Ideagen plc
Ideagen plc
Annual Report and
Annual Report and
Accounts for the Year
Ended 30 April 2019
Accounts for the Year
Ended 30 April 2019
Registration number: 02805019
Registration number: 02805019
CONTENTS
WELCOME TO IDEAGEN
OFFICERS
ADVISERS AND REGISTERED OFFICE
FINANCIAL AND OPERATIONAL HIGHLIGHTS
STRATEGIC REPORT
CORPORATE GOVERNANCE STATEMENT
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
3
4
5
6
7
18
23
26
27
30
31
33
35
36
38
40
41
1
Ideagen | ANNUAL REPORT 2019
Welcome to
Ideagen
2
Ideagen | ANNUAL REPORT 2019 Ideagen is a UK-headquartered global technology company quoted on the AIM market of the London Stock Exchange
(Ticker: IDEA.L) and is a leading supplier of information management software solutions to highly regulated industries.
The Group has established a global business supplying Governance, Risk and Compliance (GRC) solutions predominantly
to the Aviation, Life Sciences, Banking and Finance, Aerospace and Defence, and Automotive sectors.
Ideagen has operations in the UK, the United States, Bulgaria, Malaysia, Ireland 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 4,700 customers including 7 of the top 10 UK accounting firms, over 80% of NHS Trusts the top 7
global Aerospace and Defence companies and 35 of the top global Life Sciences companies.
The Group has grown both organically and through a number of strategic acquisitions, with this year’s results representing
the 10th consecutive year of growth in revenue, adjusted EBITDA* and adjusted earnings per share**.
£50,000,000
£40,000,000
£35,000,000
£30,000,000
£25,000,000
£20,000,000
£15,000,000
£10,000,000
£5,000,000
6.00
5.00
4.00
3.00
2.00
1.00
0.00
-1.00
-2.00
-3.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Revenue
Adjusted EBITDA
Diluted adjusted Earnings per share
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
* Before share-based payments and exceptional items
** Before share-based payments, amortisation of acquisition intangibles and exceptional items
3
Ideagen | ANNUAL REPORT 2019 OFFICERS
David Hornsby
Executive Chairman
Aged 52
Ben Dorks
Chief Executive Officer
Aged 45
David was the Chief Executive Officer of Ideagen plc
between June 2009 and May 2018 when he became
Executive Chairman. David has over 20 years’ experience
in the technology sector and 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.
Ben joined Ideagen via the acquisition of Plumtree Group
in December 2012 and joined the Board in January 2017 as
Chief Customer Officer. He became Chief Executive Officer
in May 2018. Ben has over 15 years’ experience helping
companies fast-track their growth strategy and at Plumtree
Group consistently exceeded annual growth and delivered
on corporate strategy. Previous to this, Ben held a variety of
sales and management roles for Applied Group, TSF Group,
and others.
Graeme Spenceley
Chief Financial Officer &
Company Secretary
Aged 54
Barnaby Kent
Chief Operating Officer
Aged 42
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.
Barnaby joined Ideagen via the acquisition of Plumtree
Group in 2012, where he was the CEO. Plumtree specialised
in software for the Content and Clinical markets. He has over
15 years’ experience within the Technology sector, prior to
that working at Corus Group plc, now Tata Steel. Barnaby
has a BSc (Hons) from the University of Southampton and an
MBA from Edinburgh Business School. He joined the Board
in January 2017.
Alan Carroll
Senior Independent
Non-Executive Director
Aged 68
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. He was
appointed to the Board in June 2012. Time commitment to
Ideagen is typically one to two days per month.
4
Ideagen | ANNUAL REPORT 2019 OFFICERS (CONTINUED)
Jonathan Wearing
Non-Executive Director
Aged 66
Tony Rodriguez
Independent Non-Executive
Director
Aged 50
Jonathan was formerly the Chairman of Ideagen until
May 2018 when he was succeeded by David Hornsby.
He was previously 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. Time commitment to Ideagen is
typically one to two days per month.
Tony is an experienced technology entrepreneur and software
developer. After an early career in a number of blue-chip
technology companies, he founded Avellino Technologies
Ltd in 1997, and personally led the development of its data
profiling software product, now known as TS Discovery,
before its acquisition in 2004 by Harte Hanks Trillium.
Subsequently he founded X88 Software, since acquired
by Experian in 2014, where he led, as CEO and CTO, the
development of its data management product (now known
as Experian Pandora), which was recognised as visionary by
Gartner. Time commitment to Ideagen is typically one to two
days per month.
ADVISERS AND REGISTERED OFFICE
NOMAD & JOINT
BROKER
finncap
60 New Broad Street
London
EC2M 1JJ
JOINT BROKER
Canaccord Genuity
88 Wood Street
London
EC2V7QR
SHARE REGISTRAR
SOLICITORS
AUDITOR
SLC Registrars
Elder House
St Georges Business Park
Brooklands Road
Weybridge
Surrey
KT13 0TS
Howard Kennedy
No.1 London Bridge
London
SE1 9BG
Peregrine Law
Amadeus House
27b Floral Street
London
WC2E 9DP
RSM UK Audit LLP
Suite A, 7th Floor,
City Gate East
Tollhouse Hill
Nottingham
NG1 5FS
REGISTERED OFFICE
Ergo House
Mere Way
Ruddington Fields Business Park
Ruddington
Nottinghamshire
NG11 6JS
5
Ideagen | ANNUAL REPORT 2019
FINANCIAL HIGHLIGHTS
29%
8%
67%
Revenue increased by 29%
to £46.7m (2018: £36.1m)
Underlying organic revenue
growth of 8% (2018: 11%)*
Recurring revenues of £31.2m
(2018: £22.2m) representing 67%
(2018: 62%) of total revenues
30%
15%
15%
Adjusted EBITDA** increased by
30% to £14.3m (2018: £11.0m)
Adjusted diluted EPS*** increased by
15% to 4.80 pence (2018: 4.16 pence)
Proposed final dividend of 0.188 pence
per share making a total of 0.278 pence
(2018: 0.241 pence) per share for the
year representing a 15% increase
£1.4m
£12.3m
£1.3m
Profit before tax of
£1.4m (2018: £1.4m)
Cash generated by operations
of £12.3m (2018: £9.4m)
Net debt at year end of
£1.3m (2018: cash of £0.8m)
OPERATIONAL HIGHLIGHTS
▪ Acquisition of InspectionXpert Corp. adding 900 US manufacturing customers, IP, growing Software as a Service (SaaS)
recurring revenues and a platform for further growth in North America
▪ Acquisition of Morgan Kai adding 400 internal audit customers, doubling the size of our internal audit business
▪ Acquisition of Scannell Solutions, a SaaS company that has developed a functionally rich content-enabled
Environmental, Health, and Safety platform
▪ 77% increase in SaaS bookings (2018: 174%)
▪ Strong international growth with 87% (2018: 78%) of all new SaaS logo wins outside of the UK
▪ 273 new logo SaaS customer wins including Glaxo SmithKline, Keolis, Green Climate Fund, Boston Biomedical, Fidelity
National Finance, Air Nostrum, Immunomedics Inc
▪ 140 new logo on-premise customer wins including Transport For London, Cancer Research UK, Thompson Aero
Seating, Addiko Bank, TP Aerospace, SAMREF
▪ Strong account management with significant contract extensions from Triumph Group, Pfizer, Regeneron
Pharmaceuticals, Meggitt PLC, Thales Group, International Energy Agency
▪ Continued high levels of customer retention with support and maintenance contract renewal rate of 95% (2018: 96%)
▪ Ongoing product innovation and investment across all products with a strong emphasis on cloud
Comparison calculated on a pro-forma basis as if acquired businesses had been in the Group for the same period in the previous year
Before share-based payments and exceptional items
Before share-based payments, amortisation of acquisition intangibles and exceptional items
*
**
***
6
Ideagen | ANNUAL REPORT 2019 STRATEGIC REPORT
CHAIRMAN’S STATEMENT
I am pleased to report on another strong performance for the year to 30 April 2019, representing Ideagen’s 10th consecutive
year of revenue and EBITDA growth. The Group met or exceeded all key financial and operational objectives for the year
including targets for revenue, profitability, organic growth, cash generation and customer retention.
These results are underpinned by Ideagen’s world class customer base, strong global reach, outstanding product set and
proven and effective management team. These are the first set of results that we have announced following the appointment
of Ben Dorks as Chief Executive in May 2018 and the Board is delighted with the progress made under Ben’s leadership.
The Group continues to source and execute acquisitions and has an extensive pipeline of opportunities that would increase
our product capability, scale and recurring revenues, which the Board expect would further enhance shareholder value for
the long term.
The Group has a clear vision for the future and has a number of growth and financial objectives for the coming years. These
are based on achieving a targeted £100 million in run rate revenues by 2022, with recurring revenues representing a minimum
of 75%, EBITDA margins at a minimum of 30% and operating cash collection in excess of 90% of EBITDA. The Board believes
that approximately £70 million in revenue will be achieved from our current business through organic growth with £30 million
being generated through acquisitions.
‘C Level’ management
In May 2018, Ben Dorks was appointed as Chief Executive to provide the necessary operational leadership for the Group. I
moved from Chief Executive to Executive Chairman, to focus on M&A activities and the 3-year strategic plan.
Over the past 12 months, the Group has also recruited and promoted a number of key individuals to provide the necessary
depth and breadth of senior management to support our continued growth. During the year Ian Hepworth, formerly
Divisional CTO at Thompson Reuters was appointed as Chief Technical Officer and Arun Varma, formerly Global Vice President
of Marketing at Kaspersky as Chief Marketing Officer. Both Ian and Arun have an excellent pedigree having worked at a
senior level with global innovators and leaders such as RAC, Nokia, Cambridge University Press and Segura Systems during
their careers. In April 2019, Paul Marshall was promoted to Chief Customer Officer as the Group continues to drive customer
success and the ongoing expansion of its products within the customer base. Paul is an Ideagen veteran of over 10 years,
having served as a Project Consultant, Sales Manager and Head of Sales and is a trusted advisor to many of Ideagen’s most
strategic customers. They join Alex Hewitt (Chief Legal Officer), Barnaby Kent (Chief Operating Officer) and Graeme Spenceley
(Chief Financial Officer) to make up Ben’s senior leadership team.
Market Opportunity
The Board is confident in the long-term prospects of the Group. The Integrated Risk Management market was, according to
Gartner, worth $5.4 billion globally in 2018 and is estimated to be growing at 13% per annum. We believe we have a compelling
business platform that has been significantly enhanced over the past year through the acquisitions of InspectionXpert, Morgan
Kai and Scannell Solutions and the acquisition of Redland in the current year.
Highly regulated organisations require the tools we provide to help them identify, assess and manage corporate risk while
complying with international industry standards. Many of these organisations are only in the early stages of adopting an
enterprise-wide approach. The Board believes that the Group’s cloud solutions will be a particular growth area for the Group
which will increase the percentage of total revenues derived from recurring contracts providing further visibility of earnings.
Dividend
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 0.188 pence per share making a total dividend of 0.278 pence for the year (2018: 0.241
pence) an increase of 15%. Subject to approval at the forthcoming AGM, the final dividend will be payable on 26 November
2019 to shareholders on the register on 8 November 2019. The corresponding ex-dividend date is 7 November 2019.
The success of Ideagen is the result of the excellence and dedication of our employees and on behalf of the Board, I would like
to thank all of them for their continued hard work. The new financial year has started well and I look forward to continuing our
track record of growth and delivering on our strategic objectives.
David Hornsby
Executive Chairman
7
Ideagen | ANNUAL REPORT 2019
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
CHIEF EXECUTIVE’S REVIEW
BUSINESS REVIEW
I am delighted to report that 2019 has been another successful year for Ideagen. We have announced a further year of solid
financial performance during which our organic revenue growth was 8% and ARR grew by 44%. I am encouraged by the
success in our priority international markets which continue to form a significant expansion opportunity.
Excellent strategic progress has been made, in particular with the three acquisitions completed during the year. This has
strengthened our product range and keeps us well-placed to support our customers and capitalise on the significant market
opportunities ahead.
Total revenue of £46.7 million (2018: £36.1 million), represented overall growth of 29% and adjusted EBITDA grew by 30% to
£14.3 million (2018: £11.0 million). A key financial metric for the Group continues to be adjusted EPS and I am pleased to report
an increase in adjusted diluted EPS of 15% to 4.80 pence for the year (2018: 4.19 pence).
MARKET DRIVERS AND GROWTH OPPORTUNITIES
Ideagen operates in a global market with a number of drivers for structural growth. Businesses around the world need
innovative solutions to help them meet increasingly stringent compliance, quality, safety, and regulatory risk requirements.
Ideagen’s product-market strategy is focussed in two areas:
QHSE –
Quality, Health & Safety and Environmental
Management – covering:
ARC –
Audit, Risk and Compliance Management – covering:
▪ Compliance with existing and new standards, laws
▪ Pursuit of sustainable competitive advantage through
and regulations
▪ Conformance with customer requirements, including,
for example, new pressures for risk-based shop floor
quality management in manufacturing supply chains
▪ Efficiency and productivity in quality, safety and
environmental management; for example, being able
to comply with new or more stringent requirements
without increasing headcount in the compliance team
▪ Improving performance in these areas, for example
by reducing the number of safety incidents in which
employees are harmed, ensuring that important
quality audits are passed successfully
risk-based compliance and oversight
▪ Establishing a strong governance model to deliver
resilience, compliance and strategic goals
▪ Productivity of internal audit teams through
automation of their business processes
▪ Compliance with laws and regulations such as SOX, UK
Companies Act, SM&CR or ASC 275
▪ Stewardship of brand and reputation
These key market opportunities overlaid with vertical concentration in aviation, aerospace, automotive and defence
manufacturing, life sciences, healthcare, financial services and banking, provide global opportunity for growth with the
accelerating shift towards a cloud economy.
OVERVIEW
Following another strong financial performance in 2019, Ideagen has the capability and resources to continue to make
important investments across the Group. These investments will support further growth in line with our People, Products
and Customers. Organic investment will be directed at developing and launching additional world-class products, improving
the value-based outcomes for our customer, and recruiting and developing the very best people. We intend to support this
organic investment by considering acquisitions that broaden our geographic reach and strengthen our product capabilities.
8
Ideagen | ANNUAL REPORT 2019 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
STRATEGIC FOCUS AREAS
In the past year we have increased our focus on our three core business areas that underpin our strategy: People, Products
and Customers. This has not only contributed to the strong performance in the period but in a complex and rapidly changing
environment, this approach allows us to prioritise and align our resource and developments with customer demand and
capitalise on market trends.
We have strengthened the capabilities of all our teams, particularly in development, marketing and sales. With the creation
of 4 centres of excellence in Nottingham, Glasgow, Kuala Lumpur and Raleigh (North Carolina). This investment will provide
resource, technology and infrastructure to further support the Group’s growth strategy.
Our customer strategy continues to mature with the introduction of new customer success profiling, people, and systems.
We are pleased with the progress we have made during the period which is demonstrated by the industry high retention rate
of 95% of recurring revenue. We had a 30% increase in customer engagement for our Net Promoter Score (NPS) which is a
customer loyalty metric measured on a scale of -100 to +100, where NPS of greater than Zero (0) is considered good within
the enterprise software space. During the year we established that our overall NPS score is +12 (2018: +23). The reduction in
score was due to a lower NPS from the acquisitions made in year, like many small businesses, our acquired businesses whilst
successful, did not proactively and scientifically manage customer success but are now benefitting from Ideagen’s dedicated
resource in this area.
This year we have significantly advanced the technology that underpins our customer propositions. The shift to a cloud
operational model is a strategic priority, which will continue to evolve through our partnerships with Amazon Web Services
and Azure. This innovation means the business is able to scale faster and can continue to support our evolving customer
requirements in the UK and international markets.
CORPORATE TRANSACTIONS
Ideagen has a strong track record of acquiring companies. During the year we completed three further acquisitions to
strengthen our product and technology capabilities, broaden our international reach and customer base, and take us closer
to our strategic goal of being global leader in our chosen markets.
The first of these was InspectionXpert (IX) in Raleigh, North Carolina, USA. IX is a profitable and growing Software as a Service
(SaaS) company that has developed a digital Quality Inspection solution for the advanced engineering and manufacturing
sector. Increasingly OEMs are driving automated inspection initiatives through their supply chains in order to reduce costs
and improve product quality. This acquisition further consolidated our position within the fast-growing Quality market and
strengthened our US presence.
This was followed by our largest transaction to date, the acquisition of Morgan Kai, a profitable and growing software company
that has developed a leading Internal Audit Management product ‘MKinsight’. Customers include the UK’s National Audit
Office, the Federal Reserve, Investec, the New York Stock Exchange, Shell, Bombardier and Blue Cross Blue Shield; with 77%
of them being international and 28% in the US. The addition of MKinsight to the Group doubles the existing Ideagen Internal
Audit business providing scale, enhanced technology, and a strong competitive position.
Our third acquisition was Scannell Solutions, a SaaS company that has developed a functionally rich content enabled
Environmental, Health, and Safety platform. This acquisition supports the Group’s product roadmap providing the technology
and content to accelerate our market leading QHSE strategy.
Together, these acquisitions mean that we now have businesses of genuine scale and ability to execute on the market
opportunity.
The Board remains committed to our ongoing buy and build strategy and we expect to complete further acquisitions in the
future. Our acquisition strategy focusses on recurring revenues and compelling product offerings, and we apply strict criteria
to ensure that acquisitions represent value for shareholders.
9
Ideagen | ANNUAL REPORT 2019 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
CUSTOMER CASE STUDIES
CADENCE BANK
A subsidiary of Cadence Bancorporation, Cadence Bank N.A. is a
regional bank with $17.6 billion in assets. Cadence operates 98 branch
locations in Alabama, Florida, Georgia, Mississippi, Tennessee and
Texas, and provides corporations, middle-market companies, small
businesses and consumers with a full range of innovative banking and
financial solutions.
Like many businesses today, Cadence Bank recognised a need for
their audit and risk functions to be as integrated as possible in order to
remain agile in a volatile, uncertain and increasingly complex business
risk environment. This led to the audit group looking for a software
solution that allowed them to work fluidly with the rest of the business
and provide the Enterprise Risk Management group with a complete
view of their collective risks in a single, easy-to-access system.
“We pride ourselves on being very resourceful and responsive to
our clients so that we can build long lasting relationships,” says Lana
Blackmon, Vice President and Audit Group Manager at Cadence Bank.
“To do this, every arm of the bank needs to be aware of their existing
and emerging risks. We have utilised Pentana Audit as a complete GRC
tool. Our Enterprise Risk Management Group collects risk and control
assessments from the different lines of business, and we utilize those
risk and control self-assessments to test and assess the controls,
ensuring they are operating just as they are designed to.”
Lana explains that with the use of Pentana, the risk culture within
Cadence has evolved into something much more proactive and
constructive:
“It’s been an incredibly effective way for us to build the risk culture
within the organization. Our lines of business are now accustomed to
seeing their risks and controls regularly, they are used to being tested
on them, and can see how the conversation really flows.”
Cadence have come to release a wealth of time and cost savings
since implementing Pentana Audit, especially in their communication
channels.
“With Pentana, we can communicate very well with our other second
and third line of defence functions, as well as our CRM group and our
lines of business. With everything in the system paperless and with
this baseline understanding from all the different groups that use it,
we avoid a lot of time wasting trying to translate from one system
to another. Everyone understands when we say we’re looking at the
entity risk, or we’re looking at a review risk.”
“Pentana Audit has given us a level of discipline and consistency
that has led to us getting some really satisfactory reviews from
regulators. In future, we want to do more on risk assessments, and
build the product out more to other lines of business. We are also
looking for ways to leverage the information in Pentana to produce
some advanced reports that incorporates all the key information
management need to make decisions.”
With Pentana, we can
communicate very well with our
other second and third line of
defence functions, as well as
our CRM group and our lines of
business. With everything in the
system paperless and with this
baseline understanding from all
the different groups that use it,
we avoid a lot of time wasting
trying to translate from one
system to another. Everyone
understands when we say we’re
looking at the entity risk, or we’re
looking at a review risk
10
Ideagen | ANNUAL REPORT 2019
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
CUSTOMER CASE STUDIES
CUSTOMER CASE STUDIES
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
WALES RESEARCH AND
DIAGNOSTIC PET IMAGING CENTRE
Wales Research and Diagnostic PET Imaging Centre is a major facility
which is part of Cardiff University, and was a result of a £16.5 million
investment by the Welsh Government. It provides researchers and
doctors with a far greater ability to detect malignant tissue and track
the effects of drugs in incredible detail.
In highly regulated environments such as the pharmaceutical sector,
where not only is there pharmaceutical legislation to deal with but
radiation legislation among others, it is essential to have a good quality
management system in place to ensure regulatory requirements are
met consistently. In previous roles within other organisations Professor
Marshall has seen the use of paper-based documentation systems.
However these were incredibly time consuming and managing change
proved difficult with draft versions spending time on different desks
waiting for review and sign off. Although risk assessments have always
been controlled documents the continued adoption of quality risk
management approaches in pharmaceutical manufacturing meant
that this paper-based risk assessment approach was no longer
appropriate.
Q-Pulse is widely known in the Medical Physics industry and is broadly
used across the fields of Radiotherapy and Nuclear Medicine where a
strong quality management system is essential to meet the stringent
regulatory requirements.
Professor Marshall said: “Given the key role that quality management
and risk management play in complying with regulations such as
the Environmental Permitting Regulations (2010), Ionising Radiation
(Medical Exposure) Regulations (2017), The Carriage of Dangerous
Goods and Use of Transportable Pressure Equipment Regulations
2009, Good Manufacturing Practice and many more, a robust
electronic risk management system is essential to ensure compliance.
The introduction of Q-Pulse Risk has been beneficial in ensuring we
increase our compliance in an efficient manner.”
“During the training and installation of Q-Pulse Risk, it became
apparent that we were underutilising the Incident and Occurrence
modules, which are key to unlocking the potential of the system. As
a result, we transferred numerous paper forms into electronic forms
where data can be captured using the Q-Pulse iPad app. As a result,
we now have access to more data in an electronic format.”
In addition, the installation of Q-Pulse Risk has also enabled the
migration to a paper free clean room, reducing the risk of contamination
of the facility. The team now has visibility of the effectiveness of their
controls and risks to patients, staff and the company, which enables
them to better manage their business as well as ensuring the safety
of patients and staff. The goal is to migrate all risk assessments to
Q-Pulse Risk and complete the migration of paper-based forms to the
Occurrences and Incidents module. A significant part of the business
process has already been transferred, and it is clear to see that the
work involved in completing this migration will significantly improve
the management of the facility and processes.
During the training and
installation of Q-Pulse Risk, it
became apparent that we were
underutilising the Incident and
Occurrence modules, which are
key to unlocking the potential
of the system. As a result, we
transferred numerous paper
forms into electronic forms
where data can be captured
using the Q-Pulse iPad app. As
a result, we now have access
to more data in an electronic
format.
11
Ideagen | ANNUAL REPORT 2019
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
OPERATIONAL
Cash generated by operations remained strong in the year at over 90% of EBITDA on an adjusted basis. Net debt as at 30 April
2019 was £1.3 million (30 April 2018: net cash of £0.8million) having raised £19.4 million in September 2018 through a share
placing and having paid a total of £28.2 million in consideration and costs for the acquisitions of InspectionXpert, Morgan Kai,
Scannell Solutions and IPI (deferred) and £0.6 million in dividend.
The Group continues to benefit from a strong and growing base of recurring revenues, which represented 67% of total
revenue in the year (2018: 62%). The Group is committed to increasing the percentage of total revenue derived from recurring
contracts through the medium-term transition from a traditional licence model to a SaaS subscription-based model. This
transition is well underway and recurring SaaS revenues increased by 63% to £13.7 million (2018: £8.4 million) with 25%
organic SaaS revenue growth.
The Medforce acquisition completed in April 2018 has been successfully integrated using our mature integration framework
which provided the delivery of true synergies and enabled an acceleration of sales execution. The acquisition broadened
Ideagen’s relationships in our existing core sector of healthcare and provides an additional source of recurring revenue.
In order to facilitate growth, Ideagen has invested heavily in ‘best of breed’ cloud systems that have scalability, functionality
and reporting at their core. Salesforce.com remains the most important system for the organisation, providing the internal
platform for sales and marketing. This is supported by NetSuite, recently introduced into the finance function, and several
functionally specific cloud solutions such as Zendesk, Natero, Peakon, Krow, and Jira. These packages are collectively used to
provide analytics and Management Information (MI) in support of strategic decision making across Ideagen.
As Ideagen develops, significant resource is invested in benchmarking processes and systems to ensure best practice is
standard and that Ideagen remains fit for growth. Ideagen remains committed to relevant accreditations and currently holds
Microsoft Gold Partner status, ISO 9001, ISO 27001, and ISO 14001. The Group has membership of a significant number of
leading bodies including the Chartered Quality Institute (CQI), Institute of Internal Auditors (IIA), Flight Safety Foundation, and
the Institute of Biomedical Science (IBMS).
GROWTH: SALES AND MARKETING
We have seen good performance in terms of new business and customer retention. This includes key wins across all our core
markets and geographies within each of our solution areas.
We have invested into our marketing teams to generate qualified sales leads and to enhance the global recognition and
reputation of our brand and solutions. This is achieved through content driven product and vertical marketing covering blogs,
white papers, webinars, a dedicated digital team and over 50 global events per year. We have increased the number of
marketing qualified leads significantly and also introduced a new Sales Development team to support lead generation and
qualification.
We sell our products primarily through a direct sales force which generates 97% (2018: 95%) of Group revenue. Our sales
force operates globally with a focus on UK, Europe, North America, and Asia. The team is organised by both vertical market
and product focus area and includes 57 ‘quota carrying’ sales executives and account managers supported by technical sales
and domain experts.
We generate revenues from sales to new customers and through repeat licence and services sales to our existing customers.
Key highlights of the year have been the success of the Ideagen Sales Excellence Academy and continued growth of our
geographical expansion in Asia and the US.
In order to drive growth, we have successfully added new customers to the Group across all of our key verticals, with aviation,
financial services and life sciences providing particularly notable success in the year. We also continue to maintain a strong
focus on customer success with continuous investment in customer teams, technology, and product enhancement. This has
resulted in significant revenues from strong retention of recurring contracts and new projects from our extensive customer
base.
12
Ideagen | ANNUAL REPORT 2019 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
CHIEF EXECUTIVE’S REVIEW (CONTINUED)
PEOPLE
At 30 April 2019 Ideagen had 442 (2018: 423) employees based across its UK and international office network, with the
majority located at our Centres of Excellence: Nottingham HQ (UK), Glasgow (UK), Kuala Lumpur (Malaysia) and Raleigh (US).
A combined total of 120 (2018: 57) people are based internationally.
The organisation is committed to significant investment within our development teams, with 35% of resource dedicated to
this area, primarily based in Nottingham and Malaysia. Ideagen maintains its focus upon building domain expertise within
core markets and delivering excellence across the customer base. As a result, the Group has 21% of its resource within Sales
& Marketing and 31% in Customer Delivery, Support and Success.
Ideagen continues to believe a broad talent pool across the company is the best way to ensure sustainable growth. As such
it is pleased to confirm that 48% of employees have been with the Group for 3 or more years, and 31% have been with the
company for 6 years or more. The Group is delighted that this traditionally male dominated sector continues to see strong
growth in female applications, resulting in an improved ratio of 64% (2018: 67%) male to 36% (2018: 33%) female.
I am immensely proud to work every day with such a committed and talented team and delighted to see it reflected in positive
feedback from customers.
CURRENT TRADING & OUTLOOK
Trading since the year end has remained robust and we continue to see strong demand for our products from new potential
customers. With acquisitions made during the previous year performing well, and with a base of over 4,700 customers
generating growing recurring revenues and repeat business, the Board has every confidence in the continued prospects for
the Group.
Ben Dorks
Chief Executive Officer
13
Ideagen | ANNUAL REPORT 2019
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
FINANCIAL REVIEW OF THE YEAR
Revenue for the year ended 30 April 2019 increased by 29% to £46.7 million (2018: £36.1 million). Within this, pro-forma
organic revenue growth was 8% (2018: 11%). This is calculated based on a comparison with pro-forma revenue for FY2018 of
£43.3 million which includes revenues for Medforce Technologies, InspectionXpert, Morgan Kai and Scannell for the equivalent
period that they were owned by the Group in FY2019.
Revenues are analysed by revenue type in note 2 to the financial statements.
Recurring revenues are a key strategic focus and they have grown strongly because of both the continuing emphasis on
growing sales of our SaaS/Subscription-based products and the acquisitions of businesses with high levels of recurring
revenues. The Annualised Recurring Revenue (ARR) book amounted to £36.4million at April 2019, an increase of 44%.
Total recurring revenues increased by 40% to £31.2 million (2018: £22.2 million) representing 67% (2018: 62%) of overall
revenues. This proportion has improved consistently since 2016 when recurring revenues represented only 53% of total
revenues.
SaaS revenues increased by 63% to £13.7million (2018: £8.4 million) representing 29% (2018: 23%) of Group revenue. Support &
Maintenance revenues continued to grow both through new perpetual licence sales and through the acquisitions of Medforce
and Morgan Kai where significant proportions of recurring revenues have historically come from the perpetual licence model.
Support & Maintenance revenues increased by 27% to £17.5 million (2018: £13.8 million) but represented a slightly reduced
proportion of total revenues at 37% (2018: 38%) due to the focus on SaaS growth.
Professional services revenues represented 11% (2018: 14%) of total revenues. This decline is due to a lower proportion of
professional services revenues inherent within the businesses acquired over the last two years and the increasing proportion
of SaaS sales which require less configuration work.
Licence & Software development kit sales, increased to £9.7 million (2018: £8.3 million) representing 21% (2018: 23%) of total
revenue in line with the increasing emphasis on SaaS sales.
Adjusted EBITDA increased by 30% to £14.3 million (2018: £11.0 million) and the adjusted EBITDA margin remained stable at
30.6% (2018: 30.5%). Gross margin improved slightly to 91.6% (2018: 91.2%). Operating costs continue to be tightly controlled
representing 61.1% (2018: 60.7%) of revenue, however we recognise the need to continue targeting investment in our staff
and the operational systems of the business to support continued organic growth and to provide a strong, scalable platform
for the integration of future acquisitions.
The Group has significant intangible assets, primarily from the acquisitions that it has made. Amortisation of acquisition
intangibles of £7.5 million (2018: £5.8 million) represents the majority of the total depreciation and amortisation charge of £9.4
million (2018: £7.1 million). Amortisation of development costs amounted to £1.4 million (FY2018: £1.0 million).
The share-based payment charge of £1.5 million (2018: £1.9 million) relates to the Group’s equity-settled share option schemes
including the Long-Term Incentive Plan and the Share Incentive Scheme for employees. The charge included £0.4 million
(2018: £0.3 million) of national insurance costs on the exercise of non-tax efficient options. The remainder of the share-based
payment charge does not represent a cash cost to the Group.
The Group incurred costs of £1.3 million (2018: £0.4 million) in acquiring the businesses of InspectionXpert, Morgan Kai and
Scannell during the year. Only Medforce was acquired in the previous financial year. During the year we have significantly
restructured the Group’s development function and reduced the number of offices we operate which has resulted in a
restructuring cost of £0.5 million (2018: £0.2 million).
The adjusted Group tax charge amounted to £1.5 million (2018: £1.0 million). This has been adjusted to exclude the deferred
tax effects associated with the amortisation of acquisition intangibles and share based payment charges. The adjusted Group
tax charge represents 12% (2018: 10%) of adjusted profit before tax of £12.2 million (2018: £9.7 million). The increased tax rate
is largely due to the increased level of profits earned in the United States which attract higher rates of tax than in the UK. The
Group’s use of R&D tax credit claims and tax deductions linked to the exercises of share options in particular have significantly
reduced the Group’s liability to UK corporation tax on FY2019 profits.
As a result of the above, adjusted diluted earnings per share increased by 15% to 4.80 pence (2018: 4.19 pence).
The Group’s financial position has continued to strengthen during the year with net assets increasing to £73.7 million (2018:
£50.5 million).
14
Ideagen | ANNUAL REPORT 2019 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
FINANCIAL REVIEW OF THE YEAR (CONTINUED)
The value of intangible assets increased to £90.7 million (2018: £60.3 million) mainly as a result of the three acquisitions
completed during the year. The Group capitalised £2.7 million (2018: £2.2 million) of R&D development costs during the year
which represented 5.75% (2018: 6.2%) of total revenues. The increase is mainly due to costs capitalised in respect of the
products being developed by the businesses acquired during the year and the prior year.
Starting with the purchase of Medforce in April 2018, the Group’s approach to the funding of acquisitions has been more
evenly balanced between using debt and equity together with the Group’s own cash generation. The strong cash flow and
recurring revenue profile of the business mean that the Group has been able to secure relatively inexpensive debt funding.
The acquisitions of Medforce, InspectionXpert and Scannell were funded through increases in the Group’s Revolving Credit
Facility and the acquisition of Morgan Kai was primarily funded through a heavily oversubscribed share placing which raised
£19.4 million net of costs.
Cash generated by operations during the year amounted to £12.3 million (2018: £9.4 million) representing cash conversion
of approximately 86% (2018: 85%) of adjusted EBITDA. However, this cash conversion figure was impacted by the receipt,
prior to the FY2018 year-end, of £1.1 million of cash from option holders to cover payroll taxes arising on the exercise. The
subsequent payment of this £1.1 million of taxes has therefore negatively impacted cash generated by operations during the
year to 30 April 2019. Excluding this, cash generated by operations would have represented approximately 94% (2018: 83%)
of adjusted EBITDA.
Working capital increased by £0.9 million after adjusting for the £1.1 million of payroll tax liabilities on share options at 30
April 2018. Within this, receivables increased by £3.9 million due to significant organic growth in SaaS billings and increased
organic growth in the wider business together with an increased bias of recurring billings in the final quarter on the acquired
businesses and in the wider business as a whole. There was also a £2.4 million increase in the deferred revenue creditor as a
result of the strong growth in recurring revenues and the additional bias towards final quarter billings.
Free Cash Flow in the year amounted to £6.3 million (2018: £6.1 million) representing 44% (2018: 55%) of adjusted EBITDA
or 13.5% of Revenue. However, adjusting for the cash outflow of payroll taxes on share options referred to above, adjusted
Free Cash Flow would have been £7.3 million representing 51% of adjusted EBITDA or 15.7% of Revenue. Adjusted Free Cash
Flow before payments of acquisition costs of £0.9 million was £8.2 million representing 58% of adjusted EBITDA or 17.7% of
Revenue.
The Group ended the year with net debt of £1.3 million (2018: net cash balances of £0.8 million).
15
Ideagen | ANNUAL REPORT 2019 STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
FINANCIAL REVIEW OF THE YEAR (CONTINUED)
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. The risk of a
worsening economic climate in the UK is perceived by many to have increased as a result of the uncertainties surrounding
Brexit. However, the Group has a wide geographical spread of customers and the effects of Brexit on the Group have so far
been quite limited. The Group also has products and solutions which can help customers lower their cost base in difficult
trading conditions and which address compliance issues that, to a large extent, 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. We endeavour to retain employees through ongoing initiatives to foster good staff engagement and ensure
that remuneration packages are competitive in the market.
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 and its strategic
requirements. The greater part of the Group’s revenues and costs are denominated in sterling however the Group is exposed
to foreign exchange risk, principally through profits and cash inflows generated in US dollars by the Group’s US subsidiaries
and through invoicing a proportion of overseas customers in foreign currencies, most notably US dollars and euros. 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.
16
Ideagen | ANNUAL REPORT 2019
STRATEGIC REPORT FOR THE YEAR ENDED 30 APRIL 2019
FINANCIAL REVIEW OF THE YEAR (CONTINUED)
KEY PERFORMANCE INDICATORS
The Board measures the performance of the Group against budgets and its strategic objectives on a regular basis. The
following key financial performance indicators are used by management as part of this ongoing assessment.
PERFORMANCE INDICATOR
Total revenue growth
2019
29%
2018
33%
Organic revenue growth
8%
11%
Recurring revenue as a percentage of
total revenue
67%
62%
Adjusted EBITDA (£million)
14.3
11.0
Adjusted EBITDA margin
30.6%
30.5%
Adjusted diluted earnings per share
(pence)
Adjusted diluted earnings per share
growth
4.80
4.19
15%
33%
Cash generated by operations as a
percentage of adjusted EBITDA
86%
85%
Free cash flow as a percentage of
adjusted EBITDA
51%
55%
Net Promoter Score (NPS)
+12
+23
COMMENTARY
Revenue growth is used in the internal
assessment of how
is
performing against strategy.
the Group
is calculated
Organic revenue growth
based on a comparison of current year
revenue with prior year revenue as
adjusted to include acquisitions for the
same period as the current year.
One of the Group’s strategic aims is to
increase the proportion of contracted
recurring revenues in the medium term.
for
adjusted
share-based
EBITDA
payment charges and exceptional items.
Management consider this to be a more
appropriate measure of the underlying
performance of the Group.
Adjusted EBITDA as a percentage of
revenue.
The calculation of adjusted earnings per
share is detailed in note 8 to the financial
statements. Management consider that
adjusted earnings per share is a better
indicator of the underlying performance of
the Group than unadjusted earnings per
share.
This is a measure of the rate of conversion
of adjusted EBITDA into operating cash
flow.
Free cash flow is defined as cash generated
by operating activities plus cash flows
from investing activities excluding those
cash flows associated with the acquisition
of businesses. It is a measure of the cash
generated by the Group which is available
in business acquisitions
for
before taking into account any financing
cash flows.
investing
NPS is a customer loyalty metric measured
on a scale of -100 to +100, where NPS of
greater than zero is considered good
within the enterprise software space. The
reduction in score was due to a lower NPS
from the acquisitions made in year.
Approved by the Board and signed on its behalf by
Graeme Spenceley
Director and Company Secretary
1 October 2019
17
Ideagen | ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT FOR THE YEAR ENDED
30 APRIL 2019
INTRODUCTION
The Board understands the value and importance of good corporate governance and is committed to the ongoing development
of practices within the Group to provide better governance. In this statement we explain our approach to this and how the
Board and its committees operate.
The corporate governance framework which the Group operates is proportional to the size, stage of development and
complexity of the business. In order to meet the requirements of AIM Rule 26, we have decided to follow the Quoted Companies
Alliance (“QCA”) guidance for smaller and mid-sized quoted companies.
The QCA Code is constructed around ten broad principles and a set of disclosures. The QCA has stated what it considers to
be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are
meeting the principles through the prescribed disclosures. We have considered how we apply each principle to the extent that
the Board judges these to be appropriate in the circumstances. The QCA also provides recommendations as to whether the
explanations in respect of each principle should be provided in the annual accounts or on the Company’s website or both. We
have provided information below in respect of those principles which the QCA recommends should be explained in the annual
accounts. Further information can be found on the Company’s website at www.ideagen.com.
ESTABLISH A STRATEGY AND BUSINESS MODEL WHICH PROMOTE LONG-TERM VALUE FOR
SHAREHOLDERS
The purpose of the Group is to provide document and data centric Quality, Safety, Audit and Risk solutions to heavily regulated
markets such as Aviation, Life Sciences, Banking and Finance, Aerospace and Defence, and Automotive. This is distributed
through our Ideagen Cloud Service architecture (ICSA) and licensed software technology to deliver world class governance,
risk and compliance outcomes for our customers on a long-term basis.
Our business model is to deliver this through our own sales, marketing and customer delivery teams within our global network
of offices in the UK, Europe, Middle East, Asia and the US.
Our strategy is to develop, in conjunction with our 4,700+ global customers, leading proprietary software technology that
acts as a competitive differentiator. This enables us to drive excellent return on investment and world class outcomes
for our customers while providing high-quality long-term recurring revenue. In addition, we look to make acquisitions in
complementary markets which deliver high value IP and strong recurring revenue growth.
This will deliver a profitable and highly-valued business with competitive advantages over other providers of similar services.
The key challenges we face include:
▪ Maintaining consistently high levels of quality development and market leading roadmap – With 35% of all employees
engaged in our R&D teams we invest heavily in ensuring the continued development of our products. Very high
standards are now expected by customers when it comes to software development. We have implemented automated
testing wherever possible, and our software is 100% unit tested throughout its lifecycle. Our product roadmaps are
developed through a 15-strong product team that works closely with customers and industry analysts such as Gartner.
This delivers a product roadmap which maintains competitive advantage and ensures our continued high rate of
customer retention.
▪ Customer Success and Loyalty – We continue to invest heavily in customer success and continually measure customer
sentiment and health through an ongoing programme. This includes voice of the customer survey, transactional
measurement of customer service and net promoter score as well as a full customer success platform. Additionally, we
have a customer success team managing recurring revenue, subscriptions and attrition rates.
▪ Delivering continuous availability – A failure in the group’s systems could lead to an inability to deliver services to our
customers. This is addressed by operating redundant systems across multiple availability zones using both AWS and
Azure cloud infrastructure, and a comprehensive business continuity programme. In addition, we have a 24/7 global
support operation in the UK and Kuala Lumpur which monitors availability and performance.
18
Ideagen | ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
▪ Acquisition and Integration – We apply strict criteria to ensure that acquisitions represent value for shareholders. A
key element is the active integration of all the acquisition’s technology, organisational and sales capability. We have
a dedicated integration team which actively bring together the integration through our 72-point programme. This is
reviewed by the senior management and leadership team through a regular monthly meeting, and the PLC Board on
a quarterly basis to ensure this is independently checked and verified and that the integration and return on capital is
being fully maximised.
▪ Recruiting and retaining suitable staff – the group’s ability to execute its strategy is dependent on the skills and abilities
of its staff. We undertake ongoing initiatives to foster good staff engagement and ensure that remuneration packages
are competitive in the market.
We believe we have the right strategy and service in place to deliver strong growth in sales over the medium to long term and
we expect to continue growing our base of recurring revenues. This is achieved by increasing the percentage of total revenue
derived from recurring contracts through the medium-term transition from a traditional licence model to a SaaS subscription-
based model. This transition is well under way which will result in improving EBITDA margins and provide us with scope for
additional investment in new services. This will enable us to deliver sustainable shareholder value.
EMBEDDING EFFECTIVE RISK MANAGEMENT
In the formation of the Ideagen medium term strategy the Group has documented the strategic drivers and key corporate
risks that it needs to understand and manage. These 10 identified areas represent all aspects of the Ideagen operational
model and specifically cover the risks attached to the Group’s acquisitive ‘Buy and Build’ strategy.
CUSTOMERS
COMPETITION
& MARKETS
TECHNOLOGY
BRAND,
REPUTATION
& TRUST
SUPPLIERS
DATA SECURITY
& DATA PRIVACY
LIQUIDITY
TRANSFORMATION
& INTEGRATION
PEOPLE
ACQUISITIONS
Overall accountability for risk management rests with the Board, which is actively engaged in setting risk appetite and
monitoring the process of risk assessment and mitigation. However, through Ideagen’s proven organisational structure, the
responsibility for all individual aspects of risk is passed down to the operational functions, ensuring that risk becomes a cultural
part of the Group’s identity. When this is combined with open communication and a policy of honesty and transparency, the
Board has confidence that all decisions are being made against the backdrop of a controlled process, clearly striking the
balance between a drive for growth and an awareness of risk.
A Risk Analyst has recently been recruited to further enhance our approach to risk management through the establishment of
a comprehensive risk dashboard linked to a risk register which will be regularly reviewed by the Board.
19
Ideagen | ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
MAINTAINING THE BOARD AS A WELL-FUNCTIONING BALANCED TEAM LED BY THE CHAIR
The Board has a legal obligation to promote the interests of the Group, and the members of the Board are collectively
responsible for defining the Group’s corporate governance arrangements. Ultimate responsibility for the quality of, and
approach to, corporate governance lies with the chairman.
The Board consists of seven directors of which four are executives and three are non-executives. In May 2018, the roles of
three members of the Board were changed. These changes are designed to optimise the talent and expertise within the Group
and will provide a structure that ensures the Board’s skillset remains aligned to the Group’s ongoing growth strategy.
David Hornsby moved from the role of Chief Executive Officer to become the Group’s Executive Chairman. The Board has
a clear strategic objective to grow the business significantly both organically and through further acquisitions. Having led
Ideagen’s significant growth since 2009, David now has responsibility for Ideagen’s medium and long-term growth plans and
his particular areas of focus will include Group strategy, M&A and Investor Relations. David will continue to be involved with
Ideagen on a full-time basis but will not be involved in the day to day operational management of the Group.
Ben Dorks, formerly Ideagen’s Chief Customer Officer, succeeded David to become Ideagen’s Chief Executive Officer. In
this role Ben is building upon his previous leadership responsibilities and his focus is on the Group’s overall operational
performance, customer acquisition and retention and product development.
Alan Carroll and Tony Rodriguez are considered to be independent non-executive directors and Alan Carroll is considered to
be the senior independent non-executive. After stepping down from his role as non-executive chairman in May 2018, Jonathan
Wearing remains on the Board as a non-executive director. However, due to the size of his shareholding in the Company, the
Board takes the view that he should not be considered as independent within the meaning of the Code. Due to the further
increase in the size and complexity of the Group, we are actively seeking to strengthen the non-executive representation on
the Board in the short term.
The Board is supported by an Audit Committee and a Remuneration Committee. The Board does not consider that it is of a
size at present to require a separate nominations committee, and all members of the Board are involved in the appointment
of new directors. In addition to attending Board meetings, non-executive directors are required to be available at other times
as required for face-to-face and telephone meetings with the executive team and investors.
During the year ended 30 April 2019, there were 11 scheduled Board meetings and other Board meetings as required to
approve other business such as the acquisition of a business. All directors attended all 11 meetings with the exception of Alan
Carroll and Tony Rodriguez who both attended 9 scheduled meetings. Absences were mainly due to illness.
In addition, there were two Audit Committee meetings and two Remuneration Committee meetings which were all attended
by Alan Carroll as committee chairman and Tony Rodriguez.
The chairman is responsible for ensuring that directors receive accurate, sufficient and timely information. The company
secretary compiles the board and committee papers which are circulated to directors prior to meetings. The company
secretary provides minutes of each meeting and every director is aware of the right to have any concerns minuted and to seek
independent advice at the group’s expense where appropriate.
DIRECTOR EXPERIENCE, SKILLS AND CAPABILITIES
The Board considers that it has an appropriate blend of sector, financial and public markets experience and personal skills
and capabilities to enable it to deliver its strategy. Five members of the Board have been involved in the technology sector for
many years and four of the directors have at least 7 years of public markets experience. Directors attend trade events and
seminars to ensure that they remain up to date with current developments.
The Board acknowledges that as the Group continues to develop, the mix of skills and experience of its members will need to
change to reflect this. As noted above, the Board is now actively seeking to balance the number of executives and independent
non-executives in the short term.
Further information on the experience of each of the directors is provided on pages 4 and 5.
20
Ideagen | ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
EVALUATING BOARD PERFORMANCE
It is recognised by shareholders that the Board has performed well both in terms of the development of an effective business
strategy and in its day to day execution. The Board has continued to evolve and a number of important changes have been
implemented to ensure continuous improvement and performance.
In January 2016 Ben Dorks, then Chief Customer Officer and Barney Kent, Chief Operating Officer joined the Board to provide
deeper and broader input to board decision making. In September 2017 Tony Rodriguez joined the board as an independent
non-executive Director with a specific responsibility for technology.
Subsequently a further board evaluation process led by the Chairman took place between November 2017 and April 2018.
All directors met with the Chairman about the effectiveness of the board and provided a self-assessment of their own
contributions, skillset and future development.
PROMOTING A CORPORATE CULTURE THAT IS BASED ON ETHICAL VALUES AND BEHAVIOURS
Ideagen is an organisation built on the three core pillars of People, Customers, and Products. These provide the foundation for
the company culture and identity, which revolves around investment in our people, to build great products for both existing
and new customers. These customers in turn provide the revenue to feed back into the cycle for continuous improvement of
our People.
PEOPLE
CUSTOMERS
PRODUCTS
This simple approach is at the heart of the Group, whereby all the functions and teams believe they contribute to the success
of Ideagen and feel empowered to contribute to the delivery of the Group’s vision.
Complimenting these three pillars are seven shared strategic drivers, which are used to ensure the actions of our employees
are targeted towards improving the organisation in a sustainable and controlled manner and one that represents Ideagen’s
core values and beliefs of open communication and transparency.
In support of all actions within the Group is a strong organisational structure and a comprehensive suite of documented
policies and processes to ensure all appropriate workflows have rigorous safeguards. However, as an organisation we are
conscious to strike the balance to create a culture of openness and collaboration, where teamwork in delivering the Group’s
objectives is the primary driver.
The Group consults with employees through the employee forum and through regular focused short surveys designed to
measure and improve employee engagement. These provide a continuous process for feedback allowing Ideagen to learn
more about what drives our employees, areas we could improve and also what we are already doing well. Response rates to
the surveys are generally good.
21
Ideagen | ANNUAL REPORT 2019 CORPORATE GOVERNANCE STATEMENT
AUDIT COMMITTEE REPORT
The Audit Committee is required to meet not less than twice each year. The audit committee receives and reviews reports from
management and from the Group’s external auditors relating to the annual accounts and to the internal control procedures in
use throughout the Group. It is responsible for ensuring that the financial performance of the Group is properly reported with
particular regard to legal requirements, accounting standards and the AIM Rules for Companies. The ultimate responsibility
for reviewing and approving the annual report and accounts and the interim reports remains with the Board.
The Audit Committee comprises the two independent non-executive directors, Alan Carroll (as committee chairman) and Tony
Rodriguez.
During the year the Committee met with the external auditors on two occasions, prior to and after the annual audit. The
members of the Committee also have direct access to the external auditors on an ongoing basis as required.
REMUNERATION COMMITTEE REPORT
The Remuneration Committee is required to meet not less than twice each year. It is responsible for considering and reviewing
the terms and conditions of service (including remuneration) of executive directors and senior employees and the design and
operation of the Company’s share option schemes and making appropriate recommendations to the Board.
The Audit Committee comprises the two independent non-executive directors, Alan Carroll (as committee chairman) and Tony
Rodriguez.
The Company’s remuneration policy for directors is designed to retain and attract high-calibre executives and motivate them
to develop and execute strategies aimed at optimising long-term shareholder value. When formulating remuneration policies
for the directors, the Remuneration Committee considers external data on market rates for remuneration of directors of
comparable seniority and type of other companies which are of a similar size and nature to Ideagen. The Company aims to
pay its directors at the median level based on this comparison whilst aiming for top quartile long-term performance.
The salaries of the Executive Directors are reviewed annually taking into account their experience, responsibilities and
performance. Executive Directors have private medical insurance and the Company makes contributions into the Company’s
contributory pension scheme on behalf of the Executive Directors.
The fees of the Non-Executive Directors are determined by the Executive Directors.
During the year ended 30 April 2019, the Company introduced the 2018 Long Term Incentive Plan and the 2018 Long Term
Incentive Plan Extension. Under these plans, 1,200,000 share options with an exercise price of 1 penny each were granted to
Ben Dorks and 750,000 share options were granted to both Graeme Spenceley and Barnaby Kent. In total, 1,350,000 of these
options will become eligible to vest on the Company’s share price reaching 196 pence over 30 consecutive business days. The
remaining 1,350,000 options will become eligible to vest on the Company’s share price reaching 259 pence over 30 consecutive
business days. None of these options were exercisable at 30 April 2019. Any shares issued in respect of the exercise of any of
these options cannot be sold until the fourth anniversary of the grant date and are subject to continued service throughout.
During the year ended 30 April 2019, the final tranche of 1,800,000 share options linked to the 136 pence share price condition
from the 2017 Long Term Incentive Plan were exercised by Ben Dorks, Graeme Spenceley and Barnaby Kent.
Full details of the remuneration and share options of the directors are set out at notes 6 and 20 to the financial statements.
By order of the Board
David Hornsby
Chairman
22
Ideagen | ANNUAL REPORT 2019 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 APRIL 2019
The directors are pleased to present their report and the audited financial statements for the year ended 30 April 2019.
PRINCIPAL ACTIVITIES
The principal activities of the Group are the development and supply of software solutions and the provision of associated
professional and support services.
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 7 to 17
and details are set out in the financial statements on pages 30 to 93.
A final dividend in respect of the year ended 30 April 2018 of 0.163 pence per ordinary share was paid to shareholders on 21
November 2018. The total cost of this dividend was £357,000.
An interim dividend in respect of the year ended 30 April 2019 of 0.09 pence per ordinary share was paid to shareholders on
20 March 2019. The total cost of this dividend was £198,000.
The directors propose a final dividend in respect of the year ended 30 April 2019 of 0.188 pence per share payable on 26
November 2019 to shareholders on the register on 8 November 2019. 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 were as follows:
▪ David R K Hornsby (Executive Chairman)
▪ Benjamin C Dorks (Chief Executive Officer)
▪ Graeme P Spenceley (Chief Financial Officer)
▪ Barnaby L Kent (Chief Operating Officer)
▪ Alan M Carroll (Non-Executive Director)
▪ Jonathan P Wearing (Non-Executive Director)
▪ Tony Rodriguez (Non-Executive Director)
DIRECTORS’ INTERESTS IN THE SHARE CAPITAL OF THE COMPANY
During the year ended 30 April 2019, the Company introduced the 2018 Long Term Incentive Plan and the 2018 Long Term
Incentive Plan Extension. Under these plans, 1,200,000 share options with an exercise price of 1 penny each were granted to
Ben Dorks and 750,000 share options were granted to both Graeme Spenceley and Barnaby Kent. In total, 1,350,000 of these
options will become eligible to vest on the Company’s share price reaching 196 pence over 30 consecutive business days. The
remaining 1,350,000 options will become eligible to vest on the Company’s share price reaching 259 pence over 30 consecutive
business days. None of these options were exercisable at 30 April 2019. Any shares issued in respect of the exercise of any of
these options cannot be sold until the fourth anniversary of the grant date and are subject to continued service throughout.
During the year ended 30 April 2019, the final tranche of 1,800,000 share options linked to the 136 pence share price condition
from the 2017 Long Term Incentive Plan were exercised by Ben Dorks, Graeme Spenceley and Barnaby Kent.
23
Ideagen | ANNUAL REPORT 2019 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 APRIL 2019 (CONTINUED)
Full details of the remuneration and share options of the directors are set out at notes 6 and 20 to the financial statements.
The directors who served during the year had the following interests in the share capital of the Company at the beginning and
end of the year.
David Hornsby
Ben Dorks
Graeme Spenceley
Barnaby Kent
Alan Carroll
Jonathan Wearing
Tony Rodriguez
30 April 2019
30 April 2018
8,650,066
8,648,853
2,000,533
1,699,320
828,253
827,040
2,278,193
1,976,980
204,171
204,021
4,189,066
4,189,066
-
-
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.
EMPLOYEES
‘People’ remains one of the three core pillars within Ideagen, alongside ‘Customers’ and ‘Products’. The evolution of how
Ideagen manages, engages, and rewards its teams has progressed well over the last 12 months. All the primary benefits
such as Life Insurance, contributory pension, Private Medical, and the Share Incentive Plan (SIP) have continued and, where
appropriate, been expanded. In addition, Ideagen seeks to be creative in the use of soft benefits such as Personal Financial
Planning initiatives, mental health workshops, holiday Buy/Sell, and informal flexi-time, all of which are supported by the full-
time in-house Employee Engagement Officer.
The Group has a targeted employee net promoter score (eNPS) provided through the leading employee engagement platform
Peakon. This anonymous survey every 8 weeks allows the company to understand the pulse of each office / function /
demographic, thereby ensuring that a broad and comprehensive plan can be established that touches all employees around
the globe.
There is no doubt that Technology continues to be a challenging recruitment market, but Ideagen invests heavily to ensure
that all employees benefit from great facilities, excellent Learning & Development and best of breed tools, whilst enjoying a
framework that aims to deliver #bestversionofyou in a stable, fulfilling environment.
Although employee turnover is inevitable in an acquisition focused Technology company, the Board remains pleased that
non-acquisition employee turnover of 11.3% is considerably better than the wider technology market where all indicators
suggest it is 15%+.
Ideagen is an equal opportunities employer and it is our policy to treat all employees, job applicants, customers and suppliers
equally regardless of their age, disability, gender reassignment, marital status, pregnancy, race (including nationality, ethnic or
national origins), religion or religious beliefs, sex or sexual orientation.
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
7 to 17.
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.
24
Ideagen | ANNUAL REPORT 2019 DIRECTORS’ REPORT FOR THE YEAR ENDED 30 APRIL 2019 (CONTINUED)
EVENTS AFTER THE END OF THE REPORTING PERIOD
On 7 June 2019, the Group completed the acquisition of Redland Business Solutions Limited, a company incorporated and
domiciled in England. The initial net cash consideration for the purchase was £15.8 million with a further £0.5 million payable
12 months after completion contingent upon the achievement of certain revenue objectives.
The acquisition will strengthen the Group’s position in the financial services market and the combination of Redland’s Insight
platform with Ideagen’s existing product set will provide a compelling proposition covering internal audit, risk management,
certification and SMCR compliance.
The acquisition was funded from the Group’s cash resources and from the extension of the Group’s existing Revolving Credit
Facility with NatWest to £28 million.
SUBSTANTIAL SHAREHOLDINGS
As at 30 April 2019, the Company was notified of the following interests which represented 3% or more of the Ordinary share
capital of the Company.
Liontrust Asset Management
Investec Wealth & Investment
Vind LV AS
Canaccord Genuity Wealth Management
Gresham House Asset Management
David Hornsby
HL Fund Managers
AUDITOR
Number of shares held
at 30 April 2019
Percentage of shares
held at 30 April 2019
34,070,735
25,194,848
17,608,280
14,361,849
12,553,962
8,650,066
6,826,154
15.5%
11.5%
8.0%
6.5%
5.7%
3.9%
3.1%
In accordance with the Companies Act 2006 a resolution proposing the reappointment of RSM UK Audit LLP as auditor will be
put to the members at the forthcoming Annual General Meeting.
DISCLOSURE OF INFORMATION TO THE 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.
FUTURE DEVELOPMENTS
The Strategic Report on pages 7 to 17 refers to the Group’s ongoing 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.
Approved by the Board and signed on its behalf by:
Graeme Spenceley
Director & Company Secretary
1 October 2019
25
Ideagen | ANNUAL REPORT 2019 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.
26
Ideagen | ANNUAL REPORT 2019 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS
OF IDEAGEN PLC (REGISTRATION NUMBER: 02805019)
OPINION
We have audited the financial statements of Ideagen plc (the ‘parent company’) and its subsidiaries (the ‘group’) for the year
ended 30 April 2019 which comprise the group statement of comprehensive income, group and company statements of
financial position, group and company statements of changes in equity, group and company statements of cash flows and
notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework
that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted
by the European Union and, as regards the parent company financial statements, as applied in accordance with the provisions
of the Companies Act 2006.
In our opinion:
-
-
-
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at
30 April 2019 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 company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the Companies Act 2006; and
-
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group and parent company in accordance with the ethical
requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as
applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
CONCLUSIONS RELATING TO GOING CONCERN
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you
where:
-
-
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due
to fraud) we identified, including those which had the greatest effect on the overall audit strategy, the allocation of resources
in the audit and directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
Group key audit matters
-
Revenue recognition – We focused on the recognition of revenue as the timing of revenue recognition and its presentation
in the statement of comprehensive income is subject to inherent complexities in the software industry. We considered
the controls over the recognition of revenue and whether these continued to be appropriate and consistently applied.
We performed controls testing, cut-off testing and substantive analytical review procedures to validate the recognition
of revenue throughout the year with additional procedures incorporated to assess the impact of IFRS 15 “Revenue
from Contracts with Customers” on the Group. We also considered the adequacy of the Group’s revenue recognition
accounting policy given in note 1.
27
Ideagen | ANNUAL REPORT 2019 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IDEAGEN PLC (REGISTRATION NUMBER: 02805019)
- Development costs - We focused on the capitalisation of development costs due to its impact on reported earnings
and the judgements involved in assessing whether the IAS 38 criteria for capitalisation have been suitably met. We
reconfirmed our understanding of management’s basis for capitalising development costs and reviewed whether the
costs had been appropriately capitalised in accordance with IAS 38 and in accordance with the accounting policy in
note 1. Our procedures included an assessment over the appropriateness of any management judgements including
the future expected economic benefit of capitalised projects and substantive testing of the costs capitalised. We also
assessed the reasonableness of the amortisation policies in place, potential impairment and the level of taxation credits
recognised for eligible expenditure. Capitalised development costs are disclosed in note 9, with the key judgements in
relation thereto in note 1.
- Trade receivables provisioning – This is considered a key audit matter due to its judgemental nature and magnitude. We
understood management’s basis for determining provisions against expected bad debts. The adequacy of the provisions
was assessed by consideration and testing over the level of overdue debts, the historic track record of recovery, certain
documentary evidence to support the debtors and cash receipts since the year end. We also performed additional
procedures to critically assess management’s adoption of IFRS 9 “Financial instruments” and the adequacy of the
accounting policy included within note 1.
- Business combinations – The Group acquired InspectionXpert Corp, Morgan Kai Group Limited and Scannell Solutions
Limited in the year. These transactions fall under the scope of IFRS 3 “Business Combinations” which requires
management judgement in determining the fair value of assets acquired, including intangible assets. In conjunction
with our valuation specialists, we reviewed the reasonableness of the methodology and inputs used to determine the
acquired intangible values. Our work also included a review of management’s other fair value adjustments including
those required to align revenue recognition to the Group’s accounting policy. We also reviewed the adequacy of the
disclosures in the financial statements in notes 1 and 9.
Parent company key audit matters
- There were no key audit matters specifically related to the parent company in the 30 April 2019 financial statements.
OUR APPLICATION OF MATERIALITY
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing and
extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and on the financial
statements as a whole, could reasonably influence the economic decisions of the users we take into account the qualitative
nature and the size of the misstatements. During planning materiality for the group financial statements as a whole was
calculated as £700,000, which was not significantly changed during the course of our audit. Materiality for the parent company
financial statements as a whole was calculated as £400,000, which was not significantly changed during the course of our
audit. We agreed with the Audit Committee that we would report to them all unadjusted differences in excess of £20,000, as
well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our Group audit approach focused on the parent company, the UK trading subsidiaries and the consolidation which have
been subject to a full scope audit to Group materiality. These audits covered 82% of Group revenue, 79% of Group profit
from operating activities before depreciation, amortisation, share-based payment charges and exceptional items and 97% of
Group total assets. In addition, we have performed desk top review procedures on the overseas subsidiaries corroborating
any significant differences from expectations.
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the
annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in
the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material misstatement in the financial statements or a
material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
28
Ideagen | ANNUAL REPORT 2019
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IDEAGEN PLC (REGISTRATION NUMBER: 02805019)
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
-
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
-
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
- adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
-
the parent company financial statements are not in agreement with the accounting records and returns; or
- certain disclosures of directors’ remuneration specified by law are not made; or
- we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement set out on page 26, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the group or the parent company or to cease operations, or have
no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required
to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
Neil Stephenson (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
Suite A, 7th Floor, City Gate East
Tollhouse Hill
Nottingham, NG1 5FS
1 October 2019
29
Ideagen | ANNUAL REPORT 2019
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 2019
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
Restructuring costs
Share-based payment charges
Profit from operating activities
Net finance costs
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
30
NOTES
2
3
3
17
20
5
7
8
8
2019
£’000
2018
£’000
46,667
36,120
(3,900)
(3,166)
42,767
32,954
(28,494)
(21,936)
14,273
11,018
(9,391)
(7,122)
(1,268)
(479)
(426)
(151)
(1,491)
(1,880)
1,644
1,439
(263)
1,381
4
1,385
(40)
1,399
130
1,529
641
537
(133)
325
2,563
1,721
Pence
Pence
0.65
0.62
0.77
0.74
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements. GROUP STATEMENT OF FINANCIAL POSITION AT
30 APRIL 2019
Assets and liabilities
Non-current assets
Intangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Current income tax liabilities
Short term borrowings
Deferred revenue
Contingent consideration on business combinations
Deferred consideration on business combinations
Non-current liabilities
Deferred income tax liabilities
NOTE
2019
£’000
2018
£’000
9
10
90,749
60,289
1,069
787
91,818
61,076
12
17,547
12,482
6,199
5,532
23,746
18,014
13
15
14
16
6,043
387
7,500
5,400
147
4,750
18,570
12,527
769
1,269
-
460
34,538
23,284
7
7,344
5,322
Net assets
73,682
50,484
31
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements. GROUP STATEMENT OF FINANCIAL POSITION AT 30 APRIL 2019 (CONTINUED)
Equity
Issued share capital
Share premium account
Merger reserve
Share-based payments reserve
Retained earnings
Foreign currency translation reserve
NOTES
2019
£’000
2018
£’000
18
18
18
20
2,198
2,027
53,948
34,257
1,658
1,440
1,658
1,148
13,597
11,194
841
200
Equity attributable to the owners of the parent
73,682
50,484
The Company reported a profit for the year of £77,000 (2018: £401,000).
Approved and authorised for issue by the Board on 1 October 2019 and signed on its behalf by:
David Hornsby
Director
Graeme Spenceley
Director
Registration number: 02805019
32
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements.
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2019
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33
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements.
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2018
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Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements.
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GROUP STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 APRIL 2019
Cash flows from operating activities
Profit for the year
Depreciation of property, plant and equipment
Amortisation of intangible non-current assets
Profit on disposal of property, plant and equipment
Share-based payment charges
Net finance costs recognised in profit or loss
Taxation credit recognised in profit or loss
Business acquisition costs in profit or loss
Restructuring costs in profit or loss
Decrease in inventories
Increase in trade and other receivables
Decrease in trade and other payables
Increase in deferred revenue liability
Cash generated by operations
Net finance costs paid
Income tax paid
Business acquisition costs paid
Restructuring costs paid
Employer’s national insurance paid on share-based payments
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
Proceeds from issue of shares under the share incentive scheme
Cost of shares purchased under the share incentive scheme
New short-term borrowings
Repayment of short term borrowings
Equity dividends paid
Net cash generated by financing activities
Net increase/(decrease) in cash and cash equivalents during the year
Cash and cash equivalents at the beginning of the year
Effect of exchange rate changes on cash balances held in foreign currencies
Cash and cash equivalents at the end of the year
NOTES
10
9
3
20
5
7
17
17
16
14
9
10
18
18
18
18
15
15
19
24
24
2019
£’000
1,385
463
8,928
(7)
1,491
263
(4)
1,268
479
-
(3,914)
(444)
2, 438
12,346
(323)
(248)
(915)
(479)
(730)
9,651
(27,252)
(460)
-
(2,683)
(679)
7
2018
£’000
1,529
320
6,802
(6)
1,880
40
(130)
426
-
10
(1,447)
(259)
255
9, 420
(99)
(21)
(204)
-
(253)
8,843
(6,225)
(1,640)
(2,057)
(2,246)
(517)
6
(31,067)
(12,679)
20,000
(625)
397
90
(3)
6,000
(3,250)
(555)
22,054
638
5,532
29
6,199
-
-
833
65
(6)
4,750
(2,000)
(440)
3,202
(634)
6,205
(39)
5,532
35
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION AS AT
30 APRIL 2019
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
Short-term borrowings
Deferred revenue
Deferred consideration on business combinations
Net assets
NOTES
2019
£’000
2018
£’000
9
10
11
7
26
221
78
92
71,767
51,824
70
70
72,084
52,064
12
12,693
24,082
13
15
16
1,438
2,301
14,131
26,383
11,877
28,024
7,500
4,750
823
500
697
460
20,700
33,931
65,515
44,516
36
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements. COMPANY STATEMENT OF FINANCIAL POSITION AS AT 30 APRIL 2019 (CONTINUED)
Equity
Issued share capital
Share premium account
Merger reserve
Share-based payments reserve
Retained earnings
NOTES
2019
£’000
2018
£’000
18
18
18
20
2,198
2,027
53, 948
34,257
1,709
1,440
6,220
1,709
1,148
5,375
Equity attributable to the owners of the parent
65,515
44,516
Approved and authorised for issue by the Board on 1 October 2019 and signed on its behalf by:
David Hornsby
Director
Graeme Spenceley
Director
Registration number: 02805019
37
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2019
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38
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2018
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39
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED
30 APRIL 2019
Cash flows from operating activities
NOTES
Profit for the year
Depreciation of property, plant and equipment
Amortisation of intangible assets
Net finance costs recognised in profit or loss
Taxation charge recognised in profit or loss
Business acquisition costs in profit or loss
(Increase)/decrease in trade and other receivables
Movement in intra-group balances
Increase/(decrease) in trade and other payables
Increase in deferred revenue
Cash generated by operations
Net finance costs paid
Business acquisition costs paid
Net cash generated by operating activities
Cash flows from investing activities
Payments for investments in subsidiaries
Payment of deferred consideration on business combinations
Payment of contingent consideration on business combinations
Payments for 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
Proceeds from issue of shares under the share incentive scheme
Cost of shares purchased under the share incentive scheme
New short-term borrowings
Repayment of short term borrowings
Equity dividends paid
Net cash generated by financing activities
Net (decrease)/increase in cash and cash equivalents during the year
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
40
10
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10
18
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15
15
19
24
24
2019
£’000
77
71
52
266
413
1,268
(22)
1,205
908
126
4,364
(326)
(915)
3,123
(25,380)
(460)
-
(200)
2018
£’000
401
28
71
44
291
426
5
436
(123)
283
1,862
(102)
(204)
1,556
-
(1,640)
(2,057)
(77)
(26,040)
(3,774)
20,000
(625)
397
90
(3)
6,000
(3,250)
(555)
22,054
(863)
2,301
1,438
-
-
833
65
(6)
4,750
(2,000)
(440)
3,202
984
1,317
2,301
Ideagen | ANNUAL REPORT 2019The notes on pages 41 to 93 form an integral part of these financial statements. NOTES TO THE FINANCIAL STATEMENTS FOR THE
YEAR ENDED 30 APRIL 2019
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 2019 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 Company for the year ended 30 April 2019 was £77,000 (2018: £401,000).
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 2019. 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 with the
exception of Ideagen EOOD in Bulgaria which makes its financial statements up to 31 December each year as required by
Bulgarian law.
GOING CONCERN
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.
REVENUE RECOGNITION
Revenue is recognised at the fair value of the consideration to which the Group is expected to be entitled in exchange for
transferring services or goods to a customer. For each contract with a customer, the Group: identifies the contract with a
customer; identifies the performance obligations in the contract; determines the transaction price; allocates the transaction
price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or
service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts
the transfer to the customer of the services or goods promised.
Revenue from the sale of perpetual software licences or software development kits on a ‘right of use’ basis, where no
customisation of the software is required, is recognised at a point in time once the licence has been delivered to the customer
and the customer can obtain benefit from the licence or kit.
41
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
1 | ACCOUNTING POLICIES (CONTINUED)
Revenue from the sale of perpetual software licences on a ‘right of use’ basis, where customisation of the software is required in
order for the customer to obtain benefit from the licence, is recognised over the period of time during which the customisation
work is carried out in a manner which reflects the varying level of effort involved.
Revenues from the provision of customisation, configuration or training services are recognised over a period of time as these
services are delivered to the customer.
Revenues from supporting perpetual software licences and revenues from the sale of software on a ‘right of access’ basis
including software as a service, software hosting and software sold on a subscription basis are recognised over the period of
time that the customer benefits from the provision of these services.
Revenues from the sale of third-party hardware are recognised once the associated performance obligation has been satisfied
which will be once the hardware has been delivered and the customer is able to benefit from it.
Software as a service, software hosting, software sold on a subscription basis and support for perpetual licences are invoiced
in advance. A deferred revenue liability is recognised in the statement of financial position to represent the element of the
service or support revenue deferred to be recognised as revenue in the future.
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.
42
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
1 | ACCOUNTING POLICIES (CONTINUED)
TAXATION
The tax charge or credit is based on the result for the year and comprises current and deferred income tax.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the year end date and includes any adjustment to tax payable in respect of previous years.
Deferred income tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities
included in the financial statements and the tax base of those assets and liabilities. Deferred income tax assets are recognised
only to the extent that the directors consider that it is probable that there will be suitable taxable profits in the future against
which an asset can be utilised.
Deferred tax assets and liabilities are calculated at tax rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted at the year end date. Deferred income tax assets and deferred income tax
liabilities arising in different tax jurisdictions are not offset.
PENSIONS AND POST RETIREMENT BENEFITS
The Group operates a defined contribution pension scheme which is available to all 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 this
scheme and 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 applied to the group’s intangible assets on a straight line basis are as follows:
Software
Development costs
Customer relationships
20%
20% or 25%
10%
Amortisation charges are included in ‘Depreciation and amortisation’ in the Statement of Comprehensive Income.
43
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
1 | ACCOUNTING POLICIES (CONTINUED)
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.
PROPERTY, PLANT AND EQUIPMENT
Property, 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 15% - 33% on a straight line basis
▪ Motor vehicles at 25% - 33% on a reducing balance basis
▪ Leasehold improvements over the remaining lease term
▪ All other plant and equipment assets at 15% - 33% on a straight line basis.
The remaining useful lives and residual values of property, plant and equipment are reassessed by the directors each year.
The carrying values of property, 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 NON-FINANCIAL 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.
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 initially recognised at fair value and are subsequently measured at amortised
cost using the effective interest method less any allowance for expected credit losses.
The Group has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss
allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. The expected
loss rate against certain balances is adjusted where there are specific indicators that the trade receivable is either irrecoverable
or the risk of loss is high. Indicators include, amongst others, the failure of a debtor to engage in a repayment plan with the
Group or a failure to make contractual payments for a period greater than 120 days past due.
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.
44
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
1 | ACCOUNTING POLICIES (CONTINUED)
TRADE AND OTHER PAYABLES
Trade and other payables are recognised initially at fair value. After initial recognition, they are measured at amortised cost
using the effective interest method.
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.
The Group has a Share Incentive Scheme under which all eligible employees can be awarded free shares. The fair value of
shares awarded under the Scheme is the market value of those shares at the date of grant which is then recognised on a
straight line basis over the vesting period. The free shares awarded are issued at nominal value and held in a trust managed
by a third party trustee. On vesting, an amount equal to the fair value of the shares at the date the shares were awarded 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.
45
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
1 | ACCOUNTING POLICIES (CONTINUED)
NEW OR AMENDED ACCOUNTING STANDARDS AND INTERPRETATIONS ADOPTED
The consolidated entity has adopted all of the new or amended Accounting Standards and Interpretations issued by the
International Accounting Standards Board (‘IASB’) that are mandatory for the current reporting period. Any new or amended
Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.
The accounting policies are the same as those applied in the Group’s consolidated financial statements as at and for the year
ended 30 April 2018 with the exception of the changes in respect of IFRS 9 ‘Financial Instruments’ and IFRS 15 ‘Revenue from
Contracts with Customers’, both of which were adopted on 1 May 2018. The effect of initially applying these standards is noted
below.
IFRS 9 ‘Financial Instruments’
IFRS 9 replaces IAS 39 ‘Financial Instruments: Recognition and Measurement’. The standard applies a forward-looking
impairment model that replaces the current applicable incurred loss model. New impairment requirements use an ‘expected
credit loss’ (‘ECL’) model to recognise an allowance. Impairment is measured using a 12-month ECL method unless the credit
risk on a financial instrument has increased significantly since initial recognition in which case the lifetime ECL method is
adopted. For receivables, a simplified approach to measuring expected credit losses using a lifetime expected loss allowance
is available.
The adoption of IFRS 9 did not have a material impact on the reported results of previous years.
IFRS 15 ‘Revenue from Contracts with Customers’
IFRS 15 replaces IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’ and related interpretations. It describes the principles
an entity must follow to measure and recognise revenue using a five-step approach. The standard requires revenue to be
recognised when goods or services are transferred to customers and the entity has satisfied its performance obligations
under the contract, and at an amount that reflects the consideration to which an entity expects to be entitled in exchange for
those goods or services.
The Group has applied IFRS 15 using the full retrospective method (adopting all practical expedients) with no impact on the
reported results in the current or previous years.
NEW AND REVISED IFRSs IN ISSUE BUT NOT YET EFFECTIVE
Certain new accounting standards and interpretations have been published that are not mandatory for 30 April 2019 reporting
periods and have not been early adopted by the Group. The Group’s assessment of the impact of these new standards and
interpretations is set out below.
IFRS 16 ‘Leases’ – to be adopted in the financial year ending 30 April 2020
This standard is applicable to annual reporting periods beginning on or after 1 January 2019 and the Group will adopt this
standard in the accounts for the year ending 30 April 2020. The standard replaces IAS 17 ‘Leases’ and for lessees will eliminate
the classifications of operating leases and finance leases. Subject to exceptions, a ‘right-of-use’ asset will be capitalised in
the statement of financial position, measured at the present value of the unavoidable future lease payments to be made
over the lease term. The exceptions relate to short-term leases of 12 months or less and leases of low-value assets (such
as personal computers and small office furniture) where an accounting policy choice exists whereby either a ‘right-of-use’
asset is recognised or lease payments are expensed to profit or loss as incurred. A liability corresponding to the capitalised
lease will also be recognised, adjusted for lease prepayments, lease incentives received, initial direct costs incurred and an
estimate of any future restoration or removal costs. Straight-line operating lease expense recognition will be replaced with
a depreciation charge for the leased asset and an interest expense on the recognised lease liability to be included in finance
costs. In the earlier periods of the lease, the expenses associated with the lease under IFRS 16 will be higher when compared
to lease expenses under IAS 17. However, results from operating activities before depreciation, amortisation and share-based
payment charges will be improved as the operating expense is replaced by interest expense and depreciation in profit or loss
under IFRS 16. For classification within the statement of cash flows, the lease payments will be separated into both a principal
(financing activities) and interest (either operating or financing activities) component.
The Group is proposing to adopt the modified retrospective transition approach making use of the practical expedient not
to apply the standard to leases of less than 12 months. The expected impact of applying IFRS 16 is that a right of use asset
46
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
1 | ACCOUNTING POLICIES (CONTINUED)
of £2,330,000 and a capitalised lease liability of £2,260,000 will be initially recognised on 1 May 2019. The effect of this on
the Statement of Comprehensive Income for the year to 30 April 2020 is estimated to be a reduction in operating costs by
approximately £620,000, an increase in depreciation charges by approximately £600,000 and an increase in net finance costs
by approximately £50,000.
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 20.
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.
Trade and other receivables
Management judgement is required in considering the recoverability of debts and in the estimation of expected credit losses
which may be incurred. Further information is provided in note 12.
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.
Development costs
Management judgement is required in assessing the fair value of development costs capitalised including the future economic
benefit expected to be generated by those assets and in calculating the attributable costs. Management judgement is also
required in assessing the useful economic lives of these assets for the purposes of amortisation. The carrying value of
development costs at 30 April 2019 was £6,752,000.
47
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
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.
Recurring software subscription/SaaS
Recurring support & maintenance
Total recurring revenues
Software – new licences & development kits
Professional services
Other revenues
2019
£’000
13,727
2018
£’000
8,442
17,452
13,793
31,179
22,235
9,694
5,307
487
8,339
5,052
494
46,667
36,120
An analysis of external revenue by location of customers and non-current assets by location of assets is given below:
United Kingdom
North America
Europe
Middle East
Rest of the World
Unallocated
External revenue by
location of customers
Non-current assets by
location of assets*
2019
£’000
17,682
17,822
5,429
2,354
3,380
-
2018
£’000
16,376
9,687
5,529
1,970
2,558
2019
£’000
70,114
14,834
4,229
3
155
2018
£’000
49,998
8,375
21
2
-
-
2,483
2,680
46,667
36,120
91,818
61,076
* Non-current assets exclude deferred income tax assets.
No single customer accounted for more than 10% of total revenue in either year.
48
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
3 | OPERATING COSTS
Wages and salaries (note 4)
Operating lease charges – land & buildings
Profit 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 and its related entities:
- The audit of the Company’s subsidiaries’ annual accounts
- Tax compliance and advisory services
2019
£’000
2018
£’000
19,716
15,557
929
(7)
(67)
598
(6)
40
7,923
5,747
28,494
21,936
7,548
1,380
8,928
463
9,391
5,819
983
6,802
320
7,122
6,424
5,136
(2,683)
(2,246)
3,741
2,890
12
124
33
12
87
16
49
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
4 | PARTICULARS OF EMPLOYEES
The average number of staff including directors employed by the Group during the year, analysed by category, was as follows:
Administrative staff
Sales and marketing
Technical and support
The aggregate payroll costs of these employees were as follows:
Wages and salaries
Social security costs
Other pension costs (note 23)
Less: internal development costs capitalised
Share based payment costs (note 20)
- on options granted
- on share incentive scheme
- national insurance
5 | NET FINANCE COSTS
Borrowing facility fees amortised
Interest payable on bank borrowings
Bank interest receivable
50
2019
2018
NUMBER
NUMBER
68
124
259
451
50
97
228
375
2019
£’000
2018
£’000
19,770
15,631
2,002
627
1,650
522
22,399
17,803
(2,683)
(2,246)
19,716
15,557
802
279
410
1,429
116
335
21,207
17,437
2019
£’000
(35)
(233)
5
(263)
2018
£’000
(25)
(19)
4
(40)
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
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
2019
£’000
1,490
37
2018
£’000
1,214
27
1,527
1,241
Aggregate gains made by directors on the exercise of share options
2,718
1,944
The remuneration of each of the directors of the company during the year ended 30 April 2019 was as follows:
David Hornsby
Ben Dorks
Graeme Spenceley
Barnaby Kent
Alan Carroll
Jonathan Wearing
Tony Rodriguez
SALARY OR
FEES
BENEFITS IN
KIND
BONUSES
NATIONAL
INSURANCE ON
SHARE OPTIONS
TOTAL
£’000
£’000
£’000
£’000
£’000
204
206
156
156
30
30
25
807
1
1
-
1
-
-
-
3
120
100
30
55
-
-
-
-
125
125
125
-
-
-
325
432
311
337
30
30
25
305
375
1,490
51
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
6 | DIRECTORS’ REMUNERATION AND SHARE OPTIONS (CONTINUED)
The remuneration of each of the directors of the Company during the year ended 30 April 2018 was as follows:
SALARY OR
FEES
BENEFITS IN
KIND
BONUSES
David Hornsby
Ben Dorks
Graeme Spenceley
Barnaby Kent
Alan Carroll
Jonathan Wearing
Tony Rodriguez
£’000
£’000
185
181
136
136
24
24
17
703
1
1
1
1
-
-
-
4
NATIONAL
INSURANCE ON
SHARE OPTIONS
TOTAL
£’000
£’000
-
89
89
89
-
-
-
306
331
256
256
24
24
17
£’000
120
60
30
30
-
-
-
240
267
1,214
The bonuses for David Hornsby, Graeme Spenceley, Barnaby Kent and Ben Dorks were in respect of the successful completion
of the acquisition and integration of the businesses acquired during the relevant years and on achieving certain business-
related targets.
The Group paid the employer’s national insurance costs outlined above in respect of the gains arising on non-tax-efficient
share options exercised during the year. The associated income tax and employee national insurance costs were paid by the
individual directors.
The remuneration for Alan Carroll was paid to Ultris Limited and the remuneration for Tony Rodriguez was paid to X88 Ltd as
set out in note 25.
The remuneration of the highest paid director during the year ended 30 April 2019 was £432,000 (2018: £331,000).
The Group paid contributions to a defined contribution pension scheme in respect of the following directors:
David Hornsby
Ben Dorks
Graeme Spenceley
Barnaby Kent
Jonathan Wearing
52
2019
£’000
2018
£’000
10
10
8
8
1
37
8
6
6
6
1
27
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
6 | DIRECTORS’ REMUNERATION AND SHARE OPTIONS (CONTINUED)
The following options over shares in the Company granted to the directors remain outstanding at 30 April 2019:
Notes
(see
below)
Balance
at 30 April
2018
Granted in
the year
Exercised
in the year
1,333,333
500,000
1,833,333
1,000,000
600,000
-
-
-
-
-
Balance
at 30 April
2019
Option
exercise
price
(pence)
Date
exercisable
1,333,333
9.0
2014 - 2021
500,000
22.38
2016 - 2023
1,833,333
1,000,000
22.38
2016 - 2023
-
-
-
-
-
1,200,000
-
1,200,000
1,600,000
1,200,000
600,000
2,200,000
600,000
-
1.0
1.0
2021 - 2023
800,000
795,000
600,000
-
-
-
-
-
800,000
795,000
9.0
2014 - 2021
22.38
2016 – 2023
600,000
-
1.0
1.0
2022 - 2024
-
750,000
-
750,000
2,195,000
750,000
600,000
2,345,000
1,000,000
600,000
-
-
-
-
1,000,000
22.38
2016 - 2023
600,000
-
1.0
1.0
2022 - 2024
-
750,000
-
750,000
1,600,000
750,000
600,000
1,750,000
Director
David Hornsby
Ben Dorks
Graeme Spenceley
Barnaby Kent
Notes
a
b
b
c
d
a
b
c
e
b
c
e
a. options were granted on 20 October 2011 under the Company’s EMI share option scheme. All options are exercisable
at 30 April 2019.
b. options were granted on 30 January 2013 under the Company’s EMI share option scheme. All options are exercisable
at 30 April 2019.
c. options were granted on 23 March 2017 under the Company’s 2017 Long Term Incentive Plan. All of these options had
been exercised at 30 April 2019.
d. options were granted on 22 October 2018 under the Company’s 2018 Long Term Incentive Plan. None of these
options were exercisable at 30 April 2019.
e. options were granted on 28 March 2019 under the Company’s 2018 Long Term Incentive Plan Extension. None of
these options were exercisable at 30 April 2019.
During the year ended 30 April 2019, 1,201 (30 April 2018: 2,197) “Free” shares were awarded to each of David Hornsby, Ben
Dorks, Graeme Spenceley and Barnaby Kent under the Company’s Share Incentive Scheme. In addition, during the year ended 30
April 2018, each of these directors purchased 2,117 “Partnership” shares at 85 pence each through the Share Incentive Scheme.
Further information on the Group’s share option schemes can be found at note 20 to the accounts. The contracts of
employment of the executive directors include notice periods of 6 months.
53
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
7 | TAXATION
The taxation credit 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
Deferred income tax
Deferred income tax credit for the current year
Total taxation credit recognised in the current year
2019
£’000
2018
£’000
610
377
987
(991)
(4)
410
113
523
(653)
(130)
The taxation for the year is lower than the average rate of corporation tax in the UK of 19% (2018: 19%). The differences are
reconciled below:
Profit before taxation
Tax on profit at average standard rate of 19% (2018: 19%)
Expenses not deductible for tax purposes
Deferred taxation not provided on accelerated capital allowances
Movement in fair value of contingent consideration not taxable
Enhanced R&D tax relief
Effect on deferred tax from change in current tax rate
Different tax rates in overseas jurisdictions
Deferred tax asset not recognised on new trading losses
2019
£’000
1,381
262
228
19
-
(506)
(42)
119
(84)
2018
£’000
1,399
266
37
3
1
(422)
(27)
45
(33)
Taxation credit recognised for the current year
(4)
(130)
54
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
7 | TAXATION (CONTINUED)
A further taxation credit of £250,000 (2018: £347,000) 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:
Deferred income tax assets: Group
At 1 May 2017
Recognised in profit or loss
Recognised in equity
Offset against deferred tax liabilities
At 30 April 2018
On acquisition of businesses
Recognised in profit or loss
Recognised in equity
Offset against deferred tax liabilities
At 30 April 2019
Deferred income tax assets: Company
At 1 May 2017
Recognised in profit or loss
At 30 April 2018 and 30 April 2019
Trading
losses
£’000
322
(242)
-
(80)
-
292
(292)
-
-
-
Share-
based
payments
£’000
1,026
13
347
Total
£’000
1,348
(229)
347
(1,386)
(1,466)
-
-
-
250
(250)
-
292
(292)
250
(250)
-
-
Total
£’000
79
(9)
70
55
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
7 | TAXATION (CONTINUED)
The deferred income tax assets at 30 April 2019 above are expected to be utilised after more than one year.
The deferred income tax assets 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 2019 there are also unrecognised deferred
income tax assets in respect of trading losses of £525,000 (2018: £519,000) in the Group and £363,000 (2018: £348,000) in the
Company.
The movements in deferred income tax liabilities during the year were as follows:
Group
At 1 May 2017
Recognised in profit or loss
Recognised on business combinations
Foreign exchange differences
Offset against deferred tax assets
At 30 April 2018
Recognised in profit or loss
Recognised on business combinations
Foreign exchange differences
Offset against deferred tax assets
At 30 April 2019
The deferred tax liabilities at 30 April 2019 are expected to crystallise as follows:
Group
Within 1 year
After more than 1 year
Intangibles
£’000
(6,274)
882
(1,374)
(22)
1,466
(5,322)
1,283
(3,478)
(77)
250
(7,344)
£’000
(1,828)
(5,516)
(7,344)
FACTORS THAT MAY AFFECT FUTURE TAX CHARGES
Legislation to reduce the main rate of UK corporation tax from 19% to 17% from 1 April 2020 has been enacted. 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.
56
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
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 2019
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
1,385
-
pence
212,825,943
0.65
9,647,629
Profit for the year attributable to equity holders of the parent
1,385
222,473,572
0.62
Year ended 30 April 2018
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
1,529
-
pence
199,462,389
0.77
7,671,592
Profit for the year attributable to equity holders of the parent
1,529
207,133,981
0.74
57
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
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
Restructuring costs
Deferred taxation on share-based payment charges
Amortisation of acquisition-related intangibles (Note 3)
Deferred taxation on amortisation of acquisition-related intangibles
2019
£’000
1,385
1,268
1,491
479
1
7,548
(1,500)
2018
£’000
1,529
426
1,880
151
(14)
5,819
(1,109)
Adjusted earnings
10,672
8,682
Weighted average number of shares: Basic adjusted EPS calculation
212,825,943
199,462,389
Effect of dilutive securities: share options
9,647,629
7,671,592
Weighted average number of shares: Diluted adjusted EPS calculation
222,473,572
207,133,981
Adjusted earnings per share:
Basic
Diluted
2019
pence
5.01
4.80
2018
pence
4.35
4.19
58
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
9 | INTANGIBLE ASSETS
Group
Cost
At 1 May 2017
Goodwill
Software
Customer
relationships
Development
costs
Total
£’000
£’000
£’000
£’000
£’000
21,521
17,870
24,766
5,723
69,880
Acquisition through business combinations
(note 17)
3,199
1,767
3,320
Foreign exchange differences
Additions from internal development
51
-
29
-
52
-
At 30 April 2018
24,771
19,666
28,138
Acquisition through business combinations
(note 17)
16,869
5,255
14,120
Foreign exchange differences
Additions from internal development
178
-
101
-
186
-
-
-
2,246
7,969
-
-
2,683
8,286
132
2,246
80,544
36,244
465
2,683
At 30 April 2019
41,818
25,022
42,444
10,652
119,936
Amortisation
At 1 May 2017
Amortisation expense
At 30 April 2018
Amortisation expense
Foreign exchange differences
At 30 April 2019
Net carrying amount
At 30 April 2019
At 30 April 2018
Goodwill
-
-
-
-
-
-
7,301
3,319
10,620
4,614
2,500
7,114
1,538
983
2,521
13,453
6,802
20,255
3,915
3,634
1,379
8,928
2
2
-
4
14,537
10,750
3,900
29,187
41,818
10,485
24,771
9,046
31,694
21,024
6,752
5,448
90,749
60,289
The carrying amount of goodwill has been allocated to the following Cash Generating Units (“CGUs”):
GRC CGU
Content & clinical CGU
£’000
40,568
1,250
41,818
59
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
9 | INTANGIBLE ASSETS (CONTINUED)
The GRC CGU comprises the businesses of the acquisitions of Gael, Pentana, Covalent, Pleasetech, IPI Solutions, Logen,
Ideagen Software, Ideagen Capture, Proquis, Medforce, InspectionXpert, Morgan Kai and Scannell Solutions.
The Content & clinical CGU comprises the businesses of the acquisitions of Plumtree, MSS and EIBS.
These goodwill amounts were tested for impairment at 30 April 2019 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 2020 are taken from the budget approved by the
Board which is closely linked with recent historical performance and current sales opportunities. The operating cash
flow budget is most sensitive to the level of new business sales;
ii. No growth has been assumed in operating cash flows for the remainder of the value in use calculation period;
iii. A pre-tax discount rate of 10% has been used;
iv. The use of cash flow projections over longer than a 5 year period is considered appropriate as many of the businesses
comprising both of the CGUs have been operating for over 15 years, have strong recurring revenue bases and the
Group continues to invest in the development of the products in both CGUs.
GRC 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.
Amount by which recoverable amount of the CGU, based on
value in use, exceeds the carrying amount (£’000)
Reduction in annual operating cash flows below the no-growth
assumption used in value in use calculations required to reduce
the recoverable amount of the CGU below the carrying amount
Projection period in value in use calculations
In perpetuity
15 years
10 years
60,483
33,959
13,970
46%
32%
17%
60
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
9 | INTANGIBLE ASSETS (CONTINUED)
CONTENT & CLINICAL 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.
Amount by which recoverable amount of the CGU, based on
value in use, exceeds the carrying amount (£’000)
Reduction in annual operating cash flows below the no-growth
assumption used in value in use calculations required to reduce
the recoverable amount of the CGU below the carrying amount
Projection period in value in use calculations
In perpetuity
15 years
10 years
7,828
5,996
4,615
87%
83%
79%
61
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
9 | INTANGIBLE ASSETS (CONTINUED)
DEVELOPMENT COSTS
Development costs are internally generated. At 30 April 2019, the carrying amount of ongoing development projects on which
amortisation has not yet commenced was £1,946,000 (2018: £1,445,000). At 30 April 2019, the carrying amount of completed
development projects on which amortisation is being charged was £4,806,000 (2018: £4,003,000). The weighted average
remaining amortisation period of these assets at 30 April 2019 is 2.8 years (2018: 3.1 years).
The remaining amortisation periods and carrying amounts of the Group’s other intangible assets are as follows:
2019
Remaining
amortisation
period
2018
Remaining
amortisation
period
2019
Carrying
amount
2018
Carrying
amount
(years)
(years)
£’000
Customer relationships
Ideagen Capture
Ideagen Software
Proquis
Plumtree
MSS
Pentana
EIBS
Gael
Covalent
Logen
IPI Solutions
Pleasetech
Medforce
InspectionXpert
Morgan Kai
Scannell Solutions
62
1.2
1.9
2.7
3.6
4.2
4.5
5.2
5.7
7.3
7.3
7.6
7.9
8.9
9.3
9.4
9.7
2.2
2.9
3.7
4.6
5.2
5.5
6.2
6.7
8.3
8.3
8.6
8.9
9.9
-
-
-
56
81
110
395
146
709
517
£’000
105
123
151
503
180
864
618
5,097
5,992
1,529
1,739
129
146
2,083
2,357
4,347
4,897
3,187
3,349
2,428
9,308
1,572
-
-
-
31,694
21,024
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
9 | INTANGIBLE ASSETS (CONTINUED)
2019
Remaining
amortisation
period
2018
Remaining
amortisation
period
2019
Carrying
amount
2018
Carrying
amount
(years)
(years)
£’000
Software
MSS
Pentana
EIBS
Gael
Covalent
Logen
IPI Solutions
Pleasetech
Medforce
InspectionXpert
Morgan Kai
Scannell Solutions
-
-
0.2
0.7
2.3
-
2.6
2.9
3.9
4.3
4.4
4.7
0.2
0.5
1.2
1.7
3.3
1.0
3.6
3.9
4.9
-
-
-
-
-
22
990
448
-
£’000
19
140
164
2,405
646
1
853
1,180
2,024
2,721
1,493
1,770
1,001
3,034
620
-
-
-
10,485
9,046
63
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
9 | INTANGIBLE ASSETS (CONTINUED)
COMPANY
The intangible assets of the Company are as follows:
Software
Development
costs
Total
£’000
£’000
£’000
121
-
121
-
121
121
-
121
-
121
-
-
489
-
489
-
489
340
71
411
52
463
26
78
610
-
610
-
610
461
71
532
52
584
26
78
Cost
At 1 May 2017
Additions from internal development
At 30 April 2018
Additions from internal development
At 30 April 2019
Amortisation
At 1 May 2017
Amortisation expense
At 30 April 2018
Amortisation expense
At 30 April 2019
Net carrying amount
At 30 April 2019
At 30 April 2018
64
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
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 2017
Additions
Acquisition through
business combinations
Disposals
Foreign currency exchange
differences
244
197
-
-
-
1,014
240
6
-
1
At 30 April 2018
441
1,261
Additions
Acquisition through
business combinations
Disposals
Foreign currency exchange
differences
43
-
-
1
581
67
-
(2)
At 30 April 2019
485
1,907
Depreciation
At 1 May 2017
Depreciation expense
Disposals
Foreign currency exchange
differences
At 30 April 2018
Depreciation expense
Disposals
Foreign currency exchange
differences
120
63
-
-
183
92
-
-
626
212
-
-
838
314
-
-
At 30 April 2019
275
1,152
Net carrying amount
At 30 April 2019
At 30 April 2018
210
258
755
423
39
-
-
(15)
-
24
-
-
(16)
-
8
26
10
(15)
-
21
3
(16)
-
8
-
3
116
80
-
-
-
196
55
-
-
-
43
-
-
-
-
1,456
517
6
(15)
1
43
1,965
-
-
-
-
679
67
(16)
(1)
251
43
2,694
58
35
-
-
93
54
-
-
43
-
-
-
873
320
(15)
-
43
1,178
-
-
-
463
(16)
-
147
43
1,625
104
103
-
-
1,069
787
65
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
10 | PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Fixtures
and fittings
Office
equipment
Leasehold
Total
£’000
£’000
£’000
£’000
23
7
30
-
30
23
1
24
2
26
4
6
173
6
179
160
339
170
2
172
27
199
140
7
49
64
113
40
153
9
25
34
42
76
77
79
245
77
322
200
522
202
28
230
71
301
221
92
COMPANY
Cost
At 1 May 2017
Additions
At 30 April 2018
Additions
At 30 April 2019
Accumulated depreciation
At 1 May 2017
Depreciation expense
At 30 April 2018
Depreciation expense
At 30 April 2019
Net carrying amount
As at 30 April 2019
As at 30 April 2018
66
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
11 | FIXED ASSET INVESTMENTS
COMPANY
Cost
As at 1 May 2017
Transfer of shares to other group companies
Capital contributions to subsidiary companies
As at 30 April 2018
Additions in the year
Transfer of shares to other group companies
Capital contributions to subsidiary companies
As at 30 April 2019
Net carrying amount
As at 30 April 2019
As at 30 April 2018
Shares in subsidiaries
£’000
54,954
(4,675)
1,545
51,824
25,880
(7.018)
1,081
71,767
71,767
51,824
At 30 April 2019 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, Ideagen Inc, Ideagen Software Inc, Medforce Technologies Inc, Covalent
Software Inc, InspectionXpert Corp and Morgan Kai Group Inc which are incorporated in the United States of America, Ideagen
EOOD which is incorporated in Bulgaria and Scannell Solutions Limited which is incorporated in the Republic of Ireland.
67
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
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 Software Limited
Development and sale of software licences, software
maintenance and related professional services
Pleasetech Limited
IPI Solutions Limited
Development and sale of software licences, software
maintenance and related professional services
Development and sale of software licences, software
maintenance and related professional services
Ideagen EOOD
Development and sale of software licences, software
maintenance and related professional services
Ideagen Software Inc.
Non-trading holding company based in the USA
Ideagen Inc.
Sale of software licences, software maintenance and related
professional services
Medforce Technologies Inc
Sale of software licences, software maintenance and related
professional services
Ideagen MK Group Limited
(formerly Morgan Kai Group
Limited)
UK-based holding company for the Morgan Kai companies
Ideagen MK Limited (formerly
Morgan Kai Limited)
Development and sale of software licences, software
maintenance and related professional services
Ordinary and ‘B’
Ordinary
Ordinary and ‘B’
Ordinary
Ordinary
Ordinary, A
Ordinary and
B Ordinary
shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary and
Cumulative
Preference
shares
Ordinary
Morgan Kai Group Inc.
InspectionXpert Corp.
Sale of software licences, software maintenance and related
professional services
Ordinary
Development and sale of software licences, software
maintenance and related professional services
Ordinary A and
Ordinary B
shares
Ordinary, B
Ordinary and
convertible
Preference
shares
Scannell Solutions Limited
Development and sale of software licences, software
maintenance and related professional services
68
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
11 | FIXED ASSET INVESTMENTS (CONTINUED)
Name of subsidiary
Nature of business
Filebutton Limited
Dormant
Covalent Software Limited
Dormant
Ideagen Solutions Limited
Dormant
Pentana Limited
EIBS Limited
MSS Management Systems
Services Limited
Dormant
Dormant
Dormant
Ideagen Capture Limited
Dormant
Proquis Limited
Root3 Systems Limited
Dormant
Dormant
Ideagen Systems Limited
Dormant
Gael Products Limited
Dormant
Class of shares
‘A’ Ordinary and
‘B’ Ordinary
Ordinary,
Ordinary A and
Ordinary non-
voting shares
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
The registered office address of each of the above subsidiaries is Ergo House, Mere Way, Ruddington Fields Business Park,
Nottinghamshire, NG11 6JS except for the following:
Ideagen Gael Limited, Gael Products Limited
Orion House, Bramah Avenue, SE Technology Park,
East Kilbride, G75 0RD
Ideagen Inc.
Suite 2000, 11710 Plaza America Drive, Reston, Virginia 20190, USA
Ideagen Software Inc.
251 Little Falls Drive, Wilmington, Delaware 19808, USA
Medforce Technologies Inc
Suite 410, 2 Executive Boulevard, Suffern, NY 10901, USA
Covalent Software Inc.
4505 Chimney Creek Drive, Sarasota, FL34235, USA
Ideagen EOOD
InspectionXpert Corp.
Morgan Kai Group Inc.
140 GS Rakovski Street, 1000 Sofia, Bulgaria
56 Hunter Street, Suite 330, Apex, North Carolina 27502-2325, USA
191 N. Wacker Drive, Chicago, Illinois 60606, USA
Scannell Solutions Limited
National Software Centre, Mahon, Cork, Republic of Ireland T12 R29P
69
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
12 | TRADE AND OTHER RECEIVABLES
GROUP
Trade receivables
Prepayments and accrued income
2019
£’000
14,685
2,862
17,547
Trade receivables includes £385,000 (2018: £nil) which falls due for payment after more than one year.
COMPANY
Trade receivables
Prepayments and accrued income
Amounts receivable from subsidiaries
2019
£’000
800
595
11,298
12,693
2018
£’000
10,507
1,975
12,482
2018
£’000
1,023
290
22,769
24,082
The majority of sales invoices are due for payment 30 days after the date of the invoice however, in a small number of cases
the due date for payment is extended by specific agreement with the customer. 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.
An analysis of trade receivables ageing based on due date is set out below.
GROUP
Not yet due
1 – 30 days due
30 – 60 days overdue
>60 days overdue
Allowance for expected credit losses
70
2019
£’000
7,003
3,125
1,647
4,327
16,102
(1,417)
14,685
2018
£’000
4,078
2,756
801
3,703
11,338
(831)
10,507
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
12 | TRADE AND OTHER RECEIVABLES (CONTINUED)
COMPANY
Not yet due
1 – 30 days overdue
30 – 60 days overdue
>60 days overdue
Allowance for expected credit losses
2019
£’000
375
257
61
232
925
(125)
800
2018
£’000
154
460
135
344
1,093
(70)
1,023
The credit loss allowance is measured at an amount equal to lifetime expected credit losses.
The expected rate of credit loss in respect of all debts except those more than 60 days overdue at 30 April 2019 is 0.5% of the
gross balances which amounted to £59,000 in the Group and £3,000 in the Company.
The expected rate of credit loss for all debts more than 60 days overdue at 30 April 2019 in the Group was 31.4% (in the
Company: 52.6%) of the gross balances which amounted to £1,358,000 in the Group (£122,000 in the Company).
Trade receivables are shown net of an allowance for expected credit losses, movements on which are set out below.
GROUP
Balance at the start of the year
On acquisition of businesses
Impairment losses recognised
Amounts utilised
2019
£’000
831
209
553
(176)
2018
£’000
410
22
774
(375)
Balance at the end of the year
1,417
831
71
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
12 | TRADE AND OTHER RECEIVABLES (CONTINUED)
COMPANY
Balance at the start of the year
Impairment losses recognised
Amounts utilised
Balance at the end of the year
13 | TRADE AND OTHER PAYABLES
GROUP
Trade payables
Other taxes and social security
Accruals
COMPANY
Trade payables
Other taxes and social security
Amounts payable to subsidiaries
Accruals
72
2019
£’000
70
121
(66)
125
2019
£’000
2,181
1,636
2,226
6,043
2019
£’000
689
525
9,685
978
2018
£’000
11
201
(142)
70
2018
£’000
916
2,930
1,554
5,400
2018
£’000
134
19
27,092
779
11,877
28,024
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
14 | CONTINGENT CONSIDERATION ON BUSINESS COMBINATIONS
GROUP
Contingent consideration on the acquisition of InspectionXpert Corp
2019
£’000
769
2018
£’000
-
Part of the consideration for the acquisition of InspectionXpert Corp in September 2018 is contingent on the achievement of
certain revenue targets in the year following acquisition. The contingent amount payable under this arrangement was between
$nil and $1,000,000. At the date of acquisition, the directors assessed the fair value of the contingent consideration payable
under this arrangement at $1,000,000, which was equivalent to £769,000. This remains the estimated amount payable.
15 | SHORT-TERM BORROWINGS
In April 2018, the Group increased its 3-year revolving credit facility from £3,000,000 to £8,000,000 and this was subsequently
further increased to £16,000,000 in January 2019. The facility has an interest rate of 3-month LIBOR plus 2% on borrowed
funds and a rate of 0.8% on unutilised funds within the facility. Security for borrowings under the facility is provided by way of
a debenture over the assets of the Group.
GROUP AND COMPANY
Balance at the start of the year
New borrowings
Amounts repaid
2019
£’000
4,750
6,000
(3,250)
7,500
2018
£’000
2,000
4,750
(2,000)
4,750
73
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
16 | DEFERRED CONSIDERATION ON BUSINESS COMBINATIONS
GROUP
Deferred consideration on the acquisition of InspectionXpert Corp.
Deferred consideration on the acquisition of Scannell Solutions Limited
Deferred consideration on the acquisition of IPI Solutions Limited
COMPANY
Deferred consideration on the acquisition of Scannell Solutions Limited
Deferred consideration on the acquisition of IPI Solutions Limited
2019
£’000
769
500
-
1,269
2019
£’000
500
-
500
2018
£’000
-
-
460
460
2018
£’000
-
460
460
No interest is payable on these deferred consideration balances and they are not subject to any performance criteria. The
deferred consideration on the acquisition of InspectionXpert is $1,000,000 and is payable in September 2019 and the deferred
consideration on the acquisition of Scannell Solutions of £500,000, is payable in January 2020. The final £460,000 of deferred
consideration on the acquisition of IPI Solutions was paid in December 2018.
74
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
17 | BUSINESS COMBINATIONS
Acquisition of InspectionXpert Corp.
On 4 September 2018, the Group acquired 100% of the issued ordinary share capital of InspectionXpert Corp., a company
incorporated and domiciled in the United States of America, for total consideration of $7,000,000 (£5,405,000). The acquisition
is expected to enhance the Group’s existing business by consolidating its position in the Quality Inspection market, expanding
the Group’s US presence and bringing strong recurring revenues.
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 assets
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Deferred revenue
Non-current liabilities
Deferred income tax liabilities
Net identifiable assets acquired
The fair value of the consideration at the date of acquisition is as follows:
Cash paid at completion
Deferred consideration
Contingent 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
£’000
3,377
1,497
3
340
275
72
(159)
(1,446)
(1,146)
2,813
2,608
1,156
2
262
212
55
(123)
(1,116)
(884)
2,172
$’000
£’000
5,000
1,000
1,000
7,000
3,861
772
772
5,405
$’000
£’000
7,000
(2,813)
4,187
5,405
(2,172)
3,233
75
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
17 | BUSINESS COMBINATIONS (CONTINUED)
Goodwill arose on the acquisition of InspectionXpert Corp. 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 £268,000 have been expensed within a separate line in the Group Statement of Comprehensive
Income for the year ended 30 April 2019. The Group Statement of Comprehensive Income for the year ended 30 April 2019
includes revenue of £2,731,000 and profit after taxation, excluding amortisation of relevant acquisition intangibles, of £956,000
in respect of the business acquired. Disclosure of information on revenue and profit or loss for the combined entity as though
the acquisition of InspectionXpert Corp. had been completed on 1 May 2018 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 InspectionXpert Corp:
Consideration paid in cash
Less: cash acquired in subsidiary
Net cash outflow on acquisition of subsidiary
£’000
3,861
(55)
3,806
Acquisition of Morgan Kai Group Limited
On 27 September 2018, the Company acquired 100% of all classes of the issued ordinary and preference share capital of
Morgan Kai Group Limited, a company incorporated and domiciled in the United Kingdom, together with its 100% owned
subsidiaries, Morgan Kai Limited, a company incorporated in England, and Morgan Kai Group Inc., a company incorporated
and domiciled in the United States, for total consideration of £22,398,000. The acquisition doubles the size of the Group’s
Audit business thereby strengthening our competitive position, enhances our technology and capabilities and brings strong
recurring revenues.
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 assets
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Corporation tax
Deferred revenue
Non-current liabilities
Deferred income tax liabilities
Net identifiable assets acquired
76
£’000
9,891
3,440
55
30
485
1,918
(797)
(67)
(2,059)
(2,309)
10,587
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
17 | BUSINESS COMBINATIONS (CONTINUED)
The fair value of the consideration at the date of acquisition is as follows:
Cash paid at completion
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
22,398
£’000
22,398
(10,587)
11,811
Goodwill arose on the acquisition of Morgan Kai Group Limited as the consideration paid for the combination effectively
included amounts in relation to the benefit of revenue growth, expected synergies and the assembled workforce. 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 £784,000 have been expensed within a separate line in the Group Statement of Comprehensive
Income for the year ended 30 April 2019. The Group Statement of Comprehensive Income for the year ended 30 April
2019 includes revenue of £2,992,000 and profit after taxation, excluding amortisation of relevant acquisition intangibles, of
£1,129,000 in respect of the business acquired. Disclosure of information on revenue and profit or loss for the combined
entity as though the acquisition of Morgan Kai Group Limited had been completed on 1 May 2018 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 Morgan Kai Group Limited:
Consideration paid in cash
Less: cash acquired in subsidiary
Net cash outflow on acquisition of subsidiary
£’000
22,398
(1,918)
20,480
77
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
17 | BUSINESS COMBINATIONS (CONTINUED)
Acquisition of Scannell Solutions Limited
On 11 January 2019, the Group acquired 100% of all classes of the issued ordinary and preference share capital of Scannell
Solutions Limited, a company incorporated and domiciled in the Republic of Ireland, for total consideration of £3,481,000. The
acquisition is expected to enhance the Group’s product roadmap providing technology and content to accelerate the Group’s
EHSQ strategy.
The fair values of the identifiable assets acquired and liabilities recognised at the date of acquisition are summarised in the
table below.
€’000
£’000
Non-current assets
Customer relationships intangible
Software intangible
Property, plant and equipment
Current assets
Trade and other receivables
Corporation tax
Cash and cash equivalents
Current liabilities
Trade and other payables
Deferred revenue
Non-current liabilities
Deferred income tax liabilities
1,775
722
11
93
37
16
(136)
(392)
(312)
1,621
659
10
85
34
15
(125)
(358)
(285)
Net identifiable assets acquired
1,814
1,656
The fair value of the consideration at the date of acquisition is as follows:
Cash paid at completion
Deferred 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
€’000
3,244
547
3,791
€’000
3,791
(1,814)
£’000
2,981
500
3,481
£’000
3,481
(1,656)
Goodwill arising on acquisition
1,977
1,825
78
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
17 | BUSINESS COMBINATIONS (CONTINUED)
Goodwill arose on the acquisition of Scannell Solutions 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 £206,000 have been expensed within a separate line in the Group Statement of Comprehensive
Income for the year ended 30 April 2019. The Group Statement of Comprehensive Income for the year ended 30 April 2019
includes revenue of £315,000 and profit after taxation, excluding amortisation of relevant acquisition intangibles, of £105,000
in respect of the business acquired. Disclosure of information on revenue and profit or loss for the combined entity as though
the acquisition of Scannell Solutions Limited had been completed on 1 May 2018 is impracticable as the accounting reference
date of this company was previously 31 March and it did not prepare comparable revenue and profit information on a monthly
basis.
Net cash outflow on acquisition Scannell Solutions:
Consideration paid in cash
Less: cash acquired in subsidiary
Net cash outflow on acquisition of subsidiary
£’000
2,981
(15)
2,966
Business combination completed during the year ended 30 April 2018
Acquisition of Medforce Technologies Inc.
On 5 April 2018, the Group acquired 100% of the issued ordinary share capital of Medforce Technologies Inc., a company
incorporated and domiciled in the United States of America, for total consideration of $9,000,000 (£6,438,000). The acquisition
is expected to enhance the Group’s existing business by expanding the Group’s geographic footprint, the addition of a
complementary solution offering, a talented workforce and strong recurring revenues and further consolidates the Group’s
position in the healthcare sector. The acquisition also provides infrastructure and a platform for further growth in the
important US market.
The fair values of the identifiable assets acquired and liabilities recognised at the date of acquisition are summarised in the
table below.
Non-current assets
Customer relationships intangible
Software intangible
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other payables
Deferred revenue
Non-current liabilities
Deferred income tax liabilities
$’000
£’000
4,641
2,470
9
181
298
(156)
(995)
3,320
1,767
6
130
213
(111)
(712)
(1,920)
(1,374)
Net identifiable assets acquired
4,528
3,239
79
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
17 | BUSINESS COMBINATIONS (CONTINUED)
The fair value of the consideration at the date of acquisition is as follows:
Cash paid at completion
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
9,000
£’000
6,438
$’000
9,000
(4,528)
4,472
£’000
6,438
(3,239)
3,199
Goodwill arose on the acquisition of Medforce Technologies Inc. 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 £426,000 have been expensed within a separate line in the Group Statement of Comprehensive
Income for the year ended 30 April 2018. The Group Statement of Comprehensive Income for the year ended 30 April 2018
includes revenue of £266,000 and profit after taxation, excluding amortisation of relevant acquisition intangibles, of £71,000
in respect of the business acquired. Disclosure of information on revenue and profit or loss for the combined entity as though
the acquisition of Medforce Technologies Inc. had been completed on 1 May 2017 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 Medforce Technologies Inc:
Consideration paid in cash
Less: cash acquired in subsidiary
Net cash outflow on acquisition of subsidiary
£’000
6,438
(213)
6,225
80
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
18 | EQUITY SHARE CAPITAL, SHARE PREMIUM AND OTHER RESERVES
GROUP AND COMPANY
Issued and fully paid share capital:
219,784,656 ordinary shares of £0.01 each (2018: 202,657,783 shares)
2,198
2,087
Share premium account
53,948
34,257
2019
£’000
2018
£’000
Number of shares in issue at beginning of the year
Issued on exercise of share options
Issued under the share incentive scheme
Issued on share placing at 142 pence
2019
2018
Number
Number
202,657,783
198,117,442
2,684,333
3,929,666
358,033
610,675
14,084,507
-
Number of shares in issue at end of the year
219,784,656
202,657,783
The total share issue costs during the year ended 30 April 2019 of £625,000 (2018: £nil) have been deducted from the share
premium account.
Ordinary shares issued during the year ended 30 April 2019 on the exercise of share options were as follows:
Date shares issued
Number of shares
issued
Issue price (pence)
Share premium account
(£)
8 May 2018
15 May 2018
11 June 2018
18 June 2018
3 September 2018
21 September 2018
3 October 2018
4 October 2018
29 January 2019
22 February 2019
22 February 2019
22 February 2019
39,000
51,667
10,000
65,000
107,000
65,000
25,000
1,800,000
166,666
325,000
20,000
10,000
37.63
35.00
37.63
37.63
35.00
45.50
35.00
1.00
50.00
45.50
37.63
35.00
14,286
17,567
3,663
23,810
36,380
28,925
8,500
-
81,666
144,625
7,326
3,400
81
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
18| EQUITY SHARE CAPITAL, SHARE PREMIUM AND OTHER RESERVES
(CONTINUED)
Ordinary shares issued during the year ended 30 April 2018 on the exercise of share options were as follows:
Date shares issued
Number of shares
issued
Issue price (pence)
Share premium account
(£)
18 May 2017
27 September 2017
16 October 2017
23 October 2017
24 October 2017
6 November 2017
4 December 2017
4 December 2017
6 March 2018
10 April 2018
10 April 2018
10 April 2018
83,333
150,000
103,333
25,000
1,000,000
18,000
25,000
110,000
15,000
1,800,000
500,000
100,000
35.00
50.00
35.00
37.63
32.12
35.00
35.00
32.12
37.63
1.00
50.00
37.63
28,333
73,500
35,133
9,158
311,200
6,120
8,500
34,323
5,495
-
245,000
36,630
Details of outstanding options over the shares of the Company are provided in note 20.
MERGER RESERVE
Group
Company
2019
£’000
1,658
1,709
2018
£’000
1,658
1,709
The merger reserve is in respect of the premium arising on shares issued as part of the consideration provided on business
combinations.
Retained earnings
Retained earnings of both the Group and the Company include an amount of £1,336,000 (2018: £1,336,000) which does not
represent a realised profit and is not distributable.
82
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
19 | DIVIDENDS
A final dividend in respect of the year ended 30 April 2018 of 0.163 pence per ordinary share (in respect of the year ended
30 April 2017: 0.142 pence) was paid to shareholders on 21 November 2018. The total cost of this dividend was £357,000 (in
respect of the year ended 30 April 2017: £284,000).
An interim dividend in respect of the year ended 30 April 2019 of 0.09 pence per ordinary share (2018: 0.078 pence) was paid
to shareholders on 20 March 2019. The total cost of this dividend was £198,000 (2018: £156,000).
The directors have proposed the payment of a final dividend of 0.188 pence per ordinary share (2018: 0.163 pence) on 26
November 2019 subject to approval by shareholders at the forthcoming Annual General Meeting.
20 | SHARE-BASED PAYMENTS, SHARE OPTIONS AND SHARE INCENTIVE
SCHEME
At 30 April 2019 share options granted to directors and employees remain unexercised under four different arrangements.
In addition, the Company has issued shares under a Share Incentive Scheme into a separate trust, which is managed by an
external trustee, for the benefit of employees.
The share option arrangements are an Enterprise Management Incentive Scheme, the 2016 Share Option Scheme, the 2017
Long Term Incentive Plan, the 2018 Long Term Incentive Plan and the 2018 Long Term Incentive Plan Extension. All options
granted under the 2017 Long Term Incentive Plan had been exercised at 30 April 2019.
Ideagen Enterprise Management Incentive Scheme
The Company has an Enterprise Management Incentive Scheme which permitted the grant to directors and staff of share
options in respect of ordinary shares in the Company. Since September 2015, no further options can be granted under this
scheme. 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 Group.
The following is a summary of the movements in outstanding share options under the Ideagen Enterprise Management
Incentive Scheme.
Year ended 30 April 2019
Outstanding at 1 May 2018
Exercised during the year
Outstanding at 30 April 2019
Exercisable as at 30 April 2019
Number of options
Weighted average
exercise price (pence)
7,296,000
(717,667)
6,578,333
6,578,333
22.6
41.2
20.6
20.6
83
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
20 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
Of the options outstanding at 30 April 2019, 2,133,333 (2018: 2,133,333) options have an exercise price of 9 pence, 3,295,000
(2018: 3,295,000) options have an exercise price of 22.38 pence, 635,000 (2018: 828,667) options have an exercise price of 35
pence, 380,000 (2018: 514,000) options have an exercise price of 37.63 pence and 135,000 (2018: 525,000) options have an
exercise price of 45.5 pence.
The weighted average remaining contractual life of the options outstanding at 30 April 2019 was 3.8 years (2018: 5.0 years).
The fair values of the options exercised during the year at the date they were granted 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)
39,000
41,667
10,000
75,000
107,000
65,000
25,000
325,000
20,000
10,000
717,667
37.63
35.00
35.00
37.63
35.00
45.50
35.00
45.50
37.63
35.00
115.00
122.13
120.00
130.00
154.00
172.00
161.50
127.00
127.00
127.00
13.69
10.16
10.16
13.69
10.16
13.20
10.16
13.20
13.69
10.16
Number of options
Weighted average
exercise price (pence)
8,817,333
(1,479,666)
(41,667)
7,296,000
6,746,000
24.5
33.1
35.0
22.6
21.4
Year ended 30 April 2018
Outstanding at 1 May 2017
Exercised during the year
Lapsed during the year
Outstanding at 30 April 2018
Exercisable as at 30 April 2018
84
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
20| SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
Of the options outstanding at 30 April 2018, 2,133,333 (2017: 2,133,333) options have an exercise price of 9 pence, 3,295,000
(2017: 3,295,000) options have an exercise price of 22.38 pence, nil (2017: 1,110,000) options have an exercise price of 32.12
pence, 828,667 (2017: 1,100,000) options have an exercise price of 35 pence, 514,000 (2017: 654,000) options have an exercise
price of 37.63 pence and 525,000 (2017: 525,000) options have an exercise price of 45.5 pence.
The fair values of the options exercised during the year at the date they were granted 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)
83,333
40,000
63,333
25,000
1,000,000
18,000
25,000
110,000
15,000
100,000
1,479,666
35.00
35.00
35.00
37.63
32.12
35.00
35.00
32.12
37.63
37.63
95.00
84.00
82.00
80.00
80.00
85.00
98.19
98.19
107.00
109.00
10.16
10.16
10.16
13.69
12.12
10.16
10.16
12.12
13.69
13.69
Ideagen 2016 Share Option Scheme
This scheme was introduced in the year ended 30 April 2017 to replace the Enterprise Management Incentive Scheme as no
further option awards can be made under that scheme.
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 normally capable of being exercised in stages unless otherwise agreed by the Board. 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
Group if they have not been exercised.
85
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
20 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
The following is a summary of the movements in outstanding share options under the Ideagen 2016 Share Option Scheme.
Outstanding at 1 May 2017
Granted during the year
Exercised during the year
Outstanding at 30 April 2018
Granted during the year
Exercised during the year
Outstanding at 30 April 2019
Exercisable as at 30 April 2019
Exercisable as at 30 April 2018
Number of options
Weighted average
exercise price (pence)
950,000
300,000
(650,000)
600,000
550,000
(166,666)
983,334
133,332
100,000
50.0
50.0
50.0
50.0
112.0
50.0
84.7
50.0
50.0
During the year ended 30 April 2019, 166,666 options were exercised when the Ideagen plc share price was 140 pence. During
the year ended 30 April 2018, 150,000 options were exercised when the Ideagen plc share price was 82 pence and a further
500,000 options were exercised when the Ideagen plc share price was 109 pence.
During the year, 550,000 (2018: 300,000) options were granted under this scheme with an exercise price of 112 pence (2018:
50 pence) each. The fair values of the options granted were estimated at the date of grant using a Black-Scholes option pricing
model. The key inputs to the option pricing model are summarised below.
Year ended
30 April 2019
30 April 2018
30 April 2017
Number of options granted
in the year
550,000
Date of grant
3 May 2018
Share price at grant date
112 pence
Exercise price
112 pence
Expected volatility
Expected dividend yield
Expected option life
Risk-free interest rate
33%
0.20%
5 years
1.11%
300,000
2 May 2017
88.5 pence
50 pence
33%
0.21%
5 years
0.51%
950,000
1 September 2016
54.5 pence
50 pence
33%
0.34%
5 years
0.23%
Fair value of option
33.73 pence
44.46 pence
16.98 pence
86
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
20 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
Future share price volatility was estimated by using historic share price volatility over the most recent period commensurate
with the expected life of the option.
The average remaining contractual life of the options outstanding at 30 April 2019 was 8.5 years (2018: 8.6 years).
Ideagen 2017 Long Term Incentive Plan
On 23 March 2017, the Company introduced the 2017 Long Term Incentive Plan and 3,600,000 share options were granted
under the plan at an exercise price of 1 penny to certain directors.
1,800,000 of these options were eligible to vest on the Company’s share price reaching 98 pence over 30 consecutive business
days with the remainder becoming eligible to vest on the Company’s share price reaching 136 pence over 30 consecutive
business days.
Any shares issued in respect of the exercise of any of these options cannot be sold until the fourth anniversary of the grant
date, except to cover the taxation charges arising on exercise, and are subject to continued service throughout. All options will
lapse if the eligibility criteria are not satisfied or the options are not exercised within 5 years of the date of grant of the options.
In the event of a takeover of the Company, different rules would apply and all of these options may become exercisable at
that point.
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.
Number of options granted on 23 March 2017
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
98 pence share price
exercise condition
136 pence share price
exercise condition
1,800,000
78 pence
1 penny
98 pence
33%
0.27%
3 years
0.6%
1,800,000
78 pence
1 penny
136 pence
33%
0.27%
3 years
0.6%
59.3 pence
33.58 pence
Future share price volatility was estimated by using historic share price volatility over the most recent period commensurate
with the expected life of the option.
During the year ended 30 April 2018, the 98 pence share price condition in respect of 1,800,000 of these options was met.
Accordingly, these 1,800,000 options were exercised in the year when the Ideagen plc share price was 109 pence.
During the year ended 30 April 2019, the 136 pence share price condition in respect of the remaining 1,800,000 of these
options was met. Accordingly, these 1,800,000 options were exercised in the year when the Ideagen plc share price was 152
pence. At 30 April 2019, all of the 2017 Long Term Incentive Plan options had been exercised.
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Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
20 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
Ideagen 2018 Long Term Incentive Plan
On 22 October 2018, the Company introduced the 2018 Long Term Incentive Plan and 1,200,000 share options were granted
under the plan at an exercise price of 1 penny to Ben Dorks, Chief Executive Officer.
600,000 of these options were eligible to vest on the Company’s share price reaching 196 pence over 30 consecutive business
days with the remainder becoming eligible to vest on the Company’s share price reaching 259 pence over 30 consecutive
business days.
Any shares issued in respect of the exercise of any of these options cannot be sold until the fourth anniversary of the grant
date, except to cover the taxation charges arising on exercise, and are subject to continued service throughout. All options will
lapse if the eligibility criteria are not satisfied or the options are not exercised within 5 years of the date of grant of the options.
In the event of a takeover of the Company, different rules would apply and all of these options may become exercisable at
that point.
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 in the following table.
Number of options granted on 22 October 2018
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
196 pence share price
exercise condition
259 pence share price
exercise condition
600,000
156.5 pence
1 penny
196 pence
32%
0.15%
3 years
0.66%
600,000
156.5 pence
1 penny
259 pence
32%
0.15%
3 years
0.66%
118.6 pence
72.4 pence
Future share price volatility was estimated by using historic share price volatility over the most recent period commensurate
with the expected life of the option.
At 30 April 2019, none of the options under the 2018 Long Term Incentive Plan had been exercised and none were exercisable.
Ideagen 2018 Long Term Incentive Plan Extension
On 28 March 2019, the Company introduced the 2018 Long Term Incentive Plan Extension and 2,500,000 share options were
granted under the plan at an exercise price of 1 penny to certain directors and senior managers.
1,250,000 of these options were eligible to vest on the Company’s share price reaching 196 pence over 30 consecutive business
days with the remainder becoming eligible to vest on the Company’s share price reaching 259 pence over 30 consecutive
business days.
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Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
20 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
Any shares issued in respect of the exercise of any of these options cannot be sold until the fourth anniversary of the grant
date, except to cover the taxation charges arising on exercise, and are subject to continued service throughout. All options will
lapse if the eligibility criteria are not satisfied or the options are not exercised within 5 years of the date of grant of the options.
In the event of a takeover of the Company, different rules would apply and all of these options may become exercisable at
that point.
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.
Number of options granted on 28 March 2019
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
196 pence share price
exercise condition
259 pence share price
exercise condition
1,250,000
146.5 pence
1 penny
196 pence
32%
0.17%
3 years
0.66%
1,250,000
146.5 pence
1 penny
259 pence
32%
0.17%
3 years
0.66%
100.6 pence
58.9 pence
Future share price volatility was estimated by using historic share price volatility over the most recent period commensurate
with the expected life of the option.
At 30 April 2019, none of the options under the 2018 Long Term Incentive Plan Extension had been exercised and none were
exercisable.
Share Incentive Scheme
During the year ended 30 April 2018, the company set up a Share Incentive Scheme. All employees are eligible to join the
Company’s Share Incentive Scheme once they have been employed by the Group for six months. Subject to the Group
achieving certain profit targets, “Free Shares” are awarded to all eligible employees. During the years ended 30 April 2019 and
30 April 2018, up to £2,000 worth of Free Shares were awarded to eligible employees when the Ideagen share price was 166.5
pence (2018: 91 pence). There are no vesting conditions attached to the Free Shares other than being continuously employed
by the Group for 3 years from the date of award. If an employee leaves the Group within the 3-year period, in certain cases
the shares will vest and in other cases they will be forfeited. In addition, employees are able to purchase “Partnership Shares”
at prevailing market rates out of their pre-tax income, subject to an annual HMRC limit of £1,800. No share-based payment
charge arises in respect of the Partnership Shares. All Free Shares and Partnership Shares are held in a trust which is managed
by an external trustee. On leaving employment with the Group the employee must take all of their shares out of the trust.
89
Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
20 | SHARE-BASED PAYMENTS AND SHARE OPTIONS (CONTINUED)
Details of the movements of Free Shares in the Share Incentive Scheme were as follows:
Outstanding at 1 May 2018
Granted during the year
Vested during the year
Forfeited during the year
Outstanding at 30 April 2019
Exercisable as at 30 April 2019
Number of Free Shares
500,020
335,162
(67,627)
(53,622)
713,933
-
Effect of share options and the Share Incentive Scheme on the Group Statement of Comprehensive Income and Equity
reserves
The total share-based payment charge in the Group Statement of Comprehensive Income was as follows:
Enterprise Management Incentive Share Option Scheme
2016 Share Option Scheme
2017 Long Term Incentive Plan Share Option Scheme
2018 Long Term Incentive Plan Share Option Scheme
2018 Long Term Incentive Plan Extension Share Option Scheme
Share Incentive Scheme
National insurance costs on exercise of share options
2019
£’000
3
159
381
199
60
802
279
410
2018
£’000
40
158
1,231
-
-
1,429
116
335
1,491
1,880
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 2019 amounted to £1,440,000 (2018: £1,148,000).
The total fair value at the date the share options were granted of the options exercised during the year ended 30 April 2019
was £722,000 (2018: £1,337,000). This was transferred from the share-based payment reserve to retained earnings during
the year. In addition, a further £64,000 (2018: £15,000) was transferred from the share-based payment reserve to retained
earnings in respect of shares which had vested under the rules of the Share Incentive Scheme.
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Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
21 | 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 14 and 16 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. At 30 April 2019, the Group also had a revolving credit facility of up to £16 million and had short-term borrowings
of £7.5 million as set out in note 15.
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.
22 | OPERATING LEASE COMMITMENTS
As at 30 April 2019 the Group had the following aggregate commitments under non-cancellable operating leases in respect
of land & buildings:
Within one year
Between two and five years
After more than five years
23 | PENSION SCHEMES
2019
£’000
729
1,619
165
2,513
2018
£’000
615
1,008
-
1,623
The Group operated a defined contribution pension scheme for employees during the year. The pension cost charge
represents contributions payable by the Group into the scheme and amounted to £627,000 (2018: £522,000). At 30 April 2019,
trade and other payables included £87,000 (2018: £77,000) payable to the Group pension scheme.
91
Ideagen | ANNUAL REPORT 2019 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
24 | NET CASH / (DEBT) RECONCILIATION
The movements in net cash / (debt) during the year were as follows:
GROUP
At 1 May 2018
Cash flow
Non-cash movement
At 30 April 2019
COMPANY
At 1 May 2018
Cash flow
At 30 April 2019
Cash & Cash
equivalents
Borrowings
Net cash/
(debt)
£’000
£’000
£’000
5,532
638
(4,750)
782
(2,750)
(2,112)
29
-
29
6,199
(7,500)
(1,301)
Cash & Cash
equivalents
Borrowings
Net cash/
(debt)
£’000
£’000
£’000
2,301
(863)
1,438
(4,750)
(2,750)
(7,500)
(2,449)
(3,613)
(6,062)
25 | 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 12 and 13. During the year, the Company recharged £1,529,000 (2018: £1,039,000) of costs to its wholly owned
subsidiaries and suffered recharges of £2,251,000 (2018: £1,490,000) from its wholly owned subsidiaries. Details of transactions
between the Company and other related parties are disclosed below.
At 30 April 2019, trade and other payables in the Company included £6,457 (2018: £5,089) payable to Ultris Limited, a company
in which Mr Alan Carroll is a director and major shareholder. This amount is in respect of fees and expenses payable to Mr
Alan Carroll as a director of the Company. Amounts charged by Tony Rodriguez for his services as a director of the company
are payable to X88 Limited, a company in which Mr Rodriguez is a director and major shareholder. At 30 April 2019 trade and
other payables included £2,777 (2018: £nil) payable to X88 Limited for these services. The amounts payable to Ultris Limited
and X88 Limited for the services of Mr Carroll and Mr Rodriguez respectively as directors of the Company are as per the
remuneration of directors disclosed in note 6.
Total dividends paid to the directors of the Company during the year were as follows: David Hornsby £21,885 (2018: £19,027),
Ben Dorks £5,061 (2018: £3,298), Graeme Spenceley £2,095 (2018: £1,379), Barnaby Kent £5,764 (2018: £3,909), Alan Carroll
£516 (2018: £449), Jonathan Wearing £10,598 (2018: £9,546) and Tony Rodriguez £nil (2018: £nil).
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Ideagen | ANNUAL REPORT 2019
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 APRIL 2019
25 | RELATED PARTY TRANSACTIONS (CONTINUED)
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 and related employer national insurance
Share based payments
2019
£’000
1,255
991
2,246
2018
£’000
1,066
1,499
2,565
26 | EVENTS AFTER THE END OF THE REPORTING PERIOD
Acquisition of businesses
On 7 June 2019, the Group completed the acquisition of Redland Business Solutions Limited, a company incorporated and
domiciled in England. The initial net cash consideration for the purchase was £15.8 million with a further £0.5 million payable
12 months after completion contingent upon the achievement of certain revenue objectives.
The acquisition will strengthen the Group’s position in the financial services market and the combination of Redland’s Insight
platform with Ideagen’s existing product set will provide a compelling proposition covering internal audit, risk management,
certification and SMCR compliance
A full assessment of the fair values of assets and liabilities acquired has not yet been completed.
The acquisition was funded from the Group’s cash resources and from the extension of the Group’s existing Revolving Credit
Facility with NatWest to £28 million.
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Ideagen | ANNUAL REPORT 2019 Ideagen plc
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