group's employment policies are designed to ensure that they meet the statutory, social and market practices in the United
Kingdom. The Group systematically provides employees with information on matters of concern to them, consulting them or their
representatives regularly, so that their views can be taken into account when making decisions that are likely to affect their interests.
Employee involvement in the Group is encouraged, as achieving a common awareness on the part of all employees on the financial
and economic factors affecting the Group, plays a major role in maintaining its relationship with its staff.
The Group gives full and fair consideration to applications for employment for disabled persons, taking into account aptitude and
abilities. Appropriate arrangements are made for the continued employment and training, career development and promotion of
disabled persons employed by the Group. This includes, where applicable and possible, the retraining and retention of staff who
become disabled during their employment.
The Board believes that its investment in the wider stakeholder network is expected to assist the Company's management in
achieving its long-term goals creating an environment of trust and communication which will have positive implications for the long
term success of the Group.
Principle 4 - Embed effective risk management, considering both opportunities and threats, throughout the
organisation.
Risk assessment and evaluation is an essential part of the Group's planning and an important aspect of the Group's internal control
system. The business and management of the Company and its subsidiaries are the collective responsibility of the Board. At each
meeting, the Board considers and reviews the trading performance of the Group. The Board has a formal written schedule of
matters reserved for its review and approval. These include the approval of the annual budget, major capital expenditure,
investment proposals, the interim and annual results and a review of the overall system of internal control and risk management.
The results of the Strategic and Operational Review undertaken in 2018 followed by a period of strategic realignment in 2019 have
enabled the current Board to identify the most critical risks and challenges facing the business and to take the necessary steps to
mitigate these risks by strengthening its control systems and policies where necessary. The revised and refined system of risk
management is explained in the Strategic Report under the heading Principal Risks and Uncertainties. The Board has established
a risk register which is bespoke to the Group's business. The risk register is reviewed at least twice a year, and the Board considers
the appropriateness of the risks identified and the mitigating action taken by management on a risk by risk basis with a particular
focus on those deemed most critical.
21
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Corporate Governance Statement (continued)
Principle 5 - Maintain the board as a well-functioning, balanced team led by the Chair.
Membership of the Board and information on each member can be found in the Directors' Report. The Board is currently comprised
of one Executive and two Non-Executive Directors, and during the year ended 31 December 2019, it was supported by an interim
Chief Financial Officer and other senior managers, and it oversees and implements the Company's corporate governance
programme.
As Non-Executive Chairman, Andy Parker is responsible for the Company's approach to corporate governance and the application
of the principles of the OCA Code. As Andy was previously Executive Chairman of the Company, until he stepped down from the
role in 2020, he is not considered to be an independent director.
Ian Smith is the Executive Director, and whilst he holds no direct beneficial interest in iDE Group, he is the Chief Executive Officer
and a substantial shareholder of MXC Capital Limited. Ian is not considered to be an independent director as MXC Capital Limited
is a substantial shareholder of the Company.
Sebastian White was appointed Non-Executive Director in November 2019. As Investment Director of Kestrel Partners LLP, a
London based fund management business whose clients are significant shareholders of iDE Group, Sebastian is not considered
to be independent.
Each Board member commits sufficient time to fulfil their duties and obligations to the Board and the Company. They attend regular
monthly board meetings and join ad hoc board calls and offer availability for consultation when needed. The contractual
arrangements between the Directors and the Company specify the minimum time commitments which are considered sufficient for
the proper discharge of their duties. However, in exceptional circumstances all Board members understand the need to commit
additional time.
Detailed board packs include information on all business units and financial performance and are circulated ahead of Board
meetings. Key issues are highlighted and explained, providing Board members with sufficient information to enable a relevant
discussion in the Board meeting.
The Board is supported by its Audit Committee and its Remuneration Committee. The number of Board and Committee meetings
held throughout the course of the financial year is set out at the end of this Corporate Governance Statement.
Departures from the Code
The Company accepts that having only three directors on the Board, none of whom are independent, is not a long-term solution
and is different to the composition of the Board in previous years where there were two independent directors. However, the Group
has recently undergone significant change and for the majority of 2019 the focus has been on implementing the revised strategy
for which the current directors, albeit not independent, are fully qualified. The Board recognises the need for at least one
independent director and is looking to find appropriate candidates to fulfil that role at which time the composition of the Board
committees will be reviewed.
Principle 6 - Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.
The Chairman believes that, as a whole, the Board has a suitable mix of skills and competencies in order to drive the Group's
strategy and execute on the Strategic and Operational Review and is best placed to secure the future of the Group and create
long-term value for all stakeholders.
The Board consists of one Executive Director and two Non-Executive Directors, none of whom are independent, and comprises
three men as set out in the Directors' Report. The nature of the Group's business requires the Directors to keep their skillset up to
date which they do by attending industry events and keeping up to date with the latest industry and regulatory publications. Periodic
updates to the Board on regulatory matters are given by Company's professional advisers. The Directors' Report identifies the
members of the Board and describes the relevant experience, skills and qualities they bring.
22
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 Decem ber 2019
Corporate Governance Statement (continued)
The Company's financial adviser, NOMAD and lawyers are consulted on any significant matters where the Board believes external
expertise is required.
External advisers attend Board meetings as invited by the Chairman to report and/or discuss specific matters relevant to the Group
and the markets in which it operates. Additionally, MXC Advisory Limited provides the services of Ian Smith, Executive Director,
and MXC Capital Markets LLP is a retained financial adviser principally focused on acquisitions. Both MXC Advisory Limited and
MXC Capital Markets LLP are part of the same group as the significant shareholder MXC Capital Limited.
The Company Secretary, Rose Herbert on behalf of Delgany Corporate Services Limited, advises the Board on corporate
governance and regulatory matters, attends the Board meetings and reports directly to the Chairman on governance matters. In
keeping with best practice as set out the in the QCA guidelines the Company has split the role of Chief Financial Officer and
Company Secretary.
Andy Parker and Ian Smith are primarily responsible for communicating with investors.
Departures from the Code
The Board is supported by a Chief Financial Officer who is not a member of the Board. The Chief Financial Officer, a qualified
accountant, works closely with the Board and is managing financial procedures and controls. The Board believes that, with the
support of the chief financial officer and the finance team, its members have sufficient financial experience to manage the Group's
financial function.
The Board recognises the need for at least one independent director and the benefits it would bring to the board. The Company is
looking to find appropriate candidates to fulfil that role and enhance the balance and skillset of the Board.
Principle 7 - Evaluate board performance based on clear and relevant objectives, seeking continuous improvement.
The Board regularly reviews the effectiveness of its performance as a whole as well as that of its committees and individual
directors. Effectiveness is reviewed by looking at the Group's performance against budget as well as by the success of the strategy
as set by the Board. The Board meets regularly to review the Group's performance as well as their respective roles.
Board appointments are made after consultation with advisers in all cases and in some cases with major shareholders. The
NOMAD undertakes due diligence on all new potential Board candidates. Board members all have appropriate notice periods so
that if a Board member indicates his/her intention to step down, there is sufficient time to appoint a replacement, whether internal
or external. All Directors are required to retire by rotation and seek re-election every three years.
Departures from the Code
As part of the strategic and operational review in 2018, the need to strengthen the Board was recognised and changes were swiftly
implemented with appointments made to add significant commercial, financial and operational experience to the Board overall.
The Board recognises that a more robust means of evaluating Board performance needs to be adopted going forwards. The
evaluation process is currently under review. In the past, a review of the Board has been undertaken by external advisers. The
Board will consider using this method of review in future to supplement its own processes.
23
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Corporate Governance Statement (continued)
Principle 8- Promote a corporate culture that is based on ethical values and behaviours.
The Board firmly believes that sustained success will best be achieved by adhering to the Group's corporate culture of treating all
our stakeholders fairly and with respect.
Accordingly, in dealing with each of the Company's principal stakeholders, the Board encourages our staff to operate in an honest
and respectful manner. The Group's culture of honesty and respect is reflected in the continued support and dedication shown by
employees to deliver value to the Group's customers during what has been a challenging year.
The Board also believes that achieving a common awareness across all employees plays a major role in maintaining good
employee relations. The Strategic and Operational Review of the entire business in 2018 highlighted areas that concerned
employees and steps were taken to remedy these concerns, such as more frequent Group-wide communication by management
and the Board.
The Group is committed to promoting a culture based on ethical values and behaviours across the business. Policies are in place
covering key matters such as bribery, protection of intellectual property and sensitive information, conflicts of interest,
whistleblowing and anti-slavery. These are strongly enforced and monitored. Central to the Group's culture and values are
Collaboration, Respect, Excellence, Speed, Trust and Accountability, known to the Company's employees as CRESTA.
the website:
Information about how the Group's beliefs are applied to the business is set out on
https://www.idegroup.com/about/our-people/.
Staff policies
The Group's employment policies are designed to ensure that they meet the statutory, social and market practices in the United
Kingdom. The Group systematically provides employees with information on matters of concern to them, consulting them or their
representatives regularly, so that their views can be taken into account when making decisions that are likely to affect their interests.
Employee involvement in the Group is encouraged, as achieving a common awareness on the part of all employees on the financial
and economic factors affecting the Group plays a major role in maintaining its relationship with its staff.
The Group is committed to employment policies, which follow best practice based on equal opportunities for all employees,
irrespective of sex, race, colour, disability or marital status. The Group gives full and fair consideration to applications for
employment for disabled persons, having regard to their particular aptitude and abilities. Appropriate arrangements are made for
the continued employment and training, career development and promotion of disabled persons employed by the Group. This
includes, where applicable and possible, the retraining and retention of staff who become disabled during their employment.
Certifications
The Company is proud to have been awarded ISO/IEC 20000-1, ISO 9001, and ISO 27001. Details of these and other certifications
are included on the website: https://www.idegroup.com/abouUcertification/.
Principle 9 - Maintain governance structures and processes that are fit for purpose and support good decision-making
by the board.
The principle governance structures and processes of the Company and its subsidiaries are the collective responsibility of the
Board and its Committees, details of which are set out earlier in this report. At each Board meeting, the Board considers and
reviews the trading performance of the Group. The Board has a formal written schedule of matters reserved for its review and
approval. These include the approval of the annual budget, major capital expenditure, investment proposals, the interim and annual
results and a review of the overall system of internal control and risk management.
There are two standing Board Committees - Audit and Remuneration. Each of these committees acts within defined terms of
reference. The roles of the Audit Committee and the Remuneration Committee are set out in the Corporate Governance section
of the Company's website as follows: https://www.idegroup.com/abouUinvestors/corporate-governance/.
Departures from the Code
The Company recognises that its lack of independent directors does not comply with the standards of the QCA Corporate
Governance Code in terms of composition of the Board and its Committees. The Board recognises the need for at least one
independent director and is looking to find appropriate candidates to fulfil that role and enhance its governance structures and
processes.
24
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Corporate Governance Statement (continued)
Principle 1 O - Communicate how the company is governed and is performing by maintaining a dialogue with shareholders
and other relevant stakeholders.
The Company reports formally to its shareholders and the market twice each year with the release of its interim and full year
results. The full year results are audited by a firm of external auditors.
This report contains full details of all the principal events of the relevant period together with an assessment of current trading and
future prospects. The report is made available to the public via the Company's website.
The Company maintains a regular dialogue with stakeholders including shareholders to enable interested parties to make informed
decisions about the Group and its performance. The Board believes that transparency in its dealings offers a level of comfort to
stakeholders and an understanding that their views will be listened to. This has proved to be of utmost importance during recent
years which have been a period of significant change and challenge for the Group. The Board intends to continue its policy of
communication for the mutual benefit of the Company, its subsidiaries and their stakeholders.
The Board discloses the result of general meetings by way of announcement and discloses the proxy voting numbers to those
attending the meetings. In order to improve transparency, the Board has committed to announcing proxy voting results from the
coming Annual General Meeting onwards. In the event that a significant portion of voters have voted against a resolution, the
Board intends to disclose the actions it will take to understand the reasons behind the vote.
Attendance at Board and Committee Meetings
Board meetings are held on a regular basis with additional meetings or conference calls held when required during the year, for
example in relation to significant events. Each of the current Directors has attended every meeting and call since their appointment.
Remuneration Committee meetings are held at least annually, with further ad hoc meetings called as required, all Remuneration
Committee members attended 2019 and post year end meetings.
Audit Committee meetings are held bi-annually to review interim and full year results, with further ad hoc meetings to agree audit
planning. All Audit Committee meetings in relation to the audit for the year ended 31 December 2019 were attended by all Audit
Committee members.
25
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Statement of Directors' Responsibilities
The directors are responsible for preparing the Strategic Report and the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare group and company financial statements for each financial year. The directors are
required by the AIM Rules of the London Stock Exchange to prepare group financial statements in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU") and have elected under company law to prepare
the company financial statements in accordance with IFRS as adopted by the EU.
The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the group and
the company and the financial performance of the group. The Companies Act 2006 provides in relation to such financial statements
that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a
fair presentation.
Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and the company and of the profit or loss of the group for that period.
In preparing each of the group and company financial statements, the directors are required to:
a.
b.
c.
d.
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 IFRSs adopted by the EU;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and the
company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group's and the
company's transactions and disclose with reasonable accuracy at any time the financial position of the group and the company
and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for
safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of
fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the iDE
Group Holdings pic website.
Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation
in other jurisdictions.
Ian Smith
Executive Director
On behalf of the Board
13 July 2020
26
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF iDE GROUP HOLDINGS PLC
Opinion
We have audited the financial statements of iDE Group Holdings pic (the 'parent company') and its subsidiaries (the 'group') for
the year ended 31 December 2019 which comprise the Consolidated Income Statement, the Consolidated Statement of
Comprehensive income, Statements of Financial Position for the group and parent company, Statements of Changes in Equity for
the group and parent company, Statements of Cash Flows for the group and parent company and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the
parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
• the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31
December 2019 and of the group's loss for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union;
• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the Companies Act 2006; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements
section of our report. We are independent of the group and parent company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to SME listed entities
and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require
us to report to you where:
• the directors' use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties that may cast significant
doubt about the group's or the parent company's ability to continue to adopt the going concern basis of accounting for a
period of at least twelve months from the date when the financial statements are authorised for issue.
Summary of our audit approach
Key audit matters
Group
• Incremental borrowing rate applied on initial application of IFRS 16
• Impairment of intangible assets
Parent Company
• Impairment of intercompany receivables
Materiality
Group
• Overall materiality: £367,000 (2018: £440,000).
• Performance materiality: £275,000 (2018: £308,000).
Parent Company
• Overall materiality: £351,000 (2018: £418,000)
• Performance materiality: £263,000 (2018: 292,000)
Scope
Our audit procedures covered 100% of revenue, 99.9% of net assets and 99.2% of loss before
tax.
27
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group and
parent company financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation
of resources in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our
audit of the group and parent company financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Incremental borrowing rate applied on initial application of IFRS 16
audit
Key
description
matter 'IFRS 16- Leases' became effective for annual reporting periods beginning on or after 1 January 2019.
The application of the new standard gives rise to right of use (ROU') assets of £5.5 million and a
corresponding increase in lease liabilities of £5.5 million, as shown in note 1.25.
The group applied the modified retrospective approach for the transition accounting. As the interest rate
implicit in the leases could not be readily determined, the lessee's incremental borrowing rate (IBR") was
used to measure the lease liabilities and ROU assets. The assessment of the IBR involves the exercise
of a significant degree of judgement and may have a material impact on the amounts recognised in the
statement of financial position.
How the matter was
addressed in the audit
Our audit procedures included an evaluation of the discount rate applied by management to certain
property leases with an aggregate liability on transition of £2.5 million, and the resulting impact on the
right of use assets and lease liability. The remaining lease liabilities recognised are relatively short term,
with expiry dates within 24 months and, therefore, movements in the IBR would not give rise to a risk of
material misstatement.
Our work included:
•
•
•
consulting our auditor's expert who considered a benchmark incremental borrowing rate for a
sample of property leases, both short and longer term. They obtained independent external
data to support a reference rate and credit spread for each lease tested, and considered
whether any asset specific adjustment was required;
discussing the findings of our auditor's expert with management, who subsequently revised
the rate used in their calculations; and
reviewing the related disclosure in note 1.25.
Key observations
Based on the audit work performed, we are satisfied that the incremental borrowing rates used are
reasonable.
Impairment of intangible assets
audit
Key
description
matter As set out in note 14, the Group has intangible assets at 31 December 2019 of £21.1 million, including
goodwill of £2.9 million. The group has two cash generating units ("CGUs'); Connect and Manage. The
goodwill all relates to the Connect CGU.
As a result of the impairment review for the Connect CGU, management recognised an impairment charge
of £3.0 million. This was due to recent and continuing under-performance of the CGU.
Additionally, they identified that the losses recorded in the Manage CGU were an indicator of potential
impairment. Therefore, an impairment review was also undertaken for this CGU.
The Group's assessment of impairment in accordance with IAS 36 Impairment of Assets is a judgemental
process which requires estimating future cash flows based on management's view of future business
prospects. The degree of subjectivity and the size of the impairment provision meant that this was a
significant area of audit focus.
Our work included:
How the matter was
addressed in the audit
•
critically challenging the key underlying assumptions (revenue, profit margins and discount
rate) used in the forecasts that form the basis of the Group's impairment reviews. This included
consulting our internal valuations experts on the discount rates used, and benchmarking
growth rates to information produced by independent industry research and data organisations;
• assessing the accuracy of past forecasts; this included comparing actual trading performance
in 2019 to the forecast made in 2018 for that year and understanding the reasons for any
significant variances;
reviewing the performance of each CGU for the 2020 year to date results against forecasts;
performing additional sensitivities, to assess the robustness of the model;
•
•
• discussing our findings with management, as a result of which an adjustment was made to the
discount rate and the growth rates in one of the CG Us;
28
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
•
•
performing a model integrity check, including reviewing the model for mathematical and clerical
accuracy; and
reviewing the disclosures in the financial statements, including the disclosure of the events and
circumstances that led to the recognition of the impairment charge and sensitivities.
Key observations
Based on the audit procedures performed, we are satisfied that management has made reasonable
assumptions in their consideration of the impairment charge and the valuation of intangible assets at the
year end.
Impairment of intercompany receivables
audit
Key
description
matter As disclosed in note 16 the parent company has group receivables (before impairment) of £68.0 million
at 31 December 2019. Under IFRS 9- Financial Instruments, management must calculate an expected
credit loss provision in respect of this balance. There is significant measurement uncertainty involved in
assessing the probabilities to be assigned to the possible outcomes in this calculation. For this reason the
valuation of group receivables was significant to our audit of the parent company financial statements.
Management assessed the required level of provision under IFRS 9-Financial Instruments as £49.0m.
How the matter was
addressed in the audit
We obtained management's calculation of the expected credit loss ("ECL') and the underlying calculations
prepared to support the carrying value of the balances and performed work as follows:
•
•
•
•
•
•
assessed the reasonableness of the scenarios considered by management and the
probabilities assigned to each;
considered the appropriateness of the financial outcome for each scenario;
recalculated the computation of the EGL;
considered the impact of the calculations on the prior period impairment charge;
discussed our findings with management, following which an adjustment was made to the
current and prior period's impairment provisions; and
reviewed the disclosures of the prior period adjustment arising from the revision of the EGL.
Key observations
As a result of our work we concurred with management's revised calculated EGL. We also considered the
disclosure of the prior period adjustment to be appropriate.
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and extent of
our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial statements as
a whole, could reasonably influence the economic decisions of the users we take into account the qualitative nature and the size
of the misstatements. Based on our professional judgement, we determined materiality as follows:
Overall materiality
£367,000 (2018. £440,000).
£351,000 (2018:. £418,000)
Group
Parent company
Basis for determining overall
materiality
1.3% of revenue
Rationale for benchmark applied
Revenue is considered the most appropriate
measure used to assess the performance of
the group.
3.3% of net assets. The percentage applied to
the benchmark has been restricted for the
purpose of calculating an appropriate
component materiality.
Net assets are considered to be the
appropriate measure as the company's
activity is to hold investments in group
companies.
Performance materiality
£275,000 (2018: £308,000)
£263,000 (2018: £.292,000)
Basis
performance materiality
for
determining
75% of overall materiality
75% of overall materiality
29
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Reporting of misstatements to Misstatements in excess of £18,300 and
the Audit Committee
misstatements below that threshold that, in our
view, warranted reporting on qualitative
grounds.
Misstatements in excess of £17,500 and
misstatements below that threshold that, in
our view, warranted reporting on qualitative
grounds.
An overview of the scope of our audit
The group consists of the parent company, two trading companies; iDE Group Manage Limited and iDE Group Connect Limited;
and 13 other dormant or non trading entities. The parent company and the two trading companies are based in the UK.
The coverage achieved by our audit procedures was:
Number of
components
3
13
16
Full scope audit
Analytical procedures
at group level
Total
Revenue
100.0%
Net assets
Loss before tax
99.9%
0.1%
99.2%
0.8%
100.0%
100.0%
100.0%
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual
report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic Report and the Directors' Report have been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course
of the audit, we have not identified material misstatements in the Strategic Report or the Directors' Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to
you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors' remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
30
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Responsibilities of directors
As explained more fully in the directors' responsibilities statement set out on page 26, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group's and the parent company's ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a
high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's
website at: http://www.frc.orq.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to
state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for
the opinions we have formed.
GEOFF WIGHTWICK (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Portland
25 High Street
Crawley
West Sussex
RH101BG
Date: 13 July 2020
31
Consolidated Income Statement
for the year ended 31 December 2019
Continuing operations
Revenue
Cost of sales
Gross profit
Administrative expenses excluding impairment
Impairment loss on trade receivables
Impairment charge on goodwill and intangibles
Total administrative expenses
Adjusted EBITDA*
Exceptional items
Depreciation
Amortisation
Impairment charge on goodwill and intangibles
Loss on disposal of fixed assets
Charges for share-based payments
Operating loss
Finance costs
Loss on ordinary activities before taxation
Income tax
Loss for the year from continuing operations
Discontinued operations
Loss after tax for the year from discontinued operations
Loss for the year attributable to owners of the parent
company
From continuing operations
Basic and diluted loss per share
From discontinued operations
Basic and diluted loss per share
Total basic and diluted loss per share
Note
4
5
3&5
5
14
7
13
14
14
28
9
11
8
12
12
12
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Year ended
31 December
2019
£000
Year ended
31 December
2018
£000
28,161
(21,742)
6,419
(12,450)
(30)
(3,000)
(15,480)
1,143
(588)
(3,241)
(3,289)
(3,000)
(86)
(9,061)
(1,827)
(10,888)
2,411
41,137
(34,521)
6,616
(18,522)
(725)
(17,528)
(36,775)
(3,886)
(2,368)
(2,848)
(3,290)
(17,528)
(441)
202
(30,159)
(389)
(30,548)
1,089
(8,477)
(29,459)
(179)
(3,165)
(8,656)
(32,624)
(2.12)p
(11.97)p
(0.04)p
(1.29)p
(2.16)p
(13.29)p
• Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, impainment charge, exceptional items, loss on disposal of fixed assets
and share-based payments
The notes on pages 40 to 77 are an integral part of these financial statements.
32
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Year ended
31 December
2019
£000
Year ended
31 December
2018
£000
Loss for the year attributable to the owners of the parent company
(8,656)
(32,624)
Items that are or may be reclassified subsequently to the income
statement
Foreign exchange translation differences
Total other comprehensive (loss)/ income
(23)
(23)
Total comprehensive loss for the year attributable to the owners of
the parent company
(8,656)
(32,647)
The notes on pages 40 to 77 are an integral part of these financial statements.
33
Statements of Financial Position
As at 31 December 2019
Group
Note
Non-current assets
Property, plant and equipment
Intangible assets
Investments
Deferred tax asset
Trade and other receivables
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Contract liabilities
Borrowings
Provisions
Non-current liabilities
Contract liabilities
Borrowings
Convertible loan notes
Provisions
Deferred tax liabilities
Total liabilities
Net assets
Equity attributable to equity holders of the parent
Share capital
Share premium
Equity reserve
Retained earnings
Foreign currency translation reserve
13
14
15
11
16
16
17
18
19
22
21
19
22
23
21
11
27
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2018
£000
9,836
27,395
2019
£000
9,706
21,106
1,821
Company
2019
£000
(Restated)
2018
£000
7,877
7,877
18,940
26,782
32,633
37,231
26,817
34,659
7,621
679
8,300
8,893
8,893
29
103
132
46
5,488
5,534
40,933
46,124
26,949
40,193
7,562
1,926
1,766
192
7,670
2,962
7,800
1,514
2,075
50
11,446
19,946
2,125
6
14,333
1,803
230
3,272
19,644
13
494
1,654
1,705
3,899
7,765
12,474
1,803
14,277
31,090
27,711
16,402
1,651
4,681
50
6,382
1,654
1,654
8,036
9,843
18,413
10,547
32,157
10,020
35,439
967
(36,433)
(150)
10,020
35,439
967
(27,863)
(150)
10,020
35,439
967
(35,879)
10,020
35,439
967
(14,269)
Total equity
9,843
18,413
10,547
32,157
The notes on pages 40 to 77 are an integral part of these financial statements. The Company made a loss of £21. 7 million in the
year ended 31 December 2019 (2018 Restated: £6.3 million). These financial statements were approved by the Board of Directors
on 13 July 2020 and were signed on its behalf by:
Ian Smith
Executive Director
Company registered number: SC368538
34
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 Decem ber 2019
Statements of Changes in Equity
for the year ended 31 December 2019
Group
Share
Capital (a)
Share
Premium (b)
Equity
reserve (c)
Retained Foreign currency
Earnings (d) translation reserve
Total
equity
Balance at 1 January 2018
Loss for the financial year
Other comprehensive income!(expense)
Movement in foreign currency translation
Total comprehensive income/(expense)
Transactions with owners recorded
directly in equity:
Share issues
Share based payments
Convertible loan notes
£000
5,018
£000
35,439
£000
(e)
£000
(127)
(23)
(23)
£000
4,963
(32,624)
(32,624)
5,002
(202)
967
£000
45,293
(32,624)
(23)
(32,647)
5,002
(202)
967
Balance at 31 December 2018
10,020
35,439
967
(27,863)
(150)
18,413
Loss for the financial
comprehensive expense
year and total
Transactions with owners recorded
directly in equity:
Share based payments
(8,656)
(8,656)
86
86
Balance at 31 December 2019
10,020
35,439
967
(36,433)
(150)
9,843
35
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Statements of Changes in Equity (continued)
for the year ended 31 December 2019 (continued)
Company
Balance at 1 January 2018
Transition to IFRS 9 on I January 2018 (Restated)
Total comprehensive loss for the year
Loss for the year (restated)
Transactions with owners recorded directly in
equity:
Share issues
Share based payments
Convertible loan notes
Note
Share
Capital (a)
Share Equity reserve
(e)
Premium (b)
Retained
Earnings (d)
(restated)
£000
5,018
£000
35,439
£000
£000
16,541
Total
equity
(restated)
£000
56,998
2
2
(24,312)
(24,312)
(6,296)
(6,296)
5,002
(202)
967
5,002
(202)
967
Balance at 31 December 2018 (Restated)
10,020
35,439
967
(14,269)
32,157
Total comprehensive loss for the year
Loss for the year
Transactions with owners recorded
directly in equity:
Share based payments
(21,696)
(21,696)
86
86
Balance at 31 December 2019
10,020
35,439
967
(35,879)
10,547
( a) Share capital represents the nominal value of equity shares
(b) Share premium represents the excess over nominal value of the fair value of consideration received for equity shares; net of expenses
of the share issue;
(c) The equity reserve consists of the equity component of convertible loan notes that were issued as part of the fundraising in August
2018 less the equity component of instruments converted or settled.
The fair value of the equity component of convertible loan notes issued is the residual value after deduction of the fair value of the
debt component of the instrument from the face value of the loan note.
( d) Retained earnings represents retained profils and accumulated losses
(e) On consolidation, the balance sheets of the Group's foreign subsidiaries are translated into sterling at the rates of exchange ruling at
the balance sheet date. Exchange gains or losses arising from the consolidation of these foreign subsidiaries are recognised in the
foreign currency translation reserve.
36
Statements of Cash Flows
for the year ended 31 December 2019
Group
Cash flows from operating activities
Loss before tax for the year:
Continuing operations
Discontinued operations
Total loss before tax
Adjustments for:
Depreciation
Amortisation
Impairment charge
Net finance expenses
Share based payments
Loss on disposal of fixed assets
Loss/(profit) on disposal of subsidiary
Decrease in trade and other receivables
Decrease in inventory
Decrease in trade and other payables and contract liabilities
(Decrease)/increase in provisions
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Note
2019
£000
Restated
2018
£000
13
14
9
28
(10,888)
(216)
(30,548)
(3,292)
(11,104)
(33,840)
3,241
3,289
3,000
1,827
86
339
1,271
(1,355)
(208)
3,033
3,549
21,505
390
(202)
425
(680)
(5,820)
6,284
366
(11,320)
1,485
Net cash generated from/(used in) operating activities
47
(9,005)
Cash flows from investing activities
Proceeds from sale of subsidiary and PACT business, net of overdraft repaid
Acquisition of property, plant and equipment
Realisation/ (acquisition) of non-current financial assets
Proceeds from sale of fixed assets
13
(177)
3,611
(272)
89
23
Net cash (used in)/generated from investing activities
(177)
3,451
Cash flows from financing activities
Interest paid
Share issue, net of expenses
New loans and borrowings, net of expenses
Repayment of loans and borrowings
Repayment of lease liabilities
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
Cash and cash equivalents comprise
Cash at bank
Overdrafts
(451)
11,520
(4,750)
(2,605)
(320)
3,752
3,800
(2,750)
(335)
3,714
4,147
3,584
(2,905)
(1,407)
(1,498)
679
(2,905)
17
679
(2,905)
679
(2,905)
37
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Statements of Cash Flows (continued)
for the year ended 31 December 2019
Restatement of 2018 Group cash flow statement:
The comparative figures for the Group cash flow statement have been restated to start from the Group's loss before tax and show discontinued
activities separately, with the corresponding removal of the tax charge of £1,216k from adjustments in arriving at cash from operating activities,
as follows:
Cash flows from operating activities as originally stated
Add tax
Total loss before tax
2018
£000
(32,624)
(1,216)
(33,840)
38
Statements of Cash Flows (continued)
for the year ended 31 December 2019
Company
Cash flows from operating activities
Loss for the year
Adjustments for:
Net financial expenses
Impairment of intercompany loans
Share based payments
Other
(lncrease)/decrease in trade and other receivables
lncrease/(decrease) in trade and other payables
Decrease in provisions
Net cash from operating activities
Cash flows from investing activities
Amounts (advanced to)/repaid by subsidiaries
Net cash generated from investing activities
Cash flows from financing activities
Interest paid
Share issue, net of expenses
New loans and borrowings, net of expenses
Repayment of loans and borrowings
Net cash generated from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at 1 January
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2019
£000
(Restated)
2018
£000
(21,696)
(6,296)
1,418
19,408
86
(784)
(17)
424
278
5,245
(202)
28
(947)
1,351
(808)
(202)
(377)
(606)
(11,734)
1,123
(11,734)
1,123
(44)
11,520
(4,750)
(209)
3,752
3,800
(2,750)
6,726
4,593
(5,385)
5,488
5,110
378
Note
21
22
22
Cash and cash equivalents at 31 December
17
103
5,488
39
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements
1
Accounting policies
iDE Group Holdings pic (IDE Group') is a company incorporated in Scotland, domiciled in the United Kingdom and limited by
shares which are publicly traded on AIM, the market of that name operated by the London Stock Exchange. The registered office
is 24 Dublin Street, Edinburgh EH1 3PP and the principal place of business is in the United Kingdom.
The principal activity of the Group is the provision of network, cloud and IT managed services.
The principal accounting policies, which have been applied consistently in the preparation of these consolidated financial
statements throughout the year and all by subsidiary companies are set out below. These are the first full year results which are
presented by iDE Group following the adoption of IFRS 16. Further detail of the implementation of this new standard can be found
in note 1.25.
1.1 Basis of preparation
The consolidated financial statements of iDE Group have been prepared on the going concern basis and in accordance with EU
adopted International Financial Reporting Standards (IFRS), IFRS Interpretations Committee (IFRS IC} and the Companies Act
2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the
historical cost convention. The Company has elected to take the exemption under section 408 of the Companies Act 2006 to not
present the parent Company's Income Statement.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial
statements are disclosed in note 1.26 in the accounting policies.
Going concern
The Directors have taken advantage of the Government's Job Retention Scheme to furlough some staff members during the
COVID-19 lockdown period, as well as senior staff taking a short-term 20% salary reduction, and also deferment of PAYE and VAT
liabilities. There has been increased demand for lifecycle services which necessitated an increase in shifts and production, and
this has offset minor reductions in user support desk activities.
The Directors have prepared detailed cash flow projections; these projections, considering reasonably possible changes in trading
performance and the timing of key strategic events, including COVID-19, show the Group expects to operate within the level and
conditions of available funding. The directors note, however, that although the cash flow projections show that the group expects
to have sufficient cash resources throughout the forecast period, the levels of cash fluctuate and at times in the forecast period are
relatively low. The continuing Covid-19 pandemic creates added uncertainties for the Group. Any reasonably possible deviation
from the forecast cash inflows could result in the Group requiring additional funding.
The directors have discussed the future cashflows with two of the Group's major shareholders who are represented on the Board
and, furthermore, note the continued support of these shareholders, as demonstrated by the refinancing during the year. In
reaching their conclusion on the going concern assumption, the directors note and rely on the letter of support provided by MXC
Capital Limited, in which they undertake to continue to provide such financial support needed for continued operations for a period
not less than one year from the date of approval of these financial statements. The directors having made the necessary inquiries,
have satisfied themselves of MXC Capital's ability to provide such finance if necessary. After making enquiries and having regard
to the FRC's Guidance to Companies on COVID-19 issued in March 2020, the Directors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Group continues
to adopt the going concern basis in preparing its consolidated financial statements.In the year ended 31 December 2019, the
Group fully repaid its banking facilities with National Westminster Bank pic which consisted of a £4.75 million Revolving Credit
Facility (the total facility was £7.5 million; £2.75 million was repaid in October 2018 with the proceeds of the disposal of 365 ITMS
Limited) and a £3.5 million overdraft facility. The facilities were repaid with the proceeds of the issue of 6-year secured loan notes
to certain of the Company's shareholders. Further detail can be found in note 22.
Based on the above the Directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future.
40
iDE Group Holdings pic
Annu'al report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1
Accounting policies (continued)
1.2 Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition
of a subsidiary is the total of the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree
and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting
from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling
interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate
share of the recognised amounts of the acquiree's identifiable net assets.
lntercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated on
consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with policies
adopted by the Group.
1.3 Investments
Investments in subsidiaries are held at cost less accumulated impairment losses. A formal assessment of the recoverability of the
investment values is undertaken on an annual basis by the Directors. Where indicators of impairment identified, fixed asset
investments are impaired accordingly.
1.4 Intangible assets
Goodwill
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of any non
controlling interest over the fair value of the net identifiable assets acquired and liabilities assumed. If this consideration is lower
than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement as a bargain
purchase.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.
For the purposes of impairment testing, goodwill acquired in a business combination is allocated to a cash generating unit.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential
impairment. Any impairment is recognised immediately as an expense and is not subsequently reversed.
Other intangible assets arising from business combinations
Intangible assets that meet the criteria to be separately recognised as part of a business combination are carried at cost (which is
equal to their fair value at the date of acquisition) less accumulated amortisation and impairment losses. An intangible asset
acquired as part of a business combination is recognised outside of goodwill if the asset is separable or arises from contractual or
other legal rights and its fair value can be measured reliably.
Intangible assets acquired in this manner include trademarks and
customer contracts. They are amortised over their estimated useful lives on a straight-line basis as follows:
• Customer contracts and related relationships
• Trademarks
5- 13 years
5 years
Impairment and amortisation charges are included within the administrative expenses line in the income statement.
41
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1
Accounting policies (continued)
Technology development
Expenditure on internally developed technology is capitalised if it can be demonstrated that:
- it is technically feasible to develop the technology for it to be used or sold
- adequate resources are available to complete the development
- there is an intention to complete and for the Group to use or sell the technology
- uSe or sale of the asset will generate future economic benefits, and
- expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods the Group expects to benefit from using or selling the assets
developed. The amortisation expense is included within the administrative expenses line in the income statement. Development
expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the
consolidated income statement as incurred.
1.5 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. The cost includes
the original price of the asset and the cost attributable to bringing the asset to its current working condition for its intended use.
Computer software includes software purchased from third party vendors used in conjunction with related hardware, rather than a
stand-alone basis, and is therefore treated as tangible.
Depreciation, down to residual value, is calculated on a straight-line basis over the estimated useful life of the asset, which is
reviewed on an annual basis, as follows:
• Leasehold property
• Computer software
• Network infrastructure
• Equipment, fixtures and fittings
Over remaining lease term
3-5 years
3-10 years
3-5 years
An item of property, plant and equipment is de-recognised upon disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the year the item
is de-recognised.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which
comprises the initial amount of the lease liability, adjusted for, as applicable, any lease payments made at or before the
commencement date net of any lease incentives received, any initial direct costs incurred, and, except where included in the cost
of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the
site or asset.
Right-of-use assets are depreciated on a straight-line basis over the unexpired period of the lease or the estimated useful life of
the asset, whichever is the shorter. Where the Group expects to obtain ownership of the leased asset at the end of the lease term,
the depreciation is over its estimated useful life. Right-of use assets are subject to impairment or adjusted for any remeasurement
of lease liabilities.
The Group has elected not to recognise a right-of-use asset and corresponding lease liability for short-term leases with terms of
12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred.
42
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1 Accounting policies (continued)
1.6 Impairment of assets (continued)
Goodwill is not subject to amortisation and is reviewed for impairment annually or more frequently if events or changes in
circumstances indicate the carrying value may be impaired. As at the acquisition date, any goodwill acquired is allocated to each
of the cash generating units expected to benefit from the business combination's synergies.
Impairment is determined by
assessing the recoverable amount of each of the cash generating unit to which the goodwill relates. When the recoverable amount
of the cash generating unit is less than the carrying amount, including goodwill, an impairment loss is recognised.
Other intangible assets and property, plant and equipment are subject to amortisation and depreciation and are reviewed for
impairment whenever events or changes in circumstances indicate the carrying values may not be recoverable.
If any such
indication exists and where the carrying value exceeds the estimated recoverable amount, the assets or cash generating units are
written down to their recoverable amount.
The recoverable amount of intangible assets and property, plant and equipment is the greater of the 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 values 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 an asset
that does not generate largely independent cash inflows, the recoverable amount is determined by the cash generating unit to
which the asset belongs. Fair value less costs to sell is, where known, based on actual sales price net of costs incurred in
completing the disposal.
Non-financial assets, other than goodwill, that were impaired in previous periods are reviewed annually to assess whether the
impairment is still relevant.
1.7 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction from proceeds.
1.8 Leases
A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value
of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate
cannot be readily determined, the Group's incremental borrowing rate. Lease payments comprise of fixed payments less any lease
incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual
value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any
anticipated termination penalties. The variable lease payments that do not depend on an index or a rate are expensed in the period
in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are remeasured if there
is a change in the following: future lease payments arising from a change in an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination penalties. When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down.
The following accounting policies were applied to leases in the year ended 31 December 2018:
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.
Where the Group has substantially all the risks and rewards of ownership of a leased asset, the asset is capitalised as property,
plant and equipment and depreciated over the shorter of its useful economic life and the lease term. The resulting lease obligations
are included in borrowings, net of finance charges.
Interest costs on finance leases are charged to the income statement to
produce a constant periodic rate of change on the remaining balance of the liability for each period.
43
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1
Accounting policies (continued)
1.9 Provisions
Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event where it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate
can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by
discounting the expected future cash flows at a risk-free rate that reflects current market assessments of the time value of money
and, where appropriate, the risks specific to the liability.
1.1 O Current and deferred income tax
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities,
based on tax rates and laws that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided for on all temporary differences at the balance sheet date between the tax bases of assets and
liabilities and their carrying amounts for financial reporting purposes, with the following exceptions:
• where the temporary difference arises from the initial recognition of goodwill or an asset or liability in a transaction that
is not a business combination that at the time of the transaction neither affects accounting nor taxable profit or loss;
• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal
of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future; and
• deferred income tax assets are recognised only to the extent that it is probable that taxable profits will be available
against which deductible temporary differences carried forward tax credits or tax losses can be utilised.
1.11 Trade and other receivables
Trade receivables, which principally represent amounts due from customers, are recognised at amortised cost as they meet the IFRS
9 classification test of being held to collect, and the cash flow characteristics represent solely payments of principal and interest.
The Group has applied the Simplified Approach applying a provision matrix based on number of days past due to measure lifetime
expected credit losses and after taking into account customers with different credit risk profiles and current and forecast trading
conditions.
Trade receivables are written-off when there is no reasonable expectation of recovery, such as a debtor failing to engage in a
repayment plan with the company. The Group's trade and other receivables are non-interest bearing.
1.12 Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original
maturity of three months or less.
For the purposes of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as
defined above, net of outstanding bank overdrafts.
1.13 Foreign currencies
The presentational currency of the Group is Pound Sterling (£) and the Group conducts the majority of its business in Sterling.
Transactions in foreign currencies are initially recorded in the presentational currency by applying the rate of exchange ruling at
the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the presentational
currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.
Foreign exchange translation differences arising from the translation of entities reporting in foreign currencies are classified as
other comprehensive income
44
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1
Accounting policies (continued)
1.14 Accrual for employee benefits, including holiday pay
Provision is made for employee benefits, including holiday pay, to the extent of the liability as if all employees of the Group had left
the business at its reporting date.
1.15 Financial assets and liabilities
The Group's financial assets and liabilities mainly comprise cash, borrowings, trade and other receivables and trade and other
payables. These are accounted for in accordance with the relevant accounting policy note.
Trade and other payables are not interest bearing and are stated at their amortised cost.
1.16 Convertible loan notes
The component parts of convertible loans issued by the Company are classified separately as financial liabilities and equity in
accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
At the date of issue, the fair value of the liability portion of convertible loan notes is determined using a market interest rate for a
comparable loan note with no conversion option. This amount is recorded as a liability on an amortised cost basis using the
effective interest method until the loan notes are redeemed or converted either during or at the end of the term of the convertible
loan notes. The remainder of the carrying amount of the loan notes is allocated to the conversion option and shown within equity,
and is not subsequently remeasured. When the conversion option remains unexercised at the maturity date of the convertible note,
the balance recognised in equity will be transferred to retained earnings. No gain or loss is recognised in the income statement
upon conversion or expiration of the conversion options.
1.17 Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition,
interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains
and losses arising on the repurchase, settlement or otherwise cancellation of liabilities are recognised in the finance cost line in
the income statement.
1.18 Finance costs
Loans are carried at fair value on initial recognition, net of unamortised issue costs of debt. These costs are amortised over the
loan term.
All other borrowing costs are recognised in the income statement on an accruals basis, using the effective rate method.
1.19 Revenue
Revenue is measured at the fair value of the consideration received or receivable for the sale of goods and services in the ordinary
course of the Group's activities. Revenue is shown net of Valued Added Tax, returns, rebates and discounts and after the
elimination of sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits
will flow to the entity and when specific criteria have been met for each of the Group's activities as described below.
Recurring revenue
The largest portion of the Group's revenues relates to a number of network, cloud and IT managed services, which the Group
offers to its customers. All of the revenue in this category is contracted and includes a full range of support, maintenance,
subscription and service agreements. Revenue for these types of services is recognised as the services are provided on the basis
that the customer simultaneously receives and consumes the benefits provided by the Group's performance of the services over
the contract term. In terms of performance obligations, the customer can benefit from each service on its own and the Group's
promise to transfer the service to the customer is separately identifiable from other promises in the contract. The transaction price
for each service is allocated to each performance obligation. The costs incurred for these revenue streams typically match the
revenue pattern. A contract liability is recognised when billing occurs ahead of revenue recognition. A contract asset is recognised
when the revenue recognition criteria were met but in accordance with the underlying contract, the sales invoice has not been
issued yet.
45
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1
Accounting policies (continued)
1.19 Revenue (continued)
Project revenue
These project services include mainly installation and consultancy services. Performance obligations are met once the hours or
days have been worked. Revenue is therefore recognised over time based on the hours or days worked at the agreed price per
hour or day. The costs incurred for this revenue stream generally match the revenue pattern, as a significant portion of consultancy
costs relate to staff costs, which are recognised as incurred. Consultancy services are generally provided on a time and material
basis.
1.20 Exceptional items
It is the policy of the Group to identify certain costs, which are material either because of their size or nature, separately on the
face of the Income Statement in order that the underlying profitability of the business can be clearly understood. These costs are
identified as Exceptional costs, and comprise;
a) Professional fees incurred in sourcing and completing acquisitions and disposals including legal expenses
b) Professional fees incurred in restructuring and refinancing acquisitions
c)
Integration costs which are incurred by the Group when integrating one trading business into another, including
rebranding of acquired businesses
d) Redundancy costs, including employment related costs of staff made redundant up to the date of their leaving as a
consequence of integration
e) Property costs such as lease termination penalties and vacant property provisions and third-party advisor fees
1.21 Cost of Sales
Cost of sales include costs which are directly attributable to the supply of goods and services, including salary costs of all
employees whose roles are directly related to the provision of services.
1.22 Operating profit or loss
The operating profit or loss is identified in the income statement and represents the profit or loss on continuing activities before
finance income, finance costs and taxation.
1.23 Segmental reporting
The Chief Operating Decision Maker has been identified as the Executive Board. The Chief Operating Decision Maker reviews
the Group's internal reporting in order to assess performance and allocate resources. For management reporting purposes and
operationally, the continuing operations of the Group consist of two operating segments: iDE Group Manage and iDE Group
Connect. iDE Group Manage consists of IT Managed services and iDE Group Connect consists of connectivity, cloud and
colocation services. The Board assess the performance of the operating segments based on profitability and EBITDA. An analysis
of revenue and gross profit of both segments is described under their respective headings in the financial review.
Information provided to the Executive Board is measured in a manner consistent with that in the Financial Statements.
1.24 Discontinued operations
Cash flows and operations that relate to a major component of the business that has been disposed of, or is classified as held for
sale or distribution are shown separately from continuing operations.
1.25 Application of new IFRSs and interpretations
International Financial Reporting Standard (IFRS) 16 "Leases"
The Group implemented IFRS 16 Leases as of 1 January 2019, adopting the modified retrospective approach. The new standard
is effective for periods beginning on or after 1 January 2019. IFRS 16 removes the operating and finance lease classification for
lessees in IAS 17 Leases and replaces them with the concept of right-of-use assets and associated financial liabilities. This change
46
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1
Accounting policies (continued)
1.25 Application of new IFRSs and interpretations (continued)
results in the recognition of a liability on the balance sheet for all leases which convey a right to use the asset for the period of the
contract. The lease liability reflects the present value of the future rental payments, discounted using either the effective interest
rate or the incremental borrowing rate of the Group. The operating lease charges previously reflected within administrative
expenses have been eliminated and instead depreciation and finance charges have been recognised in respect of the lease assets
and liabilities.
International Financial Reporting Standard (IFRS) 16 "Leases"(continued)
The effect of IFRS 16 for the current reporting period, based on the operating leases in place and qualifying for recognition under
IFRS 16 has resulted in the recognition of additional lease assets within property, plant and equipment at 31 December 2019 of
£5.5 million and additional lease liabilities of £5.5 million in total for the Group. Additional lease liabilities include £2.6m in respect
of contracts which were determined to be onerous in prior periods. The related right of use assets were recognised at £2.6m and
the onerous leases provision brought forward was transferred to the right of use asset impairment provision The depreciation
charge against the right of use asset in 2019 has been calculated to be £0.7 million, with an interest charge of £0.3 million, which
compares to the previous IAS 17 treatment which would have been an operating lease charge within operating expenses of £0.9
million, resulting in an increase in Adjusted EBITDA reported in 2019 of £0.9 million compared to the IAS 17 treatment.
The weighted average incremental borrowing rate applied to lease liabilities recognised by the group at 1 January 2019 is 7.97%.
When adopting IFRS 16 from 1 January 2019, the consolidated entity has applied the following practical expedients:
• applying a single discount rate to the portfolio of leases with reasonably similar characteristics;
• excluding any initial direct costs from the measurement of right-of-use assets; and
• using hindsight in determining the lease term when the contract contains options to extend or terminate the lease.
• The right-of-use-assets have not been assessed for impairment at 1 January 2019 but have been reduced by the
amount of any onerous lease provisions at that date.
Impact of adoption
IFRS 16 was adopted using the modified retrospective approach and as such the comparatives have not been restated.
Differences between the operating lease commitments disclosed at 31 December 2018 under IAS 17 discounted at the incremental
borrowing rate at 1 January 2019 and lease liabilities recognised at 1 January 2019 are explained below:
Operating lease commitments as at 1 January 2019 (IAS 17)
Adjustment to opening lease commitments in respect of lease extension
Operating lease commitments discount based on the weighted average incremental borrowing rate of 7.97% (IFRS 16)
Onerous contract provision for network infrastructure and properties now recognised as lease liabilities at 1 January 2019
Right of use assets recognised on transition to IFRS 16 on 1 January 2019
Lease liabilities - current (IFRS 16)
Lease liabilities - non-current (IFRS 16)
There was no impact on retained earnings on transition.
The Company has no leases.
1 January 2019
£000
2,476
1,345
(887)
2,590
5,524
2,924
2,600
5,524
47
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
1.26 Critical accounting estimates and judgements
Estimates
The Group makes estimates and assumptions concerning the future, which by definition will seldom result in actual results that
match the accounting estimate. The estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial year are discussed below:
Estimated impairment of goodwill and intangibles - the Group tests whether goodwill and any non-amortised intangible assets have
suffered any impairment, in accordance with the accounting policy stated in 1.5 above. The Group also tests at the interim stage
and at year end whether other intangible assets which are amortised have suffered any impairment. Should circumstances change
between the interim stage and the year end, then any impairment in relation to intangible assets other than goodwill which was
recognised at the interim stage is reviewed and, if applicable, reversed. The value-in-use calculations contain a number of
significant estimates and assumptions including future sales, margins and appropriate discount rates. See note 13 in the financial
statements for an analysis of goodwill and CGUs.
Estimation of incremental borrowing rate - Where the interest rate implicit in a lease cannot be readily determined, an incremental
borrowing rate is estimated to discount future lease payments to measure the present value of the lease liability at the lease
commencement date. Such a rate is based on what the Group estimates it would have to pay a third party to borrow the funds
necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment.
Estimation of provisions - a number of provisions exist at the year end. By their nature, these provisions are judgmental. The
Directors have considered the range of possible outcomes and have made provision on the basis of these outcomes. See note
20 to the financial statements.
Estimation of probability of loss on recoverability of intercompany loans - Where full recoverability of an intercompany loan is not
certain, an estimate is determined as to the probability of recoverability. This considers the probability of default, loss arising under
any default, and the exposure upon any default {the outstanding balances).
Judgements
In the process of applying the Group's accounting policies, management makes various judgements which can significantly affect
the amounts recognised in the financial statements. Critical judgements are considered to be:
Classification of exceptional costs- the Directors have exercised judgement when classifying certain costs arising during integration
and strategic reorganisation projects. The Directors believe that these costs are all related to the types of costs described in 1.20
above and are appropriately clarified.
Recoverability of deferred tax asset - the Directors have exercised judgement on the recoverability of tax losses attributable to
future trading profits generated by the Group, and in doing so this has given rise to a deferred tax asset details of which are shown
in note 10 to the financial statements.
48
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
2 Restatement of Company results for the year ended 31 December 2018
Correction of error in assessing expected credit losses
Following the introduction of IFRS 9 with effect from 1 January 2018, the company was required to assess the expected credit
losses on intercompany receivables. Management has discovered an error in the application of the standard in the year ended 31
December 2018 which resulted in an overstatement of the impairment provision made at 31 December 2018, and an
understatement of the impairment provision in the opening position at 1 January 2018.
The error has been corrected by restating each of the affected financial statement line items for the prior periods as follows:
Balance sheet:
Amounts due from subsidiary undertakings
Provision against amounts due from
subsidiary undertakings
Total amounts due from subsidiary
undertakings
31 December 2018
as originally stated
£'000
2018 (increase)/ Transition to IFRS 9
increase/( decrease)
£'000
decrease
£'000
31 December 2018
(restated)
£'000
56,338
(56,338)
56,338
2,470
24,312
(29,556)
2,470
24,312
26,782
Net assets
5,375
2,470
24,312
32,157
Retained earnings
Total equity
Loss for the year
Changes to cash flow statement:
(41,051)
51,094
(24,312)
(14,269)
5,375
51,094
(24,312)
32,157
(57,390)
51,094
(6,296)
Loss for year
Adjustment for impairment of intercompany loans
31 December 2018
as originally stated
£'000
(57,390)
Decrease/(increase) in trade and other receivables
58,811
Amounts (advanced to)/repaid by subsidiaries
(Increase )/decrease
£000
31 December 2018
(restated)
£'000
51,094
5,245
(57,460)
1,123
(6,296)
5,245
1,351
1,123
3
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker
(CODM'). The CODM has been identified as the Executive Board. The Executive Board is responsible for resource allocation
and assessing the performance of the operating segments. The operating segments are defined by distinctly separate product
offerings or markets. The CODM assesses the performance of the operating segments based on a measure of revenue and gross
profit.
49
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
3
Segment reporting (continued)
During the year, the CODM reviewed the operating segments of the Group in response to the sale of 365 ITMS Limited, the PACT
business and the client novation exercise carried out in late 2018 to streamline the activities of the subsidiaries. In response to
these changes it was deemed more appropriate to report upon the subsidiaries as operating segments and as such the 2018
comparative reporting has been restated to reflect this change below.
The following table presents revenue and gross profit in respect of the Group's continuing operating segments for the year ended
31 December 2019.
Year ended 31 December 2019
iDE Group
Manage
iDE Group
Connect
Central &
inter-segment
£000
£000
14,660
(10,128)
4,532
(7,069)
14,603
(12,716)
1,887
(4,525)
(3,000)
£000
(1,102)
1,102
Total
Continuing
Operations
£000
28,161
(21,742)
Discontinued
Operations
£000
(216)
6,419
(216)
(886)
(12,480)
(3,000)
Total
£000
27,945
(21,742)
6,203
(12,480)
(3,000)
(2,537)
(5,638)
(886)
(9,061)
(216)
(9,277)
Revenue from contracts with customers
Cost of Sales
Gross profit
Administrative expenses
lmpainment charge
Operating profit/(loss)
Analysed as:
Adjusted EBITDA
Exceptional costs
Depreciation
Amortisation of intangible assets
lmpainment charge
(Loss)/profit on disposal of fixed assets
Share based payments
1,113
(355)
(1,469)
(1,826)
748
(152)
(1,772)
(1,463)
(3,000)
(216)
(719)
(81)
(86)
1,142
(588)
(3,241)
(3,289)
(3,000)
(86)
Net financial costs
(369)
(38)
(1,420)
(1,827)
Profit/(loss) before taxation
Tax on profit/(loss) on ordinary activities
Profit/(loss) for the year after taxation
(2,906)
1,130
(1,776)
(5,676)
277
(5,399)
(2,306)
1,004
(1,302)
(10,888)
2,411
(8,477)
(216)
37
(179)
926
(588)
(3,241)
(3,289)
(3,000)
(86)
(1,827)
(11,104)
2,448
(8,656)
50
Notes to the Consolidated Financial Statements (continued)
3
Segment reporting (continued)
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Year ended 31 December 2018
iDE Group
Manage
iDE Group
Connect
Central and
inter-segment
Revenue from contracts with customers
Cost of Sales
Gross profit
Administrative expenses
Impairment charge
£000
£000
27,212
(21,369)
5,843
(15,453)
(10,609)
14,581
(13,808)
773
(3,327)
(6,919)
£000
(656)
656
(467)
Total
Continuing
Operations
£000
41,137
(34,521)
6,616
(19,247)
(17,528)
Discontinued
Operations
£000
10,428
(7,822)
2,606
(2,600)
(3,977)
Total
£000
51,565
(42,343)
9,222
(21,847)
(21,505)
Operating profiV(loss)
(20,219)
(9,473)
(467)
(30,159)
(3,971)
(34,130)
Analysed as:
Adjusted EBITDA
Exceptional costs
Depreciation
Amortisation of intangible assets
Impairment charge
(Loss )/profit on disposal of fixed assets
Share based payments
Profit on disposal of subsidiary
(3,144)
(1,889)
(2,024)
(2,519)
(10,609)
(440)
(443)
(109)
(824)
(771)
(6,919)
(1)
(299)
(370)
(3,886)
(2,368)
(2,848)
(3,290)
(17,528)
(441)
202
202
Net financial costs
(108)
(1)
Profit/(loss) before taxation
Tax on_profit/(loss) on ordinary activities
(20,327)
272
Profitl(loss) for the year after taxation
(20,055)
(9,474)
124
(9,350)
(280)
(747)
693
(54)
(389)
(30,548)
1,089
582
(148)
(185)
(259)
(3,977)
16
680
(1)
(3,304)
(2,516)
(3,033)
(3,549)
(21,505)
(425)
202
680
(390)
(3,292)
(33,840)
127
1,216
(29,459)
(3,165)
(32,624)
IFRS 16 was adopted using the modified retrospective approach. As such, the comparatives have not been restated and therefore
are not directly comparable.
The Group had one customer who accounted for 27% of revenue from continuing operations during the year (2018: 36.8% ). This
revenue is attributed fully to the iDE Group Manage segment.
4
Revenue
Revenue from contracts with customers
Sale of goods
Rendering of services
Total
2019
£000
925
27,236
28,161
2018
£000
1,244
39,893
41,137
51
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
4
Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Year ended 31 December 2019
Managed
Services
£000
Cloud
Hosting
£000
Networks
Projects
£000
£000
Total
£000
Geographical regions
United Kingdom
Europe
Rest of world
Total
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
10,998
162
7,222
421
104
4,709
358
176
3,968
43
26,897
984
280
11,160
7,747
5,243
4,011
28,161
925
10,235
7,747
5,243
4,011
925
27,236
Total
11,160
7,747
5,243
4,011
28,161
Year ended 31 December 2018
Managed
Services
£000
Cloud
Hosting
£000
Networks
Projects
£000
£000
Total
£000
Geographical regions
United Kingdom
Europe
Rest of world
Total
Timing of revenue recognition
Goods transferred at a point in time
Services transferred over time
16,352
149
9,485
440
322
6,637
539
190
6,951
71
1
39,425
1,199
513
16,501
10,247
7,366
7,023
41,137
1,146
15,355
49
10,198
49
7,317
7,023
1,244
39,893
Total
16,501
10,247
7,366
7,023
41,137
52
Notes to the Consolidated Financial Statements (continued)
4
Revenue (continued)
Contract balances
Receivables included within trade and other receivables
Contract assets
Contract liabilities
Total
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2019
£000
6,006
590
(1,932)
2018
£000
7,108
662
(2,975)
6,596
7,770
Contract assets predominantly relate to fulfilled obligations in respect of projects and managed services which are billed monthly
and in arrears. At the point where completed work is invoiced, the contract asset is derecognised and a corresponding receivable
recognised.
Contract liabilities relate to consideration received from customers in advance of work being completed.
The Group's standard payment terms are 30 days from the date of invoice. Refunds are only due in the exceptional circumstances
where the Group does not meet the performance obligations set out in a contract. The majority of revenue for services is invoiced
monthly, sometimes quarterly, in advance, and goods are invoiced on delivery.
Unsatisfied performance obligations
All contracts for the provision of services are for periods of one year or less or are billed based on resources utilised. As permitted
under IFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.
5
Expenses by nature
Continuing operations
Direct staff costs
Third party cost of sales
Employee costs within administrative expenses
Amortisation of intangible assets
Depreciation
Impairment charge
Impairment (gain)/loss on trade receivables
Loss on disposal of fixed assets
Share-based payments
Exceptional costs
Amounts payable under operating leases
Other administrative costs
2019
£000
7,125
14,617
2,608
3,289
3,241
3,000
30
86
588
2,638
2018
£000
8,858
25,663
5,737
3,290
2,848
17,528
725
441
(202)
2,368
1,463
2,577
Total cost of sales and administrative expenses
37,222
71,296
6
Auditor's remuneration
Audit of these financial statements
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries of the Company
Additional fees charged in respect of prior year's audit
Total
2019
£000
24
78
31
133
2018
£000
25
72
60
157
53
Notes to the Consolidated Financial Statements (continued)
7
Exceptional costs
In accordance with the Group's policy in respect of exceptional items, the following charges were incurred for the year in relation
to continuing operations:
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Restructuring and reorganisation costs
Trademark dispute
Other exceptional costs
2019
£000
466
122
588
2018
£000
2,105
263
2,368
Restructuring and reorganisation costs in the year ended 31 December 2019 and the year ended 31 December 2018 relate to
costs incurred on the restructure of the Group, predominantly redundancy costs. Trademark dispute costs in the year ended 31
December 2018 relate to the settlement and associated legal costs in relation to the trademark dispute with Coreix Limited.
Other exceptional costs in the year ended 31 December 2019 relate mainly to costs associated with a break in at the Dartford
facility.
8
Discontinued operations
On 12 October 2018, the Company sold the entire issued share capital of 365 ITMS Limited ("365 ITMS") and its subsidiaries to
PTCA Newco Limited ("PTCA"), a newly incorporated company owned by certain members of the management team within 365
ITMS, on a cash free, debt free basis with a normalised level of working capital (the "Sale"). The consideration for the Sale was
£2.8 million, payable in cash. The proceeds of the Sale were used to reduce the Group's net debt.
In addition, as part of the Sale, certain assets relating to PACT, the Group's business unit focused on cyber security, including
contracts and staff, were transferred to 365 ITMS for cash consideration of £0.2 million which was paid to the Group by 365 ITMS
upon completion of the Sale.
The results for 2018 showed a loss on discontinued operations of £3.2m and a profit on disposal of subsidiary of £0. 7m. Further
losses of £0.2m were identified in the current year on contracts novated as part of the disposal.
9
Finance costs
Continuing Operations
Interest payable on bank loans and overdrafts
Interest expense on lease liabilities
Amortisation of loan arrangement fees
Interest expense in respect of convertible loan notes
Interest expense in respect of loan notes
The Group had no finance income in 2019 or 2018.
2019
£000
29
422
138
149
1,089
1,827
2018
£000
232
55
32
70
389
54
Notes to the Consolidated Financial Statements (continued)
10
Employee benefits expense
Staff costs for the year, including Directors, relating to continuing operations amounted to:
Wages and salaries
Social security costs
Other pension costs
Share-based payments
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2019
£000
8,293
841
599
86
9,819
2018
£000
12,667
1,325
603
(202)
14,393
At 31 December 2019, the Group employed 262 staff, including Directors (2018: 303).
The average monthly number of persons employed by the Group during the year, including Directors, analysed by category, and
relating to continuing operations, was as follows:
Operations
Sales and Marketing
Administration
Directors
Total average monthly headcount
Number of employees
2019
2018
200
17
48
3
268
309
22
54
4
389
The Company employed an average of 3 employees during 2019 (2018: 4), being the three directors of the Company, whose
remuneration is shown below.
For Directors who held office during the year, emoluments for the year ended 31 December 2019 were as follows:
Executive
Andy Ross
Julian Phipps
lan Smith'
Andy Parker
Non-Executive
Jonathan Watts
Bill Dabble
Katherine Ward
Max Royde2
Sebastian White?
Total
Salary/fees
2019 total
£
Salary/fees
2018 total
£
141,144
92,870
29,167
38,469
16,668
20,000
23,334
7,177
50,000
150,000
26,048
3,952
230,000
368,829
1. Directors' emoluments to Ian Smith were paid to MXC Advisory Limited, a subsidiary of MXC Capital Limited
2. Directors' emoluments to Max Royde and Sebastian White were paid to Kestrel Partners LLP
55
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
10
Employee benefits expense (continued'¡
Social security costs in respect of Directors' emoluments were £19.5k (2018: £44k). Pension contributions were made to a defined
contribution scheme for previous directors. No current director participates in any Company pension scheme.
None of the Directors made any gains on the exercise of share options in 2019 or 2018.
The options previously awarded to Jonathan Watts, Andy Ross and Julian Phipps lapsed upon their departure.
Following the lapse of options in 2018, there were no equity share based payments in respect of Directors during the year (credit
of £104k in the year to 31 December 2018), there were also no equity share based payments in respect of other employees during
the year (credit of £102k in the year to 31 December 2018)
11
Taxation
(a)
Tax on loss on ordinary activities
Current tax credit
Current year
Adjustments for prior years
Current tax credit
Deferred tax credit
Total tax credit
Relating to:
Continuing operations
Discontinued operations
2019
£000
2018
£000
(2,448)
(1,216)
(2,448)
(1,216)
(2,411)
(37)
(1,089)
(127)
(2,448)
(1,216)
Following the year end, in the Budget of 11 March 2020, the Chancellor announced the reversal of the previously enacted reduction
in the rate of corporation tax. This reversal was subsequently confirmed by a resolution under the Provisional Collection of Taxes
Act 1968, which set the rate at 19%. The impact of this reversal is a net increase in the tax charge, which will be recognised in
2020, of less than £0.4million.
Reconciliation of the total income tax credit:
Loss before taxation on continuing operations
Tax using the United Kingdom corporation tax rate of 19% (2018: 19%)
Non-deductible expenses
Depreciation on non-qualifying assets
Tax losses not recognised
Tax losses recognised in period
Adjustment for rate change
Discontinued operations
Total tax credit
2019
£000
2018
£000
(10,888)
(30,548)
(2,069)
165
587
(1,233)
139
(37)
(2,448)
(5,804)
747
3,332
986
(431)
81
(127)
(1,216)
56
Notes to the Consolidated Financial Statements (continued)
11
Taxation (continued)
(b)
Deferred tax liability
Net deferred tax liability:
At 1 January
Credit to income statement
At 31 December
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2019
£000
3,899
(2,448)
2018
£000
5,115
(1,216)
1,451
3,899
Deferred tax liabilities arose in respect of the amortisation of intangible assets recognised on acquisitions made and the difference
between capital allowances and depreciation, details as follows:
Fixed asset timing differences
Other temporary differences
At 31 December
Deferred tax assets arose in respect of trade losses, details as follows:
Tax losses recognised
Other temporary differences
At 31 December
2018
£000
3,917
(18)
3,899
2018
£000
2019
£000
3,272
3,272
2019
£000
1,806
15
1,821
The Group had unrecognised trading losses carried forward at 31 December 2019 of £15.6 million (2018: £25.5 million).
Deferred tax assets are recognised for tax losses carried forward of £1 O. 7 million to the extent that the realisation of the related
tax benefit through future taxable profits is probable. The deferred tax credit to the income statement relates to the recognition of
a previously unrecognised deferred tax asset for trading losses of £1 O. 7 million at the reporting period end date. The recognition
is restricted to the deferred tax liability arising in relation to timing differences on the acquired intangible assets. In assessing
recoverability, management considers that the appropriate period over which profits can be assessed with a reasonable degree
of certainty, and therefore used to offset the losses, is the period to 31 December 2028.
57
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
12
Earnings per share
Basic earnings per share has been calculated using the loss after tax for the year for continuing operations of £8.5 million (2018:
£29.5 million), a loss after tax for the year for discontinued operations of £0.2 million (2018: £3.2 million) and a weighted average
number of ordinary shares of 400,802,032 (2018 246,067,004). The weighted average number of ordinary shares for the purpose
of calculating the basic and diluted measures is the same. This is because the outstanding share incentives, details of which are
given in note 25, would have the effect of reducing the loss per ordinary share and therefore would be anti-dilutive under the terms
of JAS 33.
Continuing operations
Statutory basic and diluted loss per share (pence)
Discontinued operations
2019
2018
(2.12)
(11.97)p
Statutory basic and diluted loss per share (pence)
(0.04)p
(1.29)p
Total basic and diluted loss per share
(2.16)p
(13.26)p
58
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
13
Property, plant and equipment
Group
Cost
Leasehold
property
£000
Computer
software
£000
Network
infrastructure
£000
Equipment,
fixtures
and fittings
£000
At 1 January 2018
Disposal of discontinued operations
Additions
Disposals
43
55
19
1,595
(12)
131
(711)
13,269
(139)
308
At 31 December 2018
117
1,003
13,438
Additions
Right of use assets recognised on transition to IFRS16
10
2,542
22
35
85
3,626
(424)
96
(14)
3,284
110
307
Total
£000
18,533
(520)
554
(725)
17,842
177
2,934
At 31 December 2019
2,669
1,025
13,558
3,701
20,953
Accumulated depreciation
At 1 January 2018
Disposal of discontinued operations
Charge for the year - continuing
Charge for the year - discontinued
Disposals
At 31 December 2018
Charge for the year - continuing
At 31 December 2019
Net carrying amount
31 December 2019
31 December 2018
24
57
10
5
96
521
617
2,052
21
673
(10)
304
5
(283)
689
238
927
98
314
2,584
(56)
1,961
47
4,536
1,833
2,208
(223)
573
128
(1)
2,685
649
5,489
(232)
2,848
185
(284)
8,006
3,241
6,369
3,334
11,247
7,189
8,902
367
599
9,706
9,836
59
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
13
Property, plant and equipment (continued)
Right of use assets
The carrying amounts of property, plant and equipment include right of use assets as detailed below:
Leasehold Property - right-of-use
Less: accumulated depreciation
Equipment, fixtures and fittings - right-of-use
Less: Accumulated depreciation
Network Infrastructure - right-of-use
Network infrastructure - right of use
Less: impairment provision
Less: Accumulated depreciation
2019
£000
2,542
(505)
2,037
307
(178)
129
85
2,589
(2,589)
85
(73)
12
2,178
At 31 December 2018 included within network infrastructure are assets held under finance leases with a carrying value of £475k.
The depreciation charge for the year of £3.2 million (2018: £2.8 million) relates to continuing operations and has been charged to
administrative expenses.
Company
The Company has no property, plant and equipment at 31 December 2019 and at 31 December 2018.
60
Notes to the Consolidated Financial Statements (continued)
iDE Group Holdings pic
Annual report and financial statements
Yearended31 December2019
14
Intangible assets
Group
Cost:
At 1 January 2018
Disposal of discontinued operations
At 31 December 2018
Additions
Goodwill Trademarks
£000
£000
Customer
contracts and
related
relationships
£000
Technology
development
£000
Total
£000
38,381
1,707
30,187
1,095
71,370
(6,125)
32,256
(1,111)
(160)
(7,396)
1,707
29,076
935
63,974
At 31 December 2019
32,256
1,707
29,076
935
63,974
Impairment and amortisation:
At 1 January 2018
Amortisation for the year - continuing operations
Impairment charge - continuing operations
Reversal of impairment charge
Impairment charge - discontinued operations
Amortisation for the year - discontinued operations
Disposal of discontinued operations
At 31 December 2018
Amortisation for the year - continuing operations
Impairment charge - continuing operations
At 31 December 2019
Net carrying amount:
31 December 2019
9,339
16,986
3,977
(3,977)
26,325
3,000
640
341
981
341
5,841
2,865
13,655
(13,655)
259
(518)
8,447
2,865
200
84
542
826
83
16,020
3,290
31,183
(13,655)
3,977
259
(4,495)
36,579
3,289
3,000
29,325
1,322
11,312
909
42,868
2,931
385
17,764
26
21,106
31 December 2018
5,931
726
20,629
109
27,395
The amortisation charge of £3.3 million relates to continuing operations and is included in the loss for the year from continued
operations in the Income Statement within administrative expenses.
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying
value may be impaired. Goodwill is supported by calculating the discounted cash flows arising from the businesses acquired which
represent the cash generating unit ("CGU) to which goodwill is allocated. The Group's CGUs are considered to be the two trading
subsidiaries, iDE Group Manage and iDE Group Connect. The goodwill held is attributable to the iDE Group Connect CGU.
Other intangible assets are reviewed for impairment indicators in line with the Group's accounting policy.
As a result of this review, there is an impairment charge of £3.0 million in the year (2018: £17.5 million).
The recoverable amount of all cash generating units has been determined based on value-in-use calculations. These calculations
use pre-tax cash flow projections based on financial budgets for the year ending 31 December 2020 and extrapolated forecasts
for a further four years by prudent growth rates applicable to the CGU, which are below bench-marked median revenue growth
rates and EBITDA profitability levels for relevant sectors. The financial budgets were approved by the Board of Directors as part
of our annual forecasting and budgeting process. A terminal value has been calculated based on a long-term growth rate of 2% ..
The recoverable amount in relation to iDE Group Manage was calculated to be £19. 7 million and the recoverable amount in relation
to iDE Group Connect was calculated to be £10.7 million.
61
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
14
Intangible assets (continued)
The calculations used to compute cash flows at CGU level are based on the Group's budget, growth rates, WACC and other known
variables. The calculations are sensitive to movements in both WACC and EBITDA. The pre-tax WACC has been estimated at
11% per annum (2018: 15%) for both CGUs with reference to comparable companies operating within the sector. Sensitivities
have been run on cash flow forecasts for all CGUs. The Board is satisfied that the key assumptions, summarised below, of revenue,
gross profit, and overhead growth rates are achievable.
Carrying amount £000
Value in use £000
Key assumptions
2020 forecast Revenue £000
2020 forecast Gross Profit £000
2020 forecast Overheads £000
Gross Profit growth rate 2021-2024
Overhead growth rate 2021-2024
Discount rate
Manage
Connect
12,007
19,768
16,694
4,463
3,842
+10%
+2%
11%
13,781
10,743
14,054
1,897
1,091
+5%
+2%
11%
The Board reviewed the Manage CGU for impairment in view of pre-tax losses incurred in the CGU, and based on the review do
not consider there to be any impairment of the Manage CGU intangible assets. Given the Group's current pipeline and ability to
undertake large projects which could result in higher gross margin, as well as the fact that further direct cost savings are in the
process of being identified, the Board is satisfied with the rates of growth in the base case and believe there could be significant
upside and is therefore satisfied that there are no reasonably plausible scenarios which may result in an impairment of the Manage
CGU's intangible assets. Accordingly, no sensitivity analysis is presented.
For the Connect CGU, the impairment review indicated a requirement for a further £3 million impairment against goodwill for the
year (2018: £17.0 million) based on a shortfall of the estimated value in use compared to the carrying value CGU. The CGU's
performance has improved compared to prior years, but the recovery has been slower than forecast.
The remaining unamortised life of the intangible assets at 31 December 2019 is as follows:
• iDE Group Connect Trademarks - 1 year, net carrying value £0.4 million
• iDE Group Connect Technology - 1 year, net carrying value £0.03 million
• iDE Group Connect novated customer contracts and related relationships- 5 years, net carrying value £6.8 million
• iDE Group Connect legacy customer contracts and related relationships- 1 year, net carrying value £0.4 million
• iDE Group Manage customer contracts and related relationships -9 years, net carrying value £10.6 million
Company
The company had no intangible assets at 1 January 2018, 31 December 2018 or 31 December 2019.
62
Notes to the Consolidated Financial Statements (continued)
15
Investments
Company
At 1 January 2018, 31 December 2018 and 31 December 2019
The Company has the following investments in subsidiaries:
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2019
£000
7,877
2018
£000
7,877
Held directly by iDE Group Holdings pic
iDE Group Limited
Connexions4London Limited
Selection Services Investments Limited
Selection Services Limited
Castle Digital Services Inc.
Cupid.com Inc.
Assistance Genie Logiciel
Held indirectly by iDE Group Holdings pic
iDE Group Financing Limited
iDE Group Manage Limited
iDE Group Protect Limited
iDE Group Subholdings Limited
iDE Group Connect Limited
iDE Group Voice Limited
Aggregated Telecom Limited
Hooya Digital Limited
Country of
Incorporation
Class of
shares held
Ownership
2019
2018
England1
Scotland?
Scotland?
England'
USA3
USA?
France4
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
England1
England'
England'
England1
England1
England'
England'
Cyprus5
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
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%
2
3
4
5
Registered office is located at Interchange, 81-85 Station Road, Croydon, England, CR0 2RD
Registered office is located at 24 Dublin Street, Edinburgh EH1 3PP
Registered office is located at 2711 Centerville Road, Suite 400, New Castle, Wilmington, Delaware 19808, U.S.A.
Registered office is located at 39 Rue Royale, 92201 Saint-Cloud, France
Registered office is located at F aneromenis 115, Antouanettas Building, 6031 Larnaca, Cyprus
At 31 December 2019 and 2018, the trading subsidiaries of the Company were iDE Group Manage Limited and iDE Group Connect
Limited.
iDE Group Manage activity consists of IT Managed services and iDE Group Connect consists of connectivity, cloud and colocation
services
All of the remaining subsidiaries are non-trading.
Connexions4London Limited, Selection Services Investments Limited, Aggregated Telecom Limited, Selection Services Limited,
iDE Group Subholdings Limited, iDE Group Voice, iDE Group Financing Limited and iDE Group Protect Limited are exempt from
the requirements of the Companies Act relating to the audit of individual accounts by virtue of Section 479A and the parent company
has guaranteed all their liabilities at the reporting date.
63
Notes to the Consolidated Financial Statements (continued)
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
16
Trade and other receivables
Current
Trade receivables
Less provision for impairment of trade receivables
Trade receivables - net
Contract assets
Prepayments and other receivables
Taxation and social security
Group
Company
2019
£000
6,006
(597)
5,409
590
1,596
26
7,621
2018
£000
7,108
(725)
6,383
662
1,848
8,893
2019
£000
2018
£000
9
9
37
46
2
26
28
Group
Company
Non-current
2019
£000
2018
£000
Amounts due from subsidiary undertakings
Provision against amounts due from subsidiary undertakings
2019
£000
67,904
(48,964)
(Restated)
2018
£000
56,338
(29,556)
18,940
26,782
In accordance with IFRS 9, the Group reviews the amount of credit loss associated with its trade receivables based on forward
looking estimates that take into account current and forecast credit conditions as opposed to relying on past historical default rates.
The Group has applied the Simplified Approach applying a provision matrix based on categorisation of the customer based on total
revenue received by the group per annum to measure lifetime expected credit losses and after taking into account customers with
different credit risk profiles and current and forecast trading conditions. Credit risk is deemed lower on customers that contribute
higher revenue due to an increased dependency on the group's services for business continuity.
At period end, customers were categorised into three categories based on spend in the last 12 months:
1. Top 10
2. Top 50
3. Other
Impairment was calculated based on the category the customer falls in to:
Category
Impairment Rate
Carrying amount
Top 10
Top 50
Other
Specific
2019
%
o
2
5
100
2018
%
o
2
5
100
2019
£000
3,468
751
1,130
657
6,006
2018
£000
3,783
1,670
861
794
7,108
Credit loss allowance (net of VAT)
2018
£000
2019
£000
13
38
546
597
28
36
661
725
Specific provisions are also made based on known issues or changes in the lifetime expected credit loss. As at 31 December 2019,
trade receivables of £0.6 million (2018: £0.7 million) were impaired and fully provided, and were mainly over 120 days old. The
majority of the impairment relates to specific customers, and the credit risk on other customers is considered very low.
64
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
16
Trade and other receivables (continued)
Movements on the Group provision for impairment of trade receivables are as follows:
At 1 January
Increase in impairment provision
Disposal of discontinued operations
Write offs
At 31 December
Company
2019
£000
2018
£000
Group
2019
£000
725
30
(157)
598
2018
£000
380
396
(33)
(18)
725
The creation and release of a provision for impaired receivables has been in the main included in "administrative expenses" in the
Income Statement, with an amount being set against contract assets, £6k (2018: £11 k).
The other asset classes within the Group's trade and other receivables do not contain impaired assets.
Amounts due from subsidiary undertakings
The Company has funded the trading activities of its principal subsidiaries by way of inter-company loans. The amounts advanced
do not have any specific terms relating to their repayment, are unsecured and are interest free. As all loans to subsidiaries are to
be treated as due on demand, they fall within the scope of IFRS 9.
In accordance with IFRS 9, the Company is required to make an assessment of expected credit losses. Having considered the
quantum and probability of credit losses expected to arise across a number of scenarios, a provision of £1.5 million for the expected
credit loss was recognised in the reporting period in respect to trading subsidiaries, and a provision of £47.5 million for the expected
credit loss was recognised at the reporting period end in respect to intermediary holding companies.
The calculation of the allowance for lifetime expected credit losses requires a significant degree of estimation and judgement, in
particular in determining the probability weighted likely outcome for each scenario considered to determine the expected credit
loss in each scenario. Should the assumptions in the business plan vary, this could have a significant impact on the carrying value
of the intercompany loans in following periods.
The recoverability is sensitive to the probability of the achievement of future cash flows. Each change of 1% point in probability
results in an increase/decrease of £190k.
A breakdown of the balances is set out in note 30.
17
Cash and cash equivalents
Cash and cash equivalents
Group
Company
2019
£000
679
2018
£000
2019
£000
103
2018
£000
5,488
Bank overdrafts are detailed in note 22 borrowings.
The table below shows the balance with the major counterparty in respect of cash and cash equivalents.
Credit rating
A
Group
Company
2019
£000
679
2018
£000
2019
£000
103
2018
£000
5,488
65
18
Trade and other payables
Current
Trade payables
Amounts due to subsidiary undertakings
Other payables
Taxation and social security
Accruals
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Group
2019
£000
5,624
408
225
1,305
7,562
2018
£000
4,883
185
786
1,816
7,670
Company
2019
£000
752
1,204
42
77
2,075
2018
£000
156
1,204
42
249
1,651
Amounts due to subsidiary undertakings are unsecured, interest free and are repayable on demand.
19
Contract liabilities
Contract liabilities recognisable within 12 months
Contract liabilities recognisable after 12 months
Total contract liabilities
Company
2019
£000
2018
£000
Group
2019
£000
1,926
6
1,932
2018
£000
2,962
13
2,975
Income is deferred to the Statement of Financial Position when invoicing of revenue to customers occurs ahead of revenue
recognition in the Income Statement.
20
Commitments and contingencies
a) Operating leases
Future aggregated minimum annual lease payments under non-cancellable operating leases for continuing operations as at 31
December 2018 are as follows:
Group
Not later than one year
After one year but not more than five years
Land and
Buildings
2018
£000
854
1,197
2,051
Other
2018
£000
278
147
425
The Group's operating leases in the year ending 31 December 2018 relate to property, motor vehicles and office equipment and
had remaining terms of between one and five years.
On 1 January 2019, the Group adopted the modified retrospective approach of IFRS16. All operating leases met the criteria for
capitalisation and were reclassified as finance leases accordingly.
The Company had no leases.
b) Capital commitments
The Group had no contracted but not provided for capital commitments at 31 December 2019 (2018: £nil).
c) Contingent liabilities
The Group has no contingent liabilities.
66
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
21
Provisions
Tax planning provision
The tax planning arrangements relate to two tax schemes entered into by iDE Group Manage Limited on behalf of ex-directors in
a previous accounting year prior to becoming part of the Group. The liabilities for outstanding tax and national insurance were
settled with HMRC during 2017, the remaining position covers the potential further costs which may be incurred with the schemes,
therefore there is an uncertainty in respect of the value, however it is not expected to exceed the provision and all amounts are
expected to be settled in 2020.
Property provision
The Group currently has some vacant office space. This was previously treated as a provision for an onerous lease but has been
transferred to right of use assets. The remaining balance in respect of property provision are dilapidation provisions. Dilapidation
provisions are built up over the associated lease based on estimates of costs of work required to fulfil the Group's contractual
obligation under the lease agreements to return the property to the same condition as at the commencement of the lease. This
provision is expected to be settled in full at the expiry of the longest standing lease, currently expiring in 2027.
Other provisions
Other provisions in the prior year primarily relate to committed costs under various onerous supplier contracts across hosting,
connectivity, hardware and software services, for example costs in relation to empty racks within data centres which have to be
paid for regardless of whether populated or not and costs in relation to excess software licences which are not used. The provisions
relating to contracts qualifying as leases have been de-recognised on transition to IFRS 16 and dealt with in accordance. All
remaining amounts are expected to be settled by 2022.
Group
Tax planning
provision
£000
Property
provision
£000
Other
provision
£000
Balance at 1 January 2019
Increase in year
Utilised
Onerous leases de-recognised on transition to IFRS16
Balance at 31 December 2019
33
33
599
51
(379)
(162)
109
Non-current
Current
Company
Balance at 1 January 2019
Utilised
Balance at 31 December 2019
Non-current
Current
Total
£000
3,219
306
(514)
(2,589)
2,587
255
(135)
(2,427)
280
422
2019
230
192
422
Other
Provision
£000
50
50
2018
1,705
1,514
3,219
Total
£000
50
50
2019
2018
50
50
50
50
67
Notes to the Consolidated Financial Statements (continued)
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
22
Borrowings
Non-current
Lease liabilities
Loan Notes
Current
Bank loan
Unamortised loan arrangement fee
Bank overdraft
Lease liabilities
Group
2019
£000
1,859
12,474
2018
£000
494
Company
2019
£000
2018
£000
12,474
14,333
494
12,474
Group
2019
£000
1,766
2018
£000
4,750
(69)
2,905
214
Company
2019
£000
2018
£000
4,750
(69)
1,766
7,800
4,681
The carrying value is not materially different to the fair value of these liabilities.
Bank facilities
During the year ended 31 December 2018 the Group's borrowings were with National Westminster Bank plc ("Natwest") and
comprised a five-year, fully drawn £4.75 million Revolving Credit Facility (RCF") and a £3.5 million overdraft facility (the
Facilities"). Interest was payable on the utilised RCF at 2% above LIBOR.
In January 2019 the Company issued £5.3 million of secured loan notes with a six-year term and a 12% coupon which is
compounded, rolled up and payable at the end of the term ("Loan Notes"). The proceeds of the Loan Notes were used to repay
£4.125 million to Natwest and the RCF was reduced to £625,000. In February and March 2019, a further £4. 7 million in total of
Loan Notes were issued to repay the remaining Facilities, which were then cancelled, and provide additional working capital. The
Loan Notes carry an arrangement fee of 2.5 per cent., payable at the end of the term, and an exit fee of 2.5 per cent., also payable
at the end of the term.
In December 2019 the Company issued an additional £1.5 million of Loan Notes (with the same terms as those issued in the first
quarter of the year). The proceeds of the issue of the Loan Notes were used to fully repay certain lease agreements to which the
Group was party and to provide additional working capital for the Company.
The Loan Notes are held at amortised cost using the effective interest rate method. The effective interest rate for the Loan Notes
has been calculated to be 18%.
68
Notes to the Consolidated Financial Statements (continued)
iDE Group Holdings pic
Annual report and financial statements
Year en ded 31 December 2019
22
Borrowings (continued)
Lease liabilities
The present value of lease liabilities is as follows:
Group
Less than one year
Between one and five years
Greater than five years
Finance lease obligations at 31 December 2018 were:
Group
Less than one year
Between one and five years
Gross
contractual
amounts
payable
2019
£000
1,945
1,686
644
4,275
Minimum
lease
payments
2018
£000
254
558
812
Interest
2019
£000
179
407
64
650
Interest
2018
£000
40
64
104
Carrying
amount
2019
£000
1,766
1,279
580
3,625
Principal
2018
£000
214
494
708
The Company has no lease liabilities at 31 December 2019 (31 December 2018: nil)
Reconciliation of borrowings:
Group
Non-current
Lease liabilities
£000
Current
Lease liabilities
£000
Non-current
Borrowings
£000
Current
Borrowings
£000
Total
Borrowings
£000
Balance at 1 January 2019
494
214
7,586
8,294
Non-cash changes
Transfer from current to non-current
Lease liabilities recognised on transition
Loan note interest
Lease interest
Amortisation of loan fee
Loan fees accrued
Fees in respect of loan notes
Interest and other charges
Cash flows
Issue of loan notes
Repayment of loan
Repayment of lease liabilities
Overdraft repaid
Interest paid
1,239
126
(1,239)
5,398
318
104
(2,605)
(422)
1,089
(135)
11,520
138
(69)
29
(4,750)
(2,905)
(29)
Balance at 31 December 2019
1,859
1,766
12,474
5,524
1,089
318
138
(69)
(135)
133
11,520
(4,750)
(2,605)
(2,905)
(451)
16,099
69
Notes to the Consolidated Financial Statements (continued)
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
22
Borrowings (continued)
Company
Balance at 1 January 2019
Non-cash changes
Loan note interest
Amortisation of loan fee
Fees in respect of loan notes
Interest and other charges
Cash flows
Issue of loan notes
Repayment of bank loan
Interest paid
Balance at 31 December 2019
23
Convertible loan notes
Group and Company
Balance at 1 January 2019
Interest unwound
Balance at 31 December 2019
Non-current
Lease liabilities
£000
Current
Lease liabilities
£000
Non-current
Borrowings
£000
Current
Borrowings
£000
Total
Borrowings
£000
4,681
4,681
1,089
(135)
11,520
12,474
69
44
(4,750)
(44)
1,089
69
(135)
44
11,520
(4,750)
(44)
12,474
£000
1,654
149
1,803
On 21 August 2018, as part of a wider fundraising, the Company issued £2.55 million of unsecured loan notes, which have a term
of 5 years and a zero per cent coupon ("CLNs"). The CLNs can be converted into new ordinary shares in the capital of iDE at a
price of 2.5 pence per share. Conversion is at the option of the holder at any time during the 5-year term. At the end of the term, if
the holder has not chosen to convert the CLNs, the CLNs will be settled with a cash repayment. At issue, the CLNs have a fair
value of £2.54 million, split into an equity component (£0.96 million) and a debt component (£1.58 million).
24
Financial instruments by category
The objectives of the Group's treasury activities are to manage financial risk, secure cost-effective funding where necessary and
minimise adverse effects of fluctuations in the financial markets on the value of the Group's financial assets and liabilities, on
reported profitability and on cash flows of the Group.
The Group's principal financial instruments for fundraising are convertible loan notes and loan notes. The Group has various other
financial instruments such as cash, trade receivables and trade payables that arise directly from its operations.
Group
Assets
Amortised cost:
Trade receivables net of credit loss provision
Contract assets
Other receivables
Cash and cash equivalents
Total
2019
£000
5,409
590
348
679
7,026
2018
£000
6,383
662
7,045
70
Notes to the Consolidated Financial Statements (continued)
24
Financial instruments by category (continued)
Company
Assets
Amortised cost:
Trade receivables
Other receivables
Amounts due from subsidiary undertakings
Cash and cash equivalents
Total
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2019
£000
18,940
103
(Restated)
2018
£000
9
39
26,782
5,488
19,043
32,318
The carrying amount of these assets is equivalent to their fair value. At 31 December 2019, trade receivables are reported net of
the expected credit loss provision of £0.6 million (2018: £0.7 million), amounts due from subsidiary undertakings are reported net
of the expected credit loss provision of £49 million (2018: £30 million)
Group
Liabilities at amortised cost
Trade payables
Accruals and other payables
Bank loan
Bank overdraft
Lease liabilities (2018: finance leases)
Convertible loan notes
Loan Notes
Total
Company
Liabilities
Trade payables
Accruals and other payables
lntercompany payables
Bank loan
Convertible loan notes
Loan Notes
Total
The carrying amount of these liabilities is equivalent to their fair value.
The Group has not entered into any derivative financial instruments in the current or preceding period.
2019
£000
5,624
1,714
3, 625
1,803
12,474
2018
£000
4,883
2,000
4,750
2,905
708
1,654
25,240
16,900
2019
£000
752
119
1,204
1,803
12,474
2018
£000
156
291
1,204
4,750
1,654
16,352
8,055
71
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
25
Financial risk management
The Group's activities are exposed to a variety of financial risks: market risk (including cash flow interest rate risk and price risk),
credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the Group's financial performance.
Risk management is carried out centrally under policies approved by the Board of Directors. Management identifies, evaluates
and seeks to mitigate financial risks. The Board of Directors provides principles for overall risk management as well as policies
covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and
non-derivative financial instruments, and investments of excess liquidity.
Cash flow interest risk
The Group pays interest on its borrowings.
Borrowings at variable rates expose the Group to cash flow interest rate risk. During the year ended 31 December 2018, the
Group's borrowings at variable rate were denominated in Pounds Sterling with interest linked to Sterling interest rates. During the
year under review, these borrowings were repaid and replaced with loan notes with a fixed rate of interest. The further loan notes
issued in December 2019 also have a fixed rate of interest.
Price risk
The Group is not exposed to significant commodity or security price risk.
Credit risk
Credit risk is managed at a subsidiary level. Credit risk arises from cash and cash equivalents as well as credit exposures to
customers, including outstanding receivables. Individual risk limits are set based on internal and external ratings and reviewed by
management. The utilisation of credit limits is regularly monitored with appropriate action taken by management in the event of
the breach of a credit limit. The Group has applied the simplified approach applying a provision matrix based on number of days past
due to measure lifetime expected credit losses and after taking into account customers with different credit risk profiles and current
and forecast trading conditions. The Group has recognised a provision in respect of trade receivables of £0.6 million (2018: £0.7
million).
Liquidity risk
Management reviews cash forecasts of trading companies of the Group in accordance with practice and limits set by the Group.
The Group's liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to
meet these.
The tables below analyse the Group and the Company's financial liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date. These amounts disclosed in the table are the contracted
undiscounted cash flows. Balances within 12 months equal their carrying balances as the impact of discounting is not significant.
Group
At 31 December 2019
Trade and other payables
Lease liabilities
Convertible loan notes
Loan Notes
Within 1 year
£000
1-2 years
£000
7,337
1,945
619
9,282
619
More than
2 years
£000
1,711
1,803
12,474
15,988
Total
£000
7,337
4,275
1,803
12,474
25,889
72
Notes to the Consolidated Financial Statements (continued)
25
Financial risk management (continued)
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Group
At 31 December 2018
Trade and other payables
Finance leases
Bank loan
Overdraft
Interest on loan & leases
Convertible loan notes
Company
At 31 December 2019
Trade and other payables
lntercompany payables
Convertible loan notes
Loan Notes
Company
At 31 December 2018
Trade and other payables
lntercompany payables
Bank loan
Interest on bank loan
Convertible loan notes
Within 1 year
£000
1-2 years
£000
7,670
214
2,905
40
213
33
More than
2 years
£000
281
4,750
32
1,654
Total
£000
7,670
708
4,750
2,905
105
1,654
10,829
246
6,717
17,792
Within 1 year
£000
1-2 years
£000
871
1,204
---
2,075
More than
2 years
£000
1,803
12,474
Total
£000
871
1,204
1,803
12,474
14,277
16,352
Within 1 year
£000
1-2 years
£000
447
1,204
102
1,753
41
41
More than
2 years
£000
4,750
20
1,654
6,424
Total
£000
447
1,204
4,750
163
1,654
8,218
26
Capital risk management
The Group's objectives when managing capital is to safeguard the Group's future growth and its ability to continue as a going
concern in order to provide returns for shareholders and to maintain an optimal capital structure to reduce the cost of capital. The
Group operates in the network and cloud hosting sector, which, from time-to-time requires substantial fixed asset investments, but
the Group is financed predominately by equity.
In order to maintain or adjust the capital structure, the Group has previously both issued new shares, bank debt and bank facilities,
and both unsecured and secured loan notes. The Group monitors capital on the basis of the ratio of net debt to adjusted
EBITDA. As at 31 December 2019 the ratio was 11.9. Net debt as at 31 December 2019 is calculated as total bank borrowings, as
at 31 December 2019 nil, and loan notes (including 'current and non-current borrowings' as shown in the consolidated balance
sheet) less cash and cash equivalents. Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation,
impairment charge, exceptional items, (loss)/gain on disposal of fixed assets and share-based payments.
The loan note instrument under which the Secured Loan Notes were issued does not contain any covenants, however, the Group
continues to carefully monitor its capital position. The Group adopts a risk-averse position with respect to borrowings and maintains
significant headroom to ensure that any unexpected situations do not create financial stress.
The Group has not proposed a dividend for the current or prior year.
73
Notes to the Consolidated Financial Statements (continued)
27
Called up share capital - Group and Company
Share capital
At 1 January - fully paid
Shares issued on subscription, 1 August 2018
Shares issued on placing, 21 August 2018
In issue at 31 December - fully paid
Allotted, called up and fully paid
Ordinary shares of 2.5
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
2019
Number
400,802,032
2018
Number
200,729,121
20,000,000
180,072,911
400,802,032
400,802,032
2019
£
2018
£
10,020,050
10,020,050
Shares classified in shareholders' funds
10,020,050
10,020,050
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company.
On 1 August 2018, the Company issued 20,000,000 new ordinary shares at a price of 2.5 pence per ordinary share as the initial
tranche of a total fundraising of £5.5 million of which £1.8 million was raised by way of convertible loan notes. On 21 August 2018
a further 130,072,911 shares were issued at 2.5 pence per ordinary share to complete the fundraising. In addition, a further
50,000,000 ordinary shares were issued on that date by way of repayment of£1.25 million of the £2.0 million loan notes which had
been issued in May 2018. The other £0.75 million of loan notes which were issued in May were repaid by way of the issue of
convertible loan notes, giving the total of £2.55 milion convertible loan notes in issue at the year end.
The Company had 400,802,032 ordinary shares issued and fully paid up as at 31 December 2019.
Dividends
The Directors do not propose a dividend for the year ended 31 December 2019 (2018: £nil).
28
Share-based payment plans
The share-based payment charge comprises:
(Reversal of)/ equity-settled share-based charges arising from ESS/ CSOP options
(Reversal of)/ equity-settled share-based charges arising from hurdle share options
Equity-settled share-based charges arising from warrants
Total charge/(credit)
2019
£000
86
86
2018
£000
(193)
(13)
4
(202)
74
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
28
Share-based payment plans (continued)
In 2016, the Group introduced an Employee Share Scheme ("ESS") to the Executive Directors and various senior managers,
granted Hurdle Shares to the Chairman and granted evergreen warrants to MXC Capital Limited ("MXC").
In 2017, the Group introduced a Company Share Option Plan ("CSOP") for various senior managers and issued warrants to MXC
following the acquisition of 365 ITMS. No options were issued to any of the Directors during 2017 or 2018.
On 1 August 2018, MXC was awarded warrants over 1,000,000 ordinary shares, representing 5% of the share capital issued in
connection with the first tranche of the fundraising. On 21 August 2018 MXC was awarded warrants over 9,003,645 ordinary
shares, representing 5% of the share capital issued in connection with the second tranche of the fundraising and the conversion
of certain of the loan notes issued earlier in the year. All the warrants issued to MXC in 2018 have an exercise price of 2.5 pence.
MXC warrants
CSOP/ESS
number of
Total
number of
options warrants/options
Options/warrants granted at 1 January 2019
20,040,101
88,888
20,128,989
Options lapsed in year
(88,888)
(88,888)
Total options/warrants granted at 31 December 2019
20,040,101
20,040,101
Options awarded under the ESSI CSOP scheme lapse if the recipient resigns and in the case of redundancy, the options are either
returned at no cost or purchased by the Company. There was only one employee remaining at 31 December 2018 who held
options under the ESSI CSOP scheme which lapsed when he left the Company on 31 January 2019.
The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements, in share options and
warrants during the year:
Opening balance
Granted during the year
Lapsed during the year
2019
Number
20,128,989
(88,888)
2019
WAEP
£0.17
£0.30
2018
Number
13,720,205
10,003,645
(3,594,861)
Closing balance
20,040,101
£0.17
20,128,989
2018
WAEP
£0.30
£0.03
£0.30
£0.17
There were no options or warrants exercisable at 31 December 2019 (2018: nil).
The exercise prices for warrants outstanding at the end of the year ranges from £0.025-£0.30 (2018: ranged from £0.025-£0.30).
There are 10,036,456 warrants with an exercise price of £0.30 to £0.325 which had a vesting date of 31 December 2018 and expiry
date of 31 December 2022; these are considered to be so far out of the money and well below the share price conditions that they
will not be exercised; a further 10,003,645 warrants have an exercise price of £0.025, a vesting date of 1 August 2021 and an
expiry date of 31 December 2022.
The fair value of the equity-settled share options granted is estimated at the date of grant using an average of Black Scholes and
an empirical model to take into account market conditions attaching to the options granted throughout the year. Volatility was
calculated based upon the change in the daily share price of the company over the last 24 months.
75
iDE Group Holdings pic
Annual report and financial statements
Year ended 31 December 2019
Notes to the Consolidated Financial Statements (continued)
29
Pensions
The Group operates a defined contribution pension schemes for eligible employees. The charge for the year ended 31 December
2019 relating to continuing operations is £0.6 million (continuing operations 2018: £0.6 million). An amount of £53k is included in
creditors being outstanding contributions at 31 December 2019 (2018: £53k).
30
Related parties
Key management is considered to comprise only the Directors. Directors' emoluments are disclosed in note 10. Social security
costs in respect of Directors' emoluments were £19.5k (2018: £44k).
Ian Smith, Executive Director at 31 December 2019, is Chief Executive Officer and a substantial shareholder of MXC. MXC owned
43.1 % of the issued share capital of the Company at 31 December 2019.
During the year, the Group and Company paid MXC Capital Markets LLP, a subsidiary of MXC, corporate finance advice and other
services amounting to £47,000 (2018: £nil). The balance owed to MXC Capital Markets LLP as at 31 December 2019 was £57,000
(2018: £nil).
In addition, the Group paid MXC Advisory Limited, a subsidiary of MXC, fees of £229,259 (2018:£28,713) in respect of the services
of Ian Smith as Executive Director and the services of an Interim Chief Financial Officer for the year ended 31 December 2019.
The balance owed to MXC Advisory Limited as at 31 December 2019 was £345,854 (2018: £101,031)
The Group also paid MXC Guernsey Limited, a subsidiary of MXC Capital Limited, fees of £239,799 (2018: £nil) in respect of
underwriting of loan notes and guarantee fee of the finance leases with Lombard. The balance owed to MXC Guernsey as at 31
December 2019 was £239,799 (2018: £nil).
At 31 December 2019, in addition to owning shares in the Company, MXC Capital Limited held warrants over 20,040,101 shares
in the Company (2018: 20,040,101 shares).
During the year, Kestrel Partners LLP invoiced the Company £30,092 (2018: £7,177) in respect of the services of Max Royde and
Sebastian White as Non-Executive Directors. The balance owed to Kestrel Partners LLP as at 31 December 2019 was £6,030
(2018: £5,613)
The Company had the following balances with its subsidiary companies:
Receivables
iDE Group Limited
iDE Group Manage Limited
iDE Group Connect Limited
Assistance Genie Logiciel
iDE Group Voice Limited
iDE Group Protect Limited
iDE Group Financing Limited
iDE Group Subholdings Limited
Total
2019
£000
53,647
11,680
2,366
151
3
9
47
1
2018
£000
53,612
39
2,506
161
3
9
8
67,904
56,338
A provision of £1m was made in respect of the iDE Group Manage receivable, a provision of £0.2m was made in respect of iDE Group Connect
and a provision of £47.5m was made in respect of iDE Group Limited receivable. All other receivables were provided for in full.
Payables
iDE Group Connect
Cupid.com inc
Castle Digital services inc
Selection Services Limited
Hooya Digital Limited
Connexions4London Limited
Aggregated Telecom Limited
Total
2019
£000
1,033
61
61
42
6
1
1,204
2018
£000
1,033
61
61
42
6
1
1,204
76
iDE Group Holdings pic
Annual report and financial statements
Yearended31 December2019
Notes to the Consolidated Financial Statements (continued)
31
Post balance sheet events
Covid-19
The unprecedented and continually changing circumstances surrounding the COVID-19 outbreak provide an uncertain economic
landscape.
Whilst it is difficult to predict accurately the potential long-term consequences, we remain vigilant and, in common with all
businesses, are closely monitoring the situation and to date there has been no material adverse effect on the business as IT
managed services have remained buoyant during the UK-wide lock down; with increased reliance on mobile working and the need
to facilitate customers' staff working remotely, in addition there has been increased demand for lifecycle services which
necessitated an increase in shifts and production, and this has offset modest reductions in user support desk activities.
The Directors have taken advantage of the Government's Job Retention Scheme to furlough some staff members during the lock
down period, as well as senior staff taking a short-term 20% salary reduction, and also deferment of PAYE and VAT cash payments
to maximise cash flows.
We have continued to see new opportunities during lock-down, and believe that the demand for centralised managed services,
cloud, user support desk, mobile working & collaboration, and over-arching business continuity solutions will provide good
opportunities during the remainder of 2020.
We therefore do not expect an adverse effect on asset values, with the exception of some receivable balances, which we do not
foresee being material due to the sectors in which our largest clients operate and the critical nature of the services we provide.
Nimoveri Acquisition
On 1 June 2020, the Group completed the acquisition of Nimoveri Holdings Limited, a small cloud and IT services business, for a
total consideration of £200,000; £100,000 paid in cash on completion, and £100,000 of secured 0% loan notes redeemable 31
December 2021. The initial accounting for this is still incomplete.
77