IDE Group Holdings plc
Annual report and financial statements
Registered number SC368538
Year ended 31 December 2020
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
Report of the Audit Committee
Independent Auditors' Report
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 plc
Annual report and financial statements
31 December 2020
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Directors and Advisers
Directors
Andy Parker (Non-Executive Chairman)
Ian Smith (Executive Director)
David Templeman (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
1 Bartholomew Ct
London EC1A 7BL
Solicitors
DAC Beachcroft LLP
25 Walbrook
London EC4N 8AF
Auditor
RSM UK Audit LLP
Portland
25 High Street
Crawley
West Sussex
RH10 1BG
Share Registrar
Computershare Investor Services PLC
44 North St Andrew Street
Edinburgh EH2 1HJ
Principal Banker
RBS Natwest Plc
250 Bishopsgate
London EC2M 4AA
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Company Profile
The principal activities of IDE Group Holdings plc 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.
Business summary
• While revenues declined in 2020 to £24.1 million from £28.2 million in 2019, gross margins have increased to 24.0%
(2019: 22.8%) reflecting continued strong performance of our Manage business more than offsetting continued margin
pressure in our Connect business. Adjusted EBITDA** declined to £0.5 million from £1.1 million in 2019. Losses on
ordinary activities before taxation amount to £21.6 million (2019: £10.9 million).
• While 2020 saw reductions in both revenues and Adjusted EBITDA, the Group results reflect the consolidated position
across two core businesses which operate in very distinct sectors. Our Connect business operates in the very congested
market for networking and connectivity and experiences continued pressures on both revenues and margins. Our
Manage business on the other hand operates very successfully within the managed services arena and has
demonstrated continued revenue and margin growth with strong momentum.
• We have made an excellent start to 2021 within our Manage business, demonstrating significant growth in revenues and
profitability. These results are based on developing long-term relationships with third-party system integrators and supply
contracts typically with 3-5 year terms. Therefore, as we experience further growth we are generating a strong annuity
income stream. With a pipeline of prospects within our Manage operations we can look forward to continued strong
financial performance. Our Connect business is returning modest profits before the allocation of overheads.
• Given that the Group results reflect the very different levels of performance across two distinct business sectors we have
commenced a full review of our operations. This review is focussed on growing momentum within our managed services
business while we decide how best to return value to our shareholders in the networking and connectivity arena, which
may or may not include the divestment of the Connect business. This review is ongoing and is a priority for the Board
and management team.
• We have made key leadership appointments in 2020 and 2021 and have an experienced senior management team in
place. The Group remains debt-free other than to key shareholders.
We have built a strong base to support a period of sustained growth and we are exploring organic and acquisitive methods to
accelerate this development.
** 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 plc
Annual report and financial statements
Year ended 31 December 2020
Chairman’s Statement
2020 was an important year in the ongoing rationalisation of our trading businesses and we have continued the good work from
2019 in positioning the Group for a period of sustained growth which is now bearing fruit in 2021.
One key activity that we continued to focus on in 2020 and into the current year is the delineation between the core service-
offerings across our Manage and Connect businesses. Our Manage business encompasses service lines broadly covering field
and site engineering, projects and lifecycle, network monitoring and service desk support. Our Connect business services are
broadly networking and connectivity, cloud and hosting, and voice/telephony.
During 2020 we continued to realign customer relationships more clearly associating them with the respective Manage or Connect
offerings and allowing us to focus sales and marketing activity within the management team, and to allow a clear understanding of
the shared overheads across the two businesses. This process has allowed us to target our sales activity and to improve
management focus.
Manage
We appointed a new Managing Director of the Connect business in June 2020 (see also below) allowing our existing senior team
to focus on developing our successful Manage business, with strong relationships being built with key customers. This has greatly
benefitted the group’s performance as we win significant long-term contracts in our Manage business, giving us excellent visibility
of income in that business and strong performance moving into 2021. Our relationship with third-party system integrators has
continued to develop on the excellent grounding already put in place, and we have seen further growth in opportunities both in
service provision and project work through this channel particularly into the public sector. We are delivering IT services into a
growing number of government departments and blue-chip institutional clients.
Securing and developing our partnership channels has proven to be a successful model with new customer wins in both the public
and private sectors. We can look forward with great confidence to continued success in this area.
2020 saw revenues fall to £11.5 million (2019: £14.7 million). This was largely due to some cyclical variability in our supplies to
system integrators (at somewhat less than £1m) and the novation of contracts to our Connect business. The division has seen
strong improvement in gross profit margins to 39% (2019: 31% and 2018: 21%) and a continued reduction in overheads. The sum
of these moved adjusted EBITDA to a profit in 2020 of £2.1 million (2019: profit of £1.1 million).
This significant improvement in financial performance, shows that this division is successfully being right-sized, further
consolidation of field engineering is underway, and that continued profitable growth will be achieved in 2021.
Connect
In June we brought a new Managing Director on-board to develop and grow our Connect business, together with a small managed
services business called Nimoveri Limited which we acquired as part of that onboarding. We began a comprehensive review of
the Connect business in 2019 after declines in revenue and complexities in its operations and in 2020 we have continued a
rationalisation programme, concentrating our sales efforts and building a management team around him to drive the business
forward. We have continued to concentrate our network and datacentre offerings wherever possible and have built stronger
relationships with our customers. As I reported in my last Statement, this is a significant project which will take time to conclude,
but we are confident that it is providing the foundations for growth of our datacentre, cloud and connectivity business.
Revenues in Connect were down year-on-year at £13.1 million (2019: £14.6 million) despite the novation of contracts from Manage
valued at £1.7m, and we were disappointed to lose more cloud customers. The net result was a deterioration in gross margins to
8.5% (2019: 13%). There has been an increase in overheads level to £5.9 million from £4.5 million. The resulting adjusted EBITDA
deteriorated to a loss of £0.8 million (2019: profit £0.7 million).
Our objectives in 2021 are to further reduce costs through datacentre and network consolidation and leverage these savings into
more competitive pricing to generate new, and extend existing, business opportunities.
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Chairman’s Statement (continued)
Given the prospects for the Connect business we have again reviewed the carrying value of goodwill, trademarks and customer
relationships, contracts and other assets relating to that part of our business which results in an impairment charge of £14.0m in
2020 (2019: £3.0m). These impairment charges now mean that we are only carrying a small amount of goodwill resulting from the
acquisition of Nimoveri of £0.2m. Our detailed forecasts for the Connect business demonstrate modest profitability at trading
EBITDA (that is before the allocation of group central overheads) and thus allow us to concentrate on the continued progression
of the business without the burden of carried intangible assets.
COVID-19
The unprecedented circumstances surrounding the COVID-19 pandemic continue to provide an uncertain economic landscape
and increased risk aversion in 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 continues to be 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. To date there has been no material effect on the
business of the new working practices dictated by a much-changed business and social landscape. As we at last begin to enter
into a post-pandemic business landscape we are confident that we have developed robust business practices to provide a solid
grounding for sustained growth across our business.
Results
Revenue fell by 14.5% across the Group to £24.1 million for the full year (2019: £28.2 million), but significantly we have seen gross
profit margin growth to 24%, (2019: 23%). Resulting gross profit has fallen year-on-year to 5.8 million (2019: £6.4 million).
The significant work undertaken to reduce the Group costs underpins the improvement in gross margins, but with reduced revenues
and an increase in overheads (excluding non-underlying costs, impairment, amortisation and depreciation) by some 5% to £5.5
million (2019: £5.3 million) has resulted in Adjusted EBITDA falling to £0.5 million (2019: profit of £1.1 million). We received £0.38
million under the Covid Job Retention Scheme.
The net loss for the year from continuing operations is £18.5 million (2019: loss £8.5 million), after a £17.2 million amortisation and
impairment charge (2019: £6.3 million against goodwill and acquired intangible assets).
The Group continues to improve its cash generation and has maintained strong working capital management.
People
The management team has made continued progress in simplifying the structure of the business and aligning services better to
support our clients.
The board would like to recognise and thank its employees who have worked hard to deliver excellent client service and retain
existing key clients.
Strategy
Having been greatly encouraged by the opportunities identified in the partnership channel and 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.
Financing and dividend
Given the losses from continuing operations the Board is not proposing to declare a dividend at this time but will keep this policy
under review.
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Chairman’s Statement (continued)
Current trading and outlook
Trading in the current financial year remains buoyant in our key Manage business with current financial performance significantly
ahead of our 2020 results and reflecting the excellent business relationships that we have developed with third-party system
integrators. We have also consolidated that business within our existing premises in Dartford in April 2021 from which we can
deliver first-class business logistics and support to our field and site engineering, projects and lifecycle, network monitoring and
service desk support functions. Our Connect business continues to demonstrate the benefits of the rationalisation programme we
commenced in previous years and we can now expect that business at trading EBITDA level to show modest growth in what is a
very congested business sector.
Overall, despite the operating losses in our overall group in 2020, in the current year we are now seeing the real benefits of
focussing our business strategy on profitable partnership channels and consolidating our group offering across the Manage and
Connect operations and we can look to the future with confidence and expect to generate positive operating cashflow for the first
time in several years.
We will now undertake a full strategic review of the ongoing operations of the Group with the following objectives:
• Consider how best to capitalise on the excellent progress we are experiencing in our Manage business with a view to
build on that progress and consolidate our position within the sector, strengthening further our relationships with partner
channels, to build this business organically and to assess market opportunities for acquisitive growth.
• Review our position in the networking and connectivity, cloud and hosting, and voice/telephony sectors serviced by our
Connect business. Operational changes have given some promise of a slow recovery in this congested arena, and we
will now decide how best that business can contribute to the future success of our combined Group.
Andy Parker
Non-Executive Chairman
21 July 2021
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Financial Review
The Group reported total revenues for the year to 31 December 2020 of £24.1 million, down from £28.2 million in 2019 and gross
profit of £5.8 million (2019: £6.4 million). This shows an improvement year-on-year from 22.8% in 2019 to 24.0% in 2020 which is
encouraging and reflects strong gross margin growth in the Manage business more than offsetting a deterioration in the Connect
business.
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 2020 was a profit of £0.5 million (2019: profit of £1.1 million).
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.
Manage
There was a decrease in revenues to £11.5 million (2019: £14.7 million).
For the year we have seen an improvement in gross profit margins to 39% (2019: 31%), as a result of the services mix and
operational efficiencies, and a reduction in overheads to £5.1 million (2019: £7.1 million), which is the result of reduced headcount,
costs moving to Connect alongside novated contracts in 2019, and continued stringent cost saving initiatives.
Adjusted EBITDA attributable to Manage has moved to £2.1 million (2019: profit of £1.1 million).
Connect
Revenues in Connect fell to £13.1 million (2019: £14.6 million). This reflects additional revenues from Manage contracts novated
offset by further customer losses. Gross margins fell to 8.5% (2019:13%). Overheads increased to £6.0 million (2019: £4.5 million),
and an impairment charge against assets of £14.0 million (2019: £3 million) was incurred following an annual impairment review.
Adjusted EBITDA attributable to Connect has declined to a loss of £0.8 million (2019: profit £0.7 million).
Exceptional items
Non-underlying items, relating to restructuring and reorganisation amount to £0.5 million in the year (2019: £0.6 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
(2019: £1.8 million), the loss before tax is £21.6 million (2019: loss of £10.9 million)
Taxation
The utilisation of tax losses and a deferred tax credit arising on the amortisation and impairment of intangible assets, together with
impairment of PPE of £0.6 million has resulted in a tax credit for the year of £3.1 million (2018: £2.4 million)
The Group therefore reported a loss after tax from continuing operations of £18.5 million (2019: loss of £8.5 million), which equates
to a basic loss per share of 4.61 pence (2019: loss per share of 2.12 pence).
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Financial Review (continued)
Statement of Financial Position
Non-current assets
The Group has property, plant and equipment of £1.2 million (2019: £9.7 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 £0.1m including assets acquired
on acquisition (2019: £3.1 million additions, £2.9 million of this is in relation to the IFRS16 transition). Assets amounting to £5.6
million were written down as part of the impairment review of the Connect business.
We invested in operating system licences at the year end in an amount of £2.25 million. These licences will assist with our client
operations and are payable in three tranches at the end of 2021, 2022 and 2023 respectively. The licences are capitalised as
intangible assets at the present value of the payments, which are included within trade payables at the year end.
Further, intangible assets of goodwill, trademarks, capitalised technology and customer contracts are £11.4 million (2019: £21.1
million) and are subject to amortisation as per the policies set out in the accompanying financial statements. There was an
impairment charge of £8.5m against goodwill and customer relationships in 2020 relating to the recoverability against future
cashflows from IDE Group Connect (2019: £3 million). Details are shown in note 14.
Trade and other receivables
Trade and other receivables have fallen, reflecting revenue reductions in comparison to the previous year at £5.4 million (2019:
£7.6 million) including trade receivables of £4.1 million (2019: £5.4 million) after a credit loss provision of £0.5 million (2019 £0.6
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 £10.1 million (2019: £7.6 million), including trade payables of £7.2 million (2019: £5.6
million) taxation and social security of £1.5 million (2019: £0.2 million) and accruals of £1.2 million (2019: £1.3 million).
The increase in taxation and social security has arisen largely from deferral of liabilities provided as part of Government Covid
support.
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 £1.4 million (2019: £1.9 million), the decrease reflects the reduction in overall
revenues as well as the mix of customers’ contractual obligations for payment.
Cashflow and net debt
Net cash generated from operating activities during the year was £2.1 million (2019 £0.04m), reflecting positive underlying
performance and careful management of working capital. Cashflow suffered due to customer losses in our Connect business, but
our Manage business continues to do very well and has developed excellent relationships with key strategic partners. The Group
invested £0.1 million (2019: £0.2 million) in fixed assets and invested £0.1 million in the acquisition of Nimoveri. There were no
new borrowings (2019: £6.7 million net), but repayment of lease liabilities consumed £1.9 million (2019: £2.6 million) of cash. The
net result is that as at 31 December 2020 there were no bank borrowings or overdraft debt and the cash balance was £0.7 million
(2019: £0.7 million).
Dividend
The Directors do not propose a dividend in respect of the current financial year (2019: £nil).
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Financial Review (continued)
Update and outlook for 2021
Set out within the Chairman’s Statement are details of the current trading performance of our two trading businesses. Trading in
the first 7 months of 2021 has been particularly strong in our Manage business, including very positive further contract wins from
Atos IT Services UK Limited, while our Connect business continues to suffer in the congested networking and connectivity sector.
We are carrying out a review of our operations and the Board is confident of the Group’s future prospects.
Going concern
The Directors have produced detailed trading forecasts and cashflows which have been discussed with the Group’s major
shareholder who is represented on the Board. 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 confirm they will 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. The directors therefore have an expectation that the Group has adequate resources available to it 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 plc
Annual report and financial statements
Year ended 31 December 2020
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
another challenging one for the business with overall revenues declining year-on-year, however gross margin improved and
adjusted EBITDA* remained positive. 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 2020, the Board comprised 3 Directors (2019:3) all of which were male. At 31 December 2020 the Group had 221
employees including Directors (2019: 262) of which 173 were male (2019:202) and 48 were females (2019:60).
* 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 Board reviews the principal risks on a bi-annual basis. 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 25 contains details of financial
risks.
COVID-19
The COVID-19 pandemic has caused ongoing significant disruption to the UK economy and the financial impact to the Group
continues to be difficult to quantify. During the lock-down periods the Group has seen some reduction in user support desk activities,
which were mitigated by furloughing staff through the Job Retention Scheme. However, data centre and connectivity business
have remained at expected levels, and we continue to see a significant increase in lifecycle services as certain customers ramped
up deployment of equipment to facilitate their own staff working remotely,
We believe that demand for centralised managed services, cloud, user support desk, mobile working & collaboration, and over-
arching business continuity solutions will provide good opportunities during the current situation. The Board continues to monitor
the situation and act to mitigate any financial impact which may arise.
Market and Economic Conditions
Market and economic conditions are recognised as one of the principal risks in the current trading environment. 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 on 31 January 2020. As the Group operations are very-much UK-centric, the Group has not had
to make significant changes or incur significant disruption following Brexit.
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Strategic Report (continued)
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 competitors are much larger with considerable scale. 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 our services is in a state of constant innovation and change. We devote 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. We maintain constant pro-active vigilance against such risks and the Group 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.
s.172 Companies Act 2006: Statement of Directors’ Duties to Stakeholders
The Board is mindful of the duties of Directors under S.172 of the Companies Act 2006. The Directors act in a way they consider,
in good faith, to be most likely to promote the success of the Company for the benefit of its members. In doing so, they each have
regard to a range of matters when making decisions for the long-term success 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.
The main methods used by the Board to perform their duties and ensure decisions are made with section 172 factors in mind are:
• Monthly board meetings
• Board papers that address stakeholder requirements, for example financial overview, strategic decisions, investor
relations, rolling agenda points and consistent minute taking
• Consideration of risks facing the business.
Examples of decisions made by the board during the year include the Group’s continuing response to Covid-19, the acquisition of
Nimoveri, restructuring programmes, and customer servicing, and these decisions involved consideration of all our stakeholders.
Standards of business conduct
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.
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Strategic Report (continued)
s.172 Companies Act 2006: Statement of Directors’ Duties to Stakeholders (continued)
The impact our business decisions will have on our stakeholders is central to our strategic thinking as well as our statutory duty
under section 172 of the Companies Act 2006.
We have set out below our key groups of stakeholders.
Investors and shareholders
We place considerable importance on the maintenance of regular and open dialogue with our investors and shareholders. Our
goal is to deliver returns to them through a return to profitable and sustainable development with efficient use of capital.
Engagement with Employees
In the face of the COVID-19 pandemic, we took early measures to protect employees and successfully executed a transition to
remote working across all of its operations. Following careful engagement with employees, the team co-operated fully and adapted
their way of working to provide uninterrupted service and support to customers throughout this challenging period.
During the period, the Company faced many challenges including a programme of cost rationalisation as a result of a downturn in
certain service lines in part due to the COVID-19 pandemic. Employees were supported throughout this process and management
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.
We strive 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 our 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 business 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 provide seamless service acting as the outsourced
provider of services to our customers and their staff. The provision of high-quality service to customers throughout the COVID-19
pandemic remains a priority for the Group and IDE’s employees were able to provide uninterrupted service and support to
customers.
Society and Environment
We believe our technology and products will benefit and advance society as a whole.
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.
We make 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.
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IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
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 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.
We will 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 continued challenges we met in 2020, 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.
We have strong and reliable infrastructure and have developed a delivery model that provides assurance and certainty for
customers. This underlying platform is the core strength of the Group and we will continue to consider augmenting underlying
organic growth in the Manage business in 2021 with acquisitions to leverage this platform, should there be a compelling strategic
and financial case.
On behalf of the Board
Ian Smith
Executive Director
21 July 2021
24 Dublin Street
Edinburgh EH1 3PP
12
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Directors’ Report
The Directors present their report together with the audited consolidated financial statements for the year ended 31 December
2020 for IDE Group Holdings plc (“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 Chairman’s Statement and Strategic Report..
Dividends
The Company did not pay a dividend during the year ended 31 December 2020 (2019: £nil). The Directors do not recommend the
payment of a dividend at 31 December 2020 (2019: £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
Sebastian White (resigned 12 February 2021)
David Templeman (appointed 20 April 2021)
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 reverted 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 plc, 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 plc and Accumuli plc and was previously deputy executive chairman and
CEO at Castleton Technology plc.
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.
13
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
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 plc.
Sebastian was a member of the Remuneration Committee and a member of the Audit committee. He resigned on 12 February
2021.
David Templeman - Executive Director
David Templeman is an experienced Chartered Accountant and Chief Financial Officer with particular expertise in technology and
managed services businesses. He joined the Group as Executive Director and Chief Financial Officer in April 2021.
Directors’ Indemnity Insurance
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 and Ian Smith 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 Directors had no direct interests in the ordinary shares of the Company at 31 December 2020, or at 31 December 2019.
Ian Smith is Chief Executive Officer and a substantial shareholder of MXC Capital Limited which held shares as shown in the table
below.
Sebastian White is the Investment Director of Kestrel Partners LLP, whose clients held shares as shown in the table below.
Significant Shareholders
At 31 December 2020 and at 22 June 2021, 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
31 December 2020
Number
31 December 2020
%
22 June 2021
Number
22 June 2021
%
MXC Capital Limited1
Bill Dobbie2
Richard Griffiths
Kestrel Partners LLP3
LMS Capital
Matt Hawkins2
172,811,125
55,476,117
33,482,561
32,855,248
18,161,835
16,370,627
43.1%
13.8%
8.4%
8.2%
4.5%
4.1%
172,811,125
55,476,117
33,482,561
123,833,008
18,161,835
16,370,627
1. MXC Capital Limited is a related party; Ian Smith, Executive Director, is Chief Executive Officer and a
substantial shareholder of MXC Capital Limited
2. Former Director of the Company
3. Sebastian White, Investment Director of Kestrel Partners LLP, is a Former Director of the Company
34.8%
11.1%
6.7%
25.9%
3.6%
3.3%
14
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Directors’ Report (continued)
Auditor
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 25 to the financial statements. The
Company's capital structure is set out in note 26, share capital.
Capital structure
The Company has a single class of share capital which is divided into Ordinary shares of 2.5p each. Details of the Company’s
issued share capital can be found in note 26 to the financial statements.
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 Group’s performance.
The Group continues to focus on building channels that ensure the company is effectively listening and responding to employees.
In doing so, we 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 Group 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 our development.
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.
15
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Directors’ Report (continued)
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
21 July 2021
24 Dublin Street
Edinburgh EH1 3PP
16
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Remuneration Committee Report
Remuneration Committee
At 31 December 2020, the Remuneration Committee comprised Andy Parker (Chair), Ian Smith and Sebastian 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.
As noted in the Corporate Governance Report set out in these Financial Statements, the Board acknowledges that the lack of
independent non-executive Directors does not comply with the standards of the QCA Corporate Governance Code in terms of
composition of the Board and its Committees. With a Board comprising three Directors, all generally attend the meetings of the
Remuneration Committee and in 2020, no specific meetings of the Remuneration Committee were held and relevant matters were
discussed by the Board as a whole.
For further details of the Remuneration Committee, please refer to the Corporate Governance report in these financial statements.
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 (2019: £30,000) for a Non-Executive Director and £50,000
(2019: 50,000) for a Non-Executive Chairman.
17
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Remuneration Committee Report (continued)
Directors’ emoluments
For Directors who held office during the year, emoluments for the year ended 31 December 2020 were as follows:
Executive
Ian Smith1
Andy Parker2
Max Royde3
Sebastian White3
Total
Salary/fees
£
Benefits
£
Pension
£
2020 total
£
2019 total
£
202,315
80,833
-
30,000
313,148
-
-
-
-
-
-
-
-
-
-
202,315
80,833
-
30,000
313,148
50,000
150,000
26,048
3,952
230,000
1. Director's emoluments in respect of Ian Smith were paid to MXC Advisory Limited, a subsidiary of MXC Capital Limited.
2. Andy Parker stepped down from his role as Executive Chairman to become Non-Executive Chairman on 1 June 2020.
3. Directors’ emoluments in respect of Max Royde and Sebastian White were paid to Kestrel Partners LLP. Max Royde resigned from
the Board on 13 November 2019. Sebastian White resigned from the Board on 12 February 2021.
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
21 July 2021
18
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Corporate Governance Statement
Introduction
The Directors attach great importance to maintaining high standards of corporate governance to help achieve the Company’s
goals. To that end they have adopted the principles set out in the Quoted Companies Alliance Corporate Governance Code for
Small and Mid- Size Quoted Companies (the ‘QCA Code’) 2018. The QCA Code, which is constructed around 10 broad principles,
sets out a standard of minimum best practice for small and mid-size quoted companies, including AIM companies. Companies are
required to disclose how the implementation of the QCA Code has been applied or, to the extent not done so, to explain any areas
of departure from its requirements.
We have considered how we apply each principle to the extent that the Board judges these to be appropriate for our circumstances,
and below we provide an explanation of the approach taken in relation to each. Our compliance with the QCA Code is based on
the Company’s current practices.
IDE Group Holdings plc, whilst an established operation, underwent a programme of cost rationalisation and reorganisation in
2019 and 2020. In addition, the COVID-19 pandemic presented the Group with a new set of challenges. The Group was quick to
implement its business continuity plan in response to the global outbreak of COVID-19 and successfully executed a transition to
remote working across all our operations in order to protect its employees and support its customers.
Our objective is to secure the long-term success of the Group by establishing a sustainable and profitable operating model with an
appropriate underlying cost base. The Board believes that applying sensible corporate governance practices at this crucial stage
of the Company’s development can only help achieve our goals.
We have identified a number of areas where we are not in full compliance with the guidelines of the QCA Code and these are
Principle 5, Principle 6, Principle 7 and Principle 9. We explain in detail under the relevant principle why we have departed from
the guidelines in these areas.
We operate in the way the Board believes is most suited to the Group at its current stage of development. The Group has
established a strong leadership team and an appropriate cost base to enable it to focus on growing the business to secure its long-
term sustainable success whilst creating long-term value for shareholders and stakeholders alike.
We trust that the result of our efforts to date provide stakeholders with access to the information they need and the confidence that
the Board holds corporate governance compliance in the highest regard.
Andy Parker
Non-Executive Chairman
Date: 21 July 2021
19
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Corporate Governance Statement (continued)
Principle 1 – Establish a strategy and business model which promote long-term value for shareholders.
The Board’s objective is to secure long-term success 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. The Board has set out its
strategy and business model in the Strategic Report of the Annual Report and Financial Statements, giving further information in
the Chairman’s Statement and the Financial Review about how we performed against our stated strategy. The Strategic Report
includes information on the principal risks and uncertainties faced by the Group and how we have acted to reduce our exposure
to risk.
The Strategic Report describes on page 12 how the Group’s flexible and technically skilled workforce enable it to deliver and
support critical services and solutions in a highly secure environment and how the Group seeks to differentiate itself through
innovation, reliability and value.
The Board will continue to monitor its progress against its stated strategy.
Principle 2 – Seek to understand and meet shareholder needs and expectations.
IDE Group is committed to open communication with all its shareholders.
Copies of the Annual Report and Financial Statements 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
Company’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 announced.
Shareholders are given the opportunity to raise questions at the Annual General Meeting (“AGM”) and the Directors are available
both before and after the meeting for further discussion with shareholders. In order to comply with best practice and the
Government’s social distancing guidelines relating to Covid-19, the Company is holding its 2021 AGM as a closed meeting to
ensure the safety of staff and shareholders. However, to ensure a level of engagement with shareholders, the Company will invite
shareholders to submit questions to the Board which will be answered.
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 Directors are available to meet with
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.
The Board receives share register analysis reports to monitor the Company’s shareholder base and help identify the types of
investors on the register.
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 top 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.
20
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Corporate Governance Statement (continued)
The Company meets frequently with customers and communicates regularly with suppliers. There is a feedback system in place
and issues raised can be addressed.
The Company’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.
In the face of the COVID-19 pandemic, the Group took early measures to protect employees and successfully executed a transition
to remote working across all of our operations. The team responded extremely well and quickly adapted to a new way of working.
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 from 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. If members of staff become disabled, the Group continues employment,
either in the same or an alternative position, with appropriate retraining being given, if necessary.
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 Company.
Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation.
Risk assessment and evaluation is an essential part of the Company’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 strategic realignment undertaken in 2019 followed by Group reorganisation and cost rationalisation in 2020 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, as detailed in the Strategic Report of the Annual Report and Financial Statements.
The revised and refined system of risk management is designed to manage rather than eliminate the risk of failure to achieve
business objectives and 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. At least twice a year the risk register is reviewed 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.
Principle 5 – Maintain the board as a well-functioning, balanced team led by the Chair.
Andy Parker, who joined the Board as a Non-Executive director in August 2018, was appointed as Executive chairman in October
2018. Andy stepped down from this role in June 2020 to become Non-Executive Chairman. He is a chartered accountant and has
held a wide range of commercial and finance roles including acting as Chief Executive Officer of Capita Group plc, the FTSE 100
professional support services company. Andy has also held a number of finance director roles during his career and is a highly
experienced public markets board director. As Andy was previously an executive chairman, he is not considered to be an
independent director. Andy is Chair of the audit and remuneration committees.
21
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Corporate Governance Statement (continued)
Ian Smith is an Executive Director and he led the Group’s strategic and operational review in 2018. Whilst Ian holds no beneficial
interest in IDE Group, he is the Chief Executive Officer and a substantial shareholder of MXC Capital which is a substantial
shareholder of the Company and as such is not considered to be an independent director. Ian is a member of the audit and
remuneration committees.
The Group recognised the need to strengthen the Board with an executive finance director and in April 2021 David Templeman
was appointed to the Board as Chief Financial Officer. David is a chartered accountant and highly experienced finance professional
who began his career at BDO and progressed rapidly to Partner where he provided advisory and commercial business support to
fast-growth European and US businesses, focusing on strategic business advice including M&A and exit-planning. After leaving
BDO, David gained significant commercial experience as CFO including at Orbian (a Citigroup & SAP joint venture), FDM Group
and Applied Systems (Europe). As an Executive Director, David cannot be considered to be an independent director.
The Board currently comprises two Executive Directors and one Non-Executive Director, supported by senior managers and it
oversees and implements the Company’s corporate governance programme. As chairman, Andy leads the Board and is
responsible for the Company’s approach to corporate governance and the application of the principles of the QCA Code. Further
details pertaining to the Board and the roles carried out by each member are set out in the Board of Directors section of the Annual
Report and Financial Statements (although there has been a change after the year end, as noted above).
Each board member commits sufficient time to fulfil their duties and obligations to the Board and the Company. They attend regular
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.
Board and committee meetings
The Board is supported by its Audit Committee and its Remuneration Committee. Each of the Directors were present at Board and
committee meetings convened in 2020, and which they were eligible to attend.
Departures from the Code
Size and balance of the board
The Company accepts that having only three Directors on the Board is not a long-term solution. However, the Company has
undergone significant periods of change in recent years and its focus has on implementing the revised strategy. 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.
Remuneration Committee
The Remuneration Committee did not convene in 2020. Instead, matters such as remuneration of new appointments to the Board
and senior management were handled by the Chief Executive Officer and Chairman. Whilst no director was involved in determining
his or her own remuneration, the Board recognises that this is a departure from the Code.
Principle 6 – Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.
The Board of Directors section in the Annual Report and Financial Statements identifies the members of the Board at the time of
publication and describes the relevant experience, skills and qualities they bring.
The Chairman believes that the Board has a suitable mix of skills and competencies in order to drive the Group’s strategy following
completion of the Strategic and Operational Review and is best placed to secure the future of the Company and create long-term
value for all stakeholders.
22
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Corporate Governance Statement (continued)
The nature of the Company’s business requires the Directors to keep their skillset up to date. Periodic updates to the Board on
regulatory matters are given by Company’s professional advisers. The Company’s financial adviser and 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
Company and the markets in which they operate. Additionally, MXC Advisory Limited, which is part of the same group as the
significant shareholder MXC Capital Limited, is a retained financial adviser principally focused on acquisitions and provides the
services of Ian Smith, Executive Director.
The Company Secretary 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 Company accepts that not having any independent Directors is not ideal. The Board recognises the need for at least one
independent director and 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 that of its committees and individual Directors. The Directors’
Report in the Annual Report and Financial Statements identifies the members of the Board at the time of its publication and
describes the relevant experience, skills and qualities they bring.
Board appointments are made after consultation with advisers in all cases and often with major shareholders in some cases. 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 who are required to retire by rotation and seek re-election every three years.
Departures from the Code
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.
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 our corporate culture of treating all our
stakeholders fairly and with respect.
Accordingly, in dealing with each of the Company’s principal stakeholders, we encourage our staff to operate in an honest and
respectful manner. The Board believes that achieving a common awareness across all employees plays a major role in maintaining
good employee relations. The Strategic Report set out in the Annual Report and Financial Statements highlighted areas that
concerned employees and steps were taken to remedy these concerns. The Group’s culture of honesty and respect is reflected in
the continued support and dedication shown by employees to deliver value to our customers during what has been a challenging
year.
The Company 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 vigorously enforced and monitored. Central to the Company’s culture and values are
Collaboration, Respect, Excellence, Speed, Trust and Accountability, known to the Company’s employees as CRESTA.
Information on how
the website:
https://www.idegroup.com/about/our-people/
the Company’s beliefs are applied
is set out on
the business
to
23
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Corporate Governance Statement (continued)
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/about/certification/
Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making
by the board.
The principal governance structures and processes of the Company and its subsidiaries are the collective responsibility of the
Board and its Committees. 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.
Audit Committee
The duties of the Audit Committee include reviewing, in draft, form the Company’s annual and half-yearly report and accounts and
providing advice to the Board. Members of the Audit Committee are also responsible for reviewing and supervising the financial
reporting process and internal control systems of IDE Group. The Audit Committee is comprised of one Non-Executive Director
and one Executive Director
Remuneration Committee
The Remuneration Committee is responsible for determining the policy for Directors’ remuneration and setting remuneration for
the Company’s chair, executive Directors and senior management including share option schemes and any bonus arrangements.
No director plays any role in determining his or her own remuneration.
Departures from the Code
The Company recognises that its lack of independent non-executive Directors does not comply with the standards of the QCA
Corporate Governance Code in terms of composition of the Board and its Committees.
The Remuneration Committee did not convene in 2020. Instead, matters such as remuneration of new appointments to the Board
and senior management were handled by the Chief Executive Officer and Chairman. Whilst no director was involved in determining
his or her own remuneration, the Board recognises that this is a departure from the Code.
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.
Principle 10 – 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 generally twice each year with the release of its interim and full
year results. The full year results are audited by an external firm of auditors with the interim statement usually subject to a review
by the same external auditors.
The Annual Report and Financial Statements set out how the corporate governance of the Company has been applied in the period
under review.
These reports contain full details of all the principal events of the relevant period together with an assessment of current trading
and future prospects and the reports are made available via the Company’s website to anyone who wishes to review them.
24
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Corporate Governance Statement (continued)
The Group maintains a regular dialogue with stakeholders including shareholders to enable interested parties to make informed
decisions about the Company 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 proved to be of utmost importance during 2020 which
was a period of significant change and challenge for the Company. The Board intends to continue its policy of communication for
the mutual benefit of the Company and its 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 implemented a policy to announce proxy voting results
following the Annual General Meeting in August 2019, as it had committed to do. In the event that a significant portion of voters
vote against a resolution, an explanation of what actions the Board intends to take to understand the reasons behind the vote will
be included.
The roles and responsibilities of the committees supporting the Board are set out in the Corporate Governance section of the
Annual Report and Financial Statements.
25
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Statement of Directors’ Responsibilities
The directors are responsible for preparing the Strategic Report, 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 have
elected under company law to prepare the group financial statements in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and to prepare the company financial statements in accordance with
international accounting standards in conformity with the requirements of the Companies Act 2006 and applicable law.
The group and company financial statements are required by law and international accounting standards in conformity with the
requirements of the Companies Act 2006 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.
select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c.
d.
state whether they have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006.
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 requirements of 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 plc 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
21 July 2021
26
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Report of the Audit Committee
I am pleased to present the Audit Committee’s report for the year ended 31 December 2020. The following pages provide an
insight into how the Audit Committee discharged its responsibilities during the year and the key topics that it considered in doing
so.
Composition
In 2020 the Audit Committee was comprised of one non-executive director, Sebastian White, and Andy Parker, who was Executive
Chairman of the Group until June 2020 when he became Non-Executive Chairman, with Andy Parker acting as Chair of the
Committee. The Chair is considered by the Board to have recent and relevant financial experience and the other member has
competence relevant to the Company’s sector of operation.
As noted in the Corporate Governance Report set out in these Financial Statements, the Board acknowledges that the lack of
independent non-executive Directors does not comply with the standards of the QCA Corporate Governance Code in terms of
composition of the Board and its Committees. With a Board comprising three Directors, all generally attend the meetings of the
Audit Committee. Other members of senior management may also be invited to attend the meetings as guests.
Role and Responsibilities
The Audit Committee determines and examines any matters relating to the financial affairs of the Group including the terms of
engagement of the Group’s auditors and, in consultation with the auditors, the scope of the audit. The Audit Committee meets at
least twice in each financial year.
The Audit Committee is responsible for monitoring the integrity of the Company’s financial statements, reviewing significant
financial reporting issues, reviewing the effectiveness of the Group’s internal control and risk management systems. In addition, it
considers the financial performance, position and prospects of the Group and the Company and ensures they are properly
monitored and reported on. It oversees the relationship with the Auditor (including advising on their appointment, agreeing the
scope of the audit and reviewing the audit findings).
The Board and the Audit Committee do not consider it appropriate for the current size of the Group to establish an internal audit
function.
Principal activities during the year
The Committee held two meetings during the year under review and considered the following:
•
•
The financial statements for the year ended 31 December 2019; and
The draft interim results for the period ended 30 June 2020.
The Committee met in 2021 to consider the following:
• An overview of the planned work by the external auditors on the 2020 audit including the scope and regulatory
requirements of the audit and audit findings.
The Committee is planning the following activities during 2021:
• Review and approve the FY21 external Auditor’s plan, including the proposed materiality threshold, the scope of the
audit, the significant audit risks and fees;
• Review the Company’s procedures, systems and controls for the prevention of bribery or fraud;
27
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Report of the Audit Committee (continued)
• Review the adequacy and security of the Company’s arrangements for its employees to raise concerns, in confidence,
about possible wrongdoing in financial reporting or other matters. The Committee shall ensure that these arrangements
allow proportionate and independent investigation of such matters and appropriate follow up action;
• Review the Committee’s internal audit role, in the absence of an external provider of an internal audit service.
External Auditor
RSM UK Audit LLP (“RSM”) has been the external Auditor of the Group since 2019. The continued appointment of RSM is to be
reviewed by the Committee each year, taking into account relevant legislation, guidance and best practice appropriate for a
Company of IDE’s size and nature.
The Committee will consider a number of areas when reviewing the external Auditor appointment, namely its performance in
discharging the audit, the scope of the audit and terms of engagement, its independence and objectivity, and its reappointment
and remuneration.
The fees paid to RSM during the financial year are set out in note 6 to the Group’s consolidated financial statements. No non-
audit services were provided by RSM.
Attendance at Audit Committee Meetings
Please see the report in the Corporate Governance Report in this document for attendance by the members of the Audit Committee.
Andy Parker
Chairman of the Audit Committee
21 July 2021
28
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IDE GROUP HOLDINGS PLC
Opinion
We have audited the financial statements of IDE Group Holdings PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for
the year ended 31 December 2020 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 significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable
law and International Accounting Standards in conformity with the requirements of the Companies Act 2006 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 2020 and of the group’s loss for the year then ended;
the group financial statements have been properly prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with International Accounting
Standards in conformity with the requirements of the Companies Act 2006 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
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the group’s and parent
company’s ability to continue to adopt the going concern basis of accounting included:
•
•
•
•
obtaining an understanding of management’s going concern evaluation;
assessing the information used in the going concern assessment for consistency with management’s plan and
information obtained through our other audit work;
challenging the major assumptions in management’s forecasts, and checking the construction of the forecasts;
assessing the intent and ability of MXC Capital Limited to provide additional funding if and when required.
Our key observations are that the Group's cash flow forecasts indicate the requirement for further funding over the forecast period
in order to meet working capital requirements as the Manage business grows. The continued support of the Group's cornerstone
investor, MXC Capital Limited, has been confirmed in writing and evidence of the availability of funding has been obtained.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s or the parent company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
29
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Summary of our audit approach
Key audit matters
Group
Materiality
Group
•
Impairment of assets in Connect CGU
• Overall materiality: £312,000 (2019: £367,000)
• Performance materiality: £234,000 (2019: £275,000)
Parent Company
• Overall materiality: £306,000 (2019: £351,000)
• Performance materiality: £229,000 (2019: £263,000)
Scope
Our audit procedures covered 99% of revenue, 99% of total assets and 99% of loss
before tax.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the group 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
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Impairment of assets in Connect CGU
Key audit matter
description
How the matter was
addressed in the audit
Refer to notes 1.28 (critical accounting estimates) and note 14 (intangible assets).
The majority of the group’s goodwill relates to the Connect CGU. The impairment review,
undertaken by management, determined the carrying value of this CGU to be £nil. This
reflected its continued poor performance and losses.
Management concluded, therefore, that goodwill, trademarks, customer contracts and related
relationships and network infrastructure assets, attributable to the CGU, should be impaired in
full.
The assessment of impairment in accordance with IAS 36 requires an assessment of the
recoverable amount, based on the higher of value in use and fair value less costs to sell. This
involves the use of estimates and judgements in determining the future cash flows for
calculating value in use.
The CGU’s assets constitute the majority of the carrying amount of the non-current assets of
the group, prior to impairment. Therefore, this area was considered to be a key audit matter.
Our work included:
• Critically challenging the key underlying assumptions in the forecasts used to
determine value in use and understanding the reasons for the continued forecast
losses;
• Understanding management’s future plans for the CGU and challenging their
assessment that the fair value less costs to sell was £nil; and
• Reviewing the adequacy of the disclosures in the financial statements, including
disclosure of the events and circumstances that led to the recognition of the
impairment charge.
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:
30
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Overall materiality
£312,000 (2019: £367,000)
£306,000 (2019: £351,000)
Group
Parent company
Basis for determining overall
materiality
Rationale for benchmark
applied
1.3% of revenue
4.8% of net assets
is
the most
considered
Revenue
appropriate measure used to assess the
performance of the group.
Net assets are considered to be the
appropriate measure as the company’s
activity is to hold investments in group
companies.
Performance materiality
£234,000 (2019: £275,000)
£229,000 (2019: £263,000)
Basis for determining
performance materiality
Reporting of misstatements
to the Audit Committee
75% of overall materiality
75% of overall materiality
Misstatements in excess of £15,600 and
misstatements below that threshold that,
in our view, warranted reporting on
qualitative grounds.
Misstatements in excess of £15,300 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, three trading companies (IDE Group Manage Limited, IDE Group Connect Limited and
Nimoveri Limited (which was acquired in the year)) and 15 other entities which are dormant or non-trading. The parent company
and the three trading companies are based in the UK.
The coverage achieved by our audit procedures was:
Full scope audit
Analytical
procedures at
group level
Total
Number of
components
3
16
19
Revenue
Total assets
Loss before tax
98.9%
99.3%
99.3%
1.1%
100%
0.7%
100%
0.7%
100%
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the
financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives
rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
31
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
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.
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.
The extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities are instances of non-compliance with laws and regulations. The objectives of our audit are to obtain sufficient
appropriate audit evidence regarding compliance with laws and regulations that have a direct effect on the determination of material
amounts and disclosures in the financial statements, to perform audit procedures to help identify instances of non-compliance with
other laws and regulations that may have a material effect on the financial statements, and to respond appropriately to identified
or suspected non-compliance with laws and regulations identified during the audit.
In relation to fraud, the objectives of our audit are to identify and assess the risk of material misstatement of the financial statements
due to fraud, to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud
through designing and implementing appropriate responses and to respond appropriately to fraud or suspected fraud identified
during the audit.
However, it is the primary responsibility of management, with the oversight of those charged with governance, to ensure that the
entity's operations are conducted in accordance with the provisions of laws and regulations and for the prevention and detection
of fraud.
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud, the group audit engagement
team:
32
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
obtained an understanding of the nature of the industry and sector, including the legal and regulatory framework that the group
and parent company operates in and how the group and parent company are complying with the legal and regulatory framework;
•
•
inquired of management, and those charged with governance, about their own identification and assessment of the
risks of irregularities, including any known actual, suspected or alleged instances of fraud;
discussed matters about non-compliance with laws and regulations and how fraud might occur including assessment of
how and where the financial statements may be susceptible to fraud.
The most significant laws and regulations were determined as follows:
Legislation /
Regulation
IFRS and Companies
Act 2006
Tax
regulations
compliance
Additional audit procedures performed by the Group audit engagement team
included:
Review of the financial statement disclosures and testing to supporting documentation;
Completion of disclosure checklists to identify areas of non-compliance.
Inspection of computations provided by external tax advisors.
The areas that we identified as being susceptible to material misstatement due to fraud were:
Risk
Revenue cut-off
Management
override of controls
Audit procedures performed by the audit engagement team:
A sample of revenue from immediately before and after the period end was substantively
tested, and accrued or deferred income recalculated by reference to the underlying contracts
and invoice details.
Testing the appropriateness of journal entries and other adjustments;
Assessing whether the judgements exercised in making accounting estimates are indicative
of a potential bias; and
Evaluating the business rationale of any significant transactions that are unusual or outside
the normal course of business.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s
website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.
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
RH10 1BG
21 July 2021
33
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2020
Note
3
5
4
2 & 5
5
14
13
7
13
14
14
13
27
9
11
Continuing operations
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses excluding impairment
Impairment loss on trade receivables
Impairment charge on goodwill and intangibles
Impairment charge on property, plant and equipment
Total administrative expenses
Adjusted EBITDA*
Exceptional items
Depreciation
Amortisation
Impairment charge on goodwill and intangibles
Impairment charge on property, plant and equipment
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
8
Loss for the year and total comprehensive income
attributable to owners of the parent company
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Year ended
31 December
2020
£000
Year ended
31 December
2019
£000
24,061
(18,294)
__________
5,767
__________
383
(11,835)
(142)
(8,473)
(5,481)
__________
(25,548)
533
(479)
(2,616)
(3,233)
(8,473)
(5,481)
(32)
(19,781)
(1,799)
__________
(21,580)
3,103
__________
(18,477)
-
__________
(18,477)
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
__________
(8,477)
(179)
__________
(8,656)
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
12
12
12
(4.61)p
(2.12)p
-
(0.04)p
_________
(4.61)p
_________
_________
(2.16)p
_________
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation, amortisation, impairment 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.
34
Statements of Financial Position
As at 31 December 2020
Note
Group
Company
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
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
Trade and other payables
Contract liabilities
Borrowings
Convertible loan notes
Provisions
Deferred tax liabilities
Total liabilities
Net (liabilities)/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
21
20
18
19
21
22
20
11
26
2020
£000
1,208
11,429
-
3,439
100
16,176
5,444
693
6,137
2019
£000
9,706
21,106
-
1,821
-
32,633
7,621
679
8,300
2020
£000
-
-
7,877
-
16,137
24,014
140
7
147
2019
£000
-
-
7,877
-
18,940
26,817
29
103
132
22,313
40,933
24,161
26,949
8,487
1,370
531
221
7,562
1,926
1,766
192
10,609
11,446
1,584
15
14,847
1,983
91
1,786
-
6
14,333
1,803
230
3,272
1,830
-
-
50
1,880
-
-
13,988
1,983
-
-
2,075
-
-
50
2,125
-
-
12,474
1,803
-
-
20,306
19,644
15,971
14,277
30,915
31,090
17,851
16,402
(8,602)
9,843
6,310
10,547
10,020
35,439
967
(54,878)
(150)
10,020
35,439
967
(36,433)
(150)
10,020
35,439
967
(40,116)
-
10,020
35,439
967
(35,879)
-
Total equity
(8,602)
9,843
6,310
10,547
The notes on pages 40 to 77 are an integral part of these financial statements. The Company made a loss of £4.3 million in the year ended 31
December 2020 (2019: £21.7 million) and in accordance with s408 of the Companies Act 2006 has not presented a company statement of
comprehensive income. These financial statements were approved by the Board of Directors on 21 July 2020 and were signed on its behalf by:
Ian Smith
Executive Director
Company registered number: SC368538
35
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Statements of Changes in Equity
for the year ended 31 December 2020
Group
Share
Capital (a)
Share
Premium (b)
Equity
reserve (c)
Retained
Earnings (d)
Foreign currency
translation reserve
Total
equity
Balance at 1 January 2019
Loss for the financial year and total
comprehensive expense
Transactions with owners recorded
directly in equity:
Share based payments
£000
10,020
£000
35,439
£000
967
-
-
-
-
-
-
£000
(27,863)
(8,656)
86
(e)
£000
(150)
-
-
£000
18,413
(8,656)
86
Balance at 31 December 2019
10,020
35,439
967
(36,433)
(150)
9,843
Loss for the financial year and total
comprehensive expense
Transactions with owners recorded
directly in equity:
Share based payments
-
-
-
-
-
(18,477)
-
32
-
-
(18,477)
32
Balance at 31 December 2020
10,020
35,439
967
(54,878)
(150)
(8,602)
(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 val ue of the
debt component of the instrument from the face value of the loan note.
(d) Retained earnings represents retained profits 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
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Statements of Changes in Equity (continued)
for the year ended 31 December 2020 (continued)
Company
Balance at 1 January 2019
Total comprehensive loss for the year
Loss for the year
Transactions with owners recorded directly in
equity:
Share based payments
Share
Capital (a)
Share
Premium (b)
Equity reserve
(c)
Retained
Earnings (d)
£000
10,020
£000
35,439
£000
967
£000
(14,269)
Total
equity
£000
32,157
-
-
-
-
-
(21,696)
(21,696)
-
86
86
Balance at 31 December 2019
10,020
35,439
967
(35,879)
10,547
Total comprehensive loss for the year
Loss for the year
Transactions with owners recorded
directly in equity:
Share based payments
-
-
-
-
-
(4,269)
(4,269)
32
32
Balance at 31 December 2020
10,020
35,439
967
(40,116)
6,310
(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 val ue of the
debt component of the instrument from the face value of the loan note.
(d) Retained earnings represents retained profits and accumulated losses
37
Statements of Cash Flows
for the year ended 31 December 2020
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 on goodwill and intangibles
Impairment charge on property, plant and equipment
Net finance expenses
Share based payments
Decrease in trade and other receivables
Increase/(Decrease) in trade and other payables and contract liabilities*
(Decrease)/increase in provisions
Net cash generated from operating activities
Cash flows from investing activities
Acquisition of property, plant and equipment
Acquisition of Nimoveri, net of cash acquired
Acquisition of other intangible assets*
Net cash used in investing activities
Cash flows from financing activities
Interest paid
New loans and borrowings, net of expenses
Repayment of loans and borrowings
Repayment of lease liabilities
Net cash (absorbed by)/generated from financing activities
Net increase 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
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Note
13
14
14
13
9
27
8
22
17
2020
£000
2019
£000
(21,580)
-
(10,888)
(216)
(21,580)
(11,104)
2,616
3,233
8,473
5,481
1,799
32
3,241
3,289
3,000
-
1,827
86
54
339
2,175
(4)
(111)
1,271
(1,355)
(208)
2,114
47
(82)
(72)
-
(177)
-
-
(154)
(177)
(98)
-
-
(1,848)
(451)
11,520
(4,750)
(2,605)
(1,946)
3,714
14
679
693
693
693
3,584
(2,905)
679
679
679
* A balance of £1.8m has not been included in the additions of intangible assets as the invoice was outstanding at year end. This has been
deducted from the movement in trade and other payables.
38
Statements of Cash Flows (continued)
for the year ended 31 December 2020
Company
Cash flows from operating activities
Loss before tax for the year
Adjustments for:
Net financial expenses
Impairment of intercompany loans
Share based payments
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Net cash used in operating activities
Cash flows from investing activities
Amounts (advanced to)/repaid by subsidiaries
Note
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020
£000
2019
£000
(4,268)
(21,696)
1,697
1,769
32
(770)
28
(388)
1,418
19,408
86
(784)
(17)
424
(1,130)
(377)
1,034
(11,734)
Net cash generated from investing activities
1,034
(11,734)
Cash flows from financing activities
Interest paid
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
-
-
-
-
(96)
103
(44)
11,520
(4,750)
6,726
(5,385)
5,488
Cash and cash equivalents at 31 December
17
7
103
39
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements
1
Accounting policies
IDE Group Holdings plc (“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 and parent
company financial statements throughout the year and all by subsidiary companies are set out below.
1.1 Basis of preparation
The consolidated and parent company financial statements of IDE Group have been prepared on the going concern basis and in
accordance with International Accounting Standards in conformity with the Companies Act 2006. 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 accounting framework 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 1.28 in the accounting policies. The financial statements are prepared in GBP (being the functional currency of the Group)
and rounded to the nearest £1,000.
Going concern
The Directors have produced detailed trading forecasts and cashflows which have been discussed with the Group’s major
shareholder who is represented on the Board. 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 confirm 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. The Directors therefore have an expectation that the Group has adequate resources to continue in operational
existence for the foreseeable future. The group is now also investigating the possibility of alternative working capital funding
sources which if available will further support working capital as our client activity increases. Accordingly, the Group continues to
adopt the going concern basis in preparing its consolidated financial statements.
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.
Acquisition related costs are expensed as incurred.
Intercompany 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.
40
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
1 Accounting policies (continued)
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
•
• Software and licensing
Trademarks
5 – 13 years
5 years
8 years
Impairment and amortisation charges are included within the administrative expenses line in the income statement.
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.
41
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
1
Accounting policies (continued)
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
on 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.
1.6 Impairment of assets
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 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.
42
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
1 Accounting policies (continued)
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.
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.
1.10 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.
43
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
1 Accounting policies (continued)
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.
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.
44
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
1 Accounting policies (continued)
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.
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 Government Grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Where applicable, government grants are offset against the expenditure to
which they relate.
1.21 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
1.22 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.
45
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
1 Accounting policies (continued)
1.23 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.
1.24 Alternative performance measure
The group uses an alternative measure in the Income Statement, being Adjusted EBITDA, defined as earnings before interest,
tax, depreciation, amortisation, impairment charges, exceptional items, loss on disposal of fixed assets and share-based payments.
1.25 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.
1.26 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 three operating segments: IDE Group Manage, IDE Group Connect
and Nimoveri Limited which was acquired during the current year. IDE Group Manage and Nimoveri Limited 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.
1.27 Application of new IFRSs and interpretations
a) New standards, interpretations and amendments effective from 1 January 2020
New standards adopted in the annual financial statements for the year ended 31 December 2020 but which have not had a
significant effect on the Group are:
•
IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and
Errors (Amendment – Definition of Material)
IFRS 3 Business Combinations (Amendment – Definition of Business)
•
• Conceptual Framework for Financial Reporting (Revised)
• COVID-19 Related Rent Concessions (Amendment to IFRS16)
b) New standards, interpretations and amendments not yet effective
A number of standards, amendments to standards and interpretations have been issued by the IASB and are effective in future
accounting periods which the Group has decided not to adopt early. The following amendment is effective for the period beginning
1 January 2021:
•
Interest Rate Benchmark Reform (Amendments to IFRS9, IAS 39, IFRS 7 and IFRS16
The following amendments are effective for the period beginning 1 January 2022:
• Onerous Contract – Cost of fulfilling a Contract (Amendments to IAS 37)
• Property, plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
• Annual Improvements to IFRS Standards 2018-2020 (Amendments to IFRS1, IFRS 9, IFRS 16 and IAS 41)
• References to Conceptual Framework (Amendments to IFRS 3)
The Group is assessing the impact of these new standards and amendments but does not expect that they will have a material
impact on the Group
46
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
1 Accounting policies (continued)
1.28 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 year end
whether other intangible assets which are amortised have suffered any impairment. The value-in-use calculations contain a number
of significant estimates and assumptions including future sales, margins and appropriate discount rates. See note 14 in the financial
statements for an analysis of goodwill and CGUs.
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
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 11 to the financial statements.
47
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
2 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. The CODM does not review the segmental assets and liabilities on a disaggregated basis and therefore this information has
not been provided
The following table presents revenue and gross profit in respect of the Group’s continuing operating segments for the year ended
31 December 2020. Certain contract novations took place in 2020 between our Manage and Connect businesses with an
annualised contract value of £1.7m.
Year ended 31 December 2020
IDE Group Manage
IDE Group Connect
from contracts with
Revenue
customers
Cost of Sales
Gross profit
Other Income
Administrative expenses
Impairment charge
£000
11,527
(7,014)
4,513
286
(5,083)
-
£000
13,062
(11,953)
1,109
82
(5,962)
(13,954)
Operating profit/(loss)
(284)
(18,725)
Analysed as:
Adjusted EBITDA
Exceptional costs
Depreciation
Amortisation of intangible assets
Impairment charge
Share based payments
Financial costs
Profit/(loss) before taxation
Tax on profit/(loss) on ordinary
activities
Profit/(loss) for the year after
taxation
2,103
(381)
(837)
(1,169)
-
-
(86)
(370)
139
(231)
(836)
(92)
(1,779)
(2,064)
(13,954)
-
(16)
(18,741)
404
(18,337)
Nimoveri
Limited
£000
269
(124)
145
15
(126)
-
34
34
-
-
-
-
-
-
34
(4)
30
Central & inter-
segment
Total Continuing
Operations
£000
(797)
797
-
-
(806)
-
£000
24,061
(18,294)
5,767
383
(11,977)
(13,954)
(806)
(19,781)
(768)
(6)
-
-
-
(32)
(1,697)
(2,503)
2,564
533
(479)
(2,616)
(3,233)
(13,954)
(32)
(1,799)
(21,580)
3,103
61
(18,477)
Nimoveri has been presented separately in the above table as it is a hybrid business which does not fit easily into either of the
other two segments, and in order to provide details of the results since acquisition.
48
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
2
Segment reporting (continued)
Year ended 31 December 2019
IDE Group
Manage
IDE Group
Connect
Central &
inter-segment
£000
£000
Revenue from contracts with customers
Cost of Sales
14,660
(10,128)
14,603
(12,716)
Gross profit
Administrative expenses
Impairment charge
4,532
(7,069)
-
1,887
(4,525)
(3,000)
£000
(1,102)
1,102
-
(886)
-
Total
Continuing
Operations
£000
28,161
(21,742)
6,419
(12,480)
(3,000)
Discontinued
Operations
£000
(216)
-
(216)
-
-
Total
£000
27,945
(21,742)
6,203
(12,480)
(3,000)
Operating profit/(loss)
(2,537)
(5,638)
(886)
(9,061)
(216)
(9,277)
Analysed as:
Adjusted EBITDA
Exceptional costs
Depreciation
Amortisation of intangible assets
Impairment charge
Share based payments
1,113
(355)
(1,469)
(1,826)
-
-
749
(152)
(1,772)
(1,463)
(3,000)
-
(719)
(81)
-
-
-
(86)
1,143
(588)
(3,241)
(3,289)
(3,000)
(86)
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)
-
-
-
-
-
-
(216)
37
(179)
927
(588)
(3,241)
(3,289)
(3,000)
(86)
(1,827)
(11,104)
2,448
(8,656)
The Group had one customer who accounted for 29% of revenue from continuing operations during the year (2019: 27%). This
revenue is attributed fully to the IDE Group Manage segment.
3
Revenue
Revenue from contracts with customers
Sale of goods
Rendering of services
Total
2020
£000
2019
£000
959
23,102
925
27,236
24,061
28,161
49
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
3
Revenue (continued)
Disaggregation of revenue
The disaggregation of revenue from contracts with customers is as follows:
Year ended 31 December 2020
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
10,151
59
11
5,333
472
227
3,774
332
127
3,546
29
-
22,804
892
365
10,221
6,032
4,233
3,575
24,061
915
9,306
-
6,032
-
4,233
44
3,531
959
23,102
Total
10,221
6,032
4,233
3,575
24,061
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
50
Notes to the Consolidated Financial Statements (continued)
3
Revenue (continued)
Contract balances
Receivables included within trade and other receivables
Contract assets
Contract liabilities
Total
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020
£000
4,598
178
4,776
(1,385)
3,391
2019
£000
6,006
590
6,596
(1,932)
4,664
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 change in contract assets and liabilities is a result of a reduction in revenue in the year ended 31 December 2020. In the year,
contract liabilities of £1,926k were recognised in revenue.
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.
4
Other operating income
Other operating income comprises government grants receivable.
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 loss on trade receivables
Share-based payments
Other restructuring costs
Other administrative costs
2020
£000
6,549
11,745
3,024
3,233
2,616
13,954
142
32
34
2,896
2019
£000
7,326
14,416
2,734
3,289
3,241
3,000
30
86
261
2,839
Total cost of sales and administrative expenses
44,225
37,222
51
Notes to the Consolidated Financial Statements (continued)
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
7
Exceptional costs
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020
£000
41
85
30
156
2019
£000
24
78
31
133
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:
Restructuring and reorganisation costs
Other exceptional costs
2020
£000
479
-
479
2019
£000
466
122
588
Restructuring and reorganisation costs in the year ended 31 December 2020 and the year ended 31 December 2019 relate to
costs incurred on the restructure of the Group, predominantly redundancy costs, of which £445k are staff related as disclosed in
note 10 (2019: £327k).
Other exceptional costs in the year ended 31 December 2019 relate mainly to costs associated with a break in at the Dartford
facility.
52
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
8
Acquisition and discontinued operations
On 1 June 2020, the Group completed the acquisition of 100% of the issued share capital of Nimoveri Holdings Limited and its
subsidiary, a small cloud and IT services business, for a total consideration of £200,000; £100,000 paid in cash on completion and
the issue of £100,000 0% loan notes by IDE Group Limited, a Group company (the “Nimoveri Loan Notes”). The Nimoveri Loan
Notes are secured over the assets of Nimoveri Holdings Limited and redeemable on 31 December 2021.
The following table summarises the consideration and the fair value of the assets acquired:
Consideration
Cash
Loan notes
Fair value of recognised amounts of identifiable assets acquired and liabilities assumed
Cash
Property, plant and equipment
Trade and other receivables
Trade and other payables
Deferred tax asset
Total identifiable net assets
Goodwill
Total
£’000
100
100
200
28
6
96
(131)
5
4
196
200
Acquisition related costs of £1k have been charged to administrative expenses in the Consolidated Income Statement.
There was no credit loss provision in respect of trade and other receivables.
The revenue included in the Consolidated Income Statement since 1 June 2020 contributed by Nimoveri was £269k, and profit
before tax of £29k.
If Nimoveri had been consolidated from 1 January 2020 the Consolidated Statement of Income would show pro-forma revenue of
£24.3m and profit before tax of £21.6m.
Discontinued operations
On 12 October 2018, the Company sold the entire issued share capital of 365 ITMS Limited and its subsidiaries to PTCA Newco
Limited., Further losses of £0.2m were identified in 2019 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
Other interest
2020
£000
-
98
134
180
1,383
4
1,799
2019
£000
29
422
138
149
1,089
-
1,827
53
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
Restructuring costs
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020
£000
7,700
779
649
445
9,573
2019
£000
8,293
841
599
327
10,060
At 31 December 2020, the Group employed 237 staff, including Directors (2019: 262).
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
2020
2019
181
17
44
3
245
200
17
48
3
268
The Company employed an average of 4 employees during 2020 (2019: 3).
For Directors who held office during the year, emoluments for the year ended 31 December 2020 were as follows:
Executive
Ian Smith1
Andy Parker
Non-Executive
Max Royde2
Sebastian White2
Total
Salary/fees
2020 total
£
202,315
80,833
-
30,000
Salary/fees
2019 total
£
50,000
150,000
26,048
3,952
313,148
230,000
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
Social security costs in respect of Directors’ emoluments were £10k (2019: £19.5k). 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 2020 or 2019.
54
Notes to the Consolidated Financial Statements (continued)
11 Taxation
(a)
Tax on loss on ordinary activities
Current tax
Current year
Adjustments for prior years
Current tax
Deferred tax credit
Total tax credit
Relating to:
Continuing operations
Discontinued operations
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020
£000
-
-
-
2019
£000
-
-
-
(3,103)
(2,448)
(3,103)
(2,448)
(3,103)
-
(2,411)
(37)
(3,103)
(2,448)
Following the year end, the Finance Act 2021 increased the main corporation tax rate from 19% to 25% with effect from 1 April
2023. Given the extent of the deferred tax asset recognised in respect of tax losses, it is expected that there will be a material
effect to the deferred tax assets and liabilities as stated from the increase in the corporation tax rate from 2023.
Reconciliation of the total income tax credit:
Loss before taxation on continuing operations
Tax using the United Kingdom corporation tax rate of 19% (2019: 19%)
Non-deductible expenses
Amortisation and impairment of goodwill and intangibles
Tax losses utilised
Prior year adjustment deferred tax
Adjustment for rate change
Discontinued operations
Total tax credit
2020
£000
2019
£000
(21,580)
(10,888)
(4,100)
4
915
(93)
-
171
-
(3,103)
(2,069)
165
587
-
(1,233)
139
(37)
(2,448)
55
Notes to the Consolidated Financial Statements (continued)
11 Taxation (continued)
(b)
Deferred tax (asset)/liability
At 1 January 2019
Credit to income statement
At 1 January 2020
Business Combinations
Credit to income statement
Timing differences in respect of intangible assets
Timing differences in respect of tangible assets
Recognition of losses
Short term timing differences
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
£000
£000
£000
(Asset)
Liability
Net (asset)/
liability
(1,240)
(1,131)
(2,371)
-
-
(40)
(1,026)
(1)
5,139
(1,317)
3,822
(1)
(2,036)
-
-
-
3,899
(2,448)
1,451
(1)
(2,036)
(40)
(1,026)
(1)
(1,067)
(2,036)
(3,103)
At 31 December 2020
(3,439)
1,786
(1,653)
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
At 31 December
Deferred tax assets arose in respect of trade losses and fixed asset differences, details as follows:
Tax losses recognised
Other temporary differences
Depreciation in advance of capital allowances
At 31 December
2020
£000
1,786
1,786
2020
£000
2,832
17
590
3,439
2019
£000
3,272
3,272
2019
£000
1,806
15
-
1,821
Deferred tax assets are recognised for tax losses carried forward of £14.9 million (2019: £10.7 million) to the extent that the
realisation of the related tax benefit through future taxable profits is probable. 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 2029.
The evidence supporting the recognition of the deferred tax asset for losses is the partial use of losses in the year.
The Group had unrecognised trading losses carried forward at 31 December 2020 of £18.0 million (2019: £18.5 million).
Company: The Company has no deferred tax assets or deferred tax liabilities as at 31 December 2020 or 31 December 2019.
56
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
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 £18.5 million (2019:
£8.5 million), a loss after tax for the year for discontinued operations of £nil (2019: £0.2 million) and a weighted average number
of ordinary shares of 400,802,032 (2019: 400,802,032). 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 27, would have the effect of reducing the loss per ordinary share and therefore would be anti-dilutive under the terms
of IAS 33.
Continuing operations
Statutory basic and diluted loss per share (pence)
Discontinued operations
Statutory basic and diluted loss per share (pence)
Total basic and diluted loss per share
2020
(4.61)p
2019
(2.12)p
-
(0.04)p
_________
(4.61)p
_________
_________
(2.16)p
_________
57
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
13
Property, plant and equipment
Group
Cost
At 1 January 2019
Additions
Right of use assets recognised on transition to IFRS16
At 31 December 2019
Additions
Acquisition (note 8)
Lease modification
Disposals
Leasehold
property
£000
Network
infrastructure
£000
Equipment,
fixtures
and fittings
£000
117
10
2,542
2,669
-
-
(488)
-
14,441
57
85
14,637
54
-
-
-
3,284
110
307
3,701
28
6
-
(9)
Total
£000
17,842
177
2,934
20,953
82
6
(488)
(9)
At 31 December 2020
2,181
14,637
3,726
20,544
Accumulated depreciation
At 1 January 2019
Charge for the year - continuing
At 31 December 2019
Charge for the year – continuing
Disposal
Impairment
At 31 December 2020
Net carrying amount
31 December 2020
31 December 2019
96
521
617
527
-
-
5,225
2,071
7,296
1,781
-
5,481
2,685
649
3,334
308
(8)
-
8,006
3,241
11,247
2,616
(8)
5,481
1,144
_______
14,558
_______
3,634
_______
19,336
_______
1,037
79
92
1,208
2,052
_______
7,189
_______
367
_______
9,706
_______
The impairment charge for the year arises from the impairment review carried out in the year in respect of the Connect segment.
Details are included in note 14. Due to the forecast continuing losses it has been determined that the Connect CGU has no value
in use and therefore full provision has been made against the carrying value of the infrastructure assets attributable to the Connect
CGU.
58
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
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:
Cost
At 1 January 2019
Right of use assets recognised on transition to IFRS16
At 31 December 2019
Lease modification
At 31 December 2020
Accumulated depreciation
At 1 January 2019
Charge for the year
At 31 December 2019
Charge for the year – continuing
At 31 December 2020
Net carrying amount
31 December 2020
31 December 2019
Leasehold
£000
Network
infrastructure
£000
Equipment,
fixtures
and fittings
£000
-
2,542
2,542
(488)
2,054
-
505
505
512
-
85
85
-
85
-
73
73
12
-
307
307
-
307
-
178
178
83
Total
£000
-
2,934
2,934
(488)
2,446
-
756
756
607
1,017
_______
85
_______
261
_______
1,363
_______
1,037
-
46
1,083
2,037
_______
12
_______
129
_______
2,178
_______
Additions to the right-of-use assets during the year were nil (2019: £2m)
The depreciation charge for the year of £2.6million (2019: £3.2 million) relates to continuing operations and has been charged to
administrative expenses.
Company
The Company has no property, plant and equipment at 31 December 2020 and at 31 December 2019.
59
Notes to the Consolidated Financial Statements (continued)
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
14
Intangible assets
Group
Cost:
At 1 January 2019
Additions
At 31 December 2019
Additions
Acquisition (see note 8)
At 31 December 2020
Customer
contracts
and related
relationships
£000
Technology
development
£000
Software
and
Licensing
£000
Goodwill Trademarks
£000
£000
32,256
1,707
29,076
-
32,256
-
196
-
1,707
-
-
-
29,076
-
-
935
-
935
-
-
-
-
-
1,833
-
Total
£000
63,974
-
63,974
1,833
196
32,452
_______
1,707
_______
29,076
_______
935
_______
1,833
_______
66,003
_______
Impairment and amortisation:
At 1 January 2019
Amortisation for the year – continuing operations
Impairment charge – continuing operations
26,325
-
3,000
981
341
8,447
2,865
-
At 31 December 2019
29,325
1,322
11,312
Amortisation for the year – continuing operations
Impairment charge – continuing operations
-
2,931
342
43
2,865
5,499
826
83
-
909
26
-
-
-
-
-
-
-
36,579
3,289
3,000
42,868
3,233
8,473
At 31 December 2020
Net carrying amount:
31 December 2020
31 December 2019
32,256
_______
1,707
_______
19,676
_______
935
_______
-
_______
54,574
_______
196
___
2,931
_______
-
__ _
385
___ __
9,400
17,764
_______
-
__ ___
26
______
1,833
__ ___
-
______
11,429
__ ____
21,106
___ ___
The amortisation charge of £3.2 million relates to continuing operations and is included in the loss for the year from continued
operations in the Income Statement within administrative expenses.
The software and licensing asset is subject to continuing development and is not fully in use. No amortisation has been charged
for the period.
The group has two major CGUs, Manage and Connect, as described in note 2, plus Nimoveri which was acquired during the year.
Goodwill is allocated among the CGUs as follows:
Carrying value at 31 December 2019
Business combinations
Impairment charge in year
Manage
£'000s
Connect
£'000s
Nimoveri
£'000s
Group
£'000s
-
-
-
-
_______
2,931
-
(2,931)
-
______
-
196
-
196
______
2,931
196
(2,931)
196
______
An impairment review was carried out during the year for Connect.
60
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
14
Intangible assets (continued)
The key assumptions used in the impairment review were:
Base revenue forecast FY21
Revenue growth in forecast period
Long term growth rate
Gross margin %
Overheads – rate of increase after year one
five-year
the
£12.6m
5%
for
forecast period
2
10.8%
2%
The results of the impairment review showed the Connect CGU was forecast to report losses after the allocation of overheads for
the duration of the forecast period. As a result, no discounted cash flow assessment was required, and consequently the goodwill,
intangible assets and property, plant and equipment used in the business were fully impaired. No impairment was recognised on
other assets, including trade and other receivables.
This resulted in an impairment charge of:
Goodwill
Trademarks
Customer contracts
Property, plant and equipment
Total impairment charge
£'000s
2,931
43
5,499
5,481
13,954
The carrying value of the customer contracts at 31 December 2020 of £9.4 million is entirely attributable to the Manage CGU.
There were no indications of any impairment in the Manage intangible assets, given its strong trading results and positive EBITDA
both during the year and in the period post year end, which are forecast to continue.
The remaining unamortised life of the intangible assets at 31 December 2020 is as follows:
•
•
IDE Group Manage customer contracts and related relationships – 8 years, net carrying value £9.4 million
IDE Group Manage software – 8 years, net carrying value £1.8 million
Company
The company had no intangible assets at 1 January 2019, 31 December 2019 or 31 December 2020.
61
Notes to the Consolidated Financial Statements (continued)
15
Investments
Company
At 1 January 2019, 31 December 2019 and 31 December 2020
The Company has the following investments in subsidiaries:
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020
£000
7,877
2019
£000
7,877
Held directly by IDE Group Holdings plc
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 plc
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
Nimoveri Holdings Limited
Nimoveri Limited
Holdfast Systems Limited
Country of
Incorporation
Class of
shares held
Ownership
2020
2019
England1
Scotland2
Scotland2
England1
USA3
USA3
France4
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
England1
England1
England1
England1
England1
England1
England1
Cyprus5
England6
England7
England7
Ordinary
Ordinary
Ordinary
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%
100%
100%
100%
N/A
N/A
N/A
1
2
3
4
5
6
7
Registered office is located at Unit 2, Quadrant Court, Crossways Business Park, Greenhithe, Dartford, England, DA9 9AY
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 Faneromenis 115, Antouanettas Building, 6031 Larnaca, Cyprus
Registered office is located at 15 Rosemary Lane, Rowledge, Farnham, United Kingdom, GU10 4DB
Registered office is located at Unit 9, The Granary, Waverley Lane, Farnham, Surry, England, GU9 8BB
At 31 December 2020, the trading subsidiaries of the Company were IDE Group Manage Limited, IDE Group Connect Limited and
Nimoveri Limited (31 December 2019: IDE Group Manage Limited and IDE Group Connect Limited).
IDE Group Manage and Nimoveri Limited 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, IDE Group Protect Limited, IDE Group Limited,
Nimoveri Holdings Limited, Nimoveri Limited and Holdfast Systems 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.
62
Notes to the Consolidated Financial Statements (continued)
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
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
Non-current
Other receivables
Amounts due from subsidiary undertakings
Provision against amounts due from subsidiary undertakings
Group
Company
2020
£000
4,598
(519)
4,079
178
1,187
-
5,444
2019
£000
6,006
(597)
5,409
590
1,596
26
7,621
2020
£000
-
-
-
-
1
139
140
2019
£000
-
-
-
-
3
26
29
Group
Company
2020
£000
100
-
-
100
2019
£000
-
-
-
-
2020
£000
-
66,870
(50,733)
2019
£000
-
67,904
(48,964)
16,137
18,940
In accordance with IFRS 9, the Group reviews the amount of credit loss associated with its trade receivables, and contract assets.
Customer credit risk is managed according to strict credit control policies. The majority of the Group’s revenues are derived from
national or multi-national organisations with no prior history of default with the Group. There is low incidence of default in the top
50 customers. In respect of these customers credit risk is deemed lower on customers that contribute higher revenue due to an
increased dependency on the group’s services for business continuity, and because they are larger more secure businesses.
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 and the days past due. The historical loss rates will be
adjusted to reflect current and forward looking information on macroeconomic factors affecting the ability of customers to settle the
receivables.
63
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
16
Trade and other receivables (continued)
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
2020
%
0
2
5
100
2019
%
0
2
5
100
2020
£000
2,629
209
1,178
582
4,598
Credit loss allowance (net of
VAT)
2019
£000
3,468
751
1,130
657
2020
£000
-
4
49
466
2019
£000
-
13
38
546
6,006
519
597
The group is exposed to credit concentration risk with its largest customer comprising 37% (2019: 32%) of outstanding trade
receivables.
Specific provisions are also made based on known issues or changes in the lifetime expected credit loss. As at 31 December 2020,
trade receivables of £0.5 million (2019: £0.5 million) were impaired and fully provided and were mainly in respect of individually
impaired historic balances over 12 months old, where recovery activity is still in progress. The majority of the impairment relates
to specific customers in the ‘Other’ category, and the credit risk on other customers is considered very low due to the business-
critical nature of the Company’s services.
Movements on the Group provision for impairment of trade receivables are as follows:
At 1 January
Increase in impairment provision
Write offs
At 31 December
Group
2020
£000
597
142
(220)
519
2019
£000
725
30
(158)
597
Company
2020
£000
-
-
-
-
2019
£000
-
-
-
-
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, £5k (2019: £6k). 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, a provision of £1.7million for the expected credit loss was recognised
in the reporting period in respect to trading subsidiaries.
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; however, given the trading projections and
the level of provisions, there is currently no reasonably plausible scenario in which the provision would alter materially. A breakdown
of the balances is set out in note 29.
64
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
17
Cash and cash equivalents
Cash and cash equivalents
Group
Company
2020
£000
693
2019
£000
679
2020
£000
7
The table below shows the balance with the major counterparty in respect of cash and cash equivalents.
Group
Company
Credit rating
A
18
Trade and other payables
Non Current
Trade payables
Current
Trade payables
Amounts due to subsidiary undertakings
Other payables
Taxation and social security
Accruals
2020
£000
693
Group
2020
£000
1,584
1.584
5,603
-
220
1,491
1,173
8,487
2019
£000
679
2019
£000
-
-
5,624
-
408
225
1,305
7,562
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
Group
2020
£000
1,370
15
1,385
2019
£000
1,926
6
1,932
2020
£000
7
Company
2020
£000
-
-
518
1,204
42
-
66
1,830
Company
2020
£000
-
-
-
2019
£000
103
2019
£000
103
2019
£000
-
-
752
1,204
42
-
77
2,075
2019
£000
-
-
-
Income is deferred to the Statement of Financial Position when invoicing of revenue to customers occurs ahead of revenue
recognition in the Income Statement.
65
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
20
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 2019 position covered potential further costs which may have been incurred with the schemes.
Confirmation was received in 2020 that the scheme had been settled in full.
Property provision
The Group currently has some vacant office space. Provisions have been recognised to cover the rent, business rates and service
charges for the period that the office space is expected to be vacant. Provisions are calculated using the contracted rates of rents
and service charges on each individual lease arrangement. 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. Part of this provision will be utilised in 2021, the remaining provision
is not expected to be utilised until 2026. The onerous space provision is expected to be resolved in 2021.
Other provisions
Other provisions 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 onerous provisions
are expected to be resolved in 2022.
Group
Balance at 1 January 2020
Increase in year
Utilised
Balance at 31 December 2020
Non-current
Current
Company
Balance at 1 January 2020
Utilised
Balance at 31 December 2020
Non-current
Current
Tax planning
provision
£000
Property
provision
£000
Other
provision
£000
33
-
(33)
-
109
31
-
140
280
-
(109)
171
2020
91
221
312
Other
Provision
£000
50
-
50
2020
-
50
50
Total
£000
422
31
(142)
311
2019
230
192
422
Total
£000
50
-
50
2019
-
50
50
66
Notes to the Consolidated Financial Statements (continued)
21
Borrowings
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Non-current
Lease liabilities
Loan Notes
Current
Loan Notes
Lease liabilities
Group
2020
£000
859
13,988
2019
£000
1,859
12,474
Company
2020
£000
-
13,988
2019
£000
-
12,474
14,847
14,333
13,988
12,474
Group
2020
£000
100
431
2019
£000
-
1,766
531
1,766
Company
2020
£000
-
-
-
2019
£000
-
-
-
The carrying value is not materially different to the fair value of these liabilities.
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”). In February and March 2019, a further £4.7 million in
total of secured Loan Notes were issued. 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 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%.
On 1 June 2020, the Group completed the acquisition of Nimoveri Holdings Limited (see note 8), a small cloud and IT services
business, for a total consideration of £200,000; £100,000 paid in cash on completion and the issue of £100,000 0% loan notes by
IDE Group Limited, a Group company (the “Nimoveri Loan Notes”). The Nimoveri Loan Notes are secured over the assets of
Nimoveri Holdings Limited and redeemable on 31 December 2021.
67
Notes to the Consolidated Financial Statements (continued)
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
21
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
31 December 2019
Group
Less than one year
Between one and five years
Greater than five years
Gross
contractual
amounts
payable
2020
£000
522
836
242
1,600
Gross contractual
amounts
payable
2019
£000
1,945
1,686
644
4,275
Interest
2020
£000
91
201
18
310
Interest
2019
£000
179
407
64
650
Carrying
amount
2020
£000
431
635
224
1,290
Carrying
amount
2019
£000
1,766
1,279
580
3,625
The Company has no lease liabilities at 31 December 2020 (31 December 2019: 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 2020
Non-cash changes
Transfer from current to non-current
Lease liability adjustment due to change in
lease date
Loan note interest
Lease interest
Fees in respect of loan notes
Issue of deferred consideration loan notes
Cash flows
Lease interest paid
Repayment of lease liabilities
1,859
(1,000)
-
-
-
-
-
1,766
1,000
(487)
-
98
-
-
(98)
(1,848)
12,474
-
1,383
-
131
-
-
Balance at 31 December 2020
859
431
13,988
-
-
-
-
-
100
-
100
The total cash outflow for leases in the year including interest was £1,946,000 (2019: £2,709,000).
16,099
-
(487)
1,383
98
131
100
(98)
(1,848)
15,378
68
Notes to the Consolidated Financial Statements (continued)
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
21
Borrowings (continued)
Company
Balance at 1 January 2020
Non-cash changes
Loan note interest
Amortisation of loan fee
Fees in respect of loan notes
Interest and other charges
Non-current
Lease liabilities
£000
Current
Lease liabilities
£000
Non-current
Borrowings
£000
Total
Borrowings
£000
12,474
12,474
-
-
-
-
-
-
-
-
-
-
1,383
-
131
-
Balance at 31 December 2020
-
-
13,988
22
Convertible loan notes
Group and Company
Balance at 1 January 2020
Interest unwound
Balance at 31 December 2020
1,383
-
131
-
13,988
£000
1,803
180
1,983
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).
23
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
2020
£000
4,079
178
264
693
5,214
2019
£000
5,409
590
348
679
7,026
69
Notes to the Consolidated Financial Statements (continued)
23
Financial instruments by category (continued)
Company
Assets
Amortised cost:
Amounts due from subsidiary undertakings
Cash and cash equivalents
Total
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020 2019
£000
£000
16,137
7
18,940
103
16,144
19,043
The carrying amount of these assets is equivalent to their fair value. At 31 December 2020, trade receivables are reported net of
the expected credit loss provision of £0.5 million (2019: £0.6 million), amounts due from subsidiary undertakings are reported net
of the expected credit loss provision of £40.7 million (2019: £49 million)
Group
Liabilities at amortised cost
Trade payables
Accruals and other payables
Lease liabilities
Convertible loan notes
Loan Notes
Total
Company
Liabilities
Trade payables
Accruals and other payables
Intercompany payables
Convertible loan notes
Loan Notes
Total
2020
£000
7,187
1,393
1,290
1,983
14,088
2019
£000
5,624
1,714
3, 625
1,803
12,474
25,941
25,240
2020
£000
518
108
1,204
1,983
13,988
2019
£000
752
119
1,204
1,803
12,474
17,801
16,352
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.
70
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
24
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.
The Group has no borrowings at variable rates which would expose the Group to cash flow interest rate risk. Borrowings issued at
fixed rates expose the Group to fair value interest rate risk. The Group does not enter into derivatives.
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 £0.5 million (2019: £0.6 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 parent company’s operations expose it to the following risks:
interest rate risk
The Company pays interest on its loan note borrowings. These are at fixed rates and therefore there is no exposure to cash flow
interest rate risk. Borrowings issued at fixed rates expose the Company to fair value interest rate risk. The Company does not enter
into derivatives.
Credit risk
The Company is exposed to credit risk mainly in respect of inter-company receivables. Details of the approach to credit loss
provisions in respect of inter company receivables is set out in note 16 and note 29.
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 2020
Trade and other payables
Lease liabilities
Convertible loan notes
Loan Notes
Within 1 year
£000
1-2 years
£000
More than
2 years
£000
6,546
521
-
100
7,167
2,034
215
-
-
2,249
-
864
1,983
13,988
16,835
Total
£000
8,580
1,600
1,983
14,088
26,251
71
Notes to the Consolidated Financial Statements (continued)
24
Financial risk management (continued)
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Group
At 31 December 2019
Trade and other payables
Lease liabilities
Convertible loan notes
Loan Notes
Company
At 31 December 2020
Trade and other payables
Intercompany payables
Convertible loan notes
Loan Notes
Company
At 31 December 2019
Trade and other payables
Intercompany payables
Convertible loan notes
Loan Notes
Within 1 year
£000
1-2 years
£000
More than
2 years
£000
7,337
1,945
-
-
9,282
--
619
-
-
619
-
1,711
1,803
12,474
15,988
Total
£000
7,337
4,275
1,803
12,474
25,889
Within 1 year
£000
633
1,204
-
-
1-2 years
£000
-
-
-
-
More than
2 years
£000
-
-
1,983
13,988
Total
£000
633
1,204
1,983
13,988
1,837
-
15,971
17,808
Within 1 year
£000
871
1,204
-
-
1-2 years
£000
-
-
-
-
More than
2 years
£000
-
-
1,803
12,474
Total
£000
871
1,204
1,803
12,474
2,075
-
14,277
16,352
25
Capital risk management
The Group’s objectives when managing capital are 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 2020 the ratio was 28.9. Net debt as at 31 December 2020 is calculated as total bank borrowings, as at 31
December 2020 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.
72
Notes to the Consolidated Financial Statements (continued)
26
Called up share capital – Group and Company
Share capital
In issue at 31 December – fully paid
Allotted, called up and fully paid
Ordinary shares of 2.5p
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
2020
Number
2019
Number
400,802,032
400,802,032
2020
£
2019
£
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.
Dividends
The Directors do not propose a dividend for the year ended 31 December 2020 (2019: £nil).
27
Share-based payment
The share-based payment charge comprises:
Equity-settled share-based charges arising from warrants
Total charge
2020
£000
32
32
2019
£000
86
86
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.
The remaining options under these schemes all lapsed in the 2019 year.
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.
73
Notes to the Consolidated Financial Statements (continued)
27
Share-based payment (continued)
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
MXC warrants
CSOP/ESS
number of
options
Total
number of
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)
Options/warrants granted at 1 January 2020
Options lapsed in year
20,040,101
-
Total options/warrants granted at 31 December 2020
20,040,101
-
-
-
20,040,101
-
20,040,101
Options awarded under the ESS/ 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 ESS/ 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
2020
Number
20,040,101
-
-
2020
WAEP
£0.17
-
-
2019
Number
20,128,989
-
(88,888)
Closing balance
20,040,101
£0.17
20,040,101
2019
WAEP
£0.17
-
£0.30
£0.17
74
Notes to the Consolidated Financial Statements (continued)
27
Share-based payment (continued)
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
There were 10,036,456 warrants exercisable at 31 December 2020 (2019: 10,036,456).
The exercise price for warrants outstanding at the end of the year ranges from £0.025 - £0.325 (2019: 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 and 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 warrants granted is estimated at the date of grant using a Black Scholes model to take into
account market conditions attaching to the options granted.
Volatility of 146% was calculated based upon the change in the daily share price of the company over the previous 24 months.
The risk free rate of return of -0.14% is the yield of zero-coupon UK government bonds of a term consistent with the assumed life
of the warrant.
The total fair value of the award is charged to the income statement over the vesting period of the warrants.
The amount charged to the income statement in respect of the share-based payments was £32,000 (2019: £86,000).
28
Pensions
The Group operates a defined contribution pension schemes for eligible employees. The charge for the year ended 31 December
2020 relating to continuing operations is £649k (continuing operations 2019: £599k). An amount of £64k is included in creditors
being outstanding contributions at 31 December 2019 (2019: £53k).
75
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Consolidated Financial Statements (continued)
29
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 £10k (2019: £19.5k).
Ian Smith, Executive Director at 31 December 2020, 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 2020.
During the year, the Group and Company paid MXC Capital Markets LLP, a subsidiary of MXC, corporate finance advice and other
services amounting to £29,000 (2019: £47,000). The balance owed to MXC Capital Markets LLP as at 31 December 2020 was
£55,800 (2019: £57,000).
In addition, the Group paid MXC Advisory Limited, a subsidiary of MXC, fees of £242,505 (2019: £229,259) 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
2020. The balance owed to MXC Advisory Limited as at 31 December 2020 was £349,923 (2019: £345,854).
The Group also paid MXC Guernsey Limited, a subsidiary of MXC Capital Limited, fees of £nil (2019: £239,799) 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 2020 was £29,560 (2019: £239,799).
At 31 December 2020, in addition to owning shares in the Company, MXC Capital Limited held warrants over 20,040,101 shares
in the Company (2019: 20,040,101 shares).
During the year, Kestrel Partners LLP invoiced the Company £30,000 (2019: £30,092) in respect of the services of Sebastian
White as Non-Executive Director (2019: Max Royde and Sebastian White as Non-Executive Directors). The balance owed to
Kestrel Partners LLP as at 31 December 2019 was £6,000 (2019: £6,030)
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
2020
£000
53,652
11,027
1,975
151
3
9
52
1
2019
£000
53,647
11,680
2,366
151
3
9
47
1
66,870
67,904
In the prior year 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. In the current year a further provision was made for £1.7m in respect of IDE the Connect receivable.
Payables
Cupid.com inc
Castle Digital services inc
Selection Services Limited
Hooya Digital Limited
Connexions4London Limited
Aggregated Telecom Limited
Total
2020
£000
1,033
61
61
42
6
1
1,204
2019
£000
1,033
61
61
42
6
1
1,204
76
IDE Group Holdings plc
Annual report and financial statements
Year ended 31 December 2020
Notes to the Consolidated Financial Statements (continued)
30
Post balance sheet events
Covid 19
We have now operated in a covid environment for the majority of 2020 and the entirety of 2021 to date. We have not seen significant
operating issues in having our staff working remotely, and indeed we have successfully amended our working practices to adapt
to the changed landscape. Demand for our managed services remains strong and we have experienced strong growth as a result
in 2021. We have therefore not experienced any adverse effect on asset values and look to the future with optimism.
On 7 June 2021 £2,397,519 of the unsecured convertible loan notes issued in August 2018 were converted into 95,900,760
Ordinary shares of 2.5p each, at a conversion price of 2.5p per share.
77