Ideagen plc
Annual Report and
Accounts for the Year
Ended 30 April 2016
Registration number: 02805019
CONTENTS
WELCOME TO IDEAGEN
OFFICERS AND ADVISERS
FINANCIAL HIGHLIGHTS
OPERATIONAL HIGHLIGHTS
STRATEGIC REPORT
DIRECTORS’ REPORT
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
INDEPENDENT AUDITOR’S REPORT
GROUP STATEMENT OF COMPREHENSIVE INCOME
GROUP STATEMENT OF FINANCIAL POSITION
GROUP STATEMENTS OF CHANGES IN EQUITY
GROUP STATEMENT OF CASH FLOWS
COMPANY STATEMENT OF FINANCIAL POSITION
COMPANY STATEMENTS OF CHANGES IN EQUITY
COMPANY STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
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6
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Ideagen | ANNUAL REPORT 2016
4
Ideagen | ANNUAL REPORT 2016 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 2,200 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
7th consecutive year of growth in revenue, adjusted EBITDA* and adjusted earnings per share**.
£25,000,000
£20,000,000
£15,000,000
£10,000,000
£5,000,000
£0
3.00
2.00
1.00
0.00
-1.00
-2.00
-3.00
-4.00
2009
2010
2011
2014
REVENUE ADJUSTED EBITDA*
2012
2013
2015
2016
Diluted adjusted Earnings per share (pence)**
2009
2010
2011
2012
2013
2014
2015
2016
* 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
5
Ideagen | ANNUAL REPORT 2016 OFFICERS AND ADVISERS
DIRECTORS
Jonathan Wearing
Non-Executive Chairman
Aged 63
David Hornsby
Chief Executive Officer
Aged 49
Jonathan was formerly a director in the London corporate
finance department of Citicorp Investment Bank Limited
and previously 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 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 Workforce Management Plc, Parametric
Technology Corporation and Profund Systems Limited.
Graeme Spenceley
Chief Financial Officer &
Company Secretary
Aged 51
Alan Carroll
Independent Non-Executive
Director
Aged 65
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 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. He is
currently managing director of Ultris Limited and Ultris
Information Services Limited which are 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.
ADVISERS
NOMAD & BROKER
AUDITOR
SOLICITORS
REGISTERED OFFICE
finncap
60 New Broad Street
London
EC2M 1JJ
RSM UK Audit LLP
Suite A, 7th Floor,
City Gate East
Tollhouse Hill
Nottingham
NG1 5FS
Howard Kennedy
No.1 London Bridge
London
SE1 9BG
Peregrine Law
Amadeus House
27b Floral Street
London
WC2E 9DP
Ergo House
Mere Way
Ruddington Fields Business
Park
Ruddington
Nottinghamshire
NG11 6JS
6
Ideagen | ANNUAL REPORT 2016 FINANCIAL HIGHLIGHTS
52%
10%
53%
Revenue increased by 52% to
£21.9m (2015: £14.4m)
Underlying organic revenue
growth of 10% (2015: 5.3%)***
Recurring revenues of £11.5m
(2015: £10.6m) representing 53%
(2015: 53%) of total revenues
57%
26%
11%
Adjusted EBITDA* increased 57% to
£6.3m (2015: £4m)
Adjusted diluted EPS** increased by
26% to 2.66 pence (2015: 2.11 pence)
Proposed final dividend increased by
11% to 0.122 pence per share making a
total of 0.183 pence (2015: 0.165 pence)
per share for the year
£1m
£4.9m
£6.3m
Profit before tax of £1m
(2015: £0.6m)
Cash generated by operations
of £4.9m (2015: £2.2m)
Net cash at year end
of £6.3m (2015: £5.3m)
OPERATIONAL HIGHLIGHTS
▪ Strong growth in SaaS business driven by investment in Enlighten, Ideagen’s cloud based Governance, Risk and
Compliance (GRC) platform
▪ Landmark contract awarded for Enlighten with the Railway Safety and Standards Board worth £4.9 million over 5
years
▪ Additional 15 SaaS deals, including Providence Financial, WAMOS Air, HNZ Global and Air Greenland
▪ Over 100 new on-premise customer wins including Schiphol Airport, DHL, Cobalt Air, Meggitt and South West
Yorkshire NHS Trust
▪ Significant contract extensions and expanded engagements within existing customer base, including PWC, Haeco,
Babcock, Bristow Helicopters, BTG and Dartford and Gravesham NHS Trust
▪ Continued high levels of customer retention with support and maintenance contract renewal rate of 96% (FY2015:
96%)
▪ Ongoing product innovation and investment across all products
* 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 with pro-forma revenue for the comparative period as adjusted to include acquisitions for a full year
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Ideagen | ANNUAL REPORT 2016 STRATEGIC REPORT
CHAIRMAN’S STATEMENT
We are pleased to report on another solid performance for the year to 30 April 2016, representing our 7th consecutive
year of revenue and EBITDA growth. The Group delivered strong organic revenue growth of 10%, combined with a full year
contribution from Gael which was acquired in January 2015.
A key financial metric for the Group continues to be adjusted diluted EPS and we are pleased to report an increase in adjusted
diluted EPS of 26% to 2.66 pence for the year (FY2015: 2.11 pence).
Following several successful acquisitions in prior years, Ideagen now has scale, a world class customer base, an outstanding
product set and a proven and effective management team. This year’s focus has been on driving forward our expanded
operations and executing the strategy through stronger organic growth.
We have successfully added new customers to the Group across all of our key Governance, Risk and Compliance (“GRC”)
verticals, including manufacturing, life sciences, healthcare and financial services, while also maintaining a focus on product
enhancement and innovation which has seen acceptance across the user base, resulting in significant revenues.
The clinical management solutions market continues to be impacted by the stasis in acute NHS Trusts, as anticipated. However
our existing customers in this market continue to provide us with strong levels of recurring revenues, adding to the underlying
financial strength of the business. GRC represents the large majority of Ideagen revenues at 80% and continues to be the
primary engine of growth for the Group.
The long term prospects for the Group are positive. Organisations require the tools we provide to help them identify, assess
and manage corporate risk while complying with international industry standards, and many are only in the early stages of
adopting an enterprise-wide approach. We believe we have established the right business platform to continue to participate
in this growth, with a comprehensive set of integrated solutions and offices in the UK, US and Dubai from which we can service
our global customer base.
In line with our progressive dividend policy and reflecting our continued confidence in the prospects for the Group, the
Board is pleased to propose a final dividend of 0.122 pence per share making a total dividend of 0.183 pence for the year
(FY2015: 0.165 pence). Subject to approval at the forthcoming AGM, the final dividend will be payable on 15 November 2016
to shareholders on the register on 28 October 2016. The corresponding ex-dividend date is 27 October 2016.
The success of Ideagen is the result of our dedicated and committed employees and on behalf of the Board I should like
to thank all of them for their continued hard work. The new financial year has started well and I look forward to continued
growth.
Jonathan Wearing
Non-Executive Chairman
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Ideagen | ANNUAL REPORT 2016
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2016
CHIEF EXECUTIVE’S REVIEW
BUSINESS REVIEW
Trading for the period was robust, resulting in a year of solid growth for the Group. Our priorities during the year were
completing the integration of Gael, our largest acquisition to date in January 2015, and the continued development of the
solutions portfolio to ensure we are fully aligned to our customers’ evolving needs.
Growth in the period was driven by our core business in the development and implementation of GRC solutions. New
customers added in the period include HNZ Global, Amsterdam Schiphol, Providence Financial, WAMOS Air, DHL and Meggitt
while significant new orders from the existing customer base were achieved with Haeco, Babcock, Boeing and PwC.
Revenue for the year increased 52% to £21.9 million (FY2015: £14.4 million), representing underlying organic growth of 10%
(FY2015: 5.3%). This resulted in adjusted EBITDA for the Group of £6.3 million (FY2015: £4.0 million), an increase of 57% whilst
adjusted diluted EPS increased 26% to 2.66 pence.
The Group continues to enjoy high levels of recurring revenue, which represent 53% (FY2015: 53%) of revenue and cover 88%
of the operating cost base (FY2015: 84%).
Cash generation remained strong, particularly in the second half of the year, and net cash at 30 April 2016 was £6.3 million
(31 October 2015: £5.4 million), after paying £1.7 million of deferred and contingent consideration, principally for the Gael
acquisition, and £0.3 million in dividends in the second half. The Group continues to maintain a debt-free balance sheet.
The international landscape for GRC management is evolving and we believe we are well positioned to capitalise on the
emerging trends. The industry verticals we operate in are governed by an increasing number of international standards,
with the introduction of standards such as ISO 13485:2016, IATA/e-IOSA for aviation and ISO 45001 for health and safety as
examples. Furthermore, we are seeing these new standards move increasingly towards a risk-based philosophy, meaning that
it is no longer sufficient for risk management and compliance procedures to be implemented in department silos but instead
must be embedded across all areas of an organisation in an integrated way.
We have the tools and expertise to help our customers develop and embed a holistic approach to risk management across
their enterprise. This trend in turn is also driving interest in SaaS-delivered GRC systems which can easily deploy across
multiple geographies and departments and scale to cope with vast, disparate workforces. While SaaS-based revenue currently
represents a small proportion of overall revenue, we see this as a significant growth area for the Group and a key focus for
continued product development.
MARKETS: GRC AND CONTENT & CLINICAL
The Group operates in two markets: supplying GRC solutions to highly regulated industries including Healthcare (which
includes provision to the NHS), Complex Manufacturing, Finance, Transport and Life Sciences; and, supplying Content and
Clinical management solutions, primarily to the NHS.
GRC represented 80% of Ideagen revenues at £17.5 million and continues to be the main engine of growth for the Group.
Revenues from this market grew by 23% during the year (FY2015: 13%).
Content and Clinical represents 20% of Ideagen revenues contributing £4.4 million to Group revenue (FY2015: £5.5 million).
The Content and Clinical market continues to be impacted by stasis within acute NHS trusts resulting in a decline of 20% in
revenues from this market during the year (FY2015: decline of 3%). While there are encouraging longer term opportunities,
policy initiatives and decisions continue to be delayed and as a result, the Group does not see a strong growth opportunity in
the near term. The Group continues to benefit from high levels of recurring revenues from our Content and Clinical customers
adding to the underlying financial strength of the business and does not expect any further decline in the current financial
year.
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Ideagen | ANNUAL REPORT 2016 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2016
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
ACQUISITIONS
The Board continues to pursue opportunities to complement organic growth through strategic and bolt on acquisitions. The
Group continues to build on its extensive experience from previous successful acquisitions and will adhere to its strict criteria
of acquiring complementary businesses that have strong IP and significant recurring revenues.
Since the end of the financial year, the Group has made two further acquisitions which are briefly summarised in the Directors’
Report.
PRODUCT STRATEGY & DEVELOPMENT
The Group has a strong commitment to continued development of its product suite. The product development strategy
centres on the closer integration of the established product set to enable a modular best-of-breed GRC solution, delivered via
SaaS or on-premise.
On-premise:
The focus going forward is on the closer integration and interoperability of the product suite, including the Pentana,
Proquis and Q-Pulse products, across a single, modular platform. We have made good progress in the year towards
creating common standards and common user interfaces in line with this strategy.
Cloud:
We continue to see growing interest in SaaS deployed GRC systems amongst our customer base which can provide
the scale and flexibility required for a pan-enterprise approach to risk management. As a result, we have seen
excellent early success with our Enlighten solution, delivered via Amazon Web Services. The focus in the year ahead is
adding enhanced functionality to the Enlighten platform to provide smart forms capability, training and competency
and third party management.
OUTLOOK
The market for GRC management solutions remains fragmented and the drivers are long term and highly strategic. Trading
since the year end has remained robust. Whilst we remain alert to prevailing economic and political conditions we have a
strong presence in a variety of different markets across the globe, which, together with the high levels of recurring revenues
and repeat business derived from our 2,200 customer base, provides me with confidence in the future prospects for the
Group.
David Hornsby
Chief Executive Officer
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Ideagen | ANNUAL REPORT 2016
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2016
FINANCIAL REVIEW OF THE YEAR
Revenue for the year ended 30 April 2016 increased by 52% to £21.9 million (FY2015: £14.4 million). Within this, pro-forma
organic revenue growth was 10%. This is based on a comparison with pro-forma revenue for FY2015 of £19.9 million which
includes the acquisitions of Gael and EIBS for a full year.
The Group operates in two markets. Revenues from the GRC market of £17.5 million represented 80% of Ideagen revenues
and this continues to be the main engine of growth for the Group. Revenues from this market grew by 23% during the year
(FY2015: 13%). Content and Clinical represents 20% of Ideagen revenues contributing £4.4 million to Group revenue (FY2015:
£5.5 million). Revenues from this market were impacted by the ongoing stasis in acute NHS trusts and declined by 20% during
the year although this decline was only 15% if revenues from non-core hardware sales are excluded.
Recurring revenues were £11.5 million (FY2015: £10.6 million) making up 53% (FY2015: 53%) of total revenues and are
equivalent to 88% (FY2015: 84%) of operating costs. Software licence revenues represented 32.8% (FY2015: 29.5%) of total
revenues at £7.2 million (FY2015: £4.3 million), Maintenance and Support 45.6% (FY2015: 45.9%) at £10.0 million (FY2015: £6.6
million), Professional Services 21.1% (FY2015: 20.2%) at £4.6 million (FY2015: £2.9 million) and Hardware 0.5% (FY2015: 4.4%)
at £0.1 million (FY2015: £0.6 million).
Adjusted EBITDA increased by 57% to £6.3 million (FY2015: £4.0 million) and the adjusted EBITDA margin at 28.5% remained
at a similar level to FY2015 (27.9%). We have continued our programme of investment in our staff, improving customer service
and the longer-term infrastructure of the business both to support future organic growth and provide a stronger platform for
the integration of future acquisitions.
Amortisation of acquisition intangibles of £3.7 million (FY2015: £2.1 million) represents the majority of the total depreciation
and amortisation charge of £4.3 million (FY2015: £2.5 million). Amortisation of development costs amounted to £0.4 million
(FY2015: £0.2 million). The share-based payment charge of £0.9 million (FY2015: £0.3 million) is a non-cash cost which relates
to the Group’s equity-settled share option schemes. The increased charge is mainly in respect of the Long Term Incentive Plan
which was set up in 2015.
The adjusted group tax charge was £0.7 million (FY2015: £0.6 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 12.4% (FY2015: 16.4%) of adjusted profit before tax of £5.7 million (FY2015: £3.6 million). The lower
adjusted tax rate is mainly the result of a higher rate of R&D tax credit claims in the Gael business acquired in 2015. The
Group’s use of tax losses has reduced the corporation tax liability to only £13,000 at 30 April 2016.
As a result of the above, adjusted diluted earnings per share increased by 26% to 2.66p (FY2015: 2.11p).
The Group’s financial position has continued to strengthen during the year with net assets increasing to £33.7 million (FY2015:
£31.2 million) and net current assets increasing to £3.8 million (FY2015: £1.2 million).
The level of intangible assets decreased to £32.6 million (FY2015: £35.1 million) as a result of amortisation charges and no new
acquisitions in the year. The Group capitalised £1.6 million (FY2015: £0.9 million) of R&D development costs during the year
which represented 47% (FY2015: 49%) of total development costs of £3.5 million (FY2015: £1.9 million) or 7.5% (FY2015: 6.5%)
of total revenues. The increase is the result of having Gael in the Group for a full year and the acceleration of the Enlighten
development programme.
Cash generated by operations improved during the year and amounted to £4.9 million (FY2015: £2.2 million) representing 78%
(FY2015: 56%) of adjusted EBITDA. Free cash flow also improved significantly to £2.8 million (FY2015 £0.7 million) representing
45% (FY2015: 18%) of adjusted EBITDA. The group ended the year with cash balances of £6.3 million (FY2015: £5.3 million) and
no debt.
During the year, the group made the first deferred consideration payment of £1.6 million in respect of the acquisition of Gael.
A final payment of £1.6 million is due to be made in January 2017.
Graeme Spenceley
Chief Financial Officer
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Ideagen | ANNUAL REPORT 2016
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2016
CUSTOMER CASE STUDIES
IDEAGEN ENLIGHTEN
VIRGIN TRAINS
Ideagen has been working with Virgin Trains, a major UK train operating company, through the provision of its Enlighten cloud
solution.
Enlighten has brought with it a number of operational business benefits such as easy access to company documentation,
user friendly completion of audits and the proactive logging and reporting of accidents and incidents. The firm has over 1,400
employees utilising Enlighten to effectively streamline work management processes and enhance quality document control.
The software also provides dynamic safety management investigation, monitoring and reporting while safety incidents can be
captured in real time via mobile devices and processed seamlessly.
With very
little
training, we have
managed to
implement new ways
of working using the product
for
maximum benefit. We initially started
using Enlighten as a safety management
system, but it offers a lot more than
just that and fits our long-term aims in
terms of development.
Garry Hall
Safety and Standards Manager
Virgin Trains
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Ideagen | ANNUAL REPORT 2016 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2016
CUSTOMER CASE STUDIES
IDEAGEN Q-PULSE & VALIDATION SERVICES
ROYAL WOLVERHAMPTON NHS TRUST
The Royal Wolverhampton NHS Trust is one of the largest acute and community providers in the West Midlands having
more than 800 beds on the New Cross site as well as a number of additional locations. As the second largest employer in
Wolverhampton, the Trust employs more than 8,000 staff.
Ideagen worked with Royal Wolverhampton NHS Trust to validate its Q-Pulse software following the Trust’s transition from CPA
to the ISO 15189 standard. Ideagen, along with its validated partner, Compliance Path, helped the Trust achieve the standard
certification by providing a validation pack which consolidated information across each of the Trust’s Q-Pulse modules and
offered a simple guide to follow for successful validation.
The final validation report for Q-Pulse
contained the package itself along with
the additional checks. All in all it was a
fantastic, and hassle free service from
Ideagen and CompliancePath and meant
that we didn’t need to spend months
validating or contract a specialist
consultant paying a premium. It saved
us immensely in resources and removed
what would have been a major headache
for the department.
Katy New
Pathology Quality Manager
Royal Wolverhampton NHS Trust
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Ideagen | ANNUAL REPORT 2016 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2016
CUSTOMER CASE STUDIES
IDEAGEN PENTANA
BDO
BDO, a global top-five accounting firm, worked with Ideagen to implement Ideagen Pentana for its Risk and Advisory Services
department. Pentana quickly became an integral part of the department’s operations.
Pentana allowed BDO to implement a consistent methodology which was compliant with international risk and auditing
standards, allowing for multiple departments within the business – in this case the Risk, Compliance and Internal Audit teams
– to work with a single tool, increasing effectiveness of the ‘Three Lines of Defence’ and ‘Golden Thread’.
We use Pentana for all of our internal
audits and the product is a requirement
now within the risk and advisory services
team here at BDO. Every internal audit we
carry out uses Pentana from beginning to
end as it provides a structured receptacle
for our working papers. The product also
enables us to manage our reviews and our
files and to structure the risk based internal
audit reviews that we were carrying out in a
way that was relatively easy and simple for
our staff to use.
Nigel Burbidge
Partner and Global Head of Risk Advisory Services
BDO
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Ideagen | ANNUAL REPORT 2016 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2016
KEY PERFORMANCE INDICATORS
Key financial performance indicators used by management are as follows:
PERFORMANCE INDICATOR
Revenue for the year (£m)
Adjusted EBITDA (£m)
2016
21.9
6.3
2015
METHOD OF MEASUREMENT
14.4
4.0
EBITDA adjusted for business acquisition
costs, share-based payment charges and
other exceptional items
Gross margin
88.0%
86.9%
Gross profit as a percentage of revenue
Adjusted EBITDA margin
28.5%
27.9%
Adjusted EBITDA as a percentage of
revenue
PRINCIPAL RISKS AND UNCERTAINTIES
Risk management is an important part of the management process throughout the Group and a policy of continuous
improvement is adopted in assessing the adequacy of the internal system of controls. The Group’s operations expose it to a
variety of risks including strategic, economic, operational and financial. The management of the group monitors the exposures
to these risks in order to limit the adverse effects of these risks on the financial performance of the Group.
Strategic. The Group operates in a dynamic market and constantly seeks to ensure the solutions it offers are competitive.
Economic. A worsening of the economic climate may lead to reduced spend on IT systems and services by customers. However,
the Group has products and solutions which can help customers lower their cost base in difficult trading conditions and to
some extent address compliance issues which need to be covered even in an economic downturn.
Operational. The Group’s most significant assets are the intellectual property developed by the Group, the intangible assets
acquired with business acquisitions and the employees of the Group. 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 subsidiary. The foreign exchange risk is
partly addressed by maximising costs denominated in US dollars. Management closely monitors exchange rate fluctuations
and will use forward contracts when considered to be appropriate to reduce this risk. The Group implements appropriate
credit checks on potential customers before sales are made. The amount of exposure to individual customers is subject to a
limit which is regularly reassessed.
Approved by the Board and signed on its behalf by
………………………
Graeme Spenceley
Director and Company Secretary
4 October 2016
15
Ideagen | ANNUAL REPORT 2016 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 APRIL 2016
The directors are pleased to present their report and the audited financial statements for the year ended 30 April 2016.
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 8 to 15
and details are set out in the financial statements on pages 21 to 74.
A final dividend for 2015 of 0.11 pence per share amounting to £197,000 and an interim dividend for 2016 of 0.061 pence per
share amounting to £109,000 were paid during the year. The directors propose a final dividend in respect of the year of 0.122
pence per share payable on 15 November 2016 to shareholders on the register on 28 October 2016. This is subject to approval
by shareholders at the forthcoming Annual General Meeting.
In accordance with S414c(ii) of the Companies Act 2006, the Group has chosen to set out in the Group’s Strategic Report,
information required by the Large and Medium Companies and Groups (Accounts and Reports) Regulations 2008 Sch.7 to be
contained in the Director’s Report.
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)
▪ Alan M Carroll (Non-Executive Director)
DIRECTORS’ INDEMNITY AND INSURANCE
The Group maintained insurance cover during the year for its Directors and Officers and those of subsidiary companies under
a Directors and Officers liability insurance policy against liabilities which may be incurred by them while carrying out their
duties.
EVENTS AFTER THE END OF THE REPORTING PERIOD
Acquisition of Covalent Software Limited (‘Covalent’)
On 5 August 2016, Ideagen plc acquired the whole of the issued share capital of Covalent Software Limited, a company
domiciled in England. Covalent has developed and commercialised a proprietary GRC platform with significant traction in the
UK public sector. The acquisition of Covalent is expected to enhance the Group’s existing business through the addition of its
cloud-based intellectual property and its strong recurring revenue base.
The total consideration for the acquisition of Covalent was £4,655,000 which was paid in cash on completion of the acquisition.
No deferred or contingent consideration is payable.
The cash balance acquired in Covalent at the date of acquisition was £1,113,000 and accordingly the net cash outflow on
acquisition of Covalent was £3,542,000.
Acquisition of Logen EOOD
On 18 August 2016, Ideagen plc acquired the whole of the issued share capital of Logen EOOD, a company domiciled in
Bulgaria. Logen is a reseller of Ideagen’s GRC audit management and risk assessment solution, Pentana and has significant
experience in audit-based analytics, particularly within the financial and public sectors.
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Ideagen | ANNUAL REPORT 2016 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 APRIL 2016 (CONTINUED)
The acquisition will give Ideagen’s existing customers access to this expertise, as well as create a solid operational base in
central Europe from which we can enhance our sales reach and future software development capacity.
The initial consideration for the acquisition of £78,000 was paid on completion. Up to a further £50,000 may become payable
12 months after completion depending on the achievement of certain post acquisition revenue targets.
Issues of ordinary shares
In order to satisfy the exercise of share options, the company issued 221,000 shares at 37.63 pence each on 4 May 2016,
80,000 shares at 10 pence on 27 July 2016, 130,000 shares at 37.63 pence on 11 August 2016 and 110,000 shares at 32.12
pence on 31 August 2016. The company also issued 500,000 shares at 1 penny on 11 August 2016 in order to satisfy the
exercise of share options granted under the Long Term Incentive Plan.
AUDITOR
In accordance with the Companies Act 2006 a resolution proposing the reappointment of RSM UK Audit LLP (formerly Baker
Tilly UK Audit LLP) as auditor will be put to the members at the forthcoming Annual General Meeting.
DISCLOSURE OF INFORMATION TO AUDITOR
So far as the directors are aware, there is no relevant audit information of which the Group’s auditor is unaware. Additionally,
the directors have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware
of all relevant audit information and to establish that the Group’s auditor is aware of that information.
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
8 to 15.
The directors have a reasonable expectation that the company and Group have 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 8 to 15 refers to the Group’s ongoing product strategy and development. In addition, the
directors will continue to seek to acquire businesses with strong intellectual property and recurring revenues operating within
appropriate markets.
CURRENT TRADING & OUTLOOK
The market for GRC management solutions remains fragmented and the drivers are long term and highly strategic. Trading
since the year end has remained robust. Whilst we remain alert to prevailing economic and political conditions we have a
strong presence in a variety of different markets across the globe, which, together with the high levels of recurring revenues
and repeat business derived from our 2,200 customer base, provide the Board with confidence in the future prospects for
the Group.
Approved by the Board and signed on its behalf by:
.........................................
Graeme Spenceley
Director & Company Secretary
4 October 2016
17
Ideagen | ANNUAL REPORT 2016 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.
18
Ideagen | ANNUAL REPORT 2016 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 18, 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 2016
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.
19
Ideagen | ANNUAL REPORT 2016 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IDEAGEN PLC (CONTINUED)
(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 RSM UK Audit LLP (formerly Baker Tilly UK Audit LLP), Statutory Auditor
7th Floor, City Gate East
Tollhouse Hill
Nottingham
NG1 5FS
4 October 2016
20
Ideagen | ANNUAL REPORT 2016 GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 2016
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 the 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
Corporation tax on exercise of options
Total comprehensive income for the year attributable to the owners of
the parent company
Earnings per share
Basic
Diluted
NOTES
2
3
3
18
21
15
5
7
8
8
2016
£’000
2015
£’000
21,936
14,389
(2,632)
(1,892)
19,304
12,497
(13,047)
(8,477)
6,257
4,020
(4,322)
(2,503)
-
(936)
999
(4)
7
1,002
315
1,317
(450)
(276)
791
(188)
5
608
(128)
480
88
27
(4)
-
1,432
476
Pence
Pence
0.74
0.71
0.35
0.34
21
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements. GROUP STATEMENT OF FINANCIAL POSITION AT
30 APRIL 2016
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
Net assets
22
NOTE
2016
£’000
2015
£’000
9
10
7
12
13
14
15
16
17
17
7
32,572
35,050
433
877
302
876
33,882
36,228
33
8,244
6,317
55
7,332
5,266
14,594
12,653
2,506
3,476
-
13
6,603
1,623
47
44
6,228
1,628
10,745
11,423
-
4,048
4,048
1,613
4,656
6,269
33,683
31,189
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements. GROUP STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2016 (CONTINUED)
Equity
Issued share capital
Share premium
Merger reserve
Share-based payments reserve
Retained earnings
Foreign currency translation reserve
NOTES
2016
£’000
2015
£’000
19
19
19
21
1,790
1,773
23,598
23,443
1,167
1,482
5,565
81
1,167
653
4,160
(7)
Equity attributable to owners of the parent
33,683
31,189
Approved and authorised for issue by the Board on 4 October 2016 and signed on its behalf by:
..................................................... .....................................................
David Hornsby
Director
Graeme Spenceley
Director
23
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements.
GROUP STATEMENT OF CHANGES IN EQUITY FOR THE
YEAR ENDED 30 APRIL 2016
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24
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements.
GROUP STATEMENT OF CHANGES IN EQUITY FOR THE
YEAR ENDED 30 APRIL 2015
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25
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements.
GROUP STATEMENT OF CASH FLOWS FOR
THE YEAR ENDED 30 APRIL 2016
Cash flows from operating activities
Profit for the year
Depreciation of property, plant and equipment
Amortisation of intangible assets
Loss on disposal of property, plant and equipment
Share-based payment charges
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
Decrease in inventories
Increase in trade and other receivables
Decrease 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 (used)/generated by financing activities
Net increase 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
26
NOTES
10
9
3
21
5
7
18
15
18
15
9
10
19
19
20
25
25
2016
£’000
1,317
201
4,121
3
936
(7)
(315)
-
4
22
(834)
(894)
348
4,902
7
(41)
(92)
2015
£’000
480
156
2,347
-
276
(5)
128
450
188
334
(1,487)
(661)
42
2,248
5
(185)
(312)
4,776
1,756
-
(15,879)
(1,618)
(51)
(1,643)
(347)
11
(50)
(468)
(941)
(98)
9
(3,648)
(17,427)
-
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172
(306)
(134)
994
5,266
57
6,317
17,500
(584)
211
(219)
16,908
1,237
4,011
18
5,266
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements. COMPANY STATEMENT OF FINANCIAL
POSITION AS AT 30 APRIL 2016
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
Deferred consideration on business combinations
Net assets
NOTES
2016
£’000
2015
£’000
9
10
11
7
13
14
15
17
17
221
13
300
18
26,076
25,498
375
236
26,685
26,052
4,997
977
5,974
431
-
233
1,623
2,287
5,728
1,409
7,137
796
47
259
1,628
2,730
-
1,613
30,372
28,846
27
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements. COMPANY STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2016 (CONTINUED)
Equity
Issued share capital
Share premium
Merger reserve
Share-based payments reserve
Retained earnings
NOTES
2016
£’000
2015
£’000
19
19
19
21
1,790
1,773
23,598
23,443
1,218
1,482
2,284
1,218
653
1,759
Equity attributable to the owners of the parent
30,372
28,846
Approved and authorised for issue by the Board on 4 October 2016 and signed on its behalf by:
..................................................... .....................................................
David Hornsby
Director
Graeme Spenceley
Director
28
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN
EQUITY FOR THE YEAR ENDED 30 APRIL 2016
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29
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN
EQUITY FOR THE YEAR ENDED 30 APRIL 2015
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30
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS FOR
THE YEAR ENDED 30 APRIL 2016
Cash flows from operating activities
NOTES
Profit/(loss) for the year
Depreciation of property, plant and equipment
Amortisation of intangible assets
Share-based payment charge
Finance income recognised in profit or loss
Taxation credit recognised in profit or loss
Business acquisition costs in profit or loss
Movement in fair value of contingent consideration
Decrease/(increase) in trade and other receivables
Movement in intra-group balances
(Decrease)/increase in trade and other payables
(Decrease)/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
Receipts from warranty claims 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 (used)/generated 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
10
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2016
£’000
587
15
79
183
(1)
(33)
-
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364
413
(289)
(26)
1,296
1
(92)
1,205
2015
£’000
(465)
23
93
120
(2)
(23)
450
188
(466)
2,775
80
118
2,891
2
(312)
2,581
-
(19,284)
(1,618)
(51)
176
-
(10)
(50)
(468)
-
(77)
(17)
(1,503)
(19,896)
-
-
172
(306)
(134)
(432)
1,409
977
17,500
(584)
211
(219)
16,908
(407)
1,816
1,409
31
Ideagen | ANNUAL REPORT 2016The notes on pages 32 to 74 form an integral part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED 30 APRIL 2016
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 2016 and with those parts of the
Companies Act 2006 applicable to those companies reporting under IFRS.
PRINCIPAL ACTIVITIES
The principal activities of the group are the development and sale of information management software to businesses in
highly regulated industries and the provision of associated professional services and support.
BASIS OF PREPARATION
These financial statements have been prepared in sterling on an historical cost basis, unless otherwise stated, and have been
rounded to the nearest thousand pounds.
The Company has taken advantage of the exemption provided under section 408 of the Companies Act 2006 not to present its
individual Statement of Comprehensive Income and related notes. The profit for the year dealt with in the financial statements
of the Parent Company for the year ended 30 April 2016 was £587,000 (2015: loss of £465,000).
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 2016. 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. Software licences
Revenue on perpetual software licences is recognised on delivery of the licence to the customer. Software as a service,
hosted software and software sold on a subscription basis are invoiced quarterly or annually in advance and revenue is
recognised on a time-basis over the appropriate service or subscription period. A deferred revenue liability is recognised
in the statement of financial position to represent the element of the service or subscription revenue deferred to be
recognised as revenue in the future.
32
Ideagen | ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
1 | ACCOUNTING POLICIES (CONTINUED)
b. 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 recognised on delivery.
c. Annual support and maintenance
Revenue is recognised on a time-basis over the length of the support period. Annual support and maintenance is
normally invoiced in advance and a deferred revenue liability is recognised in the statement of financial position to
represent the element of the support and maintenance revenue deferred to be recognised as revenue in the future.
Products owned and supported by third parties where there is no further liability to the group are invoiced in advance
and revenue and the associated third party costs are recognised on delivery.
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 better understand 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.
33
Ideagen | ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
1 | ACCOUNTING POLICIES (CONTINUED)
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. The assets of the scheme are held
separately from those of the Group in independently administered funds. 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. Costs of acquiring businesses
are expensed as incurred. 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.
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
Customer relationships
20% or 25%
20% or 25%
10%
Amortisation charges are included in ‘Depreciation and amortisation’ in the 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.
Costs of acquiring businesses are expensed as incurred. 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.
34
Ideagen | ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
1 | ACCOUNTING POLICIES (CONTINUED)
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.
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. For the purpose of the
Statement of Cash Flows, cash and cash equivalents as defined above are stated net of any outstanding bank overdrafts.
35
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
1 | ACCOUNTING POLICIES (CONTINUED)
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.
Where there are no market conditions attaching to the exercise of the options, the fair value is determined using a range
of inputs into a Black-Scholes pricing model. Where there are market conditions attaching to the exercise of the options a
trinomial option pricing model is used to determine fair value 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.
DIVIDENDS
Dividends distributed to the Company’s shareholders are recognised as a liability in the financial statements in the period in
which the dividends are approved by the Company’s shareholders or, in the case of interim dividends, when they are paid.
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 2016 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” and IFRS 16
“Leases” are potentially considered to have a significant impact on the Group. The directors are currently reviewing these new
standards and the effects, if any, of applying these standards to the financial statements of the Group and the Company have
not yet been evaluated.
36
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
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 growth, cash flows and
an appropriate discount rate 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.
Trade and other receivables
Trade and other receivables are recognised to the extent that they are considered recoverable. Management judgement
is required in considering the recoverability of debts and in the estimation of any provisions which may be required where
recoverability is considered to be uncertain.
37
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
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 licences
Maintenance and support
Professional services
Hardware sales
2016
£’000
7,196
10,000
4,636
104
2015
£’000
4,242
6,606
2,905
636
21,936
14,389
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*
2016
£’000
12,709
2,837
2,471
1,456
2,463
2015
£’000
9,435
1,628
1,437
858
1,031
2016
£’000
2015
£’000
29,933
32,081
-
-
-
-
2
-
-
-
-
3,072
3,269
21,936
14,389
33,005
35,352
* Non-current assets exclude deferred income tax assets.
No single customer accounted for more than 10% of total revenue in either year.
38
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
3 | OPERATING COSTS
Wages and salaries (note 4)
Operating lease charges – land & buildings
Loss on disposal of property, plant and equipment
Foreign exchange (gains) / losses
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
Total research and development costs
Less: development costs capitalised
Research and development costs expensed
Auditor’s remuneration
- The audit of the company’s annual accounts
Fees payable for other services provided by the Auditor:
- The audit of the company’s subsidiaries’ annual accounts
- Tax compliance and advisory services
2016
£’000
9,593
356
3
(81)
3,176
13,047
3,715
406
4,121
201
4,322
2015
£’000
6,044
194
-
82
2,157
8,477
2,090
257
2,347
156
2,503
3,538
1,938
(1,643)
1,895
(941)
997
12
54
13
12
67
25
39
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
4 | PARTICULARS OF EMPLOYEES
The average number of staff employed by the group during the year, analysed by category, was as follows:
2016
2015
NUMBER
NUMBER
27
60
161
248
2016
£’000
10,049
1,027
160
19
34
110
163
2015
£’000
6,200
690
95
11,236
6,985
(1,643)
(941)
9,593
6,044
921
15
142
134
10,529
6,320
2016
£’000
7
2015
£’000
5
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
- national insurance
5 | FINANCE INCOME
Bank interest receivable
40
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
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
2016
£’000
329
-
329
2015
£’000
466
-
466
The remuneration of each of the directors of the company during the year ended 30 April 2016 was as follows:
David Hornsby
Graeme Spenceley
Jonathan Wearing
Alan Carroll
SALARY OR
FEES
BONUSES
TOTAL
£
£
£
159,167
15,000
174,167
105,167
15,000
120,167
12,500
21,996
-
-
12,500
21,996
298,830
30,000
328,830
The bonuses for David Hornsby and Graeme Spenceley were in respect of achieving certain business related targets.
The remuneration for Alan Carroll was paid to Ultris Limited as set out in note 26.
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
TOTAL
£
£
£
150,000
130,000
280,000
96,000
10,000
18,327
12,000
50,000
146,000
-
-
-
10,000
18,327
12,000
286,327
180,000
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.
The remuneration of the highest paid director during the year ended 30 April 2016 was £174,167 (2015: £280,000). None of the
directors received or accrued any benefits under company pension schemes or received any benefits in kind.
41
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
6 | DIRECTORS’ REMUNERATION AND SHARE OPTIONS (CONTINUED)
No options were exercised by directors during the year ended 30 April 2016. 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 in the year ended 30 April 2015, 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
Paul’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 2016:
Director
Number of
outstanding
options at
30 April 2016
and 30 April
2015
Exercise
price
(pence)
Number
of options
exercisable
at 30 April
2016
Number
of options
exercisable
at 30 April
2015
Date
granted
Date exercisable
by
David Hornsby
1,333,333
9.0
1,333,333
1,333,333
20 October 2011
19 October 2021
David Hornsby
500,000
22.38
500,000
333,333
30 January 2013
29 January 2023
Graeme Spenceley
800,000
9.0
800,000
800,000
20 October 2011
19 October 2021
Graeme Spenceley
1,000,000
22.38
1,000,000
666,666
30 January 2013
29 January 2023
In addition to the options outstanding as at 30 April 2016 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 2016 or 30 April 2015. 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.
42
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
7 | TAXATION
The taxation (credit) / 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 for the current year
Adjustments in respect of prior years
Deferred income tax
Deferred income tax credit for the current year
Total taxation (credit) / expense recognised in the current year
2016
£’000
2015
£’000
27
32
(40)
19
(334)
(315)
201
51
(92)
160
(32)
128
The taxation (credit) / expense for the year is higher than the standard rate of corporation tax in the UK of 20% (2015: 21%).
The differences are reconciled below:
Profit before taxation
Tax on profit at standard rate of 20% (2015: 21%)
Expenses not deductible for tax purposes
Deferred taxation not provided on accelerated 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 on deferred tax from change in current tax rate
Different tax rates in overseas jurisdictions
Utilisation of brought forward trading losses
Deferred tax assets not previously recognised
Tax deduction in income statement on exercise of share options
Adjustments recognised in current year tax in respect of prior years
2016
£’000
1,002
200
2
(33)
1
-
(195)
(131)
12
-
(131)
-
(40)
2015
£’000
608
128
114
8
39
236
(47)
7
5
(220)
-
(50)
(92)
Taxation (credit) / expense recognised for the current year
(315)
128
43
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
7 | TAXATION (CONTINUED)
A further taxation credit of £275,000 (2015: £294,000) in respect of share-based payment charges was reflected directly in
equity reserves.
The movements in recognised deferred income tax assets during the year were as follows:
Trading
losses
Share-
based
payments
Total
£’000
£’000
£’000
137
846
(293)
-
690
(442)
-
248
36
-
57
93
186
168
275
629
173
846
(236)
93
876
(274)
275
877
Trading
losses
Share-
based
payments
Total
£’000
£’000
£’000
137
(36)
-
101
(15)
-
86
-
42
93
135
29
125
289
137
6
93
236
14
125
375
Deferred income tax assets: Group
At 1 May 2014
On acquisition of businesses
Recognised in profit or loss
Recognised in equity
At 30 April 2015
Recognised in profit or loss
Recognised in equity
At 30 April 2016
Deferred income tax assets: Company
At 1 May 2014
Recognised in profit or loss
Recognised in equity
At 30 April 2015
Recognised in profit or loss
Recognised in equity
At 30 April 2016
44
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
7 | TAXATION (CONTINUED)
The deferred income tax assets at 30 April 2016 are expected to be utilised as follows:
Group
Within 1 year
After more than 1 year
Company
Within 1 year
After more than 1 year
Trading losses
Share-based
payments
£’000
£’000
Total
£’000
175
73
248
44
42
86
-
629
629
-
289
289
175
702
877
44
331
375
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, at 30 April 2016 there are also unrecognised deferred
income tax assets in respect of trading losses of £274,000 (2015: £207,000) in the Group and £219,000 (2015: £207,000) in the
Company.
The movements in deferred income tax liabilities during the year were as follows:
Group
At 1 May 2014
Recognised in profit or loss
Recognised on business combinations
At 30 April 2015
Recognised in profit or loss
At 30 April 2016
The deferred tax liabilities at 30 April 2016 are expected to crystallise as follows:
Group
Within 1 year
After more than 1 year
Deferred tax liability:
Intangibles
£’000
(1,377)
268
(3,547)
(4,656)
608
(4,048)
Deferred tax liability:
Intangibles
£’000
(851)
(3,197)
(4,048)
45
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
7 | TAXATION (CONTINUED)
FACTORS THAT MAY AFFECT FUTURE TAX CHARGES
Legislation to reduce the main rate of corporation tax from 20% to 19% from 1 April 2017 and from 19% to 18% from 1 April
2020 was enacted in October 2015. At the 2016 Budget, the government announced a further reduction in the rate to 17%
from 1 April 2020 which has not yet been enacted so has not been considered in the determination of deferred tax. The
deferred tax balances within these financial statements have been reassessed to reflect these rates within the period that any
related timing difference is expected to reverse.
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.
The following tables set out the computations for basic and diluted earnings per share:
Year ended 30 April 2016
Basic EPS
Profit for the year attributable to equity holders of the parent
Effect of dilutive securities: share options
Diluted EPS
Earnings
Weighted average
number of shares
Per-share
amount
£’000
1,317
-
pence
178,379,433
0.74
7,936,922
Profit for the year attributable to equity holders of the parent
1,317
186,316,355
0.71
Year ended 30 April 2015
Basic EPS
Earnings
£’000
Weighted average
number of shares
Per-share
amount
pence
Profit for the year attributable to equity holders of the parent
Effect of dilutive securities: share options
Diluted EPS
Profit for the year attributable to equity holders of the parent
480
-
480
138,783,359
0.35
4,285,025
143,068,384
0.34
46
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
8 | EARNINGS PER SHARE (CONTINUED)
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
2016
£’000
1,317
-
936
(168)
3,715
(851)
4
2015
£’000
480
450
276
(57)
2,090
(409)
188
Adjusted earnings
4,953
3,018
Weighted average number of shares: Basic adjusted EPS calculation
178,379,433
138,783,359
Effect of dilutive securities: share options
7,936,922
4,285,025
Weighted average number of shares: Diluted adjusted EPS calculation
186,316,355
143,068,384
Adjusted earnings per share:
Basic
Diluted
2016
pence
2.78
2015
pence
2.17
2.66
2.11
47
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
9 | INTANGIBLE ASSETS
Group
Cost
At 1 May 2014
Acquisition through business combinations
Additions from internal development
Goodwill
Software
Customer
relationships
Development
costs
Total
£’000
£’000
£’000
£’000
£’000
4,358
6,915
-
3,975
7,787
-
4,302
9,947
-
1,151
-
941
13,786
24,649
941
At 30 April 2015
11,273
11,762
14,249
2,092
39,376
Additions from internal development
-
-
-
At 30 April 2016
11,273
11,762
14,249
1,643
3,735
1,643
41,019
Amortisation
At 1 May 2014
Amortisation expense
At 30 April 2015
Amortisation expense
At 30 April 2016
Net carrying amount
At 30 April 2016
At 30 April 2015
Goodwill
-
-
-
-
-
11,273
11,273
1,120
1,322
2,442
2,290
4,732
7,030
9,320
655
784
1,439
1,425
2,864
204
241
445
406
851
1,979
2,347
4,326
4,121
8,447
11,385
12,810
2,884
1,647
32,572
35,050
The carrying amount of goodwill has been allocated to the following Cash Generating Units (“CGUs”):
Ideagen Gael CGU
Ideagen Content CGU
£’000
10,023
1,250
11,273
The Ideagen Gael CGU comprises the businesses of the acquisitions of Gael, Pentana, Ideagen Software, Ideagen Capture and
Proquis.
The Ideagen Content CGU comprises the businesses of the acquisitions of Plumtree, MSS and EIBS.
48
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
9 | INTANGIBLE ASSETS (CONTINUED)
These goodwill amounts were tested for impairment at 30 April 2016 by comparing the carrying value of the cash-generating
unit with the recoverable amount. The recoverable amount was determined using a value in use methodology based on
discounted cash flow projections. The key assumptions used in the value in use calculations were as follows:
i. The operating cash flows for these businesses for the year to 30 April 2017 are taken from the budget approved by the
Board which is closely linked with recent historical performance and current sales opportunities. The operating cash
flow budget is most sensitive to the level of new business sales;
ii. No growth has been assumed in operating cash flows for the remainder of the value in use calculation period;
iii. A pre-tax discount rate of 11% has been used;
iv. The use of cash flow projections over longer than a 5 year period is considered appropriate as the businesses of both
of the CGUs have been operating for over 20 years, have strong recurring revenue bases and the Group continues to
invest in the development of the products in both CGUs.
IDEAGEN GAEL 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, the directors do not currently
expect this reduced level of future annual operating cash flows to occur.
Projection period in value in use calculations
In perpetuity
15 years
10 years
22,781
14,771
8,904
52%
42%
30%
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
IDEAGEN CONTENT 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, the directors do not currently
expect this reduced level of future annual operating cash flows to occur.
Projection period in value in use calculations
In perpetuity
15 years
10 years
Amount by which recoverable amount of the CGU, based on
value in use, exceeds the carrying amount (£’000)
2,297
1,412
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
43%
32%
618
17%
49
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
9 | INTANGIBLE ASSETS (CONTINUED)
DEVELOPMENT COSTS
Development costs are internally generated. At 30 April 2016, the carrying amount of ongoing development projects on which
amortisation has not yet commenced was £520,000 (2015: £707,000). At 30 April 2016, the carrying amount of completed
development projects on which amortisation is being charged was £2,364,000 (2015: £939,000). The weighted average
remaining amortisation period of these assets at 30 April 2016 is 3.7 years (2015: 3.5 years).
The remaining amortisation periods and carrying amounts of the Group’s other intangible assets are as follows:
2016
Remaining
amortisation
period
2015
Remaining
amortisation
period
2016
Carrying
amount
2015
Carrying
amount
(years)
(years)
£’000
£’000
4.2
4.9
-
5.7
0.6
6.6
1.6
7.5
2.5
7.2
2.2
8.2
3.2
8.7
3.7
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
202
250
207
-
233
75
720
379
249
25
274
185
828
610
1,175
644
1,331
896
250
248
818
450
285
363
919
593
7,780
5,234
8,675
6,649
Group
Ideagen Capture
Customer relationships
Ideagen Software
Customer relationships
Software
Proquis
Customer relationships
Software
Plumtree
Customer relationships
Software
Pentana
Customer relationships
Software
MSS
Customer relationships
Software
EIBS
Customer relationships
Software
Gael
Customer relationships
Software
50
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
9 | INTANGIBLE ASSETS (CONTINUED)
COMPANY
The intangible assets of the Company are as follows:
Cost
At 1 May 2014
Additions from internal development
At 30 April 2015
Additions from internal development
At 30 April 2016
Amortisation
At 1 May 2014
Amortisation expense
At 30 April 2015
Amortisation expense
At 30 April 2016
Net carrying amount
At 30 April 2016
At 30 April 2015
Software
Development
costs
Total
£’000
£’000
£’000
121
-
121
-
121
106
15
121
-
121
-
-
412
77
489
-
489
111
78
189
79
268
221
300
533
77
610
-
610
217
93
310
79
389
221
300
51
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
10 | PROPERTY, PLANT AND EQUIPMENT
GROUP
Fixtures and
fittings
Office
equipment
Motor
vehicles
Leasehold
improvements
Loan
equipment
Total
£’000
£’000
£’000
£’000
£’000
£’000
Cost
At 1 May 2014
Additions
Acquisition through
business combinations
Disposals
Foreign currency exchange
differences
At 30 April 2015
Additions
Disposals
At 30 April 2016
Depreciation
At 1 May 2014
Depreciation expense
Foreign currency exchange
differences
At 30 April 2015
Depreciation expense
Disposals
Foreign currency exchange
differences
At 30 April 2016
Net carrying amount
At 30 April 2016
At 30 April 2015
65
2
7
-
-
74
92
-
166
47
18
-
65
24
-
-
89
77
9
326
92
96
-
-
514
230
-
744
222
97
1
320
139
-
1
460
284
194
-
-
95
(9)
-
86
16
(16)
86
-
6
-
6
20
(2)
-
24
62
80
39
-
5
-
1
45
9
-
54
18
21
-
39
8
-
-
47
7
6
39
4
-
-
-
469
98
203
(9)
1
43
762
-
-
347
(16)
43
1,093
16
14
-
30
10
-
-
40
3
13
303
156
1
460
201
(2)
1
660
433
302
52
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
10 | PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
COMPANY
Cost
At 1 May 2014
Additions
At 30 April 2015
Additions
At 30 April 2016
Accumulated depreciation
At 1 May 2014
Depreciation expense
At 30 April 2015
Depreciation expense
At 30 April 2016
Net carrying amount
As at 30 April 2016
As at 30 April 2015
Fixtures
and fittings
Office
equipment
Leasehold
improvements
£’000
£’000
£’000
Total
£’000
23
-
23
-
23
21
2
23
-
23
-
-
155
17
172
-
172
133
21
154
13
167
5
18
-
-
-
10
10
-
-
-
2
2
8
-
178
17
195
10
205
154
23
177
15
192
13
18
53
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
11 | FIXED ASSET INVESTMENTS
COMPANY
Cost
As at 1 May 2014
Additions in the year
Transfers of shares to other group companies
Capital contributions to subsidiary companies
As at 30 April 2015
Amounts claimed under warranties relating to business combinations
Capital contributions to subsidiary companies
As at 30 April 2016
Impairments
As at 1 May 2014
Transfer of shares to other group companies
As at 30 April 2015 and 30 April 2016
Net carrying amount
As at 30 April 2016
As at 30 April 2015
Shares in subsidiaries
£’000
11,362
22,525
(8,545)
156
25,498
(176)
754
26,076
1,368
(1,368)
-
26,076
25,498
At 30 April 2016 the Company held 100% of the nominal value of all classes of the 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.
54
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
11 | FIXED ASSET INVESTMENTS (CONTINUED)
Name of subsidiary
Nature of business
Class of shares
Ideagen Gael Limited
Development and sale of software licences, software
maintenance and related professional services
Ideagen Content Limited
Development and sale of software licences, software
maintenance and related professional services
Ordinary and ‘B’
Ordinary
Ordinary and ‘B’
Ordinary
Ideagen Inc.
Sale of software licences, software maintenance and related
professional services
Ideagen Software Limited
Pentana Limited
EIBS Limited
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
MSS Management Systems
Services Limited
Dormant
Ideagen Capture Limited
Dormant
Proquis Limited
Filebutton Limited
Dormant
Dormant
Root3 Systems Limited
Dormant
Ideagen Systems Limited
Dormant
Gael Products Limited
Dormant
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
‘A’ Ordinary and
‘B’ Ordinary
Ordinary
Ordinary
Ordinary
55
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
12 | INVENTORIES
GROUP
Goods for resale
2016
£’000
33
2015
£’000
55
Inventory costs recognised as an expense within Cost of sales in the group Statement of Comprehensive Income amounted
to £22,000 (2015: £334,000).
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
56
2016
£’000
6,117
2,127
-
8,244
2016
£’000
774
275
3,948
-
4,997
2015
£’000
6,481
772
79
7,332
2015
£’000
1,179
203
4,316
30
5,728
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
13 | TRADE AND OTHER RECEIVABLES (CONTINUED)
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 ageing based on due date 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)
2016
£’000
2,381
1,329
502
2,052
6,264
(147)
6,117
2016
£’000
224
184
15
371
794
(20)
774
2015
£’000
2,939
1,582
504
1,672
6,697
(216)
6,481
2015
£’000
517
232
-
450
1,199
(20)
1,179
57
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
13 | TRADE AND OTHER RECEIVABLES (CONTINUED)
Trade receivables are shown net of an allowance for doubtful debts, movements on which are set out below.
2016
£’000
216
-
10
(79)
147
2016
£’000
20
-
-
20
2015
£’000
51
124
92
(51)
216
2015
£’000
38
20
(38)
20
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
58
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
14 | TRADE AND OTHER PAYABLES
GROUP
Trade payables
Other taxes and social security
Accruals
Other payables
COMPANY
Trade payables
Other taxes and social security
Amounts payable to subsidiaries
Accruals
Other payables
2016
£’000
740
1,156
610
-
2,506
2016
£’000
73
65
7
286
-
431
2015
£’000
942
1,494
848
192
3,476
2015
£’000
126
148
6
325
191
796
59
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
15 | CONTINGENT CONSIDERATION ON BUSINESS COMBINATIONS
GROUP AND COMPANY
Contingent consideration on the acquisition of MSS Management Systems Services Ltd
2016
£’000
-
-
2015
£’000
47
47
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. The contingent
consideration payable was agreed during the year ended 30 April 2016 at a total of £51,000 resulting in a charge of £4,000
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 2016.
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 charge 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
2016
£’000
13
13
2015
£’000
44
44
60
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
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
Non-current liabilities
Deferred consideration on the acquisition of Gael Limited
2016
£’000
1,613
10
1,623
-
-
2015
£’000
1,613
15
1,628
1,613
1,613
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. The first of these payments was made in January 2016 and the
second payment is due in January 2017.
61
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
18 | BUSINESS COMBINATIONS
BUSINESS COMBINATIONS COMPLETED IN THE YEAR ENDED 30 APRIL 2015
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 £20.9 million. 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 fair value of the consideration at the date of acquisition is as follows:
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
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
62
£’000
8,943
7,073
176
755
1,914
3,109
(1,245)
(3,143)
(3,203)
14,379
£’000
17,699
1,613
1,613
20,925
£’000
20,925
(14,379)
6,546
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
18 | BUSINESS COMBINATIONS (CONTINUED)
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:
Consideration paid in cash
Less: cash acquired in subsidiary
Net cash outflow on acquisition of subsidiary
Acquisition of EIBS Limited
£’000
17,699
(3,109)
14,590
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 £1.6 million. 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.
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
63
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
18 | BUSINESS COMBINATIONS (CONTINUED)
The fair value of the consideration at the date of acquisition is as follows:
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
£’000
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:
Consideration paid in cash
Less: cash acquired in subsidiary
Net cash outflow on acquisition of subsidiary
£’000
1,585
(296)
1,289
64
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
19 | EQUITY SHARE CAPITAL, SHARE PREMIUM AND OTHER RESERVES
GROUP AND COMPANY
2016
£’000
2015
£’000
Issued and fully paid share capital:
178,963,428 ordinary shares of £0.01 each (2015: 177,341,678 shares)
1,790
1,773
Share premium
23,598
23,443
Shares issued in the year ended 30 April 2016
Ordinary shares issued during the year on the exercise of share options were as follows:
Date shares issued
Number of shares
issued
Issue price (pence)
Share premium (£)
6 May 2015
7 August 2015
14 October 2015
14 October 2015
21 December 2015
24 March 2016
470,000
18,000
940,000
88,750
25,000
80,000
Shares issued in the year ended 30 April 2015
8.50
20.00
8.50
20.00
2.50
37.63
35,250
3,420
70,500
16,862
375
29,304
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 share premium.
Details of outstanding options over the shares of the Company are provided in note 21.
65
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
19 | EQUITY SHARE CAPITAL, SHARE PREMIUM AND OTHER RESERVES
(CONTINUED)
MERGER RESERVE
Group
Company
2016
£’000
2015
£’000
1,167
1,167
1,218
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 2015 of 0.11 pence per ordinary share (in respect of the year ended 30
April 2014: 0.1 pence) was paid to shareholders on 12 November 2015. The total cost of this dividend was £197,000 (in respect
of the year ended 30 April 2014: £123,000).
An interim dividend in respect of the year ended 30 April 2016 of 0.061 pence per ordinary share (2015: 0.055 pence) was paid
to shareholders on 10 March 2016. The total cost of this dividend was £109,000 (2015: £96,000).
The directors have proposed the payment of a final dividend of 0.122 pence per ordinary share (2015: 0.11 pence) on 15
November 2016 subject to approval by shareholders at the forthcoming Annual General Meeting. The total estimated cost of
this dividend is £220,000.
66
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
21 | SHARE-BASED PAYMENTS AND SHARE OPTIONS
The company has issued share options under three different arrangements. The principal arrangements are an Enterprise
Management Incentive Scheme used for granting share options to directors and employees and a Long Term Incentive Plan
under which share options were granted to certain directors and managers. In addition, a small number of other share
options granted in 2005 and 2006 outside these arrangements remain outstanding.
Ideagen Enterprise Management Incentive Scheme
The company operates an Enterprise Management Incentive Scheme which permits the grant to directors and staff of share
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. All options can be exercised in the event of a takeover of the company. There are no other vesting
conditions except to note that the options will lapse on leaving employment with the company.
The following is a summary of the movements in outstanding share options under the Ideagen Enterprise Management
Incentive Scheme.
Year ended 30 April 2016
Outstanding at 1 May 2015
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at 30 April 2016
Exercisable as at 30 April 2016
Number of options
Weighted average
exercise price (pence)
9,994,333
1,650,000
(1,533,000)
(443,000)
9,668,333
6,079,666
21.2
38.3
10.0
37.63
25.2
18.4
Of the options outstanding at 30 April 2016, 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, 1,125,000 options have an exercise
price of 35 pence, 1,055,000 options have an exercise price of 37.63 pence and 525,000 options have an exercise price of 45.5
pence.
67
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
21 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
During the year, 1,125,000 options were granted at 35 pence and 525,000 options were granted at 45.5 pence. The fair values
of the options granted during the year were estimated at the date of grant using a Black-Scholes option pricing model. The
inputs to the option pricing model are summarised below.
Date of grant
Share price at grant date
Exercise price
Expected volatility
Expected dividend yield
Expected option life
Risk-free interest rate
Fair value of option
1,125,000 options
at 35 pence
525,000 options
at 45.5 pence
12 May 2015
7 September 2015
35 pence
35 pence
32%
0.4%
5 years
1.4%
45.5 pence
45.5 pence
32%
0.4%
5 years
1.26%
10.16 pence
13.20 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 values at the date the options were granted of those options exercised during the year and the price of Ideagen plc
ordinary shares on the date of exercise were as follows.
Number of options
exercised
Exercise price
(pence)
Ideagen plc share price
on date of exercise
(pence)
Fair value per option at
date of grant
(pence)
470,000
18,000
940,000
25,000
80,000
1,533,000
8.50
20.00
8.50
2.50
37.63
35.00
47.00
46.50
54.50
49.00
5.70
-
5.70
1.28
13.69
During the year, 443,000 options lapsed. These options had an exercise price of 37.63 pence and a fair value at grant date of
13.69 pence per option.
The total fair value of the options exercised during the year at the date the options were granted was £92,000. 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 2016 was 7.4 years.
68
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
21 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
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
Weighted average
exercise price (pence)
11,604,333
2,908,000
(3,851,333)
(666,667)
9,994,333
5,586,333
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 a 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 values at the date the options were granted of those options exercised during the year and the price of Ideagen plc
ordinary shares on the date of exercise were as follows.
Number of options
exercised
Exercise price
(pence)
Ideagen plc share price
on date of exercise
(pence)
Fair value per option at
date of grant
(pence)
500,000
333,333
18,000
2,800,000
200,000
3,851,333
2.50
22.38
20.00
2.50
7.00
41.12
32.38
37.25
35.00
35.00
1.28
11.80
-
1.28
1.28
69
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
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 those 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.
Ideagen Long Term Incentive Plan
On 22 July 2015, the company introduced a Long Term Incentive Plan and 4,000,000 share options were granted under the
plan at an exercise price of 1 penny to certain directors and managers.
2,000,000 of these options can be exercised when the Ideagen plc share price for the immediately preceding 20 dealing days
is at least 51 pence on each of those days provided that this occurs within 3 years of the date of grant of the options. The
remaining 2,000,000 options can be exercised when the Ideagen plc share price for the immediately preceding 20 dealing days
is at least 68 pence provided that this occurs within 3 years of the date of grant of the options.
No options can be exercised in the 12 month period immediately following the date of grant. In the event of a takeover of the
company, different rules will apply and all of these options may become exercisable at that point.
None of these options were exercisable at 30 April 2016 and no options were exercised during the year. During the year ended
30 April 2016, 500,000 of the options with a 68 pence share price exercise condition lapsed.
The fair value of the options granted were estimated at the date of grant using a trinomial option pricing model. The inputs to
the option pricing model are summarised below.
Share price at grant date
Exercise price
Share price condition (barrier)
Expected volatility
Expected dividend yield
Expected option life
Risk-free interest rate
Fair value of option
51 pence share price
exercise condition
68 pence share price
exercise condition
45.5 pence
1 penny
51 pence
32%
0.4%
3 years
0.54%
45.5 pence
1 penny
68 pence
32%
0.4%
3 years
0.54%
35.25 pence
22.70 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.
70
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
21 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
Other outstanding share options
In addition to the share options granted under the terms of the Enterprise Management Incentive Scheme and the Long Term
Incentive Plan disclosed above, a total of 297,850 further share 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.
A further 88,750 of these options were exercised during the year ended 30 April 2016 at an exercise price of 20 pence when
the price of Ideagen plc ordinary shares was 46.5 pence.
At 30 April 2016, 80,000 options with an exercise price of 10 pence remained outstanding. Since 30 April 2016, these options
have now been exercised.
Effect of share options on the Group Statement of Comprehensive Income and Equity reserves
During the year ended 30 April 2016 the group recognised a total charge of £936,000 (2015: £276,000) in the Consolidated
Statement of Comprehensive Income in relation to its equity-settled share option schemes. Of this, £649,000 (2015: £nil)
related to share options granted under the Long Term Incentive Plan, £272,000 (2015: £142,000) related to options granted
under the Enterprise Management Incentive Scheme and £15,000 (2015: £134,000) related to national insurance costs on
non-EMI qualifying options. With the exception of the national insurance costs, these charges have been credited to a share-
based payment reserve within equity. The balance on this reserve at 30 April 2016 amounted to £1,482,000 (2015: £653,000).
The total fair value at the date the options were granted of the options exercised during the year ended 30 April 2016 was
£92,000 (2015: £85,000). This was transferred from the share-based payment reserve to retained earnings during the year.
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.
71
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
23 | OPERATING LEASE COMMITMENTS
As at 30 April 2016 the group had aggregate commitments under non-cancellable operating leases in respect of land &
buildings which expire as follows:
Within one year
Between one and two years
Between two and five years
24 | PENSION SCHEMES
2016
£’000
63
-
816
879
2015
£’000
40
63
461
564
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 £160,000 (2015: £95,000).
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.
2016
£’000
2015
£’000
6,317
5,266
977
1,409
GROUP
Cash and bank balances
COMPANY
Cash and bank balances
72
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
26 | RELATED PARTY TRANSACTIONS
Ideagen plc is the parent company of the group. There was no overall control of Ideagen plc.
Balances between the Company and its wholly owned subsidiaries, which are related parties of the Company, are disclosed in
notes 13 and 14. During the year, the Company recharged £416,000 (2015: £139,000) of costs including management charges
to its wholly owned subsidiaries and suffered recharges of £196,000 (2015: £338,000) from its wholly owned subsidiaries.
Details of transactions between the Company and other related parties are disclosed below.
At 30 April 2016, trade and other payables in the Company included £4,800 (2015: £3,998) 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 as per the remuneration of directors disclosed in note 6.
Other creditors in the Company at 30 April 2016 included £nil (2015: £73,087) payable to Mr D R K Hornsby and £nil (2015:
£3,217) payable to Mr G P Spenceley. These amounts related 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.
Total dividends paid to the directors of the company during the year were as follows: Jonathan Wearing £7,591 (2015: £7,036),
David Hornsby £16,107 (2015: £12,996), Graeme Spenceley £107 (2015: £nil) and Alan Carroll £349 (2015: £316).
Key management are considered to be the directors of the Company. The remuneration of the directors of the company is
disclosed in note 6 of these financial statements. The total remuneration of key management is set out below:
Salaries, bonuses and fees
Share based payments
2016
£’000
367
180
547
2015
£’000
520
133
653
73
Ideagen | ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2016
27 | EVENTS AFTER THE END OF THE REPORTING PERIOD
Acquisition of Covalent Software Limited (‘Covalent’)
On 5 August 2016, Ideagen plc acquired the whole of the issued share capital of Covalent Software Limited, a company
domiciled in England. Covalent has developed and commercialised a proprietary GRC platform with significant traction in the
UK public sector. The acquisition of Covalent is expected to enhance the Group’s existing business through the addition of its
cloud-based intellectual property and its strong recurring revenue base.
The total consideration for the acquisition of Covalent was £4,655,000 which was paid in cash on completion of the acquisition.
No deferred or contingent consideration is payable. The cash balance acquired in Covalent at the date of acquisition was
£1,113,000 and accordingly the net cash outflow on acquisition of Covalent was £3,542,000.
With the exception of the cash balance acquired in Covalent, the initial review of the fair values of other separable assets
and liabilities acquired has not yet been completed and accordingly information has not been presented on the fair values of
assets and liabilities acquired, including the recoverability of receivables and the fair value of acquired goodwill.
The costs of the acquisition will be expensed within a separate line in the Group Statement of Comprehensive Income for the
year ending 30 April 2017.
Acquisition of Logen EOOD
On 18 August 2016, Ideagen plc acquired the whole of the issued share capital of Logen EOOD, a company domiciled in
Bulgaria. Logen is a reseller of Ideagen’s GRC audit management and risk assessment solution, Pentana and has significant
experience in audit-based analytics, particularly within the financial and public sectors.
The acquisition will give Ideagen’s existing customers access to this expertise, as well as create a solid operational base in
central Europe from which we can enhance our sales reach and future software development capacity.
The initial consideration for the acquisition of £78,000 was paid on completion. Up to a further £50,000 may become payable
12 months after completion depending on the achievement of certain post acquisition revenue targets.
The initial review of the fair values of the separable assets and liabilities acquired has not yet been completed and accordingly
information has not been presented on the fair values of assets and liabilities acquired, including the recoverability of
receivables and the fair value of acquired goodwill.
The costs of the acquisition will be expensed within a separate line in the Group Statement of Comprehensive Income for the
year ending 30 April 2017.
Issues of ordinary shares
In order to satisfy the exercise of share options, the company issued 221,000 shares at 37.63 pence each on 4 May 2016,
80,000 shares at 10 pence on 27 July 2016, 130,000 shares at 37.63 pence on 11 August 2016 and 110,000 shares at 32.12
pence on 31 August 2016. The company also issued 500,000 shares at 1 penny on 11 August 2016 in order to satisfy the
exercise of share options granted under the Long Term Incentive Plan.
74
Ideagen | ANNUAL REPORT 2016 Ideagen plc
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