Ideagen plcAnnual Report and AccountsYear Ended 30 April 2015Registration number: 02805019 Contents Welcome to Ideagen Officers and advisors Financial and Operational Highlights Strategic Report Directors’ Report Statement of Directors’ Responsibilities Independent Auditor’s Report Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statements of Changes in Equity Consolidated Statement of Cash Flows Company Statement of Financial Position Company Statements of Changes in Equity Company Statement of Cash Flows Notes to the Consolidated Financial Statements Page 2 3 4 5 13 15 16 18 19 21 23 24 26 28 29 Welcome to Ideagen • .• • • • • Ideagen is a UK company quoted on the AIM market of the London Stock Exchange (Ticker: IDEA.L) and 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, Transport, Aerospace & Defence, Manufacturing and Financial Services Sectors. Ideagen has operations in the UK, the USA and the Middle East and a network of partners servicing Asia Pacific, Europe and South America Ideagen is able to provide complete content lifecycle solutions that enable organisations to meet their Regulatory and Compliance standards, helping them to reduce corporate risks and deliver operational excellence The Group has over 1500 customers including 7 of the top 10 UK accounting firms, over 80% of NHS Trusts and the top 7 global Aerospace and Defence companies The Group has grown both organically and through a number of strategic acquisitions and this year’s results represent the sixth 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 Page 2 Ideagen plc Officers and advisors Directors Jonathan Wearing - Non-Executive Chairman Jonathan was formerly a director in the London corporate finance department of Citicorp Investment Bank Limited and previ- ously worked in the corporate banking group of Citibank in London. He has run corporate advisory and consultancy businesses in the City for the last 20 years and has worked on training and lecturing assignments with a wide variety of institutions in many parts of the world. He is an early stage investor in technology companies and holds a number of directorships. Jonathan has an MA in Economics from Cambridge University. David Hornsby - Chief Executive Officer David has been the Chief Executive of Ideagen Plc since June 2009 and has over 20 years’ experience in the technology sector. David has held a number of senior management positions in both UK and US based software companies including Smart Work- force Manangement Plc, Parametric Technology Corporation and Profund Systems Limited. Graeme Spenceley - Chief Financial Officer & Company Secretary Graeme has been a chartered accountant for over 25 years. He spent 18 years with KPMG, initially specialising in audit where he managed a number of public company clients and later as an associate director in Transaction Services which specialised in the provision of due diligence and reporting accountant services to corporates, private equity companies and banks. Graeme was appointed to the Board of Ideagen in March 2010. Alan Carroll - Independent Non-Executive Director Alan has 25 years’ experience in the information systems industry during which he has worked in a senior capacity in the development of the Ministry of Defence’s Information System Strategy. He has also been a senior sales manager and advisor to a number of major companies including Unisys where he was head of sales for defence with responsibility for £55 million of new sales. More recently he has founded a number of systems and software consultancies and been an early stage investor in technology start-ups. He is currently managing director of Ultris Limited and Ultris Information Services Limited which are both primarily focused on the UK confidential government market. Alan has an MSc in Design of Information Systems from Cranfield Institute of Technology. Alan was appointed to the Board in June 2012. Advisors Nomad & Broker finncap 60 New Broad Street London EC2M 1JJ Auditor Baker Tilly UK Audit LLP Suite A, 7th Floor, City Gate East Tollhouse Hill Nottingham NG1 5FS Registered office Lime Tree Business Park Lime Tree Road Matlock Derbyshire, DE4 3EJ Solicitors Howard Kennedy No.1 London Bridge London SE1 9BG Spring Law 65 Chandos Place London WC2N 4HG Page 3 Ideagen plc Financial and Operational Highlights Financial Highlights • • • • • • • • • Revenue up 60% to £14.4m (2014: £9.0m) Pro-forma organic revenue growth of 5.3%*** Annualised recurring revenues of £10.6m at year end Adjusted EBITDA* up 43% to £4.0m (2014: £2.8m) Adjusted diluted EPS** up by 26% to 2.11 pence (2014: 1.67 pence) Profit before tax of £0.61m (2014: £1.07m) Cash generated by operations of £2.25m (2014: £1.69m) Net cash at year end of £5.3m (2014: £4.0m) Proposed final dividend increased by 10% to 0.11 pence per share - making a total of 0.165 pence (2014: 0.15 pence) per share Operational Highlights • • • • • • Transformational acquisition and integration of Gael helping scale the business whilst supporting the Group’s GRC and Healthcare strategy Acquisition and integration of EIBS strengthening the Group’s position in the UK Healthcare sector and providing the Group with leading portal and mobile technology Appointment of Ashley Marron as Group COO and Ben Dorks as Group Sales and Marketing Director Launch of dart/Portal, a Patient Information Portal based on EIBS technology Largest single NHS contract win to date at Doncaster and Bassetlaw NHS Trust worth £1million over 5 years Strong account management and customer retention resulting in support and maintenance contract renewal rate of 96% * 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 4 Ideagen plc Strategic Report for the year ended 30 April 2015 Chairman’s Statement This has been a productive and transformational year for the business. The Group has continued to perform strongly during the period and the integration of our most recent acquisition, Gael, is progressing as planned. The addition of Gael has allowed the Group to significantly broaden the customer base, strengthen the solution set, and gain further scale in our core Governance, Risk and Compliance (GRC) markets. In the year to 30 April 2015 we have successfully delivered on ambitious targets, delivering strong growth in revenue and profit through both organic and acquisitive growth. Adjusted EPS, an important financial metric for the Group, increased by 26% to 2.11p, representing our sixth consecutive period of earnings growth. At the same time, we have invested in our infrastructure and product set to ensure we continue to anticipate our customer needs and remain at the forefront of market trends. The vertical markets in which we operate, namely healthcare, complex manufacturing, aviation and banking and finance, are characterised by a global customer profile, high consequences of controls failure and are governed by industry specific standards. As such, the demand from organisations operating in these industries for specialist software solutions to address these requirements and ensure adherence to exacting regulations is robust and growing, particularly as compliance becomes more ‘’risk based’’. Furthermore, the highly fragmented market environment means that to date we have only realised a small proportion of the opportunity available to us, and we are therefore confident of further growth through increased market share and the expansion of our footprint within our existing customer base. In line with our progressive dividend policy and reflecting the strength of the balance sheet, the Board is pleased to propose a final dividend of 0.11p making a total dividend of 0.165p for the year. I would like to take this opportunity to thank all of our employees who work tirelessly to make Ideagen a success. We have an exciting pipeline of opportunities and I look forward to the future with continued confidence. Jonathan Wearing Non-Executive Chairman Page 5 Ideagen plc Strategic Report for the year ended 30 April 2015 (continued) Chief Executive’s Review Business Review I am pleased to report on another strong year for the Group ended 30 April 2015. As well as delivering further revenue and profit growth, the year was defined by our most significant and transformative acquisition to date, of Gael Limited, which completed in January of this year. Revenue for the year was £14.4 million, an increase of 60% compared to the £9.0 million achieved in the previous year, with proforma organic growth contributing 5.3% (2014: 13%). Adjusted EBITDA increased by 43% to £4.0 million compared to the prior year’s £2.8 million whilst adjusted earnings per share also rose by 26% to 2.11p, up from 1.67p. The financial strength of the business is underpinned by high levels of recurring revenue, which represent 53% (2014: 56%) of core revenue (software licence, maintenance and support, and professional services) and cover 84% (2014: 86%) of the fixed overhead base. Software licence revenue represented 26.3% of total revenues at £3.78 million, Maintenance and Support 49.1% at £7.07 million, Professional Services 20.2% at £2.90 million and hardware 4.4% at £0.64 million. In January 2015, the Group completed a successful placing raising £17.5 million to support the acquisition of Gael and associated transaction costs and to provide adequate working capital headroom. Cash generated by operations amounted to £2.25 million (2014: £1.69 million) representing 56% (2014: 60%) of adjusted EBITDA. Cash generation during the year was impacted by two significant items which are not expected to recur: annual bonus payments to Gael employees relating to the year ended 31 December 2014 made post-acquisition, and the payments for unusually high hardware purchases towards the end of the financial year to 30 April 2014 in order to satisfy certain customer contracts. The effect of these two items adversely affected cash flow by approximately £0.8m. The group ended the year with cash balances of £5.3m (2014: £4.0m) and no debt. The Group has established a global business supplying Governance, Risk and Compliance (GRC) solutions predominantly to the healthcare, complex manufacturing, banking and finance and aviation 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. The Group’s top line growth in the year was driven by strong performance in the GRC markets, up 13% compared to 9% growth in the prior year. This was offset by a modest decline in the NHS market of 3% (2014: growth of 16%), the result of a funding uncertainty in the run up to the General Election. The Group is now experiencing renewed demand for its products from the NHS following the General Election results and the Conservative Government’s ongoing strategy to deliver a paperless NHS, and the Board believes that this market will be a growth driver for the Group. Acquisitions The acquisition of Gael, a Scottish based GRC specialist, was in line with our stated strategy of acquiring businesses with strong IP and recurring revenues and has strengthened Ideagen’s existing markets, whilst also adding new product sets, vertical markets and client relationships. Integration of the two businesses has proceeded in line with expectations and, as a result, Ideagen is well placed to deliver upon two key parts of our strategy, namely: to be a dominant supplier in Governance, Risk and Compliance and; to be a Best of Breed supplier to the NHS. The combined business is extremely well placed in a number of key sectors, including aerospace & defence, where we now count 7 out of the top 7 global companies as clients, finance where we have 7 out of the top 10 UK accounting firms as clients, and healthcare with over 125 NHS Acute Trusts using our solutions. The enlarged Group now has over 1500 customers which span across multiple geographies and size, including many blue chip names such as BAE Systems, Emirates, Ernst and Young and the European Central Bank. As a result, the acquisition has helped de-risk the Group’s business model as our revenue base is now spread across a greater number of clients and markets with the Group now less reliant on large enterprise NHS contracts where purchasing behavior can be less predictable. Page 6 Ideagen plc Strategic Report for the year ended 30 April 2015 (continued) Chief Executive’s Review (continued) In the year, the Group also acquired EIBS Limited for a net cash consideration of £1.29 million. EIBS is a software company that has developed proprietary Information Portal, Internet and Mobile solutions for the NHS and numerous public sector, not for profit and commercial organisations. The integration of this business is now complete, resulting in enhanced capabilities for the product set, particularly to the Group’s mobile offering and a further consolidated position in the NHS sector. Management Structure and Sales Strategy Following the acquisition and ongoing integration of Gael, the enlarged Group has been successfully re-organised under a single management team and fully integrated reporting structure. Ashley Marron, Chief Executive of Gael has been appointed as Group Chief Operating Officer to enable integration of the Group’s product strategy, product development and professional services groups. Additionally, the sales and marketing team has been successfully restructured into one organisation under Ben Dorks, focused into industry facing teams covering the Group’s key markets. The Group has also appointed a Global Head of Channel and the Group is developing new routes to market particularly in the Asia Pacific market. In addition to winning new customers, a key proponent of the Group’s sales strategy is expanding its footprint within the existing customer base. This represents a key growth area, both through winning contracts from new divisions within existing customers and by up-selling additional elements of the solution set, including the newly acquired Gael and EIBS solutions. To date, the sales team has been successful in both migrating customers onto new products as they become available and cross selling new products and services into the customer base. Product Development Product development remains an important part of the Group’s strategy and we currently have over 117 employees within this function. The Group is focused on ensuring all of our current products remain ‘world class’ in their specific markets and that we can continue to win and develop ‘world class’ customers. Furthermore, an important initiative is the development of the Group’s Amazon Web Services (AWS) based, scalable SaaS Risk and Compliance platform, Enlighten, which ensures customers now have the choice in terms of delivery method (SaaS, Hosted or on premise). Enlighten has also enabled the Group to bid for significantly larger contracts which are predominantly recurring in nature. Infrastructure The Group operates from 3 primary locations: Nottingham, East Kilbride and Welwyn Garden City and has 3 satellite offices in Bristol, Sittingbourne and Matlock. At year end the Group had 243 employees across the following functions: Sales and Marketing - 55, Customer Services and Support - 45, Research and Development - 117, Finance and Administration - 26. The Group will continue to recruit to support its ongoing growth plans. Outlook The new financial year has started strongly and we have seen continued progress across all of the Group’s product and markets. Furthermore, in the wake of the General Election in May, purchasing patterns in the NHS appear to have returned to a more normal level following a period of uncertainty in the lead up to the Election. The Group has a strong pipeline of new business opportunities and continues to develop sales levels to existing customers which provides the board with confidence for the year. David Hornsby Chief Executive Officer Page 7 Ideagen plc Strategic Report for the year ended 30 April 2015 (continued) Financial Review of the year Revenue for the year ended 30 April 2015 increased by 60% to £14.4 million (2014: £9.0 million). Within this, underlying organic revenue growth was 5.3% based on a comparison of revenue in the year under review with pro-forma revenue for the comparative period adjusted for the Gael, EIBS, MSS and Pentana acquisitions and excluding revenue generated from the VA PRISM contract in the early part of 2013/14. Recurring revenues represent 53% (2014: 56%) of core revenues and cover 84% (2014: 86%) of the fixed overhead base. The decrease is due to a slightly lower historical proportion of recurring revenues in the businesses acquired. Software licence revenue represented 26.3% (2014: 21.6%) of total revenues at £3.78 million (2014: £1.94 million), Maintenance and Support 49.1% (2014: 49.6%) at £7.07 million (2014: £4.45 million), Professional Services 20.2% (2014: 21.8%) at £2.90 million (2014: £1.95 million) and hardware 4.4% (2014: 7.0%) at £0.64 million (2014: £0.63 million). Adjusted EBITDA increased by 43% to £4.02 million (2014: £2.81 million). The adjusted EBITDA margin reduced to 28% (2014: 31%) as expected following increased investment in products, customer service and the longer-term infrastructure of the business. Amortisation of acquisition intangibles of £2.09 million (2014: £0.95 million) represents the majority of the total depreciation and amortisation charge of £2.50 million (2014: £1.22 million). The £188,000 increase in the fair value of contingent consideration related to settling the earn-out on the acquisition of Pentana in 2013. The adjusted group tax charge was £0.59 million (2014: £0.41 million). This has been adjusted to exclude the deferred tax credits associated with the amortisation of acquisition intangibles and share based payment charges. The adjusted group tax charge represents 16% (2014: 16%) of adjusted PBT of £3.61 million (2014: £2.55 million). A further taxation credit of £0.29 million relating to the tax deductions available on the exercise of share options has been taken in reserves. Accordingly, the group’s corporation tax liability has been reduced to £0.04 million (2014: £0.28 million). As a result of the above, adjusted diluted earnings per share increased by 26% to 2.11p (2014: 1.67p). The Group’s financial position has continued to strengthen. Net assets increasing to £31.2 million (2014: £13.4 million). Intangible assets increased to £35.1 million (2014: £11.8 million) following the acquisitions of Gael and EIBS during the year. Net current assets were £1.23 million (2014: £2.60 million). Cash generated by operations amounted to £2.25 million (2014: £1.69 million) representing 56% (2014: 60%) of adjusted EBITDA. Cash generation during the year was impacted by two significant items which are not expected to recur: annual bonus payments to Gael employees relating to the year ended 31 December 2014 made post-acquisition, and the payments for unusually high hardware purchases towards the end of the financial year to 30 April 2014 in order to satisfy certain customer contracts. The effect of these two items adversely affected cash flow by approximately £0.8 million. The group ended the year with cash balances of £5.3 million (2014: £4.0 million) and no debt. The Group completed a share placing in January 2015 raising £17.5 million before costs to support the acquisition of Gael and provide adequate headroom. The net cash outflows on acquisition of businesses during the year were £14.59 million on Gael and £1.29 million on EIBS. Deferred consideration of £3.2 million is payable in respect of the acquisition of Gael of which £1.6 million is payable in January 2016 and £1.6 million in January 2017. Dividend The Board proposes a final dividend of 0.11 pence per share payable on 12 November 2015 to shareholders on the register on 30 October 2015 subject to approval at the forthcoming Annual General Meeting. The corresponding ex-dividend date is 29 October 2015. Graeme Spenceley Chief Financial Officer Page 8 Ideagen plc Strategic Report for the year ended 30 April 2015 (continued) Customer Case Studies Brussels Airlines - Belgium’s flagship carrier Brussels Airlines – which operates 49 aircraft and has 3,500 employees – has been working with Ideagen to implement its Gael Insight suite of software solutions to transform safety and operational performance through efficient safety and risk management and in depth performance indicators. Adriaan Charlet, the airline’s Safety Services Manager, said: “Q-Pulse and the overall Gael Insight solution has provided us with much better efficiency in investigating safety issues. It has also provided safety related efficiencies as well as operational reporting benefits. “The risk management and performance monitoring capabilities in particular have been extremely beneficial for us. Risk in particular was a very important part of the overall solution – not only because we can focus on the safety issues – but also enhance our operational risk assessments. For example, nowadays we are able to carry specific cargo that requires to be handled with care thanks to being able to risk assess it and feed the results back into the system. Performance monitoring is the link between safety and efficiency. In the past we gathered information ourselves manually from a variety of different databases. However now, thanks to being able to monitor performance of the business through a series of KPIs, we are able to view all of that data in a blink of an eye in one central portal. We don’t need to search or look for this ourselves, the system does this for us and tells us what areas require extra attention or are performing well.” Dirk Adriaenssens, who oversees Brussels Airlines’ Safety & Compliance Monitoring Department, said: “We invested in an integrated software suite because we required one solution to manage all of our safety and compliance monitoring activities. The solution gives us full integration of all safety issues for all departments and is also able to integrate with existing interfaces – such as our flight data monitoring system or our scheduling software – for a complete safety product. “The largest benefit we’ve seen is that it can be used online and offline and provides us with higher efficiencies in that we now don’t have to duplicate a lot of our tasks and data. This encourages the same working methods throughout the organisation in regards to capturing safety and operational issues and other forms of data.” Mr Adriaenssens continued: “We are now capturing safety issues more easily and working more proactively as we can detect hazards in advance even better. This has helped us not only improve safety even more here at Brussels Airlines, but has increased efficiency as everyone is using and becoming knowledgeable in one tool.” “The risk management and performance monitoring capabilities in particular have been extremely beneficial for us. Risk in particular was a very important part of the overall solution” Page 9 Ideagen plc Strategic Report for the year ended 30 April 2015 (continued) Customer case studies (continued) NHS - Birmingham Children’s Hospital NHS Foundation Trust Birmingham Children’s Hospital provides the widest range of children’s health services for young patients from Birmingham, the West Midlands and beyond with over 270,000 patient visits every year. Prior to implementing Ideagen’s PatientFirst software, Birmingham’s Children’s Hospital had been using more of a Patient Administration System (PAS) than a clinical patient management system, with the Emergency Department itself being run using a manual white (wipe) board. Dr Benjamin Stanhope, one of six full-time consultants responsible for patient care within the Emergency Department, said: “This was quickly considered to be an inaccurate and inefficient way of working and had created some difficulties, particularly in the tracking of patients. “There were also challenges in our ability to safely and accurately record patients’ vital signs; with no facility to electronically record administration of nurse-dispensed Patient Group Directives (PGDs) for drugs given at triage. This led to the Trust exploring more effective options.” Dr Stanhope added: “PatientFirst was chosen due to the hospital’s confidence that Ideagen could deliver a purpose built, customisable Emergency Department management tool. The key deliverable was in Ideagen working together with us to shape the project pre and post-implementation. We had confidence in the company and in our specific Ideagen team and our selection of PatientFirst was reaffirmed by strong testimonials from colleagues who were familiar with the system.” Once up and running, PatientFirst completely transformed the way in which the Emergency Department at Birmingham Children’s Hospital NHS Foundation Trust operated, from improved tracking of patients and speed of data access to achieving national targets. Dr Stanhope continued: “We now have confidence in the tracking of our patients throughout the department as well as having quick and simple access to historical and medicinal records so we are always aware of a patient’s situation. There have been fewer errors recorded, such as patients not being seen in order, which has also improved safety and overall operations. Overall productivity has been enhanced as we now have the ability to manage departmental workload much more efficiently. Our situation can be seen remotely by the Hospital Operation Centre (HOC), meaning Trust-wide activity and resource can be coordinated more efficiently. Our governance needs are being maintained and exceeded with improvements in accuracy of activity and metrics, allowing us to continually achieve the national Emergency Department targets. This is of particular financial benefit, with the functionality of the product improving quality coding against patient episodes thus reducing missed remuneration for under-coded activity.” “PatientFirst was chosen due to the hospital’s confidence that Ideagen could deliver a purpose built, customisable Emergency Department management tool. “The key deliverable was in Ideagen working together with us to shape the project pre and post-implementation.” Page 10 Ideagen plc Strategic Report for the year ended 30 April 2015 (continued) Customer Case Studies Banco Bilbao Vizcaya Argentaria SA (BBVA) internal audit BBVA is a multinational Spanish banking group, providing financial services in over 30 countries and to 50 million customers throughout the world. In addition to being the second largest bank in Spain, the company also has a strong international presence in Mexico, South America, United States, Asia and Turkey. The initial need for an automated audit management tool was established at BBVA and to help the audit department choose the best solution for their needs they implemented a selection committee of six auditors from different audit units, in order to evaluate the three shortlisted software products. The evaluation process was centred on solving certain critical issues to BBVA, which include communication, knowledge exchange, security and the standardising of core policies and procedures to provide much more accountability. Solution Cristina Gonzalez Barreda, BBVA’s Quality Assurance and Audit Tools Director for Internal Audit explained that: “Pentana was selected as the chosen provider due to versatility, functionality and also because it was a strategic fit with the manner in which we conducted our audits. BBVA found that one of the most significant benefits that our 650 users have experienced as a result of implementing Pentana is improved communication around risk management, which undeniably results in “better audits and better tests on our risk model.” Cristina sited the feature of Pentana that she finds most useful for her daily work is being able to build report views. This is where the user can set up all the columns and filters exactly as they would like, save it and easily retrieve the “report” later. This feature uses capability called “data grids,” which allows a user to build reports from within the application using very simple graphical tools that are built in to the system, thus allowing access to permitted information from anywhere within the system without needing a specialist report writing tool. Once done, these “views” can then be saved, shared and re-used across the enterprise. They also provide management with easy and immediate access to “snapshots” of what’s happening in the universe Conclusion Cristina summarises her views on the relationship with Ideagen and the experience of using Pentana: “I would definitely recommend Ideagen and its Pentana solution to my peers due to their commitment, their solution and their professionalism.” Page 11 Ideagen plc Strategic Report for the year ended 30 April 2015 (continued) Key Performance Indicators Key financial performance indicators used by management are as follows: Performance indicator 2015 2014 Method of measurement Revenue for the year (£m) Adjusted EBITDA (£m) 14.4 4.0 9.0 2.8 Gross margin 86.9% 84.1% Adjusted EBITDA margin 27.9% 31.3% EBITDA adjusted for business acquisition costs, share-based payment charges and other exceptional items Gross profit as a percentage of revenue 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. Ongoing product review and investment into product development together with the Group’s quality procedures seek to ensure that products are reliable, of high quality and relevant to market requirements. 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 subsidiaries. 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 & Company Secretary 5 October 2015 Page 12 Ideagen plc Directors’ Report for the year ended 30 April 2015 The directors are pleased to present their report and the audited consolidated financial statements for the year ended 30 April 2015. 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 5 to 12 and details are set out in the financial statements on pages 18 to 62. A final dividend for 2014 of 0.1 pence per share amounting to £123,000 and an interim dividend for 2015 of 0.055 pence per share amounting to £96,000 were paid during the year. The directors propose a final dividend in respect of the year of 0.11 pence per share payable on 12 November 2015 to shareholders on the register on 30 October 2015. 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 Issues of ordinary shares In order to satisfy the exercise of share options, the company issued 470,000 shares at 8.5 pence each on 6 May 2015 and 18,000 shares at 20 pence on 7 August 2015. Auditor In accordance with the Companies Act 2006 a resolution proposing the reappointment 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 5 to 12. 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. Future developments The strategic report on pages 5 to 12 refers to the Group’s ongoing product development and sales growth initiatives. In addition, we will continue to seek to acquire businesses with strong intellectual property and recurring revenues operating within appropriate markets. Page 13 Ideagen plc Directors’ Report for the year ended 30 April 2015 (continued) 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 5 October 2015 Page 14 Ideagen plc Statement of Directors’ Responsibilities The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare group and company financial statements for each financial year. The directors are required by the AIM rules of the London Stock Exchange to prepare group financial statements in accordance with International Financial Reporting Standards (“IFRS”) as adopted by the European Union (“EU”) and have elected under company law to prepare the company financial statements in accordance with IFRS as adopted by the EU. The financial statements are required by law and IFRS adopted by the EU to present fairly the financial position of the group and the company and the financial performance of the group. The Companies Act 2006 provides in relation to such financial statements that references in the relevant part of that Act to financial statements giving a true and fair view are references to their achieving a fair presentation. Under company law the directors must not approve financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and the company and of the profit or loss of the group for that period. In preparing the group and company financial statements, the directors are required to: • • • • select suitable accounting policies and then apply them consistently; make judgements and accounting estimates that are reasonable and prudent; state whether they have been prepared in accordance with IFRSs adopted by the EU; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and the company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and the company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the group and the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Ideagen plc website. Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other jurisdictions. Page 15 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 15, 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 2015 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 16 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. Neil Stephenson (Senior Statutory Auditor) For and on behalf of BAKER TILLY UK AUDIT LLP, Statutory Auditor Suite A, 7th Floor, City Gate East Tollhouse Hill Nottingham NG1 5FS 5 October 2015 Page 17 Ideagen plc Group Statement of Comprehensive Income for the Year Ended 30 April 2015 2015 Note £’000 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 Profit from operating activities Movement in fair value of contingent consideration Finance income Profit before taxation Taxation Profit for the year Other comprehensive income Items that may be subsequently reclassified to profit or loss: Exchange differences on translating foreign operations 2 3 3 18 21 15 5 3,7 Total comprehensive income for the year attributable to the owners of the parent company 2014 £’000 8,970 (1,425) 7,545 (4,733) 2,812 14,389 (1,892) 12,497 (8,477) 4,020 (2,503) (1,220) (450) (276) 791 (188) 5 608 (128) 480 (4) 476 (246) (285) 1,061 - 10 1,071 (198) 873 (10) 863 Earnings per share Basic Diluted Pence Pence 0.35 0.34 0.72 0.68 8 8 The notes on pages 29 to 62 form an integral part of these financial statements. Page 18 Ideagen plc (Registration number: 02805019) Group Statement of Financial Position at 30 April 2015 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 Non-current liabilities Deferred consideration on business combinations Deferred income tax liabilities 2015 Notes £’000 2014 £’000 9 10 7 12 13 14 15 16 17 17 7 35,050 11,807 302 876 166 173 36,228 12,146 55 7,332 5,266 12,653 3,476 47 44 6,228 1,628 11,423 1,613 4,656 6,269 389 3,637 4,011 8,037 2,421 327 283 2,356 50 5,437 - 1,377 1,377 Net assets 31,189 13,369 The notes on pages 29 to 62 form an integral part of these financial statements. Page 19 Ideagen plc Group Statement of financial position as at 30 April 2015 (continued) Equity Issued share capital Share premium Merger reserve Share-based payments reserve Retained earnings Foreign currency translation reserve 2015 Notes £’000 2014 £’000 19 19 19 21 1,773 23,443 1,167 653 4,160 (7) 1,219 6,870 1,167 596 3,520 (3) Equity attributable to owners of the parent 31,189 13,369 Approved and authorised for issue by the Board on 5 October 2015 and signed on its behalf by: ......................................... …………………………………… David Hornsby – Director Graeme Spenceley – Director The notes on pages 29 to 62 form an integral part of these financial statements. Page 20 l a t o T e l b a t u b i r t t a f o s r e n w o o t t n e r a p e h t n g i e r o F y c n e r r u c n o i t a l s n a r t e v r e s e r d e n i a t e R i s g n n r a e d e s a b - e r a h S s t n e m y a p e v r e s e r r e g r e M e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a c 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 9 6 3 3 1 , ) 3 ( 0 2 5 3 , 6 9 5 7 6 1 1 , 0 7 8 6 , 9 1 2 1 , 4 1 0 2 y a M 1 t a e c n a l a B 5 1 0 2 l i r p A 0 3 d e d n e r a e y e h t r o f y t i u q e n i s e g n a h c f o t n e m e t a t s p u o r G c l p n e g a e d I ) 4 8 5 ( 0 0 5 7 1 , 1 1 2 0 8 4 ) 4 ( 2 4 1 - 4 9 2 ) 9 1 2 ( - - - - ) 4 ( - - - - - - - - - 0 8 4 5 8 4 9 2 ) 9 1 2 ( - - - - - 2 4 1 ) 5 8 ( - - - - - - - - - - - - - - - - - ) 4 8 5 ( 2 7 1 5 8 9 6 1 , 5 1 5 - 9 3 - - - - - - ) 9 1 e t o n ( e m e h c s n o i t p o e r a h s r e d n u d e u s s i s e r a h S ) 1 2 e t o n ( s n o i t p o e r a h s f o e s i c r e x e n o r e f s n a r T y t i u q e n i s t n e m y a p d e s a b - e r a h s n o n o i t a x a T r a e y e h t r o f e m o c n i e v i s n e h e r p m o c r e h t O ) 1 2 e t o n ( s t n e m y a p d e s a b - e r a h S r a e y e h t r o f t fi o r P ) 0 2 e t o n ( i d a p s d n e d v d y t i u q E i i ) 9 1 e t o n ( s t s o c e u s s i i l g n c a p e r a h S l i g n c a p e r a h S 9 8 1 1 3 , ) 7 ( 0 6 1 4 , 3 5 6 7 6 1 1 , 3 4 4 3 2 , 3 7 7 1 , 5 1 0 2 l i r p A 0 3 t a e c n a l a B . s t n e m e t a t s l i a c n a n fi e s e h t f o t r a p l a r g e t n i n a m r o f 2 6 o t 9 2 s e g a p n o s e t o n e h T Page 21 l a t o T e l b a t u b i r t t a f o s r e n w o o t t n e r a p e h t n g i e r o F y c n e r r u c n o i t a l s n a r t e v r e s e r d e n i a t e R i s g n n r a e d e s a b - e r a h S s t n e m y a p e v r e s e r r e g r e M e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a c 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 4 1 0 2 l i r p A 0 3 d e d n e r a e y e h t r o f y t i u q e n i s e g n a h c f o t n e m e t a t s p u o r G c l p n e g a e d I Page 22 7 7 2 2 1 , 5 3 7 8 ) 0 1 ( 5 8 2 - ) 1 6 ( 7 - - - - - ) 0 1 ( 6 0 7 2 , 3 1 3 7 6 1 1 , 7 6 8 6 , 7 1 2 1 , 3 1 0 2 y a M 1 t a e c n a l a B - 3 7 8 - - 2 ) 1 6 ( - - - 5 8 2 ) 2 ( - - - - - - - 3 - - - - - 2 - - - - - ) 9 1 e t o n ( e m e h c s n o i t p o e r a h s r e d n u d e u s s i s e r a h S ) 1 2 e t o n ( s n o i t p o e r a h s f o e s i c r e x e n o r e f s n a r T r a e y e h t r o f e m o c n i e v i s n e h e r p m o c r e h t O ) 1 2 e t o n ( s t n e m y a p d e s a b - e r a h S r a e y e h t r o f t fi o r P ) 0 2 e t o n ( i d a p s d n e d v d y t i u q E i i 9 6 3 3 1 , ) 3 ( 0 2 5 3 , 6 9 5 7 6 1 1 , 0 7 8 6 , 9 1 2 1 , 4 1 0 2 l i r p A 0 3 t a e c n a l a B . s t n e m e t a t s l i a c n a n fi e s e h t f o t r a p l a r g e t n i n a m r o f 2 6 o t 9 2 s e g a p n o s e t o n e h T Ideagen plc Group Statement of Cash Flows for the year ended 30 April 2015 Cash flows from operating activities Notes £’000 2015 Profit for the year Depreciation of property, plant and equipment Amortisation of intangible non-current assets Loss on disposal of property, plant and equipment Share-based payment charges Finance income recognised in profit or loss Taxation charge recognised in profit or loss Business acquisition costs in profit or loss Net foreign exchange (gain)/loss in profit or loss Movement in fair value of contingent consideration Decrease/(increase) in inventories Increase in trade and other receivables (Decrease)/increase in trade and other payables Increase in deferred revenue liability Cash generated by operations Interest received Income tax paid Business acquisition costs paid Net cash generated by operating activities Cash flows from investing activities Net cash outflow on acquisition of businesses net of cash acquired Payments of deferred consideration on business combinations Payments of contingent consideration on business combinations Payments for development costs Payments for property, plant and equipment Proceeds of disposal of 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 Equity dividends paid Net cash generated/(used) by financing activities Net increase/(decrease) in cash and cash equivalents during the year 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 10 9 21 5 7 18 15 18 15 9 10 19 19 25 25 2014 £’000 873 110 1,110 2 285 (10) 198 246 10 - (389) (1,154) 392 14 1,687 5 (281) (180) 1,231 (2,844) (106) - (525) (65) 24 480 156 2,347 - 276 (5) 128 450 (13) 188 334 (1,487) (648) 42 2,248 5 (185) (312) 1,756 (15,879) (50) (468) (941) (98) 9 (17,427) (3,516) 17,500 (584) 211 (219) 16,908 1,237 4,011 18 5,266 - - 5 (61) (56) (2,341) 6,372 (20) 4,011 The notes on pages 29 to 62 form an integral part of these financial statements. Page 23 Ideagen plc (Registration number: 02805019) Company Statement of financial position as at 30 April 2015 Assets and liabilities Non-current assets Intangible assets Property, plant and equipment Investments in subsidiaries Deferred income tax asset 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 Non-current liabilities 2015 Notes £’000 2014 £’000 9 10 11 7 13 14 15 17 300 18 25,498 236 26,052 5,728 1,409 7,137 796 47 259 1,628 2,730 316 24 9,994 137 10,471 1,408 1,816 3,224 1,210 327 141 50 1,728 Deferred consideration on business combinations 17 1,613 - Net assets 28,846 11,967 The notes on pages 29 to 62 form an integral part of these financial statements. Page 24 Ideagen plc (Registration number: 02805019) Company Statement of financial position as at 30 April 2015 (continued) Equity Issued share capital Share premium Merger reserve Share-based payments reserve Retained earnings 2015 Notes £’000 2014 £’000 19 19 19 21 1,773 23,443 1,218 653 1,759 1,219 6,870 1,218 596 2,064 Equity attributable to owners of the parent 28,846 11,967 Approved and authorised for issue by the Board on 5 October 2015 and signed on its behalf by: ......................................... …………………………………… David Hornsby – Director Graeme Spenceley – Director The notes on pages 29 to 62 form an integral part of these financial statements. Page 25 l a t o T o t e l b a t u b i r t t a e h t f o s r e n w o t n e r a p d e n i a t e R i s g n n r a e d e s a b - e r a h S s t n e m y a p e v r e s e r r e g r e M e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a c 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 7 6 9 1 1 , 4 6 0 2 , 6 9 5 8 1 2 1 , 0 7 8 6 , 9 1 2 1 , 4 1 0 2 y a M 1 t a e c n a l a B 5 1 0 2 l i r p A 0 3 d e d n e r a e y e h t r o f y t i u q e n i s e g n a h c f o t n e m e t a t s y n a p m o C c l p n e g a e d I Page 26 ) 4 8 5 ( 0 0 5 7 1 , 1 1 2 2 4 1 - 4 9 2 ) 9 1 2 ( ) 5 6 4 ( - - - - 5 8 4 9 2 ) 9 1 2 ( ) 5 6 4 ( - - - 2 4 1 ) 5 8 ( - - - - - - - - - - - - - - - - ) 4 8 5 ( 2 7 1 5 8 9 6 1 , 5 1 5 - 9 3 - - - - - ) 9 1 e t o n ( e m e h c s n o i t p o e r a h s r e d n u d e u s s i s e r a h S ) 1 2 e t o n ( s n o i t p o e r a h s f o e s i c r e x e n o r e f s n a r T y t i u q e n i s t n e m y a p d e s a b - e r a h s n o n o i t a x a T ) 1 2 e t o n ( s t n e m y a p d e s a b - e r a h S ) 9 1 e t o n ( s t s o c e u s s i l i g n c a p e r a h S l i g n c a p e r a h S ) 0 2 e t o n ( i d a p s d n e d v d y t i u q E i i r a e y e h t r o f s s o L 6 4 8 8 2 , 9 5 7 1 , 3 5 6 8 1 2 1 , 3 4 4 3 2 , 3 7 7 1 , 5 1 0 2 l i r p A 0 3 t a e c n a l a B . s t n e m e t a t s l i a c n a n fi e s e h t f o t r a p l a r g e t n i n a m r o f 2 6 o t 9 2 s e g a p n o s e t o n e h T l a t o T o t e l b a t u b i r t t a e h t f o s r e n w o t n e r a p d e n i a t e R i s g n n r a e d e s a b - e r a h S s t n e m y a p e v r e s e r r e g r e M e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a c 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 0 0 0 £ ’ 6 5 6 1 1 , 1 4 0 2 , 3 1 3 8 1 2 1 , 7 6 8 6 , 7 1 2 1 , 3 1 0 2 y a M 1 t a e c n a l a B 4 1 0 2 l i r p A 0 3 d e d n e r a e y e h t r o f y t i u q e n i s e g n a h c f o t n e m e t a t s y n a p m o C c l p n e g a e d I 5 5 8 2 - ) 1 6 ( 2 8 - - 2 ) 1 6 ( 2 8 - 5 8 2 ) 2 ( - - - - - - - 3 - - - - 2 - - - - 7 6 9 1 1 , 4 6 0 2 , 6 9 5 8 1 2 1 , 0 7 8 6 , 9 1 2 1 , ) 9 1 e t o n ( e m e h c s n o i t p o e r a h s r e d n u d e u s s i s e r a h S ) 1 2 e t o n ( s n o i t p o e r a h s f o e s i c r e x e n o r e f s n a r T ) 1 2 e t o n ( s t n e m y a p d e s a b - e r a h S ) 0 2 e t o n ( i d a p s d n e d v d y t i u q E i i 4 1 0 2 l i r p A 0 3 t a e c n a l a B r a e y e h t r o f t fi o r P . s t n e m e t a t s l i a c n a n fi e s e h t f o t r a p l a r g e t n i n a m r o f 2 6 o t 9 2 s e g a p n o s e t o n e h T Page 27 Ideagen plc Company statement of cash flows for the year ended 30 April 2015 Cash flows from operating activities (Loss)/profit for the year Depreciation of property, plant and equipment Amortisation of intangible non-current assets Share-based payment charge Finance income recognised in profit or loss Taxation (credit)/charge recognised in profit or loss Business acquisition costs in profit or loss Movement in fair value of contingent consideration Increase in trade and other receivables Movement in intra-group balances Increase in trade and other payables Increase in deferred revenue Cash generated by operations Interest received Business acquisition costs paid Net cash generated by operating activities Cash flows from investing activities Payments for investments in subsidiaries Payment of deferred consideration on business combinations Payment of contingent 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 Equity dividends paid Net cash generated/(used) by financing activities Net decrease 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 2015 Notes £’000 2014 £’000 (465) 23 93 120 (2) (23) 450 188 (466) 2,775 80 118 2,891 2 (312) 2,581 (19,284) (50) (468) (77) (17) 82 16 83 77 (8) 49 246 - (428) 2,151 14 2 2,284 3 (180) 2,107 (4,190) (106) - (199) (4) (19,896) (4,499) 17,500 (584) 211 (219) 16,908 (407) 1,816 1,409 - - 5 (61) (56) (2,448) 4,264 1,816 10 9 15 18 15 9 10 19 19 25 25 The notes on pages 29 to 62 form an integral part of these financial statements. Page 28 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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 (“IFRS”), as adopted by the European Union, and IFRIC interpretations applicable as at 30 April 2015 and with those parts of the Companies Act 2006 applicable to those companies reporting under IFRS. 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 loss for the year dealt with in the financial statements of the Parent Company for the year ended 30 April 2015 was £465,000 (2014: profit of £82,000). 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 2015. 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) (b) (c) Perpetual software licences Revenue is recognised on delivery of the licence to the customer. Professional services and hardware sales Revenue in respect of professional services such as consulting days, training and bespoke development are recognised as these services are delivered. Revenue in respect of sales of third party hardware are recognized on delivery. 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 29 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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 30 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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 development 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 included in ‘Depreciation and amortisation’ in the Consolidated Statement of Comprehensive Income. 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 the annual rates shown below, so as to write off the cost, less any estimated residual values, over the expected useful economic lives of the assets concerned. • • • • Office equipment at 25% or 33% on a straight line basis Motor vehicles at 25% on a reducing balance basis Leasehold improvements over the remaining lease term All other plant and equipment assets at 25% on a straight line basis. 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 31 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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 32 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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, liabilities, revenues and expenses. 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. Acquisition intangibles The Group initially measures the separable intangible assets acquired in a business combination at their fair value at the date of acquisition. Management judgement is required in deriving a number of assumptions which are used in assessing the fair value of each acquisition intangible including the timing and amount of future incremental cash flows expected to be generated by the asset and in calculating an appropriate cost of capital. Management judgement is also required in assessing the useful economic lives of these assets for the purposes of amortisation. 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 2015 which had a significant impact on the Group. Of the new standards, amendments to standards and interpretations which have been published but are not yet effective, only IFRS 15 “Revenue from contracts with customers” is considered to be relevant to the Group. The directors are 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. IFRS 15 was issued in 2014 but has not yet been endorsed by the EU. It will be effective for the Group’s accounting period commencing on 1 May 2018. 2 Revenue The directors consider that the Group has a single business segment, being the sale of information management software to highly regulated industries. The operations of the Group are managed centrally with group-wide functions covering sales and marketing, development, professional services, customer support and finance and administration. An analysis of revenue by product or service is given below. Software licence sales Maintenance and support Professional services Hardware and third party sales 2015 £’000 3,778 7,070 2,905 636 14,389 2014 £’000 1,939 4,445 1,954 632 8,970 Page 33 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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 Middle East Rest of the World Unallocated External revenue by location of customers Non-current assets by location of assets* 2015 £’000 9,435 1,628 1,437 858 1,031 - 2014 £’000 6,960 1,002 813 - 195 - 2015 £’000 2014 £’000 32,081 8,504 2 - - - 4 - - - 3,269 3,465 14,389 8,970 35,352 11,973 *Non-current assets exclude deferred tax assets. No single customer accounted for more than 10% of total revenue in either year. 3 Operating costs Wages and salaries Operating lease charges – land & buildings Loss 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 compliance and advisory services - Other services – due diligence Page 34 2015 £’000 6,044 194 - 2,239 8,477 2,090 257 2,347 156 2,503 12 67 25 - 2014 £’000 3,125 160 2 1,446 4,733 948 162 1,110 110 1,220 10 39 15 14 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 4 Particulars of employees The average number of staff employed by the group during the year, analysed by category, was as follows: 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 (note 21) on options granted tax on options exercised 5 Finance income Bank interest receivable 2015 Number 19 34 110 163 2015 £’000 6,200 690 95 (941) 6,044 142 134 6,320 2015 £’000 5 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 2015 £’000 466 - 466 2014 Number 11 17 44 72 2014 £’000 3,253 365 32 (525) 3,125 285 - 3,410 2014 £’000 10 2014 £’000 358 - 358 The remuneration of each of the directors of the company during the year ended 30 April 2015 was as follows: David Hornsby Graeme Spenceley Jonathan Wearing Alan Carroll Les Paul (resigned 31 July 2014) Salary or fees £ Bonuses £ 150,000 96,000 10,000 18,327 12,000 286,327 130,000 50,000 - - - 180,000 Total £ 280,000 146,000 10,000 18,327 12,000 466,327 The bonuses for David Hornsby and Graeme Spenceley were in respect of the successful completion of the acquisition and integration of Gael Ltd and EIBS Ltd during the year and on achieving certain business related targets. Page 35 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 6 Directors’ remuneration and share options (continued) 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 £ 117,500 80,000 74,667 10,000 15,996 298,163 £ 40,000 20,000 - - - 60,000 Total £ 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. The remuneration of the highest paid director during the year ended 30 April 2015 was £280,000 (2014: £157,500). None of the directors received or accrued any benefits under company pension schemes or received any benefits in kind. During the year ended 30 April 2015, David Hornsby exercised 2,800,000 options over the shares of the Company at 2.5 pence when the share price of the Company was 35 pence and Graeme Spenceley exercised 200,000 options over the shares of the Company at 7 pence when the share price of the Company was 35 pence. Following his resignation as a director, Les Paul exercised 333,333 options over the shares of the Company at 22.38 pence when the share price of the Company was 32.38 pence. Mr Pauls’s remaining 666,667 options lapsed on leaving employment with the Company. The following options over shares in the Company granted to the directors remain outstanding at 30 April 2015: Number of outstanding options at 30 April 2015 Exercise price (pence) Number of options exercisable at 30 April 2015 Date granted Date exercisable by Director David Hornsby 1,333,333 9.0 1,333,333 20 October 2011 19 October 2021 David Hornsby 500,000 22.38 333,333 30 January 2013 29 January 2023 Graeme Spenceley 800,000 9.0 800,000 20 October 2011 19 October 2021 Graeme Spenceley 1,000,000 22.38 666,666 30 January 2013 29 January 2023 In addition to the options outstanding as at 30 April 2015 noted above, 1,000,000 options over the shares of the Company with an exercise price of 1 penny each were granted to Graeme Spenceley on 22 July 2015 under the Company’s Long Term Incentive Plan. These options are exercisable from 23 July 2016 subject to the following vesting criteria: one half may be exercised on the Company’s share price reaching 51 pence for 20 consecutive business days and the other half on the share price reaching 68 pence for 20 consecutive business days. These options are exercisable by 22 July 2018. No other share options were granted to the directors during the years ended 30 April 2015 or 30 April 2014. Further information on share options is included at note 21 to the financial statements. The contracts of employment of the executive directors include notice periods of 6 months. Page 36 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 7 Taxation The taxation expense recognised in the Statement of Comprehensive Income can be analysed as follows: Current income tax UK corporation tax on profit for the current year Overseas income tax charge Adjustments in respect of prior years Deferred income tax Deferred income tax (credit) for the current year Total taxation expense recognised in the current year 2015 £’000 201 51 (92) 160 (32) 128 2014 £’000 403 20 (92) 331 (133) 198 The taxation expense for the year is higher than the standard rate of corporation tax in the UK of 21% (2014: 23%). The differences are reconciled below: Profit before taxation Tax on profit at standard rate of 21% (2014: 23%) Expenses not deductible for tax purposes Depreciation in excess of capital allowances Movement in fair value of contingent consideration not taxable Charge to income statement from movement in deferred tax asset Enhanced R&D tax relief Effect of using future deferred tax rate of 20% Effect on deferred tax from change in current tax rate Different tax rates in overseas jurisdictions Utilisation of brought forward trading losses Tax deduction in income statement on exercise of share options Adjustments recognised in current year tax in respect of prior years Tax expense recognised for the current year 2015 £’000 608 128 114 8 39 236 (47) 7 5 (220) (50) (92) 128 2014 £’000 1,071 246 102 4 - 69 - 8 (4) (27) (108) - (92) 198 A further taxation credit of £294,000 in respect of share-based payment charges was reflected directly in equity reserves during the year ended 30 April 2015. The movements in recognised deferred income tax assets during the year were as follows: Deferred income tax assets: Group Trading losses Share-based payments £’000 £’000 At 1 May 2013 Recognised in profit or loss At 30 April 2014 On acquisition of businesses Recognised in profit or loss Recognised in equity 206 (69) 137 846 (293) - - 36 36 - 57 93 Total £’000 206 (33) 173 846 (236) 93 At 30 April 2015 690 186 876 Page 37 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 7 Taxation (continued) Deferred income tax assets: Group Trading losses At 1 May 2013 Recognised in profit or loss At 30 April 2014 Recognised in profit or loss Recognised in equity At 30 April 2015 £’000 186 (49) 137 (36) - 101 Share-based payments £’000 - - - 42 93 135 Total £’000 186 (49) 137 6 93 236 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 2015 of £207,000 (2014: £110,000) in respect of trading losses and £nil (2014: £396,000) in respect of share-based payments. The movements in deferred income tax liabilities during the year were as follows: Group Deferred tax liability: Intangibles Deferred tax liability: Other temporary differences At 1 May 2013 Recognised in profit or loss Foreign exchange differences Recognised on business combinations At 30 April 2014 Recognised in profit or loss Recognised on business combinations At 30 April 2015 £’000 (762) 133 - (748) (1,377) 268 (3,547) (4,656) £’000 (34) 33 1 - - - - - Total £’000 (796) 166 1 (748) (1,377) 268 (3,547) (4,656) Factors that may affect future tax charges Legislation to reduce the main rate of corporation tax from 21% to 20% from 1 April 2015 has been enacted 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 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 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 38 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 8 Earnings per share (continued) The following tables set out the computations for basic and diluted earnings per share: Year ended 30 April 2015 Earnings Basic EPS Profit for the year attributable to equity holders of the parent Effect of dilutive securities: share options £’000 480 - Weighted average number of shares 138,783,359 4,285,025 Per-share amount pence 0.35 Diluted EPS Profit for the year attributable to equity holders of the parent 480 143,068,384 0.34 Year ended 30 April 2014 Earnings Basic EPS Profit for the year attributable to equity holders of the parent Effect of dilutive securities: share options £’000 873 - Weighted average number of shares 121,823,670 6,445,784 Per-share amount pence 0.72 Diluted EPS Profit for the year attributable to equity holders of the parent 873 128,269,454 0.68 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 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 Adjusted earnings 2015 £’000 480 450 276 (57) 2,090 (409) 188 3,018 2014 £’000 873 246 285 (36) 948 (179) - 2,137 Weighted average number of shares: Basic adjusted EPS calculation Effect of dilutive securities: share options Weighted average number of shares: Diluted adjusted EPS calculation 138,783,359 4,285,025 143,068,384 121,823,670 6,445,784 128,269,454 Adjusted earnings per share: Basic Diluted 2015 pence 2.17 2.11 2014 pence 1.75 1.67 Page 39 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 9 Intangible assets Group Goodwill Software Cost At 1 May 2013 Acquisition through business combinations Additions from internal development Disposals £’000 3,419 939 - - Customer Development costs £’000 relationships £’000 £’000 Customer contract £’000 Total £’000 2,823 11,408 2,142 1,833 2,398 1,904 - - - - 626 - 525 - - - (2,823) At 30 April 2014 4,358 3,975 4,302 1,151 Acquisition through business combinations Additions from internal t developmen 6,915 7,787 9,947 - - - - 941 At 30 April 2015 11,273 11,762 14,249 2,092 Amortisation At 1 May 2013 Amortisation expense Disposals At 30 April 2014 Amortisation expense At 30 April 2015 Net carrying amount - - - - - - 479 641 - 1,120 1,322 2,442 317 338 - 655 784 1,439 73 131 - 204 241 445 At 30 April 2015 At 30 April 2014 11,273 4,358 9,320 2,855 12,810 3,647 1,647 947 - - - - 2,823 - (2,823) - - - - - 4,676 525 (2,823) 13,786 24,649 941 39,376 3,692 1,110 (2,823) 1,979 2,347 4,326 35,050 11,807 Goodwill The carrying amount of goodwill has been allocated to the following Cash Generating Units (“CGUs”): Gael / Ideagen Software / Pentana CGU Plumtree / MSS / EIBS CGU £’000 10,023 1,250 11,273 Page 40 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 9 Intangible assets (continued) These goodwill amounts were tested for impairment at 30 April 2015 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: The operating cash flows for these businesses for the year to 30 April 2016 are taken from the budget (i) 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) period; No growth has been assumed in operating cash flows for the remainder of the value in use calculation (iii) A pre-tax discount rate of 11% has been used; The use of cash flow projections over longer than a 5 year period is considered appropriate as the businesses (iv) 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. Gael / Ideagen Software / Pentana CGU On the basis of the above assumptions and using projection periods of 10 years, 15 years and in perpetuity, the recoverable amount of the CGU, based on a value in use methodology, is estimated to exceed the carrying amount of the CGU by the amounts shown in the table below. Future annual operating cash inflows, which are most sensitive to the level of new business sales, would need to be consistently lower than the no-growth assumption used in the value in use calculation by the percentages shown in the table below to reduce the recoverable amount of the CGU to below the carrying 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 reduced level of future annual operating cash flows to occur. Amount by which recoverable amount of the CGU, based on value in use, exceeds the carrying amount (£’000) Projection period in value in use calculations In perpetuity 15 years 10 years 11,004 5,913 934 Reduction in annual operating cash flows below the no-growth assumption used in value in use calculations required to reduce the recoverable amount of the CGU below the carrying amount 32% 21% 4% Plumtree / MSS / EIBS CGU On the basis of the above assumptions and using projection periods of 10 years, 15 years and in perpetuity, the recoverable amount of the CGU, based on a value in use methodology, is estimated to exceed the carrying amount of the CGU by the amounts shown in the table below. Future annual operating cash inflows, which are most sensitive to the level of new business sales, would need to be consistently lower than the no-growth assumption used in the value in use calculation by the percentages shown in the table below to reduce the recoverable amount of the CGU to below the carrying 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 reduced level of future annual operating cash flows to occur. Amount by which recoverable amount of the CGU, based on value in use, exceeds the carrying amount (£’000) Reduction in annual operating cash flows below the no-growth assumption used in value in use calculations required to reduce the recoverable amount of the CGU below the carrying amount Projection period in value in use calculations In perpetuity 15 years 2,868 2,087 10 years 1,020 40% 35% 21% Page 41 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 9 Intangible assets (continued) Development costs Development costs are internally generated. At 30 April 2015, the carrying amount of ongoing development projects on which amortisation has not yet commenced was £707,000 (2014: £313,000). At 30 April 2015, the carrying amount of completed development projects on which amortisation is being charged was £939,000 (2014: £634,000). The weighted average remaining amortisation period of these assets at 30 April 2015 is 3.5 years (2014: 3.8 years). The remaining amortisation periods and carrying amounts of the Group’s other intangible assets are as follows: 2015 Remaining amortisation period (years) 2014 Remaining amortisation period (years) 2015 2014 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 EIBS Customer relationships Software Gael Customer relationships Software 5.2 - 5.9 0.9 6.7 1.6 7.6 2.6 - 8.5 3.5 8.2 3.2 9.2 4.2 9.7 4.7 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 - - - - 250 - 249 25 274 185 828 610 - 1,331 896 285 363 919 593 8,675 6,649 299 4 291 53 315 301 937 858 15 1,486 1,148 320 478 - - - - Page 42 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 9 Intangible assets (continued) Company The intangible assets of the Company are as follows: Cost At 1 May 2013 Additions from internal development At 30 April 2014 Additions from internal development At 30 April 2015 Amortisation At 1 May 2013 Amortisation expense At 30 April 2014 Amortisation expense At 30 April 2015 Net carrying amount At 30 April 2015 At 30 April 2014 Software £’000 Development costs £’000 Total £’000 121 - 121 - 121 76 30 106 15 121 - 15 213 199 412 77 489 58 53 111 78 189 300 301 334 199 533 77 610 134 83 217 93 310 300 316 Page 43 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 10 Property, plant and equipment Group Fixtures and fittings Office equipment Motor vehicles Leasehold Loan Total improvements equipment £’000 £’000 £’000 £’000 £’000 £’000 Cost At 1 May 2013 Additions Acquisition through business combinations Disposals Foreign currency exchange differences At 30 April 2014 Additions Acquisition through business combinations Disposals Foreign currency exchange differences At 30 April 2015 Depreciation At 1 May 2013 Depreciation expense Disposals Foreign currency exchange differences At 30 April 2014 Depreciation expense Foreign currency exchange differences At 30 April 2015 Net carrying amount At 30 April 2015 At 30 April 2014 62 1 2 - - 65 2 7 - - 248 46 33 - (1) 326 92 96 - - 74 514 32 15 - - 47 18 - 65 9 18 166 57 - (1) 222 97 1 320 194 104 - - - - - - - 95 (9) - 86 - - - - - 6 - 6 80 - 26 10 4 - (1) 39 - 5 - 1 72 8 - (41) - 408 65 39 (41) (2) 39 469 4 - - - 98 203 (9) 1 45 43 762 4 14 - - 18 21 - 39 6 21 7 24 (15) - 16 14 - 30 209 110 (15) (1) 303 156 1 460 13 302 23 166 Page 44 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 10 Property, plant and equipment (continued) Company Cost At 1 May 2013 Additions At 30 April 2014 Additions At 30 April 2015 Accumulated depreciation At 1 May 2013 Depreciation expense At 30 April 2014 Depreciation expense At 30 April 2015 Net carrying amount As at 30 April 2015 As at 30 April 2014 Fixtures and Fittings £’000 Office Equipment £’000 Total £’000 23 - 23 - 23 19 2 21 2 23 - 2 151 4 155 17 172 119 14 133 21 154 18 22 174 4 178 17 195 138 16 154 23 177 18 24 Page 45 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 11 Fixed asset investments Company Cost As at 1 May 2013 Additions in the year Transfers of shares to other group companies Capital contributions to subsidiary companies As at 30 April 2014 Additions in the year Transfers of shares to other group companies Capital contributions to subsidiary companies As at 30 April 2015 Impairments As at 1 May 2013 and 1 May 2014 Transfer of shares to other group companies As at 30 April 2015 Net carrying amount As at 30 April 2015 As at 30 April 2014 Shares in subsidiaries £’000 8,183 4,566 (1,595) 208 11,362 22,525 (8,545) 156 25,498 1,368 (1,368) - 25,498 9,994 At 30 April 2015 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 exception of Ideagen Gael Limited and Gael Products Limited which are incorporated in Scotland and Ideagen Inc. which is incorporated in the United States of America. Page 46 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 11 Fixed asset investments (continued) Name of subsidiary Nature of business Class of shares % held Development and sale of software licences, Ordinary and ‘B’ software maintenance and related professional services Ordinary Development and sale of software licences, Ordinary and ‘B’ software maintenance and related professional services Ordinary 100 100 Sale of software licences, software maintenance and related professional services Dormant from 30 April 2015. Previously engaged in the development and sale of software licences, software maintenance and related professional services Dormant from 30 April 2015. Previously engaged in the development and sale of software licences, software maintenance and related professional services Dormant from 30 April 2015. Previously engaged in the development and sale of software licences, software maintenance and related professional services Ordinary 100 Ordinary 100 Ordinary 100 Ordinary 100 Ordinary Ordinary Ordinary ‘A’ Ordinary and ‘B’ Ordinary Ordinary Ordinary Ordinary 100 100 100 100 100 100 100 Ideagen Gael Limited (formerly Gael Limited) Ideagen Content Limited (formerly Plumtree Group Limited) Ideagen Inc. (formerly Pentana Inc.) Ideagen Software Limited Pentana Limited EIBS Limited MSS Management Systems Services Limited Ideagen Capture Limited Proquis Limited Filebutton Limited Root3 Systems Limited Ideagen Systems Limited Gael Products Limited Dormant Dormant Dormant Dormant Dormant Dormant Dormant 12 Inventories Group Goods for resale 2015 £’000 55 2014 £’000 389 Page 47 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 13 Trade and other receivables Group Trade receivables Prepayments and accrued income Other receivables Company Trade receivables Prepayments and accrued income Amounts receivable from subsidiaries Other receivables 2015 £’000 6,481 772 79 7,332 2015 £’000 1,179 203 4,316 30 5,728 2014 £’000 3,400 221 16 3,637 2014 £’000 698 14 680 16 1,408 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 either 30 or 60 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) 2015 £’000 2,939 1,582 504 1,672 6,697 (216) 6,481 2015 £’000 517 232 - 450 1,199 (20) 1,179 2014 £’000 2,098 829 128 396 3,451 (51) 3,400 2014 £’000 639 4 10 83 736 (38) 698 Page 48 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 13 Trade and other receivables (continued) Trade receivables are shown net of an allowance for doubtful debts, movements on which are set out below. Group Balance at the start of the year On acquisition of businesses 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 Other payables Company Trade payables Other taxes and social security payables Amounts payable to subsidiaries Accruals Other payables 2015 £’000 2014 £’000 51 124 92 (51) 216 2015 £’000 38 20 (38) 20 2015 £’000 942 1,494 848 192 3,476 2015 £’000 126 148 6 325 191 796 20 13 20 (2) 51 2014 £’000 18 20 - 38 2014 £’000 1,384 479 558 - 2,421 2014 £’000 145 94 772 199 - 1,210 Page 49 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 15 Contingent consideration on business combinations Group and Company Contingent consideration on the acquisition of MSS Management Systems Services Limited Contingent consideration on the acquisition of Pentana Limited 2015 £’000 2014 £’000 47 - 47 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. Movement in the fair value of contingent consideration in the year ended 30 April 2015 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. 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 was agreed during the year ended 30 April 2015 at a total of £468,000 resulting in a loss of £188,000 which was included as a movement in the fair value of contingent consideration in the Statement of Comprehensive Income for the year ended 30 April 2015. 16 Current income tax liabilities Group Current income tax liabilities 2015 £’000 44 44 2014 £’000 283 283 Page 50 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 17 Deferred consideration on business combinations Group and Company Current liabilities Deferred consideration on the acquisition of Gael Limited Deferred consideration on the acquisition of EIBS Limited Deferred consideration on the acquisition of MSS Management Systems Services Limited Non-current liabilities Deferred consideration on the acquisition of Gael Limited 2015 £’000 2014 £’000 1,613 15 - 1,628 1,613 1,613 - - 50 50 - - The deferred consideration payable in respect of the acquisition of Gael Limited of £3,226,000 is not subject to any performance criteria and is payable in two equal amounts of £1,613,000 in January 2016 and January 2017. 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 Gael Limited On 13 January 2015, the company acquired 100% of all classes of the issued ordinary share capital of Gael Limited, a company incorporated and domiciled in Scotland, for £20.9million. The acquisition is expected to enhance the Group’s existing business through increased scale, marketing strength and management expertise together with a strong entry point into the transport sector and 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 Deferred income tax asset Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Deferred revenue Non-current liabilities Deferred income taxation Net identifiable assets acquired The directors expect that all of the above receivables will be collected. £’000 8,943 7,073 176 755 1,914 3,109 (1,245) (3,143) (3,203) 14,379 Page 51 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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 in January 2016 (note 17) Deferred consideration payable in cash in January 2017 (note 17) Total consideration 17,699 1,613 1,613 20,925 Goodwill arising on the acquisition is as follows: £’000 Fair value of consideration at date of acquisition Less: fair value of net identifiable assets acquired Goodwill arising on acquisition 20,925 (14,379) 6,546 Goodwill arose on the acquisition of Gael 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 £406,000 have been expensed within a separate line in the Group Statement of Comprehensive Income for the year ended 30 April 2015. The Group Statement of Comprehensive Income for the year ended 30 April 2015 includes revenue of £3,510,000 and profit after taxation, excluding amortisation of relevant acquisition intangibles, of £1,014,000 in respect of the subsidiary acquired. Disclosure of information on revenue and profit or loss for the combined entity as though the acquisition of Gael Limited had been completed on 1 May 2014 is impracticable as the accounting reference date of this company was previously 31 December and it did not prepare comparable revenue and profit information on a monthly basis. Net cash outflow on acquisition of Gael Limited: £’000 Consideration paid in cash Less: cash acquired in subsidiary Net cash outflow on acquisition of subsidiary 17,699 (3,109) 14,590 Acquisition of EIBS Limited On 24 June 2014, the company acquired 100% of the issued ordinary share capital of EIBS Limited, a company incorporated and domiciled in England, for £1.6million. The acquisition is expected to enhance the Group’s existing business through the addition of portal, internet and mobile intellectual property and increases the group’s customer base in the NHS and in a number of regulated market sectors. Page 52 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 18 Business combinations (continued) 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 Deferred income tax asset Current assets Trade and other receivables Cash and cash equivalents Current liabilities Trade and other payables Deferred revenue Non-current liabilities Deferred income taxation Net identifiable assets acquired £’000 1,004 714 26 91 288 296 (183) (661) (344) 1,231 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 Deferred consideration payable in cash (note 17) Total consideration 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 1,585 15 1,600 £’000 1,600 (1,231) 369 Goodwill arose on the acquisition of EIBS 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 £40,000 have been expensed within a separate line in the Group Statement of Comprehensive Income for the year ended 30 April 2015. The Group Statement of Comprehensive Income for the year ended 30 April 2015 includes revenue of £1,534,000 and profit after taxation of £181,000 in respect of the subsidiary acquired. Disclosure of information on revenue and profit or loss for the combined entity as though the acquisition of EIBS Limited had been completed on 1 May 2014 is impracticable as the accounting reference date of this company was previously 31 July and it did not prepare comparable revenue and profit information on a monthly basis. Net cash outflow on acquisition of EIBS Limited: £’000 Consideration paid in cash Less: cash acquired in subsidiary Net cash outflow on acquisition of subsidiary 1,585 (296) 1,289 Page 53 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 18 Business combinations (continued) Business combinations completed in the year ended 30 April 2014 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, for a total consideration of £862,000. 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 £’000 349 573 1 176 (68) (150) (26) (184) 671 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 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 (see note 15). The actual amount of contingent consideration payable has not yet been finally determined and agreed with the vendor. Page 54 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 18 Business combinations (continued) Goodwill arising on the acquisition is as follows: £’000 Fair value of consideration at date of acquisition Less: fair value of net identifiable assets acquired Goodwill arising on acquisition 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, excluding amortisation of relevant acquisition intangibles, 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 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, for a total consideration of £3.7 million. 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. Page 55 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 18 Business combinations (continued) 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. The contingent consideration payable was later agreed during the year ended 30 April 2015 at a total of £468,000 (see note 15). Goodwill arising on the acquisition is as follows: £’000 Fair value of consideration at date of acquisition Less: fair value of net identifiable assets acquired Goodwill arising on acquisition 3,705 (2,957) 748 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. Page 56 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 18 Business combinations (continued) 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, excluding amortisation of acquisition intangibles, 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 19 Equity share capital, share premium and other reserves Group and Company 2015 £’000 Issued and fully paid share capital: 177,341,678 ordinary shares of £0.01 each (2014: 121,890,656 shares) 1,773 Share premium 23,443 Shares issued in the year ended 30 April 2015 £’000 3,425 (1,170) 2,255 2014 £’000 1,219 6,870 On 15 May 2014, 500,000 ordinary shares were issued at 2.5 pence per share on the exercise of share options. On 2 June 2014, 129,100 ordinary shares were issued at 28 pence per share on the exercise of share options. On 1 August 2014, 333,333 ordinary shares were issued at 22.38 pence per share on the exercise of share options. In January 2015, a total of 51,470,589 ordinary shares were issued in three tranches under a share placing at 34 pence per share. The first tranche of 1,975,631 shares was issued on 7 January 2015 and the second and third tranches of 12,730,251 and 36,764,707 shares respectively were issued separately on 8 January 2015. Share premium of £16,985,000 arose on the three tranches of shares issued under the share placing. On 24 February 2015, 18,000 ordinary shares were issued at 20 pence per share on the exercise of share options. On 17 April 2015, 2,800,000 ordinary shares were issued at 2.5 pence per share and a further 200,000 ordinary shares were issued at 7 pence per share on the exercise of share options. The total share issue costs during the year ended 30 April 2015 of £584,000 have been deducted from the share premium account. Details of outstanding options over the shares of the Company are provided in note 21. 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. Page 57 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 19 Equity share capital, share premium and other reserves (continued) Merger reserve Group Company 2015 £’000 1,167 1,218 2014 £’000 1,167 1,218 The merger reserve is in respect of the premium arising on shares issued as part of the consideration on business combinations completed in previous years. Retained earnings Retained earnings of both the Group and the Company include an amount of £1,336,000 which does not represent a realised profit and is not distributable. 20 Dividends A final dividend in respect of the year ended 30 April 2014 of 0.1 pence per ordinary share was paid to shareholders on 12 November 2014. The total cost of this dividend was £123,000. An interim dividend in respect of the year ended 30 April 2015 of 0.055 pence per ordinary share (2014: 0.05 pence) was paid to shareholders on 11 March 2015. The total cost of this dividend was £96,000 (2014: £61,000). The directors have proposed the payment of a final dividend of 0.11 pence per ordinary share (2014: 0.1 pence) on 12 November 2015 subject to approval by shareholders at the forthcoming Annual General Meeting. The total estimated cost of this dividend is £196,000. 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 58 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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 2015 Outstanding at 1 May 2014 Granted during the year Exercised during the year Lapsed during the year Outstanding at 30 April 2015 Exercisable as at 30 April 2015 Number of options 11,604,333 2,908,000 (3,851,333) (666,667) 9,994,333 5,586,333 Weighted average exercise price (pence) 12.3 35.1 4.5 22.38 21.2 13.7 Of the options outstanding at 30 April 2015, 18,000 options have an exercise price of 20 pence, 25,000 options have an exercise price of 2.5 pence, 1,410,000 options have an exercise price of 8.5 pence, 2,133,333 options have an exercise price of 9 pence, 3,500,000 options have an exercise price of 22.38 pence, 1,330,000 options have an exercise price of 32.12 pence and 1,578,000 options have an exercise price of 37.63 pence. During the year, 1,330,000 options were granted at 32.12 pence and 1,578,000 options were granted at 37.63 pence. The fair values of the options granted during the year were 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 1,330,000 options at 32.12 pence 1,578,000 options at 37.63 pence 32.12 pence 32.12 pence 42% 0.4% 5 years 1.87% 37.63 pence 37.63 pence 42% 0.4% 5 years 1.02% 12.12 pence 13.69 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. The fair value of the options exercised during the year at the date the options were granted and the price of Ideagen plc ordinary shares on the date of exercise were as follows. Number of options exercised Exercise price 500,000 333,333 18,000 2,800,000 200,000 3,851,333 (pence) 2.50 22.38 20.00 2.50 7.00 Ideagen plc share price on date of exercise (pence) Fair value per option at date of grant (pence) 41.12 32.38 37.25 35.00 35.00 1.28 11.80 0.00 1.28 1.28 Page 59 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 21 Share-based payments and share options (continued) During the year, 666,667 options lapsed. These options had an exercise price of 22.38 pence and a fair value at grant date of 11.8 pence per option. The total fair value of the options exercised during the year at the date the options were granted was £85,000. This amount was transferred from the share-based payment reserve to retained earnings during the year. The weighted average remaining contractual life of the options outstanding at 30 April 2015 was 7.7 years. During the year ended 30 April 2015 the group recognised a total charge of £276,000 in the Consolidated Statement of Comprehensive Income in relation to its equity-settled share option scheme. Of this, £142,000 related to share options granted and £134,000 related to share options exercised. The charges relating to share options granted have been credited to a share-based payment reserve within equity. The balance on this reserve at 30 April 2015 amounted to £653,000. 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 was 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. 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 30 April 2014. Of the total outstanding at 30 April 2014, 129,100 options were exercised at an exercise price of 28 pence during the year ended 30 April 2015 when the price of Ideagen plc ordinary shares was 40 pence per share. At 30 April 2015, 168,750 options remain outstanding of which 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. Page 60 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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. 23 Operating lease commitments As at 30 April 2015 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 24 Pension schemes Land & Buildings Land & Buildings 2015 £’000 40 63 461 564 2014 £’000 46 122 - 168 The group operates several defined contribution pension schemes for certain employees. The pension cost charge for the year represents contributions payable by the group into both these schemes and into individual pension arrangements in respect of certain employees on a defined contribution basis and amounted to £95,000 (2014: £32,000). 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 2015 £’000 5,266 2014 £’000 4,011 2015 £’000 2014 £’000 1,409 1,816 Page 61 Ideagen plc Notes to the Consolidated Financial Statements for the year ended 30 April 2015 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. Trade payables in the Company at 30 April 2015 included £nil (2014: £28,487) payable to Glacier Software Limited, a company controlled by Mr D R K Hornsby. This was in respect of a balance of fees for Mr D R K Hornsby as a director of the Company earned between 2009 and 2011. At 30 April 2015, trade and other payables in the Company included £3,998 (2014: £3,627) payable to Ultris Limited, a company in which Mr A M Carroll is a director and major 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. Other creditors in the Company at 30 April 2015 included £73,087 and £3,217 payable to Mr D R K Hornsby and Mr G P Spenceley respectively. These amounts relate to outstanding balances payable by the Company from the sale of Ideagen plc shares through the Company in order to fund the tax liabilities of these individuals associated with the exercise of HMRC-unapproved Ideagen share options. Mr Hornsby and Mr Spenceley are directors of the Company. 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 Issues of ordinary shares In order to satisfy the exercise of share options, the company issued 470,000 shares at 8.5 pence each on 6 May 2015 and 18,000 shares at 20 pence on 7 August 2015. Page 62 Ideagen Plc Ergo House, Mere Way, Ruddington Fields Business Park, Ruddington, Nottinghamshire, NG11 6JS Tel: +44 (0) 1629 699100 Email: info@ideagenplc.com www.ideagenplc.com
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