Ideagen plc Annual Report and Accounts for the Year Ended 30 April 2014 Registration number: 02805019 Welcome to Ideagen • • Ideagen is a leading supplier of Information management software to highly regulated industries The Group has established a global business supplying Governance, Risk and Compliance (GRC) solutions predominantly to the Healthcare, Complex Manufacturing, Banking and Finance and Energy Sectors. • Our Pentana Disclose™ software is used by 18 of the top 25 UK accounting firms and our compliance, internal audit and risk software products are used by a growing number of national and global organisations. • • • Ideagen has established a significant footprint in the UK Healthcare sector. The Group is in a strong position to take advantage of the opportunities arising following the dismantling of the NHS National Programme for IT and the increasing NHS focus on both improving healthcare governance whilst delivering cost savings in a drive for a paperless NHS. The Group’s suite of software, which is already in use at a number of hospitals in the UK, is focused on providing a clinical enterprise document repository, electronic forms and a clinical portal to provide a single patient record which can be viewed through mobile solutions. The Group has grown both organically and through a number of strategic acquisitions and this year’s results represent the fifth consecutive year of growth in revenue, adjusted EBITDA and adjusted earnings per share. * Before share-based payments, costs of acquiring businesses and other exceptional items **Before share-based payments, amortisation of acquisition intangibles, costs of acquiring businesses and other exceptional items Contents Financial and Operational Highlights 2 Consolidated Statements of Changes in Equity Strategic Report Directors’ report 3 Consolidated Statement of Cash Flows 8 Company Statement of Financial Position Statement of Directors’ Responsibilities 10 Company Statements of Changes in Equity Independent Auditor’s Report 11 Company Statement of Cash Flows Consolidated Statement of Comprehensive Income 13 Notes to the Financial Statements 16 18 19 21 23 24 Consolidated Statement of Financial Position 14 Page 1 Ideagen plc Financial and Operational Highlights Financial Highlights • Revenue up 38% to £9.0m (2013: £6.5m) • Pro-forma organic revenue growth of 13%*** • Adjusted EBITDA* up 39% to £2.8m (2013: £2.0m) • Adjusted diluted EPS** up by 12% to 1.67 pence (2013: 1.49 pence) • Cash generated by operations of £1.7m (2013: £2.2m) • Net cash at year end of £4.0m (2013: £6.4m) • Proposed final dividend of 0.1 pence per share o making a total of 0.15 pence per share for the year Operational Highlights • Acquisition of MSS strengthening the Group’s position in the UK Healthcare sector • Acquisition of Pentana Ltd strengthening the Group’s Governance, Risk and Compliance (GRC) capability • Launch of dart/KW, a document focused Patient Information solution • Significant contract wins at Central Manchester University, Heart of England and Royal Wolverhampton NHS Trusts • Strong contribution from Pentana in the second half of the financial year • Strong performance within the life sciences market • Implementation of single Finance and CRM systems across the Group • Post year end acquisition of EIBS underpinning the Group’s portal and web product roadmap * Before share-based payments, costs of acquiring businesses and other exceptional items **Before share-based payments, amortisation of acquisition intangibles, costs of acquiring businesses and other exceptional items *** based on a comparison of revenue in the year under review with pro-forma revenue for the comparative period adjusted for acquisitions and excluding revenue from the VA Prism contract which ended in 2013 Page 2 Ideagen plc Strategic Report for the year ended 30 April 2014 Chief Executive’s Review I am pleased to announce our results for the year ended 30 April 2014. Overall, the year saw further transformation of the Group through continued organic revenue and profit growth and two further acquisitions. During the year, the Group invested in on-going product development, sales resource and additional management whilst delivering revenue growth of 38%, adjusted EBITDA* growth of 39% and adjusted EPS** growth of 12%. The focus of the Group remains the design and supply of Information Management software to organisations that operate within highly regulated industries. The Group has established a global business supplying Governance, Risk and Compliance (GRC) solutions predominantly to the Healthcare, Complex Manufacturing, Banking and Finance and Energy Sectors. The Group has in parallel leveraged its core technology and has acquired capability to build a UK business supplying content and clinical management solutions predominantly to the NHS. Each of the Group’s chosen markets require robust information systems and exhibit a high consequence of error should data and processes be compromised. In the year to 30 April 2014, the Group generated organic growth of 13% driven by a significant increase in revenues within the Healthcare sector which grew organically by 16%. Prior to the acquisition of Plumtree in December 2012, the Directors had identified the NHS as a growth opportunity for the Group. To maximise this opportunity, during the year the Group released a new product, dart/KW, an enterprise scale Patient Information solution, and transferred expert sales and technical resources from the Group’s commercial team into the NHS team. The Group has since recruited additional sales resources to ensure that we continue our growth within the commercial Governance Risk and Compliance sector which includes Banking and Finance, Life Sciences, Manufacturing and Energy, which delivered solid organic growth of 9%. In July 2013, the Group acquired MSS Management Systems Services Ltd (“MSS”), a supplier of Emergency Department software solutions. This acquisition has greatly enhanced the Group’s value proposition within healthcare, adding 10 acute Emergency Department customers. In November 2013 the Group acquired Pentana Ltd, a supplier of Risk and Audit solutions adding a further 350 customers and providing an entry point into the Banking and Finance Sector. The Group continues to benefit from robust recurring revenues and has invested in additional resources to manage the customer base resulting in a strong maintenance and support renewal rate. Recurring revenues now represent 55% of our software and services revenue and cover 86% of the fixed cost base. The strong cash generated from operations in the second half of the Group's financial year to 30 April 2013 (126% of adjusted EBITDA) meant lower cash generated in the first half of this year. However cash generated in the second half of the year was robust giving a total cash from operations for the year of 60% of adjusted EBITDA. The Group's balance sheet remains strong with cash balances of £4.0m at year end. The Group has no debt. Post year end, in June 2014, the Group completed the acquisition of EIBS Ltd (“EIBS”), a supplier of Intranet, Portal, and Mobile solutions. EIBS has annual revenues of approximately £1.4m of which £0.9m is recurring, and in excess of 140 customers including 40 NHS Trusts. The technology that EIBS has developed will underpin the Group’s portal and web product roadmap whilst adding a valuable customer base. * Before share based payments, costs of acquiring businesses and other exceptional items ** Before share-based payments, amortisation of acquisition intangibles, costs of acquiring businesses and other exceptional items Governance, Risk and Compliance (GRC) For our customers, GRC represents a key corporate initiative for improving governance through more effective compliance and a clearer understanding of the impact of risk on business performance. The Group's expertise within GRC is the development and implementation of software tools that enable our customers to identify, assess and prioritise risk and to manage information in order to comply with regulations. Increasingly organisations are obliged to demonstrate compliance with industry standards, regulations and KPIs which acts as a compelling driver for investment in the Group’s products. The Directors believe that the foundation of any robust GRC system is the effective management of unstructured and semi-structured information such as documents, electronic forms and content, email, video and scanned images which accounts for approximately 80 per cent. of all data within an organisation. Page 3 Ideagen plc Strategic Report for the year ended 30 April 2014 (continued) The management of such information has been a core competence of the Group for a number of years and, following the acquisition of Pentana, we can now combine audit and risk capability together with formal document control and business process management in the areas of competency, incident reporting and corrective action planning. This provides the Group with a broader integrated GRC proposition which we believe will be of interest to our enlarged customer base. The Group’s capability within GRC can be divided into four areas: 1. Risk Management Identification and mitigation of risks is of increasing importance in almost every organisation, but given recent disasters and legal actions, having a reliable system of risk management is particularly important in the finance and energy sectors. The Group has been successfully supplying software to these sectors for many years. Customers include banks which need to demonstrate a system of operational risk management for compliance with Basel II and energy companies that use the software to minimise risks in both on-shore and off-shore operations. Ideagen software includes libraries of common risks for consideration and provides a structured method of risk reviews to ensure a fully documented and controlled approach to assessing and treating risk. Risk management includes the need to document policies and procedures, ensuring that they are fully understood by staff. For this reason, there are significant benefits for clients in using the Group’s Risk and Compliance solutions. 2. Standards/Quality Management The Group’s solutions are used by companies to help them maintain compliance with internationally recognised standards and internal business processes. There are over 19,000 ISO standards which are published by the International Organisation for Standardisation. Whilst the Group’s software covers a number of specific standards relating to health and safety, information security and environmental compliance, the main standards which the Group’s products help customers comply with are based around ISO9000 Quality Management. The ISO9000 family of standards are related to quality management systems and are designed to ensure that organisations meet the needs of customers and other stakeholders. In the Directors’ experience, successful Quality Management can improve business performance, often driving a positive effect on investment, market share growth, sales growth, margin expansion, increased competitive advantage and the avoidance of litigation. Any organisation which has implemented a standards based quality management system, in the Directors’ opinion, represents a potential customer for the Group’s products. More than one million organisations worldwide are independently certified for ISO9001 suggesting that this standard is one of the most widely used management tools in the world today. Additionally, there are many industry specific standards, which are often based on ISO, which the Group’s products can help companies to manage in an effective manner. Industries such as Pharmaceuticals, Aerospace and Defence, Healthcare and Manufacturing represent key focus areas for the Group. 3. Audit Management As the GRC “third line of defence” after risk management and policy oversight, audit teams and the Audit Committees to which they report have a vital role in providing continued assurance on the governance of organisations. In providing that assurance, auditors of global organisations have to operate in situations where the technology may be slow or only allow occasional on-line working. The Group’s audit management software uses the latest technologies to ensure that auditors can keep working effectively in global environments, while allowing central management reporting and review of their work on a single global database. 4. Audit Compliance With its focus on the audit profession, Pentana has brought to the Group an added dimension in audit and financial regulatory compliance. 18 of the top 25 UK accounting firms use the Pentana Disclose™ software to ensure that their client’s financial statements conform to UK disclosure requirements and this market position is also reflected in use of the software for compliance with International Financial Reporting Standards internationally. Pentana software is also used by audit regulators around the world to ensure that accounting firms of all sizes comply with the International Standards on Auditing. Page 4 Ideagen plc Strategic Report for the year ended 30 April 2014 (continued) Content and Clinical Solutions The Directors believe that the UK healthcare market represents a significant growth opportunity for the Group following the dismantling of the NHS National Programme for IT (“NPfIT”). Many of the current IT drivers within the NHS are focused on improving healthcare governance through the implementation of more robust Information Management systems with the objective of improving service levels and patient care. Through the acquisitions of Plumtree and MSS, the Group has established a significant footprint in the UK Healthcare sector. This has been further augmented post year end by the acquisition of EIBS in June of this year. The failure of the National Programme for IT to deliver an integrated patient records solution has provided an opportunity for agile vendors to provide point solutions to address specific information challenges. This opportunity has been confirmed recently by Jeremy Hunt, Minister of State for Health, who has set objectives for a paperless NHS by 2018 with a budget being made available to achieve this.This strategy is supported by a funded programme aimed at improving information governance and reducing patient risk whilst delivering cost savings through the implementation of a digital patient record. The Directors estimate that approximately only 25% of the 192 NHS Trusts in the United Kingdom have implemented a trust-wide Patient Document Repository and therefore believe that there is a significant market opportunity over the coming years. To date the Group has supplied ten NHS Trusts in England and Scotland with a trust-wide solution to integrate patient documents across departments. Typically these solutions represent a major long term investment for a Trust and represent a significant increase in transaction value for the Group. Following the acquisition of EIBS, the Group now has a further opportunity to supply Trust wide Information Portals to provide a single view of Patient Information fed from multiple data sources. The Group is therefore now focused on providing digitised solutions in six key areas: 1) Clinical Enterprise Document Repository 2) Clinical Electronic Forms and Workflow 3) Clinical Enterprise Portal to provide a single patient record 4) Order communications to provide automated ordering of services between GPs and Hospitals 5) Emergency Department Management 6) Mobile Solutions The primary market for these solutions are the 166 Acute Trusts within England, the 14 Regional Health Boards in Scotland, 7 Local Health Boards in Wales and 5 Health Trusts in Northern Ireland. The Group has also identified an emerging opportunity for Order Communications software at hospitals in the Benelux region and private laboratories within the UK. Staffing and Infrastructure The Group has implemented a fully integrated Group structure with functions covering Sales and Marketing, Customer Services and Support, Research and Development and Finance and Administration and a member of each function is represented on the executive management team. At 30 April 2014 the Group had 98 employees across the following functions: Sales and Marketing – 23, Customer Services and Support – 34, Research and Development – 27, Finance and Administration – 11, Executive Directors - 3. It is envisaged that headcount will increase over the coming year to generate and support future growth. The acquisition of EIBS has added a further 32 employees to the Group. At year end the Group operated from 6 locations: Nottingham, Matlock, Welwyn, Bristol, Sittingbourne and Schaumburg (USA). The Group has outsourced the delivery of our SaaS platform to Iomart, a provider of Data Centre services. David Hornsby Chief Executive 3rd October 2014 Page 5 Ideagen plc Strategic Report for the year ended 30 April 2014 (continued) Financial Review of the year Results Revenue for the year ended 30 April 2014 increased by 38% to £9.0m (2013: £6.5m). Within this, underlying organic revenue growth was 13% based on a comparison of revenue in the year under review with pro-forma revenue for the comparative period adjusted for the Plumtree, MSS and Pentana acquisitions and excluding revenue generated in either period from the Prism contract with the Department of Veterans Affairs in the United States which ended in 2013. Adjusted EBITDA* increased by 39% to £2.81m (2013: £2.02m) with the adjusted EBITDA margin maintained at 31% of revenue. Amortisation of acquisition intangibles of £0.97m (2013: £0.98m) represents the majority of the total depreciation and amortisation charge of £1.22m (2013: £1.12m). The increase in share-based payment charges (£0.29m vs £0.18m) was due to the share options granted in January 2013 which were at higher exercise prices than previous grants of share options. The adjusted group tax charge was £0.41m (2013: £0.42m). This has been adjusted to exclude the deferred tax credits associated with the amortisation of acquisition intangibles, share based payment charges and the impairment of an acquisition intangible in 2013. The adjusted group tax charge represents 16% (2013: 23%) of adjusted Profit Before Tax of £2.6m (2013: £1.9m), benefiting from a change in the mix of profits earned towards the UK and away from the higher corporate tax rates in the United States. As a result of the above, adjusted diluted earnings per share** increased by 12% to 1.67p (2013: 1.49p). Statement of financial position The Group’s financial position has continued to strengthen with net assets increasing to £13.4m (2013: £12.3m). Intangible assets increased to £11.8m (2013: £7.7m) following the acquisitions of MSS and Pentana during the year and the ratio of intangible assets to adjusted EBITDA was 4.2 (2013: 3.8). Net current assets were £2.60m (2013: £4.95m). Cash flow Cash balances were £4.0m (2013: £6.4m) following the acquisitions of MSS in July 2013 for initial net cash consideration of £0.59m and Pentana in November 2013 for initial net cash consideration of £2.26m and the payment of the Group’s maiden dividend in March 2014. Cash generated by operations amounted to £1.7m (2013: £2.2m). The strong cash generated from operations in the second half of the year ended 30 April 2013 (126% of adjusted EBITDA*) had an impact on cash generated in the first half of this year. However cash generated from operations in the second half of this year was robust resulting in total cash generated by operations for the year of 60% of adjusted EBITDA* (2013: 111%). * Before share based payments, costs of acquiring businesses and other exceptional items ** Before share-based payments, amortisation of acquisition intangibles, costs of acquiring businesses and other exceptional items Page 6 Ideagen plc Strategic Report for the year ended 30 April 2014 (continued) Key Performance Indicators Key financial performance indicators used by management are as follows: Performance indicator 2014 2013 Method of measurement Revenue for the year (£m) Adjusted EBITDA (£m) 9.0 2.8 6.5 2.0 Gross margin 84.1% 86.7% EBITDA adjusted for business acquisition costs, share-based payment charges and other exceptional items Gross profit as a percentage of Revenue Adjusted EBITDA margin 31.3% 30.9% Adjusted EBITDA as a percentage of Revenue Principal risks and uncertainties Risk management is an important part of the management process throughout the Group and a policy of continuous improvement is adopted in assessing the adequacy of the internal system of controls. The Group’s operations expose it to a variety of risks including strategic, economic, operational and financial. The management of the group monitors the exposures to these risks in order to limit the adverse effects of these risks on the financial performance of the Group. Strategic. The Group operates in a dynamic market and constantly seeks to ensure the solutions it offers are competitive. Economic. A worsening of the economic climate may lead to reduced spend on IT systems and services by customers. However, the Group has products and solutions which can help customers lower their cost base in difficult trading conditions and to some extent address compliance issues which need to be covered even in an economic downturn. Operational. The Group’s most significant assets are the intellectual property developed by the Group, the intangible assets acquired with business acquisitions and the employees of the Group. The Group’s quality procedures seek to ensure that products are reliable and of high quality. Financial. Management actively review the cash flow position of the Group both in the short and medium term and maintain a level of cash and debt finance facilities designed to ensure that the Group has sufficient funds for its operations. The greater part of the Group’s revenues and costs are denominated in sterling however the Group is exposed to foreign exchange risk, principally through profits and cash inflows generated in US dollars by the Group’s US subsidiary. The foreign exchange risk is partly addressed by maximising costs denominated in US dollars. Management closely monitors exchange rate fluctuations and will use forward contracts when considered to be appropriate to reduce this risk. The Group implements appropriate credit checks on potential customers before sales are made. The amount of exposure to individual customers is subject to a limit which is regularly reassessed. Approved by the Board and signed on its behalf by ……………………… Graeme Spenceley Director and Company Secretary 3rd October 2014 Page 7 Ideagen plc Directors’ Report for the year ended 30 April 2014 The directors are pleased to present their report and the audited Group financial statements for the year ended 30 April 2014. Results and dividends A review of the results for the year and the financial position of the Group is included in the Strategic Report on pages 3 to 7 and details are set out in the financial statements on pages 13 to 56. A maiden interim dividend of 0.05 pence per equity share amounting to £61,000 was paid during the year. The directors propose a final dividend in respect of the year of 0.1 pence per share payable on 12th November 2014 to shareholders on the register on 24th October 2014. This is subject to approval by shareholders at the forthcoming Annual General Meeting. Directors The directors who held office during the year were as follows: - - - - - Jonathan P Wearing (Non-Executive Chairman) David R K Hornsby (Chief Executive Officer) Graeme P Spenceley (Finance Director) Les D Paul (Chief Technology Officer) (resigned 31 July 2014) Alan M Carroll (Non-Executive Director) Directors’ indemnity and insurance The Group maintained insurance cover during the year for its Directors and Officers and those of subsidiary companies under a Directors and Officers liability insurance policy against liabilities which may be incurred by them while carrying out their duties. Events after the end of the reporting period Acquisition of a business On 24 June 2014, Ideagen plc acquired the whole of the issued share capital of EIBS Limited (‘EIBS’), a company domiciled in England. EIBS has developed proprietary Information Portal, Internet and Mobile software solutions for the NHS and numerous public sector, not for profit and commercial organisations.The acquisition of EIBS is expected to enhance the Group’s existing business through the addition of strong mobile and portal intellectual property and the client base of EIBS. The total consideration for the acquisition of EIBS was £1,550,000 which was paid in cash on completion of the acquisition. No deferred on contingent consideration is payable. The cash balance acquired in EIBS at the date of acquisition was £301,000 and accordingly the net cash outflow on acquisition of EIBS was £1,249,000. With the exception of the cash balance acquired in EIBS, the initial review of the fair values of other separable assets and liabilities acquired has not yet been completed and accordingly information has not been presented on the fair values of assets and liabilities acquired, including the recoverability of receivables and the fair value of acquired goodwill. The costs of the acquisition of £73,000 will be expensed within a separate line in the Group Statement of Comprehensive Income for the year ending 30 April 2015. Disclosure of information on revenue and profit or loss for the combined entity as though the acquisition of EIBS had been completed on 1 May 2013 is impracticable as the accounting reference date for EIBS was previously 31 July and it did not prepare comparable revenue and profit information on a monthly basis. Issues of ordinary shares In order to satisfy the exercise of share options, the company issued 500,000 shares at 2.5 pence each on 15 May 2014, 129,100 shares at 28 pence on 2 June 2014 and 333,333 shares at 22.38 pence on 7 August 2014. Page 8 Ideagen plc Directors’ Report for the year ended 30 April 2014 (continued) Auditor Baker Tilly Audit Limited (formerly RSM Tenon Audit Limited) ceased trading on 31 March 2014. The Directors, having been notified of the cessation of trade of Baker Tilly Audit Limited, appointed Baker Tilly UK Audit LLP as auditor on 1 April 2014 to fill the casual vacancy. In accordance with the Companies Act 2006 a resolution proposing the appointment of Baker Tilly UK Audit LLP as auditor will be put to the members at the forthcoming Annual General Meeting. Going concern The Group’s business activities and the factors likely to affect its future development, performance and position together with a review of the financial position of the Group, its cash flows and liquidity position are set out in the Strategic Report on pages 3 to 7. The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements. Current Trading & Outlook The Group has significant contracted work in progress, a growing recurring revenue base and a strong pipeline of new business. The NHS has been, and remains, particularly strong for the Group and we are also encouraged with the increase in the new business pipeline within our commercial sector as industry regulations continue to drive demand for our software. The Board is therefore confident that the Group will continue to deliver profitable growth this year and beyond. Approved by the Board and signed on its behalf by: ......................................... Graeme Spenceley Director & Company Secretary 3rd October 2014 Page 9 Ideagen plc Statement of Directors’ Responsibilities The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards adopted for use in the European Union and applicable law. Under company law the directors must not approve 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 and the company for that period. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • • state whether applicable Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the group’s website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions. In so far as the directors, individually, are aware: • • there is no relevant audit information of which the company's auditor is unaware; and the directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditor is aware of that information. Page 10 Independent Auditor’s Report to the Members of Ideagen plc (Registration number: 02805019) We have audited the group and parent company financial statements (“the financial statements”) which comprise the Group and Parent Company Statements of Financial Position, the Group Statement of Comprehensive Income, the Group and Parent Company Statements of Cash Flows, the Group and Parent Company Statements of Changes in Equity and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As more fully explained in the Statement of Directors’ Responsibilities set out on page 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors. Scope of the audit A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at http://www.frc.org.uk/auditscopeukprivate Opinion on financial statements In our opinion: • • • • the financial statements give a true and fair view of the state of the group’s and the parent’s affairs as at 30 April 2014 and of the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the Companies Act 2006; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Opinion on other matter prescribed by the Companies Act 2006 In our opinion 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. Page 11 Independent Auditor’s Report to the Members of Ideagen plc (Registration number: 02805019) Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • • • adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches not visited by us; or the 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. Richard Eccles (Senior Statutory Auditor) For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor 7th Floor, City Gate East Tollhouse Hill Nottingham NG1 5FS 3rd October 2014 Page 12 Ideagen plc Group Statement of Comprehensive Income for the Year Ended 30 April 2014 Revenue Cost of sales Gross profit Operating costs Profit from operating activities before depreciation, amortisation, share-based payment charges and exceptional items Depreciation and amortisation Costs of acquiring businesses Share-based payment charges Impairment of acquisition intangible Profit / (loss) from operating activities Movement in fair value of contingent consideration Finance income / (costs) Profit / (loss) before taxation Taxation Profit / (loss) for the year 2014 2013 Note £’000 £’000 2 3 3 18 21 3,9 15 5 3,7 8,970 6,514 (1,425) (869) 7,545 5,645 (4,733) (3,629) 2,812 2,016 (1,220) (1,117) (246) (285) (88) (178) - (2,086) 1,061 (1,453) - 10 150 (14) 1,071 (1,317) (198) 873 512 (805) Other comprehensive income Items that may be subsequently reclassified to profit or loss: Exchange differences on translating foreign operation (10) (1) Total comprehensive income for the year attributable to the owners of the parent company 863 (806) Earnings per share pence pence Basic Diluted 8 8 0.72 0.68 (0.87) (0.87) The notes on pages 24 to 56 form an integral part of these financial statements. Page 13 Ideagen plc (Registration number: 02805019) Group Statement of Financial Position at 30 April 2014 Assets and liabilities Non-current assets Intangible assets Property, plant and equipment Deferred income tax assets Current assets Inventories Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Contingent consideration on business combinations Current income tax liabilities Deferred revenue Deferred consideration on business combinations Notes 2014 £’000 2013 £’000 9 10 7 12 13 14 15 16 17 11,807 7,716 166 173 199 206 12,146 8,121 389 3,637 4,011 8,037 - 1,972 6,372 8,344 2,421 1,636 327 283 - 311 2,356 1,345 50 100 5,437 3,392 Non-current liabilities Deferred income tax liabilities 7 1,377 796 Net assets 13,369 12,277 The notes on pages 24 to 56 form an integral part of these financial statements. Page 14 Ideagen plc (Registration number: 02805019) Group Statement of financial position as at 30 April 2014 (continued) Equity Issued share capital Share premium Merger reserve Share-based payments reserve Retained earnings Notes 19 19 19 21 2014 £’000 2013 £’000 1,219 6,870 1,167 596 3,520 1,217 6,867 1,167 313 2,706 Foreign currency translation reserve (3) 7 Equity attributable to owners of the parent 13,369 12,277 Approved and authorised for issue by the Board on 3rd October 2014 and signed on its behalf by: ......................................... …………………………………… David Hornsby – Director Graeme Spenceley – Director The notes on pages 24 to 56 form an integral part of these financial statements. Page 15 Ideagen plc Group statement of changes in equity for the year ended 30 April 2014 Share capital Share premium Merger reserve Share-based payments reserve Retained earnings Foreign currency translation reserve Total attributable to owners of the parent £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 May 2013 1,217 6,867 1,167 313 2,706 Shares issued under share option scheme (note 19) Profit for the year Other comprehensive income for the year Share-based payments (note 21) Transfer on exercise of share options (note 21) Equity dividends paid (note 20) 2 - - - - - 3 - - - - - - - - - - - - - - 285 (2) - - 873 - - 2 (61) 7 - - (10) - - - 12,277 5 873 (10) 285 - (61) Balance at 30 April 2014 1,219 6,870 1,167 596 3,520 (3) 13,369 The notes on pages 24 to 56 form an integral part of these financial statements. Page 16 Ideagen plc Group statement of changes in equity for the year ended 30 April 2013 Share capital Share premium Merger reserve Share-based payments reserve Retained earnings Foreign currency translation reserve Deferred equity consideration reserve Total attributable to owners of the parent £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 May 2012 779 1,408 1,020 138 753 Share placing (note 19) 315 5,685 Share placing issue costs Shares issued as part consideration on a business combination (note 19) Shares issued to satisfy contingent consideration on business combinations (note 19) Shares issued under share option scheme (note 19) Loss for the year Other comprehensive income for the year Share-based payments (note 21) Transfer on exercise of share options (note 21) Realisation of merger reserve on impairment of intangibles (note 19) Reduction in deferred equity consideration reserve (note 19) - 45 76 2 - - - - - - (229) - - 3 - - - - - - - - 855 711 - - - - - (1,419) - - - - - - - - 178 (3) - - - - - - - (805) - - 3 1,419 1,336 Balance at 30 April 2013 1,217 6,867 1,167 313 2,706 8 - - - - - - (1) - - - - 7 1,680 5,786 - - - (344) - - - - - - (1,336) 6,000 (229) 900 443 5 (805) (1) 178 - - - - 12,277 The notes on pages 24 to 56 form an integral part of these financial statements. Page 17 Ideagen plc Group Statement of Cash Flows for the year ended 30 April 2014 Cash flows from operating activities Profit/(loss) for the year Depreciation of property, plant and equipment Amortisation of intangible non-current assets Loss/(profit) on disposal of property, plant and equipment Share-based payment charges Finance (income)/costs recognised in profit or loss Taxation charge/(credit) recognised in profit or loss Business acquisition costs in profit or loss Impairment of intangible assets Net foreign exchange loss/(gain) in profit or loss Gain recognised on fair value of contingent consideration (Increase)/decrease in inventories (Increase)/decrease in trade and other receivables Increase/(decrease) in trade and other payables Increase/(decrease) in deferred revenue liability Cash generated by operations Interest received/(paid) Income tax paid Business acquisition costs paid AIM flotation costs paid Net cash generated by operating activities Cash flows from investing activities 2014 2013 Note £’000 £’000 10 9 21 5 7 18 15 873 110 1,110 2 285 (10) 198 246 - 10 - (389) (1,154) 392 14 1,687 5 (281) (180) - 1,231 (805) 57 1,060 (15) 178 14 (512) 88 2,086 (13) (150) - (319) 628 (59) 2,238 (12) (257) (97) (247) 1,625 Net cash outflow on acquisition of businesses net of cash acquired 18 (2,844) (1,413) Payments of deferred consideration on business combinations Payments for development costs Payments for property, plant and equipment Proceeds of disposal of property, plant and equipment (106) (525) (65) 24 (506) (350) (122) 21 Net cash used in investing activities (3,516) (2,370) Cash flows from financing activities Proceeds from placing of equity shares Payments for share issue costs Proceeds from issue of shares under the share option schemes Equity dividends paid Repayment of borrowings Net cash (used)/generated by financing activities 19 19 - - 5 (61) - (56) Net (decrease)/increase in cash and cash equivalents during the year (2,341) Cash and cash equivalents at the beginning of the year Effect of exchange rate changes on cash balances held in foreign currencies Cash and cash equivalents at the end of the year 25 6,372 (20) 25 4,011 6,000 (229) 5 - (168) 5,608 4,863 1,496 13 6,372 The notes on pages 24 to 56 form an integral part of these financial statements. Page 18 Ideagen plc (Registration number: 02805019) Company Statement of financial position as at 30 April 2014 Assets and liabilities Non-current assets Intangible assets Property, plant and equipment Investments in subsidiaries Deferred income tax asset Trade and other receivables Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Contingent consideration on business combinations Deferred revenue Deferred consideration on business combinations Notes 2014 £’000 2013 £’000 9 10 11 7 13 13 14 15 17 316 24 200 36 9,994 6,815 137 - 186 167 10,471 7,404 1,408 1,816 3,224 1,210 327 141 50 1,728 600 4,264 4,864 373 - 139 100 612 Net assets 11,967 11,656 The notes on pages 24 to 56 form an integral part of these financial statements. Page 19 Ideagen plc (Registration number: 02805019) Company Statement of financial position as at 30 April 2014 (continued) Equity Issued share capital Share premium Merger reserve Share-based payments reserve Retained earnings Notes 19 19 19 21 2014 £’000 2013 £’000 1,219 6,870 1,218 596 2,064 1,217 6,867 1,218 313 2,041 Equity attributable to the owners of the parent 11,967 11,656 Approved and authorised for issue by the Board on 3rd October 2014 and signed on its behalf by: .............................................. ………………………………….. David Hornsby - Director Graeme Spenceley - Director The notes on pages 24 to 56 form an integral part of these financial statements. Page 20 Ideagen plc Company statement of changes in equity for the year ended 30 April 2014 Share capital Share premium Merger reserve Share-based payments reserve Retained earnings Total attributable to owners of the parent £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 May 2013 1,217 6,867 1,218 313 2,041 11,656 Shares issued under share option scheme (note 19) Share-based payments (note 21) Transfer on exercise of share options (note 21) Dividends paid (note 20) Profit for the year 2 - - - - 3 - - - - - - - - - - 285 (2) - - - - 2 (61) 82 5 285 - (61) 82 Balance at 30 April 2014 1,219 6,870 1,218 596 2,064 11,967 The notes on pages 24 to 56 form an integral part of these financial statements. Page 21 Ideagen plc Company statement of changes in equity for the year ended 30 April 2013 Share capital Share premium Merger reserve Share-based payments reserve Retained earnings Deferred equity consideration reserve Total attributable to owners of the parent £’000 £’000 £’000 £’000 £’000 £’000 £’000 Balance at 1 May 2012 779 1,408 1,020 138 218 1,680 5,243 Share placing (note 19) 315 5,685 Share placing issue costs Shares issued as part consideration on a business combination (note 19) Shares issued to satisfy contingent consideration on business combinations (note 19) Shares issued under share option scheme (note 19) Share-based payments (note 21) Transfer on exercise of share options (note 21) Realisation of merger reserve on impairment of investment in subsidiary (note 19) Reduction in deferred equity consideration reserve (note 19) Loss for the year - 45 76 2 - - - - - (229) - - 3 - - - - - - - 855 711 - - - (1,368) - - - - - - - 178 (3) - - - - - - - - - 3 1,368 1,336 (884) Balance at 30 April 2013 1,217 6,867 1,218 313 2,041 - - - (344) - - - - (1,336) - - 6,000 (229) 900 443 5 178 - - - (884) 11,656 The notes on pages 24 to 56 form an integral part of these financial statements. Page 22 Ideagen plc Company statement of cash flows for the year ended 30 April 2014 Cash flows from operating activities Profit/(loss) for the year Depreciation of property, plant and equipment Amortisation of intangible non-current assets Share-based payment charge Finance (income)/costs recognised in profit or loss Taxation charge/(credit) recognised in profit or loss Business acquisition costs in profit or loss Impairment of investment in subsidiary Gain recognised on fair value of contingent consideration (Increase)/decrease in trade and other receivables Decrease/(increase) in intra-group debtors Increase/(decrease) in trade and other payables Increase/(decrease) in intra-group creditors Increase/(decrease) in deferred revenue Cash generated by operations Interest received/(paid) Business acquisition costs paid AIM flotation costs paid Net cash generated by operating activities Note 10 9 11 15 2014 £’000 82 16 83 77 (8) 49 246 - - (428) 429 14 1,722 2 2,284 3 (180) - 2,107 Cash flows from investing activities Payments for investments in subsidiaries 18 (4,190) Payment of deferred consideration on business combinations Payments for development costs Payments for property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from placing of equity shares Payments for share issue costs Proceeds from issue of shares under the share option schemes Dividends paid Net cash (used)/generated by financing activities Net (decrease)/increase in cash and cash equivalents during the year Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year (106) (199) (4) (4,499) (2,151) 19 19 - - 5 (61) (56) (2,448) 4,264 1,816 25 25 6,000 (229) 5 - 5,776 3,666 598 4,264 2013 £’000 (884) 15 64 178 14 (13) 88 1,368 (150) 51 (12) (54) (275) 7 397 (12) (97) (247) 41 (1,600) (506) (23) (22) The notes on pages 24 to 56 form an integral part of these financial statements. Page 23 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 1 Accounting policies Reporting entity Ideagen plc is a public limited company, incorporated and domiciled in England & Wales. The ordinary shares of the company are traded on the AIM market of the London Stock Exchange. Statement of compliance These financial statements have been prepared in accordance with all International Financial Reporting Standards (IFRSs), as adopted by the European Union, and IFRIC interpretations applicable as at 30 April 2014 and with those parts of the Companies Act 2006 applicable to those companies reporting under IFRSs. Basis of preparation These financial statements have been prepared in sterling on an historical cost basis, unless otherwise stated, and have been rounded to the nearest thousand pounds. The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to present its individual Statement of Comprehensive Income and related notes. The profit for the year dealt with in the financial statements of the Parent Company for the year ended 30 April 2014 was £82,000 (2013: loss of £884,000). A summary of the significant accounting policies used in the preparation of these financial statements is set out below. Basis of consolidation The group financial statements include the financial statements of the Company and all of its subsidiary undertakings made up to 30 April 2014. Subsidiaries are consolidated from the date of acquisition, being the date on which the group obtains control, and continue to be consolidated until the date that such control ceases. All intra-group balances and transactions are eliminated. The financial statements of all subsidiaries are prepared up to the same date as the parent Company. Revenue recognition Revenue is measured at the fair value of the consideration received from the sale of software licences and the rendering of services, net of value added tax and any discounts. Revenue is recognised as follows: (a) Perpetual software licences Revenue is recognised on delivery of the licence to the customer. (b) Services Revenue in respect of professional services such as consulting days, training and bespoke development are recognised as these services are delivered. (c) Annual support and maintenance Revenue is recognised on a time-basis over the length of the support period. Annual support and maintenance is normally invoiced in advance and a deferred revenue liability is recognised in the statement of financial position to represent the element of the support and maintenance revenue deferred to be recognised as revenue in the future. Page 24 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 1 Accounting policies (continued) Foreign currencies In preparing the financial information of each individual group entity, transactions in currencies other than the entity’s functional currency are recognised at the rates of exchange prevailing at the date of those transactions. At the end of the financial year, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences on monetary items are recognised in profit or loss in the period in which they arise. For the purposes of the consolidated financial information, the assets and liabilities of foreign operations are translated into sterling using exchange rates prevailing at the end of each financial year. Income and expenses are translated at the average exchange rates for the year, unless exchange rates fluctuate significantly during the year, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising are recognised in other comprehensive income and accumulated in a foreign currency translation reserve within equity. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are expensed in the Statement of Comprehensive Income on a straight line basis over the lease term. Exceptional items The Group presents as exceptional items on the face of the Statement of Comprehensive Income those material items of income and expense which, because of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow shareholders to understand better the elements of financial performance in the year, so as to facilitate comparison with prior years. Taxation The tax charge or credit is based on the result for the year and comprises current and deferred income tax. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the year end date and includes any adjustment to tax payable in respect of previous years. Deferred income tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities included in the financial statements and the tax base of those assets and liabilities. Deferred income tax assets are recognised only to the extent that the directors consider that it is probable that there will be suitable taxable profits in the future against which an asset can be utilised. Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the year end date. Deferred income tax assets and deferred income tax liabilities arising in different tax jurisdictions are not offset. Pensions and post retirement benefits The group operates a defined contribution pension scheme for certain employees. Payments are made by the group to both this scheme and to individual private defined contribution pension arrangements for certain other employees. Contributions are charged in the Statement of Comprehensive Income as they become payable. Goodwill Goodwill arising on business combinations is initially measured at cost being the excess of the fair value of the consideration paid over the group’s interest in the net fair value of the identifiable assets and liabilities acquired. Goodwill is subsequently measured at cost less any accumulated impairment losses. Goodwill is not amortised but is reviewed annually for impairment. Impairment is determined by assessing the recoverable amount of the cash-generating unit which contains the goodwill. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the Statement of Comprehensive Income. Page 25 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 1 Accounting policies (continued) Other intangible assets Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. The estimated useful life and amortisation method are reviewed annually with the effect of any changes being reflected on a prospective basis. Intangible assets acquired in a business combination and recognised separately from goodwill are initially recognised at their fair value at the acquisition date. Subsequent to initial recognition, intangible assets acquired in a business combination are reported at their initial fair value less amortisation and accumulated impairment losses. Research costs are expensed as incurred. An intangible asset arising from expenditure on a project is only recognised if management considers that it is technically feasible and that there are sufficient resources available to complete the asset so that it will be available for use or sale, that it intends to complete and is able to sell or use the asset to generate future economic benefits and that the costs of the development project can be measured reliably. Following the initial recognition of the expenditure, the asset will be carried at cost less accumulated amortisation and impairment losses. Amortisation is applied once the asset is available for sale to write off the cost over the period which is expected to benefit from the sale of the asset. The annual amortisation rates currently applied to the group’s intangible assets are as follows: Software Development costs 20% or 25% 20% or 25% Customer relationships 10% Amortisation charges are Comprehensive Income. included in ‘Depreciation and amortisation’ in the Consolidated Statement of The Company’s investments in subsidiaries The Company recognises its investments in subsidiaries at cost less any impairment in its separate financial statements. Impairment is determined by assessing the recoverable amount of the investment. Where the recoverable amount is less than the carrying amount, an impairment loss is recognised in the Statement of Comprehensive Income. Property, plant and equipment Plant and equipment are stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated at an annual rate of 25% so as to write off the cost, less any estimated residual values, over the expected useful economic lives of the assets concerned. The remaining useful lives and residual values of plant and equipment are reassessed by the directors each year. The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any indication exists, the carrying values are written down to the recoverable amount. Impairment of assets The Group reviews the carrying amounts of its tangible and intangible assets at least annually to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount provided that this does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior years. A reversal of an impairment loss is recognised immediately in profit or loss unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Page 26 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 1 Accounting policies (continued) Inventories Inventories are stated at the lower of cost and net realisable value. Net realisable value represents the estimated selling price for the inventories less all costs necessary to complete the sale. Trade and other receivables Trade and other receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade and other receivables are measured at amortised cost using the effective interest method less any impairment provision. An impairment provision is made against a trade receivable only when there is objective evidence that the Group may not be able to recover the whole invoiced amount as a result of events occurring after the initial recognition of the asset. Cash and cash equivalents Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short term deposits with an original maturity date of 3 months or less. For the purpose of the statement of cash flows, cash and cash equivalents as defined above are stated net of any outstanding bank overdrafts. Financial liabilities and equity instruments Equity and debt instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument. The Group’s financial liabilities include trade and other payables and borrowings which are measured at amortised cost using the effective interest rate method. An equity instrument is any contract which evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group, such as share capital and share premium, are recognised at the proceeds received net of direct issue costs. Contingent consideration Contingent consideration is initially measured at fair value at the date of completion of the acquisition. The accounting for changes in the fair value of contingent consideration arising on business combinations that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as a liability is remeasured to fair value at subsequent reporting dates and the corresponding gain or loss is recognised in the Statement of Comprehensive Income. Share-based payments The cost of equity settled transactions with employees is measured by reference to the fair value on the date they are granted. The fair value is determined using a Black-Scholes pricing model based on a range of inputs. The fair value of equity-settled transactions is charged to the Statement of Comprehensive Income over the period in which the service conditions are fulfilled with a corresponding credit to a share-based payments reserve in equity. On the exercise of share options, an amount equal to the fair value of the option at the date it was granted is transferred from the share-based payments reserve into retained earnings. Page 27 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 1 Accounting policies (continued) Use of estimates and judgements The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities at the year end date and the amounts reported for revenues and expenses during the year. However the nature of estimation means that actual outcomes could differ from those estimates. In applying the Group’s accounting policies, management has made the following judgements and estimates which have the most significant effect on the amounts recognised in the financial statements. Deferred income tax assets Management judgement is required to determine the amount of deferred income tax assets that can be recognised, based on the likely timing and level of future taxable profits. Details of the deferred income tax assets recognised in respect of trading losses and share-based payments are given in Note 7. Share-based payments The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. Judgement is required in determining the most appropriate valuation model and the most appropriate inputs into the model including the level of volatility and the expected life of the option. Further information is given in Note 21. Impairment of goodwill The Group tests goodwill for impairment on an annual basis in line with the accounting policy noted above. This involves judgement regarding the future development of the business and the estimation of the level of future profitability and cash flows to support the carrying value of goodwill. Impairment of other assets The Group reviews the carrying value of all other assets for indications of impairment at each period end. If indicators of impairment exist, the carrying value of the asset is subject to further testing to determine whether its carrying value exceeds its recoverable amount. This process will usually involve the estimation of future cash flows which are likely to be generated by the asset. New accounting standards There are no new standards or amendments to standards which are mandatory for the first time for the financial year ended 30 April 2014 which have a significant impact on the Group. New standards, amendments to standards and interpretations which have been published but are not yet effective are not expected to have a significant impact on the Group with the exception of IFRS 15 “Revenue from contracts with customers” which was issued in 2014. The Group is currently reviewing this new standard and the effects, if any, of applying this standard to the financial statements of the Group have not yet been evaluated. This standard will be effective for the accounting period commencing on 1 May 2017. 2 Revenue The group has a single reportable segment. An analysis of revenue by product or service is given below 2014 £’000 1,939 4,445 1,954 632 8,970 2013 £’000 1,550 2,389 2,133 442 6,514 Software licence sales Maintenance and support Professional services Hardware and third party sales Page 28 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 2 Revenue (continued) An analysis of external revenue by location of customers and non-current assets by location of assets is given below: United Kingdom United States of America Europe Other Unallocated External revenue by location of customers Non-current assets by location of assets* 2014 £’000 6,960 1,002 813 195 - 8,970 2013 £’000 4,231 1,944 260 79 - 2014 £’000 8,504 4 - 3,465 6,514 11,973 2013 £’000 6,632 11 - 1,272 7,915 *Non-current assets exclude deferred tax assets. No single customer accounted for more than 10% of total revenue in the year ended 30 April 2014. Revenue from one customer in the year ended 30 April 2013 amounted to £1,227,000. 3 Operating costs Wages and salaries Operating lease charges – land & buildings Loss / (profit) on disposal of property, plant and equipment Other operating costs Depreciation and amortisation: Amortisation of acquisition-related intangible assets Amortisation of other intangible assets Total amortisation of intangible assets Depreciation of property, plant and equipment Total depreciation and amortisation Auditor’s remuneration - The audit of the company’s annual accounts - The audit of the company’s subsidiaries’ annual accounts - Tax Services - Other Services – due diligence 2014 £’000 3,125 160 2 1,446 4,733 948 162 1,110 110 1,220 10 39 15 14 2013 £’000 2,485 151 (15) 1,008 3,629 984 76 1,060 57 1,117 10 27 10 12 An impairment loss of £2,086,000 was recognised in the Group Statement of Comprehensive Income for the year ended 30 April 2013 in respect of the impairment of an intangible asset. Further details are given in note 9. The deferred taxation credit associated with the impairment of this intangible asset of £667,000 was credited to the Group Statement of Comprehensive income during the year ended 30 April 2013 within the heading ‘Taxation’. Page 29 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 4 Particulars of employees The average number of staff employed by the group during the year, analysed by category, was as follows: 2014 2013 Number Number Administrative staff Sales and marketing Technical and support The aggregate payroll costs of these employees were as follows: Wages and salaries Social security costs Other pension costs Less: internal development costs capitalised Share based payment costs 5 Finance income / (costs) Bank interest receivable Other interest payable 6 Directors' remuneration and share options The total remuneration of the directors (including fees) for the year was as follows: Directors’ remuneration Directors’ pension contributions 11 17 44 72 2014 £’000 3,253 365 32 (525) 3,125 285 3,410 2014 £’000 10 - 10 2014 £’000 358 - 358 8 14 37 59 2013 £’000 2,499 315 20 (349) 2,485 178 2,663 2013 £’000 1 (15) (14) 2013 £’000 417 - 417 The remuneration of each of the directors of the company during the year ended 30 April 2014 was as follows: David Hornsby Graeme Spenceley Les Paul Jonathan Wearing Alan Carroll Salary or fees £ Bonuses £ Total £ 117,500 80,000 74,667 10,000 15,996 40,000 20,000 - - - 298,163 60,000 157,500 100,000 74,667 10,000 15,996 358,163 The bonuses for David Hornsby and Graeme Spenceley were in respect of the successful completion of the acquisition and integration of Pentana Ltd and MSS Management Systems Services Ltd during the year and on achieving certain business related targets. Page 30 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 6 Directors' remuneration and share options (continued) The remuneration of each of the directors of the company during the year ended 30 April 2013 was as follows: David Hornsby Graeme Spenceley Les Paul Jonathan Wearing Alan Carroll Graham Harrop (resigned 12 March 2013) Darren Spillane (resigned 1 June 2012) Salary or fees £ Bonuses £ Total £ 108,182 73,332 68,533 10,000 12,998 64,631 6,000 34,000 27,000 12,000 - - - - 343,676 73,000 142,182 100,332 80,533 10,000 12,998 64,631 6,000 416,676 Bonuses for Graeme Spenceley during the year ended 30 April 2013 include a special payment of £15,000 in relation to the successful flotation of the company on AIM in July 2012. The remaining bonuses for Graeme Spenceley and David Hornsby were in respect of the successful completion of the acquisition and integration of Plumtree Group Ltd during the year ended 30 April 2013 and on achieving certain business related targets. The bonus for Les Paul was based on achieving certain business related targets. The remuneration of the highest paid director during the year ended 30 April 2014 was £157,500 (2013: £142,182). None of the directors accrued any benefits under company pension schemes or received any benefits in kind or made any gains from the exercise of share options during the year ended 30 April 2014. The contracts of employment of the executive directors include notice periods of 6 months. The following options have been granted to the directors over ordinary 1p shares in the company: Director Number of outstanding options at 30 April 2013 and 30 April 2014 Exercise price (pence) Number of options exercisable at 30 April 2014 Date granted Date exercisable by David Hornsby David Hornsby 2,800,000 1,333,333 2.5 9.0 2,800,000 15 August 2009 14 August 2019 888,888 20 October 2011 19 October 2021 David Hornsby 500,000 22.38 166,666 30 January 2013 29 January 2023 Graeme Spenceley Graeme Spenceley 200,000 800,000 7.0 9.0 200,000 12 March 2010 11 March 2020 533,333 20 October 2011 19 October 2021 Graeme Spenceley 1,000,000 22.38 333,333 30 January 2013 29 January 2023 Les Paul 1,000,000 22.38 333,333 30 January 2013 29 January 2023 No share options were granted to or were exercised by directors or lapsed during the year ended 30 April 2014. Further information on share options is included at note 21 to the financial statements. Page 31 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 7 Taxation The taxation expense/(credit) recognised in the Statement of Comprehensive Income can be analysed as follows: Current income tax UK corporation tax on profit/(loss) for the current year Overseas income tax charge Adjustments in respect of prior years Deferred income tax Deferred income tax expense/(credit) for the current year Adjustments to deferred income tax in respect of prior years Total deferred income tax expense/(credit) Total taxation expense/(credit) recognized in the current year 2014 £’000 403 20 (92) 331 (133) - (133) 198 2013 £’000 218 90 (3) 305 (808) (9) (817) (512) The tax expense/(credit) for the year is higher than the standard rate of corporation tax in the UK of 23% (2013: 24%). The differences are reconciled below: Profit/(loss) before taxation Tax on profit/(loss) at standard rate of 23% (2013: 24%) Expenses not deductible for tax purposes Depreciation in excess of capital allowances Gain not taxable Marginal relief Enhanced R&D tax relief Effect on deferred tax from change in current tax rate Different tax rates in overseas jurisdictions Utilisation of tax losses brought forward Movement in deferred tax asset in respect of trading losses Adjustments recognised in current year tax in respect of prior years Tax expense/(credit) recognised for the current year 2014 2013 £’000 £’000 1,071 (1,317) 246 110 4 - - - (4) (27) (108) 69 (92) 198 (316) 95 (1) (36) (1) (19) (16) (186) (45) 25 (12) (512) The movements in recognised deferred income tax assets during the year were as follows: Deferred income tax assets: Group Trading losses At 1 May 2012 Recognised in profit or loss At 30 April 2013 Recognised in profit or loss At 30 April 2014 £’000 231 (25) 206 (69) 137 Page 32 Share-based payments £’000 Total £’000 - - - 36 36 231 (25) 206 (33) 173 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 7 Taxation (continued) Deferred income tax asset: Company At 1 May 2012 Recognised in profit or loss At 30 April 2013 Recognised in profit or loss At 30 April 2014 Trading losses £’000 173 13 186 (49) 137 The deferred income tax assets on trading losses and share-based payments have only been recognised to the extent that it is considered probable that they can be recovered against future taxable profits based on profit forecasts for the foreseeable future. In addition to the recognised deferred income tax assets set out above, there are also unrecognised deferred income tax assets in both the Group and the Company at 30 April 2014 of £110,000 (2013: £154,000) in respect of trading losses and £396,000 (2013: £157,000) in respect of share-based payments. The movements in deferred income tax liabilities during the year were as follows: Group At 1 May 2012 Recognised in profit or loss Foreign exchange differences Recognised on business combinations At 30 April 2013 Recognised in profit or loss Foreign exchange differences Recognised on business combinations At 30 April 2014 Factors that may affect future tax charges Deferred tax liability: Intangibles £’000 (1,167) 875 - (470) (762) 133 - (748) (1,377) Deferred tax liability: Other temporary differences £’000 - (33) (1) - (34) 33 1 - - Total £’000 (1,167) 842 (1) (470) (796) 166 1 (748) (1,377) Legislation to reduce the main rate of corporation tax from 23% to 21% from 1 April 2014 and then to 20% from 1 April 2015 was included in the Finance Act 2013 which was substantively enacted in July 2013 and hence the deferred tax balances in these accounts have been calculated at a rate of 20%. 8 Earnings per share Basic earnings per share is computed by dividing the profit or loss for the year attributable to equity holders of the parent by the weighted-average number of ordinary shares outstanding during the year. Diluted earnings per share is computed by dividing the profit or loss for the year attributable to equity holders of the parent by the weighted-average number of ordinary shares outstanding during the year as adjusted for the effect of all dilutive potential ordinary shares. Page 33 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 8 Earnings per share (continued) The following tables set out the computations for basic and diluted earnings per share: Year ended 30 April 2014 Basic EPS Profit for the year attributable to equity holders of the parent Earnings £’000 Weighted average number of shares Per-share amount pence 873 121,823,670 0.72 Effect of dilutive securities: share options - 6,445,784 Diluted EPS Profit for the year attributable to equity holders of the parent 873 128,269,454 0.68 Year ended 30 April 2013 Basic and diluted EPS Loss for the year attributable to equity holders of the parent Earnings £’000 Weighted average number of shares Per-share amount pence (805) 92,127,940 (0.87) In order to better demonstrate the performance of the Group, an adjusted earnings per share calculation has been presented below which adds back or deducts items typically adjusted for by users of financial statements. The calculations of the adjusted basic and diluted earnings per share amounts are based on the following information: Profit/(loss) for the year attributable to equity holders of the parent Adjustments: Costs of acquiring businesses Share-based payment charges Deferred taxation on share-based payment charges Amortisation of acquisition-related intangibles (Note 3) Deferred taxation on amortisation of acquisition-related intangibles Movement in fair value of contingent consideration Impairment loss recognised on acquisition intangible Deferred taxation on impairment of acquisition intangible Adjusted earnings 2014 2013 £’000 £’000 873 246 285 (36) 948 (179) - - - 2,137 (805) 88 178 - 984 (268) (150) 2,086 (668) 1,445 Weighted average number of shares: Basic adjusted EPS calculation Effect of dilutive securities: share options 121,823,670 6,445,784 Weighted average number of shares: Diluted adjusted EPS calculation 128,269,454 92,127,940 5,056,856 97,184,796 Adjusted earnings per share: Basic Diluted 2014 pence 1.75 1.67 2013 pence 1.57 1.49 Page 34 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 9 Intangible assets Group Cost Goodwill Software £’000 £’000 Customer relationships £’000 Development costs £’000 Customer contract £’000 Total £’000 At 1 May 2012 Acquisition through business combination Additions from internal development 2,729 690 936 1,206 - - At 30 April 2013 3,419 2,142 1,314 1,084 - 2,398 Acquisition through business combinations Additions from internal development Disposals 939 1,833 1,904 - - - - - - 277 - 349 626 - 525 2,823 - - 8,079 2,980 349 2,823 11,408 - - 4,676 525 - (2,823) (2,823) At 30 April 2014 4,358 3,975 4,302 1,151 - 13,786 Amortisation At 1 May 2012 Amortisation expense Impairment recognised in statement of comprehensive income At 30 April 2013 Amortisation expense Disposals At 30 April 2014 Net carrying amount - - - - - - - 200 279 - 479 641 - 1,120 147 170 - 317 338 - 655 At 30 April 2014 At 30 April 2013 4,358 3,419 2,855 1,663 3,647 2,081 27 46 - 73 131 - 204 947 553 172 565 2,086 2,823 - (2,823) - - - 546 1,060 2,086 3,692 1,110 (2,823) 1,979 11,807 7,716 The customer contract was acquired in a business combination in 2012 and was being amortised over the expected life of the contract of 5 years. The contract included a ‘termination for convenience clause’ and in May 2013 the Company was informed by the customer that this clause was being invoked and that the contract would come to an end with immediate effect. The remaining unamortised value of this intangible asset was considered to be impaired in full and an impairment loss of £2,086,000 was recognised in the Consolidated Statement of Comprehensive income for the year ended 30 April 2013. Page 35 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 9 Intangible assets (continued) Goodwill The carrying amount of goodwill has been allocated to the following Cash Generating Units (“CGUs”): Ideagen Software / Ideagen Capture / Proquis CGU Plumtree / MSS CGU Pentana CGU £’000 2,729 881 748 4,358 These amounts were tested for impairment at 30 April 2014 by comparing the carrying value of the cash-generating unit with the recoverable amount. The recoverable amount was determined using a value in use methodology based on discounted cash flow projections. The key assumptions used in the value in use calculations were as follows: (i) The operating cash flows for these businesses for the year to 30 April 2015 are taken from the budget approved by the Board which is closely linked with recent historical performance and current sales opportunities. The operating cash flow budget is most sensitive to the level of new business sales; (ii) No growth has been assumed in operating cash flows for the remainder of the value in use calculation period; (iii) A pre-tax discount rate of 10% has been used; (iv) The use of cash flow projections over longer than a 5 year period is considered appropriate as the businesses of all of the CGUs have been operating for over 20 years, have strong and growing recurring revenue bases and the Group continues to invest in the development of the products in each CGU. Ideagen Software / Ideagen Capture / Proquis On the basis of the above assumptions, over a 10 year projection period, the recoverable amount of the CGU based on value in use is estimated to exceed the carrying amount by £2,017,000. Over a 15 year projection period, the recoverable amount of the CGU, based on value in use, is estimated to exceed the carrying amount by £3,235,000. Future annual operating cash inflows, which are most sensitive to the level of new business sales, would need to be consistently 36% below the no-growth assumption used in the value in use calculation over a 10 year projection period to cause the carrying amount to exceed the recoverable amount. Over a 15 year value in use projection period, operating cash inflows would need to be consistently 50% below the no-growth assumption used in the value in use calculation to cause the carrying amount to exceed the recoverable amount. Based on the historic sales performance of the business and actions being taken to grow the business further, the directors do not currently expect this to be the case. Plumtree / MSS On the basis of the above assumptions, over a 10 year projection period, the recoverable amount of the CGU based on value in use is estimated to exceed the carrying amount by £4,995,000. Over a 15 year projection period, the recoverable amount of the CGU, based on value in use, is estimated to exceed the carrying amount by £6,854,000. Future annual operating cash inflows, which are most sensitive to the level of new business sales, would need to be consistently 64% below the no-growth assumption used in the value in use calculation over a 10 year projection period to cause the carrying amount to exceed the recoverable amount. Over a 15 year value in use projection period, operating cash inflows would need to be consistently 71% below the no-growth assumption used in the value in use calculation to cause the carrying amount to exceed the recoverable amount. Based on the historic sales performance of the business and actions being taken to grow the business further, the directors do not currently expect this to be the case. Pentana On the basis of the above assumptions, over a 10 year projection period, the recoverable amount of the CGU based on value in use is estimated to exceed the carrying amount by £1,218,000. Over a 15 year projection period, the recoverable amount of the CGU, based on value in use, is estimated to exceed the carrying amount by £2,105,000. Future annual operating cash inflows, which are most sensitive to the level of new business sales, would need to be consistently 33% below the no-growth assumption used in the value in use calculation over a 10 year projection period to cause the carrying amount to exceed the recoverable amount. Over a 15 year value in use projection period, operating cash inflows would need to be consistently 46% below the no-growth assumption used in the value in use calculation to cause the carrying amount to exceed the recoverable amount. Based on the historic sales performance of the business and actions being taken to grow the business further, the directors do not currently expect this to be the case. Page 36 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 9 Intangible assets (continued) Development costs Development costs are internally generated. At 30 April 2014, the carrying amount of ongoing development projects on which amortisation has not yet commenced was £313,000 (2013: £437,000). At 30 April 2014, the carrying amount of completed development projects on which amortisation is being charged is £634,000 (2013: £116,000). The weighted average remaining amortisation period of these assets at 30 April 2014 is 3.8 years (2013: 2.5 years). The remaining amortisation periods and carrying amounts of the Group’s other intangible assets are as follows: 2014 Remaining amortisation period (years) 2013 Remaining amortisation period (years) 2014 2013 Carrying amount £’000 Carrying amount £’000 Ideagen Capture Customer relationships Software Ideagen Software Customer relationships Software Proquis Customer relationships Software Plumtree Customer relationships Software Ideagen plc Software Pentana Customer relationships Software MSS Customer relationships Software 6.2 1.0 6.9 1.9 7.7 2.6 8.6 3.6 0.5 9.5 4.5 9.2 4.2 7.2 2.0 7.9 2.9 8.7 3.6 9.6 4.6 1.5 - - - - 299 4 291 53 315 301 937 858 15 1,486 1,148 320 478 347 8 333 80 356 416 1,045 1,114 45 - - - - Page 37 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 9 Intangible assets (continued) Company The intangible assets of the Company are as follows: Cost At 1 May 2012 Additions from internal development At 30 April 2013 Additions from internal development At 30 April 2014 Amortisation At 1 May 2012 Amortisation expense At 30 April 2013 Amortisation expense At 30 April 2014 Net carrying amount At 30 April 2014 At 30 April 2013 Software Development Total £’000 costs £’000 £’000 121 - 121 - 121 45 31 76 30 106 15 45 190 23 213 199 412 25 33 58 53 111 301 155 311 23 334 199 533 70 64 134 83 217 316 200 Page 38 Ideagen plc Notes to the financial statements for the year ended 30 April 2014 10 Property, plant and equipment Fixtures and fittings Office equipment Motor vehicles Leasehold improvements Loan equipment Total £’000 £’000 £’000 £’000 £’000 £’000 Group Cost At 1 May 2012 Additions Acquisition through business combination Disposals At 30 April 2013 Additions Acquisition through business combination Disposals Foreign currency exchange differences 47 3 12 - 62 1 2 - - 183 42 23 - 248 46 33 - (1) At 30 April 2014 65 326 Depreciation At 1 May 2012 Depreciation expense Disposals At 30 April 2013 Depreciation expense Disposals Foreign currency exchange differences At 30 April 2014 Net carrying amount At 30 April 2014 At 30 April 2013 25 7 - 32 15 - - 47 18 30 129 37 - 166 57 - (1) 222 104 82 - 11 15 - 26 10 4 - (1) 39 - 4 - 4 14 - - 18 21 22 - 66 6 72 8 - (41) - 39 - 7 - 7 24 (15) - 16 23 65 235 122 59 (8) 408 65 39 (41) (2) 469 154 57 (2) 209 110 (15) (1) 303 166 199 5 - 3 (8) - - - - - - - 2 (2) - - - - - - - Page 39 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 10 Property, plant and equipment (continued) Company Fixtures and Fittings Office Equipment £’000 £’000 Total £’000 22 1 23 - 23 18 1 19 2 21 2 4 130 21 151 4 155 105 14 119 14 133 22 32 152 22 174 4 178 123 15 138 16 154 24 36 Cost At 1 May 2012 Additions At 30 April 2013 Additions At 30 April 2014 Accumulated depreciation At 1 May 2012 Depreciation expense At 30 April 2013 Depreciation expense At 30 April 2014 Net carrying amount As at 30 April 2014 As at 30 April 2013 Page 40 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 11 Fixed asset investments Company Cost As at 1 May 2012 Addition in the year As at 30 April 2013 Additions in the year Transfers of shares to other group companies Capital contributions to subsidiary companies As at 30 April 2014 Impairments As at 1 May 2012 Impairment recognised in statement of comprehensive income As at 30 April 2013 & 30 April 2014 Net carrying amount As at 30 April 2014 As at 30 April 2013 Shares in subsidiaries £’000 5,683 2,500 8,183 4,566 (1,595) 208 11,362 - 1,368 1,368 9,994 6,815 At 30 April 2014 the Company held 20% or more of the nominal value of any class of share capital of the companies set out below. All of these companies are incorporated in England & Wales with the exceptions of Proquis Inc. and Pentana Inc. which are incorporated in the United States of America. Page 41 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 11 Fixed asset investments (continued) Name of subsidiary Nature of business Class of shares % held Ideagen Software Limited Plumtree Group Limited Sale of software licences, software maintenance and related professional services Ordinary 100 Sale of software licences, software maintenance and related professional services Ordinary and ‘B’ Ordinary 100 Pentana Limited Pentana Inc. Proquis Inc. Sale of software licences, software maintenance and related professional services Sale of software licences, software maintenance and related professional services Sale of software licences, software maintenance and related professional services MSS Management Systems Services Ltd Dormant from 1 May 2014 Ideagen Capture Limited Dormant from 1 May 2014 Proquis Limited Filebutton Limited Root3 Systems Limited Ideagen Systems Limited Dormant Dormant Dormant Dormant Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 100 100 12 Inventories Group Goods for resale 13 Trade and other receivables Group Trade receivables Prepayments and accrued income Other receivables 2014 £’000 2013 £’000 389 - 2014 £’000 3,400 221 16 3,637 2013 £’000 1,575 359 38 1,972 Page 42 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 13 Trade and other receivables (continued) Company Current Trade receivables Prepayments and accrued income Amounts receivable from subsidiaries Other receivables Non-Current 2014 £’000 698 14 680 16 1,408 2013 £’000 252 10 300 38 600 Amounts receivable from subsidiaries - 167 All trade and other receivables have been reviewed for impairment. Unless specific agreement has been reached with individual customers, sales invoices are due for payment 30 days after the date of the invoice. Where customers delay making payment, an assessment of the potential loss of customer goodwill arising from the enforcement of contractual payment terms may take place when considering actions to be taken to secure payment. Trade receivables include amounts that are past due at the reporting date for which no allowance for doubtful debts has been recognised because these amounts are still considered to be recoverable. The group does not hold any collateral or other credit enhancements over its trade receivable balances. An analysis of trade receivables that are not yet overdue or past the due date but not impaired is set out below. Group Not yet overdue 1 – 30 days overdue 30 – 60 days overdue 60+ days overdue Allowance for doubtful debts (all against debts 60+ days overdue) Company Not yet overdue 1 – 30 days overdue 30 – 60 days overdue 60+ days overdue Allowance for doubtful debts (all against debts 60+ days overdue) 2014 £’000 2,098 829 128 396 3,451 (51) 3,400 2013 £’000 780 443 76 296 1,595 (20) 1,575 2014 2013 £’000 £’000 639 4 10 83 736 (38) 698 95 55 45 75 270 (18) 252 Page 43 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 13 Trade and other receivables (continued) Trade receivables are shown net of an allowance for doubtful debts, movements on which are set out below. 2014 £’000 2013 £’000 20 13 20 (2) 51 12 - 8 - 20 2014 £’000 2013 £’000 18 20 - 38 10 8 - 18 2014 2013 £’000 £’000 1,384 479 558 2,421 2014 £’000 145 94 772 199 1,210 896 380 360 1,636 2013 £’000 84 151 3 135 373 Group Balance at the start of the year On acquisition of business Impairment losses recognised Amounts written off as uncollectable Balance at the end of the year Company Balance at the start of the year Impairment losses recognised Amounts written off as uncollectable Balance at the end of the year 14 Trade and other payables Group Trade payables Other taxes and social security payables Accruals Company Trade payables Other taxes and social security payables Amounts payable to subsidiaries Accruals Page 44 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 15 Contingent consideration on business acquisitions Group and Company Contingent consideration on the acquisition of MSS Management Systems Services Limited Contingent consideration on the acquisition of Pentana Limited 2014 £’000 2013 £’000 47 280 327 - - - Part of the consideration for the acquisition of MSS Management Systems Services Limited in July 2013 was contingent on the achievement of certain revenue targets in the period following acquisition to 30 April 2014. At the date of acquisition, the directors assessed the fair value of the contingent consideration payable under this arrangement at £47,000 although this has not yet been finally agreed with the vendor. The contingent consideration payable is estimated to be between £40,000 and £60,000. Part of the consideration for the acquisition of Pentana Limited in November 2013 was contingent on the achievement of certain revenue targets in the 12 month period following the completion of the acquisition. The contingent amount payable under this arrangement will range from £nil to £800,000. At the date of acquisition, the directors assessed the fair value of the contingent consideration payable under this arrangement at £280,000. The contingent consideration payable is estimated to be between £200,000 and £400,000. Movement in the fair value of contingent consideration in the year ended 30 April 2013 Part of the consideration for the acquisition of Ideagen Capture Limited in March 2010 was contingent on the achievement of certain revenue and profitability targets in the period following the acquisition. The contingent consideration payable under this arrangement was agreed during the year ended 30 April 2013 at a total of £137,000 resulting in a gain of £50,000. This gain was included as a movement in the fair value of contingent consideration in the Statement of Comprehensive Income for the year ended 30 April 2013. On the acquisition of Proquis Limited in January 2012, a liability of £100,000 was recognised in respect of contingent cash consideration which would become payable on the renewal of a contract option by a customer. This contract is no longer ongoing and accordingly the contingent consideration will not become payable. The resulting gain of £100,000 was included as a movement in the fair value of contingent consideration in the Statement of Comprehensive Income for the year ended 30 April 2013. 16 Current income tax liabilities Group Current income tax liabilities . 2014 £’000 2013 £’000 283 283 311 311 Page 45 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 17 Deferred consideration on business acquisitions Group and Company Deferred consideration on acquisition of MSS Management Systems Services Limited Deferred consideration on acquisition of Filebutton Limited 2014 £’000 2013 £’000 50 - 50 - 100 100 The remaining deferred consideration payable in respect of the acquisition of Filebutton Limited of £100,000 was paid in May 2013. The deferred consideration in respect of the acquisition of MSS Management Systems Services Limited of £50,000 was paid in July 2014. 18 Business combinations Acquisition of MSS Management Systems Services Limited On 2 July 2013, the company acquired 100% of the issued ordinary share capital of MSS Management Systems Services Limited, a company domiciled in England. The acquisition is expected to enhance the Group’s existing business through the addition of intellectual property which supports Emergency Departments within NHS hospital trusts and a recurring revenue stream derived from a number of NHS customers. The fair values of the identifiable assets acquired and liabilities recognised at the date of acquisition are summarised in the table below. Non-current assets Customer relationships intangible Software intangible Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Deferred revenue Current income tax Non-current liabilities Deferred income taxation Net identifiable assets acquired The directors expect that all of the above receivables will be collected. £’000 349 573 1 176 (68) (150) (26) (184) 671 Page 46 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 18 Business combinations (continued) The fair value of the consideration at the date of acquisition is as follows: £’000 Cash paid at completion Deferred consideration payable in cash 12 months after the date of acquisition (note 17) Contingent consideration payable in cash (note 15) Total consideration 765 50 47 862 The Share Purchase Agreement in respect of the acquisition of MSS Management Systems Services Limited provided for the possibility of contingent consideration of up to a maximum amount of £542,000. This further consideration was contingent upon the level of future revenue generated by MSS Management Systems Services Limited between the completion of the acquisition and 30 April 2014. At the date of the acquisition, the directors assessed the fair value of the contingent consideration payable at £47,000. The actual amount of contingent consideration payable has not yet been finally determined and agreed with the vendor. Goodwill arising on the acquisition is as follows: Fair value of consideration at date of acquisition Less: fair value of net identifiable assets acquired Goodwill arising on acquisition £’000 862 (671) 191 Goodwill arose on the acquisition of MSS Management Systems Services Limited as the consideration paid for the combination effectively included amounts in relation to the benefit of revenue growth, expected synergies and the assembled workforce. These benefits are not recognised separately from goodwill because they do not meet the criteria for recognition as identifiable intangible assets. None of this goodwill is expected to be deductible for tax purposes. The costs of the acquisition of £62,000 have been expensed within a separate line in the Group Statement of Comprehensive Income for the year ended 30 April 2014. The Group Statement of Comprehensive Income for the year ended 30 April 2014 includes revenue of £511,000 and profit after taxation of £233,000 in respect of the subsidiary acquired. Disclosure of information on revenue and profit or loss for the combined entity as though the acquisition of MSS Management Systems Services Limited had been completed on 1 May 2013 is impracticable as the accounting reference date of this company was previously 31 March and it did not prepare comparable revenue and profit information on a monthly basis. Net cash outflow on acquisition of MSS Management Systems Services Limited: £’000 Consideration paid in cash Less: cash acquired in subsidiary Net cash outflow on acquisition of subsidiary 765 (176) 589 Page 47 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 18 Business combinations (continued) Acquisition of Pentana Limited On 19 November 2013, the company acquired 100% of the issued ordinary share capital of Pentana Limited, a company domiciled in England, together with its wholly owned subsidiary, Pentana Inc. which is domiciled in the United States of America. The acquisition of Pentana Limited is expected to enhance the Group’s existing business through the addition of intellectual property in the area of Governance, Risk and Compliance providing the Group with an entry point into the financial services sector and the outsourced risk and compliance market together with a significant recurring revenue stream. The fair values of the identifiable assets acquired and liabilities recognised at the date of acquisition are summarised in the table below. Non-current assets Customer relationships intangible Software intangible Property plant and equipment Current assets Trade and other receivables Cash and cash equivalents Current income tax recoverable Current liabilities Trade and other payables Deferred revenue Non-current liabilities Deferred tax Net identifiable assets acquired £’000 1,555 1,260 39 531 1,170 101 (271) (865) (563) 2,957 The directors expect that all of the above receivables will be collected. The fair value of the consideration at the date of acquisition is as follows: £’000 Cash paid at completion Contingent consideration payable in cash (note 15) Total consideration 3,425 280 3,705 The Share Purchase Agreement in respect of the acquisition of Pentana Limited provided for the possibility of contingent consideration of up to a maximum amount of £800,000. This further consideration was contingent upon the achievement of certain revenue targets by Pentana Limited in the 12 months following the completion of the acquisition. At the date of the acquisition, the directors assessed the fair value of the contingent consideration payable at £280,000. Goodwill arising on the acquisition is as follows: Fair value of consideration at date of acquisition Less: fair value of net identifiable assets acquired Goodwill arising on acquisition £’000 3,705 (2,957) 748 Page 48 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 18 Business Combinations (continued) Goodwill arose on the acquisition of Pentana Limited as the consideration paid for the combination effectively included amounts in relation to the benefit of revenue growth, expected synergies and the assembled workforce of Pentana Limited. These benefits are not recognised separately from goodwill because they do not meet the criteria for recognition as identifiable intangible assets. None of this goodwill is expected to be deductible for tax purposes. The costs of the acquisition of £184,000 have been expensed within a separate line in the Group Statement of Comprehensive Income for the year ended 30 April 2014. The Group Statement of Comprehensive Income for the year ended 30 April 2014 includes revenue of £1,506,000 and profit after taxation of £342,000 in respect of the subsidiaries acquired. Disclosure of information on revenue and profit or loss for the combined entity as though the acquisition of Pentana Limited had been completed on 1 May 2013 is impracticable as the accounting reference date for Pentana was previously 31 December and it did not prepare comparable revenue and profit information on a monthly basis. Net cash outflow on acquisition of Pentana Limited: Consideration paid in cash Less: cash acquired in subsidiary Net cash outflow on acquisition of subsidiary £’000 3,425 (1,170) 2,255 Acquisition of Plumtree Group Limited On 21 December 2012, the company acquired 100% of the issued ordinary share capital of Plumtree Group Limited, a company domiciled in England. The acquisition of Plumtree Group Limited is expected to enhance the Group’s existing business through the addition of a significant number of NHS customers together with intellectual property and a recurring revenue stream. The fair values of the identifiable assets acquired and liabilities recognised at the date of acquisition are summarised in the table below. Non-current assets Customer relationships intangible Software intangible Property plant and equipment Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Deferred revenue Current income tax Other loans Non-current liabilities Deferred tax Net identifiable assets acquired The directors expect that all of the above receivables will be collected. Page 49 £’000 1,084 1,206 59 476 187 (241) (344) (87) (60) (470) 1,810 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 18 Business Combinations (continued) The fair value of the consideration at the date of acquisition is as follows: £’000 Shares issued at completion Cash paid at completion Total consideration 900 1,600 2,500 The consideration payable in shares at completion was satisfied by the issue of 4,500,000 shares in Ideagen plc at 20 pence per share. Goodwill arising on the acquisition is as follows: Fair value of consideration at date of acquisition Less: fair value of net identifiable assets acquired Goodwill arising on acquisition £’000 2,500 (1,810) 690 Goodwill arose on the acquisition of Plumtree Group Limited as the consideration paid for the combination effectively included amounts in relation to the benefit of revenue growth, expected synergies and the assembled workforce of Plumtree Group Limited. These benefits are not recognised separately from goodwill because they do not meet the criteria for recognition as identifiable intangible assets. None of this goodwill is expected to be deductible for tax purposes. The costs of the acquisition of £88,000 have been expensed as a separate line within the Group Statement of Comprehensive Income for the year ended 30 April 2013. The Group Statement of Comprehensive Income for the year ended 30 April 2013 includes revenue of £1,641,000 and profit after taxation of £423,000 in respect of the subsidiary acquired. Disclosure of information on revenue and profit or loss for the combined entity as though the acquisition of Plumtree Group Limited had been completed on 1 May 2012 is impracticable as the accounting reference date for Plumtree was previously 31 March and it did not prepare comparable revenue and profit information on a monthly basis. Net cash outflow on the acquisition of Plumtree Group Limited: £’000 Consideration paid in cash Less: cash acquired in subsidiary Net cash outflow on acquisition of subsidiary 1,600 (187) 1,413 Page 50 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 19 Equity share capital, share premium and other reserves Group and Company Issued and fully paid share capital: 2014 £’000 2013 £’000 121,890,656 ordinary shares of £0.01 each (2013: 121,740,656 shares) 1,219 1,217 Share premium 6,870 6,867 Shares issued in the year ended 30 April 2014 On 11 October 2013, 150,000 ordinary shares were issued at 2.5 pence per share on the exercise of share options through the Enterprise Management Incentive Scheme operated by the company. Shares issued in the year ended 30 April 2013 On 19 December 2012, 11,577,106 ordinary shares were issued under a share placing at 19 pence per share. Share premium of £2,084,000 arose on this issue of shares. Share issue costs of £59,000 were deducted from the share premium account. On 21 December 2012, 4,500,000 ordinary shares were issued at 20 pence per share as part of the consideration for the purchase of the whole of the ordinary share capital of Plumtree Group Limited. A merger reserve of £855,000 arose on this issue of shares. On 10 January 2013, following approval at a General Meeting of the company, a further 20,001,842 ordinary shares were issued under a share placing at 19 pence per share. Share premium of £3,600,000 arose on this issue of shares. Share issue costs of £170,000 were deducted from the share premium account. On 10 January 2013, 7,275,270 ordinary shares were issued at 10.5 pence per share as part of the deferred consideration for the purchase of Proquis Limited. 4,000,000 of these shares had been contingent on the level of revenue from a major US customer in the twelve months following acquisition and the remaining 3,275,270 shares had been contingent on the renewal of an option by the same major US customer to continue with a particular contract. A merger reserve of £691,000 arose on this issue of shares. On 5 February 2013, 304,880 ordinary shares were issued at 7.5 pence per share as part of the contingent consideration for the purchase of Ideagen Capture Limited. A merger reserve of £20,000 arose on this share issue. On 5 February 2013, 200,000 ordinary shares were issued at 2.5 pence per share on the exercise of share options through the Enterprise Management Incentive Scheme operated by the company. Share premium of £3,000 arose on this share issue. Page 51 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 19 Equity share capital, share premium and other reserves (continued) Merger reserve Group Company 2014 £’000 2013 £’000 1,167 1,167 1,218 1,218 During the year ended 30 April 2013 an impairment loss of £2,086,000 on an intangible asset acquired on a business combination together with the deferred tax credit of £667,000 associated with this intangible asset were recognised in the Consolidated Statement of Comprehensive Income. The net loss of £1,419,000 was realised in the Group merger reserve which arose on the same business combination. During the year ended 30 April 2013 an impairment loss of £1,368,000 on an investment in a subsidiary was recognised in the Statement of Comprehensive Income of the Company. This loss has been realised in the Company merger reserve which arose on the acquisition of the same subsidiary. Retained earnings Retained earnings of both the Group and the Company includes £1,336,000 transferred from the Deferred Equity Consideration Reserve in the year ended 30 April 2013. This does not represent a realised profit and is not distributable. 20 Dividends An interim dividend in respect of the year to 30 April 2014 of 0.05 pence per ordinary share (2013: nil) was paid to shareholders on 6 March 2014. The total cost of this dividend was £61,000 (2013: £nil). The directors have proposed the payment of a final dividend of 0.1 pence per ordinary share (2013: nil) on 12 November 2014 subject to approval by shareholders at the forthcoming Annual General Meeting. The total estimated cost of this dividend is £123,000. 21 Share-based payments and share options The company operates an Enterprise Management Incentive share option Scheme which permits the grant to directors and staff of options in respect of ordinary shares in the company. Some of the options granted under this scheme do not have the tax benefits normally associated with Enterprise Management Incentive options however these options are identical in all other respects. The Scheme is an equity-settled arrangement and options granted under the scheme have a maximum life of 10 years from the date of grant. Options are capable of being exercised in stages. One third can be exercised one year after grant date, a further third can be exercised two years after grant date and all options are capable of being exercised three years from the grant date. There are no other vesting conditions except to note that the options will lapse on leaving employment with the company. Page 52 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 21 Share-based payments and Share Options (continued) The following is a summary of the share options outstanding under the Enterprise Management Incentive Scheme. Year ended 30 April 2014 Outstanding at 1 May 2013 Exercised during the year Outstanding at 30 April 2014 Exercisable as at 30 April 2014 Number of options 11,754,333 (150,000) 11,604,333 7,893,222 Weighted average exercise price 12.1 pence 2.5 pence 12.3 pence 8.7 pence Of the options outstanding at 30 April 2014, 36,000 options have an exercise price of 20 pence, 3,325,000 options have an exercise price of 2.5 pence, 200,000 options have an exercise price of 7 pence, 1,410,000 options have an exercise price of 8.5 pence, 2,133,333 options have an exercise price of 9 pence and 4,500,000 options have an exercise price of 22.38 pence. The price of Ideagen plc ordinary shares at the date of exercise of the options noted above was 22.75 pence. The fair value of the options exercised during the year at the date the options were granted was 1.28 pence per share. The total fair value of the options exercised during the year at the date the options were granted was £1,920. This amount was transferred from the share-based payment reserve to retained earnings during the year. The weighted average remaining contractual life of the outstanding options at 30 April 2014 is 7.3 years. During the year ended 30 April 2014 the group recognised expenses of £285,000 in the Statement of Comprehensive Income in relation to its equity-settled share option scheme. These option charges have been credited to a share-based payment reserve within equity. The balance on this reserve at 30 April 2014 amounted to £596,000. Year ended 30 April 2013 Outstanding at 1 May 2012 Granted during the year Exercised during the year Outstanding at 30 April 2013 Exercisable as at 30 April 2013 Number of options 7,454,333 4,500,000 (200,000) 11,754,333 5,362,111 Weighted average exercise price 5.7 pence 22.38 pence 2.5 pence 12.1 pence 4.7 pence Of the options outstanding at 30 April 2013, 36,000 options have an exercise price of 20 pence, 3,475,000 options have an exercise price of 2.5 pence, 200,000 options have an exercise price of 7 pence, 1,410,000 options have an exercise price of 8.5 pence, 2,133,333 options have an exercise price of 9 pence and 4,500,000 options have an exercise price of 22.38 pence. The price of Ideagen plc ordinary shares at the date of exercise of the options noted above was 23.25 pence. The fair value of the options exercised during the year at the date the options were granted was 1.28 pence per share. The total fair value of the options exercised during the year at the date the options were granted was £2,560. This amount was transferred from the share-based payment reserve to retained earnings during the year. Page 53 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 21 Share-based payments and Share Options (continued) The weighted average remaining contractual life of the outstanding options at 30 April 2013 is 8.2 years. The fair value of the options granted during the year ended 30 April 2013 was estimated at the date of grant using the Black-Scholes option pricing model. The inputs to the option pricing model are summarised below. Share price at grant date Exercise price Expected volatility Expected dividend yield Expected option life Risk-free interest rate Fair value of option 22.38 pence 22.38 pence 62% 0% 5 years 1.21% 11.8 pence Future share price volatility has been estimated by using historic share price volatility over the most recent period commensurate with the expected life of the option. During the year ended 30 April 2013 the group recognised expenses of £178,000 in the Statement of Comprehensive Income in relation to its equity-settled share option scheme. These option charges have been credited to a share-based payment reserve within equity. The balance on this reserve at 30 April 2013 amounted to £313,000. Other outstanding share options In addition to the options granted under the terms of the Enterprise Management Incentive share option scheme disclosed above, a total of 297,850 further options were granted by the company in 2005 and 2006 and remained outstanding at both 30 April 2014 and 30 April 2013. Of the total outstanding at 30 April 2014, 114,100 options are exercisable at any time prior to 12 May 2015 at an exercise price of 28 pence each, 15,000 options are exercisable at any time prior to 6 July 2015 at 28 pence, 88,750 options are exercisable at any time prior to 21 November 2015 at 20 pence and 80,000 options are exercisable at any time prior to 25 October 2016 at 10 pence. 22 Capital management The group’s objective when managing capital is to safeguard the group’s ability to continue as a going concern so that it can continue to provide a return to shareholders and benefits for other stakeholders. The capital monitored by the group consists of all components of equity attributable to owners of the parent as set out in the Group Statement of Changes in Equity other than the foreign currency translation reserve, any long or short term borrowings, contingent and deferred liabilities arising from business combinations disclosed in Notes 15 and 17 and cash and cash equivalents. The group currently maintains a capital structure which is appropriate for its needs principally through a combination of cash flow management and forecasting and the issue of new shares, primarily in connection with the funding of business acquisitions. The group does not currently have any short or long term borrowings. The group is not subject to externally imposed capital requirements other than the minimum capital requirements imposed by the Companies Act 2006 on all public limited companies. Page 54 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 23 Operating lease commitments As at 30 April 2014 the group had aggregate commitments under non-cancellable operating leases which expire as follows: Within one year Between one and two years Between two and five years Land & Buildings Land & Buildings 2014 £’000 46 122 - 168 2013 £’000 10 101 242 353 24 Pension schemes The group operates a defined contribution pension scheme for certain employees. The pension cost charge for the year represents contributions payable by the group into both this scheme and into individual pension arrangements in respect of certain employees on a defined contribution basis and amounted to £32,000 (2013: £20,000). 25 Cash and cash equivalents For the purposes of the statement of cash flows, cash and cash equivalents include cash on hand and in banks, net of outstanding overdrafts as follows. Group Cash and bank balances Company Cash and bank balances 2014 £’000 4,011 2014 £’000 1,816 2013 £’000 6,372 2013 £’000 4,264 Page 55 Ideagen plc Notes to the Consolidated Financial Statements for the Year Ended 30 April 2014 26 Related party transactions Ideagen plc is the parent company of the group. There was no overall control of Ideagen plc. Balances and transactions between the Company and its wholly owned subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Company and other related parties are disclosed below. A loan to the company of £10,000 from Mr D R K Hornsby, a director, was included in current borrowings at 30 April 2011. This loan was repaid by the company during the year ended 30 April 2012. No interest was payable on this loan. Trade payables in the Company at 30 April 2014 also include £28,487 (2013: £28,487) payable to Glacier Software Limited, a company controlled by Mr D R K Hornsby. These amounts are in respect of fees for Mr D R K Hornsby as a director of the Company. At 30 April 2013, trade and other payables in the Company included £3,627 (2013: £1,617) payable to Ultris Limited, a company in which Mr A M Carroll is a director and shareholder. This amount is in respect of fees payable to Mr A M Carroll as a director of the Company. The amounts payable to Ultris Limited for the services of Mr A M Carroll as a director of the Company are included in the remuneration of directors disclosed in note 6. For the purposes of this note there are not considered to be any key management personnel other than the directors of the Company. The remuneration of the directors of the company is disclosed in note 6 of these financial statements. 27 Events after the end of the reporting period Acquisition of a business On 24 June 2014, Ideagen plc acquired the whole of the issued share capital of EIBS Limited (‘EIBS’), a company domiciled in England. EIBS has developed proprietary Information Portal, Internet and Mobile software solutions for the NHS and numerous public sector, not for profit and commercial organisations.The acquisition of EIBS is expected to enhance the Group’s existing business through the addition of strong mobile and portal intellectual property and the client base of EIBS. The total consideration for the acquisition of EIBS was £1,550,000 which was paid in cash on completion of the acquisition. No deferred on contingent consideration is payable. The cash balance acquired in EIBS at the date of acquisition was £301,000 and accordingly the net cash outflow on acquisition of EIBS was £1,249,000. With the exception of the cash balance acquired in EIBS, the initial review of the fair values of other separable assets and liabilities acquired has not yet been completed and accordingly information has not been presented on the fair values of assets and liabilities acquired, including the recoverability of receivables and the fair value of acquired goodwill. The costs of the acquisition of £73,000 will be expensed within a separate line in the Group Statement of Comprehensive Income for the year ending 30 April 2015. Disclosure of information on revenue and profit or loss for the combined entity as though the acquisition of EIBS had been completed on 1 May 2013 is impracticable as the accounting reference date for EIBS was previously 31 July and it did not prepare comparable revenue and profit information on a monthly basis. Issues of ordinary shares In order to satisfy the exercise of share options, the company issued 500,000 shares at 2.5 pence each on 15 May 2014, 129,100 shares at 28 pence on 2 June 2014 and 333,333 shares at 22.38 pence on 7 August 2014. Page 56
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