Software built on insight so you can do more Idox plc 2021 Annual Report & Accounts I d o x p l c 2 0 2 1 A n n u a l R e p o r t & A c c o u n t s Idox plc Annual Report and Accounts for the year ended 31 October 2021 Our Purpose We build software for government and industry to work better and comply with regulations. Contents Overview 02 Financial and operational highlights 04 Our company at a glance Strategic report 10 Chairman’s statement Investment case 14 Business model 16 KPIs 18 21 Chief Executive’s review 26 S172 and stakeholder engagement 30 Responsible business 38 Financial review 43 Principal risks and uncertainties Governance 50 Board of Directors 52 Directors’ report 56 Corporate governance report 61 Directors’ responsibilities statement 62 Report of the Audit Committee Financial statements 68 76 Independent Auditor’s report to the members of Idox plc Consolidated statement of comprehensive income 77 Consolidated balance sheet 78 Consolidated statement of changes in equity 80 Consolidated cash flow statement 81 Notes to the accounts 127 Company balance sheet 128 Company statement of changes in equity Notes to the company financial statements 129 Other Information 137 Alternative performance measures 139 Company information For further investor information: www.idoxgroup.com/investors/ We are pleased to report another year of strong financial performance, and strategic and operational progress. After exiting our non-core Content businesses in March 2021, we acquired three excellent Public Sector software businesses, improved our balance sheet strength, and extended our financing facilities for a further 18 months, to June 2024, on improved terms. We have invested in our people, improved our engagement with customers and focused our product efforts in response to the increasing pace of the move to digitisation and cloud. We continue to improve our supporting infrastructure and processes to ensure efficient and effective execution, and to support our ambitions to continue to grow both organically and inorganically. The outlook for the business remains strong and we are well positioned in our ‘fly’ stage of growth to continue to create good value for our people, customers and shareholders.” David Meaden Chief Executive Officer Our purpose in action Doing more for Public Sector Doing more for Engineering & Construction See more on page 16 Further Information: idoxgroup.com/industries/ government/ See more on page 17 Further information: idoxgroup.com/industries/ engineering-construction/ Key reads At a glance Chairman’s Statement Investment case See more on our company at a glance here Pages 04 to 07 See more on our Chairman’s statement here Pages 10 to 12 See more on our Investment case here Pages 14 to 15 Overview | Our Purpose 01 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Financial and operational highlights Revenue £62.2m (2020: £57.3m) Recurring revenue2 £36.3m (2020: £35.7m) 21 20 £62.2m £57.3m 21 20 £36.3m £35.7m Adjusted EBITDA3 £19.5m (2020: £17.2m) 21 20 £19.5m £17.2m Adjusted EBITDA margin3 (2020: 30%)31% 21 20 31% 30% Operating profit £7.6m(2020: £4.0m) 21 £7.6m 20 £4.0m Dividends 0.4p(2020: 0.3p) 21 20 0.4p 0.3p 02 Idox plc (AIM: IDOX), a leading supplier of specialist information management software and solutions to the public and asset intensive sectors, is pleased to report its financial results for the year ended 31 October 2021. Financial highlights Reconciliations between adjusted and statutory earnings are contained on pages 137 to 138. Continuing operations (excluding Content businesses1): Revenue • Revenue increased by 9% to £62.2m (2020: £57.3m), including excluding disposed Idox 5% organic increase. • Recurring revenue2 increased by 2% to £36.3m (2020: £35.7m). Profit • Adjusted3 EBITDA increased by 13% to £19.5m (2020: £17.2m). • Adjusted3 EBITDA margin improved to 31% (2020: 30%). • Operating profit increased by 90% to £7.6m (2020: £4.0m). Operating profit margin improved to 12% (2020: 7%). • Adjusted4 diluted EPS increased by 54% to 2.27p (2020: 1.47p). • Diluted EPS increased to 1.34p (2020: 0.11p). Cash and debt • Free cashflow5 of £7.1m (2020: £11.2m) following planned repayment of 2020 VAT deferrals. • Disposal of Content businesses generated net proceeds of £10.7m; 3 acquisitions completed in the year with initial net consideration of £10.5m. • Net debt6 at 31 October 2021 reduced by 50% to £8.1m (2020: £16.1m). Dividend • Final dividend of 0.4p per share (2020: 0.3p) declared, reflecting the strong cash generation and healthy financial position of the Group. Operational highlights Idox has maintained good progress against the Group’s strategic goals whilst delivering successful operational execution: • Material advancement in our M&A strategy to focus capital on core software businesses with high margin operations and good growth potential: – Disposal of Content businesses, in line with our continued simplification and focus on software operations. – Acquisition of Aligned Assets, thinkWhere and exeGesIS, which enhance our Public Sector offering and provide greater focus and depth of expertise in the GIS (geospatial information services) market. – Further development of our M&A ambitions in both sourcing and managing pipeline opportunities. • Improvements to our product and go-to-market efforts; now fully managed and reported in our new Group-wide CRM platform. • Consolidated all offshore activity to a single Idox centre in Pune, India. • Clear focus on innovation and consolidation of our product portfolio, including continuing our journey to cloud across our portfolio. • Further investment in our people promoting higher levels of engagement, and leadership. • Increasing our commitments to Environmental, Social and Governance initiatives; conducting business responsibly is core to our business model and long-term strategic goals. Current trading and outlook • FY22 has started well, in line with expectations. • Combination of recurring revenue and orderbook, driven by H2 sales orders, and resilient public sector markets, provides good viability for FY22 revenue. • The sales pipeline for FY22 remains encouraging. • FY21 acquisitions integrating well and to plan, and good line of sight over an attractive M&A pipeline. Alternative Performance Measures These items are excluded from statutory measures of profit to present a measure of cash earnings from underlying activities on an ongoing basis. This is in line with management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers. There have been no adjustments to any of our reporting metrics for any impact of the Covid-19 pandemic. 1 2 3 4 5 6 The comparatives have been restated due to the Content business being reclassified as discontinued operations. There has been no change to the overall results. Recurring revenue is defined as revenues recognised from support and maintenance fees, managed service fees (including for hosting) and Software-as-a-Service subscription fees (the Group’s recurring revenue is disclosed on page 92). Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs. Share option costs are excluded from Adjusted EBITDA as this is a standard measure in the industry and how management and our shareholders track performance (see page 137 for reconciliation). Adjusted EPS excludes amortisation on acquired intangibles, restructuring, financing, impairment, share option and acquisition costs (see page 137 for reconciliation). Free cashflow is defined as net cashflow excluding: acquisitions / disposals, debt repayments & drawdowns, and shareholder placing & dividends (see page 137 for reconciliation). Net debt is defined as the aggregation of cash, bank borrowings and long-term bond (see page 137 for reconciliation). Overview | Financial and operational highlights 03 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Our company at a glance Our focus is on driving digital transformation which is underpinned by continuing investment to drive growth Our business process engines drive the performance of public sector and industry. Through our deep understanding of operations and regulatory requirements in our chosen markets, our software joins teams together, automates tasks and enables better ways of working. The value we create for our customers supports improved efficiency, reduced operational costs, greater accuracy, and faster delivery. Here are some key examples: UK Local Authorities UK Healthcare Engineering & Construction Property markets Idox enables Patient records and equipment assets are tracked and managed, enabling greater efficiency to be achieved within the healthcare system. STI clinics to make access to healthcare easier and more efficient. Idox enables More efficient management of large-scale engineering projects internationally. Idox links teams of specialised people together across projects for excellent data management on project from start to finish. Idox enables Our CAFM software (Computer Aided Facilities Management) enables Property directors to manage complex property portfolios with greater efficiency, ensuring compliance and with greater focus on doing so more sustainability. Idox enables Automated task management for Public Protection, the Built Environment and Citizens Services across the UK. Through digital interfaces, often in the cloud, new, better ways of working are achieved at speed. Automated systems that join citizens and government teams together to deliver the care needs of children and families. Our markets are constantly evolving. We see opportunities for digital transformation across our customer base. To meet future needs we have extensive product roadmaps and investments plans. These plans are all linked to the development of all our people around the world and the acquisition of novel technologies that compliment and extend our portfolio of capabilities. 04 DRIVE, the core values taking us forward DRIVE are the five core values underpinning the decisions we make both as a business and as employees of Idox. Dynamic We actively shape our future Integrity We do the right thing, in the right way Responsibility We own our commitments Valued Our people and their contributions are significant Excellence We are passionate about quality Our core values were created and defined by our people in 2019, through a range of workshops outlining what it means to be part of Idox. Overview | Our company at a glance 05 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Our company at a glance continued Empowering our people Throughout 2021, and with the continued impact COVID-19 played on our business, our people remained a key focus for Idox. Having seen a positive impact our people can have through employee led initiatives, we continued to support and encourage our people to take part and contribute to employee led initiatives. Idox Voice Idox Voice brought the Group together in summer of 2021 with the Walkies with Idox challenge. Over 25 teams clocked up 23,200 miles to walk the CEO’s dog virtually across the globe, visiting all of Idox offices. Employees liked and reacted 2,183 times to 185 different posts and pictures. Workplace Wellbeing Since January 2021, the Q&A sessions have been attended live by, on average, around 107 employees per month with others being able to watch again on the recordings. Over 129 questions and comments have been put to the team in the same period. Trained mental health first aiders are on hand to help and give advice on a variety of topics including mindfulness, physical therapy and bereavement. The team continued to unite the employee group with the Christmas Card competition to end the year. Looking to the future As we look ahead to the future, culture and purpose remain a key priority for Idox. In 2022, we will undertake a programme of workshops to bring our people together to define our purpose and vision so that we can better communicate our people vision to all our stakeholders. As we see the success of Idox Elevate in improving gender balance within Idox, we are committed to improving our diversity and inclusivity approach across the business. The new year will give us more opportunities to progress our work in this area and maintain our stance as a responsible employer. 11.39%Rate of employee attrition 5.3Average employee years tenure Female Male 50% 50% Recruitment at management positions 14 Net promotor score 06 We are excited and confident in the outlook for the business.” David Meaden Chief Executive Officer Office Locations: United Kingdom: Glasgow Manchester Theale Burton-on-Trent Hillsborough Derry/Londonderry Woking Brecon France: Rennes India: Pune 10 Offices worldwide 563Employees Overview | Our company at a glance 07 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Strategic report 10 14 16 18 21 26 Chairman’s statement Investment case Business model KPIs Chief Executive’s review S172 and stakeholder engagement Simplifying administration and enabling efficient delivery of citizens services Doing more for Public Sector Large-scale digital transformation that delivers real results Built Environment Public Protection Social Care & SEND Funding & Information Services On-premise and cloud software solutions for the management of planning, building control, land charges and gazetteer management, estates and street numbering. Specialist software to support inspection and enforcement of standards, including environmental health, licensing, trading standards and public sector housing. Provision of online information, advice and guidance, information portals and self-service tools to support delivery of adult social care, children’s services, and special educational needs and disabilities (SEND) services. Delivery of online funding information and advice services, powered by a unique database of funding programmes, grants and loans available from local, regional and national government, charitable trusts and corporate sponsors. 08 30 Responsible business Financial review 38 43 Principal risks and uncertainties Entering the 21st century with Idox Cloud Public Protection solution “The adoption of Idox cloud technology has allowed us to realise the benefits of agile working, building both flexibility and sustainability into the core of our services. It is a real step forward in our digital transformation and it demonstrates what a council can do.” Ian Andrews Head of Trading Standards Royal Borough of Greenwich See how we help Public Sector do more www.idox.com/property Computer Aided Facilities Management Transport Network Management Electoral Services Comprehensive facilities management software featuring an asset register, maintenance management, room and resource booking, property management, stock control and mobile workforce management modules. Command and control traffic management systems, real-time passenger information systems and fleet management systems. Electoral registration and management systems including postal vote checking, tablet canvassing, election count reporting and boundary management. Strategic report 09 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Chairman’s statement A focus on delivering clear, tangible benefits to our customers in line with their changing needs 10 Introduction I am pleased to be able to report an excellent set of results to all of our shareholders and other stakeholders for this financial year. Since the appointment of David Meaden as CEO the business has been thoroughly transformed and we are now seeing the continuing and sustained benefits of this transformation in the results that Idox is delivering. It is rewarding to be able to report on another year of growth in revenues, profits and most importantly, cash, and a return to paying a dividend. In business, no success story can be taken for granted, but this transformation is notable and sets the business up well for future success. We operate in very good markets, with excellent market positions and insights.” Chris Stone Chairman The past three years have seen a lot of change to our Board of Directors and senior management team but fortunately we had managed to make most of these changes before having to deal with the impact of the Covid-19 pandemic. Consequently, the business has been managed consistently and steadily through a difficult phase, and the stability that comes from a settled management team has allowed us to make a couple of quite important strategic changes in our portfolio. During the year we disposed of two non-core businesses: our compliance business, based in Germany and Belgium; and our grants consultancy business, based in the Netherlands. Both are good businesses in their own right but did not enjoy a particularly strong strategic fit with our core software businesses. I would like to thank the management and the staff of both businesses for their very professional behaviour during the disposal processes and we wish them and their new shareholders the very best of luck in taking the businesses forward. The cash generated from these disposals, together with the cash that we are now generating from our own operations, has given us the firepower to make a number of acquisitions that demonstrate a stronger strategic fit with our core business. During the year we made 3 acquisitions; Aligned Assets Limited, thinkWhere Limited and exeGesIS Spatial Data Management Ltd. All of these businesses bring exciting new capabilities that fit very well with our core business, and we are pleased to welcome our new colleagues and look forward to working with them to deliver value to both existing and new customers from the combination of products and services that we can now offer. The investments that we have made over the past few years in improving our core back-office systems and processes have allowed us to set a target of generating over 30% margin from our mature operations. I am pleased to say that we have achieved that target in several areas of our business, with potentially a bit more improvement to come as we further refine our processes. In early 2021, we received an unsolicited approach for the Group. Our strategy was to reject offers until the proposed offer price was at a point where the Board felt that, if this were to be confirmed, it was at a level that shareholders would want to consider. Ultimately, the proposed offer did not materialise, and I am pleased to note that the inevitable workload associated with such an approach did not distract our colleagues from the focus required to deliver the excellent results described above. As we move into the new financial year, we can expect to see continued growth in our core businesses enhanced by the acquisitions we have already made. We will also continue to target further acquisitions to allow us to continue to leverage the platform that we have created through our operational investments. The Covid-19 pandemic has affected everyone and Idox is no exception. As I mentioned in my last report, we have been fortunate that demand for our products and services did not drop during the Covid-19 pandemic, and the excellent attitudes displayed by our colleagues in figuring out practical and effective ways of working with the many new restrictions meant that Idox did not suffer financially through this period. However, we have all adopted new ways of working, new attitudes towards essential and non-essential travel, and blended home and office work. Employers need to work hard and creatively to enable appropriate new ways of working that meet all these new requirements without allowing a drop in the most important thing, excellent customer service. I have been very impressed by the continuing positive attitudes and behaviours of all our colleagues. Strategic report | Chairman’s statement 11 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Chairman’s statement continued Group strategy The Group continued its focus on providing digital solutions and services to the public sector in the United Kingdom, complemented by our Engineering Information Management (EIM) business servicing customers across the world. The key to our success is to ensure we deliver better user results and productivity improvements for customers through focusing on usability, functionality and application of integrated digital and increasingly cloud-based technologies and solutions. As mentioned above, we were able to accelerate the development of this strategy through the disposal of businesses that did not fit this model, and the integration of further acquisitions where we identify businesses that can accelerate our progress. We expect to continue to make such accretive acquisitions in the coming year. Board There have been no changes to the Board in FY21 following a number of changes in the prior year. We carried out a formal Board Effectiveness review during the year, and there were some good points raised which we will be incorporating in the coming year. The Board of Directors has one female Director. I am satisfied that there is sufficient diversity in the Board structure to bring a balance of skills, experience, independence, and knowledge to the Group however I intend to keep this balance under review and continued assessment. Corporate governance We are cognisant of the important responsibilities we have in respect of Corporate Governance and shaping our culture to be consistent with our objectives, strategy, and business model which we set out in our Strategic Report and our description of Principal Risks and Uncertainties. The Group is committed to conducting its business fairly, impartially, in an ethical and proper manner, and in full compliance with all laws and regulations. In conducting our business, integrity is the foundation of all Company relationships, including those with customers, suppliers, communities, and employees. Corporate simplification As highlighted above, during the financial year we disposed of our non-core Content businesses and reinvested in the acquisition of three new companies, Aligned Assets, thinkWhere and exeGesIS, which will enhance our core public sector software offering. The trade and assets of Idox Health Limited was hived into Idox Software Limited in line with our corporate simplification strategy. We also completed the consolidation of our Maltese entities during the year, hiving five entities in to one. Dividends The Board has proposed a final dividend of 0.4p to be paid (2020: 0.3p) for FY21, bringing the total for the year to 0.4p (2020: 0.3p). Subject to approval at the AGM, the final dividend will be paid on 8 April 2022 to shareholders on the register at 25 March 2022. This decision was reached after a full consideration of the pace of recovery in our business, our strong financial position and our confidence in the future. Summary and outlook The financial results of the last year reflect the quality of the Idox business. We operate in good markets, with strong market positions and insights, and we have every confidence that we can continue the excellent progress we have seen in FY21. The changes that we have made in the last couple of years, to the team, our structure, systems, and processes have delivered a step-change improvement in our financial performance. I am pleased to have had the opportunity to work with all my Idox colleagues during a period of such tremendous improvement and I look forward to continuing that work in delivering growing value to all our stakeholders. Idox shareholders are fortunate that such a talented group of people, comprising our entire workforce, have chosen Idox as a place they want to work. Their expertise and diligence have continued to deliver the support and value that our customers expect, and I am pleased to extend my thanks to all of them. Chris Stone Chairman 26 January 2022 12 Bracknell Forest Council selects Idox to supercharge digitisation of its electoral services “All the processes within local electoral services are critical to the nation’s democracy. Ensuring that the electorate has all the information and resources to vote is a huge undertaking and, alongside that, people’s engagement requirements are always changing. Idox’s solution gives us the freedom, confidence and insight to evolve processes and methods so that we can continue to deliver first-class public services.” Ann Moore Head of Democratic and Registration Services Bracknell Forest Council Strategic report | Chairman’s statement 13 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Investment case Investment case Our specialist software solutions, built on insight, power the performance of government and industry, driving productivity and a better experience for everyone Market leadership Good governance Investment in People We are well respected as market leaders in our chosen markets, providing our customers with quality software solutions and a partnership approach to inform our investment choices to improve the effectiveness and efficiency of our software, and meet future challenges on the horizon. Idox prides itself on strong governance throughout the Group, leading to high quality revenues that are highly recurring and provide good visibility of future financial performance. In addition, costs are well-controlled, starting at the point a new contract is costed and bid for, through to execution. Our appetite for risk is well understood throughout our Group and reflected in our approach to investment and operational choices. Our people are everything we do, and we work hard to ensure we have the right team members throughout our organisation to drive our business. This includes high levels of engagement with our people on a continuous basis that is genuinely two-way as we strive to live our values; and committing to developing talent across our Group to become leaders both in our business and our markets. See more on our Business model Pages 16 and 17 See more on our Governance Pages 48 to 65 Read more about our people on Page 31 14 Idox has achieved strong progress through its ‘walk’ and ‘run’ phases, delivering value for our customers, people and shareholders. As we enter our ‘fly’ phase, we are well placed to continue our strong growth trajectory backed by a comprehensive programme of organic and inorganic investment and insight, ensuring we are at the forefront of innovation as the needs of our customers evolve. Streamlining facilities management (FM) with Idox’s CAFM Explorer “CAFM Explorer allows us to schedule and administer maintenance jobs, view open jobs, and run monthly reports on outstanding jobs. It provides insightful data, real-time tracking, and automatic notifications, which helps us keep on top of SLAs as well as highlight jobs that have crossed SLAs.” Anna Gur Regional Facilities Manager Affinity Water Operational Excellence Inorganic Growth Financial Discipline We strive for high levels of service to our customers and markets, building on our strong heritage of market- leading products and engaging with our customers regularly. Operationally we seek to leverage our shared resources and expertise, encouraging innovation in our products, delivery and operational infrastructure and support. We have been bold in our ambition to continue to scale by bringing in well-respected, product-led businesses into our Group that enhance our offerings to our customers and markets. Having completed our first acquisition in FY19, we completed three further acquisitions in FY21, and we are well capitalised and experienced in sourcing, acquiring and integrating these businesses in an effective and low-risk way. Good financial discipline has been the central theme throughout Idox’s ‘walk’ and ‘run’ phases as we have focused on high quality revenues; and good governance, operational execution and simplification leading to strong margins. We have managed our capital accordingly throughout this time, withdrawing or disposing of low-recurring and low-margin products and businesses, and focusing our organic and inorganic investments on high recurring, high margin, software-based sales with good opportunity for growth. See more on our s172/principal decisions Pages 26 to 29 See more on our acquisitions Pages 123 to 125 Read more about this in our Financial Review Pages 38 to 42 Strategic report | Investment case 15 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Business model Nurture quality IP, and strive for recurring revenues and good margins to fund further enterprise value (EV) growth Our strengths Our business Expert people A talented, inclusive team who live Idox’s values to be dynamic, responsible, act with integrity, value each other’s contributions, and strive for excellence. Our people are everything we do, and more. Extensive, established understanding of regulated environment With a proven track record of over 30 years working for the Public Sector, we are experts in providing solutions that accommodate highly complex rules, regulations and legislative requirements. We strive to work collaboratively with our customers to create efficiencies in existing processes and resolve challenges appearing on the horizon. Scalable end-to-end solutions with a ‘cloud-first’ approach Built around the end user and designed in collaboration with experts, our comprehensive range of integrated solutions streamline processes and deliver a responsive service to all users. We support their customers in their journey to cloud with our range of deployment options. Dependable delivery, post project services and corporate support A high quality and highly responsive services across our account management, product, development, delivery, support and corporate teams ensures our customers gain maximum benefit from our software solutions, and wider Idox engagement. Public Sector Idox has been working with local authorities for over 30 years, building an exceptional level of knowledge and experience. We deliver innovative on-premise and cloud-based solutions that underpin the secure and efficient management of property-related processes including planning, building control, environmental health, trading standards, licensing, address management and other geospatial information services; in addition to provision of software that supports elections, management of sexual health clinics, social directory services, grants funding, management of municipal transport, facilities management, assets and records management and management of Education, Health & Care plans. Over 90% of the UK’s local authorities use at least one of Idox’s offerings. 16 Our business model is to create, extend and acquire well-respected software IP rights within the Public Sector and Engineering markets; and pursue delivery methods that support high levels of recurring revenues and good margins. We reinvest our profits in further IP rights as we look to build on our successes, and directly increase the Group’s value to its customers, its people, and its shareholders. Our business Building value Engineering and construction Idox’s specialist facilities management and engineering information management software solutions are proven across the oil and gas, energy, manufacturing and construction sectors. Bringing the power of digital to engineering and construction, our solutions enable the efficient build and management of critical assets and infrastructure through better data integrity, easier collaboration and tighter control of costs. People We invest time and effort in regular engagement and personal development with our people throughout our Group. Our people directly create the success for our customers and other stakeholders through clear understanding of Group strategy, and collaborative teamwork in delivery. The Group employs 563 colleagues located in the UK, Europe, the USA and India. Customers Through the automation of tasks, simplification of complex operations and more effective management of information, we help our customers harness the power of digital, so they can do more. Shareholders Shareholder value increases as we focus on high quality revenues with high recurring qualities, good margins and strong cash generation. We pay out a modest level of our earnings via dividends, however, reinvest the majority to fund further growth and build the Group’s enterprise value. Supplier and partners When on-boarding, every supplier must complete a due diligence form in line with our supply chain management form which ensures we maintain strong, mutually beneficial relationships for our suppliers and partners. Communities Supporting, enabling and engaging with our local communities to achieve more through the use of our products, using our knowledgebase to educate and support individuals, and providing our people with the opportunity to give their time to community projects. Strategic report | Business model 17 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Key performance indicators Creating value for shareholders and other stakeholders Key financial performance indicators measure our effectiveness of executing our stated business model to deliver our strategy and therefore build value for shareholders and other stakeholders. These are monitored on an ongoing basis by management and are set out below. Revenue Group Revenue £66.1m (2020: £68.0m) Recurring Revenue £36.9m (2020: £37.4m) 21 20 £66.1m £68.0m Excluding Content* 21 20 £62.2m £57.3m Measure: Revenue received from provision of goods and services. 21 20 £36.9m £37.4m Excluding Content* 21 20 £36.3m £35.7m Measure: Recurring revenue that is contracted or considered highly likely to recur for a minimum of twelve months. This is defined as existing, contracted annuity revenues that have a high expectation of renewal. £ 18 Profitability ratios Adjusted EBITDA £ £19.8m (2020: £19.6m) 21 20 £19.8m £19.6m Excluding Content* 21 20 £19.5m £17.2m Measure: Profit before interest, tax, depreciation, amortisation, restructuring costs, acquisition costs, impairment, financing costs and share option costs (see page 137 for reconciliation). Adjusted EBITDA margin £ 30% (2020: 29%) Adjusted EPS £ 2.31p (2020: 1.81p) 21 20 30% 29% Excluding Content* 21 20 31% 30% 21 20 2.31p 1.81p Excluding Content* 21 2.33p 20 1.50p Measure: Profit before interest, tax, depreciation, amortisation, restructuring costs, acquisition costs, impairment, financing costs and share option costs as a percentage of revenue. Measure: Adjusted EPS excludes amortisation on acquired intangibles, impairment, acquisition costs, restructuring costs, financing costs and share option costs (see page 137 for reconciliation). Cash indicators Free Cash flow £7.1m (2020: £11.2m) £ Net Debt (£8.1m) (2020: (£16.1m)) 21 20 £7.1m £11.2m Excluding Content* 21 £7.1m 20 £11.2m 21 (£8.1m) 20 (£16.1m) Excluding Content* 21 20 (£8.1m) (£16.1m) Measure: Net cashflow excluding: acquisitions / disposals, debt repayments & drawdowns, and shareholder placing & dividends (see page 137 for reconciliation). Measure: The aggregation of cash, bank borrowings and long-term bond (see page 137 for reconciliation). * The Content business was disposed of during the year and has been classed as discontinued operations in these financial statements. Strategic report | Key performance indicators 19 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Key performance indicators continued Alternative Performance Measures Where relevant, adjusted measures of profit have been used alongside statutory definitions. These items are excluded from statutory measures of profit to present a measure of cash earnings from underlying activities on an ongoing basis. This is in line with management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers: • depreciation; • amortisation from acquired intangible assets; • impairment; • restructuring costs; • acquisition and financing costs; and • share option costs. Alternative performance measures may not be comparable between companies due to differences in how they are calculated. See page 137 for reconciliations of the alternative performance measures. Non-financial indicators In addition to the financial indicators, the Group has established employee related KPIs recognising our employees are central to the Group’s efforts. Measurement of our ability to attract and retain the best talent is important to understand our performance in delivering our strategy and creating value for shareholders and other stakeholders. Additionally, we also monitor non-financial KPIs around our customers and suppliers. Continuing operations Employees Attrition 11.39% (2020: 16.89%) Average tenure 5.3 (2020: 4.6 years) years Recruitment at management positions (Female:Male) 50:50 (2020: N/A) Not measured in FY20 Customers and suppliers Number of customers 1,822 (2020: 1,357) Net promotor score 14.0 (2020: 7.1) Number of active suppliers 522 (2020: 543) Idox practices an integrated management system centred around gaining and retaining ISO accreditations. These are internally and externally audited annually to ensure compliance. The current list of ISO accreditations held are noted below: ISO 9001:2015 – Quality Management System ISO 14001:2015 – Environmental Management System ISO 22301:2019 – Business Continuity Management System ISO 27001:2013 – Information Security Management System ISO 45001:2018 – Occupational Health & Safety Management System • • • • • 20 Chief Executive’s review I am pleased to report another successful year at Idox Overview I am pleased to report another successful year at Idox, where our teams across the Group have worked with great determination and fortitude through the ongoing and obvious impacts caused by the COVID-19 pandemic. We have adapted to the challenges of working from home and more latterly, hybrid models for collaboration and teamworking. I am tremendously proud of the way all my colleagues have come together and made the required adjustments in their day-to-day activities to deliver for customers and to drive the business forward. Idox has become synonymous with our strategy defined by 4 Pillars and 3 Phases. The 4 Pillars of Revenue, Margin, Simplification and Communication have become engrained in our operations and provide the foundations upon which we have delivered the Walk and Run phases of our journey. The improved strategic focus of the business, coupled with thorough operational management of the business has produced improved financial results and the subsequent reduction in net debt has provided the basis for strategic progress as we move into the Fly phase of our journey. The continued focus on producing software to manage complex business process, legislative and regulatory environments is the essence of our business model. Strategic report | Chief Executive’s review 21 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Chief Executive’s review continued Our financial performance has continued to be strong as we remained disciplined in managing costs and generating cash across our Group.” David Meaden Chief Executive Officer Closed over 4,000 orders 150New customers This focus and clarity about what we do and where we add substantive value for customers informed our decision to sell the Content division, through two transactions to separate private equity organisations. It has also provided us with clarity in the delivery of our ongoing acquisition strategy, where we have identified new capabilities that enhance our existing offerings and work to increase the target addressable markets available to us. We were delighted to complete the acquisitions of Aligned Assets, thinkWhere and exeGesIS during the year and each of these businesses offer complementary software and data capabilities to the Group. The addition of these address management and GIS capabilities allows us to provide extended service engagements into specific areas of the private sector that are also connected to the built environment and plantech markets we have long served, offering exciting opportunities for future growth and product development for our Group. Today Idox is well placed in its markets, where we improve professional and expert processes and support clients in their transition to becoming modern, agile organisations operating digitally and through the Cloud. We are leaders in software for the built environment, modern transportation networks, digitisation, elections and facilities management. We empower those that need extra support in special educational needs and disability and our software also manages the sexual health of the nation. Furthermore, with the addition of Aligned Assets, exeGesIS and ThinkWhere we can improve client data quality and improve the accuracy, accessibility and presentation of their address and geo-spatial information. Our markets We continue to see some impact on our markets of the COVID-19 pandemic, although retention rates for existing customers remains high as our systems are typically central to the processes they support. We have seen a slowdown in some new business activity compared to pre-COVID-19 pandemic levels, particularly in our Health and Social Care businesses as client resources have been diverted to directly support response to the COVID-19 pandemic, and in EIM where a slowdown in consumer and industrial consumption generally in FY20 and the first half of FY21 has impacted the engineering projects our software supports. Conversely, we have seen high demand for our services across our portfolio, as our clients look to us as a trusted partner to maintain, maximise and extend existing deployed solutions. We continue to be active in our chosen markets, bringing thought leadership and regular market engagement to identify current and future problems in our client-base and adjusting our product development plans accordingly. In addition, we are acquiring well-respected product businesses that enhance and extend our offerings to our customers and end markets. Managing our business Across our organisation we focus on our Four Pillars of Revenue, Margin, Simplification and Communication. This approach provides cohesion for the whole Group. The Four Pillars are well-articulated across the organisation and embedded into our onboarding process for people joining the organisation. This focus ensures that everyone in the Group can make a meaningful contribution to our overall success and has provided the basis on which the organisation has discovered and articulated its values. Revenue We have established strong business controls such that we do not pursue revenue for the sake of growth, but that we focus on products with the certainty of delivering lasting value to customers. We make sure that we fully understand the financial and operational implications for each piece of business that we contract. This results in improving the amount of recurring revenue in the business, providing a strong foundation for future growth in both revenues and margins. During the year we improved revenues on a continuing basis by 8.6% to £62.2m including our acquisitions (5.5% excluding acquisitions). Sales Orders During the year we established a centralised Revenue Assurance unit and completed the integration of the sales operations to include the EIM sales group. 22 We continued to deliver modern, digital SaaS platforms for built environment and public protection customers through Idox Cloud applications.” We closed over 4,000 orders to a total contract value of £61.6m and welcomed over 150 new customers to Idox. We continued to deliver modern, digital SaaS platforms for built environment and public protection customers through Idox Cloud applications, and FY21 saw significant new wins at Coventry City Council, Warrington Borough Council, Birmingham City Council and the Government of Bermuda. In addition, we saw continued success with our conversion to the cloud strategy with wins including Leicester City Council, Royal Borough of Chelsea & Westminster and the City of Cardiff Council along with the provisioning of private cloud services to our Uniform customer base, including The City of Edinburgh Council. We also saw some early success from our acquisitions, with Aligned Assets winning important contracts with the national gas and electricity supplier switching project to provide address matching services, and with the Metropolitan Police to provide Risk Intelligence services for the whole of Greater London. In our Health & Social Care businesses we recorded wins including Medway NHS Foundation Trust for the tracking of their day forward packs; and North Somerset Council, who became the latest user of our Education, Health and Care Hub as part of an overall 24-month programme to significantly improve special educational needs and disabilities service provisions within the Council. In Elections we were successful with Bracknell Forest Council implementing the Idox Election Management System, deployed through a Microsoft Azure environment, managing the council’s full breadth of electoral services and, replacing their long- term incumbent solution. In Computer Aided Facilities Management (CAFM) we recorded a number of wins, such as BCAS Bio Medical Services to manage maintenance of hospital devices following a highly successful trial, along with BET365 and DHL to manage facilities within their own organisations. In Databases we secured 96 new GrantFinder Customers and 21 new ResearchConnect Customers. In Transport we continued to closely support the ongoing Toronto Metrolinx project which is due to go live in the coming financial year, and secured long-term commitments from both Cornwall and Somerset for their development solutions. After a slower start to the year in the EIM Division, FusionLive, our Engineering Document Management solution, secured 11 new customer wins in H2. This included a 5-year agreement with EBLA, which involved the capture of 10.5m project documents and drawings for the existing Doha International Airport as well as the current expansion to scale up for the 2022 Football World Cup. Over 1,000 documents per day are uploaded into the system from engaged engineering contractors. Other new customers included Rosetti Marino and Audubon Engineering, who will be using FusionLive across all group projects within their portfolios. Margins During a year of obvious Covid-19 pandemic challenges, we have seen increased demand for services from our clients. Accordingly, we have seen an improvement in our effectiveness in delivering professional services to customers and this has helped to drive further improvement in margins across our operations. We have seen an improvement in Adjusted EBITDA margins to 31% (2020: 30%) in our continuing business over the past twelve months. We recorded a statutory profit before tax for continuing operations of £7.3m (2020: £1.8m), representing a statutory profit before tax margin of 12% (2020: 3%). With our desire and ambition to be a ‘Rule of 40’ business, we feel that further improvements in sales of existing offerings to our current clients and entry into new near adjacent markets with our newly acquired capabilities position us well for future margin growth. We take pride across our teams in delivering effectively to customers and this in turn ensures that we enjoy strong cash generation for our activities. At the end of the financial year, we had a net debt position of £8.1m. We have seen net cash generation and a reduction in debt over the last three financial years of £23.7m (a 75% reduction). Strategic report | Chief Executive’s review 23 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Chief Executive’s review continued Across the Group we have continued to drive initiatives that we believe will deliver improved margins. This included a fundamental review of our approach to data migration and in particular data mapping, with tooling developed to remove the need for our customers to map data items. This will reduce lead times, improve quality and enhance new customer experience in the critical early days of working with Idox. Also of note, our sexual health product reached a significant milestone with the release of our SaaS self-service platform, which we believe is the first to be fully NHS digital, data and technology standards compliant; and we successfully transitioned our education, health and care (‘EHC’) customers to the Idox Cloud SaaS platform. Simplification We continue in our efforts to maintain the Group as a well-run, simple and efficient organisation. Following the disposals of our Content division, Idox is now a single business providing software-based solutions to the Public Sector and Engineering markets. During the period we have continued to streamline our operations with the consolidation of all UK activities into our main UK trading company, Idox Software Limited. The trade of Aligned Assets and thinkWhere transferred to Idox Software Limited on 1 November 2021 and exeGesIS will be similarly transferred in early FY22. This consolidation allows us to maintain single customer, people and tax structures which provides clarity, simplicity, and superior service to all involved. We continue with ongoing development of our CRM installed in the prior year, and to improve the integration and utility of our ERP. We have expanded the use of CRM by embedding our key sales approval processes, installing a new configure, price and quoting process to improve the processing of customer orders, and established new reporting to understand progress in sales pipeline management and reporting of revenues. In our ERP, we have undergone a programme of industrialising a number of processes, allowing their measurement in real-time. These investments in our processes and systems help bring clarity and efficiencies through lower processing times and better information and provide a strong base for our ongoing and planned future growth. We have maintained our commitment to high quality processes by renewing our ISO 9001 (Quality Management), ISO 14001 (Environmental Management), ISO 45001 (Occupational Health & Safety) and ISO 27001 (Information Security Management) as well as achieving certification for ISO 22301 (Business Continuity). Communication This year we have continued to improve the way we work and communicate with our customers through our direct account management teams, internal sales support and our project management office. In addition, we have developed the “Idox, Do More” proposition to help deliver a consistent brand and message; this includes a number of thought leadership positions that explore in detail the challenges our clients face and how people, process and technology solutions combine to improve service, efficiency and public engagement. We have continued to engage openly with all our teams and to address issues and challenges identified with gusto. We host regular CEO broadcasts along with forums and workshops to work through any issues raised that require business attention or improvement. Increasingly, these activities are initiated and driven by teams formed across the business that have a shared interest rather than initiated from a top- down approach. This is a good sign of a healthy and vibrant business. We also aim to reflect our own people’s desire for Idox to be a socially responsible and sustainable business. As we described in prior reports, we have embraced more flexibility in our working patterns across the Group and have listened carefully to our teams about what works for them and is practical. We do not intend to mandate a return to offices, and we will continue to work flexibly. We have offered continuing support to our teams to ensure good mental health is maintained and our Idox Wellbeing team, which is drawn from across the business, provides mental health support to the Group and we are all grateful for their continued commitment to this activity. The Idox leadership development programme that ran in 2021 has proven very successful. As we move into 2022, we have a further 70 individuals committing to a year-long programme of self-development. We are grateful to the 33 people that committed to the programme in 2021, for exemplifying our DRIVE values and for their ongoing contribution to the success of the Group. Responsible Idox and ESG We recognise the importance of our responsibilities in respect to ESG. In FY21 we formed an ESG steering committee, with the responsibility of understanding and monitoring how our business practices are sustainable in environmental and social terms, as well as being well governed. This year we publish our ESG plans in detail within this financial report, and I am proud that these are an authentic representation of our progress and ambition in this area. Outlook FY22 has started well and we continue to trade in line with expectations. We will continue to invest selectively to grow our capabilities and support our customers. The business has a strong foundation in property and asset- based solutions and this, along with our focus on digital transformation and Cloud provision, will underpin our future strategy and growth. A successful business rests upon the quality of its teams and the desire and ability to go that extra step for customers, colleagues, and shareholders. Over the past three years we have invested in our people and have sought to create an environment that develops talent and is welcoming to new team members. We believe this lays the foundation for our future success and this combined with our investments in governance, processes and infrastructure will support our future progression as a successful business. We continue to have financial resources at our disposal for accretive and enhancing acquisitions and, having shown that this can be delivered successfully, we look forward to driving shareholder value moving forward and becoming a ‘rule of 40’ business. David Meaden Chief Executive Officer 26 January 2022 24 Suffolk County Council: Family Information Service Challenge: Bringing multiple databases together Suffolk County Council and Idox have a long-standing relationship, going back over 14 years. The Council’s forward-thinking team initially recognised a need to bring together multiple sources of community information; family information services (FIS), SEND Local Offer and adult social care, to become a growing and exemplary platform for local information, advice and guidance. Solution: Developing a trusted source of local information InfoLink is a dynamic system in which data can be searched, filtered and updated according to a wide variety of information needs. Anita Abram, Directorate of Children and Young People said: “The Directory has changed the way we provide information. We realised the power in bringing everything together, making it much more accessible and useful for our community. By working more closely with all our service providers with live information on InfoLink, we can easily keep in touch with them via email or broadcast messages to ensure the information is always up to date and relevant.” Responding during the COVID-19 pandemic Suffolk’s integrated and responsive directory has allowed the Council to be flexible in adapting to new challenges and communicating with residents on crucial issues. Users were signposted to vital services including food banks, community support groups and social activity providers. More than 400 services across Suffolk updated their details and InfoLink quickly became the only source of up to date, county- specific information for local services. Outcome: Looking to the future By harnessing the power of information, Suffolk has become a more efficient county council, and one which has a more direct relationship with the people it serves. This efficiency has been recognised widely and led to Suffolk County Council being recently named ‘Most Innovative Family Information Service’ by the National Association of Family Information Services (nasen). Anita continues: “Idox has a really good understanding of how we can work together to move at pace. We don’t have to wait for the next release of a product and it’s always been easy to do things quickly. We also have a really responsive relationship with the Idox Service Desk.” Strategic report | Chief Executive’s review 25 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 S172 and stakeholder engagement Sourcing diverse range of funds with Idox’s GrantFinder “GrantFinder had a big role to play in helping us deliver the project in Gretna. We assembled a capital package of £650,000 with contributions from 16 different funds. Without GrantFinder, the task of piecing all this together would have been protracted and painstaking.” Hugh McGhee Head of Social and Economic Development Cunninghame Housing Association Introduction The Directors confirm that during the year, they have conducted themselves in a manner which promotes the long-term success of the Group and of the key stakeholders. The Group considers the interests of these stakeholders when long-term decisions are made as set out in Section 172 of the Companies Act 2006. The key stakeholders are considered to be; our shareholders, employees, customers, suppliers, local communities and banking partners. The methods in which the Group engages with the key stakeholders in order to understand any issues they have are noted in the following table: Key stakeholder Method of engagement Shareholders • Direct meetings • Supporting equity research • Market communications • All staff annual events • Regular senior broadcasts Employees • Appraisal cycle • HR sponsored team leader engagement • Marketing • Account management • Technical services and on-going support • Account management • Indirect individual staff interaction via charity work and events • Regular direct meetings with existing and prospective providers of finance Customers Suppliers Local communities Banking partners 26 The Group continues to engage with its Key stakeholders, and the Board incorporates the outcomes of these engagements in its principal decision making. The following table details this for the main operational and strategic topics facing the Group: Stakeholder engagement Outcome of engagement Principal decisions Topic Long-term strategy of the Group Shareholders, employees, customers and local communities A desire for a Corporate strategy that is focused, clear and regularly articulated and re-enforced. This should be supported by a meaningful capital allocation to support strategic goals. Performance of the Group Shareholders, employees and banking partners The Group should continue to set itself stretching but realistic financial targets, and adjust pace and quantum of investment if required to meet these targets. Financing and capital Shareholders, employees, customers, suppliers and banking partners The Group should utilise debt facilities where available to maximise earnings potential, but be cautious where leverage (Net debt / adj. EBITDA) exceed 1.5. Beyond this, either equity financing or reducing investment plans should be considered. Cash generation should remain a priority of the business, and declaration of a dividend is a sign of financial health in addition to providing shareholders a return. The Board continues to assess the best strategic direction of the Group to build overall value and establish a credible path to continued growth in recurring revenues, EBITDA and cash generation. The Board has concluded in the year our current strategy remains sound and well supported by our business model and the markets we address. In addition, the Board has reviewed the budget in respect of the year ended 31 October 2022 in detail and debated which investment and spending decisions will have the biggest impact on our strategy. The performance of the Group is reviewed in detail by the senior management team on a monthly basis and further reviewed by the Board at every Board meeting. These financial and operational reviews typically involve presentation of management reports with extensive qualitative and quantitative detail, analysis through to discussion to understand any variances to forecast performance, and agreeing of adaptive actions as the situation dictates. The capital structure is regularly considered as a standing agenda item included in the finance section of the Board’s regular meetings. The CEO and CFO regularly meet existing and prospective investors and banking partners to gauge likely sources and costs of funding and associated longer- term trends. The Group’s levels of financing, and its capital allocation policy are regularly discussed at the Board’s regular meetings. During the year the available extension options were discussed in some detail, resulting in the formal extension of our facilities by 18 months through to June 2024. During the year ended 31 October 2020 the Board re- established its dividend policy. This policy is to intend to pay a final dividend of 0.4 pence in respect of the year ended 31 October 2021 and to continue to progress incrementally beyond that depending on cash and earnings affordability. Strategic report | S172 and stakeholder engagement 27 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 S172 and stakeholder engagement continued Topic Employees and culture Stakeholder engagement Outcome of engagement Principal decisions Local communities, shareholders and employees Idox should strive to be an employer of choice to attract and retain the best staff that will help scale the business in a profitable and cash-generative way. The Senior Management team has established and promoted a number of employee-support programmes, which the Board has actively discussed and endorsed as part of its wider considerations of the wellbeing of our staff, particularly given the impact of the COVID-19 pandemic. Investment in Idox’s people should go beyond financial rewards, and the Group should engender a fair, culturally strong and socially-aware ethos that existing and prospective employees will be excited to be part of. Risk, governance and internal control environments Shareholders, employees, customers, suppliers, local communities and banking partners As a PLC with a public- sector customer base and banking partners, Idox should strive for the best risk management and governance framework commensurate with its scale. These initiatives have included: • • • • Idox Voice – regular employee communications Idox Elevate – gender equality Idox Drive – establishing agreed values Idox Leads – managers support programme • Workplace Wellbeing – mental health support for our people • CEO Broadcasts – ensuring our leadership is regularly visible and communicating to our people • Leadership Together – leadership programme for our top performers Across the last 24 months the Group recorded an employee engagement net promoter score increase of 40 points. The Board continues to monitor these initiatives, the impact on our people and employee churn metrics more generally. The Board actively monitors and discusses the risks facing the Group, risk appetite for such risks, and the measures in place to manage these risks. During the year the Group has worked with specialists to perform a gap analysis on its risk and control frameworks. This review did not identify any concerns and provided guidance on a suitable evolution of relevant internal audit for Idox given our size and circumstance. 28 Social As noted above, the Senior Management team have initiated a number of employee-support programmes to improve people development, wellbeing and diversity in our Group. We encourage our people to get involved in charitable events in their communities, and support their causes by matching financial support with their own fundraising efforts, and communicating individual and team successes throughout our wider Group using our monthly Idox Voice newsletter. This report was approved by the Board of Directors and authorised for issue. Signed on its behalf by: David Meaden Chief Executive Officer 26 January 2022 Local communities Environmental The Group recognises the importance of environmental protection and is committed to operating its business responsibly and in compliance with all legal requirements. It is the Group’s declared policy to operate with and to maintain good relations with all regulatory bodies. In support of this policy, the Group operates an Environmental Management System which is included in the accreditation to BS EN ISO 14001:2015. The Group participates in the Energy Saving Opportunities Scheme (ESOS) and meets the requirements of the Streamlined Energy and Carbon Reporting (SECR) regulations. It is the Group’s objective to carry out all measures reasonable and practicable to meet, exceed or develop all necessary or desirable requirements and to continually improve environmental performance through the implementation of the following: • Assess and regularly re-assess the environmental effects of the Group’s activities. • Training of employees in environmental issues. • Minimise the production of waste. • Minimise material wastage. • Minimise energy wastage. • Promote the use of recyclable and renewable materials. • Reduce and / or limit the production of pollutants to water, land and air. • Control noise emissions from operations. • Minimise the risk to the general public and employees from operations and activities undertaken by the Group. Whilst our business model of software development and deployment is significantly lower consumption than most other industries which require creation of physical product or require regular transport of either goods or staff; we nonetheless recognise we as a business have our part to play in reducing carbon emissions in all our communities. Due to the low environmental impact of Idox activities, there is no supplier training, but we prefer to work with suppliers and other parties who have ISO 14001 accreditation which inherently encompasses this. We pro-actively manage office-based consumption and seek to minimise the impact on the environment by limiting travel of our people. The limitations arising from the COVID-19 pandemic have accelerated our pace with these changes in the way of working. As a result, we are now considering a more balanced approach to home and office working and continue to keep our office footprint under review. We also are cognisant that managing our impact on the environment is a collective effort and therefore seek to promote climate change awareness through our management teams and staff body more generally. Despite the low environmental impact of our activities, the Group acknowledges it has a responsibility to actively monitor our consumption and impact on the environment. As such, the Group has established an ESG steering committee which has adopted the approach to ESG issues that supports the UN Sustainable Development Goals. This sustainability framework is aligned with our strategic goals. See further details on our approach to Environmental Social and Governance topics and Green House Gas reporting on pages 32 to 37. Strategic report | S172 and stakeholder engagement 29 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Responsible business Looking to the future Whilst we are on the initial journey of formalising our ESG activity, the committee’s focus in FY22 will be to further establish ESG performance metrics and targets to ensure we can monitor, manage and report on our performance consistently. We look forward to enhancing our sustainability, reducing our carbon footprint and having a positive social impact in the years to come. Idox recognises the importance of our environmental and societal responsibilities in defining and growing the value of our services and solutions and building lasting commercial relationships across the industries and communities in which we operate. We’ve adopted a structured approach to ESG issues that supports the UN Sustainable Development Goals and focuses on four areas: Our people, Our communities, Our environment and Our operational responsibility. ESG Steering Committee In FY21 we formed an ESG steering committee as a further development of our previous CSR governance arrangements, with the core responsibility of understanding and monitoring how our business practices are sustainable in environmental and social terms, as well as being well governed. The committee, which is attended by members of the Executive Management team and supported by our Board, consult with the key internal and external stakeholders of Idox, to ensure that we are aligned with the expectations of our stakeholders. This has formed the cornerstone of our sustainability framework and is aligned with our strategic goals. Our four areas of commitment Our people The aim: To build a diverse and inclusive workforce who feel supported and encouraged to excel in their career and life at Idox. Our community The aim: To support and enable our local communities to achieve more through the use of our products and using our knowledge base to educate and support individuals. The UN SDGs we support The UN SDGs we support The UN SDGs we support The UN SDGs we support Our environment The aim: As a naturally low emission business, we are committed to improving our environmental performance and enabling our customers to do so. Our organisational responsibility The aim: To be a responsible employer, supplier, and overall business. 30 Exploring our four areas of commitment Our people Our colleagues at Idox are at the core of what we do. We aim to build a diverse and inclusive workforce where our people thrive and feel supported to develop their careers. Growing a sense of community organically within Idox is an important aspect of our people strategy. The Idox Workplace Wellbeing team, made up of employees across the business and Mental Health First Aiders, have provided monthly broadcasts to our colleagues aimed at educating and raising awareness of issues each of our employees face during their life at Idox. Each month in FY21, the team alongside some external speakers have dealt with difficult topics such as dealing with loss and trauma response, through to happiness and coping strategies. Alongside our UNUM Lifeworks programme, offering free counselling services to colleagues, we recognise how essential it is to care for the mental wellbeing of our teams. Diversity and inclusion continue to be a key focus for Idox. At the beginning of FY21, Idox Elevate was established with the overall goal of achieving greater gender diversity within Idox. Efforts initially focussed on establishing a baseline by measuring and evaluating the position of Idox’s Gender Pay Gap reporting and exploring opportunities where improvements can be made. Idox Elevate have worked closely with the People@Idox and Talent Acquisition teams to promote flexible working, ensuring there is quality in representation of interview panels and educating colleagues. In October, the team launched a programme of work aimed at educating and raising awareness of the issues facing women. With guest speakers ranging from parliamentarians to business leaders, it has provided necessary conversation pieces for our teams. Idox is committed to investing in the professional development of our employees. Launched in January 2021, Leading Together has accommodated 33 of our high potential talent to take on a leadership development programme accredited by the Institute of Leadership and Management. In FY22, we are proud to be able to sponsor a further 70 colleagues through the course. Our community During 2021 Idox has increased our commitment to volunteering and giving back to the communities we serve. Having launched our volunteering scheme, we provide each of our colleagues one day’s fully paid leave per year to give time back to the causes close to their hearts. In May 2021 we partnered with Payroll Giving in Action and Charities Trust, to introduce a Payroll Giving Scheme, allowing our colleagues to make a tax-free donation to their chosen charities directly via salary. In response to National Council for Voluntary Organisations (NCVO) preparing to discontinue its funding portal, Idox launched My Funding Central in March 2021. The service is specifically aimed at charities and voluntary organisations with incomes less than £1 million and is free to use for those organisations with incomes below £30,000. More than 1,500 organisations currently take advantage of our free to use service. Our environment Idox has adopted the recommendations and model of the Financial Stability Board of the Bank for International Settlements’ Task Force on Climate-related Financial Disclosures (TCFD). The Task Force structured its recommendations around four thematic areas that represent core elements of how organisations operate: governance, strategy, risk management, and metrics and targets. Strategic report | Responsible business 31 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Responsible business continued Governance: The organisation’s governance around climate-related risks and opportunities We have well established structures of governance with the Board, Audit Committee and Executive Management Team all having defined roles within this structure. Climate related risks and opportunities form a key and integral component of our overall corporate governance. Strategy: The actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning. Principle climate-related risks and opportunities Business interruption due to severe weather events. Impact(s) on Idox Impact type(s) Idox response(s) Local office closures; key staff unavailable; key project delivery delayed. Business Operational ISO 22301 accredited Business Continuity Management System; remote project support model established. Failure to address increased legislation, regulation or general expectation. Climate-related plans, actions or statements not considered adequate for some public procurement or key suppliers. Additional operational and reporting complexity; potential negative sentiment with key stakeholders. Inability to tender for some opportunities, supply chain risk. Business Operational; Strategy Annual review of scope of responsibilities and ability of our structures and processes to adapt. Financial; Business Operational Monitor tender requirements and adjust messages if necessary. Climate-related plans, actions or statements not considered adequate for some investors. Reduced ability to attract a range of investors to support strategic objectives. Strategy; Financial Ensure climate action plan remains in line with best practices and recognised disclosure standards. Risk Management: The processes used by the organisation to identify, assess, and manage climate-related risks. Idox has a comprehensive risk management strategy and supporting process which is aligned with our governance approach. Climate-related risks form part of the overall risk management regime. Our approach to risk management is described in the principal risks and uncertainties on pages 43 to 47. Metrics and Targets: The metrics and targets used to assess and manage relevant climate- related risks and opportunities. Working within the three scopes of the Greenhouse Gas Protocol (GHG), Idox has committed to achieving net zero carbon emissions by 2040. Across the business we will have a three-step approach to carbon emissions. Our main priority is to eliminate emissions, failing that we will reduce and then offset emissions by engaging in a compensating carbon offset programme. In line with the GHG, Idox has identified that financial year 2019 is an appropriate baseline year for assessing carbon reduction from for 2 reasons: • This year is highly representative of a normal stable year of Group operations with data covering all of the GHG scopes. • This year was not impacted by the COVID-19 pandemic. 32 Chesterfield Royal Hospital NHS Foundation Trust: Intelligent hospital asset tracking Challenge: Automating asset tracking to improve trust-wide visibility for Derbyshire Support and Facilities Service (DSFS) With vast amounts of essential equipment and no technology to keep track of it, the DSFS Clinical Engineering team at Chesterfield Royal Hospital NHS Foundation Trust knew they needed to find a different approach. The Trust’s inventory of medical devices is held on a central database, with all assets logged manually. With equipment moving constantly and frequently going missing, the team wanted to automate the process to deliver a better patient experience and greater efficiencies through improved asset visibility. Solution: Implement Idox’s largest Radio Frequency ID network and expand its use during the outbreak of COVID-19 DSFS, in conjunction with the Trust, selected Idox as its preferred supplier to lead the rollout of iAssets – part of the iFIT tracking and hospital management solution – which uses RFID technology to manage hospital assets, and provide a 360-degree view of their location at all times. Stuart Barton, DSFS Specialist Clinical Engineer and Equipment Library Team Leader at the Trust, said: “The Idox technology has fundamentally changed how we manage our equipment, making it so much easier to locate items and for our engineers to perform planned preventative maintenance.” The ability to pinpoint equipment quickly is also proving particularly useful during the COVID-19 pandemic. “We’ve expanded our use of the RFID system to help with equipment distribution, including patient monitors, electrocardiogram recorders and defibrillators”, explained Stuart. Outcome: 360-degree view of assets and better patient care By implementing the iFit solution, the Trust has gained tighter control over equipment, streamlined patient care and improved patient experience whilst saving a significant amount of time and money, leading to a more efficient service. “With our old system, you could be walking around the wards for the best part of a day looking for equipment. Now we can find something in a matter of minutes”, explains Stuart. “The top benefits it delivers for us daily are time savings, better critical maintenance processes and more importantly, improved patient care – which remains at the heart of everything we do.” Strategic report | Responsible business 33 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Responsible business continued Idox base year emissions recalculation policy is to: • Add to the baseline year and subsequent years, emissions related to any items which may be added to the Greenhouse Gas Protocol to the scopes. • Adjust the baseline year for any significant acquisitions or disposals which would materially distort the overall comparator to the baseline year. • Not adjust the baseline year for smaller events such as non-material acquisitions or disposals or office closures or openings. The table below shows the total gross GHG emissions in tonnes of CO2 (tCO2e): Emissions Scope 1. Direct Fuel – Gas Fuel – Oil Passenger vehicles 2. Indirect – Electricity Electricity Use 3. Indirect – Business Travel – Air Other Business Travel – Hotel Business Travel – Land Business Travel – Mileage Waste Disposal – Batteries Waste Disposal – Electrical Items Waste Disposal – Paper etc Year ended 31 October 2019 (Baseline year) Year ended 31 October 2020 Year ended 31 October 2021 Current year change from prior year Current year change from baseline 14 16 10 121 92 52 16 303 4 66 37 731 10 14 9 87 54 19 8 109 1 31 10 352 5 9 8 59 10 13 3 21 – 8 15 151 (57%) (38%) (6%) (32%) (81%) (32%) (58%) (80%) (67%) (45%) (14%) (51%) (89%) (76%) (79%) (93%) (100%) (100%) (74%) 53% (57%) (88%) (60%) (80%) An internal peer review is performed on the numbers above and we aim to improve the methods of data collection going forward to ensure we maintain a robust approach to our GHG reporting. We recognise that our normal way of operating in both the years ended 31 October 2020 and 31 October 2021 was significantly different due to the Covid-19 pandemic and that this significantly reduced emissions in almost all scopes during these years. Nevertheless, these years also saw the positive impact of initiatives we have undertaken under the Energy Saving Opportunities Scheme (ESOS) across all 3 scopes as well as from initiatives to reduce travel and waste. Whilst we do not expect to be able to sustain the reduced level of activity which created the significant savings in the reporting year, we do expect some changes to become permanent such as reduced travel as clients have become accustomed to receiving virtual support and reduced energy consumption in offices due to lower occupancy levels. 34 Awareness of our environmental impact, the initiatives we are taking to reduce it and the positive impact everyone in Idox can, and is making, has been increased including making available an interactive dashboard which all staff can access to visualise the individual and collective impact of their efforts. Underpinning all our environmental protection and impact reduction initiatives is an Environmental Management System accredited to BS EN ISO 14001:2015. This enables us to actively assess the effectiveness of the process employed across the business and make adjustments as necessary. Our commitment to achieving our goals is communicated via a clear statement on our web site which sets out how we will achieve our net zero carbon emission target by 2040. At each 3-year planning cycle we will set interim targets to ensure that we are making the required progress towards the goal and each year we will assess progress towards meeting those interim targets. We will set a simple measure of the percentage reduction in carbon emissions we aim to achieve compared with the baseline in each 3-year plan period. For the 3-year plan period to31 October 2024 we aim to achieve a 25% decrease (representing a reduction of 200 tonnes of CO2 emissions per annum). We have not previously published an achievement against target metric for the year ended 31 October 2021 in recognition of the unusual operating conditions for all companies during the COVID-19 pandemic. Strategic report | Responsible business 35 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Responsible business continued Idox Carbon Reduction Dashboard (baseline year is 2019) Year 2021 Total CO2 Change from 2019 Baseline (All Scopes) Total CO2 (Tonnes) 151 Year on Year Change (57%) 800 700 600 500 400 300 200 100 0 2019 Tonnes CO2 0% (10%) (20%) (30%) (40%) (50%) (60%) (70%) (80%) (90%) (57%) (79%) 2021 (52%) 2020 YoY Change Reduction from Baseline Year Tonnes CO2 Emissions per Year – Detail for Scope 1 & 2 121 87 30 10 2019 25 9 2020 Tonnes CO2 Change Year on Year – Detail for Scope 1 & 2 2020 (9%) (17%) 2021 (8%) (28%) (32%) (46%) 59 13 8 2021 Scope 1 – Direct Emissions – Offices Scope 1 – Direct Emissions – Vehicles Scope 2 – Electricity Use Our organisational responsibility As a responsible employer, Idox is committed to providing equal pay and opportunities for all. Our recruitment policies, work with Idox Elevate and our employee led initiative, Idox Voice, all have a mandate to ensure our processes are fair for all. Idox continues to build on our culture of integrity with regular communications to our teams to ensure that we maintain well governed processes and procedures. 36 CO2 Emissions Scope 1 Direct Emissions – Offices 13 Direct Emissions – Vehicles 8 Scope 2 Scope 3 Electricity Use Air Travel 10 Business Travel Land 3 Business Travel – Mileage Hotel Stay 13 Waste Disposal 21 23 Tonnes CO2 Emissions per Year – Detail for Scope 3 303 59 92 52 16 2019 107 109 54 19 8 41 10 13 2020 21 23 3 2021 Tonnes CO2 Emissions Year on Year – Detail for Scope 3 2020 2021 (42%) (51%) (64%) (64%) (61%) (32%) (45%) (57%) (81%) (80%) Scope 3 – Waste Disposal Scope 3 – Business Travel Mileage Scope 3 – Business Travel Land Scope 3 – Hotel Stay Scope 3 – Air Travel Our workplace policies help maintain and work to the professional standards we strive for. This includes multilingual copies of our Whistleblowing Policy, Gifts and Hospitality Policy and International Business Policy. Each year, our colleagues undertake Bribery and Corruption training and Information Security training to help us to understand the risks to the business and ourselves when the standards we aspire to are not met. These also form part of the onboarding process and help ensure integrity and security for our people and business alike. Strategic report | Responsible business 37 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Financial review The Group continues to invest in developing innovative technology solutions Financial review The financial year ended 31 October 2021 has seen a lot of change, consistent with our continued corporate simplification and focus on our core public sector software markets. The Content businesses were disposed of in March and April 21 for net proceeds of £10.7m, whilst the proceeds from the disposal were reinvested in the acquisition of Aligned Assets, thinkWhere and exeGesIS, for initial net consideration of £10.5m. A strong focus on sales and commercial governance has enabled us to pursue only earnings-enhancing revenues. This approach has resulted in improving revenue, Adjusted EBITDA and improved cash generation, for continuing operations, compared to prior periods. Idox Content is classified as discontinued operations given the disposal of its businesses during the year. In addition, corporate costs previously allocated to Idox Content in FY20 have been reduced by £1,348,000 to better reflect the actual reduction in corporate costs as a result of the discontinued operations. 38 The following table sets out the revenues and Adjusted EBITDA for each of the Group’s segments from its continuing and discontinued activities: FY21 £000 FY20 £000 Variance £000 % Revenue Public Sector Software Engineering Information Management Idox Software Idox Content (discontinued) Total Revenue Split Public Sector Software Engineering Information Management Idox Software Idox Content (discontinued) Adjusted EBITDA* Public Sector Software Engineering Information Management Idox Software Idox Content (discontinued) Total Adjusted EBITDA margin split Public Sector Software Engineering Information Management Idox Software Idox Content (discontinued) Total 5,688 (787) 4,901 (6,836) (1,935) 2,433 (152) 2,281 (2,070) 211 12% (9%) 9% (64%) (3%) 16% (9%) 13% (88%) 1% 54,114 8,071 62,185 3,897 66,082 82% 12% 94% 6% 17,969 1,550 19,519 276 19,795 33% 19% 31% 7% 30% 48,426 8,858 57,284 10,733 68,017 71% 13% 84% 16% 15,536 1,702 17,238 2,346 19,584 32% 19% 30% 22% 29% * Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs. See page 137 for reconciliations of the alternative performance measures. Continuing operations – PSS and EIM The PSS and EIM divisions, accounting for 94% of Group revenues (2020: 84%), delivered revenues of £62.2m (2020: £57.3m). Continuing revenues Recurring (PSS) Recurring (EIM) Non-recurring (PSS) Non-recurring (EIM) Recurring* Non-recurring** FY21 £000 FY20 £000 Variance £000 % 30,111 6,139 24,003 1,932 62,185 58% 42% 28,863 6,886 19,563 1,972 57,284 62% 38% 1,248 (747) 4,440 (40) 4,901 4% (11%) 23% (2%) 9% * Recurring revenue is defined as revenues associated with access to a specific ongoing service, with invoicing that typically recurs on an annual basis and underpinned by either a multi-year or rolling contract. These services include Support & Maintenance, SaaS fees, Hosting services, and some Managed Service arrangements which involve a fixed fee irrespective of consumption. ** Non-Recurring revenue is defined as revenues without any formal commitment from the customer to recur on an annual basis. Strategic Report | Financial review 39 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Financial review continued Recurring revenues have increased in PSS due to the acquisitions made in the second half of the year which have delivered recurring revenues of £1.1m. The recurring revenues in EIM have decreased in the year due to some contracts coming to their end and not being renewed. The proportion of recurring revenues has decreased slightly due to non- recurring revenues growth slightly outpacing our recurring revenues. Non-recurring revenues have increased also due to the impact of the continued high levels of sales governance implemented over the last 2 years, resulting in higher recoveries. Adjusted EBITDA increased by 13% to £19.5m (2020: £17.2m), delivering an improved EBITDA margin of 31% (2020: 30%). The margin improvement has been driven by the increased revenues converting strongly to margin and has been boosted by the high margin acquisitions of Aligned Assets and exeGesIS that were made in the year. We continue with our efforts to improve efficiencies through marginal gains across our sales, development, professional services and support activities, and leverage our common resources to drive higher margins through improved economies of scale. Discontinued operations – Content The Content division recorded a revenue reduction of 64% to £3.9m (2020: £10.7m) and a decrease in Adjusted EBITDA of 88% to £0.3m (2020: £2.3m) as a result of the businesses being disposed of in March and April 2021. Idox Content revenues Recurring Non-Recurring Recurring Non-Recurring FY21 £000 FY20 £000 Variance £000 % 604 3,293 3,897 15% 85% 1,626 9,107 (1,022) (5,814) 10,733 (6,836) (63%) (64%) (64%) 15% 85% Profit before tax for continuing operations The reported profit before tax was £7.3m (2020: £1.8m). The reasons for the improved adjusted EBITDA are set out above, and the reasons for the movements in all other constituent parts of profit before tax are set out below. The following table provides a reconciliation between adjusted EBITDA and statutory profit before taxation for continuing operations. Adjusted EBITDA Depreciation and Amortisation Restructuring costs Acquisition costs Financing costs Share option costs Net finance costs Profit before taxation FY21 £000 19,519 FY20 £000 17,238 (10,204) (10,063) 90 134 (110) (1,789) (372) 7,268 (1,748) (125) (306) (1,004) (2,177) 1,815 Variance £000 2,281 (141) 1,838 259 196 (785) 1,805 5,453 % 13% 1% (105%) (207%) (64%) 78% (83%) 300% Restructuring gains were £0.1m (2020: £1.7m costs). The restructuring of business units in the prior year has now largely been completed and as a result restructuring costs have been significantly reduced and represent a small gain in the current year. Restructuring costs are analysed as follows: 40 Redundancies Disposal of subsidiaries Take over approach Litigation Property Total restructuring costs FY21 £000 (22) 32 (171) – 251 90 FY20 £000 (245) (397) – (34) (1,072) (1,748) Variance £000 (223) (429) 171 (34) (1,323) (1,846) % (91%) (108%) n/a (100%) (123%) (106%) Acquisition gains of £0.1m (2020: £0.1m costs) relates to the acquisition of Aligned Assets, thinkWhere and exeGesIS in the year. The prior year is in relation to the final settlements to the acquisition of Idox Cloud (formerly Tascomi) in August 2019. There were no impairments in the year (2020: £Nil). Financing costs of £0.1m (2020: £0.3m) relate to professional fees incurred as part of the loan extension and transition to SONIA from LIBOR in October 2021. The prior year costs were incurred as part of the refinancing in December 2019. Share option costs of £1.8m (2020: £1.0m) relate to the accounting charge for awards made under the Group’s Long- term Incentive Plan. Net finance costs have decreased to £0.4m (2020: £2.2m) as a result of less interest being payable in respect of the Group’s decreased banking facilities which were fully drawn in the second half of the prior year as part of our COVID-19 pandemic defensive actions. Additionally, the effective interest rate accounting adjustments have decreased as a result of the change in drawn loan balances. The Group continues to invest in developing innovative technology solutions across the Idox Software portfolio and has incurred capitalised development costs of £4.6m (2020: £4.7m). Taxation The effective tax rate (ETR) for the year was 9.4% (2020: 52.8%) for total operations. The ETR for the year for continuing operations was 17.0% (2020: 73.7%). The main factors for the reduction in the volatility in the ETR on the profit before tax position was the significant increase in the profit before tax as well as the disposals in the year which resulted in income not subject to tax, meaning permanent and other differences giving rise to ETR effects were proportionately lower. These differences included routine non-allowable amounts in addition to international losses not recognised in the period and higher overseas tax rates. There are substantial carried-forward losses not recognised for deferred tax purposes to date, owing to adoption of a prudent loss recognition position. The gross value of these losses not recognised to date totals £10.8m, split across Malta (£8.5m), the UK (£0.6m), and France (£1.7m). The Board is hopeful that the Group will benefit from these unrecognised tax losses, with the exception of Malta, in the future and these will be recognised at the point where utilisation becomes more certain. Earnings per share and dividends Basic earnings per share for continuing and discontinued operations improved to 2.71p (2020: 0.29p) as a result of the Group reporting a significantly larger profit after tax compared to that in FY20. Diluted earnings per share improved to 2.65p (2020: 0.29p). Adjusted earnings per share for continuing operations increased to 2.33p (2020: 1.50p) as a result of the Group reporting a significantly larger profit after tax compared to that in FY20, as well as reduced restructuring costs in the year. Adjusted diluted earnings per share increased to 2.27p (2020: 1.47p). The Board proposes a final dividend of 0.4p per share (2020: 0.3p), which represents a total dividend for the year of 0.4p per share (2020: 0.3p), at a total cost of £1.8m (2020: £1.3m). Strategic Report | Financial review 41 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Financial review continued Balance sheet and cash flows The Group’s net assets have increased to £60.8m compared to £47.0m at 31 October 2020. The constituent movements are detailed in the Group’s consolidated Statement of Changes in Equity: which are summarised as follows: Total Equity as per FY20 Financial Report Share option movements Fair value of deferred consideration shares on purchase of subsidiary Equity dividends paid Profit for the year Exchange gains on translation of foreign operations Total Equity as per FY21 Financial Report 12 months to 31 October 2021 £000 46,958 2,081 1,261 (1,331) 11,949 (108) 60,810 The increase in the Group’s net assets is principally due to the profit for the year, with a significant improvement in net debt in the year as the Group continued to target cash generative revenues and margins across its business. This is bolstered by the increase of intangible assets due to the purchase of three acquisitions in the year, and partially offset by the increase in deferred consideration payable on these acquisitions. The Group has deferred VAT of £1.0m as at 31 October 2021 (2020: £3.9m), which it is anticipated will be repaid in the year ended 31 October 2022. Cash generated from operating activities after tax as a percentage of Adjusted EBITDA was 85% (2020: 124%). This decrease was due primarily to the VAT liability deferrals the Group took advantage of as part of its early Covid-19 pandemic defensive actions in the prior year which will be settled across FY21 and FY22. The Group generally continues to have high levels of adjusted EBITDA to cash conversion. The reported net cashflow was an outflow of £12.2m (2020: inflow of £23.7m) due in the main to net debt repayments during the year of £19.4m (2020: net debt drawdown £12.8m). Free cashflow at 31 October 2021 was £7.1m (2020: £11.2m). Free cashflow has decreased in the year due to the VAT effect referred to above. Net cashflow Add back: Acquisitions / disposals Debt repayments Drawdowns Net cost of staff share schemes / (Issue of shares) Free cashflow FY21 £000 FY20 £000 (12,068) 23,683 (139) 35,000 (15,600) (64) 7,129 200 25,762 (38,575) 118 11,188 The Group ended the year with net debt of £8.1m (2020: £16.1m), a significant improvement on the previous year. Net debt comprised cash of £18.3m less bank borrowings of £15.4m and the Maltese listed bond of £11.0m. In October 2021 the Group extended its facility with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc (the ‘Lenders’) for an additional 18 months, to June 2024. The Group also transitioned from LIBOR to SONIA at this point. The Group’s total signed debt facilities at 31 October 2021 consisted of a revolving credit facility of £35m and £10m accordion. The Group has carefully assessed the likely impact of the Covid-19 pandemic on the business and our customers. Idox is fundamentally resilient due to the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. We continue to monitor the situation and adapt our approach as required. Rob Grubb Chief Financial Officer 26 January 2022 42 Principal risks and uncertainties Responsibility for risk Risk identification and management strategy continues to be a key role for the Board, which has overall responsibility for the Group’s risk management. In addition, risk is specifically considered by the Audit Committee as part of the Audit cycle. Risk management and internal controls provide reasonable but not absolute protection against risk. We acknowledge that risk is present in almost every activity. Risk appetite is not static and is regularly assessed by the Board to ensure it continues to be aligned with the Group’s goals and strategy. The Audit Committee has responsibility for assessing and challenging the robustness of the internal control environment. This year, in light of the organisational changes in response to the COVID-19 pandemic, we have looked at and assessed additional controls to adapt to the changing environment. In addition, the Audit Committee engaged with more stakeholders across the business to ensure continuous improvements in controls, processes and reporting to build on the strong momentum over the preceding years. This will ensure the Group remains best placed to suitably mitigate risks that emerge as the Group’s operations evolve. Risk management processes and internal control procedures are established across all levels of the Group and are managed by the Executive Directors in conjunction with dedicated expert professionals in the business. We embed our Risk Assessment procedures in the Idox Software and Idox Content monthly business reviews. We also analysed and published internally our risk appetite statement, which informs the activity of the business. The Audit Committee commissioned KPMG to conduct a review to “assess the adequacy of risk management arrangements in place across the organisation, including an objective review of the approach and a review of the key risks contained within the risk register and the principal risks taken from the annual report for completeness”. This report was received in August 2021. KPMG’s report raised a number of improvement points which have been noted and actioned by the Executive Team however the report also concluded that “there are multiple areas of good practice” and that “the process for identifying, capturing and reporting risk at a senior level is robust and due to the regular review undertaken by the leadership team, we found it to be both flexible and agile. There is a demonstrable and positive tone at the top which includes a risk management strategy and well-defined appetite document”. Our Risk appetite: • • is strategic and is related to the pursuit of organisational objectives; forms an integral part of corporate governance; • guides the allocation of resources; • guides the organisation’s infrastructure, supporting its activities related to recognising, assessing, responding to, and monitoring risks in pursuit of organisational objectives; influences the organisation’s attitudes towards risk; is applied against all material risks in the business to determine whether mitigations are sufficient for residual risks to be closed or accepted; is multi-dimensional, including when applied to the pursuit of value in the short-term and the longer term of the strategic planning cycle; and • • • • requires effective monitoring of the risk itself and of the organisation’s continuing risk appetite. Embedding the risk culture Throughout the Group, risk management is subject to regular review and any opportunities for improvements identified are implemented. This is recognised by ongoing training and advice by divisional and business unit risk representatives, best practice sharing, gap analysis and internal benchmarking. Successful training and communication help build a culture and ability to further embed processes and procedures throughout the organisation. A more deeply embedded risk management culture supports long-term value creation for all stakeholders. Strategic Report | Principal risks and uncertainties 43 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Principal risks and uncertainties continued Principal Risks and Uncertainties The principal risks involved in delivering the Group’s strategy are actively managed and monitored against our risk appetite. Climate related risks are assessed and managed within the risk management structure described above but are reported in the environmental section of this report in line with the Taskforce for Climate-Related Financial Disclosures recommendations. Risk Principal risks Management of risks COVID-19 pandemic Idox implemented a number of governance, operational and financial management initiatives during the period of greatest uncertainty about the COVID-19 impact in 2020. Operations normalised during 2021 and whilst we remain alert to any changes in the national or international situation, day to day risk management is on a “business as normal” basis. Idox has carefully maintained its cash resources since the early emergence of the COVID-19 pandemic, fully drawing our banking facilities and taking up the option to defer some VAT payments to provide maximum liquidity in what was an uncertain environment. Notwithstanding this we recognised the importance of continuing to pay suppliers on time, especially given the financial vulnerability of some of our smaller suppliers. Now the impacts of the COVID-19 pandemic are becoming clearer, we have reduced the levels of drawings on our banking facilities and have started to repay the deferred VAT in line with the Government guidance. Following the impact of the COVID-19 pandemic in 2020, most businesses in most economies have continued to face unprecedented challenges with periods of reduced restrictions alternating with periods of greater limitations. It has become clearer which industries and businesses are more impacted by these restrictions and the associated impact on the general economic and trading environment and more business have been able to mitigate the impacts in the last year. Idox as a business has continued to prove more resilient than most throughout this time, principally because of our existing high levels of staff working from their home, the stability of our high recurring revenues, and the stability of our public-sector customer bases. Change in assessment of risk in the period We, and our customers, have fully adapted to new ways of “virtual” working. The Group transitioned all its people to working from home effectively, and changed the way we deal with our customers, suppliers, shareholders and banking partners which have become wholly remote, becoming the “new normal” as it has for most businesses. We now have over 12 months of experience to draw on. Idox has shown itself to be well- placed against the impacts of the COVID-19 pandemic but continues to assess changes in national and local restrictions and impacts on our people and our customers as they arise. We therefore believe this risk has significantly reduced in the period. Our plan is not dependent on the current situation changing although we fewer restrictions on travel and face to face customer interactions may offer some opportunities in relation to that plan. 44 Risk Principal risks Management of risks Political The Group has a large customer base in Local Government and other public sector bodies. A change in spending priorities by the current or a future Government could materially impact the Group. A diversified geographic footprint and sector focus reduces the risk of exposure due to adverse country or sector specific conditions. Our favoured revenue model is for high levels of recurring revenue to establish a stable base of contracted or highly visible revenues to react to any such changes in a more strategic timeframe. Our development priorities are to ensure we remain at the heart of our customer’s operations, delivering cost efficiencies and value for money whatever the political environment. Economic environment (outside of the COVID-19 pandemic) Our performance is affected by the economic cycles of the markets of the countries in which we operate. A diversified geographic footprint and sector focus reduces the risk of exposure due to adverse country or sector specific conditions. Change in assessment of risk in the period Following the impact of the COVID-19 pandemic, the current Conservative-led Government has committed significant resources to current and future public spending. Our products remain essential to supporting customers to do more with what they have, and we have not identified any of our solutions considered discretionary and therefore potentially subject to funding challenges for our customers. In the previous year the Government has published their planning reforms proposal which we continue to monitor carefully and contribute to where appropriate. There has been significant change within the responsible Government Department and indications are that a slightly less ambitious agenda may be followed. As a result, we are seeing more positive responses to our offers to contribute to help Government meet change objectives more quickly. Our strategy has been to exit non-core operations and to closely integrate our core operations. During the period we have disposed of our businesses in Belgium, Germany and the Netherlands. The exit of the UK from the Treaty of the European Union has generally increased the uncertainty in the economic, social and environmental markets in which we operate, although we see limited direct impacts on our business. We remain cognisant of UK and EU geo-political events and consider any impact on our chosen markets, both to reduce risk but also to capitalise on any opportunities that arise. Excluding the impact of the COVID-19 pandemic, we consider the Group to have lower risk due to the simplification measures taken during the year. In the main we operate within the UK, with a relatively small customer base outside. The Board considers that it is protected from cross border Brexit risks, as businesses largely serve the needs of the country in which they are located. Strategic Report | Principal risks and uncertainties 45 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Principal risks and uncertainties continued Risk Principal risks Management of risks Acquisitions The Group has stated ambition for bolt-on acquisitions as part of its growth strategy. Given the complexity of acquiring and integrating independent businesses into the Group, acquisitions and associated restructuring may not achieve the anticipated returns for the Group. Focus is placed on ensuring management reporting lines are clear, operational functions of acquired entities are supported, enhanced or consolidated into wider Group functions as appropriate, and the potential for upsell and cross-sell across the Group’s portfolio of products is maximised. We have project plans and track restructuring projects to their business case to ensure that actions match anticipated returns. Technological development The Group risks being outclassed by competitor products that have increased capabilities if the Group fails to deliver continued product development, including digital innovations. We strive to invest in quality assurance and research and development to deliver quality products into our chosen markets. In recent years we have invested significantly in increasing our capability in the delivery of digital and cloud- based solutions. Our acquisitions of Aligned Assets, thinkWhere and exeGesIS has brought additional capability in modern technology to the Group, notably in the fast-growing Geographical Information Services (GIS) area in which Idox was previously been dependent on third parties. 46 Change in assessment of risk in the period During the period the acquisition of Aligned Assets Limited, thinkWhere Limited and, towards the end of the period, exeGesIS Spatial Data Management Limited were completed. The integration of Aligned Assets and thinkWhere is well advanced and expected to be completed by early 2022. The integration of exeGesIS has also begun but will accelerate from early 2022 and is expected to be completed by the middle of the year. This strategy mitigates against the risk of organisational overload due to multiple concurrent integrations. We have been actively scouting for potential bolt-on acquisitions during the period and have identified narrow acquisition criteria that will maximise chances of success for both an acquired business and the wider Group. We have also strengthened our acquisition framework and documentation, setting out clearly the due diligence processes and steps to ensure appropriate assurance is in place before proceeding to completing an acquisition. We consider the Group to continue to have lower risk, as assessed in the previous period, in respect of acquisitions due to these measures. Idox Cloud is having significant success in the market. During the year we have continued to make improvements to Plantech offerings, including beginning to introduce the address management and GIS capabilities from the acquisitions made this year. In our wider Group, we have performed product assessments to consider the status of our products and further work required against revenue and market opportunities, and adjusted development plans accordingly. As a result, we consider the Group to have lower risk from Technological development than in previous periods. Risk Principal risks Management of risks Ability to sell effectively The Group has deep experience of selling our broad portfolio of products. The Group has strong controls to support its sales teams in selling effectively. These include upfront business approval controls to ensure we are only bidding for work that has a suitable opportunity for a profitable, cash reward, and review controls to ensure once we are committed with a customer, the agreed terms are achieved. We perform regular reviews of short, medium and long-term cash forecasting to ensure our anticipated levels of cash are sufficient to meet both near- term requirements and longer-term strategic objectives. We carefully manage cash receipts and payments with customers and suppliers to ensure cash is delivered in line with agreed obligations. It is imperative we have effective sales and marketing models, methodologies and techniques to effectively realise our investments in software products and to recover the costs of associated delivery and support functions, and that this is done in a profitable and cash generative way. The Group has borrowings in the form of bank debt and a listed Bond following prior period acquisitions. It is key that our capital structure is appropriately managed to ensure we can meet all obligations as they fall due, to ensure we have sufficient headroom to execute our strategy by being able to fund organic and inorganic investments, and ultimately to deliver cash returns for our investors. Capital structure Change in assessment of risk in the period The Group is seeing significant benefit in terms of broader and deeper customer insight resulting for completion of the implementation of a Group-wide CRM in the previous year. There is a significant pipeline of further enhancements which will further strengthen the control framework in our selling environment. We continue to ensure there is a strong link between market opportunity and our ability to exploit both with product either ready or on our development roadmap, and the strength of our sales infrastructure to realise this. We consider selling to be a “whole- team” activity that is the responsibility of every member of the Group and so continue to strive for further improvements. We consider the Group to have maintained lower risk in respect of selling than in previous years. We retain regular and detailed dialogue with our lenders. During the year we have completed an extension of our banking facilities and transitioned from LIBOR to SONIA. The Group continues to generate good cashflows, reducing leverage and improving headroom against facilities. Given this extension and the previous year’s refinancing, we consider the Group to have lower capital structure risk than in previous years. Cyber risk We operate systems that maintain our confidential data and in some cases that of our customers. We have cyber, data protection and security policies in place and regularly review the effectiveness of these policies. An information security breach or cyber-attack could result in loss or theft of data, content or intellectual property. There is an enterprise-wide data security programme and defined incident management processes, including those for employees to report security breaches. Whilst we are satisfied with our actions in the period to mitigate cyber risk, we remain cognisant that, it is by nature a constantly developing risk and we continue to review our processes and approaches on an ongoing basis. Our assessment of this risk has not changed during the year. The Group is accredited to the UK Government based Cyber Essentials standard and operates an ISO 27001 accredited Information Security Management System. Strategic Report | Principal risks and uncertainties 47 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Governance 50 Board of Directors Directors’ report 52 56 Corporate governance report 61 Directors’ responsibilities statement 62 Report of the Audit Committee Driving faster delivery of complex capital projects and better project collaboration Doing more for Engineering & Construction Driving collaboration and supporting multi-million document migration Engineering Information Management Cloud-based Engineering Information Management software designed to facilitate project collaboration and ensure the accuracy and integrity of information on complex capital projects. 48 Driving secure data storage and efficient management of more than 200,000 engineering documents “Using the Idox system has given us a 20% increase on the number of documents we can process, quality control check and load into the system in a day. Its simplicity and flexibility has completely changed our ways of working for the better.” Tim Houston Document Control Lead Torxen Energy See how we help Property do more www.idox.com/property Governance 49 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Board of Directors Great Board experience David Meaden Chief Executive Officer Chris Stone Non-Executive Chairman Alice Cummings Non-Executive Director David Meaden was appointed Chief Executive on 1 June 2018. Prior to joining Idox, David held the position of Chief Executive at Northgate Public Services, a FTSE 250 company, and led the business through its successful sale to Cinven in 2014. David has a degree in Business Studies from the University of Huddersfield. Chris was appointed Non-Executive Chairman on 22 November 2018. Chris is the Chairman of NCC Group plc and was Chairman of CityFibre plc until its sale. He has held various non-executive director and chief executive roles of listed and private equity backed technology companies, including being CEO of Northgate Information Solutions plc, from 1999 to 2011 where he led the transformation of the business from a small domestic player to a global leader. From 2013 to 2016, Chris was CEO of Radius Worldwide, a provider of software and services to support high growth companies establish and manage international operations. Alice Cummings is Vice-Chair of Cottsway Housing Association, an Independent Non-Executive Director and Chair of the Audit and Risk Committee of South Staffordshire Water plc and of Recycling Technologies Group plc. She was previously Group CFO for over seven years at the InHealth Group, the healthcare services and solutions business, where she had responsibilities for risk management, digital and IT, people services and commercial teams. During her career, she also spent over 16 years in commercial, operational and financial roles with the AEA Group, a main listed environmental, energy efficiency and data management consultancy, ultimately as Group CFO. She is a qualified FCA, having started her career with PricewaterhouseCoopers. She is the Chair of the Audit Committee. 50 Phil Kelly Non-Executive Director Rob Grubb Chief Financial Officer Phil has served as a non-executive director of several listed and private companies in the software and related services sector, and was a non-executive director of Castleton Technology plc between 2014 and 2020. Prior to that he had over 25 years’ experience as the Chief Executive of private and publicly quoted software companies supplying the commercial and public sectors in the UK, Europe and the USA. Phil had previously worked for Digital Equipment Corporation and 3i Consultants. He has an Economics degree from the University of Leicester and a Master’s Degree in Business Administration from Cranfield University. Rob Grubb was appointed Chief Financial Officer on 1 November 2018. Prior to joining Idox, Rob held the position of CFO at Gresham Technologies plc from 2009 to March 2018 where he also served as Company Secretary until 2013. Prior to this he held roles at Lucite International and Ernst & Young in the UK and New Zealand specialising in financial services and technology. Rob is a member of the Institute of Chartered Accountants of Scotland. 20%Board diversity 50:50 Recruitment at management positions Governance | Board of Directors 51 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Directors’ report For the year ended 31 October 2021 The Directors submit their report and audited financial statements for the year ended 31 October 2021 Results and dividends The Group’s audited financial statements for the year ended 31 October 2021 are set out on pages 68 to 126. The Group’s profit for the year after tax amounted to £11.9m (2020: £1.3m). The Directors have paid a dividend of 0.3p per share in the first half of 2021 financial year, in respect of the year ended 31 October 2020. The Directors propose a dividend of 0.4p per share to be paid in respect of the year ended 31 October 2021. COVID-19 pandemic The Group continues to monitor the impact of the COVID-19 pandemic. Idox is well placed because of the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of employees that routinely work from home. Further details of our assessment of the impact of the COVID-19 pandemic on the Group is included in the Going Concern disclosures in the Directors’ Report on page 54. Future developments Further information in relation to future developments has been disclosed in the Strategic Report as permitted by The Companies Act 2006, S414c(11). Research and development activities Further information in relation to research and development activities has been disclosed in the Strategic Report as permitted by The Companies Act 2006, S414c(11). Engagement with suppliers, customers and others Further information in relation to engagement with suppliers, customers and others has been disclosed in the Strategic Report as permitted by The Companies Act 2006, S414c(11). Directors and their interests The Directors who served during the year and their beneficial interests (including those of their immediate families) in the Company’s 1p ordinary share capital were as follows: C Stone D Meaden R Grubb P Kelly A Cummings Number of shares 31 October 2021 1 November 2020 936,377 468,139 94,648 105,263 – 936,377 468,139 88,885 105,263 – In addition to the shareholdings listed above, certain Directors have been granted options over ordinary shares. Full details of these options are given in the Report on Remuneration on pages 56 to 57. Since the balance sheet date, R Grubb has purchased an additional 872 shares through the employee share scheme. No other movements have taken place. Details of the Directors’ service contracts can be found in the Report on Remuneration on pages 41 to 42. 52 Insurance for Directors and officers The Group has granted an indemnity to one or more of its Directors against liability in respect of proceedings brought by third parties, subject to the conditions set out in section 234 of the Companies Act 2006. Such qualifying third- party indemnity provision remains in force as at the date of approving the Directors’ Report. Directors’ and officers’ liability insurance with an indemnity limit of up to £10m has been purchased in order to minimise the potential impact of proceedings against Directors in respect of claims that fall within the policy cover provided. Substantial shareholdings As at 31 October 2021, the Company was aware of the following interests in 3% or more of its issued share capital: Shareholder Number of shares % Holding Canaccord Genuity Wealth Management Soros Fund Management Long Path Partners Kestrel Partners Herald Investment Management Gresham House Asset Management Transaction in own shares During the year, the Group did not purchase any of its own ordinary shares. During the year three share option exercises were satisfied using treasury shares. These exercises used a total of 65,000 treasury shares. The maximum number of shares held in treasury at any time during the year was 1,491,219, which had a cost value of £620,182. The current number of shares held in treasury is 1,426,219. Health, safety and environmental policies The Group recognises and accepts its responsibilities for health, safety and the environment (‘H,S&E’) and has a team which provides advice and support in this area. The team members regularly attend external H,S&E courses and internal reviews are performed on a regular basis to ensure compliance with best practice and all relevant legislation. Anti-slavery and human trafficking Pursuant to Section 54 of the Modern Slavery Act 2015, the Group has published a Slavery and Human Trafficking Statement for the year ended 31 October 2021. The Statement sets out the steps that the Group has taken to address and 90,031,766 52,181,652 47,396,301 40,460,396 31,659,483 25,643,781 20.15 11.68 10.61 9.05 7.08 5.74 reduce the risk of slavery and human trafficking occurring within its own operations and its supply chains. This statement can be found on the Group’s corporate website: https:// www.idoxgroup.com/about-us/ corporate-responsibility/. views, including our CEO broadcast, employee engagement surveys and a wide range of employee initiatives. In addition, the Group has connected Team sites, and a newly developed intranet hub, which facilitates faster and more effective communication. Disabled employees Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes and abilities of the applicant concerned. In the event of members of our employees becoming disabled, every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled employees should, as far as possible, be identical with that of other employees. Employee consultation The Group consults employees on appropriate matters via the Group’s employee engagement hub, Idox Voice, comprising employee facilitators who reflect the Group’s business activities. Employees are encouraged to present their views and suggestions in respect of the Group’s performance and policies, and we engage across a wide range of platforms to hear employee An Employee Share Investment Trust is in place to provide UK-based employees with a tax efficient way of investing in the Company. The Company purchases matching shares, which become the property of the employee after a three-year vesting period. Financial risk management objectives and policies The Group uses various financial instruments which include cash, equity investments, bank loans and items such as trade debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Group’s operations. The main risks arising from the Group’s financial instruments are credit risk, liquidity risk, exchange rate risk, price risk and interest rate risk. The Directors review these risks on an ongoing basis. This policy has remained unchanged from previous years. Further information on financial risk management is disclosed in note 23 of the Group accounts. Governance | Directors’ Report 53 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Directors’ report continued For the year ended 31 October 2021 Credit Risk The Group’s principal financial assets are cash and trade receivables. The credit risk associated with cash is limited as the counterparties have high credit ratings assigned by international credit-rating agencies. The principal credit risk arises therefore, from its trade receivables. In order to manage credit risk, the management review the debt ageing on an ongoing basis, together with the collection history and third-party credit references where appropriate. Liquidity Risk The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs through cash management and availability of borrowing facilities and by investing cash assets safely and profitably. Exchange Rate Risk The Group monitors its exposure to exchange rate risk on an ongoing basis. The Group has limited exposure to foreign exchange risk as a result of natural hedges arising between sales and cost transactions. Cash Flow and Interest Rate Risk The Group’s bank borrowings bear interest at rates linked to LIBOR, this was transitioned to SONIA as part of the bank facility extension in October 2021. On an ongoing basis, the Board reviews the SONIA rate and discuss whether it is considered necessary to set up hedges to protect against interest rate movements. Going concern The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered the Group’s budget, cash flow forecasts, available banking facility with appropriate headroom in facilities and financial covenants, and levels of recurring revenue. In December 2019 the Group had refinanced with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc. The facilities, which comprise a revolving credit facility of £35,000,000, were extended during the current year and are committed until June 2024. Idox along with most companies has been impacted by the COVID-19 pandemic, however the impact on our Group has in the main been limited to the initial disruption of the early stages of the emerging challenges in 2020, including restrictions on physical movement. We have largely seen our operations return to their pre-COVID-19 pandemic levels across our Group. We remain cautious in respect of the ongoing impact of the COVID-19 pandemic and associated restrictions but are confident we are fundamentally resilient due to the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. We continue to assess the impact of the COVID-19 pandemic on the business, taking actions to mitigate or limit the impacts on our organisation where we can and supporting our staff, customers and partners in dealing with the ongoing impacts which are largely in respect of associated restrictions. As part of the preparation of our FY21 results, the Group has performed detailed financial forecasting, as well as severe stress-testing in our financial modelling, but have not identified any credible scenarios that would cast doubt on our ability to continue as a going concern. The Group has performed sensitivity analysis of financial modelling to identify what circumstances could lead to liquidity challenges. This forecasting has demonstrated that the Group would only breach its banking covenants in the most severe of circumstances which are not considered credible. Under this sensitivity analysis, recurring revenues renewals were assumed to be 37% lower than plan and non-recurring revenues won and delivered lower by 74%, with no corresponding action on costs to address these shortfalls. Under this scenario, the Group would likely be in breach of its banking covenants during FY22, albeit liquidity even in this extreme scenario remains strong. This scenario is not considered credible given the growth the Group has experienced in FY20 and FY21 in recurring and non-recurring revenues despite the impact of the COVID-19 pandemic. Therefore, this supports the going concern assessment for the business. 54 Auditor A resolution to reappoint an Auditor and to authorise the Directors to agree their remuneration will be placed before the forthcoming Annual General Meeting of the Company. Statement of disclosure to Auditor So far as each person who was a Director at the date of approving these financial statements is aware, there is no relevant audit information of which the Group’s auditor is unaware. Additionally, each Director has taken all the necessary steps, that they ought to have taken as a Director in order to make themselves aware of all relevant audit information and to establish that the Group’s auditor is aware of this information. This report was approved by the Board of Directors and authorised for issue. Signed on its behalf by: David Meaden Chief Executive Officer 26 January 2022 Governance | Directors’ Report 55 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Corporate governance report For the year ended 31 October 2021 Idox has a Remuneration Committee. Terms of Reference for this Committee are available at https://www.idoxgroup. com/investors/corporate-governance/. Phil Kelly was appointed as Chair of the Remuneration Committee on his appointment as a Director on 29 March 2019. The Company’s remuneration policies and the application of these policies to the Board and Senior Management Team during the year are set out in the sections below. Remuneration policy The policy of the Group is to set levels of remuneration to attract, retain and motivate Executive Directors and other key senior staff. The packages are designed to be competitive in value to those offered to the Directors of similar sized public companies in related sectors. It is the Board’s policy to align the long-term interests of managers with those of our shareholders in the granting of options and other equity awards. The components of the Executive Directors’ remuneration packages are currently a basic salary, bonus, money purchase pension contributions and benefits in kind. The benefits include car allowance, private medical cover and life cover. The bonus elements are dependent on the Executive Directors achieving performance criteria set out by the Remuneration Committee. In addition, the Group operates a Long-term Incentive Plan for the Executive Directors. Directors’ remuneration 2021 Executive Directors David Meaden Rob Grubb Non-Executive Directors Chris Stone* Phil Kelly Alice Cummings * Chairman 2020 Executive Directors David Meaden Rob Grubb Non-Executive Directors Chris Stone* Phil Kelly Alice Cummings (appointed 14 April 2020) Oliver Scott (resigned 14 April 2020) Jeremy Millard (resigned 28 August 2020) Basic salary and fees 2021 £000 Bonus 2021 £000 Benefits in kind 2021 £000 Total 2021 £000 Pension 2021 £000 331 175 100 35 35 676 232 92 – – – 20 10 – – – 583 277 100 35 35 324 30 1,030 – 10 – – – 10 Basic salary and fees 2020 £000 Bonus 2020 £000 Benefits in kind 2020 £000 Total 2020 £000 Pension 2020 £000 331 175 100 35 19 19 29 159 74 – – – – – 20 9 – – – – – 510 258 100 35 19 19 29 708 233 29 970 – 10 – – – – – 10 * Chairman The amounts in respect of pension represent money purchase pension contributions. 56 Non-Executive Directors The Board reviews the remuneration of the Chairman and Non-Executive Directors on a regular basis. Service contracts The Executive Directors have entered into service contracts with the Group that are terminable by either party on no less than six months prior notice. Share options The Directors believe it is important to incentivise key management and employees. The following options have been granted to the Directors over ordinary 1p shares in the Company: Granted Exercised Lapsed At end of year Exercise price Exercise date from Exercise date to Director At start of year Chris Stone 585,500 David Meaden 3,512,400 Rob Grubb 1,000,000 Rob Grubb 324,074 – – – – David Meaden Rob Grubb – – 933,962 495,283 Totals 5,421,974 1,429,245 – – – – – – – – – – – – – – 585,500 3,512,400 1,000,000 324,074 933,962 495,283 6,851,219 1p 0p 0p 0p 0p 0p Mar 2019 Mar 2029 Mar 2020 Mar 2029 Mar 2020 Mar 2029 Jun 2021 Jun 2030 Feb 2022 Feb 2031 Feb 2022 Feb 2031 The £Nil cost Directors’ options vest evenly over the three years from issue, with the date exercisable from noted in the table above being the date at which the first third of the options are available to exercise. The other options have no vesting conditions and are fully exercisable from the dates noted in the table above. The mid-market price of the Company’s shares at close of business on 31 October 2021 was 71.60p and the low and high share prices during the year were 47.33p and 81.92p, respectively. The Company recognised total expenses of £1,908,150 (2020: £1,057,423) related to equity-settled, share-based payment transactions during the year in respect of all Directors and employees, of which £1,908,150 (2020: £1,057,423) related to the LTIP share option scheme. The pre-tax aggregate gain on exercise of share options during the year was £Nil (2020: £Nil). Note 25 of the Group accounts contains full disclosure of the Company’s share options. Directors’ share interests The Directors’ shareholdings in the Company are listed in the Directors’ Report on page 52. Corporate governance Idox has adopted the QCA Corporate Governance Code (the “Code”) on a comply or explain basis. Further Information on that can be found within the Compliance Statement published on our website: https:// www.idoxgroup.com/wp-content/ uploads/2020/07/idox-plc- statement-of-compliance-with-the- corporate-governance-code_1118.pdf. Where Idox chooses not to comply with the Code it will explain such choices in the context of the business. Board of Directors Subject to the Articles of Association, UK legislation and any directions given by special resolution, the business of the Group is managed by the Board. The Code requires the Group to have an effective Board whose role is to develop strategy and provide leadership to the Group as a whole. It sets out a framework of controls that allows for the identification, assessment and management of risk. Additionally, it ensures the Board takes collective responsibility for the success of the Group. The Board’s main roles are to provide leadership to the management of the Group, determine the Group’s strategy and ensure that the agreed strategy is implemented. The Board takes responsibility for approving potential acquisitions and disposals, major capital expenditure items, disposals, annual budgets, annual reports, interim statements and Group financing matters. The Board appoints its members and those of its principal Committees, following the recommendations of the Nomination Committee. The Board reviews the financial performance and operation of the Group’s businesses. The Board regularly reviews the identification, evaluation and management of the principal risks faced by the Group, and the effectiveness of the Group’s systems of internal control. Governance | Corporate governance report 57 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Corporate governance report continued For the year ended 31 October 2021 The Board considers the appropriateness of its accounting policies on an annual basis. The Board believes that its accounting policies, in particular in relation to income recognition and research and development, are appropriate and are discussed with its Auditors on future changes to such accounting policies. Financial results with comparisons to budget and forecast results are reported to the Board on a regular basis, together with a commercial report on operational issues. Significant variances from budget or strategy are discussed at Board meetings and actions set in place to address them. Board and committee meetings are scheduled in line with the financial calendar of the Group. The timing of meetings ensures the latest operating data is available for review and that appropriate time and focus can be given to matters under consideration. The Board met nine times throughout the year for principal Board meetings to discuss a formal schedule of business. The Board is supported by an Executive team, and is supported by qualified Executive, senior and finance management teams. Role of Chairman and Chief Executive Officer The Code requires that there should be a clear division of responsibilities between the running of the Board and the Executive responsible for the Group’s business, so as to ensure that no one person has unrestricted powers of decision. The Chairman is responsible for the leadership of the Board, ensuring its effectiveness and setting its agenda. Once strategic and financial objectives have been agreed by the Board, it is the CEO’s responsibility to ensure they are delivered upon. To facilitate this, the CEO regularly meets the Executive Management Team (EMT) which additionally comprises business division directors and senior members of the management team. The day to day operations of the Group are managed by the EMT. Composition of and appointments to the board The Code requires that there should be a balance of Executive and Non-Executive Directors and when appointing new Directors to the Board, there should be a formal, rigorous and transparent procedure. The Board comprises the Non-Executive Chairman, the CEO, the CFO and two Non-Executive Directors. Short biographies of the Directors are given on pages 50 to 51. The Board considers Chris Stone, Alice Cummings and Phil Kelly as independent. The Board is satisfied with the balance between Executive and Non-Executive Directors and will continue to review this position in the coming years. The Board considers that its composition is appropriate in view of the size and requirements of the Group’s business and the need to maintain a practical balance between Executive and Non- Executive Directors. Each member of the Board brings different skills and experience to the Board and the Board Committees. The Board is satisfied that there is sufficient diversity in the Board structure to bring a balance of skills, experience, independence and knowledge to the Group. The Code requires that the Board undertakes a formal annual evaluation of its own performance and that of its Committees and Directors. The Non- Executive Chairman continually works with each Non-Executive Director to assess their individual contribution and to assess that their contribution is relevant and effective, they have sufficient time to commit to the role, and where relevant, they have maintained their independence. The Board continues to annually review its composition, to ensure there is adequate diversity to allow for its proper functioning and that the Board works effectively together as a unit. When a new appointment to the Board is made, consideration is given to the particular skills, knowledge and experience that a potential new member could add to the existing Board composition. The Nomination Committee may elect to engage external recruitment agencies, with appropriate consideration being given, in regard to Executive appointments to internal and external candidates. Before undertaking the appointment of a Non-Executive Director, the Chairman establishes that the prospective Director can give the time and commitment necessary to fulfil their duties, in terms of availability both to prepare for and attend meetings and to discuss matters at other times. Board committees The Audit Committee has been established to look after specific areas of the Board’s responsibilities. The Audit Committee is chaired by Alice Cummings and at present includes Chris Stone and Phil Kelly. The Report of the Audit Committee can be found on pages 62 to 65. The Remuneration Committee is chaired by Phil Kelly and at present includes Chris Stone and Alice Cummings. The Committee has overall responsibility for making recommendations to the Board, of the remuneration packages of the Executive Directors. The Committee’s key responsibilities include: • making recommendations to the Board on any changes to service contracts; • approving and overseeing any share related incentive schemes within the Group; • ensuring that remuneration is in line with current industry practice; and • ensuring remuneration is both appropriate to the level of responsibility and adequate to attract and / or retain Directors and staff of the calibre required by the Group. 58 The Nomination Committee includes Chris Stone, Alice Cummings and Phil Kelly as members. The Committee has overall responsibility for making recommendations to the Board, of the composition of the Board. The Committee’s key responsibilities include: • reviewing the size, composition and structure required of the Board and making recommendations to the Board with regard to any changes; • identifying and nominating, for approval by the Board, candidates to fill Board vacancies as they arise; • giving full consideration to succession planning for Directors; and • vetting and approving recommendations from the Executive Directors for the appointment of senior Executives. The Audit Committee met four times in the year, the Remuneration Committee met three times in the year, and the Nominations Committee met once in the year. Re-election Under the Code, Directors should offer themselves for re-election at regular intervals. Additionally, under the Group’s Articles of Association, at least one third of the Directors who are subject to retirement by rotation are required to retire and may be proposed for re-election at each Annual General Meeting. New Directors, who were not appointed at the previous Annual General Meeting, automatically retire at their first Annual General Meeting and if eligible, can seek re-appointment. There are three Directors due to retire by rotation and seek re-election at the next Annual General Meeting. Internal control The Board takes responsibility for establishing and maintaining reliable systems of control in all areas of operation. These systems of control, especially of financial control, can only provide reasonable but not absolute assurance against material misstatement or loss. The Board remains committed to a continuous programme to make improvements in controls, processes and reporting to build on the strong progress in the year to ensure the Group remains best placed to suitably mitigate risks that emerge as the Group’s operations evolve. During the year the Group has worked with specialists to perform a gap analysis on its risk and control frameworks. This review did not identify any concerns and provided guidance on a suitable evolution of relevant internal audit for Idox given our size and circumstance. The Audit Committee has maintained a close dialogue with Management and the Group’s external auditors in FY21 and the resulting audit process to ensure the extensive operational reviews performed by the Management team have been thorough and the resulting accounting has been appropriate. In addition, we have worked closely with the Management team as part of their efforts to upgrade processes and controls throughout the Group, and where appropriate have requested recommendations for future improvements for addressing identified issues. • sufficient resource is focused to maintain and develop internal control procedures and information systems, especially in financial management. The Board considers that there have been improvements in internal financial controls that have reduced the risk of material losses, contingencies or uncertainties that need to be disclosed in the accounts. These improvements have included Business Approval Forms, whereby all new business must be approved based on size and risk before presentation to the customer, formal bid reviews for material contracts, balance sheet and cash flow forecasting, and introduction of detailed monthly business reviews. The Board remains committed to further improvements in the internal control environment of the Group and is currently working with senior operational and finance staff to; • further extend the Group’s suite of financial reporting through investments in its Customer Relationship Management and Enterprise Resource Planning systems and internal resourcing to improve granularity and robustness of routine reporting; The key matters relating to the system of internal control are set out below: • • Idox has established an operational management structure with clearly defined responsibilities and regular performance reviews; • the Group operates a comprehensive system for reporting financial and non- financial information to the Board, including review of strategy plans and annual budgets; • on a monthly basis, financial results are monitored in detail against budgets, forecasts and other performance indicators with action dictated accordingly at each meeting; • a structured approval process is maintained for sales order-to-cash and procurement purchase-to-pay processes based on assessment of risk and value delivered; and incorporate the outputs from the detailed monthly business reviews in Board reporting, detailing operational issues as they arise and any impact on the Group’s financial reporting; • facilitate senior operational management to attend Board meetings and present on their subject matter and answer questions; • embed risk management throughout the organisation, by establishing risk registers at a divisional level, to be consolidated and presented to the Board; and • consider the need for internal audit, notably to ensure the control frameworks established are being suitably adhered to. Governance | Corporate governance report 59 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Corporate governance report continued For the year ended 31 October 2021 The Board confirms that there is an ongoing process for identifying, evaluating and managing the significant risks faced by the Group, and that this process has been in place for the year under review and up to the date of approval of the Annual Report and Accounts. This process is regularly reviewed by the Board. Information and Development The Code requires that the Board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. The Chairman is responsible for ensuring that all the Directors continually update their skills, knowledge and familiarity with the Group in order to fulfil their role on the Board and the Board’s Committees. Updates dealing with changes in legislation and regulation relevant to the Group’s business are provided to the Board by external advisors, the CFO, the Company Secretary and in- house legal advisors. All Directors have access to the advice and services of the Company Secretary, who is responsible to the Board for ensuring its procedures are properly complied with and that the discussions and decisions are appropriately minuted. Directors may seek independent professional advice at the Group’s expense in furtherance of their duties as Directors. Training on matters relevant to their role is available to all Board Directors. New Directors are provided with an induction in order to introduce them to the operations and management of the business. Investor relations Idox is committed to open communication with all its shareholders. The Directors hold regular meetings with institutional shareholders to discuss and review the Group’s activities and objectives. Communication with private shareholders is principally through the Annual General Meeting, where participation is encouraged and where the Board is available to answer questions. Idox maintains up-to-date information on the Investor Relations section of its website https://www. idoxgroup.com/investors/. The CEO and CFO meet institutional investors after publication of the annual and interim results, on an ongoing basis, as required. The Directors also undertake consultation on certain matters with major shareholders from time to time. Through these consultations, the Group maintains a regular dialogue with institutional shareholders. Feedback is reported to the Board so that all Directors develop an understanding of the views of major shareholders. Trading updates and press releases are issued as appropriate and the Group’s Nominated Advisor (NOMAD) provide briefings on shareholder opinion and compile independent feedback from investor meetings. The Annual General Meeting is used by the Directors to communicate with both institutional and private investors. Every shareholder has access to a full annual report each year end and an interim report at the half year end. Care is taken to ensure that any price sensitive information is released to all shareholders, institutional and private, at the same time in accordance with London Stock Exchange requirements. Idox strives to give a full, timely and realistic assessment of its business in all price-sensitive reports. AIM rule compliance report Idox is quoted on AIM, London Stock Exchange’s international market for smaller growing companies. Idox complies with the AIM Rules, in particular AIM Rule 31 which requires the following: • sufficient procedures, resources and controls to enable its compliance with the AIM Rules; • seek advice from NOMAD regarding its compliance with the Rules whenever appropriate and take that advice into account; • provide the NOMAD with any information it reasonably requests in order for the NOMAD to carry out its responsibilities under the AIM Rules for Nominated Advisers, including any proposed changes to the Board and provision of draft notifications in advance; • ensure that each of the Directors accepts full responsibility, collectively and individually, for compliance with the AIM rules; and • ensure that each Director discloses without delay all information which the Group needs in order to comply with AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the Director or could with reasonable diligence be ascertained by the Director. 60 Directors’ responsibilities statement For the year ended 31 October 2021 Directors’ responsibilities statement The Directors are responsible for preparing the Annual Report and Accounts and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the parent Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS 101 “Reduced Disclosure Framework”. Under Company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs and profit or loss of the Group and Company for that period. In preparing the parent 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 applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. In preparing the Group financial statements, International Accounting Standard 1 requires that Directors: Responsibility statement The Directors confirm that to the best of their knowledge: • the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; • the strategic report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and • the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. This responsibility statement was approved by the Board of Directors on 26 January 2022 and is signed on its behalf by: David Meaden Chief Executive Officer Rob Grubb Chief Financial Officer • properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and • make an assessment of the Company’s ability to continue as a going concern. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of 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 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 Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Governance | Directors’ responsibilities statement 61 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Report of the Audit Committee For the year ended 31 October 2021 Overview This report presents the activities of the Committee during the financial year ended 31 October 2021. The report provides insights on the Committee’s work and sets out how the Committee has fulfilled its responsibilities in relation to the integrity of financial reporting, oversight of risk management and internal control and the effectiveness of the external audit. Membership and meetings The Audit Committee is a committee of the Board comprised of three Non-Executive Directors: Alice Cummings, Chris Stone and Phil Kelly. The Audit Committee is chaired by Alice Cummings. The Board considers that Alice Cummings has relevant and recent financial experience to discharge this role, as noted on page 36. The Audit Committee members are considered to have sufficient, recent and relevant financial and commercial experience to discharge their duties. The Company Secretary is also the Secretary of the Audit Committee. The Committee carries out its activities for Idox plc, its major subsidiary undertakings and the Group as a whole, as appropriate. The Committee is provided with sufficient resources to perform its duties including support, as necessary, from the Executive Directors, senior managers, finance and legal team members, external accounting firms and the external audit firms for the Group and listed subsidiary. During the year under review, the Audit Committee held four scheduled meetings. The Audit Committee invites the Executive Directors, the Group’s and listed subsidiary’s Auditors and other senior managers to attend its meetings as appropriate. The Group’s Auditor has attended three of the four scheduled meetings. The Executive Directors attended all meetings of the Audit Committee in the year. Roles and responsibilities The Board reaffirmed its terms of reference for the Audit Committee during the year. The Audit Committee has a wide remit and its key roles and responsibilities include reviewing and advising the Board on: • the integrity of the financial statements of the Group, including its annual and interim reports, results announcements and any other formal announcement relating to its financial performance, reviewing significant financial reporting issues and the key judgements that they contain; • the appointment and remuneration of the Group’s Auditor and their effectiveness in line with the requirements of the Code; • the nature and extent of non- audit services provided by the Group’s Auditor to ensure that their independence and objectivity are maintained; • changes to accounting policies and procedures; • decisions of judgement affecting financial reporting, compliance with accounting standards and with the Companies Act 2006; • risk management processes, including the risk management framework, risk appetite statement and the principal strategic and operational risks; • internal controls, including financial delegations, internal control findings highlighted by management or the external audits; • the content of the Group’s and listed subsidiary’s Auditors’ transparency reports, concerning Auditor independence in providing both audit and non-audit services; • the scope, performance and effectiveness of other internal control functions and the Group Auditor’s assessment thereon; and • the Group’s procedures for responding to any allegations of wrongdoing including those made by whistle-blowers. 62 The Committee is satisfied with the effectiveness of the Auditor in performing their audit for the year ended 31 October 2021.” Alice Cummings Chairman of the Audit Committee Audit Committee activities in the financial year ended 2021 The Committee met four times during the financial year ended 31 October 2021 to consider standing items on its agenda. The Committee’s standing items on its agenda are: • reviewed the Interim Accounts and the Annual Report and Accounts in the context of being fair, balanced and understandable including related announcements and market updates; • considered the key audit matters; • considered the risk framework, risk appetite statement, risk register and principal risks to the Group; • considered the effectiveness of the Group’s risk management and internal control systems including resourcing the key internal control processes ensuring that the finance and operational teams are appropriately trained and qualified, including taking external specialist advice; • for each of the Group’s Auditor and the listed subsidiary’s Auditor, received and considered, as part of the review of the Annual Report and Accounts, reports from the Auditor in respect of the audit plan for the year and the results of the annual audit including the scope of the annual audit, the approach to be adopted by the Auditor to address and conclude upon key estimates and other key audit areas, the basis on which the materiality is assessed, the terms of engagement and fees for the Auditor, the letter of representation to the Auditor and an on-going assessment of the impact of future accounting developments for the Group; • considered the effectiveness and independence of the external auditors; • considered the level and value of non-audit services; • considered the key accounting and internal control policies; • considered the policies and reporting for any wrongdoing, fraud and whistleblowing; • considered management’s key judgements papers including the review of business reporting segments in line with guidance in respect of identifiable cash generating units; and • reviewed the budget process. The Committee discussed and took papers from Management and in some cases external advisors on a number of other matters that are not on the standing agenda including the tax strategy and transfer pricing arrangements, costs and provisions in relation to closed office locations, foreign exchange and derivatives, acquisitions and divestments and extending and updating banking arrangements for the changes to SONIA. Risk management The Audit Committee has responsibility for assessing and challenging the robustness of the risk management and internal control environment. During the year, the Committee commissioned and received a report from KPMG to assess the adequacy of risk management arrangements across the organisation including an objective review of the approach and a review of the key risks contained within the risk register and the principal risks in the Annual Report. There is now a well-articulated plan to develop a risk management dashboard and regular reporting suite for the senior managers and Board that provides insight over the key elements of the risk environment in a more dynamic and real time way including new/mitigated risks, key risk indicators, trend analysis and emerging risks. The Committee engaged with the Executive Directors and senior managers with input from KPMG to undertake a high-level assessment of the quality of internal controls by reference to a control benchmark. The aim of this exercise, which is in progress at the end of the reporting year, is to determine the gap (if any) between the expected and actual controls. This report will assist in developing an assurance policy and provide some information regarding options available to the organisation for developing an internal audit function. Governance | Report of the Audit Committee 63 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Report of the Audit Committee continued For the year ended 31 October 2021 Effectiveness of the Auditor The Committee continues to monitor the work of the Auditors to ensure that they remain effective. This includes liaising directly with the Group’s Auditor on significant matters including without the Executive Directors being present. The Committee also discusses the quality and value for money of the audit process with the Executive Directors and senior finance staff. The Committee is satisfied with the effectiveness of the Auditor in performing their audit for the year ended 31 October 2021. Independence and objectivity of the Auditor The Committee continues to monitor the work of the Auditor to ensure that the Auditor’s objectivity and independence is not compromised by it undertaking inappropriate non-audit work. The current auditor, Deloitte LLP, was appointed on 19 June 2018. The audit for the financial year ended 31 October 2021 is the fourth consecutive year end for the current audit partner and audit firm. The Audit Committee considers and reviews non-audit services provided by the Group’s Auditor, and this is tabled annually at the Board for discussion. The Audit Committee reports to the Board on the effectiveness of the Auditor. The Audit Committee and Board also consider the appointment of the Auditor annually prior to recommending the appointment of the Auditor at the Idox Annual General Meeting. Auditor objectivity was safeguarded by the Committee considering several factors: • an appraisal of the standing and experience of the audit partner; • using a different audit firm for the audit of the listed subsidiary in Malta; • using a number of different firms to provide tax compliance services, tax advice, risk management and internal control reviews and banking advisory services during the year; and • confirmation from the Auditor that they have complied with relevant UK independence standards and fully considered any threats and safeguards in the performance of non-audit work. Non-audit fees It is the Audit Committee’s policy to engage the Group’s Auditor for non- audit services where such level of expertise is not readily available from comparable firms at a commensurate cost and engaging for such services would not impair the independence of the Group’s Auditor. The Committee has not contracted for non-audit services with the Group’s Auditor in this financial year. Each engagement for non-audit services is carefully reviewed against this policy, and when the Committee is satisfied it approves all non-audit work commissioned from the external auditors. During the year the fees paid to the Auditor were £307,500 (2020: £425,000) for Group and subsidiary audit services, £Nil (2020: £Nil) for interim audit services, and £Nil (2020: £74,000) for non-audit services (in 2020, relating to tax compliance, tax advice and refinancing advice). The Committee concluded in 2020 that it was in the interests of the Group to use the Auditor for this work as they were considered to be best placed to provide these services and didn’t present a threat to Deloitte’s independence. Significant matters in relation to financial statements Revenue recognition Management assesses both legal paperwork and the underlying commercial specifics of transactions, alongside accounting standards, to determine the appropriate revenue recognition treatment for each of the different revenue streams. This assessment involves internal chartered accountants, internal legal staff, operational staff and professional advice where appropriate. The Audit Committee has reviewed the principles for each type of Group revenue stream and the mechanism used to determine the milestones and performance obligations as part of the Group’s Business Approval Form process (and equivalent processes for the newly acquired businesses where their full financial integration is from the start of the new financial year). As part of this work, the Committee has challenged and reviewed analyses of some specific multi-year contracts prepared by Management to confirm that the appropriate treatment for contract revenue recognition and recoverability of the associated receivables balances has been recorded. Goodwill and intangible assets valuation The Group recognises intangible assets acquired as part of business combinations. These include, Goodwill, Customer relationships, Trade names, Software, Databases and Order backlog, which are recorded at fair value at the date of acquisition. The determination of these fair values is based upon Management’s judgement and includes assumptions on the timing and amount of future incremental cash flows generated by the assets and selection of an appropriate cost of capital. Management estimates the expected useful lives of intangible assets and charges amortisation on those assets accordingly. 64 Reporting responsibilities The Committee makes whatever recommendations to the Board it deems appropriate on any area within its remit where action or improvement is required. The Committee ensures that it gives due consideration to laws and regulations, the provisions of the QCA Corporate Governance Code, the requirements of the UK Listing Authority’s Listing Rules, Prospectus and Disclosure and Transparency Rules, the AIM Rules for Companies and any other applicable rules as appropriate. The Committee also oversees any investigation of activities which are within its terms of reference. The Audit Committee operates within agreed terms of reference, which can be found on the Group’s website. Alice Cummings Chair of the Audit Committee 26 January 2022 Management is required to test, at least annually, whether goodwill has suffered any impairment. The recoverable amount is determined based upon value-in-use and net realisable value calculations. The value-in-use method requires the calculation of future cash flows and the choice of a suitable discount rate to calculate the present value of these cash flows. Pre-tax discount rates have been applied and are based on WACC calculations performed and supplied by independent valuation specialists. The Audit Committee has considered Management’s assessments of value- in-use of Cash Generating Units (CGUs) of intangible assets at the reporting date and the acquisition accounting for the businesses acquired in the second half-year. This included considering a range of sensitivities applied to future cash flows and the discount factors. The Committee has through its work confirmed that no impairment charge is required. Other matters The Committee is authorised to seek any information it requires from any Group employee in order to perform its duties. The Committee can obtain, at the Group’s expense, outside legal or other professional advice on any matters within its terms of reference. The Committee may call any member of staff to be questioned at a meeting of the Committee as and when required. The Committee has put in place discussions for senior teams across the organisation to meet with the Non-Executive Directors without the Executive Directors present and this year has held meetings with stakeholders in sales, development, legal and finance. Governance | Report of the Audit Committee 65 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Financial statements 68 76 77 Independent Auditor’s report to the members of Idox plc Consolidated statement of comprehensive income Consolidated balance sheet Consolidated statement of changes in equity 78 80 Consolidated cash flow statement 81 127 Company balance sheet Notes to the accounts Simplifying administration and enabling efficient delivery of citizens services Doing more for Public Sector Large-scale digital transformation that delivers real results Built Environment Public Protection Social Care & SEND Funding & Information Services On-premise and cloud software solutions for the management of planning, building control, land charges and gazetteer management, estates and street numbering. Specialist software to support inspection and enforcement of standards, including environmental health, licensing, trading standards and public sector housing. Provision of online information, advice and guidance, information portals and self-service tools to support delivery of adult social care, children’s services, and special educational needs and disabilities (SEND) services. Delivery of online funding information and advice services, powered by a unique database of funding programmes, grants and loans available from local, regional and national government, charitable trusts and corporate sponsors. 66 Overview Strategic report Governance Financial statements 128 129 Company statement of changes in equity Notes to the company financial statements Other information 137 Alternative performance measures 139 Company information Maximising operational efficiency with Idox Cloud “Implementing the Idox software offered us flexibility around remote working, accessing data from anywhere, and becoming agile which resulted in a more productive workforce and faster delivery of projects.” Janine Weaver Director South Thames Gateway Building Control Partnership See how we help Public Sector do more www.idox.com/property Computer Aided Facilities Management Transport Network Management Electoral Services Comprehensive facilities management software featuring an asset register, maintenance management, room and resource booking, property management, stock control and mobile workforce management modules. Command and control traffic management systems, real-time passenger information systems and fleet management systems. Electoral registration and management systems including postal vote checking, tablet canvassing, election count reporting and boundary management. Financial Statements 67 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Independent Auditor’s report to the members of Idox plc For the year ended 31 October 2021 Report on the audit of the financial statements 1. Opinion In our opinion: • the financial statements of Idox plc (the ‘parent Company’) and its subsidiaries (the ‘Group’) give a true and fair view of the state of the Group’s and of the parent Company’s affairs as at 31 October 2021 and of the Group’s profit for the year then ended; • the Group financial statements have been properly prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB); • the parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the financial statements which comprise: • the consolidated statement of comprehensive income; • the consolidated and parent Company balance sheets; • the consolidated and parent Company statements of changes in equity; • the consolidated cash flow statement; and • the related notes 1 to 31 to the Group financial statements, and the related notes 1 to 15 to the parent Company financial statements. The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law, international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as issued by the IASB. The financial reporting framework that has been applied in the preparation of the parent Company financial statements is applicable law and United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom Generally Accepted Accounting Practice). 2. 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 the parent Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (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. 68 3. Summary of our audit approach Key audit matters The key audit matters that we identified in the current year were: • Revenue recognition; and • Valuation of goodwill and intangible assets; Within this report, key audit matters are identified as follows: Newly identified Increased level of risk Similar level of risk Decreased level of risk Materiality Scoping Significant changes in our approach The materiality that we used for the Group financial statements was £580,000, which was determined on the basis of EBITDA benchmark. Our audit covered 94% of the Group’s total revenue, 91% of the Group’s PBT, 93% of the Group’s EBITDA and 84% of the Group’s net assets. Our approach is consistent with previous year with the exception of: • A change in the benchmark used to set materiality, to be 3% of EBITDA. The prior year was determined using profit before tax adjusted for impact of amortisation from acquisitions. • The impact of Covid-19 pandemic on going concern is no longer a key audit matter as business has proven to be resilient for past 2 years and it does not have an impact on the business’s ability to deliver or perform its obligations. 4. Conclusions relating to going concern In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the directors’ assessment of the Group’s and parent Company’s ability to continue to adopt the going concern basis of accounting included: • Evaluating the financing facilities including nature of facilities, repayment terms and covenants by reviewing the contracts; • Evaluating assumptions used and amount of headroom in the forecasts by performing independent recalculations, sensitivity analysis and stress test; • Assessing the appropriateness of management’s forecasted cash flows and covenants under the base case and worst-case scenario; • Assessing accuracy of forecast by comparing it to actual results; • Assessment of the disclosures in the financial statements relating to going concern. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group’s and parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. 5. Key audit matters Key audit matters are those matters that, in our professional judgement, 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) that we identified. These matters included 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. Financial Statements | Independent Auditor’s report 69 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Independent Auditor’s report to the members of Idox plc continued For the year ended 31 October 2021 5. Key audit matters continued 5.1. Revenue Recognition Key audit matter description The Group generated £62.2m of revenue (2020: £57.3m) during the year. The Group provides specialist software solutions. It has two separate business segments – Public Sector Software (PSS) and Engineering Information Management (EIM). Each business segment has its own revenue recognition policies (Refer to note 1 accounting policies) depending on the nature of the revenue (recurring or non-recurring) and underlying contractual arrangements. How the scope of our audit responded to the key audit matter Recurring revenue is defined as revenues associated with access to a specific ongoing service, with invoicing that typically recurs on an annual basis and underpinned by either a multi-year or rolling contract. These services include Support & Maintenance, SaaS fees, Hosting services, and some Managed Service arrangements which involve a fixed fee irrespective of consumption. Non- Recurring revenue is defined as revenues without any formal commitment from the customer to recur on an annual basis. Management judgement is required around the timing of when performance obligations are met, as well as for the application of principles set out in IFRS 15 Revenue from contracts with customers with regards to the measurement of revenue recognised. This judgement could be the subject of management bias surrounding the stage of completion of any projects that are not completed at year end and so we consider that this represents a fraud risk. Our key audit matter has been pinpointed to the cut-off, accuracy and occurrence of revenue from new contracts that have arisen in the year. As explained above, the key source of management judgement is in the application of IFRS 15 principles and identification of performance obligations. Further details are provided in Strategic Report on page 25 and note 2 of the financial statements. The audit procedures we performed in respect of this matter included: • Obtained an understanding of the relevant controls over the recording of revenue; • Testing of product and service revenue for new contracts during the year by focusing on those generating revenue one month pre year-end and one month post year-end, in order to assess cut-off, agreeing each sampled item to invoice details and evidencing the performance obligations criteria; • Assessing management’s accounting for a sample of new customer contracts in the year against the requirements of IFRS 15 Revenue from contracts with customers; • Testing a sample of invoices raised in the year for accuracy and occurrence to assess whether they were accounted for in line with the Group’s revenue recognition policy. Each of these items were traced through to invoice, third party support (e.g. purchase order or signed contract) and payment into the bank; • Testing of accrued income with each selected item agreed to evidence of the split of the revenue (service/product/ recurring), and also to assess whether the criteria for revenue recognition had been met before the year end; • Obtained customer confirmations for new projects in order to corroborate start date, end date and value of contracts. We received less than 50% responses back and hence performed alternative procedures where responses were not received and to also corroborate the responses received, by obtaining contracts to confirm start date, end date and value and also obtaining a list of all invoices raised during the year and post end and agreeing back to source document; • Detailed testing of deferred income agreeing each item selected to assess the split of the revenue recognised (service/product/recurring), and recalculating the portion of income that should be deferred based on evidence of the duration of the contract; and • Assessed the disclosures in the financial statements. Key observations Based on the work performed we are satisfied that the revenue was appropriately recognised in accordance with the requirements of IFRS 15. 70 5.2. Valuation of goodwill and intangible assets Key audit matter description The Group has goodwill of £51.2m (2020: £48.0m) and other intangible assets of £40.8m (2020: £33.6m) as at 31 October 2021. As required by IAS 36 Impairment of assets, management performs an impairment review for all goodwill balances on an annual basis, and for other assets whenever an indication of impairment is identified. For further details, refer accounting policies in note 1 of the financial statements. How the scope of our audit responded to the key audit matter This has been identified as a key audit matter as a result of the quantitative significance of the balances, the application of management judgement and estimation in performing impairment reviews and the ongoing impact of Covid-19 on the long-term growth assumptions. Our significant risk in this area is focussed on the forecast assumptions of Engineering Information Management (“EIM”) Cash-Generating Unit (CGU) due to the historical lower headroom of the CGU because the business has been underperforming on budgets and is more sensitive to change in budgets. Determination of the recoverable amount incorporates estimation based on assumptions about future operating cash flows for the related businesses, using assumptions around discount rate, growth rates, and cash flow forecasts. Our key audit matter is focused around the most sensitive and judgemental assumptions, being the forecast cash flows in management’s assessment of recoverable amount based on value-in-use, and the discount rates applied to the cash flows. Further details are provided in Audit Committee report on page 51 and note 12 of the financial statements. The audit procedures we performed in respect of this matter included: • Obtaining an understanding of the relevant controls over the carrying value of goodwill and other intangible assets, in particular the controls over the forecasts that underpin the value-in- use models, and controls around management’s selection of the discount rate; • Challenging management’s assessment of the cash flow assumptions in determining value- in-use, including sensitivities, by assessing historical accuracy of forecasting and budgeting accuracy, reviewing the future sales order book and considering third party evidence where available and assessing the impact of Covid-19; • Agreeing cash flow forecasts to board approved budgets including net working capital and capital expenditure; • In response to the underperformance of historical budget and given low headroom, we have performed additional sensitivity analysis on EIM CGU; • Engaging our valuations specialist to perform a review of the discount rate applied on EIM CGU and to assess the long-term growth rate; • As a result of our work assessing management’s additional disclosure of sensitivity within the EIM CGU grouping; and • Engaging impairment specialist to review the valuation of EIM CGU. Key observations Based on the work performed we concluded that the valuation of goodwill and intangible assets relating to EIM CGU was appropriate, and following our challenge, appropriate disclosure has been made in the financial statements. Financial Statements | Independent Auditor’s report 71 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Independent Auditor’s report to the members of Idox plc continued For the year ended 31 October 2021 6. Our application of materiality 6.1. Materiality We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Group financial statements Parent Company financial statements Materiality £580,000 (2020: £355,000) £290,000 (2020: £85,000) Basis for determining materiality 3% of EBITDA In prior year, we determined materiality using adjusted income before tax. Rationale for the benchmark applied The change in basis has arisen as EBITDA is more stable benchmark following acquisitions and disposals during the year. Parent Company materiality equates to .43% (2020: .14%) of net assets, which is capped at 50% (2020: 40%) of Group materiality. As this is the ultimate holding Company for the Group, the key balances are investments held, external borrowings and intercompany balances. We have used EBITDA as the benchmark for our determination of materiality having considered the important metrics of the business for different stakeholder groups. Materiality has also increased as compared to prior year due to underlying growth in business following acquisitions. EBITDA £19,519k EBITDA Group materiality Group materiality £580k Component materiality range £162k to £365k Audit Committee reporting threshold £29k 6.2. Performance materiality We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group financial statements Parent Company financial statements Performance materiality Basis for determining materiality 70% (2020: 60%) of Group materiality 70% (2020: 60%) of parent Company materiality In determining performance materiality, we considered the following factors: our risk assessment, including our assessment of the Group’s overall control environment and the fact we did not plan to rely on controls; return to more stable trading performance and the history of prior period adjustments in prior years. 6.3. Error reporting threshold We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £29k (2020: £10k), as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 72 7. An overview of the scope of our audit 7.1. Identification and scoping of components Our Group audit was scoped by obtaining an understanding of the Group and its environment through discussions with finance, IT and commercial teams and performing walkthroughs of processes across these areas, including Group wide controls, and assessing the risks of material misstatement at a Group level. The Group operates globally with material revenues being generated in the United Kingdom, the United States of America, Europe and Australia. Revenues are split across the following segments: Public Sector Software and Engineering Information Management. On a legal entity basis, the significant components to the Group are Idox Plc and Idox Software Ltd. These components represent 83% of the Group’s revenue, 80% of the Group’s profit before tax, 81% of the Group’s EBITDA and 84% of the Group’s total net assets. All the work around components has been performed by the Group engagement team. Additionally, our audit planning identified the following non-significant components and specified audit procedures have been performed in relation to material account balances: McLaren Software Inc and Idox Health Limited. This adds an additional 11% of coverage over revenue, 11% over profit before tax, 13% of the Group’s EBITDA and 0% over total net assets. 6% 11% 6% 13% 9% 11% 16% 0% Revenue EBITDA Profit before tax Net assets 83% 81% 80% 84% Full audit scope Specified audit procedures Review at Group Level 7.2. Our consideration of the control environment During our audit we did not rely on IT controls, nor on manual controls over business cycles. Following previous year’s audit, management and the Board continue in their process of implementing an improved governance process and upgraded processes and controls throughout the Group as set out in Corporate Governance Report on page 45. As a result of the timing of implementation of these changes, a control reliance strategy for this year’s audit was not deemed to be appropriate. 8. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact . We have nothing to report in respect of these matters. 9. Responsibilities of Directors As explained more fully in the directors’ responsibilities statement, 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. Financial Statements | Independent Auditor’s report 73 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Independent Auditor’s report to the members of Idox plc continued For the year ended 31 October 2021 9. Responsibilities of Directors continued 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. 10. 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 FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report. 11. Extent to which the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. 11.1. Identifying and assessing potential risks related to irregularities In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non- compliance with laws and regulations, we considered the following: • the nature of the industry and sector, control environment and business performance including the design of the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets; • results of our enquiries of management and the audit committee about their own identification and assessment of the risks of irregularities; • any matters we identified having obtained and reviewed the group’s documentation of their policies and procedures relating to; – identifying, evaluating, and complying with laws and regulations and whether they were aware of any instances of non-compliance; – detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected, or alleged fraud; – the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations; • the matters discussed among the audit engagement team and relevant internal specialists, including tax, valuations, IT, and industry specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud. As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in Revenue Recognition. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of management override. We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of those laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The key laws and regulations we considered in this context included the UK Companies Act, Listing Rules, pensions legislation and tax legislation. In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. 11.2. Audit response to risks identified As a result of performing the above, we identified revenue recognition as key audit matter related to the potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the specific procedures we performed in response to that key audit matter. 74 In addition to the above, our procedures to respond to risks identified included the following: • reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant laws and regulations described as having a direct effect on the financial statements; • enquiring of management, the audit committee and in-house legal counsel concerning actual and potential litigation and claims; • performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due to fraud; • reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; • in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including internal specialists and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit. Report on other legal and regulatory requirements 12. 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. 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 any material misstatements in the strategic report or the directors’ report. 13. Matters on which we are required to report by exception 13.1. Adequacy of explanations received and accounting records Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not received all the information and explanations we require for our audit; or • 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. We have nothing to report in respect of these matters. 13.2. Directors’ remuneration Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of Directors’ remuneration have not been made. We have nothing to report in respect of this matter. 14. 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. David Mitchell, CA (Senior statutory auditor) For and on behalf of Deloitte LLP Statutory Auditor Glasgow, United Kingdom 26 January 2022 Financial Statements | Independent Auditor’s report 75 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Consolidated statement of comprehensive income For the year ended 31 October 2021 Continuing operations Revenue Cost of sales Gross profit Administrative expenses Operating profit Analysed as: Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs Depreciation Amortisation Restructuring costs Acquisition costs Financing costs Share option costs Finance income Finance costs Profit before taxation Income tax charge Profit for the year from continuing operations Discontinued operations Profit for the year from discontinued operations Profit for the year attributable to the owners of the parent Other comprehensive loss for the year Items that will be reclassified subsequently to profit or loss: Exchange movements on translation of foreign operations net of tax Other comprehensive loss for the year, net of tax Total comprehensive profit for the year Total comprehensive profit for the year attributable to owners of the parent Earnings per share attributable to owners of the parent during the year From continuing operations Basic Diluted From continuing and discontinued operations Basic Diluted Note 2 2021 £000 62,185 (17,130) Restated* 2020 £000 57,284 (14,752) 45,055 42,532 (37,415) (38,540) 7,640 3,992 2 3 3 3 5 19,519 (1,581) (8,623) 90 134 (110) 17,238 (1,498) (8,565) (1,748) (125) (306) 25 (1,789) (1,004) 6 6 8 9 10 10 10 10 818 (1,190) 7,268 (1,237) 6,031 5,918 11,949 (108) (108) 11,841 11,841 1.37p 1.34p 2.71p 2.65p 181 (2,358) 1,815 (1,338) 477 799 1,276 (97) (97) 1,179 1,179 0.11p 0.11p 0.29p 0.29p * The comparatives have been restated due to the Content business being reclassified as discontinued operations. There has been no change to the overall results. The accompanying accounting policies and notes form an integral part of these financial statements. 76 Consolidated balance sheet As at 31 October 2021 ASSETS Non-current assets Property, plant and equipment Intangible assets Right-of-use-assets Investment Deferred tax assets Total non-current assets Current assets Trade and other receivables Current tax receivable Cash and cash equivalents Total current assets Total assets LIABILITIES Current liabilities Trade and other payables Deferred consideration Current tax payable Other liabilities Provisions Lease liabilities Total current liabilities Non-current liabilities Deferred tax liabilities Deferred consideration Lease liabilities Other liabilities Provisions Bonds in issue Borrowings Total non-current liabilities Total liabilities Net assets EQUITY Called up share capital Capital redemption reserve Share premium account Treasury reserve Share option reserve Other reserves ESOP trust Foreign currency translation reserve Retained earnings / (accumulated losses) Total equity attributable to the owners of the parent Note 2021 £000 2020 £000 11 12 26 13 14 16 17 18 19 19 20 26 14 19 26 19 20 21 22 24 1,307 92,025 2,363 – 2,623 98,318 16,968 – 18,283 35,251 133,569 8,075 2,070 1,399 23,547 1,433 727 37,251 5,579 841 1,747 949 – 10,998 15,394 35,508 72,759 60,810 4,469 1,112 41,556 (594) 3,962 8,789 (417) (189) (2,122) 60,810 1,183 81,652 3,726 18 1,111 87,690 18,700 1,117 30,812 50,629 138,319 6,084 57 – 26,839 1,261 1,188 35,429 3,907 27 2,695 1,791 612 11,848 35,052 55,932 91,361 46,958 4,450 1,112 41,356 (621) 2,618 7,528 (373) (161) (8,951) 46,958 The financial statements were approved by the Board of Directors and authorised for issue on 26 January 2022 and are signed on its behalf by: David Meaden Chief Executive Officer Rob Grubb Chief Financial Officer The accompanying accounting policies and notes form an integral part of these financial statements. Company name: Idox plc Company number: 03984070 Financial Statements | Consolidated balance sheet 77 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Consolidated statement of changes in equity As at 31 October 2021 Balance at 1 November 2019 4,446 1,112 41,348 (621) Called up share capital £000 Capital redemption reserve £000 Share premium account £000 Treasury reserve £000 Share option translation (accumulated controlling reserve Other reserves ESOP trust £000 7,528 £000 (365) Foreign currency Retained earnings / reserve £000 losses) £000 Non- interest £000 (64) (10,500) (110) Issue of share capital Share option costs Exercise / lapses of share options ESOP trust Disposal of investment Transactions with owners and non-controlling interests Profit for the year Other comprehensive loss Exchange movement on translation of foreign operations Total comprehensive (loss) / profit for the year 4 – – – – 4 – – – – – – – – – – – – Balance at 31 October 2020 4,450 1,112 Issue of share capital Share option costs Exercise / lapses of share options ESOP trust Fair value of deferred consideration shares on purchase of subsidiary Equity dividends paid Transactions with owners Profit for the year Other comprehensive loss Recycled exchange movements on disposal of subsidiaries Exchange movement on translation of foreign operations Total comprehensive (loss) / profit for the year 19 – – – – – 19 – – – – – – – – – – – – – – – 8 – – – – 8 – – – 41,356 200 – – – – – 200 – – – – – – – – – – – – – (621) 2,618 7,528 (373) – – 27 – – – 27 – – – – Balance at 31 October 2021 4,469 1,112 41,556 (594) 3,962 8,789 (417) The accompanying accounting policies and notes form an integral part of these financial statements. £000 1,837 1,054 (273) 781 – 1,894 (550) 1,344 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 1,261 1,261 – – – (8) – (8) – (44) (44) – – – – – – – – – – – – – – – – – – – – – – – – – – (97) (97) (161) 80 (108) (28) (189) – – – – – – – – – 273 273 1,276 1,276 (8,951) 535 (1,331) (796) 11,949 (80) – 11,869 2,122 Total £000 44,611 12 1,054 – (8) 110 1,168 1,276 (97) 1,179 46,958 219 1,894 12 (44) 1,261 (1,331) 2,011 11,949 – (108) 11,841 60,810 – – – – 110 110 – – – – – – – – – – – – – – – – 78 Transactions with owners and non-controlling Exchange movement on translation of foreign operations Total comprehensive (loss) / profit for the year Balance at 1 November 2019 Issue of share capital Share option costs Exercise / lapses of share options ESOP trust Disposal of investment interests Profit for the year Other comprehensive loss Balance at 31 October 2020 Issue of share capital Share option costs Exercise / lapses of share options ESOP trust purchase of subsidiary Equity dividends paid Transactions with owners Profit for the year Other comprehensive loss Fair value of deferred consideration shares on Recycled exchange movements on disposal of subsidiaries operations Exchange movement on translation of foreign Total comprehensive (loss) / profit for the year Called up share redemption Share premium capital £000 4,446 Capital reserve £000 1,112 account £000 41,348 Treasury reserve £000 (621) 4,450 19 1,112 (621) 41,356 200 4 – – – – 4 – – – – – – – – – – – 19 – – – – – – – – – – – – – – – – – – – – – 8 – – – – 8 – – – – – – – – – – – – 200 – – – – – – – – – – – – – – – – – 27 27 – Share option reserve £000 Other reserves £000 ESOP trust £000 Foreign currency translation reserve £000 Retained earnings / (accumulated losses) £000 Non- controlling interest £000 7,528 (365) (64) (10,500) (110) 1,837 – 1,054 (273) – – 781 – – – 2,618 – 1,894 (550) – – – 1,344 – – – – – – – – – – – – – – – – (8) – (8) – – – 7,528 (373) – – – – 1,261 – 1,261 – – – – – – – (44) – – (44) – – – – – – – – – – – (97) (97) (161) – – – – – – – – 80 (108) (28) (189) – – 273 – – 273 1,276 – 1,276 (8,951) – – 535 – – (1,331) (796) 11,949 (80) – 11,869 2,122 – – – – 110 110 – – – – – – – – – – – – – – – – Balance at 31 October 2021 4,469 1,112 41,556 (594) 3,962 8,789 (417) The accompanying accounting policies and notes form an integral part of these financial statements. Total £000 44,611 12 1,054 – (8) 110 1,168 1,276 (97) 1,179 46,958 219 1,894 12 (44) 1,261 (1,331) 2,011 11,949 – (108) 11,841 60,810 Financial Statements | Consolidated statement of changes in equity 79 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Consolidated cash flow statement For the year ended 31 October 2021 Cash flows from operating activities Profit for the year before taxation Adjustments for: Depreciation of property, plant and equipment Depreciation of right-of-use assets Amortisation of intangible assets (Gain) / loss on disposal / purchase of subsidiary Finance income Finance costs Debt issue costs amortisation Research and development tax credit Share option costs Loss on disposal of leases Movement in stock Movement in receivables Movement in payables Cash generated by operations Tax refunded / (tax paid) Net cash from operating activities Cash flows from investing activities Acquisition of subsidiaries Disposal of subsidiaries Purchase of property, plant and equipment Purchase of intangible assets Finance income Net cash used in investing activities Cash flows from financing activities Interest paid New loans Loan related costs Loan repayments Principal lease payments Equity dividends paid Issue of own shares Net cash (outflows) / inflows from financing activities Net movement in cash and cash equivalents Cash and cash equivalents at the beginning of the year Exchange gains on cash and cash equivalents Cash and cash equivalents at the end of the year Note 2021 £000 2020 £000 13,186 2,702 11 26 12 25 6 17 801 1,021 8,835 (6,679) (800) 1,060 144 (267) 1,908 – – 3,086 (5,947) 16,348 206 16,554 (10,530) 10,669 (1,110) (4,637) 66 (5,542) (967) 15,600 (292) (35,000) (1,154) (1,331) 64 817 1,240 9,282 380 (5) 2,210 189 (134) 1,057 36 54 1,192 4,329 23,349 (2,000) 21,349 – (200) (931) (5,998) 5 (7,124) (1,644) 38,575 (48) (25,762) (1,545) – (118) (23,080) 9,458 (12,068) 23,683 30,812 (461) 18,283 7,023 106 30,812 The accompanying accounting policies and notes form an integral part of these financial statements. 80 Notes to the accounts For the year ended 31 October 2021 1 Accounting Policies General information Idox plc is a leading supplier of software and services for the management of Local Government and other organisations. The Company is a public limited company, limited by shares, which is listed on the AIM Market of the London Stock Exchange and is incorporated and domiciled in the UK. The address of its registered office is 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA. The registered number of the Company is 03984070. There is no ultimate controlling party. The financial statements are prepared in pounds sterling. Basis of preparation These financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. The financial statements have also been prepared in accordance with International Financial Reporting Standards as issued by the IASB. The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities, being, deferred consideration at fair value through profit or loss. These financial statements are available on the Group’s website: https://www.idoxgroup.com/investors/financial-reporting/. As set out on pages 39 to 40 in the Directors’ Report, the financial statements have been prepared on a going concern basis. Going concern The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, the Directors have considered the Group’s budget, cash flow forecasts, available banking facility with appropriate headroom in facilities and financial covenants, and levels of recurring revenue. In December 2019 the Group had refinanced with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc. The facilities, which comprise a revolving credit facility of £35,000,000, were extended during the year and are committed until June 2024. Idox along with most companies has been impacted by the COVID-19 pandemic, however the impact on our Group has in the main been limited to the initial disruption of the early stages of the emerging challenges in 2020, including restrictions on physical movement. We have largely seen our operations return to their pre-COVID-19 pandemic levels across our Group. We remain cautious in respect of the ongoing impact of the COVID-19 pandemic and associated restrictions but are confident we are fundamentally resilient due to the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. We continue to assess the impact of the COVID-19 pandemic on the business, taking actions to mitigate or limit the impacts on our organisation where we can and supporting our staff, customers and partners in dealing with the ongoing impacts which are largely in respect of associated restrictions. As part of the preparation of our FY21 results, the Group has performed detailed financial forecasting, as well as severe stress-testing in our financial modelling, but have not identified any credible scenarios that would cast doubt on our ability to continue as a going concern. The Group has performed sensitivity analysis of financial modelling to identify what circumstances could lead to liquidity challenges. This forecasting has demonstrated that the Group would only breach its banking covenants in the most severe of circumstances which are not considered credible. Under this sensitivity analysis, recurring revenues renewals were assumed to be 37% lower than plan and non-recurring revenues won and delivered lower by 74%, with no corresponding action on costs to address these shortfalls. Under this scenario, the Group would likely be in breach of its banking covenants during FY22, albeit liquidity even in this extreme scenario remains strong. This scenario is not considered credible given the growth the Group has experienced in FY20 and FY21 in recurring and non-recurring revenues despite the impact of the COVID-19 pandemic. Therefore, this supports the going concern assessment for the business. Financial Statements | Notes to the accounts 81 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 1 Accounting Policies continued International Financial Reporting Standards and Interpretations issued but not yet effective At the date of authorisation of these financial statements, the following new standards, amendments and interpretations to existing standards have been published. These are mandatory for forthcoming financial periods, but which the Group has not adopted early. These are not expected to have a material impact on the Group’s consolidated financial statements: • • IFRS 17 Insurance Contracts – effective for periods commencing on or after 1 January 2023. IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture. • Amendments to IAS 1 Classification of Liabilities as Current or Non-current – effective for periods commencing on or after 1 January 2022. • Amendments to IFRS 3 Reference to the Conceptual Framework – effective for periods commencing on or after 1 January 2022. • Amendments to IAS 16 Property, Plant and Equipment – Proceeds Before Intended Use – effective for periods commencing on or after 1 January 2022. • Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract – effective for periods commencing on or after 1 January 2022. Adoption of new and revised standards There were no additional standards, amendments and interpretations that had a material impact on the Group’s financial statements during the year. Critical judgements and key sources of estimation uncertainty In applying the Group’s accounting policies, the Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not easily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Judgements (not involving estimation) Management considers the following items to be critical judgements (apart from those involving estimations) that were made in the process of applying the Group’s accounting policies in the reporting period that are deemed to have the most significant effect on the amounts recognised in financial statements: Development costs Judgement is exercised in the expenditure that is capitalised or alternatively expensed as research. This is governed by the Group’s capitalisation policy, which describes the nature and type of costs that should be capitalised to ensure consistency across the Group. Creation and application of this Group capitalisation policy requires judgement in how IFRS is applied to Idox in describing which expenditure qualifies for capitalisation as well as the thresholds that are applied. The recognition requirements of development costs are reviewed quarterly. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each review. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors. Capitalised development is reviewed on an individual project basis and management will select the most appropriate rate of amortisation for each asset. Amortisation is typically 5 years depending on the future revenue projected for each individual asset. See note 12 for further information. 82 Revenue recognition Management assesses both legal paperwork and the underlying commercial specifics of transactions, alongside accounting standards, to determine revenue recognition treatment. This assessment could involve internal chartered accountants, internal legal staff, operational staff and professional advice where appropriate. The Group has prepared an underlying technical framework to substantiate current and ongoing judgements on revenue recognition. Management exercise judgement over various elements of a contract, for example: • the point at which the customer takes full control of any bundled software solution; • an estimate of the value of the underlying elements of a bundled software solution; and • whether it is appropriate to recognise revenue on certain contracts prior to an invoice being raised, where work has been completed and there is a high degree of certainty of the contract being completed, with the invoice raised and cash received. The underlying technical framework is used to inform and support areas of judgement, of the type mentioned in these examples. See note 19 for further information on contract liabilities. Key sources of estimation uncertainty Management does not consider there to be any items to involve key assumptions and other key sources of estimation uncertainty at the balance sheet date that would have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Basis of consolidation The Group financial statements consolidate the financial statements of the Company and its subsidiary undertakings drawn up to 31 October each year. Under IFRS 10, control exists when an investor is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its powers over the investee. As each of the subsidiaries are 100% wholly owned, the Group has full control over each of its investees. All inter-company transactions are eliminated on consolidation. For business combinations occurring since 1 November 2009, the requirements of IFRS 3R have been applied. The consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the fair values at acquisition date of assets, liabilities incurred and the equity interests issued by the Group, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed as incurred. For all acquisitions, the Group will perform a fair value review of all property, plant and equipment, intangible assets, and accrued and deferred balances to align accounting policies with the Group. Alternative performance measures Where relevant, adjusted measures of profit have been used alongside statutory definitions. These items are excluded from statutory measures of profit to present a measure of cash earnings from underlying activities on an ongoing basis. This is in line with management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers: • depreciation; • amortisation from acquired intangible assets; • impairment; • restructuring costs; • acquisition and financing costs; and • share option costs. Alternative performance measures may not be comparable between companies due to differences in how they are calculated. Financial Statements | Notes to the accounts 83 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 1 Accounting Policies continued Revenue Revenue represents the income arising in the course of an entity’s ordinary activities, net of value added tax and after eliminating sales within the Group. Where work has been completed but the performance obligation has not been fully satisfied, the income has been accrued and included in contract receivables on the balance sheet. The Group derives its revenue from the following revenue streams: Non-Recurring: Software (Initial Licence Fee) Revenue from Initial License Fees (whether in respect of a perpetual or term license granted) is recognised on delivery and passing of full control of the software to the customer. For license fees (Initial Licence Fees and Recurring Licence Fees) where the customer’s control of our software is dependent on associated services such as non-recurring services which may be essential for the customer to use the software, the revenue from software license fees will be recognised over the course of the service provision in line with delivery of agreed performance obligation milestones as control of the whole solution is progressively transferred to the customer. Non-Recurring: Services Revenue from non-recurring services is recognised over the course of the service provision in line with delivery of agreed performance obligation milestones as control of the environment is progressively transferred to the customer. Non-Recurring: Hardware Revenue on hardware is recognised when control of the asset is passed to the customer which typically occurs on delivery. Recurring: Software (Recurring Licence Fee and Support & Maintenance) Revenue from Recurring License Fee (typically in respect of a term license granted) is recognised on delivery and passing of full control of the software to the customer as described for Non-recurring: Software (Initial Licence Fee). In order to achieve this, anticipated license fees from future recurring invoicing are typically ‘unbundled’ from the Support & Maintenance element and accrued until the invoicing occurs. Revenue from Support & Maintenance is recognised evenly across the support and maintenance period, in line with the pattern of how we deliver the services and how they are consumed by the customer. Recurring: Managed Services Revenue from recurring managed services is recognised evenly across the managed service period, in line with the pattern of how we deliver the services and how they are consumed by the customer. Recurring: Hosting Revenue from recurring hosting is recognised evenly across the hosting period, in line with the pattern of how we deliver the services and how they are consumed by the customer. Software as a Service (SaaS) Fees from SaaS arrangements typically combine software licencing, support & maintenance, managed services and hosting into a single subscription payable by the customer for provision of a holistic service rather than delivery of constituent parts. Revenues from SaaS are recognised evenly across the period of contract for provision of the service, in line with the pattern of how we deliver the services and how they are consumed by the customer. 84 Contract revenue, receivables and liabilities Long-term contracts for software solutions often contain multiple elements such as software, support, services, hosting and/or managed services. Where there is a need to unbundle a software solution into its constituent elements, software industry benchmarks are applied. Recognition of revenue on the software and services elements of longer-term contracts will be driven by IFRS 15 treatment whereby revenue is recognised in line with agreed delivery performance obligation milestones as control passes to the customer. The remaining elements will be considered distinct performance obligations with revenue recognised over the course of the contract. Contract receivables are recognised when performance obligations are discharged under a contractual arrangement to the customer but have not been invoiced. Once the invoicing does occur a trade receivable is recognised, and the contract receivable is derecognised. Contract liabilities arise when invoicing occurs in advance of performance obligations being discharged. The revenue associated with the invoicing is deferred until such time as the performance obligation is delivered. Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-makers. The chief operating decision-makers have been identified as the Chief Executive Officer and the Chief Financial Officer. Discontinued operations and held for sale Assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard. Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Subsidiary Audit Exemption Idox Software Limited (02933889), Idox Trustees Limited (04111557), Idox Health Limited (02585086), Aligned Assets Limited (04610724), Aligned Assets Holdco Limited (10577181), thinkWhere Limited (SC315349), and exeGesIS Spatial Data Management Ltd (03743089) are exempt from the provisions of Companies Act 2006 relating to the audit of individual accounts by virtue of section 479A. Goodwill Goodwill is stated after separate recognition of identifiable intangible assets. It is calculated as the excess of the sum of a) fair value of consideration transferred, b) the recognised amount of any non-controlling interest in the acquiree and c) acquisition-date fair value of any existing equity interest in the acquiree, over the acquisition-date fair values of identifiable net assets. If the fair values of the identifiable net assets exceed the sum calculated above, the excess amount (i.e. gain on a bargain purchase) is recognised in profit or loss immediately. Cash-generating units to which goodwill has been allocated are tested for impairment biannually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Goodwill is carried at cost less accumulated impairment losses. Unallocated goodwill on acquisitions relates mainly to workforce valuation, synergies and economies of scale obtained on combining acquisitions with existing operations. Goodwill written off to reserves prior to the date of transition to IFRS remains in reserves. There is no re-instatement of goodwill that was amortised prior to transition to IFRS. Goodwill previously written off to reserves is not written back to profit or loss on subsequent disposal. Financial Statements | Notes to the accounts 85 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 1 Accounting Policies continued Other intangible assets Intangible assets with a finite useful life are amortised to the consolidated statement of comprehensive income on a straight-line basis over their estimated useful lives, which are reviewed on an annual basis. Amortisation commences when the asset is available for use. The residual values of intangible assets are assumed to be zero. (i) Research and development Expenditure on research (or the research phase of an internal project) is recognised in profit or loss in the period in which it is incurred. Development costs incurred are capitalised when all the following conditions are satisfied: • completion of the intangible asset is technically feasible so that it will be available for use or sale; • the Group intends to complete the intangible asset and use or sell it; • the Group has the ability to use or sell the intangible asset; • the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used internally, the asset will be used in generating such benefits; • there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and • the expenditure attributable to the intangible asset during its development can be measured reliably. Development costs not meeting the criteria for capitalisation are expensed in profit or loss as incurred. The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create, produce, and prepare the asset to be capable of operating in the manner intended by management. Amortisation commences upon completion of the asset. Careful judgement by the Directors is applied when deciding whether the recognition requirements for development costs have been met. This is necessary as the economic success of any product development is uncertain and may be subject to future technical problems at the time of recognition. Judgements are based on the information available at each balance sheet date. In addition, all internal activities related to the research and development of new software products are continuously monitored by the Directors. Amortisation is calculated using the straight-line method over a period of up to 5 years. (ii) Customer relationships Customer relationships represent the purchase price of customer lists and contractual relationships purchased on the acquisition of subsidiaries. These relationships are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method over a period of 20, 10 or 5 years. (iii) Trade names Trade names represent the named intangible asset recognised on the acquisition of these trade names are carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight- line method over a period of between 5 and 20 years. (iv) Software Software represents the purchase price of developed products either acquired as part of the acquisition of subsidiaries or procured directly from a vendor. The software is carried at cost less accumulated amortisation and accumulated impairment losses. Amortisation is calculated using the straight-line method over a period of between 3 and 10 years. (v) Order backlog Order backlog includes the managed service contracts and subscription deferred revenue purchased on the acquisition of subsidiaries. Amortisation on the managed service deferred revenue is calculated based on the weighting and length of each contract purchased. Amortisation on the subscription deferred revenue is calculated using the straight-line method over a period up to 5 years. 86 Impairment For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows (cash-generating units). As a result, some assets are tested individually for impairment, and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management monitors the related cash flows. Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life, and those intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the assets or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value-in-use based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Property, plant and equipment Items of property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is charged to the statement of comprehensive income using the following rates and bases so as to write off the cost or valuation of items of property, plant and equipment over their expected useful lives. The rates that are generally applicable are: • Computer hardware 25% and 50% straight line • Fixtures, fittings and equipment 25% straight line • Library books and journals 33.3% straight line Useful economic lives and residual values are reviewed annually. Employee benefits Defined contribution pension plans Contributions paid to pension plans of employees are charged to the statement of comprehensive income in the period in which they become payable. Share-based payment transactions All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and sales growth targets). All equity-settled share-based payments are ultimately recognised as an expense in the statement of comprehensive income with a corresponding credit to the share option reserve. If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are revised subsequently if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options that have vested are not exercised. Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to reserves. Financial Statements | Notes to the accounts 87 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 1 Accounting Policies continued Reserves Equity comprises the following: • “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. • “Capital redemption reserve” represents when the entire deferred ordinary share capital was bought in exchange for one ordinary 1p share. • “Other reserves” arose as a result of: – a Group reconstruction that occurred on 17 November 2000. This represents the issued share capital and share premium account in the Company’s subsidiary undertaking, Idox Software Limited; and – share premium arising on consideration shares issued on the acquisition of 6PM Holdings plc and Halarose Holdings Limited, – the fair value of the deferred consideration shares included in the purchase of Aligned Assets Limited. • “Share options reserve” represents shares to be issued on potential exercise of those share options that have been accounted for under “IFRS 2 Share Based Payments”. • “ESOP trust” represents share capital purchased to satisfy the obligation of the employee share scheme. Purchased shares are classified within the ESOP trust reserve and the cost of shares purchased are presented as a deduction from total equity. • “Retained earnings / (accumulated losses)” represents retained profits / (losses). • “Treasury reserve” represents shares repurchased by the Company to be held for redistribution as share options. The cost of treasury shares is debited to the Treasury reserve. • “Foreign currency translation reserve” represents exchange gains and losses on translation of foreign operations. Taxation Tax on the profit or loss for the year comprises current and deferred tax. Current tax is charged to profit or loss except where it relates to tax on items recognised in other comprehensive income or directly in equity, in which case it is charged to equity or other comprehensive income. Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses available to be carried forward as well as other income credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be offset against future taxable income. Current and 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 balance sheet date. Changes in deferred tax assets or liabilities are recognised as a component of tax expense in profit or loss, except where they relate to items that are charged or credited directly to other comprehensive income or equity in which case the related deferred tax is also charged or credited directly to other comprehensive income or equity. Research and development tax credits The UK tax regime permits additional tax relief for qualifying expenditure incurred on research and development. The Research and Development Expenditure Credit (RDEC) Scheme has been adopted, which permits a tax credit of 11% of qualifying expenditure for companies classified as large. The Group is considered large for research and development tax credit purposes owing to a headcount of over 500. 88 Leases The Group assesses whether a contract is or contains a lease, at inception of the contract. The Group recognises a right-of- use asset and a corresponding lease liability with respect to all lease arrangements in which it is the lessee, except for short- term leases (defined as leases with a lease term of twelve months or less) and leases of low value assets. For these leases, the Group recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed. This expense is presented within administration expenses in the statement of comprehensive income. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted at a single discount rate to a portfolio of leases with reasonably similar characteristics. Lease payments included in the measurement of the lease liability comprise: • fixed lease payments; • variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date. The lease liability is presented as a separate line in the consolidated statement of financial position. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and by reducing the carrying amount to reflect the lease payments made. The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever: • The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate. • The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments change is due to a change in a floating interest rate, in which case a revised discount rate is used). • A lease contract is modified and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of the modification. The Group did not make any such adjustments during the periods presented. The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement day, less any lease incentives received and any initial direct costs. They are subsequently measured at cost less accumulated depreciation and impairment losses. Whenever the Group incurs an obligation for costs to dismantle and remove a leased asset, restore the site on which it is located or restore the underlying asset to the condition required by the terms and conditions of the lease, a provision is recognised and measured under IAS 37. To the extent that the costs relate to a right-of-use asset, the costs are included in the related right-of-use asset, unless those costs are incurred to produce inventories. Right-of-use assets are depreciated over the shorter period of lease term and useful life of the right-of-use asset. If a lease transfers ownership of the underlying asset or the cost of the right-of-use asset reflects that the Group expects to exercise a purchase option, the related right-of-use asset is depreciated over the useful life of the underlying asset. The depreciation starts at the commencement date of the lease. The right-of-use assets are presented as a separate line in the consolidated statement of financial position. The Group applies IAS 36 to determine whether a right-of-use asset is impaired and accounts for any identified impairment loss as described in the Impairment policy. As a practical expedient, IFRS 16 permits a lessee not to separate non-lease components, and instead account for any lease and associated non-lease components as a single arrangement. For contracts that contain a lease component and one or more additional lease or non-lease components, the Group allocates the consideration in the contract to each lease component on the basis of the relative stand-alone price of the lease component and the aggregate stand- alone price of the non-lease components. Financial Statements | Notes to the accounts 89 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 1 Accounting Policies continued Dividend distributions Interim dividends in respect of equity shares are recognised in the financial statements in the period in which they are paid. Final dividends in respect of equity shares are recognised in the financial statements in the period that the dividends are formally approved. Foreign currency translation The functional and presentation currency of Idox plc and its United Kingdom subsidiaries is the pound sterling (£). Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss. In the consolidated financial statements, the assets and liabilities of non-sterling functional currency subsidiaries, are translated into pound sterling at the rate of exchange ruling at the balance sheet date. The results of non-sterling functional currency subsidiaries are translated into pound sterling using average rates of exchange. Exchange adjustments arising are taken to the foreign currency translation reserve and reported in other comprehensive income. There is no tax impact on these adjustments. Financial instruments Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group has become a party to the contractual provisions of the instrument. The Group has a hold-to-collect business model in respect of financial assets held at amortised cost. The objective of the ‘hold to collect’ business model is, in most cases, to hold financial assets to collect their contractual cash flows, rather than with a view to selling the assets to generate cash flows. Financial assets Financial assets are classified according to the substance of the contractual arrangements entered into. Trade and other receivables The entity always recognises lifetime expected credit losses (ECL) for trade receivables, and contract assets, and ECL are estimated using a provision matrix based on the Group’s historical credit loss experience. Trade receivables do not carry any interest and are initially stated at their fair value, as reduced by appropriate credit losses for estimated irrecoverable amounts. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and on deposit with a maturity of three months or less from inception and are subject to an insignificant risk of changes in value. Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its financial liabilities. Bank borrowings Interest-bearing bank loans and overdrafts are recorded initially at fair value, net of direct transaction costs. Such instruments are subsequently carried at their amortised cost and finance charges, including premiums payable on settlement or redemption, are recognised in profit or loss over the committed term, excluding any optional extensions of the instrument using an effective rate of interest. Bonds in issue Bonds in issue are recorded initially at fair value, net of direct transaction costs. The bonds are subsequently carried at their amortised cost and finance charges are recognised in profit or loss over the term of the instrument using an effective rate of interest. 90 Trade and other payables Trade and other payables are not interest-bearing, these are initially stated at their fair value and subsequently at amortised cost. Equity instruments Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. 2 Segmental analysis During the year ended 31 October 2021, the Group was organised into three operating segments, which are detailed below. Financial information is reported to the chief operating decision maker, which comprises the Chief Executive Officer and the Chief Financial Officer, monthly on a business unit basis with revenue and operating profits split by business unit. Each business unit is deemed an operating segment as each offers different products and services. • Public Sector Software (PSS) – delivering specialist information management solutions and services to the public sector. • Engineering Information Management (EIM) – delivering engineering document management and control solutions to asset intensive industry sectors. • Content (CONT) – delivering funding and compliance solutions to corporate, public and commercial customers. The entities comprising this segment were fully disposed in the year ended 31 October 2021, and the results which have been consolidated under the Group’s ownership have been disclosed as Discontinued operations in these financial statements. Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the Board represents the profit earned by each segment before the allocation of taxation, Group interest payments and Group acquisition costs. The assets and liabilities of the Group are not reviewed by the chief operating decision maker on a segment basis. The Group does not place reliance on any specific customer and has no individual customer that generates 10% or more of its total Group revenue. The segment revenues by geographic location are as follows: 2021: Revenues from external customers United Kingdom USA Europe Rest of World 2020: Revenues from external customers United Kingdom USA Europe Rest of World Continuing £000 Discontinued £000 Total Group £000 52,038 5,181 4,275 691 62,185 46 27 3,824 – 3,897 52,084 5,208 8,099 691 66,082 Continuing £000 Discontinued £000 Total Group £000 47,572 5,913 2,589 1,210 57,284 328 193 10,212 – 10,733 47,900 6,106 12,801 1,210 68,017 Revenues are attributed to individual countries on the basis of the location of the customer. Financial Statements | Notes to the accounts 91 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 2 Segmental analysis continued The segment revenues by type are as follows: 2021: Revenues by type Recurring revenues – PSS Recurring revenues – EIM Recurring revenues – Content Recurring revenues Non-recurring revenues – PSS Non-recurring revenues – EIM Non-recurring revenues – Content Non-recurring revenues Revenue from sale of goods Revenue from rendering of services 2020: Revenues by type Recurring revenues – PSS Recurring revenues – EIM Recurring revenues – Software Recurring revenues – Content Recurring revenues Non-recurring revenues – PSS Non-recurring revenues – EIM Non-recurring revenues – Software Non-recurring revenues – Content Non-recurring revenues Revenue from sale of goods Revenue from rendering of services Continuing £000 Discontinued £000 Total Group £000 30,111 6,139 – 36,250 24,003 1,932 – 25,935 62,185 23,940 38,245 62,185 – – 604 604 – – 3,293 3,293 3,897 1,220 2,677 3,897 30,111 6,139 604 36,854 24,003 1,932 3,293 29,228 66,082 25,160 40,922 66,082 Continuing £000 Discontinued £000 Total Group £000 28,863 6,886 35,749 – 35,749 19,563 1,972 21,535 – 21,535 57,284 19,144 38,140 57,284 – – – 1,626 1,626 – – – 9,107 9,107 10,733 3,158 7,575 10,733 28,863 6,886 35,749 1,626 37,375 19,563 1,972 21,535 9,107 30,642 68,017 22,302 45,715 68,017 Recurring revenue is income generated from customers on an annual contractual basis. Recurring revenue amounts to approximately 58% (2020: 62%) of continuing revenue, which is revenue generated annually from sales to existing customers. 92 All revenues are recognised over the period of the contract, unless the only performance obligation is to license or re-license a customer’s existing user without any further obligations, in which case the revenue is recognised upon completion of the obligation. All contracts are issued with commercial payment terms without any unusual financial or deferred arrangements and do not include any amounts of variable consideration that are constrained. The Group’s total outstanding contracted performance obligations at 31 October 2021 was £53,897,000 and it is anticipated that 64% of this will be recognised as revenue in FY22 and 22% in FY23. The segment results by business unit for the year ended 31 October 2021: Revenue Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs Depreciation Depreciation – right-of-use-assets Amortisation – software licences, customer lists, order backlog and R&D Amortisation – acquired intangibles Restructuring costs Acquisition costs Share option costs Segment operating profit / (loss) Financing costs Operating profit / (loss) Gain from sale of discontinued operations Finance income Finance costs Profit before taxation PSS £000 54,114 17,969 (751) (709) (4,193) (3,210) 98 134 (1,760) 7,578 Continuing Operations Total £000 Discontinued Operations CONTENT* £000 62,185 3,897 EIM £000 8,071 1,550 (36) (85) (869) (351) (8) – (29) 172 19,519 (787) (794) (5,062) (3,561) 90 134 (1,789) 7,750 (110) 7,640 – 818 (1,190) 7,268 276 (14) (227) (46) (166) (11) – (119) (307) – (307) 6,239 – (14) 5,918 Total £000 66,082 19,795 (801) (1,021) (5,108) (3,727) 79 134 (1,908) 7,443 (110) 7,333 6,239 818 (1,204) 13,186 * Corporate costs for Idox Content have been reduced by £1,349,000 to better reflect the actual reduction in Corporate costs as a result of the discontinued operations. These costs have been allocated to PSS and EIM on a headcount basis. The corporate recharge to the business unit EBITDA is allocated on a head count basis with the exception of Content, which has had corporate costs reduced to avoid stranded costs. Financial Statements | Notes to the accounts 93 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 2 Segmental analysis continued The segment results by business unit for the year ended 31 October 2020: Revenue Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs Depreciation Depreciation – right-of-use-assets Amortisation – software licences, customer lists, order backlog and R&D Amortisation – acquired intangibles Restructuring costs Acquisition costs Share option costs Segment operating profit Financing costs Operating profit Finance income Finance costs Profit before taxation PSS £000 48,426 EIM £000 8,858 Continuing Operations Total £000 Discontinued Operations CONTENT* £000 57,284 10,733 15,536 (708) (618) (3,803) (3,570) (1,652) (125) (1,004) 4,056 1,702 (83) (89) (752) (440) (96) – – 242 17,238 (791) (707) (4,555) (4,010) (1,748) (125) (1,004) 4,298 (306) 3,992 181 (2,358) 1,815 2,346 (26) (533) (270) (447) (90) – (53) 927 – 927 – (40) 887 Total £000 68,017 19,584 (817) (1,240) (4,825) (4,457) (1,838) (125) (1,057) 5,225 (306) 4,919 181 (2,398) 2,702 * Corporate costs for Idox Content have been reduced by £1,349,000 to better reflect the actual reduction in Corporate costs as a result of the discontinued operations. These costs have been allocated to PSS and EIM on a headcount basis. 94 3 Operating profit for the year Continuing operating profit for the year has been arrived at after charging: Auditor’s remuneration: Fees payable to the Company Auditor for the audit of the parent company and consolidated annual accounts The audit of the Company’s subsidiaries, pursuant to legislation Non-audit services Tax services – compliance Tax services – advisory Depreciation – owned Depreciation – right-of-use assets Amortisation: Software licences Research & development Backlog Orders Customer Contracts Acquired intangibles – customer relationships Acquired intangibles – trade names Acquired intangibles – software Acquired intangibles – order backlog Equity-settled share-based payments 2021 £000 2020 £000 15 293 – 308 81 27 787 794 882 4,179 – – 1,212 588 1,762 – 1,793 21 404 74 499 36 – 791 707 943 3,593 19 – 1,406 596 1,966 42 1,004 Financial Statements | Notes to the accounts 95 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 3 Operating profit for the year continued Restructuring costs Restructuring costs for continuing operations were £0.1m gain (2020: £1.7m). The balance is broken down as follows: Redundancies Disposal of subsidiaries Take over approach Property Redundancies Disposal of subsidiaries Litigation Property Continuing 2021 £000 Discontinued 2021 £000 Total Group 2021 £000 22 (32) 171 (251) (90) (8) (6,220) – – (6,228) 14 (6,252) 171 (251) (6,318) Continuing 2020 £000 Discontinued 2020 £000 Total Group 2020 £000 245 397 34 1,072 1,748 82 – 8 – 90 327 397 42 1,072 1,838 96 4 Directors and employees Staff costs during the year were as follows: Wages and salaries Social security costs Pension costs Wages and salaries Social security costs Pension costs Continuing 2021 £000 Discontinued 2021 £000 Total Group 2021 £000 26,986 2,808 1,149 30,943 2,201 292 108 2,601 29,187 3,100 1,257 33,544 Continuing 2020 £000 Discontinued 2020 £000 Total Group 2020 £000 26,549 2,529 1,071 30,149 5,059 650 257 5,966 31,608 3,179 1,328 36,115 In addition, during the year share based payment charges of £1,793,000 (2020: £1,004,000) were incurred in relation to continuing operations and £115,000 (2020: £53,000) in respect of discontinued operations. During the year, for total operations, the Group incurred redundancy costs to former employees in respect of continuing operations of £22,000 (2020: £245,000) and £Nil (2020: £82,000) in respect of discontinued operations. The average number of employees of the Group during the year for continuing operations was 522 (2020: 514) and 45 (2020: 123) for discontinued operations. This was made up as follows: Office and administration (including Directors of the Company and its subsidiary undertakings) Sales Development Operations Office and administration (including Directors of the Company and its subsidiary undertakings) Sales Development Operations Continuing 2021 No. Discontinued 2021 No. Total Group 2021 No. 50 37 109 326 522 – 1 – 44 45 50 38 109 370 567 Continuing 2020 No. Discontinued 2020 No. Total Group 2020 No. 44 39 116 315 514 – 2 – 121 123 44 41 116 436 637 Financial Statements | Notes to the accounts 97 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 4 Directors and employees continued The average number of Directors of the Group during the year was 5 (2020: 6). Remuneration in respect of Directors was as follows: Emoluments Pension contributions Share option exercise gain 2021 £000 1,030 10 – 1,040 2020 £000 970 10 – 980 The pension contributions above are in respect of one director and are in relation to the Group’s defined contribution scheme. In addition to the remuneration stated above, the Group incurred social security costs in respect of Directors of £134,000 (2020: £122,000). The amounts set out above include remuneration in respect of the highest paid Director as follows: Aggregate emoluments Pension contributions 2021 £000 583 – 583 2020 £000 510 – 510 During the year the highest paid Director did not exercise share options. In the prior year the highest paid Director did not exercise share options. During the year, the Group incurred social security costs in respect of the highest paid Director of £79,000 (2020: £68,000). Details of the remuneration for each Director are included in the Report on Remuneration, which can be found on page 56 but does not form part of the audited accounts. 5 Acquisition costs All acquisition related costs are expensed in the period incurred rather than added to the cost of investment. Acquisition costs in the previous year relate to the acquisition of Tascomi Limited in August 2019, with the current year costs relating to the acquisition of Aligned Assets Limited, thinkWhere Limited and exeGesIS Spatial Data Management Ltd. The current year also contains the acquisition gain on the purchase of thinkWhere Limited, see note 27 for further details. 2021 £000 (134) (134) 2020 £000 125 125 Acquisition costs Acquisition costs 98 6 Finance income and costs Interest receivable Other income Foreign exchange differences Finance income Bank interest payable Bond interest payable Effective interest rate adjustment Non-utilisation fees Amortisation of employee equity scheme shares Amortisation of bank fees Lease liability interest Finance costs Interest receivable Other income Finance income Bank interest payable Bond interest payable Effective interest rate adjustment Non-utilisation fees Amortisation of employee equity scheme shares Amortisation of bank fees Lease liability interest Finance costs Continuing 2021 £000 Discontinued 2021 £000 Total Group 2021 £000 66 17 735 818 (462) (549) 360 (154) (121) (144) (120) (1,190) – – – – – – – – – – (14) (14) 66 17 735 818 (462) (549) 360 (154) (121) (144) (134) (1,204) Continuing 2020 £000 Discontinued 2020 £000 Total Group 2020 £000 5 176 181 (1,000) (611) (270) (38) (123) (189) (127) (2,358) – – – – – – – – – (40) (40) 5 176 181 (1,000) (611) (270) (38) (123) (189) (167) (2,398) 7 Dividends The Directors have proposed the payment of a final dividend of 0.4p per share, which would amount to £1,781,754 (2020: final dividend of 0.3p which amounted to £1,331,259). Financial Statements | Notes to the accounts 99 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 8 Income tax The tax charge is made up as follows: Current tax UK corporation tax on profit for the year Foreign tax on overseas companies (Over) / under provision in respect of prior periods Total current tax Deferred tax Origination and reversal of temporary differences Adjustment for rate change Adjustments in respect of prior periods Other Total deferred tax Total tax charge The tax charge is made up as follows: Current tax UK corporation tax on profit for the year Foreign tax on overseas companies (Over) / under provision in respect of prior periods Total current tax Deferred tax Origination and reversal of temporary differences Adjustment for rate change Adjustments in respect of prior periods Other Total deferred tax Total tax charge 100 Continuing 2021 £000 Continuing 2020 £000 2,406 145 (30) 2,521 (1,553) 826 (577) 20 (1,284) 936 (16) 317 1,237 738 (181) (467) 11 101 1,237 1,338 Total Group 2021 £000 Total Group 2020 £000 2,406 145 (30) 2,521 (1,553) 826 (577) 20 (1,284) 1,065 (16) 235 1,284 774 (169) (473) 10 142 1,237 1,426 The differences between the total tax charge above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax, together with the impact on the effective tax rate, are as follows: Profit before taxation on total operations % ETR movement 2021 £000 13,186 % ETR movement 2020 £000 2,702 Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19% (2020: 19%) 2,505 19.00 513 19.00 Effects of: Share option deduction Tax losses utilised in year International losses derecognised Other timing differences Expenses not deductible for tax purposes Prior year over-provision Non-taxable income Adjustment for tax rate differences R&D enhanced relief Foreign tax suffered Gain/Loss on disposal of investment Tax rate change (842) (4) 60 17 641 (720) (1,527) 19 – 60 202 826 1,237 (6.38) (0.03) 0.46 0.13 4.86 (5.46) (11.58) 0.15 – 0.45 1.53 6.26 9.39 (206) (7.63) – 362 172 732 (238) (34) 66 24 (16) – 51 1,426 – 13.40 6.36 27.09 (8.81) (1.26) 2.44 0.89 (0.59) – 1.89 52.78 The main factors for the reduction in the volatility in the ETR on the profit before tax position was the significant increase in the profit before tax as well as the disposals in the year which resulted in income not subject to tax, meaning permanent and other differences giving rise to ETR effects were proportionately lower. These differences included routine non-allowable amounts in addition to international losses not recognised in the period and higher overseas tax rates. Financial Statements | Notes to the accounts 101 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 8 Income tax continued Movement on trading losses during 2021 are as follows: Recognised trading losses As at 1 November 2020 Acquisitions and disposals Utilised during the year Unrecognised trading losses Losses not recognised UK unrelieved trading losses £000 Foreign unrelieved trading losses £000 Total unrelieved trading losses £000 Tax effect £000 – 1,070 – 1,070 350 (350) – – 350 720 – 1,070 104 99 – 203 (549) (549) (10,253) (10,253) (10,802) (10,802) (3,692) (3,692) For comparative purposes, movement on trading losses during 2020 were as follows: Recognised trading losses As at 1 November 2019 Utilised during the year Unrecognised trading losses Losses not recognised UK unrelieved trading losses £000 Foreign unrelieved trading losses £000 Total unrelieved trading losses £000 Tax effect £000 1,729 (1,729) – (641) (641) 379 (29) 350 2,108 (1,758) 350 382 (278) 104 (11,966) (11,966) (12,607) (12,607) (4,208) (4,208) The UK trading losses remaining unrecognised at the end of the year relate to brought-forward losses in respect of loss-making trades. The closing unrecognised losses of £10,801,947 relate to Malta, the UK and France. The decision was made to maintain derecognition of these assets on the basis these losses will not be utilised over the next three to five years. Across the year the total deferred tax asset in respect of unrelieved trading losses increased from £104,000 to £203,000. There is no expiry dates for any of the unrelieved trading losses carried forward. 102 9 Discontinued operations During the first six months of the financial year, the Group received separate offers to acquire its Continental Compliance operations, and its Netherlands Grants Consultancy operations. These operations collectively comprised the Idox Content division of the Group. These offers were at an acceptable valuation and given the Group’s desire to prioritise capital on its Idox Software operation, these disposals were completed in the year. The Continental Compliance operations were disposed on 12 March 2021 and the Netherlands Grants Consultancy operations were disposed on 6 April 2021. These dates represent the point the control and legal ownership of these operations passed to the acquirers. The results of the discontinued operations, which have been excluded in the consolidated income statement, were as follows: Revenue Expenses Gain on Disposal Profit before tax Attributable tax expense Net profit attributable to discontinued operations 2021 £000 3,897 2020 £000 10,733 (4,218) (9,846) 6,239 5,918 – 5,918 – 887 (88) 799 During the year, Content contributed £2.7m (2020: £1.6m) to the Group’s net operating cash flows and contributed £10.7m (2020: £Nil) in respect of investing and financing activities. 10 Earnings per share The earnings per ordinary share is calculated by reference to the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during each period, as follows: Continuing Operations Profit for the year Basic earnings per share Weighted average number of shares in issue Basic earnings per share Weighted average number of shares in issue Add back: Dilutive share options Weighted average allotted, called up and fully paid share capital Diluted earnings per share Diluted earnings per share 2021 £000 6,031 2020 £000 477 440,376,576 439,245,132 1.37p 0.11p 440,376,576 439,245,132 10,749,077 7,279,721 451,125,653 446,524,853 1.34p 0.11p Financial Statements | Notes to the accounts 103 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 10 Earnings per share continued Adjusted earnings per share Profit for the year Add back: Amortisation on acquired intangibles Acquisition costs Restructuring costs Financing costs Share option costs Tax rate changes Tax effect Adjusted profit for year Weighted average number of shares in issue – basic Weighted average number of shares in issue – diluted Adjusted earnings per share Adjusted diluted earnings per share Discontinued Operations Profit for the year Basic earnings per share Weighted average number of shares in issue Basic earnings per share Weighted average number of shares in issue Add back: Dilutive share options Weighted average allotted, called up and fully paid share capital Diluted earnings per share Diluted earnings per share 104 2021 £000 6,031 3,561 (134) (90) 110 1,789 826 (1,841) 10,252 2020 £000 477 4,010 125 1,748 306 1,004 – (1,094) 6,576 440,376,576 439,245,132 451,125,653 446,524,853 2.33p 2.27p 2021 £000 5,918 1.50p 1.47p 2020 £000 799 440,376,576 439,245,132 1.34p 0.18p 440,376,576 439,245,132 10,749,077 7,279,721 451,125,653 446,524,853 1.31p 0.18p Total Operations Profit for the year Basic earnings per share Weighted average number of shares in issue Basic earnings per share Weighted average number of shares in issue Add back: Dilutive share options Weighted average allotted, called up and fully paid share capital Diluted earnings per share Diluted earnings per share Adjusted earnings per share Profit for the year Add back: Amortisation on acquired intangibles Acquisition costs Restructuring costs Financing costs Share option costs Tax rate changes Tax effect Adjusted profit for year Weighted average number of shares in issue – basic Weighted average number of shares in issue – diluted Adjusted earnings per share Adjusted diluted earnings per share 2021 £000 11,949 2020 £000 1,276 440,376,576 439,245,132 2.71p 0.29p 440,376,576 439,245,132 10,749,077 7,279,721 451,125,653 446,524,853 2.65p 0.29p 2021 £000 11,949 3,727 (134) (6,318) 110 1,908 826 (1,911) 10,157 2020 £000 1,276 4,457 125 1,838 306 1,057 – (1,122) 7,937 440,376,576 439,245,132 451,125,653 446,524,853 2.31p 2.25p 1.81p 1.78p Financial Statements | Notes to the accounts 105 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 11 Property, plant and equipment Cost At 1 November 2019 Foreign exchange Additions Disposals At 31 October 2020 Foreign exchange Additions Additions on acquisition Disposals At 31 October 2021 Depreciation At 1 November 2019 Foreign exchange Provided in the year Disposals At 31 October 2020 Foreign exchange Provided in the year Depreciation of acquisition Fair value adjustment Disposals At 31 October 2021 Net book amount at 31 October 2021 Net book amount at 31 October 2020 Computer hardware £000 Fixtures, fittings and equipment £000 Library books and journals £000 3,731 (21) 890 (5) 4,595 (68) 1,304 325 (575) 5,581 2,751 (11) 767 (5) 3,502 (54) 775 283 26 (209) 4,323 1,258 1,093 1,406 20 42 (345) 1,123 (61) 4 125 (137) 1,054 1,232 17 46 (257) 1,038 (50) 22 51 24 (77) 1,008 46 85 22 – 1 – 23 – 2 – – 25 14 – 4 – 18 – 4 – – – 22 3 5 Total £000 5,159 (1) 933 (350) 5,741 (129) 1,310 450 (712) 6,660 3,997 6 817 (262) 4,558 (104) 801 334 50 (286) 5,353 1,307 1,183 The Group has pledged the above assets to secure banking facilities granted to the Group. 106 12 Intangible assets Goodwill £000 Customer relationships £000 Trade names £000 Software £000 Development costs £000 Order backlog £000 Customer lists £000 Total £000 Cost At 1 November 2019 79,841 31,958 12,593 22,687 19,288 320 273 166,960 Foreign exchange Additions Fair value – – (113) – – – – – – (9) 380 – At 31 October 2020 79,728 31,958 12,593 23,058 Foreign exchange Additions Additions on acquisition Disposals At 31 October 2021 Amortisation – – 7,775 (4,893) 82,610 – – 5,808 – – – (2,920) (877) (1) 56 6,192 (906) 27 4,672 – 23,987 (88) 4,588 422 (870) (8) – – 312 (10) – – – 5 – – 278 (18) – – 15 5,052 (113) 171,914 (117) 4,644 20,197 (260) (10,726) 34,846 11,716 28,399 28,039 302 – 185,912 At 1 November 2019 31,709 19,142 8,565 12,565 Foreign exchange Amortisation for the year – – – – (9) 1,685 675 2,998 At 31 October 2020 31,709 20,827 9,240 15,554 Foreign exchange Amortisation for the year Disposals – – – – – (1) 1,321 612 2,676 (2,530) (762) (775) 8,558 29 3,755 12,342 (78) 4,226 (776) 258 (7) 61 312 (10) – – At 31 October 2021 31,709 19,618 9,090 17,454 15,714 302 Carrying amount at 31 October 2021 Carrying amount at 31 October 2020 50,901 15,228 2,626 10,945 12,325 48,019 11,131 3,353 7,504 11,645 Average remaining amortisation period (years) 31 October 2021 31 October 2020 n/a n/a 12.0 6.6 4.3 5.0 3.8 2.5 2.9 3.1 – – – – 159 11 108 278 (18) 80,956 24 9,282 90,262 (107) – 8,835 (260) (5,103) 93,887 92,025 81,652 – – – – – During the year, goodwill and intangibles were reviewed for impairment in accordance with IAS 36, ‘Impairment of Assets’. An impairment charge of £Nil (2020: £Nil) was processed in the year. Fair value adjustments are in relation to the finalisation of acquisition accounting in respect of Aligned Assets Limited, thinkWhere Limited and exeGesIS Spatial Data Management Ltd. Further information on these fair value adjustments is provided in note 27. Financial Statements | Notes to the accounts 107 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 12 Intangible assets continued Impairment test for goodwill For this review, goodwill was allocated to individual Cash Generating Units (CGUs) on the basis of the Group’s operations as disclosed in the segmental analysis. As the Board reviews results on a segmental level, the Group monitors goodwill on the same basis. The carrying value of goodwill by each CGU is as follows: Cash Generating Units Public Sector Software (PSS) Engineering Information Management (EIM) Idox Content (discontinued) 2021 £000 40,927 9,974 – 50,901 2020 £000 30,624 9,974 7,421 48,019 The recoverable amount of all CGUs has been determined using value-in-use calculations. These calculations use pre- tax cash flow projections based on financial budgets approved by management covering the next five financial years. The key assumptions used in the financial budgets relate to revenue and EBITDA growth targets. Cash flows beyond this period are extrapolated using the estimated growth rates stated below. Growth rates are reviewed in line with historic actuals to ensure reasonableness and are based on an increase in market share. For value-in-use calculations, the growth rates and margins used to estimate future performance are based on financial year 2022 budgets (as approved by the Board) which is management’s best estimate of short-term performance based on an assessment of market opportunities and macro-economic conditions. In the year to 31 October 2021, the Weighted Average Cost of Capital for each CGU has been used as an appropriate discount rate to apply to cash flows. The same basis was used in the year to 31 October 2020. The assumptions used for the value-in-use calculations are as follows and are considered appropriate for each of the risk profiles of the respective CGUs: Cash Generating Units PSS EIM Idox Content (discontinued) Discount rate Current year Compound Annual Growth Rate Long term growth rate Current year Discount rate Prior year Growth rate Prior year 12.4% 13.5% – 4.2% (0.1)% – 1.7% 1.7% – 11.8% 12.7% 12.7% 1.5% 1.5% 1.5% Individual Weighted Average Costs of Capital were calculated for each CGU and adjusted for the market’s assessment of the risks attaching to each CGUs cash flows. The Weighted Average Cost of Capital is recalculated at each period end. Management considered the level of intangible assets within the Group in comparison to the future budgets and have processed an impairment charge of £Nil within the year (2020: £Nil). Management have specifically considered the past financial performance of the EIM CGU which has seen revenue decreases following market challenges in the Oil and Gas sectors, compounded by the Covid-19 pandemic and its impact on global consumption in FY20 and FY21 following various periods of domestic lockdowns. Reported EIM revenues have also been impacted by new business being on a SaaS basis compared to previous periods that recorded larger on-premise enterprise license sales. However, the business has benefitted from the reorganisation of the Group in the past three years, with adjusted EBITDA contribution (i.e., before allocation of corporate expenses) up in FY19, FY20 and FY21, achieving a CAGR of 17%. Management anticipates a return to revenue growth in FY22 following the easing of lockdown restrictions and improvement in global supply, and following implementation of a more focused go-to- market approach established from a strategic review completed in late FY21. In the event the EIM CGU does not achieve revenue growth in FY22 as anticipated, this may give rise to an impairment in the carrying value of the EIM CGU assets. 108 The Group has conducted sensitivity analysis on the impairment test of each CGU and the group of units carrying value. Sensitivities have been run on the discount rate applied and management are satisfied that a reasonable increase in the discount rate used would not lead to the carrying amount of each CGU exceeding the recoverable amount. Sensitivities have also been run on cash flow forecasts for all CGUs EBITDA by 10%. Management are satisfied that this change would not lead to the carrying amount of each CGU exceeding the recoverable amount. Sensitivities have also been run on cash flow forecasts for all CGUs reducing the growth rate to 0%. Management are satisfied that this change would not lead to the carrying amount of each CGU exceeding the recoverable amount. In relation to EIM, in the event a combination of all the sensitivities occur, this could give rise to an impairment; however, the Directors have concluded the likelihood of this is remote. Management have further considered the CGUs for which prior period impairments were recorded to reduce the value-in-use of those CGUs to their recoverable amount, and how such carrying values are subject to the current year sensitivities noted above. Whilst the current year impairment reviews and sensitivities have not provided any indicators of further impairment on these assets, management have considered whether a reversal of the prior period impairment is required and concluded this is not appropriate at this time due to the ongoing transformation and improvement of those businesses. 13 Investments The investment is measured at fair value and relates to an investment acquired as part of the acquisition of the 6PM Group in February 2017. It was written off during the year. 14 Deferred tax Deferred tax assets and liabilities are summarised as follows: Deferred tax assets Deferred tax liabilities (non-current) The movement in the year in the net deferred tax provision was as follows: At 1 November Credit to income for the year Adjustment for changes in rate Adjustment to prior year provision Other movements Arising on acquisition At 31 October 2021 £000 2,623 (5,579) (2,956) 2021 £000 (2,796) 1,553 (826) 577 (20) (1,444) (2,956) 2020 £000 1,111 (3,907) (2,796) 2020 £000 (2,647) (594) (11) 473 (17) – (2,796) Financial Statements | Notes to the accounts 109 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 14 Deferred tax continued The movement in deferred income tax assets and liabilities during the year is as follows: Share-based payments £000 Other temporary differences £000 Losses carried forward £000 Accelerated tax depreciation £000 IFRS 15 £000 Total deferred tax asset £000 146 308 454 454 – 1,180 1,634 46 44 90 90 103 (152) 41 382 (382) – – 203 – 203 113 (14) 99 99 – 302 401 681 (213) 468 468 – (124) 344 1,368 (257) 1,111 1,111 306 1,206 2,623 Other temporary differences £000 Acquired intangibles £000 Associated deferred tax asset recognised £000 Total deferred tax liability £000 – – – – – (14) (14) (4,773) 762 (4,011) (4,011) (1,750) 196 (5,565) 758 (654) 104 104 – (104) – (4,015) 108 (3,907) (3,907) (1,750) 78 (5,579) At 1 November 2019 Charge to income At 31 October 2020 At 1 November 2020 Acquisitions Charge to income At 31 October 2021 At 1 November 2019 Charge to income At 31 October 2020 At 1 November 2020 Acquisitions Charge to income At 31 October 2021 Deferred tax is recognised where there is evidence that there will be sufficient future profitability of Group companies in the required jurisdictions to utilise the unrelieved losses or timing difference that gives rise to the deferred tax. Such evidence includes profitability of these companies in the year, and an estimate on future profitability based on budgeted future financial performance. 110 15 Financial assets and liabilities Categories of financial assets and liabilities The disclosures detailed below are as required by IFRS 7 – Financial Instruments: Disclosures. The carrying amounts presented on the Consolidated Balance Sheet relate to the following categories of assets and liabilities: Financial assets Financial assets measured at amortised cost: Note 2021 £000 2020 £000 Non-current: Investment Current: Trade receivables, net Other receivables Contract receivables Cash and cash equivalents Financial liabilities Financial liabilities measured at amortised cost: Non-current: Provisions Bonds in issue Bank borrowings Current: Trade and other payables Other liabilities Provisions Financial liabilities measured at fair value through profit or loss: Non-current: Other liabilities* Current: Other liabilities* 13 16 16 16 17 Note 20 21 22 18 19 20 19 19 – – 6,344 3,682 4,808 18,283 33,117 2021 £000 – 10,998 15,394 26,392 8,075 2,459 1,433 11,967 841 841 2,070 2,070 18 18 8,158 2,565 5,498 30,812 47,033 2020 £000 612 11,848 35,052 47,512 6,084 1,756 1,261 9,101 27 27 57 57 * Hierarchy 3 being inputs for the asset or liability which are not based on observable market data. The current year liability relates to deferred consideration on the acquisition of Aligned Assets Limited and exeGesIS Spatial Data Management Ltd, the prior year liability relates to deferred consideration on the acquisition of the Funding Solutions customer lists. Financial Statements | Notes to the accounts 111 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 15 Financial assets and liabilities continued The Group’s financial liabilities per the fair value hierarchy classifications under IFRS 13 – Financial Instruments: Disclosures’ are described below: Category of financial liability Contingent consideration due on acquisitions Fair value at 31 October 2021 £000 Level in hierarchy Description of valuation technique Inputs used for financial model 2,911 3 Based on future revenue and probability that vendor will meet obligations under sale and purchase agreement Management estimate on probability and timescale of vendors meeting revenue targets specified in sale and purchase agreement Total gains recognised in profit or loss £000 – There have been no changes to valuation techniques in the year. 16 Trade and other receivables Trade receivables, gross Allowance for credit losses Trade receivables, net Other receivables Contract receivables Financial assets Prepayments Non-financial assets Trade and other receivables due within one year 2021 £000 6,414 2020 £000 8,306 (70) (148) 6,344 3,682 4,808 14,834 2,134 2,134 16,968 8,158 2,565 5,498 16,221 2,479 2,479 18,700 Total trade receivables (net of allowances) held by the Group at 31 October 2021 amounted to £6,344,000 (2020: £8,158,000). The carrying amount of trade and other receivables approximates to their fair value, which has been calculated based on expectations of debt recovery, impairment provision calculations are based on historic performances. The following table sets out expected credit losses of gross trade receivables at 31 October. In addition to the expected credit losses below, an increase of £70,000 (2020: increase £77,000) of specific bad debts have been included within the expected credit losses balance that the Group has deemed prudent to provide for. 2021 Expected credit loss rate 0.0% 0.0% 0.0% 0.0% 0.0% Not past due 1–30 days past due 31–60 days past due 61–90 days past due >90 days past due Total Expected total gross carrying amount at default (£000) Lifetime ECL at 31 October 2021 2020 5,170 – 664 – 222 – 193 – 165 – Expected credit loss rate 0.3% 0.6% 0.9% 2.9% 4.6% Expected total gross carrying amount at default (£000) Lifetime ECL 31 October 2020 6,182 27 1,293 10 259 5 71 2 501 27 – 71 112 We have no expected credit loss scenarios in respect of our contract assets which are in respect of local authority entities. Trade receivables are reviewed regularly for impairment and judgement made as to any likely impairment based on historic trends and the latest communication with customers. Contract receivables represent work completed and delivered to the customer but due to the contractual payment terms have not yet been invoiced. £5,415,000 (2020: £4,619,000) of the gross balance, before net off, is in relation to deferred payment deals on local authority contracts, which typically have three to five year payment terms. The increase in these Local Authority balances is due to the number of multi-year resigns in the year which has increased the amount of product contract receivables. All of the closing Group trade receivables are in UK sterling with the exception of: Euros Australian Dollars US Dollars Canadian Dollars 2021 2020 €960,350 €4,324,278 AUD42,698 AUD14,023 $901,553 $1,648,269 CAD472,632 CAD1,175,978 Credit quality of financial assets The maximum exposure for the Group to credit risk for trade receivables at the reporting date by type of customer was: Local authorities and other public bodies Private companies The ageing of trade receivables at the reporting date for the Group was: Not past due Past due 0 to 30 days Past due 31 to 60 days More than 60 days Gross 2021 £000 4,766 777 323 548 6,414 Impairment 2021 £000 – – – 70 70 Movements in the provision for impairment of receivables for the Group were as follows: At 1 November Charge for the year Utilised At 31 October 2021 £000 3,991 2,423 6,414 Gross 2020 £000 5,949 1,384 276 697 8,306 2021 £000 148 125 (203) 70 2020 £000 2,122 6,184 8,306 Impairment 2020 £000 – – – 148 148 2020 £000 69 213 (134) 148 The provision allowance in respect of trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the amounts are considered irrecoverable and are written off against the trade receivable directly. Where trade receivables are past due, an assessment is made of individual customers and the outstanding balance. Financial Statements | Notes to the accounts 113 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 17 Cash and cash equivalents Cash at bank and in hand Cash and cash equivalents per cash flow statements The credit quality of the holders of the cash at bank is A and BBB+ rated. 18 Trade and other payables Trade payables Accruals 2021 £000 18,283 18,283 2021 £000 2,404 5,671 8,075 2020 £000 30,812 30,812 2020 £000 2,261 3,823 6,084 The carrying values of trade and other payables are considered to be reasonable approximations of fair value. Accruals represent liabilities which have been recognised at the balance sheet date. The majority of these will be paid during the next six months. 19 Other liabilities Social security and other taxes Other payables – deferred consideration Other payables Contract liabilities Other liabilities payable within one year Social security and other taxes Other payables – deferred consideration Contract liabilities Other liabilities payable after one year 2021 £000 2,852 2,070 2,459 18,236 25,617 – 841 949 1,790 2020 £000 5,217 57 1,756 19,866 26,896 1,074 27 717 1,818 The Group has deferred VAT of £1.0m as at 31 October 2021 (2020: £3.9m), of which it is anticipated £1.0m will be repaid in the year ended 31 October 2022. Contract liabilities represents software revenue, where billing milestones have been reached but the appropriate proportion of work has not been completed, and maintenance, managed service and subscription revenues that are spread over the period, typically one year, for which the service is supplied. Of the £20,583,000 contract liabilities present at 31 October 2020, £19,866,000 has been recognised as revenue in FY21. 114 20 Provisions At 1 November Provision made during the year Provision utilised during the year At 31 October The constituent parts of the provision at 31 October is as follows: 2021 £000 1,873 806 (1,246) 1,433 Holidays earned but not yet taken by employees Onerous legacy Transport contract Costs associated with previous properties Other items Provisions made in year £000 Provisions utilised in year £000 557 – 19 230 806 (411) (111) (724) – (1,246) 2020 £000 411 111 1,351 – 1,873 2020 £000 495 1,762 (384) 1,873 2021 £000 557 – 646 230 1,433 Other items include provisions made in respect of various operational items. Of the full provision, £1,433,000 is expected to be payable during the year ending 31 October 2022. Of the prior year provision (£1,873,000) £1,261,000 was payable within one year and £612,000 of the costs associated with previous properties, was payable within two years. 21 Bonds in issue Bonds in issue are measured at amortised cost. 130,000 bonds at €100 each 2021 £000 10,998 10,998 2020 £000 11,848 11,848 The bonds were acquired following the acquisition of 6PM Holdings plc. The bonds were issued in 2015 at a nominal value of €100 each bearing interest at 5.1% per annum. They are redeemable at par value in 2025. Interest on the bonds is paid annually in arrears in July. The bonds are listed on the Official Companies List of the Malta Stock Exchange. At 31 October 2021 the bond was trading at 103% which equates to a fair value of £11,445,000. 22 Borrowings All borrowings are held at amortised cost and after set-off for unamortised loan facility fees: Current: Bank borrowings Non-current: Bank borrowings Total borrowings 2021 £000 2020 £000 – – 15,394 35,052 15,394 35,052 Financial Statements | Notes to the accounts 115 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 22 Borrowings continued Reconciliation of liabilities arising from financing activities: As at 1 November 2019 Cash movements: Payments on lease liability Repayment of borrowings New loans Non-cash movements: Opening IFRS 16 adjustment Lease liability additions Movement in lease interest Lease liability disposal Movement in amortisation Movement in foreign exchange rate Movement in EIR Adjustment As at 31 October 2020 Cash movements: Payments on lease liability Repayment of borrowings New loans Non-cash movements: Lease liability additions Movement in lease interest Lease liability disposal Movement in amortisation Movement in foreign exchange rate Movement in EIR Adjustment As at 31 October 2021 Lease liability £000 Bonds in issue £000 – 11,584 (1,545) – – 4,825 461 167 (25) – – – – – – – – – – – 237 27 – – – – – – (304) – 356 3,883 11,848 35,052 (1,154) – – 1,216 134 (1,525) – (80) – – – – – – – – (734) (116) 2,474 10,998 – (35,000) 15,600 – – – (14) – (244) 15,394 Long-term borrowings £000 Short-term borrowings £000 Total £000 21,809 33,393 (12) (25,750) 35,012 4,000 – – – – – 54 – (113) – – – – – – – – – – – (1,545) (25,762) 39,012 4,825 461 167 (25) (250) 237 270 50,783 (1,154) (35,000) 15,600 1,216 134 (1,525) (14) (814) (360) 28,866 It was announced on 7 October 2021 that the Group had extended its facility with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc for an additional 18 months. The Group also transitioned from LIBOR to SONIA at this point. At the balance sheet date, the facilities consist of a revolving credit facility of £35m and £10m accordion facility (2020: £35m and £10m accordion facility). During the period the loan was held, the average interest rate was 2.48% (2020: 3.50%). There are unamortised loan fees of £318,000 (2020: £304,000) at the balance sheet date. An accounting adjustment of (£244,000) (2020: £243,000) has been processed during the period to take into account the effective rate of interest on the bank facilities. 116 As security for the above loans, Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc hold a fixed and floating charge over the assets of Idox plc and certain subsidiaries, a guarantee supported by Idox plc and certain subsidiaries and a share pledge in respect of the entire issued share capital of each subsidiary company. The Directors estimate that the fair value of the Group’s borrowing is not significantly different to the carrying value. 23 Risk management objectives and policies The Group’s principal financial instruments comprise cash and cash equivalents, short-term deposits, bonds and bank borrowings. The main purpose of these financial instruments is to finance the Group’s operations. The Group has other financial instruments, which mainly comprise trade receivables and trade payables that arise directly from its operations. Risk management is carried out by the finance department under policies approved by the Board. The Group’s finance department identifies, evaluates and manages financial risks. The Board provides guidance on overall risk management including foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity. The Board has evaluated the risks and is satisfied that the risk management objectives are met. The impact of the risks required to be discussed under IFRS 7 are detailed below: Market risk (i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the functional currency of the operations. The Group has minimal exposure to foreign exchange risk as a result of natural hedges arising between sales and cost transactions. (ii) Cash flow and fair value interest rate risk The Group is exposed to interest rate risk in respect of cash balances held with banks and other highly rated counterparties. The Group’s main interest rate risk arises from its borrowings. Borrowings issued at variable rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. During 2021 and 2020, all the Group’s borrowings at variable rates were denominated in UK Sterling. The average interest rate during the year ended 31 October 2021 was 2.48% (2020: 3.50%). Interest payable in the year was £456,000 (2020: £1,000,000). If the average interest rate during the year had been 1% different, this would have had an impact of £184,000 (2020: £318,000) on the interest payable during the year. Credit risk The Group’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below: Classes of financial assets – carrying amounts Cash and cash equivalents Trade receivables Contract receivables Other receivables Financial assets 2021 £000 18,283 6,344 4,808 3,682 33,117 2020 £000 30,812 8,158 5,498 2,565 47,033 Credit risk is managed on a Group basis. Credit risks arise from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The Group’s credit risk is primarily attributable to its trade receivables. It is the policy of the Group to present the amounts in the balance sheet net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and the current economic environment. The Group reviews the reliability of its customers on a regular basis and these reviews take into account the nature of the Group’s trading history with the customer. Financial Statements | Notes to the accounts 117 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 23 Risk management objectives and policies continued Credit risk continued The credit risk on liquid funds is limited because the majority of funds are held with banks with high credit-ratings assigned by international credit-rating agencies. Management does not expect any losses from non-performance of these counterparties. None of the Group’s financial assets are secured by collateral or other credit enhancements. Liquidity risk The Group closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments on a regular basis, to ensure that it has sufficient funds to meet obligations of the Group as they fall due. The Board receives regular debt management forecasts, which estimate the cash inflows and outflows over the next twelve months, so that management can ensure that sufficient financing is in place as it is required. Detailed analysis of the debt facilities taken out and available to the Group are disclosed in note 22. As at 31 October 2021, the Group’s financial liabilities have contractual maturities (including interest payments where applicable) as summarised below: Bonds in issue Bank borrowings Trade and other payables Current Non-current Within 1 month £000 – 27 7,245 1 – 3 months £000 – 55 830 3 – 12 months £000 567 243 – 1 – 5 years £000 12,698 16,243 – Later than 5 years £000 – – – This compares to the maturity of the Group’s financial liabilities in the previous reporting period as follows: Current Non-current Bonds in issue Bank borrowings Within 1 month £000 – 80 1 – 3 months £000 – 166 Trade and other payables 2,986 3,098 3 – 12 months £000 452 35,753 – 1 – 5 years £000 14,266 – – Later than 5 years £000 – – – The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of the liabilities at the reporting date. Capital risk management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts. 118 Capital for the reporting periods under review is summarised as follows: Total equity Less unrestricted cash and cash equivalents (note 17) Total equity Bonds in issue (note 21) Borrowings (note 22) 2021 £000 60,810 (18,283) 42,527 60,810 10,998 15,394 87,202 2020 £000 46,958 (30,812) 16,146 46,958 11,848 35,052 93,858 Capital-to-overall-financing ratio 0.49 0.17 24 Share capital Authorised: 650,000,000 ordinary shares of 1p each Allotted, called up and fully paid: As at 1 November Issued and allotted during the year 446,864,792 ordinary shares of 1p each (2020: 445,040,609) 2021 £000 2020 £000 6,500 6,500 4,450 19 4,469 4,446 4 4,450 Movement in issued share capital in the year During the year to 31 October 2021, 16 employees exercised share options across 21 separate exercises. To satisfy the exercise of these transactions, the Company issued and allotted 1,824,183 new ordinary shares of 1p each. The Company has one class of ordinary share which carries no right to fixed income. At 31 October 2021, there were 3,451,301 (2020: 3,448,878) shares in issue under ESOP. During the year, the average issue share price was 63p (2020: 42p). At 31 October 2021, there were 1,426,219 (2020: 1,491,219) shares held in treasury. 25 Share options The Company has an unapproved share option scheme for all employees (including Directors). All share options are exercisable at a price equal to the average market price of the Company’s shares on the date of grant. The vesting period is typically annually from the date of grant, and at the discretion of the Board. Per the contractual agreements, the options are settled in equity once exercised. An Employee Share Investment Trust is in place to allow employees a tax efficient way of investing in the Company. The Company purchases matching shares which become the property of the employee after a three-year vesting period. Financial Statements | Notes to the accounts 119 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 25 Share options continued Details of all share options over 1p Ordinary shares, falling within the measurement and recognition criteria of IFRS 2 – Share-based Payment and forming part of the unapproved share scheme, including their contractual life and exercise prices, are as follows: At start of year 65,000 200,000 150,000 525,000 400,000 585,500 1,925,500 Granted Exercised Lapsed (65,000) – – (200,000) (10,000) (50,000) – (400,000) (400,000) – – – – – – – – – – (475,000) (650,000) 800,500 At end of year Exercise price Exercise date from – – 90,000 125,000 – 18.00p 35.75p 39.00p 50.00p 50.00p Mar 2011 Jul 2013 Jul 2014 Apr 2016 Apr 2016 Exercise date to Mar 2021 Jul 2023 Jun 2024 Apr 2026 Apr 2026 585,500 1.00p Mar 2019 Mar 2029 The following table sets out the number of share options and associated weighted average exercise price (WAEP) outstanding during the year: Outstanding at the beginning of the year Exercised during the year Lapsed during the year Outstanding at the end of the year Exercisable at the end of the year 2021 2020 No. 1,925,500 (475,000) (650,000) 800,500 800,500 WAEP Pence 31.68 45.39 44.77 12.92 12.92 No. 3,658,427 (50,000) (1,682,927) 1,925,500 1,925,500 WAEP Pence 24.30 18.00 16.04 31.68 31.68 The share options outstanding at the end of the year have a weighted average remaining contractual life of 6 years. The share options exercised during the year had a weighted average exercise price of 45.39p and a weighted average market price of 64.82p. The Group recognised a total charge of £Nil (2020: £Nil) for equity-settled share-based payment transactions related to the unapproved share option scheme during the year. The charge of £Nil (2020: £Nil) related to share options granted and £Nil (2020: £Nil) related to share options exercised. Long-Term Incentive Plan (LTIP) During the year, 4,800,709 options were granted under the Long-Term Incentive Plan. The Group recognised a total charge of £1,908,150 (2020: £1,057,423) for equity-settled share-based payment transactions related to the LTIP during the year. The total cost was in relation to outstanding share options and share options granted in the year. The weighted average exercise price of options exercised in the year was £Nil (2020: £Nil). The number of options in the LTIP scheme is as follows: Outstanding at the beginning of the year Granted Forfeited Exercised Outstanding at the end of the year Exercisable at the end of the year 120 2021 No. 2020 No. 12,435,871 8,429,410 4,800,709 4,366,064 (265,345) – (1,414,183) (359,603) 15,557,052 12,435,871 5,301,163 2,450,196 The fair values were calculated using the modified Black-Scholes option pricing method and the following information: Number granted No. 3,183,961 203,774 1,412,974 4,800,709 Date of issue Feb 21 Apr 21 Aug 21 26 Leases Right-of-use-assets Cost At 1 November 2020 Foreign exchange Additions Additions on acquisition Disposals At 31 October 2021 Accumulated depreciation At 1 November 2020 Charge for the year Disposals Foreign exchange At 31 October 2021 Carrying amount at 31 October 2021 Carrying amount at 31 October 2020 Weighted average share price Pence Weighted average exercise price Pence Expected volatility % Expected life Years Risk free rate % Weighted average fair value at grant date £ 53.3 67 75.6 – – – 40 40 40 5 5 5 0.10 0.32 0.32 0.467 0.668 0.698 Buildings £000 Cars £000 Equipment £000 3,835 (80) 461 669 (1,380) 3,505 837 789 (383) (25) 1,218 2,287 2,998 658 (33) 72 – (697) – 227 101 (313) (15) – – 431 447 (7) – – (134) 306 150 131 (49) (2) 230 76 297 Total £000 4,940 (120) 533 669 (2,211) 3,811 1,214 1,021 (745) (42) 1,448 2,363 3,726 The Group leases several assets including; buildings, cars and IT equipment. The average lease term is 6.5 years. None of the leases for property, cars and equipment expired in the current financial year. This resulted in £Nil of the £533,000 additions to right-of-use-assets in FY21. The maturity analysis of lease liabilities is presented below. Amounts recognised in profit and loss Depreciation expense on right-of-use-assets Interest expense on lease liabilities 2021 £000 1,021 134 1,155 2020 £000 1,240 167 1,407 Financial Statements | Notes to the accounts 121 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 26 Leases continued Lease liabilities Analysed as: Non-current Current Maturity analysis: Year 1 Year 2 Year 3 Year 4 Year 5 Onwards Impact of discounting Carrying value 2021 £000 1,747 727 2,474 2021 £000 773 607 376 311 300 386 2020 £000 2,695 1,188 3,883 2020 £000 1,296 1,128 880 458 252 323 2,753 4,337 (279) (454) 2,474 3,883 The Group does not face significant liquidity risk with regard to its lease liabilities. Lease liabilities are monitored within the Group’s treasury function. 122 27 Acquisitions Aligned Assets On 5 June 2021, the Group acquired the entire share capital of Aligned Assets. Aligned Assets has provided software solutions to local authorities and a range of other public and private sectors for Address Management Solutions for over 20 years and adds to the Group’s existing portfolio of local government focussed solutions which focus on built environment, public protection, transport, elections, and social care. Goodwill arising on the acquisition of Aligned Assets has been capitalised and consists largely of the value of the synergies and economies of scale expected from combining the operations of Aligned Assets with Idox. None of the goodwill recognised is expected to be deductible for income tax purposes. The purchase of Aligned Assets has been accounted for using the acquisition method of accounting. Intangible Assets Property, plant and equipment Trade receivables Other receivables Cash at bank Total Assets Trade payables Other liabilities Contract liabilities Social security and other taxes Deferred tax liability Total Liabilities Net Assets Goodwill arising on acquisition Purchased customer relationships capitalised Purchased software capitalised Total consideration Satisfied by: Cash to vendor Earnout consideration Book value £000 Fair value £000 3,424 104 394 184 367 – 46 394 258 367 4,473 1,065 (71) (804) (1,362) (111) (7) (2,355) (71) (211) (1,527) (111) (1,691) (3,611) (2,546) 5,609 3,822 3,194 10,079 7,557 2,522 10,079 The revenue included in the consolidated statement of comprehensive income since 5 June 2021 contributed by Aligned Assets was £1,229,000. Aligned Assets also made a profit after tax of £537,000 for the same period. If Aligned Assets had been included from 1 November 2020, it would have contributed £3,289,000 to Group revenue and a profit after tax of £1,353,000. Acquisition costs of £165,000 have been written off in the consolidated statement of comprehensive income. Financial Statements | Notes to the accounts 123 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 27 Acquisitions continued thinkWhere On 6 August 2021, the Group acquired the entire share capital of thinkWhere. thinkWhere provides end-to-end GIS systems using open source, cloud-based products and applications, providing unique access to a wealth of open datasets supported by professional consulting services. thinkWhere will help build capability and new opportunities for both our customers and products. Having previously been equally owned by Falkirk and Stirling Councils, the acquisition will provide thinkWhere and its staff with the investment and resources to scale and accelerate as part of Idox. We were able to complete the purchase of thinkWhere Limited for £1 as the funding requirements that the company was placing on Stirling and Falkirk councils was deemed to be too high. The purchase of thinkWhere has been accounted for using the acquisition method of accounting. Intangible Assets Trade receivables Other receivables Cash at bank Total Assets Trade payables Other liabilities Contract liabilities Social security and other taxes Deferred tax liability Total Liabilities Net Assets Gain on acquisition Purchased customer relationships capitalised Purchased software capitalised Total consideration Book value £000 Fair value £000 322 36 114 (24) 448 (50) (69) (261) (128) 185 (323) 421 36 114 (24) 547 (50) (69) (261) (128) 119 (389) 158 (440) 157 125 – The revenue included in the consolidated statement of comprehensive income since 6 August 2021 contributed by thinkWhere was £174,000. thinkWhere also made a loss after tax of £42,000 for the same period. If thinkWhere had been included from 1 November 2020, it would have contributed £694,000 to Group revenue and a loss after tax of £168,000. Acquisition costs of £35,000 have been written off in the consolidated statement of comprehensive income. 124 exeGesIS On 4 October 2021, the Group acquired the entire share capital of exeGesIS. exeGesIS provides both public and private sectors software which helps collect information and manage assets of ecological, environmental and historical importance. The company works with private organisations, local authorities and other public sector bodies who manage public rights-of-way, archaeological sites, historic assets, conservation areas and nature reserves. This customer base is complementary to Idox’s and brings a number of new clients into the Group. Goodwill arising on the acquisition of exeGesIS has been capitalised and consists largely of the value of the synergies and economies of scale expected from combining the operations of exeGesIS with Idox. None of the goodwill recognised is expected to be deductible for income tax purposes. The purchase of exeGesIS has been accounted for using the acquisition method of accounting. Property, plant and equipment Trade receivables Other receivables Cash at bank Total Assets Trade payables Other liabilities Contract liabilities Social security and other taxes Deferred tax liability Total Liabilities Net Assets Goodwill arising on acquisition Purchased customer relationships capitalised Purchased software capitalised Total consideration Satisfied by: Cash to vendor Earnout consideration Book value £000 Fair value £000 14 366 9 2,033 2,422 (34) (404) (779) (13) (2) (1,232) 11 366 9 2,033 2,419 (34) (565) (779) (13) (2) (1,393) 1,026 2,166 1,829 2,873 7,894 6,244 1,650 7,894 The revenue included in the consolidated statement of comprehensive income since 4 October 2021 contributed by exeGesIS was £224,000. exeGesIS also made a profit after tax of £91,000 for the same period. If exeGesIS had been included from 1 November 2020, it would have contributed £2,686,000 to Group revenue and a profit after tax of £1,095,000. The purchase price allocation between goodwill, customer relationships and software is management’s best estimate as a formal valuation has not yet been finalised. Any required reallocations between the categories will be completed within 12 months of acquisitions as permitted by IFRS 3. Acquisition costs of £102,000 have been written off in the consolidated statement of comprehensive income. Financial Statements | Notes to the accounts 125 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the accounts continued For the year ended 31 October 2021 28 Capital commitments There were no material Group capital commitments at 31 October 2021 or 31 October 2020. 29 Contingent liabilities There were no material Group contingent liabilities at 31 October 2021 or 31 October 2020. 30 Related party transactions Compensation paid to key management (which comprises the Executive Management Team and the Board) of the Group: Salaries and other short-term employee benefits including NIC Post-employment benefits Share-based payments 2021 £000 3,364 74 1,375 4,813 2020 £000 3,108 79 830 4,017 During the year ended 31 October 2021, no Directors and three member of the Executive Management Team exercised share options resulting in a taxable gain of £498,736. No Directors and two members of the Executive Management Team exercised share options resulting in a taxable gain of £93,795 in the year ended 31 October 2020. Details of the remuneration for each Director are included in the Report on Remuneration, which can be found on pages 56 to 57 but does not form part of the audited accounts. 31 Post balance sheet events There have been no post balance sheet events which had a material impact on the Group. 126 Company balance sheet As at 31 October 2021 ASSETS Non-current assets Investments Total non-current assets Current assets Debtors: falling due within one year Cash at bank and in hand Total current assets Total assets LIABILITIES Note 2021 £000 2020 £000 6 7 110,960 110,960 102,344 102,344 1,675 1 1,676 62 9 71 112,636 102,415 Creditors: amounts falling due within one year 8 (30,374) (4,616) Net current liabilities Total assets less current liabilities (28,698) (4,545) 82,262 97,799 Creditors amounts falling due after more than one year 9 (16,235) (35,052) Total liabilities Net assets Capital and reserves Called up share capital Capital redemption reserve Share premium account Other reserve Treasury reserve Share option reserve Retained earnings Total shareholders’ funds 10 (46,609) (39,668) 66,027 62,747 4,469 1,112 41,556 7,495 (594) 3,959 8,030 66,027 4,450 1,112 41,356 6,234 (621) 2,615 7,601 62,747 The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own profit and loss account in these financial statements. The parent company’s profit for the year was £1,225,000 (2020: £4,917,000 profit). The financial statements were approved by the Board of Directors and authorised for issue on 26 January 2022 and are signed on its behalf by: David Meaden Chief Executive Officer 26 January 2022 The accompanying accounting policies and notes form an integral part of these Company financial statements. Company name: Idox plc Company number: 03984070 Financial Statements | Company balance sheet 127 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Company statement of changes in equity As at 31 October 2021 Called–up share capital £000 Capital redemption reserve £000 Share premium account £000 Other reserve £000 Treasury reserve £000 Share option reserve £000 Retained earnings £000 Total £000 Balance at 1 November 2019 4,446 1,112 41,348 6,234 (621) 1,834 2,411 56,764 Issue of share capital Share options reserve movement Exercise of options Lapse of options Transactions with owners Profit for the year Total comprehensive profit for the year 4 – – – 4 – – – – – – – – – 8 – – – 8 – – – – – – – – – – – – – – – – – 1,054 (98) (175) 781 – – – – 98 175 273 4,917 12 1,054 – – 1,066 4,917 4,917 4,917 Balance at 31 October 2020 4,450 1,112 41,356 6,234 (621) 2,615 7,601 62,747 Issue of share capital Share options reserve movement Exercise of options Lapse of options Fair value of deferred consideration shares on purchase of subsidiary Equity dividends paid Transactions with owners Profit for the year Total comprehensive profit for the year 19 – – – – – 19 – – – – – – – – – – – 200 – – – – – 200 – – – – – – 1,261 – 1,261 – – – – 27 – – – 27 – – – 1,894 (465) (85) – – – 535 – – 219 1,894 97 (85) 1,261 (1,331) (1,331) 1,344 (796) 2,055 – – 1,225 1,225 1,225 1,225 Balance at 31 October 2021 4,469 1,112 41,556 7,495 (594) 3,959 8,030 66,027 128 Notes to the company financial statements For the year ended 31 October 2021 1 Company information Idox plc is a company which is incorporated and domiciled in the UK, which is its principal place of business. The address of its registered office is 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA. The registered number of the Company is 03984070. 2 Accounting policies Basis of preparation These financial statements have been prepared in accordance with applicable accounting standards and in accordance with Financial Reporting Standard 101 – ‘The Reduced Disclosure Framework’ (FRS 101). The principal accounting policies adopted in preparation of these financial statements are set out below. These policies have all been applied consistently throughout the year unless otherwise stated. The financial statements have been prepared under the historical cost convention. These financial statements are separate financial statements for Idox plc, the Company. The financial statements are prepared in pounds sterling. Disclosure exemptions adopted In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore, these financial statements do not include: • A statement of cash flows and related notes. • Disclosure of key management personnel compensation. • Certain disclosures in relation to share based payments. • Disclosures in relation to impairment of assets. • The effect of future accounting standards not adopted. • The requirements of IFRS 7 Financial Instruments: Disclosures. • The requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement. • The requirements of paragraphs 10(d), 10(f), 16, 38A to 38D, 40A to 40D, 111 and 134–136 of IAS 1 Presentation of Financial Statements Judgements and estimates Management assess critical judgements and estimates in line with the Financial Reporting Council’s (FRC) guidance. The Directors are required to make judgements (other than those involving estimations) that have a significant impact on the amounts recognised and to make estimates and assumptions about the carrying amounts of assets and liabilities that are not easily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. Key sources of estimation uncertainty Management does not consider there to be any items to involve key assumptions and other key sources of estimation uncertainty at the balance sheet date that would have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Financial Statements | Notes to the company financial statements 129 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the company financial statements continued For the year ended 31 October 2021 2 Accounting policies continued Share based payment All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees are rewarded using share-based payments, the fair values of employees’ services are determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and sales growth targets). Employees to whom share options have been granted provide their services in subsidiary companies of Idox plc. All equity-settled share-based payments are recognised as an expense in the profit and loss account of the relevant subsidiary company. In Idox plc, the cost is allocated to investments in subsidiaries. If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are revised subsequently if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense recognised in prior periods if share options that have vested are not exercised. Upon exercise of share options, the proceeds received net of attributable transaction costs are credited to reserves. Investments Fixed asset investments in subsidiary undertakings are stated at cost less provision for impairment. If there is a subsequent change in the total consideration paid, such as a refund received from the seller, then the Company will recognise an adjustment to the acquisition price which will reduce the cost, and consequently the net book value, of that investment. Financial instruments Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its financial liabilities. Where the contractual obligations of financial instruments (including share capital) are equivalent to a similar debt instrument, those financial instruments are classed as financial liabilities. Financial liabilities are presented as such in the balance sheet. Share capital is classed as an equity instrument where the contractual terms do not have any terms meeting the definition of a financial liability. Dividends and distributions relating to equity instruments are debited direct to equity. Interest and expenditure arising on financial instruments is recognised on the accruals basis and credited or charged to the profit and loss account in the financial period to which it relates. Reserves Equity comprises the following: • “Capital redemption reserve” for the Company was created during 2003 when the entire deferred ordinary share capital was bought in exchange for one ordinary 1p share. • “Share premium” represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. • “Other reserves” arose as a result of share premium arising on consideration shares issued on the acquisition of 6PM Holdings plc and Halarose Holdings Limited. It also includes the fair value of the deferred consideration shares included in the purchase of Aligned Assets Limited. • Treasury reserve” represents shares repurchased by the Company to be held for redistribution as share options. The cost of treasury shares is debited to the Treasury reserve. • “Share options reserve” represents shares to be issued on potential exercise of those share options that have been accounted for under FRS 101. • “Retained earnings” represents retained profits. 130 3 Directors and employees There are no wages and salaries paid by the parent company. The Company has no employees and Directors are remunerated by other Group companies. Details of the remuneration for each Director are included in the Report on Remuneration which can be found on pages 56 to 57 but which do not form part of the audited accounts. 4 Dividends The Directors have proposed the payment of a final dividend of 0.4p per share, which would amount to £1,781,754 (2020: final dividend of 0.3p which amounted to £1,331,259). 5 Profit for the financial year The parent company’s profit for the year was £1,225,000 (2020: £4,917,000). 6 Investments Cost or market value At 1 November 2020 Additions Disposals At 31 October 2021 Impairment At 1 November 2020 Provided in the year At 31 October 2021 Net book amount At 31 October 2021 At 31 October 2020 Investment in Group undertakings £000 136,427 19,867 (11,251) 145,043 34,083 – 34,083 110,960 102,344 The Group has performed impairment reviews in respect of the assets of all its CGUs as disclosed in note 12 of the Group’s financial statements. The Company’s investments in Group undertakings associated with its EIM CGU has comparable carrying values to the carrying values of the assets of the CGU, and therefore, sensitivity of impairment reviews against value-in-use calculations is also comparable. The Company’s investments in Group undertakings associated with its PSS CGU has a higher carrying value than the carrying value of the assets of the PSS CGU, however, headroom of impairment reviews against value-in-use calculations is significant in both cases. Any comparable movement in sensitivity which resulted in an impairment of intangibles would result in a similar impairment to investments. However, at present there is no significant risk of an impairment to the investment values. Financial Statements | Notes to the company financial statements 131 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the company financial statements continued For the year ended 31 October 2021 6 Investments continued At 31 October 2021 the Company held investments in the following companies (* indirect holdings): Country of registration Registered office Class of share held Proportion held Nature of business Idox Trustees Limited England Idox Software Limited England 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA Ordinary 100% Corporate trustee of Employee share ownership trust Ordinary 100% Software services McLaren Software Limited Scotland 72 Gordon Street, Glasgow, Scotland, G1 3RS Ordinary 100% Dormant Company McLaren Software Inc USA 818 West Seventh St, 2nd Floor, LA, CA 90017 Ordinary 100% Software services Idox France SARL France Idox India Private Limited India McLaren Software Group Limited McLaren Software GmbH* Scotland Germany 75, Avenue Parmentier, 75544 Paris cedex 11, France Kapil Towers, Sixth Floor, C Wing, Dr. Ambedkar Road, Pune MH 411001, India 72 Gordon Street, Glasgow, Scotland, G1 3RS c/o RGT Consultants Partnerschaftsgesellschaft mbB, Niddastraße 91, 60329 Frankfurt am Main Ordinary 100% Software services Ordinary 100% Software services Ordinary 100% Holding Company Ordinary 100% Dormant Company McLaren Consulting BV* Netherlands Kauwenhoven 78, 6741 PW Lunteren, Netherlands Ordinary 100% Dormant Company CT Space Inc Citadon Inc USA USA 6PM Holdings plc Malta 1209 Orange Street, Corporation Trust Center, Wilmington, DE 19801 919 North Market St, Suite 950, Wilmington, DE 19801 GVZH Advocates, 192 Old Bakery Street, Valletta, VLT 1455, Malta Ordinary 100% Dormant Company Ordinary 100% Dormant Company Ordinary 100% Holding Company Tascomi Limited Northern Ireland 3 Ballynahinch Street, Hillsborough, Northern Ireland BY26 6AW 6PM Limited* Malta GVZH Advocates, 192 Old Bakery Street, Valletta, VLT 1455, Malta Idox DOOEL North Macedonia 5,Vasil Gjorgov Street, 1000 Skopje, North Macedonia Ordinary 100% Software services Ordinary 100% Software services Ordinary 100% Software services Idox Health Limited England Aligned Assets Holdco Limited England Aligned Assets Limited England thinkWhere Limited Scotland 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA 72 Gordon Street, Glasgow, Scotland, G1 3RS exeGesIS Spatial Data Management Ltd England 2nd Floor, 1310 Waterside, Arlington Business Park, Theale, Reading, RG7 4SA Ordinary 100% Dormant Company Ordinary 100% Holding Company Ordinary 100% Software services Ordinary 100% Software services Ordinary 100% Software services 132 7 Debtors Falling due within one year: Other debtors Amounts owed by Group undertakings 8 Creditors: amounts falling due within one year Amounts owed to Group undertakings Other creditors Accruals Amounts owed to Group undertakings are interest bearing and are repayable on demand. 9 Creditors: amounts falling due after more than one year Other creditors Bank loan 2021 £000 2020 £000 1,611 64 1,675 2021 £000 27,173 3,020 181 – 62 62 2020 £000 4,487 73 56 30,374 4,616 2021 £000 841 15,394 16,235 2020 £000 – 35,052 35,052 It was announced on 7 October 2021 that the Group had extended its facility with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc for an additional 18 months. The Group also transitioned from LIBOR to SONIA at this point. At the balance sheet date, the facilities consist of a revolving credit facility of £35m and £10m accordion facility (2020: £35m and £10m accordion facility). During the period the loan was held, the average interest rate was 2.48% (2020: 3.50%). There are unamortised loan fees of £318,000 (2020: £304,000) at the balance sheet date. An accounting adjustment of (£244,000) (2020: £243,000) has been processed during the period to take into account the effective rate of interest on the bank facilities. As security for the above loans, Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc hold a fixed and floating charge over the assets of Idox plc and certain subsidiaries, a guarantee supported by Idox plc and certain subsidiaries and a share pledge in respect of the entire issued share capital of each subsidiary company. The Directors estimate that the fair value of the Group’s borrowing is not significantly different to the carrying value. Financial Statements | Notes to the company financial statements 133 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the company financial statements continued For the year ended 31 October 2021 10 Share capital Authorised: 650,000,000 ordinary shares of 1p each Allotted, called up and fully paid: As at 1 November Issued and allotted during the year 446,864,792 ordinary shares of 1p each (2020: 445,040,609) 2021 £000 2020 £000 6,500 6,500 4,450 19 4,469 4,446 4 4,450 Movement in issued share capital in the year During the year to 31 October 2020, 16 employees exercised share options across 21 separate exercises. To satisfy the exercise of these transactions, the Company issued and allotted 1,824,183 new ordinary shares of 1p each. The Company has one class of ordinary share which carries no right to fixed income. At 31 October 2021, there were 3,451,301 (2020: 3,448,878) shares in issue under ESOP. During the year, the average issue share price was 63p (2020: 42p). At 31 October 2021, there were 1,426,219 (2020: 1,491,219) shares held in treasury. 11 Share options The Company has an unapproved share option scheme for all employees (including Directors). All share options are exercisable at a price equal to the average market price of the Company’s shares on the date of grant. The vesting period is typically annually from the date of grant, and at the discretion of the Board. Per the contractual agreements, the options are settled in equity once exercised. An Employee Share Investment Trust is in place to allow employees a tax efficient way of investing in the Company. The Company purchases matching shares which become the property of the employee after a three-year vesting period. Details of all share options over 1p Ordinary shares, falling within the measurement and recognition criteria of IFRS 2 - Share-based Payment and forming part of the unapproved share scheme, including their contractual life and exercise prices, are as follows: Exercised Lapsed (65,000) – – (200,000) (10,000) (50,000) – (400,000) (400,000) – – – – – 90,000 125,000 – 585,500 (475,000) (650,000) 800,500 At end of year Exercise price Exercise date from 18.00p 35.75p 39.00p 50.00p 50.00p Mar 2011 Jul 2013 Jul 2014 Apr 2016 Apr 2016 Exercise date to Mar 2021 Jul 2023 Jun 2024 Apr 2026 Apr 2026 1.00p Mar 2019 Mar 2029 At start of year Granted 65,000 200,000 150,000 525,000 400,000 585,500 1,925,500 – – – – – – – 134 The following table sets out the number of share options and associated weighted average exercise price (WAEP) outstanding during the year: Outstanding at the beginning of the year Exercised during the year Lapsed during the year Outstanding at the end of the year Exercisable at the end of the year 2021 2020 No. 1,925,500 (475,000) (650,000) 800,500 800,500 WAEP Pence 31.68 45.39 44.77 12.92 12.92 No. 3,658,427 (50,000) (1,682,927) 1,925,500 1,925,500 WAEP Pence 24.30 18.00 16.04 31.68 31.68 The share options outstanding at the end of the year have a weighted average remaining contractual life of 6 years. The share options exercised during the year had a weighted average exercise price of 45.39p and a weighted average market price of 64.82p. As the share option scheme is a Group scheme, there has been no charge recognised in the parent Company accounts. Long-Term Incentive Plan (LTIP) During the year, 4,800,709 options were granted under the Long-Term Incentive Plan. The Group recognised a total charge of £1,908,150 (2020: £1,057,423) for equity-settled share-based payment transactions related to the LTIP during the year. The total cost was in relation to outstanding share options and share options granted in the year. The weighted average exercise price of options exercised in the year was £Nil (2020: £Nil). The number of options in the LTIP scheme is as follows: Outstanding at the beginning of the year Granted Forfeited Exercised Outstanding at the end of the year Exercisable at the end of the year 2021 No. 2020 No. 12,435,871 8,429,410 4,800,709 4,366,064 (265,345) – (1,414,183) (359,603) 15,557,052 12,435,871 5,301,163 2,450,196 As the LTIP share option scheme is a Group scheme, there has been no charge recognised in the parent Company accounts. The fair values were calculated using the modified Black-Scholes option pricing method and the following information: Date of issue Feb 21 Apr 21 Aug 21 Number granted No. 3,183,961 203,774 1,412,974 4,800,709 Weighted average share price Pence Weighted average exercise price Pence Expected volatility % Expected life Years Risk free rate % Weighted average fair value at grant date £ 53.3 67 75.6 – – – 40 40 40 5 5 5 0.10 0.32 0.32 0.467 0.668 0.698 Financial Statements | Notes to the company financial statements 135 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Notes to the company financial statements continued For the year ended 31 October 2021 12 Related party disclosures As permitted by FRS 101, related party transactions with wholly owned members of the Group and remuneration of key management personnel have not been disclosed. 13 Capital commitments The Company had no capital commitments at 31 October 2021 or 31 October 2020. 14 Contingent liabilities There were no material Company contingent liabilities at 31 October 2021 or 31 October 2020. 15 Ultimate controlling party There is no ultimate controlling party. 136 Alternative performance measures For the year ended 31 October 2021 Within these financial statements, the Group makes reference to Alternative Performance Measures (APMs) which are not defined or specified under International Reporting Standards. The Group uses these APMs as this is in line with the management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers. Details are included within the financial review section of the Strategic Report. The following table reconciles these APMs to statutory equivalents for continuing operations: Adjusted EBITDA: Profit before taxation Depreciation and Amortisation Restructuring costs Acquisition costs Financing costs Share option costs Net finance costs Adjusted EBITDA Free cashflow: Net cashflow Add back: Acquisitions / disposals Debt repayments Drawdowns (Issue of shares) / net cost of staff share schemes Free cashflow Net debt: Cash Bank borrowings Bonds in issue Net Debt Adjusted profit for the year and adjusted earnings per share: Profit for the year Add back: Amortisation on acquired intangibles Acquisition costs Restructuring costs Financing costs Share option costs Tax rate changes Tax effect Adjusted profit for year 2021 £000 7,268 10,204 (90) (134) 110 1,789 372 19,519 2020 £000 1,815 10,063 1,748 125 306 1,004 2,177 17,238 (12,068) 23,683 (139) 35,000 200 25,762 (15,600) (38,575) (64) 7,129 118 11,188 (18,283) (30,812) 15,394 10,998 8,109 35,052 11,848 16,088 6,031 477 3,561 (134) (90) 110 1,789 826 (1,841) 10,252 4,010 125 1,748 306 1,004 – (1,094) 6,576 Weighted average number of shares in issue – basic Weighted average number of shares in issue – diluted Adjusted earnings per share Adjusted diluted earnings per share 440,376,576 439,245,132 451,125,653 446,524,853 2.33p 2.27p 1.50p 1.47p Financial Statements | Alternative performance measures 137 OverviewStrategic reportGovernanceFinancial statements Idox plc Annual Report and Accounts for the year ended 31 October 2021 Alternative performance measures continued For the year ended 31 October 2021 The following table reconciles these APMs to statutory equivalents for total operations: Adjusted EBITDA: Profit before taxation Depreciation and Amortisation Restructuring costs Acquisition costs Financing costs Share option costs Net finance costs Adjusted EBITDA Free cashflow: Net cashflow Add back: Acquisitions / disposals Debt repayments Drawdowns (Issue of shares) / net cost of staff share schemes Free cashflow Net debt: Cash Bank borrowings Bonds in issue Net Debt Adjusted profit for the year and adjusted earnings per share: Profit for the year Add back: Amortisation on acquired intangibles Acquisition costs Restructuring costs Financing costs Share option costs Tax rate changes Tax effect Adjusted profit for year 2021 £000 2020 £000 13,186 10,657 (6,318) (134) 110 1,908 386 19,795 2,702 11,339 1,838 125 306 1,057 2,217 19,584 (12,068) 23,683 (139) 35,000 200 25,762 (15,600) (38,575) (64) 7,129 118 11,188 (18,283) (30,812) 15,394 10,998 8,109 35,052 11,848 16,088 11,949 1,276 3,727 (134) (6,318) 110 1,908 826 (1,911) 10,157 4,457 125 1,838 306 1,057 – (1,122) 7,937 Weighted average number of shares in issue – basic Weighted average number of shares in issue – diluted Adjusted earnings per share Adjusted diluted earnings per share 440,376,576 439,245,132 451,125,653 446,524,853 2.31p 2.25p 1.81p 1.78p 138 Overview Strategic report Governance Financial statements Company information Company Secretary and Registered Office: R Paterson 2nd Floor 1310 Waterside Arlington Business Park Theale Reading RG7 4SA Nominated Adviser and Broker: Peel Hunt LLP Moor House 120 London Wall London EC2Y 5ET Auditor: Deloitte LLP Statutory Auditor 110 Queen Street Glasgow G1 3BX Corporate Solicitors: Pinsent Masons LLP 30 Crown Place Earl Street London EC2A 4ES Registrars: Neville Registrars Ltd Neville House Steelpark Road Halesowen B62 8HD Company Registration Number: 03984070 CBP00019082504183028 Printed by Pureprint, a CarbonNeutral® Company certified to ISO 14001 environmental management system. 100% of all dry waste associated with this production has been recycled. This publication is printed on Revive 100 offset an FSC® certified paper produced from 100 % recycled material, manufactured at a mill that has ISO 14001 environmental standard accreditation. The paper is Carbon Balanced with World Land Trust, an international conservation charity, who offset carbon emissions through the purchase and preservation of high conservation value land. Through protecting standing forests, under threat of clearance, carbon is locked-in, that would otherwise be released. Financial Statements | Company information 139 I d o x p l c 2 0 2 1 A n n u a l R e p o r t & A c c o u n t s Idox plc Second Floor, 1310 Waterside, Arlington Business Park, Theale, RG7 4SA T +44 (0) 333 011 1200 E investors@idoxplc.com idoxplc.com
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