Inghams Group Limited Annual Report 2016

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FY2016 Annual Report · Inghams Group Limited

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Annual report

For the year ended
31 December 2016

ingenta.com

Annual Report
For the year ended 31 December 2016

Contents

Directors and advisers

Highlights

Board members and management team

Chairman’s statement

Group strategic report

Directors’ report

Corporate governance statement

Directors’ remuneration report

Independent auditor’s report

Group Statement of Comprehensive Income

Group Statement of Financial Position

Group Statement of Changes in Equity

Group Statement of Cash Flows

Notes to the Group financial statements

Company Statement of Financial Position

Company Statement of Changes in Equity

Company Statement of Cash Flows

Notes to the Company financial statements

The Directors submit to the members their report and accounts of the Group for the year ended
31 December 2016. Pages 1 to 21, including the Chairman’s statement, Corporate governance
statement and Directors’ remuneration report, form part of the Directors’ report.

Directors and advisers

Executive Directors

D R Montgomery, Chief Executive Officer

Non-Executive Directors

M C Rose, Chairman
M A Rowse
N W Kirton
M M E Royde
B H Holmström

Company Secretary

J R Sheffield

Registered Office

8100 Alec Issigonis Way
Oxford
OX4 2HU

Auditor

Grant Thornton UK LLP
Registered Auditor
3140 Rowan Place
John Smith Drive
Oxford
OX4 2WB

Banker

HSBC plc
70 Pall Mall
London

SW1Y SE2

Solicitor

Memery Crystal LLP
44 Southampton Buildings
London

WC2A 1AP

Registrar

Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent

BR3 4TU

Nominated Adviser

Cenkos Securities plc
6-8 Tokenhouse Yard
London

EC2R 7AS

Highlights

•

Revenues up 9% to £15.2m (2015: £13.9m).

Gross profit up 45% to £5.8m (2015: £4.0m).

Pre-tax results improved by £2.8m to a profit of £0.9m (2015: loss of £1.9m).

Adjusted EBITDA profit of £1.3m (2015: loss of £0.8m).

Successful integration of the acquired 5 Fifteen business now branded as Ingenta Advertising.

Gross profit is calculated after Research & Development spend of £2.2m (2015: £2.5m).

Profit from operations is calculated after restructuring costs of £0.6m (2015: £0.4m).

Basic earnings per share of 6.03p (2015: loss of 11.28p).

Net cash at year end of £2.0m (2015: £2.1m).

Cash outflow from operations £0.5m (2015: £2.6m).

• Maiden dividend of 1p per share proposed.

*EBITDA – Earnings before interest, tax, depreciation and amortisation. A calculation is provided in note 6 to the accounts.

Annual ReportFor the year ended 31 December 2016Board members

M C Rose
Chairman

N W Kirton
Non-Executive Director

M A Rowse
Non-Executive Director

B H Holmström
Non-Executive Director

M M E Royde
Non-Executive Director

D R Montgomery
CEO

J R Sheffield
iCFO

G S Winner
COO

J Teitelbaum
Managing Director, Vista

M A Scheld
Managing Director, PCG

Management team

VISTA

Vista

Ingenta
Commercial

Enterprise

Product Manager
Rights
Royalties
Order to Cash

GO!

Product Manager
Rights
Royalties

Ingenta
Content

Enterprise

CMS
Ingenta Connect
Ingenta Open
E-commerce

GO!

CMS

Annual ReportFor the year ended 31 December 2016Publishers
Communication
Group

Research
Marketing
Sales

Ingenta
Content

Enterprise

CMS

Ingenta Connect
Ingenta Open
E-commerce

GO!

CMS

Ingenta
Advertising

Enterprise

Advertising
Audience

GO!

Advertising
Audience

Ingenta products

More than 80% of the world’s leading publishers turn to Ingenta to advance their content strategies. As your
single, trusted partner, we have the solutions you need for all your technology and business development
requirements. We can assist you every step of the way, from editorial acquisition through to your end-user with
our premier asset management systems, sales and marketing consulting, and digital hosting platforms.

Ingenta Product Families offer a choice of deployment models: Enterprise or GO!

Product family

Product

Implementation Methodology

Enterprise

GO!

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VISTA

Vista

Ingenta Rights

Ingenta Royalties

Ingenta Product Manager

Ingenta Order to Cash

Ingenta CMS

Ingenta Connect

Ingenta Open

Ingenta E-commerce

Ingenta Advertising

Ingenta Audience

Ingenta product families offer a choice of deployment models: Enterprise or GO!. Enterprise deployments will be product-based, but allow for bespoke
changes and customisations to be made to the software. GO! deploys an “off the shelf ” software package which allows the Group to sell at a lower
price point with a standard implementation. GO! products have full capability with limited flexibility, and are designed for publishers prepared to
adapt their processes rather than customise the software. Ingenta has adopted best practices when defining the GO! offerings.

Annual ReportFor the year ended 31 December 2016
Vista

Vista is a legacy enterprise level product, delivered through
several managed services

• Applications Implementation Services (AIS)

VISTA

• Applications Support and Updates (ASU)

• Applications Management Services (AMS)

• Applications Hosting Services (AHS)

Ingenta Commercial

The Ingenta Commercial framework provides a range of applications
designed to move your content forward in today’s marketplace,
combining the best business solutions for both print and digital
products.

• Royalties

• Permissions

• Editorial and Production

• Online Sales & Marketing

• Digital & Print Distribution

Ingenta Content

Our Ingenta suite of hosting platforms enable publishers of any size,
discipline or technical proficiency to convert, store, deliver and monetise
digital content.

• Online Platforms

• Semantic Enrichment

• Mobile

• E-commerce

• Access Entitlement

Ingenta Advertising

Our advertising solution is a complete, browser-based multimedia
advertising, CRM and sales management platform for content
providers. With the ability to sell and track digital and print ads in
a single system, maximise the value of your audience with streamlined
ad sales, packaged ad buys and multi-channel campaigns, generating
new revenues from previously untapped sources.

• Bookings

• Packages and bundles

• Inventory management

• Finance/credit control

• CRM

The Ingenta Audience data management platform (DMP) processes
enriched data to gain valuable insights on your users. These insights
empower advertisers to ensure that their creative advertising
campaigns reach and engage with their target audiences.

Vista

Vista is a legacy enterprise level product, delivered through several managed services, including:

• Applications Implementation Services (AIS)
• Applications Support and Updates (ASU)
• Applications Management Services (AMS)
• Applications Hosting Services (AHS)

All of which deliver a level of support tailored to our customer’s business. These service solutions provide publishers with greater flexibility and
support for the system and enables our customers to concentrate on their core business while our support services oversee and manage their business
applications.

Annual ReportFor the year ended 31 December 2016Ingenta Commercial

The Ingenta Commercial family of products are next generation solutions designed to enable publishers to exploit:

• All channels: both legacy book trade and emerging direct to consumer supply chains
• All paths to discovery: best in class metadata management, visibility and social commerce
• All revenue streams: collect micro-revenues many times over
• All business models: supporting fragments, bundles, rentals, pay-per-view, subscriptions, and samples
• All content: a truly agnostic enterprise system, not a bolt-on to print-based software

The Commercial product family includes the following solutions, which can be purchased separately, in any combination, or as a complete enterprise
system:

Ingenta Product Manager

Ingenta Product Manager allows content providers to retain essential control and consistency of data by improving visibility, opening lines of
communication, and streamlining the end-to-end lifecycle management of all types of content.

The system manages assets along with editorial, production and marketing workflows with data transparency, unrivalled metadata management and
a single version of the truth.

• Planning and acquisition

• Metadata management and distribution

• Scheduling and workflows

• Flexible and promotional pricing

• Profit and loss account engine

Rights

Royalties

Idea

Acquisition

Contract

Advances

Marketing

Concept

Contracts

Relationship
Manager

Product
Manager

c
t

I
P

u
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e

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r r

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p
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Sales

Digital
Distribution

Physical
Distribution

Payments

Returns

Delivery

Ingenta Rights

Managing electronic rights, sub rights, fragments and permissions, Ingenta Rights ensures that content owners get the most from their assets, no
matter the size, format, or fine details of the transaction.

• Real-time visibility of rights inventory

• Complete tracking of expiration, publication,

and sales histories

• Support for chapter, image, and fragment sales

• Full downstream management of rights income

In addition, Ingenta Rights manages the full IP lifecycle, ensuring legal issues, from territorial rights and marketing obligations to supply chain
management and insurance, are properly considered and consistently administered. Contracts management within Ingenta Rights underpins the
system and enables consistency and compliance across your organisation, to avoid potentially costly disputes.

Ingenta Rights enables data owners and users to confidently fulfil contractual obligations, decrease operating expenses and boost revenue potential
with a complete intellectual property system which leverages rights, royalties and permissions compliance with accurate cash flow forecasting,
multicurrency calculations and tracking across various products and content types.

Rights

Royalties

Idea

Acquisition

Contract

Advances

Marketing

Concept

Contracts

Relationship
Manager

Product
Manager

c
t

Ingenta Royalties

I
P

u
l
e

Delivery

Sales

Digital
Distribution

Physical
Distribution

Payments

Returns

u
t
h

ri
r r

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p
t

The Ingenta Royalties application enables publishers to calculate complex royalties quickly, easily and with confidence, and provides authors with a
self-service interface. This allows publishers to better serve their authors, contributors, illustrators, and other rights owners from initial contract to
final payment. The Ingenta Royalties solution is considered the only system on the market able to handle the complexities and nuances of today’s most
creative deals.

• Complex royalty calculations

• Support for multiple currencies and international

tax reporting

• Streamlined operations and cash flow forecasting

• Improved author care with user-friendly interface

Ingenta Order to Cash (OtC)

The Order to Cash application allows publishers to package, market, sell and deliver content in the formats that readers demand, where and when
they seek it.

OtC has the range and depth of features necessary to integrate the delivery of diverse product types and billing methods via multiple channels,
including e-books, online subscriptions, social commerce, digital access, downloads and service billing, while providing full support for print and
physical products.

Rights

Royalties

Idea

Acquisition

Contract

Advances

Marketing

Concept

Contracts

Relationship
Manager

Product
Manager

I
P

u
l
e

Delivery

Sales

Digital
Distribution

Physical
Distribution

Payments

Returns

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Annual ReportFor the year ended 31 December 2016

Ingenta Content

Our Content products deliver over 700 million page views and data requests per year through our fully outsourced
Ingenta Connect scholarly portal, our custom, semantically enriched, multi-format Ingenta CMS platform and
E-commerce solution.

These products enable publishers of any size, discipline, or technical proficiency to convert, store, deliver, and monetise
digital content.

Ingenta CMS

The Ingenta CMS platform is a custom hosting solution that supports and delivers all the information a data provider will publish. The result of a multi-
year research and development program, our CMS solution has been built from the ground up using a powerful combination of industry standard
architecture and semantic web technologies. Ingenta CMS maximises the visibility, usage, and value of publishers’ content via semantic enrichment
while optimising content licensing around flexible E-commerce and access controls regardless of format or type.

• Provides seamless access to all content in all its formats

• Harnesses semantic discovery and drives usage with intuitive routes into research

• Allows content to be repackaged easily to experiment with new business models

• Delivers content via desktop, tablet, or smartphone

• Uses sophisticated access control

Ingenta CMS GO!

A packaged solution for publishers looking to host their own branded site using standardised technology without the cost of a fully-customised
interface. Ingenta CMS GO! is delivered from the Amazon cloud and shares the same underlying technology as Ingenta CMS.

• Cost-effective mid-point solution

• Reliable performance

• Fully-branded with publisher URL

• Flexible user experience, with full responsive design

• Indexing on Ingenta Connect for additional revenue potential

Ingenta Connect

Ingenta Connect hosts content for around 300 publishers and is the home of scholarly research. Academics and students from over 25,000 registered
institutions around the world have access to tens of thousands of publications, leading to an average of 30 million page views per year, delivering
14,000 downloads per day. Our fully outsourced e-publishing package is a turn-key platform solution and a proven channel to get content online
quickly, easily and affordably.

On Ingenta Connect, there is a broad spectrum of cost-effective services to choose from, whether a publisher is taking content online for the first time,
looking to increase revenues through online activity or thinking of creating a custom-branded website.

• Data conversion & enhancement

• Secure web hosting

• Flexible E-commerce

• Linking and distribution

Ingenta Open

Rights

Royalties

Idea

Acquisition

Contract

Advances

Marketing

Concept

Contracts

Relationship

Manager

Product

Manager

Ingenta Open is a new portal from Ingenta; linked directly to Ingenta Connect. The concept behind it is simple – to be a single solution for all open
access content. Ingenta Open consists of a supported content management system and discovery service, exclusively for open access content,
implemented across a broad range of networks and repositories and facilitating access for researchers, students and the public.

Ingenta Open facilitates search and discovery both internally via a sophisticated content management system, and externally via publishers’ own
content management systems and institutional repositories. With a low-cost entry threshold for open access publishers seeking a supported content
management system and a sustainable long term business model, Ingenta Open carries the huge additional benefit for smaller publishers of dual
hosting on Ingenta Connect, thereby opening discovery to over 1.5 million registered users and thousands of libraries.

Delivery

Ingenta E-commerce

r r

Sales

Digital

Physical

Payments

Returns

Distribution

Ingenta E-commerce is a single solution that manages business models, access entitlement and cross-selling of products on multiple platforms. It
can maximise existing content by creating new revenue streams at the touch of a button, allowing publishers to enhance profits from their existing
intellectual property by empowering sales and marketing teams to pinpoint the needs of the digital customer, create content bundles and sell to
specific customer groups whilst integrating online business models with back office legacy infrastructure.

Publishers
Communications Group

An Ingenta Company

Publishers Communication Group (PCG), an Ingenta company, is an internationally recognised sales and marketing
consulting firm providing a range of services designed to support and drive clients’ sales strategy. PCG has advocated
for scholarly publications and digital content around the world for over a quarter of a century.

PCG sales, marketing and research professionals have executed successful campaigns, forged relationships with top
global consortia and scrutinised the ever-changing academic marketplace on behalf of over 100 industry clients,
generating in excess of $50 million for clients in sales.

Established in 1990 and headquartered in Boston (USA) with offices in the UK, Brazil, Mexico, India and China, PCG’s global presence continues to
grow to better serve the needs of publishers.

Drawing on the infrastructure of a world-leading provider, PCG manages strategic sales and marketing operations for publishers ranging from The
Microbiology Society, CABI and BioOne to Elsevier, and conducts individual and repeat projects for dozens of other publishers around the world.

Experience

Now in its third decade, PCG has helped publishers launch sales and marketing efforts in new regions, shore up existing business, conduct market
research and analysis, and negotiate lucrative consortia deals. Our established network of faculty, library selectors, consortia leaders and end-users,
paired with our seasoned, multilingual sales teams makes us an ideal partner for a publisher of any size.

Connections

PCG team members have held positions at academic libraries, subscription agents and publishers including Cambridge University Press, LexisNexis,
the MIT Press, Elsevier, Cengage, NEJM, JBJS, Swets, Forrester Research, Sage, and Taylor & Francis, resulting in over 200 years of collective industry
experience. Their extensive global network includes tens of thousands of library selectors from academic, corporate, medical libraries and consortia
worldwide.

Trusted Partner

PCG clients include commercial publishers, non-profit associations and electronic services providers. Publishers trust that we will promote their content
to the right people and in the most impartial manner possible by providing measurable results and explicit data to help justify marketing expenditure.

Global Reach

With offices in the US and UK in addition to Brazil, Mexico, India and China, PCG’s multilingual team consistently develops new relationships with key
decision-makers in twelve languages.

Annual ReportFor the year ended 31 December 2016Ingenta Advertising

Ingenta Advertising is a complete, browser-based multimedia advertising, CRM and sales management platform for
content providers. With the ability to sell and track digital and print ads in a single system, publishers can maximise the
value of their audience with streamlined ad sales, packaged ad buys and multi-channel campaigns, generating new
revenues from previously untapped sources.

Ingenta Advertising manages

• Bookings

• Packages and bundles

• Inventory management

• Finance/credit control

• CRM

Features

• Account de-duplication

• Contact management

• Reporting and dashboard

• Free text, combined and advanced searching

• Traffic and ad copy tracking

• Third-party CRM integration

Ingenta Audience, powered by Enreach, is the latest addition to the Ingenta Advertising package.

Combined with the Ingenta Advertising platform, Audience allows content and media managers to sell online newspaper and magazine advertising
space by leveraging programmatic buying capability to reach “the right audience, with the right offer, at the right time”.

The new solution allows advertising channel media owners to generate data-driven revenue by collecting first party data and enriching it with
segmentation to enable prediction and customisation capabilities to their advertising properties.

Chairman’s statement

2016 Developments

The major development in the year was the acquisition of the UK advertising software company 5 Fifteen at the end of July. The business has been
successfully integrated into the Group and trades under the Ingenta Advertising brand. The purchase has allowed Ingenta to diversify its client base
and extend its offering into the wider media industry which includes newspapers, magazines and other creators of content.

In order to fund the additional working capital requirements resulting from the acquisition, the Company also raised £780K before costs via the issue of
600,000 new shares in August for £1.30 a share.

Within the wider Group, performance has also been encouraging with Ingenta CMS signing up five new customers during the year and Ingenta
Commercial making strong progress on its current implementations with two customers expected to go live in the first half of 2017 and one more early
in the second half.

After 12 years of service, Alan Moug resigned as Chief Financial Officer and the board would like to thank him for all his efforts over that period. Jon
Sheffield took over on an interim basis with effect from 1 January 2017 and his position has been confirmed with immediate effect.

Results

The audited results for the year ended 31 December 2016 reflect a substantial improvement in performance with revenues and profit markedly up on
2015. The decisions made in 2015 have played a large part in this as the product development and rebranding exercise have produced a streamlined
product set that can be sold to a much wider market place. The successes within Ingenta CMS bear testament to this with strong sales growth for the
recently launched GO! product offering. It is anticipated that similar results can be achieved from the Ingenta Commercial suite of products in due
course.

In addition to these product developments, the restructuring program implemented mid-way through 2015 has put the business in a strong position to
deliver consistent profitability and shareholder return.

Shareholders’ returns and dividends

The Directors reiterated their intention to pay an interim dividend in 2017 of 1 pence per share (2015: £nil).

Outlook

I am very pleased with the results David Montgomery and his team have produced for 2016 and excited about the potential for 2017. The target for the
current year is to build on these sales successes and drive the business forward. To this effect, Kathryn Layland has been appointed to EVP of Business
Development and will oversee the Group’s sales strategy of selling Ingenta’s product lines into global markets and widening the focus to a broader
range of content owners.

M C Rose
Chairman
31 March 2017

Annual ReportFor the year ended 31 December 2016

Group strategic report

2016 has been an encouraging year for the Group with significant improvements in a number of areas of the business.

Product Strategy

The decision to develop a simplified GO! offering for the Ingenta products has proved successful and will be an important factor in the strategy
to target mid-tier customers. Previously, the product solutions were typically complex, bespoke software packages which required substantial
development and implementation effort. GO! is a simplified and standardised solution that can be offered at a lower price point and be implemented
in a shorter time scale. Full enterprise solutions will also be offered for larger clients but it is clear these will have much longer sales and implementation
cycles. The acquisition of 5 Fifteen has provided the Group with a new software product in the advertising space but importantly also provides a
customer base in the wider media and newspaper segment which will be focused on to drive cross selling opportunities.

Another important strategy is to optimise operational practices in all areas of the business. Flexible working practiceswith the use of offshore
development resources combined with the transferrable skills of the existing employee base means the Group can successfully deploy products and
service the growing customer base.

Key Performance Indicators

The Board and senior management review a number of KPI’s on an ongoing basis throughout the year. These are all part of the monthly management
accounts process and include:

•
•
•

Revenue versus budget at a Group and business unit level
Adjusted EBITDA (see note 6 for calculation) versus budget at Group and business unit level
Group cashflow versus budget

Any deviation or anomalies are investigated and corrective action taken where appropriate.

At year end, Group revenues were £110K better than budget largely due to the mid-year acquisition of 5 Fifteen which did not form part of the 2016
budgeting process. The Ingenta Content division revenues were down on budget by £220K because of project commencement delays. PCG revenue
was £200K down on budget as a number of sales were delayed until Q1 2017. Vista revenue was £430K better than budgeted due to extra consulting
service work on the client base. Ingenta Commercial revenues were also affected by delayed project commencement dates and ended the year £600K
down on budget. Ingenta Advertising, which was acquired from the purchase of 5 Fifteen, was not part of the budget and added £706K to revenue in
the year.

Adjusted EBITDA numbers are included in the segmental information by business unit in the Group accounts. For the Group these were £270K better
than budget due to the acquired advertising business. Ingenta Content EBITDA was £220K better than budget due to delayed hiring and general cost
control. PCG EBITDA was in line with budget as new hires were delayed in line with new business wins. Vista EBITDA was £490K better than budget
because of the additional consulting services revenue noted above. Ingenta Commercial was £715K behind budgeted EBITDA due to delayed sales.
However, all modules have now gone live and are ready for sale.

Year-end cash balances were £600K better than budgeted mainly due to temporary timing differences as the 2017 annual renewals process was
completed in good time allowing invoices to go out in Q4

Financial Performance

Group revenues for the year have increased by £1.3m to £15.2m (2015: £13.9m). There have been several factors behind this growth including new sales
wins, successful project implementations and growth via acquisition. Further details of this are included in the business unit review section below.

Elsewhere, the restructuring program initiated in 2015 has helped manage the cost base of the business which is illustrated by the savings in cost of
sales, sales and marketing expenses and administration expenses. Profit from operations stands at £0.7m (2015: loss £1.5m), an improvement of £2.2m
on the reported loss in 2015.

The Group’s joint venture (JV) in China, Beijing Ingenta Digital Publishing Technology, has also performed well in the year. The Group holds a 49% stake
in the JV and its share of reported profit was £170K as opposed to a loss of £100K in 2015. The driver behind this was increased revenues as the JV
made good progress on its software implementations. Further details are in note 3.

Finance costs within the business have been reduced substantially as the raising and offer in mid-2015 allowed repayment of interest-bearing debt.
The finance costs in 2016 relate to finance leases.

A tax credit of £150K (2015: £405K) is included in the results for the year and relates to money expected to be received under the research and
development tax credit scheme. The claim has been calculated in the same way as prior years and is subject to HMRC approval. Further details are in
note 9.

Financial Position

Non-current assets within the Group have increased by £1.8m. The main contributor to this increase was the goodwill and intangibles created because
of the acquisition of 5 Fifteen. The intangibles relate to the software technology acquired and were valued at £0.5m using a discounted cashflow
model. These are being amortised over 5 years. £1.1m of goodwill was also recognised on consolidation of the 5 Fifteen business. This was tested for
impairment using discounted cashflows. Further details are included in notes 11 and 12.

Current assets have decreased compared to 2015. The key factor in this, was the Group’s decision to pay down all overdrafts. In prior years, large
positive cash balances were offset by substantial overdraft positions which were reported in current liabilities. The reduction in the R&D tax debtor
has arisen because of the improved trading performance in the year – current year losses in prior years augmented the value of the credit. Trade
debtors were also higher at the end of 2016 as several project milestones were met allowing invoices to be raised. In addition, year-end accrued revenue
balances were also higher than in prior years because of the acquisition of 5 Fifteen and its associated balances.

During the year, 600,000 shares were issued at £1.30 per share. This has resulted in the Share capital and Share premium increases in 2016.

As noted above, the Group paid down its overdrafts in the year and this has reduced reported borrowings in 2016. Trade and other payables includes
additional accruals at the end of 2016 for contingent payments on the acquisition of 5 Fifteen. Further details on this are in note 17.

Cashflow

At year end, the Group’s cash balances have remained steady closing with a balance of £2.0m. Cash outflows from operations have improved by £2.2m
compared to 2015. The key factor behind this improvement is the profitable trading in the year. Elsewhere, the business successfully raised £780K from
a share issue in the year and £460K of this was spent on the acquisition of 5 Fifteen (net of acquired cash balances). Another important development in
2016 was the substantial reduction in interest costs which were down from £425K in 2015 to £33K in 2016. The R&D tax credit of £390K was received in
the year and the estimate for 2016 is a further £150K although this is subject to HMRC approval.

Business unit review

Ingenta Commercial

Ingenta Commercial provide enterprise level publishing management systems for both print and digital products.

2016 has been a year of significant progress. The team have 3 go-lives planned for 2017, two in the first half of 2017 and another early in the
second half. The first of these go lives signals the completion of the last major product offering of the Commercial division, “order to cash”. This is
a referenceable client which we believe will open future sales opportunities. In addition to this, the onerous contract disclosed in prior years was
successfully resolved in 2016. All provisions made in prior years were sufficient and have been fully released. There is no longer a burden on the business
going forward into 2017.

Ingenta Content

The Ingenta Content suite of products enable publishers of any size, discipline or technical proficiency to convert, store, deliver and monetise digital
content.

The Content team have won 5 new customers in 2016 and this success has been augmented by the widened product offering which now includes a
full Content Management Solution (CMS) solution as well as a simpler GO! offering. The first sale of GO! was in South Africa where Ingenta has no
local presence and the implementation was performed remotely. This has proven that GO! can be sold and deployed to a much wider audience which
dramatically extends our addressable market. This deployment was also cloud based, meaning the solution is not reliant on our UK and USA hosting
centres, which further enhances the market reach of the product.

Ingenta Advertising

Ingenta Advertising provides a complete browser based multimedia advertising, CRM and sales management platform for content providers.

The 5 Fifteen business was acquired at the end of July 2016 and formed the new Ingenta Advertising division. The division contributed £700K to
reported Group revenues and has a strong pipeline with most new prospects purchasing the software as a service (SaaS), deployed in the cloud. Prior
to acquisition, 5 Fifteen operated predominantly in the newspaper and magazine space though now have a live academic client on their platform. The
academic market is already a primary space for Ingenta so the integration of the business will provide much wider market opportunities.

PCG

The PCG consulting arm provides a range of services designed to support and drive a business’s sales strategy.

Revenues and profitability have improved compared to those reported in 2015 and the division has undergone a restructuring exercise to reduce risk.
Several new clients were signed in 2016, some of which were outside of the traditional academic publishing market which has broadened the client base
and opened new sales opportunities. The outlook for 2017 remains positive with several renewals and new business wins already being confirmed.

Vista

Vista provides services to support the author2reader publishing management system.

The Vista business remains core to the Group going forward recording revenues of £6.7m whilst also maintaining healthy profitability. Time based
service utilisation rates are high within the division and Vista staff are now increasingly working on Ingenta Commercial projects as the business looks
to benefit from their wealth of experience in the wider Group.

Annual ReportFor the year ended 31 December 2016
Risks and uncertainties

Sales risk

The major risks for future trading are converting sales of Ingenta CMS and the Commercial product suite (Ingenta Rights, Royalties, Product Manager
and Order to Cash), and generating revenue within PCG. Most of the business costs are fixed in the medium-term, being people and premises costs,
and therefore there is a risk to Group profitability when budgeted revenue is not delivered as cost reductions will lag behind revenue reductions.
Management undertake detailed monthly revenue forecasting and assess risk on an ongoing basis.

Project risk

There are two principal project risks: risk of fixed priced projects running over and the risk on all projects where there is development required that we
are unable to deliver to the specification agreed.

Fixed price projects risk relates to the accuracy of project estimates and the time it will take to complete the tasks as specified in the customer
contract. Management mitigate this risk by hiring the best staff who are able to estimate projects accurately and by building in a contingency to fixed
priced contracts. Management also closely monitor contracts to ensure all work performed is in accordance with the agreement and any new requests
are separately contracted for. Management also mitigate the risk by taking on new projects on a time and materials basis wherever possible.

Projects requiring bespoke development also carry risk as the development is usually fixed price or discounted to encourage the customer to purchase
the product and in the knowledge that any development will enhance the product and be able to be re-sold. The risk is that the development will over-
run or not be able to be delivered in the way envisaged at the time of contract. Management take care to fully scope these development projects and
use developers who understand the products and the costs of building bespoke elements.

IT risk

Internal IT services are deployed onto fault tolerant platforms and spread over multiple locations including the Group’s offices, co-location facilities,
Infrastructure as a service (IAAS) and Office365. Regular backups and securing of data offer multiple restore points in the event of a critical failure
outside of the scope of the in-built resilience. E-mail is a cloud based deployment that staff can access from any working PC/smart phone. Staff have
access to cloud based storage (OneDrive) in addition to co-location deployed file servers where data cannot be stored in e-mail. Key staff have mobile
phones and access to resilient telephony services for the purposes of contacting each other and customers. Through Remote Working staff can access
their data and customer sites in the event that it was not possible to gain access to our offices.

Customer facing services are monitored for both stability and performance; wherever possible proactive maintenance is undertaken to avoid
performance problems and/or downtime. All customer deployments are done to fault tolerant hardware either in one of our co-location facilities or to
a cloud based service, both offering high levels of resiliency and multiple, redundant access.

The Group’s business continuity plan is available from multiple locations and is regularly updated to cover new services and deployments.

FX risk

The risk associated with generating revenue and suffering costs in a currency other than sterling. This is mitigated naturally within Ingenta plc as
revenues and associated costs are generally denominated in the same currency. Overall the Group is a net generator of USD.

HR risk

In a company with a high proportion of people based revenue there is a risk of key staff leaving or being absent through sickness. This is mitigated by
having appropriate notice periods built into employee contracts and ensuring there is adequate coverage for all staff roles with no individual solely
responsible for significant revenue generation.

Brexit

Management continue to monitor the UK’s exit from the EU and its implications for the business. It is not anticipated the UK’s exit from the EU will
affect software sales. At present, the main risks identified are currency fluctuations which have been reviewed above.

Outlook

The business is now well positioned for growth in 2017 after a solid set of results. The GO! product strategy has proved successful in the Ingenta
Content space with 5 new customer wins. These deployments are in the cloud and can be implemented in any geographical area as they do not require
a local presence. Now that all the modules of Ingenta Commercial are live the same strategy can be followed in this division, particularly so in the mid-
market tier where there are a significant number of opportunities.

On behalf of the Board.

D R Montgomery
Chief Executive Officer
31 March 2017

Directors’ report

For the year ended 31 December 2016

The Directors present their report and the audited financial statements for the year ended 31 December 2016.

Going concern

The Directors have prepared the financial statements on the going concern basis. In assessing whether this assumption is appropriate, management
have taken into account all relevant available information about the future including a revenue, profit and cash forecast, and management’s ability
to affect costs and revenues. Management regularly forecast profit, financial position and cash flows for the Group and a rolling forecast is updated
monthly. Revenue is forecast in detail with all revenue contracts individually listed and ranked by probability from firm to prospect. Management have
reviewed forecast costs for reasonableness against prior years in light of known changes and have concluded that forecast costs are robust. Further
details on going concern are included within note 1 to the accounts (principal accounting policies).

Directors

The Directors of the Company who held office during the year were:

Executive Directors:

D R Montgomery, Chief Executive Officer

A B Moug, Chief Financial Officer (resigned 31 December 2016)

Non-Executive Directors:

M C Rose, Chairman

M A Rowse

N W Kirton

B H Holmström, (appointed 1 August 2016)

M M E Royde, (appointed 1 August 2016)

The interests of Directors in the shares of the Company at 31 December 2016 are disclosed in the Directors’ remuneration report.

Corporate governance

Details of corporate governance for the year to 31 December 2016 are disclosed in the corporate governance statement.

Research and development activities

The Group carries out research and development activities in connection with administration systems, web delivery, access control and linking
technologies. All costs relating to these activities are charged to profit and loss within the Statement of Comprehensive Income as incurred. The
charge to the Statement of Comprehensive Income was £2.2m (2015: £2.5m) in the year to 31 December 2016.

Substantial shareholdings

As at 10 January 2017, the Company had been notified of the following shareholders who are interested, directly or indirectly, in three percent or more
of the issued share capital of the Company:

Name

M C Rose

Kestrel Partners LLP

Miton Group plc

Criseren Investments Limited

A B Moug

Financial risk management

Details of the Group’s financial risks are given in note 27.

Employment policy

Number of ordinary 10p shares

Percentage of issued ordinary share capital

4,645,412

4,480,773

2,025,000

827,785

583,095

27.46%

26.48%

11.97%

4.89%

3.45%

Group employees are regularly consulted by Management and kept informed of matters affecting them and the overall development of the Group.
The Group’s policy is to give disabled people full and fair consideration for job vacancies, having due regard for their abilities and the safety of the
individual. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and
appropriate training is arranged.

Directors’ and officers’ liability insurance

The Group, as permitted by sections 234 and 235 of the Companies Act 2006, maintains insurance cover on behalf of the Directors and Company
Secretary indemnifying them against certain liabilities which may be incurred by them in relation to the Group.

Auditor

Grant Thornton UK LLP, offer themselves for re-appointment as auditor. A resolution to re-appoint Grant Thornton UK LLP will be proposed at the
forthcoming Annual General Meeting.

On behalf of the Board.

D R Montgomery
Director
31 March 2017

Annual ReportFor the year ended 31 December 2016

Corporate governance statement

The Group is committed to high standards of corporate governance. It has adopted procedures to institute good governance insofar as it is practical
and appropriate for an organisation of its size and nature, notwithstanding the fact that companies that have securities traded on the Alternative
Investment Market (AIM) are not required to comply with the UK Corporate Governance Code as appended to the Listing Rules issued by the Financial
Conduct Authority.

As the Group grows, it will regularly review the extent of its corporate governance practices and procedures. At its current stage of development, the
parent Company does not comply with the UK Corporate Governance Code. However, we have reported on our Corporate Governance arrangements
by drawing upon best practice available, including those aspects of the UK Corporate Governance Code we consider to be relevant to the company
and best practice.

Board of Directors

Board meetings are scheduled to take place every month, with additional meetings to review and approve significant transactions or strategic issues.
There were 14 meetings in the year to 31 December 2016. The Board is provided with Board papers where appropriate before each Board meeting. The
Company Secretary’s services are available to all members of the Board. If required, the Directors are entitled to take independent advice and if the
Board is informed in advance, the Group will reimburse the cost of the advice. The appointment and removal of the Company Secretary is a decision for
the Board as a whole.

Non-Executive Directors are appointed on a contract with a three month notice period. One Executive Director is appointed on a contract with a
six month notice period from both the Company and from the Executive Director. All Directors are subject to re-election. Each year, one third of the
Directors are subject to re-election by rotation. The Group does not combine the role of Chairman and Chief Executive. New Directors are subject to
re-election at the first AGM after their appointment. At the year end, the Board comprised the Non-Executive Chairman, the Chief Executive and four
other Non-Executive Directors.

Remuneration Committee

The Remuneration Committee is composed of three Non-Executive Directors: M C Rose (Chairman), M A Rowse and N W Kirton. It is responsible for
the terms, conditions and remuneration of the Executive Directors and senior management. The Remuneration Committee may consult external
agencies when ascertaining market salaries. The Chairman of the Remuneration Committee will be available at the AGM to answer any shareholder
questions.

Audit Committee

The Audit Committee is comprised of three Non-Executive Directors: M C Rose (Chairman), M A Rowse and N W Kirton. It monitors the adequacy of
the Group’s internal controls and provides the opportunity for the external auditor to communicate directly with the Non-Executive Directors.

The Audit Committee also ensures that the external auditor is independent via the segregation of audit related work from other accounting functions
and non audit related services provided, and measures applicable fees with similar auditors.

During the year, the company received a Corporate Reporting Review enquiry from the Financial Reporting Council in respect of certain matters in the
Group’s 2015 financial statements, which resulted in an internal review of these points. As a result of this review Ingenta plc has, in the Company only
financial statements, reclassified and restated amounts receivable from subsidiaries. A detailed analysis of the impact of this can be seen in note 1 to
the parent Company financial statements. The FRC enquiry remains open in respect of this point. All other points raised by the FRC enquiry have been
resolved.

Relations with shareholders

The Group gives high priority to its communication with shareholders. This is achieved through the Group’s website, correspondence and extensive
corporate information. In addition, the Group visits its main institutional investors on an ongoing basis and makes available to all shareholders, free
of charge, its Interim and Annual Reports online, from the Group’s head office or via the Financial Times Annual Report Service. At the AGM the
shareholders are given the opportunity to question members of the Board. The notice of the AGM is sent to shareholders at least 21 business days
before the meeting.

Internal controls

The Board of Directors acknowledges its responsibility for the Group’s system of risk management and internal control, including suitable monitoring
procedures. There are inherent limitations in any system of risk management and internal control and accordingly, even the most effective system can
provide only reasonable, and not absolute, assurance with respect to the preparation of financial information and the safeguarding of assets. The
Group’s control environment is the responsibility of the Group’s Directors and managers at all levels.

The Group’s organisational structure has clear lines of responsibility. Operating and financial responsibility for business units is delegated to the
operational management, including key risk assessment. Investment policy, acquisition and disposal proposals and major capital expenditure are
authorised and monitored by the Board.

The Group operates a comprehensive budgeting and financial reporting system and, as a matter of routine, compares actual results with budgets,
which are approved by the Board of Directors.

Management accounts are prepared for the Group on a monthly basis. Material variances from budget are thoroughly investigated. In addition, an
updated forecast is prepared monthly, to reflect actual performance and the revised outlook for the year.

The Board considered the usefulness of establishing an internal audit function and decided in view of the size of the Group, it was not cost-effective to
establish. This will be kept under review.

Functional reporting and risk management

The Directors and management have considered the risks facing the business and these are assessed on an ongoing basis. The key risks are discussed
in the Group strategic report. Other risks which come under the direct control of the Directors include treasury management, capital expenditure,
insurance, health and safety and regulatory compliance. Risk assessment includes the review of potential mitigations. The accounting policies cover
several key risks and these are included in the notes.

Statement of Directors’ responsibilities

The directors are responsible for preparing the Group Strategic Report and Directors’ Report and the financial statements in accordance with
applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the
financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union for the Company and
the Group. 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 Company and Group for that period. In preparing these financial statements, the directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable IFRSs for the Company and the Group have been followed, subject to any material departures disclosed and explained in

the financial statements;

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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 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 confirm that:

• so far as each Director is aware, there is no relevant audit information of which the Company’s auditor is unaware; and

• the Directors have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit

information and to establish that the auditors are aware of that information.

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.

On behalf of the Board.

M C Rose
Chairman of the Audit Committee
31 March 2017

Annual ReportFor the year ended 31 December 2016Directors’ remuneration report

For the year ended 31 December 2016

The Remuneration Committee comprises M C Rose (Chairman), M A Rowse and N W Kirton who are Non-Executive Directors. The Remuneration
Committee decides the remuneration policy that applies to Executive Directors and senior management. The Remuneration Committee meets
regularly in order to consider and set the annual remuneration for the Executive Directors, having regard to personal performance and industry
remuneration rates.

In determining that policy, it considers a number of factors including:

•

the basic salaries and benefits available to Executive Directors of comparable companies,

the need to attract and retain Directors of an appropriate calibre, and

the need to ensure Directors’ commitment to the success of the Group.

Non-Executive Directors are appointed on a contract with a three month notice period and may be awarded fees in relation to the Board and
committee meetings attended. Any fee awards to Non-Executive Directors are determined by the Board. Non-Executive Directors do not participate
in the Company’s share option scheme and do not receive the benefit of pension contributions.

The Group made contributions to externally administered defined contribution pension schemes for two Executive Directors.

The interests of the Directors at 31 December 2016 in the shares of the Company were as follows:

Name

M C Rose

A B Moug

M A Rowse

D R Montgomery

N W Kirton

M M E Royde

A B Moug resigned on 31 December 2016.

Number of ordinary shares of 10p in Ingenta plc
31 December 2016

Number of ordinary shares of 10p in Ingenta plc
31 December 2015

4,645,412

583,095

440,277

8,400

44,250

4,480,773

4,453,112

601,795

440,277

8,400

25,000

Directors’ interests

The Directors at 31 December 2016 had an interest in 80,000 options over the ordinary shares. The Directors had no post-employment benefits, other
long-term benefits, termination benefits or share-based payments in the year.

The market price of the Company’s shares at the end of the year was 167.5p and the price ranged in the year between 113.5p and 181.0p.

Directors’ remuneration

Name

Salary and
fees
£’000

Benefits
£’000

Sums paid to
a third-party
for Directors’
services
£’000

Pension
contribution
£’000

Total
remuneration
£’000

Group
National
Insurance
costs
£’000

2016 Total
cost of
employment
£’000

2015 Total
remuneration
£’000

2015 Total
cost of
employment
£’000

D R Montgomery

178

A B Moug

348

M C Rose

M A Rowse

N W Kirton

M P Cairns

M M E Royde

B H Holmström

187

401

210

420

180

198

318

328

592

107

761

810

670

710

A B Moug resigned on 31 December 2016.
M P Cairns resigned 22 September 2015.
B H Holmström was appointed on 1 August 2016.
M M E Royde was appointed on 1 August 2016.

On behalf of the Remuneration Committee.

M C Rose
Chairman
31 March 2017

Annual ReportFor the year ended 31 December 2016Independent auditor’s report to the
members of Ingenta plc

We have audited the financial statements of Ingenta PLC for the year ended 31 December 2016, which comprise the Group Statement of
Comprehensive Income, the group and company statement of financial position, the group and company statement of changes in equity, the
group and company statement of cash flows and the related notes. The financial, reporting framework that has been applied in their preparation
is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the parent company
financial statements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work
has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of Directors and auditors

As explained more fully in the Statement of Directors’ Responsibilities set out on page 20, the directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion:

• the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2016 and of the

group’s profit for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;

• the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied

in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion 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 Directors’ Report for the financial year for which the financial statements are prepared is

consistent with the financial statements.

• the Strategic Report and Directors’ Report has been prepared in accordance with applicable legal requirements.

Matter on which we are required to report under the Companies Act 2006

In the light of the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not
identified any material misstatements in the Strategic Report and Directors’ Report.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches

not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Mark Bishop

Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
31 March 2017

Group Statement of Comprehensive
Income

For the year ended 31 December 2016

Group revenue

Cost of sales

Gross profit

Sales and marketing expenses

Administrative expenses

Profit / (loss) from operations

Share of profit / (loss) from equity accounted investments

Finance costs

Profit / (loss) before income tax

Income tax

note

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

15,204

(9,371)

13,941

(9,908)

5,833

4,033

(1,290)

(1,494)

(3,827)

(4,055)

716

(1,516)

170

(25)

861

138

(100)

(288)

(1,904)

472

Profit / (loss) for the year attributable to equity holders of the parent

999

(1,432)

Other comprehensive expenses which will be reclassified subsequently to profit or loss:

Exchange differences on translation of foreign operations

Total comprehensive income \ (loss) for the year attributable to equity holders of the parent

1,014

(1,416)

Basic earnings \ (loss) per share (pence)

Diluted earnings \ (loss) per share (pence)

6.03

5.98

(11.28)

All activities are classified as continuing.

The accompanying notes form part of these financial statements.

Annual ReportFor the year ended 31 December 2016

Group Statement of Financial Position

note

31 Dec 16
£’000

31 Dec 15
£’000

31 Dec 14
£’000

For the year ended 31 December 2016

Non-current assets

Goodwill

Other intangible assets

Property, plant and equipment

Investments accounted for using the equity method

Current assets

Trade and other receivables

Research and Development tax credit receivable

Cash and cash equivalents

Total assets

Equity

Share capital

Share Premium

Merger reserve

Reverse acquisition reserve

Translation reserve

Retained earnings

Investment in own shares

Total equity

Non-current liabilities

Borrowings

Deferred tax liability

Finance leases

Current liabilities

Trade and other payables

Deferred income

Borrowings

Total liabilities

Total equity and liabilities

4,900

458

203

368

5,929

5,385

150

2,027

7,562

13,491

1,692

8,999

11,055

(5,228)

(871)

3,737

239

198

4,174

4,234

405

8,807

13,446

17,620

1,632

8,294

11,055

(5,228)

(887)

(10,240)

(11,239)

5,407

127

4,349

3,608

7,957

8,084

13,491

(1)

3,626

3,601

3,594

6,730

13,925

13,994

17,620

3,737

363

298

4,398

4,377

400

2,790

7,567

11,965

841

11,055

(5,228)

(904)

(9,807)

(6)

(4,049)

1,500

134

1,634

5,226

3,585

5,569

14,380

16,014

11,965

The financial statements were approved by the Board of Directors and authorised for issue on 31 March 2017 and were signed on its behalf by:

M C Rose
Director

D R Montgomery
Director

Registered number: 837205
The accompanying notes form part of these financial statements.

Group statement of changes in equity

For the year ended 31 December 2016

Share
capital
£’000

Share
Premium
£’000

Merger
reserve
£’000

Reverse
acquisition
reserve
£’000

Translation
reserve
£’000

Retained
earnings
£’000

Investment in
own shares
£’000

Total
attributable to
owners of parent
£’000

1,632

8,294

11,055

(5,228)

(887)

(11,239)

(1)

3,626

705

999

1,692

8,999

11,055

(5,228)

(871)

(10,240)

765

766

999

1,015

5,407

Balance at
1 January 2016

Employee Share
Ownership Trust
transactions

Share issue

Transactions with
owners

Profit for the year

Other comprehensive
expense:

Exchange differences
on translating foreign
operations

Total comprehensive
income for the year

Balance at
31 December 2016

For the year ended 31 December 2015

Share
capital
£’000

Share
Premium
£’000

Merger
reserve
£’000

Reverse
acquisition
reserve
£’000

Translation
reserve
£’000

Retained
earnings
£’000

Investment in
own shares
£’000

Total
attributable to
owners of parent
£’000

11,055

(5,228)

(903)

(9,807)

(7)

(4,049)

(1,432)

9,085

9,091

(1,432)

(1,416)

1,632

8,294

11,055

(5,228)

(887)

(11,239)

(1)

3,626

Balance at
1 January 2015

Employee Share
Ownership Trust
transactions

841

Share issue

791

8,294

Transactions with
owners

1,632

8,294

Loss for the year

Other comprehensive
expense:

Exchange differences
on translating foreign
operations

Total comprehensive
income for the year

Balance at
31 December 2015

Annual ReportFor the year ended 31 December 2016Group statement of cash flows

For the year ended 31 December 2016

Profit / (loss) before taxation

Adjustments for

Share of (profit) / loss from Joint Venture

Depreciation

(Profit) / loss on disposal of fixed assets

Interest expense

Unrealised foreign exchange differences

(Increase) / decrease in trade and other receivables

Decrease in trade and other payables

note

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

861

(1,904)

(170)

234

(1)

(650)

(773)

100

233

288

143

(1,494)

Cash outflow from operations

(458)

(2,615)

Research and Development tax credit received

Tax paid

Net cash outflow from operating activities

Cash flows from investing activities

Acquisition of subsidiaries, net of cash acquired

Purchase of property, plant and equipment

Net cash used in investing activities

Cash flows from financing activities

Interest paid

Repayment of short term borrowings

Payment of finance lease liabilities

Costs associated with share raising

Share raising proceeds

Net cash from / (used in) financing activities

390

(5)

(73)

(460)

(69)

(529)

(33)

(165)

(15)

780

567

467

(2,148)

(9)

(425)

(2,550)

(146)

(396)

9,487

5,970

Net (decrease) / increase in cash and cash equivalents

(35)

3,813

Cash and cash equivalents at the beginning of the year

2,077

(1,729)

Exchange differences on cash and cash equivalents

Cash and cash equivalents at the end of the year

15, 24

(15)

2,027

(7)

2,077

The accompanying notes form part of these financial statements.

Notes to the Group financial statements

For the year ended 31 December 2016

General information and nature of operations

Statement of compliance

Ingenta plc (the ‘Company’) and its subsidiaries (together the ‘Group’)
is a provider of content management, advertising and Commercial
enterprise solutions and services to publishers, information providers,
academic libraries and institutions. The nature of the Group’s operations
and its principal activities are set out in the Chairman’s statement and
Group Strategic report.

The Company is incorporated in the United Kingdom under the
Companies Act 2006. The Company’s registration number is 837205
and its registered office is 8100 Alec Issigonis Way, Oxford, OX4 2HU.
The consolidated financial statements were authorised by the Board of
Directors for issue on 31 March, 2017.

1. Principal accounting policies

Going concern

The accounts are prepared on a going concern basis. In assessing
whether the going concern assumption is appropriate, management
have taken into account all relevant available information about the
future including revenue, profit and cash forecast and management’s
ability to affect costs and revenues.

Management regularly forecast profit, financial position and cash flows
for the Group. The rolling annual forecast is normally updated monthly.

Management have reviewed forecast costs for reasonableness against
prior years and with knowledge of expected movements and concluded
that forecast costs are robust.

As at 31 December 2016 the Group had net current liabilities of £0.4m
(2015: liabilities of £0.5m), of which £3.6m (2015: £3.6m) relates to
deferred income which will be recognised in the year ending 31
December 2017.

The Group does not have the need for an overdraft facility and has
positive cash balances of £2.0m as at 31 December 2016 (2015: £2.1m).
The 2015 cash balance of £2.1m was a net cash position. The Group held
linked accounts with HSBC such that any facility was based on the net
balance of all accounts taken together. Management have assured
themselves that cash is sufficient for the needs of the business based
on the cash flow forecast.

The major risks for future trading are the uptake of new generation
products Ingenta CMS and the Commercial product suite (Ingenta
Rights, Royalties, Product Manager and Order to Cash), which to some
extent is reliant on the macro-economy and the willingness of data
providers to commit to capital expenditure projects.

There is a strong sales pipeline for all new generation products which
gives the Board confidence that the forecast for 2017 is achievable.
It is therefore considered appropriate to use the going concern basis
to compile these financial statements.

Basis of preparation

The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies
have been consistently applied to all years presented.

The accounting policies applied have been applied consistently
throughout the Ingenta Group. The financial statements have been
prepared under the historical cost convention.

The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (“IFRS”)
as adopted by the European Union. The accounting policies set out
below have been applied consistently to all periods presented in these
consolidated financial statements.

Significant management judgements in applying accounting policies

The following are the significant management judgements used in
applying the accounting policies of the Group that have the most
significant effect on the financial statements.

Consulting service revenue
Please refer to the Revenue section of the accounting policies note for
detailed disclosure.

Support and upgrade revenue
Please refer to the Revenue section of the accounting policies note for
detailed disclosure.

Deferred tax assets
The assessment of the probability of future taxable income against
which deferred tax assets can be utilised is based on the Group’s latest
approved forecast, which is adjusted for significant non-taxable income
and expenses and specific limits to the use of any unused tax loss or
credit. The tax rules in the numerous jurisdictions in which the Group
operates are also carefully taken into consideration. If a positive forecast
of taxable income indicates the probable use of a deferred tax asset,
especially when it can be utilised without a time limit, that deferred tax
asset is usually recognised in full. The recognition of deferred tax assets
that are subject to certain legal or economic limits or uncertainti es are
assessed individually by management based on the specific facts and
circumstances.

Research and development expenditure
Research and development expenditure is fully written off to the
Statement of Comprehensive Income as costs are incurred. The
Board have taken into account the inherent risks in all research and
development expenditure and specifically the expenditure being incurred
by the business in the year and have concluded that the requirements of
IAS 38 to capitalise development expenditure have not been met.

Intangible assets and fair value on acquisition
Software technology acquired in a business combination that qualify
for separate recognition are recognised as intangible assets at their
fair values. For further details see the Intangible asset section of the
accounting policies note.

Research and Development tax credits
Research and Development tax credits are recognised on an accruals
basis as in prior years. The basis of calculation is consistent with prior
years, taking into account current legislation, which has been accepted
by HMRC.

Estimation uncertainty

When preparing the financial statements management make a number
of estimates and assumptions about recognition and measurement
of assets, liabilities, income and expenses. The actual results are likely
to differ from the judgements, estimates and assumptions made by
management, and will seldom equal the estimated results. Information
about the significant judgements, estimates and assumptions that have
the most significant effect on the recognition and measurement
of assets, liabilities, income and expenses are discussed on the
following pages.

Impairment
An impairment loss is recognised for the amount by which an asset’s,
or cash generating unit’s, carrying amount exceeds its recoverable
amount. To determine the recoverable amount, management estimates
expected future cash flows from each asset, or cash-generating unit,
and determines a suitable pre tax discount rate in order to calculate
the present value of those cash flows. In the process of measuring

Annual ReportFor the year ended 31 December 2016

expected future cash flows management makes assumptions about
future gross profits. These assumptions relate to future events and
circumstances. The actual results may vary, and may cause significant
adjustments to the Group’s assets within the next financial year. In most
cases, determining the applicable discount rate involves estimating the
appropriate adjustment to market risk and the appropriate adjustment
to asset-specific risk factors. See note 11 for details of the review.

Fair value of financial instruments
Management uses valuation techniques in measuring the fair value of
financial instruments, where active market quotes are not available.
Details of the assumptions used are given in the notes regarding financial
assets and liabilities. In applying the valuation techniques management
makes maximum use of market inputs, and uses estimates and
assumptions that are, as far as possible, consistent with observable data
that market participants would use in pricing the instrument. Where
applicable data is not observable, management uses its best estimate
about the assumptions that market participants would make. These
estimates may vary from the actual prices that would be achieved in an
arm’s length transaction at the reporting date.

Basis of consolidation

The Group financial statements consolidate those of the parent
Company and all of its subsidiaries as of 31 December 2016. All
subsidiaries have a reporting date of 31 December.

All transactions and balances between Group companies are eliminated
on consolidation, including unrealised gains and losses on transactions
between Group companies. Where unrealised losses on intra-group asset
sales are reversed on consolidation, the underlying asset is also tested for
impairment from a Group perspective. Amounts reported in the financial
statements of subsidiaries have been adjusted where necessary to ensure
consistency with the accounting policies adopted by the Group.

Share options

The Group operates an unapproved Executive Management Incentive
(EMI) Share Option plan. £50K (2015: nil) has been recognised during the
year as the fair value of the options. The Group had an approved scheme
which was closed during 2015. Full details are in note 22.

Property, plant and equipment

Cost
Property, plant and equipment is stated at cost, net of depreciation and
any provision for impairment.

Depreciation
Depreciation is calculated using the straight - line method to allocate
the cost of assets less their estimated residual value over their estimated
useful lives, as follows:

Leasehold improvements

Over the term of the lease

Computer equipment

Fixtures, fittings and equipment

3 years

5 years

The residual value and the useful life of each asset are reviewed at least
at each financial year-end and, if expectations differ from previous
estimates, the change(s) are accounted for as a change in an accounting
estimate.

Disposal of assets
The gain or loss arising on the disposal or retirement of an asset is
determined as the difference between the sales proceeds and the
carrying amount of the asset and is recognised within profit or loss within
the Statement of Comprehensive Income.

Profit or loss and other comprehensive income of subsidiaries acquired
or disposed of during the year are recognised from the effective date of
acquisition, or up to the effective date of disposal, as applicable.

Intangible assets

The Group attributes total comprehensive income or loss of subsidiaries
between the owners of the parent and the non-controlling interests
based on their respective ownership interests.

Unrealised gains on transactions between the Group and its subsidiaries
are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred.

Goodwill
Goodwill arising on consolidation represents the excess of the cost of
acquisition over the Group’s interest in the fair value of the identifiable
assets and liabilities of a subsidiary at the date of acquisition. Goodwill
is tested annually for impairment and is carried at cost less accumulated
impairment losses. Impairment losses are recognised immediately in the
income statement and are not subsequently reversed.

The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases.

Goodwill arising on acquisitions before the date of transition to IFRS has
been retained at the previous UK GAAP amounts subject to being tested
for impairment at that date and at least annually thereafter.

On disposal of a subsidiary, the attributable net book value of goodwill is
included in the determination of the profit or loss on disposal.

Technology based intellectual property
Intangible assets relating to the technology acquired from business
combinations that qualify for separate recognition are recognised as
intangible assets at their fair value.

The assets are valued using a discounted cash flow model for the
revenues they will generate over the next 5 years.

The asset is amortised on a straight line basis over a 5 year period.
Residual values and useful lives are reviewed at each reporting
date. Amortisation is include within depreciation, amortisation and
impairment of non financial assets.

Acquisitions of subsidiaries are dealt with by the purchase method. The
purchase method involves the recognition at fair value of all identifiable
assets and liabilities, including contingent liabilities of the subsidiary, at
the acquisition date, regardless of whether or not they were recorded
in the financial statements of the subsidiary prior to acquisition. The
acquisition cost is calculated as the sum of the acquisition date fair
values of the assets transferred by the acquirer and excludes any
transaction costs. On initial recognition, the assets and liabilities of
the subsidiary are included in the consolidated statement of financial
position at their fair values, which are also used as the bases for
subsequent measurement in accordance with the Group accounting
policies. Goodwill is stated after separating out identifiable intangible
assets. Goodwill represents the excess of acquisition cost over the fair
value of the Group’s share of the identifiable net assets of the acquired
subsidiary at the date of acquisition.

Investments in Joint Ventures are initially recognised at cost and
subsequently accounted for using the equity method. Any goodwill or fair
value adjustment attributable to the Group’s share in the Joint Venture
is not recognised separately and is included in the amount recognised as
investment in Joint Ventures. The carrying amount of the investment in
Joint Ventures is increased or decreased to recognise the Group’s share
of the profit or loss and other comprehensive income of the Joint Venture,
adjusted where necessary to ensure consistency with the accounting
policies of the Group. Unrealised gains and losses on transactions
between the Group and its Joint Ventures are eliminated to the extent
of the Group’s interest in those entities. Where unrealised losses are
eliminated, the underlying asset is also tested for impairment.

Impairment of intangibles and property, plant and equipment

For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are separately identifiable cash flows (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
goodwill.

Goodwill, other individual assets or cash-generating units that include
goodwill and other intangible assets with an indefinite useful life 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.

Financial instruments

Financial assets and financial liabilities are recognised when the
Group becomes a party to the contractual provisions of the financial
instrument.

Financial assets are derecognised when the contractual rights to the
cash flows from the financial asset expire, or when the financial asset and
all substantial risks and rewards are transferred. A financial liability is
derecognised when it is extinguished, discharged, cancelled or expires.

Financial assets and financial liabilities are measured initially at fair
value plus transactions costs, except for financial assets and financial
liabilities carried at fair value through profit or loss, which are measured
initially at fair value. Financial assets and financial liabilities are
measured subsequently as described herein.

Financial assets

The Group classifies its financial assets as ‘loans and receivables’ and
‘available for sale’. The classification depends on the purpose for which
the financial assets were acquired. Management determines the
classification of its financial assets at initial recognition.

intends to dispose of the investment within 12 months of the Statement
of Financial Position date.

On initial recognition, financial assets are measured at fair value plus
transaction costs that are directly attributable to the acquisition or
issue of the financial assets. After initial recognition, financial assets are
measured at fair value, without any deduction of transaction costs.

Gains and losses arising from changes in the fair value of a financial asset
are recognised in other comprehensive income, except for impairment
losses. When securities classified as available for sale are sold or
impaired, the accumulated fair value adjustments recognised in equity
are reclassified from equity to profit or loss.

The fair values of quoted investments are based on current bid prices. If
the market for a financial asset is not active the Group establishes fair
value by using valuation techniques. These include the use of recent arm’s
length transactions, reference to other instruments that are substantially
the same, discounted cash flow analysis and option pricing models
making maximum use of market inputs and relying as little as possible on
entity specific inputs.

Financial liabilities

The Group’s financial liabilities include borrowing and trade and other
payables.

Trade payables
Trade payables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method.

Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently stated at amortised cost; any
difference between the proceeds (net of transaction costs) and the
redemption value is recognised within profit or loss within the Statement
of Comprehensive Income over the period of the borrowing using the
effective interest method.

Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting date.

The Group assesses at the date of each Statement of Financial Position
whether there is objective evidence that a financial asset or a group of
financial assets is impaired.

Cash and cash equivalents

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active market.
They are included in current assets, except for maturities greater than
12 months after the Statement of Financial Position date, which are
classified as non-current assets. Loans and receivables are classified as
‘trade and other receivables’ in the Statement of Financial Position.

Trade receivables
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method; less
provision for impairment. A provision for impairment of trade receivables
is established when there is objective evidence that the Group will
not be able to collect all amounts due according to the original terms
of the receivables. Significant financial difficulty, high probability of
bankruptcy or a financial reorganisation and default are considered
indicators that the trade receivable is impaired. The amount of the
provision is the difference between the asset’s carrying amount and
the present value of the estimated future cash flows discounted at
original effective interest rate. The loss is recognised in the Statement
of Comprehensive Income within ‘Sales and marketing expenses’.
When a trade receivable is uncollectible, it is written off against the
allowance account for trade receivables. Subsequent recoveries of
amounts previously written off are credited against ‘Sales and marketing
expenses’ in the Statement of Comprehensive Income.

Available for sale financial assets
Available for sale financial assets are non derivative financial assets that
are either designated in this category or are not classified in any other
category. They are included in non current assets unless management

Cash and cash equivalents comprise cash on hand and demand deposits
together with other short term highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value. Cash and cash equivalents include
bank overdrafts as they are repayable on demand and form an integral
part of the Group’s cash management. The Group’s banking facility is all
with one bank (HSBC) and the accounts are linked such that any facility
limit is based on the net balance of all accounts.

Equity

Share capital represents the nominal value of shares that have been
issued.

The translation reserve within equity relates to foreign currency
translation differences arising on the translation of the Group’s foreign
entities.

Retained earnings include all current and prior year retained profits and
losses.

Reverse acquisition reserve and merger reserve represent balances
arising on the acquisition of Ingenta plc in 2007. The IFRS 3 acquisition
adjustment reflects the entries required under reverse acquisition
accounting, whereby consolidated shareholders’ funds comprise the
capital structure of the legal parent combined with the reserves of the
legal subsidiary and the post acquisition reserves of the parent.

Investment in own shares within equity represents the cost of shares held
within the Employee Share Ownership Trust (ESOT).

Annual ReportFor the year ended 31 December 2016

Where any Group company purchases the Company’s equity share
capital (treasury shares), the consideration paid, including any directly
attributable incremental costs (net of income taxes) is deducted from
equity attributable to the Company’s equity holders until the shares
are cancelled or reissued. Where such shares are subsequently sold or
reissued, any consideration received, net of any directly attributable
incremental transactions costs and the related income tax effect, is
included in equity attributable to the Company’s equity holders.

Revenue

Revenue comprises the fair value of the consideration received or
receivable for the sale of goods and services in the ordinary course of
the Group’s activities. Revenue is shown net of value added tax, returns,
rebates and discounts after eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits will flow
to the entity and when specific criteria have been met for each of the
Group’s activities as described below. The Group bases its estimates
on historical results, taking into account the type of customer, type of
transaction and specifics of each arrangement.

Recognition of Ingenta Connect Revenue (within the Content products
division):
Ingenta Connect revenues comprise ‘Hosted services’ and ‘Consulting
Services’ revenue.

Hosted Services:
Hosted services include annual fees for hosting publishers content on
the Ingenta Connect platform and revenues from document delivery
under pay-per-view access, clearance and digitisation services. The
hosting fees are recognised over the period content is hosted on Ingenta
Connect. Pay per view revenues are recognised on despatch of the
documents.

Consulting Services:
Consulting services includes revenues from the processing of e-journal
content and ongoing services. These fees are based on a per article
charge and are recognised in the period to which they relate. The period
is assessed by reference to when the work is carried out. Any work which
relates to more than one period is recognised based on the percentage
complete method which is made with reference to the number of articles
processed in the period.

Recognition of Vista Revenues, Ingenta Commercial products, Ingenta
CMS (within the Content products division), and Ingenta Advertising:
Revenues from these divisions comprise ‘Licences’, ‘Consulting Services’,
Hosted Services’, ‘Managed Services’ and ‘Support and Upgrade’
revenue.

Licences:
Revenue from sales of software licences is recognised immediately if
there are no associated implementation requirements. This will only be
the case where an existing customer purchases additional licences to
increase the number of users on an existing installed software system.
Where software licences sold require consulting services to make the
licences usable, the licence revenue is recognised over the period of the
associated consulting services on a percentage complete basis. This
is assessed by reference to the estimated project days in the project
planning documentation, amended for project change requests and the
days worked on the project to the year end.

Consulting Services:
Revenues from long term contracts within consulting services are
recognised on the percentage of completion method. This is assessed
by reference to the estimated project days in the project planning
documentation, amended for project change requests and the days
worked on the project to the year end. Where certain products are
sold as multi element arrangements, revenue is recognised when each
element is delivered to the customer based on the relative fair value of
each product element which is assessed as being the selling price of each
product when sold separately.

Hosted Services, Managed Services and Support and Upgrade:
Revenues collected or billed in advance for hosted services, managed
services and support and upgrade revenue, are recorded as deferred
income and recognised over the period to which the service relates.

Recognition of PCG Revenues:
Ingenta’s PCG division earns revenue from providing services to
Publishers and Content providers. Some revenue is charged as a retainer
for services provided throughout the period. These revenues are
recognised in line with the effort expended across the period to which
they relate.

Some revenues are earned on a commission basis associated with selling
publishers content. This revenue is recognised when commission is earned
which contractually is when PCG’s publishing customer invoices the end
user for the services sold by PCG. In some cases, PCG invoices the end
user on behalf of the customer for the services sold by PCG and records
PCG’s commission when the invoice is issued as agreed in the contract.
Where any sales representation and cash collection services are
incorporated into the contract the work involved is minimal and does not
affect recognition of commission.

Some further revenues are based on performing surveys for publishers.
These revenues are based on a fixed number of calls at an agreed rate
per call. Revenue is recognised on a per call completed basis in the period
the calls were made

Employee benefits

Pension obligations
The Group operates various pension schemes which are by nature
defined contribution plans. A defined contribution plan is a pension
plan under which the Group pays a fixed contribution into a separate
entity. The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current and
prior periods. The Group does not operate a defined benefit plan.

For defined contribution plans, the Group pays contributions to publicly
or privately administered pension insurance plans on a mandatory,
contractual or voluntary basis. The contributions are recognised as
employee benefit expenses when they are due.

Share-based employee remuneration
The Group operates equity-settled share-based remuneration plans for
its employees. None of the Group’s plans feature any options for a cash
settlement.

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
equity instruments granted. This fair value is appraised at the grant date
and excludes the impact of non-market vesting conditions.

All share-based remuneration is ultimately recognised as an expense
in profit or loss. If vesting periods or other 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.

Non-market vesting conditions are included in assumptions about the
number of options that are expected to become exercisable. Estimates
are subsequently revised, 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 ultimately exercised are different to that
estimated on vesting.

Upon exercise of share options, the proceeds received net of any directly
attributable transaction costs up to the nominal value of the shares
issued are allocated to share capital with any excess being recorded as
share premium.

Termination benefits
Termination benefits are payable when employment is terminated by
the Group before the normal retirement date or when an employee
accepts voluntary redundancy in exchange for these benefits. The Group
recognises termination benefits when it is demonstrably committed to
either terminating the employment according to a detailed formal plan
without possibility of withdrawal or to providing termination benefits as

a result of an offer made to encourage voluntary redundancy. Benefits
falling due more than 12 months after the reporting date are discounted
to their present value.

Employee Share Ownership Trust (ESOT)

As the company is deemed to have control of the ESOT, it is treated
as a subsidiary and consolidated for the purposes of the consolidated
financial statements. The ESOT’s assets (other than investments in the
company’s shares), liabilities, income and expenses are included on a
line-by-line basis in the consolidated financial statements. The ESOT’s
investment in the company’s shares is deducted from equity in the
consolidated statement of financial position as if they were treasury
shares.

Finance leases

The economic ownership of a leased asset is transferred to the lessee if
the lessee bears substantially all the risks and rewards of ownership of
the leased asset. Where the Group is a lessee in this type of arrangement,
the related asset is recognised at the inception of the lease at the fair
value of the leased asset or, if lower, the present value of the lease
payments plus incidental payments, if any. A corresponding amount is
recognised as a finance lease liability. Leases of land and buildings are
classified separately and are split into a land and a building element, in
accordance with the relative fair values of the leasehold interests at the
date the asset is recognised initially.

temporary differences between the carrying amounts of assets and
liabilities and their tax bases. However, deferred tax is not provided on
the initial recognition of goodwill, or 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 and Joint Ventures is not provided if reversal of these
temporary differences can be controlled by the Group and it is probable
that reversal will occur in the foreseeable future.

Deferred tax assets and liabilities are calculated, without discounting,
at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted by the
end of the reporting period. Deferred tax liabilities are always provided
for in full.

Deferred tax assets are recognised to the extent that it is probable that
they will be able to be utilised against future taxable income. Deferred
tax assets and liabilities are offset only when the Group has a right
and intention to set off current tax assets and liabilities from the same
taxation authority.

Changes in deferred tax assets or liabilities are recognised as a
component of tax income or expense in profit or loss, except where they
relate to items that are recognised in other comprehensive income (such
as the revaluation of land) or directly in equity, in which case the related
deferred tax is also recognised in other comprehensive income or equity,
respectively.

The depreciation methods and useful lives for assets held under finance
leases are described under “Property, Plant and Equipment” herein. The
corresponding finance lease liability is reduced by lease payments net of
finance charges. The interest element of lease payments represents
a constant proportion of the outstanding capital balance and is charged
to profit or loss, as finance costs over the period of the lease.

Operating leases

Leases in which a significant risk and reward of ownership are retained
by the lessor are classified as operating leases. Payments made under
operating leases are recognised in the Statement of Comprehensive
Income on a straight-line basis over the term of the lease. Lease
incentives received are recognised within profit or loss within the
Statement of Comprehensive Income as an integral part of the total
lease expense and are spread on a straight-line basis over the lease term.

Operating expenses

Operating expenses are recognised within profit or loss within the
Statement of Comprehensive Income upon utilisation of the service
or at the date of their origin.

Finance costs

Financing costs comprise interest payable, the amortisation of the costs
of acquiring finance and the unwinding of discounts that are recognised
within profit or loss within the Statement of Comprehensive Income.
Interest payable is recognised in the Statement of Comprehensive
Income as it accrues, using the effective interest method.

Income taxes

The tax expense recognised within profit or loss within the Statement of
Comprehensive Income comprises the sum of deferred tax and current
tax not recognised in other comprehensive income or directly in equity.
Current income tax assets and/or liabilities comprise those obligations
to, or claims from, fiscal authorities relating to the current or prior
reporting periods, that are unpaid at the reporting date. Current tax is
payable on taxable profit, which differs from profit or loss in the financial
statements. Calculation of current tax is based on tax rates and tax
laws that have been enacted or substantively enacted by the end of the
reporting period.

Provisions, contingent liabilities and contingent assets

Provisions are recognised when present obligations as a result of a past
event will probably lead to an outflow of economic resources from the
Group and amounts can be estimated reliably. Timing or amount of
the outflow may still be uncertain. A present obligation arises from the
presence of a legal or constructive commitment that has resulted from
past events, for example, onerous contracts. Restructuring provisions are
recognised only if a detailed formal plan for the restructuring has been
developed and implemented, or management has at least announced
the plan’s main features to those affected by it. Provisions are not
recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle
the present obligation, based on the most reliable evidence available
at the reporting date, including the risks and uncertainties associated
with the present obligation. Where there are a number of similar
obligations, the likelihood that an outflow will be required in settlement is
determined by considering the class of obligations as a whole. Provisions
are discounted to their present values, where the time value of money is
material.

Any reimbursement that the Group can be virtually certain to collect
from a third-party with respect to the obligation is recognised as a
separate asset. However, this asset may not exceed the amount of the
related provision. All provisions are reviewed at each reporting date and
adjusted to reflect the current best estimate.

In those cases, where the possible outflow of economic resources as a
result of present obligations is considered improbable or remote, no
liability is recognised, unless it was assumed in the course of a business
combination. In a business combination, contingent liabilities are
recognised in the course of the allocation of the purchase price to the
assets and liabilities acquired in the business combination. They are
subsequently measured at the higher amount of a comparable provision
as described above and the amount initially recognised, less any
amortisation.

Possible inflows of economic benefits to the Group that do not yet meet
the recognition criteria of an asset are considered contingent assets.

Foreign currency

The consolidated financial statements are presented in Sterling (GBP),
which is also the functional currency of the parent Company.

Deferred income taxes are calculated using the liability method on

Foreign currency transactions are translated into the functional currency
of the respective Group entity, using a monthly estimated rate set at the

Annual ReportFor the year ended 31 December 2016

beginning of each month. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the remeasurement
of monetary items at year-end exchange rates are recognised in profit
or loss. Non-monetary items measured at historical cost are translated
using the exchange rates at the date of the transaction and not
subsequently retranslated.

In the Group’s financial statements, all assets, liabilities and transactions
of Group entities with a functional currency other than Sterling are
translated into Sterling upon consolidation. The functional currencies of
the entities in the Group have remained unchanged during the reporting
period. On consolidation, assets and liabilities have been translated into
Sterling at the closing rate at the reporting date. Income and expenses
have been translated into the Group’s presentation currency
at an approximation of the average rate over the reporting period.
Exchange differences are charged / credited to other comprehensive
income and recognised in the currency translation reserve in equity. On
disposal of a foreign operation the cumulative translation differences
recognised in equity are reclassified to profit or loss and recognised as
part of the gain or loss on disposal. Goodwill and fair value adjustments
arising on the acquisition of a foreign entity have been treated as assets
and liabilities of the foreign entity and translated into Sterling at the
closing rate.

Segmental reporting

Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the Executive
Board, at which level strategic decisions are made.

IFRS 8 “Operating segments” requires a ‘management approach’, under
which segment information is presented on the same basis as that
used for internal reporting purposes and reported in a manner which is
more consistent with internal reporting provided to the chief operating
decision-maker.

Standards, amendments and interpretations to existing standards
that are in issue but not effective for periods commencing on 1 January
2016 and have not been adopted early by the Group.

New standards and interpretations currently in issue but not effective
based on EU mandatory effective dates, for accounting periods
commencing on 1 January 2016 are:

•

IFRS 9 Financial Instruments (IASB effective date 1 January 2018).
Management has started to assess the impact of IFRS 9 but is not yet
in a position to provide quantified information.

IFRS 15 Revenue from Contracts with Customers (effective 1 January
2018). IFRS 15 presents new requirements for the recognition of
revenue, replacing IAS 18 ‘Revenue’, IAS 11 ‘Construction Contracts’,
and several revenue-related interpretations. The new standard
establishes a control-based revenue recognition model and provides
additional guidance in many areas not covered in detail under existing
IFRSs, including how to account for arrangements with multiple
performance obligations, variable pricing, customer refund rights,
supplier repurchase options , and other common complexities.
Management has started to assess the impact of IFRS 15 but is not yet
in a position to provide quantified information.

•

IFRS 16 Leases (effective 1 January 2019). Management is yet to fully
assess the impact of the Standard and is therefore unable to provide
quantified information.

Management anticipates that all of the pronouncements will be adopted
in the Group’s accounting policy for the first period beginning after the
effective date of the pronouncement.

2. Revenue

An analysis of the Group’s revenue is detailed below by activity across the Group’s operating units:

Licences

Consulting Services

Hosted Services

Managed Services

Support and Upgrade

PCG

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

146

3,168

4,269

2,862

2,648

2,111

2,717

3,519

3,001

2,613

2,039

15,204

13,941

An analysis of the Group’s revenue (excluding revenue of the equity accounted investment) by business division is as follows:

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

6,726

1,735

3,926

2,111

706

7,014

910

3,978

2,039

15,204

13,941

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

5,893

7,162

2,149

5,459

6,978

1,504

15,204

13,941

Vista applications division

Ingenta Commercial products division

Ingenta Content products division

PCG

Ingenta Advertising

A geographical analysis of the Group’s revenue (excluding revenue of the equity accounted investment) is as follows:

USA

Rest of the World

Revenue is allocated to geographical locations based on the location of the customer.

Annual ReportFor the year ended 31 December 2016

3. Joint Venture

The Group holds a 49% voting and equity interest in Beijing Ingenta Digital Publishing Technology Ltd (BIDPT) which was purchased during the year to
31 December 2012.

This investment is accounted for under the equity method. BIDPT has a reporting date of 31 December. The shares are not publicly listed on a stock
exchange and hence published price quotes are not available.

Certain financial information on BIDPT is as follows:

Assets

Liabilities

Revenues

Profit / (loss)

Revenue attributable to the Group

Profit / (loss) attributable to the Group

Changes in equity accounted investments

Cost of 49% investment in BIDPT plus share of accumulated profit and loss

Retained profit / (loss) attributable to the Group

Investment book value

As at
31 Dec 16
£’000

1,974

(1,223)

Year ended
31 Dec 16
£’000

2,080

350

1,019

170

As at
31 Dec 15
£’000

1,571

(1,164)

Year ended
31 Dec 15
£’000

1,395

(205)

684

(100)

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

198

170

368

298

(100)

198

Dividends are subject to the approval of at least 51% of all shareholders of BIDPT. The Group has received no dividends.

4. Acquisitions

On 28th July 2016, the Group acquired 100% of the issued share capital of UK based advertising software company 5 Fifteen Limited, thereby
obtaining control. The purchase will allow Ingenta to strengthen its product portfolio and strategically build on its existing plans to diversify its client
base, extending its offering into the wider media industry as well as trade and academic publishers.

Details of the business combination are as follows:

Note

2016
£’000s

Fair value of consideration transferred

Amount settled in cash

Fair value of contingent consideration

Total

Recognised amounts of identifiable net assets

Property, plant and equipment

Intangible assets

Total non-current assets

Trade and other receivables

Cash and cash equivalents

Total current assets

Provisions

Total non-current liabilities

Trade and other payables

Deferred income

Deferred tax liability

Total current liabilities

Identifiable net liabilities

Goodwill

Consideration transferred settled in cash

Cash and cash equivalents acquired

Net cash outflow on acquisition

490

500

990

500

516

499

529

(75)

(188)

(855)

(100)

(1,143)

173

1,163

490

(30)

460

Annual ReportFor the year ended 31 December 2016
Consideration transferred

The acquisition of 5 Fifteen was settled in cash amounting to £490K and an additional consideration of up to £500K payable only if sales exceed a
target set by both parties in 2016 and 2017. The additional consideration will be payable after 31 December 2017 and could be in the range of no
further payment up to a maximum of £500K. At the date of acquisition management believe the acquired business will exceed the targets set and
reach the maximum pay out based on the available forecasts. Legal fees of £35K were incurred as part of the transaction and are included within
administrative expenses in the Group Statement of Comprehensive Income.

Identifiable net assets

The fair value of trade and other receivables acquired as part of the business combination amounted to £499K which included a provision against bad
debts of £2K.

Goodwill

Goodwill of £1,163K is primarily related to future profitability, the substantial skill and expertise of the 5 Fifteen workforce and expected cost
synergies. Goodwill has been allocated to a new Advertising segment of the wider Ingenta Group.

5 Fifteen’s contribution to Group results

Over the 5 months to 31 December 2016, 5 Fifteen contributed £706K to Group revenues and £270K to Group EBITDA.

Deferred tax liability

On consolidation, a deferred tax liability of £100K was recognised in respect of the software technology intangible asset. During the year £8K was
credited to the Statement of Comprehensive income (see note 9).

5. Operating segments

The following segment information has been prepared in accordance with IFRS 8, “Operating Segments”, which defines the requirements for the
disclosure of financial information of an entity’s operating segments. IFRS 8 follows the management approach, which is the basis for decision making
within the Group.

The Board consider the Group on a business division basis. Reports by business division are used by the chief decision-maker in the Group. Significant
operating segments are: Ingenta Commercial products; Ingenta Content products; Vista; PCG and Ingenta Advertising. This split of business
segments is based on the products and services each offer.

Ingenta Commercial products are enterprise level publishing management systems. Ingenta Content products help content providers sell their
content online. PCG provides consultancy services in sales and marketing to publishers. Vista provides services to support the heritage author2reader
publishing management system. Ingenta Advertising provides a complete browser based multimedia advertising, CRM and sales management
platform for content providers.

The reported operating segments derive their revenues from the revenue streams reported in the revenue analysis in note 2. A further discussion of
revenue streams within each division is included on pages 4 to 13. All revenues are derived from trade with external parties.

Property, plant and equipment is held in the UK £129K (2015: £156K) and the USA £74K (2015: £83K).

One customer contributed more than 10% of revenue (2015: one) and this amounted to £1,859K (2015: £1,897K). The Group’s operations are located in
the United Kingdom, North America, Brazil, Mexico, India, China and Australia. Any transactions between business divisions are on normal commercial
terms and conditions.

Segment information by business unit is presented below.

Year to 31 December 2016

External sales

Segment result
(adjusted EBITDA, see note 6)

Depreciation

Unallocated corporate income

Restructuring

Foreign exchange gain

Operating profit

Share of profit from equity accounted
investment

Finance costs

Profit before tax

Tax

Profit after tax

Ingenta
Commercial
products
£’000

1,735

(2,695)

(30)

Vista
£’000

6,726

3,495

(118)

Ingenta
Content
products
£’000

3,926

(12)

(69)

PCG
£’000

2,111

211

(5)

Ingenta
Advertising
£’000

706

270

(12)

Consolidated
£’000

15,204

1,269

(234)

(608)

288

716

170

(25)

861

138

999

Other information

Statement of Financial Position

Assets

Ingenta
Commercial
products
£’000

Attributable Goodwill and intangibles

Property, plant and equipment

Vista
£’000

Segment assets

2,093

Ingenta
Content
products
£’000

PCG
£’000

Ingenta
Advertising
£’000

Consolidated
£’000

2,661

1,932

1,076

1,479

1,621

322

2,431

2,244

446

374

Unallocated corporate assets

Consolidated total assets

Liabilities

Segment liabilities

Unallocated corporate liabilities

Consolidated total liabilities

Total equity and liabilities

5,358

203

7,919

13,491

7,926

158

8,084

13,491

Annual ReportFor the year ended 31 December 2016Year to 31 December 2015

External sales

Segment result
(adjusted EBITDA, see note 6)

Depreciation

Unallocated corporate expenses

Restructuring

Foreign exchange loss

Operating loss

Share of profit from equity accounted
investment

Finance costs

Loss before tax

Tax

Loss after tax

Other information

Statement of Financial Position

Assets

Attributable Goodwill

Property, plant and equipment

Segment assets

Unallocated corporate assets

Consolidated total assets

Liabilities

Segment liabilities

Unallocated corporate liabilities

Consolidated total liabilities

Total equity and liabilities

Ingenta
Commercial
products
£’000

909

(4,135)

(18)

Vista
£’000

7,014

3,682

(137)

Ingenta Content
products
£’000

3,979

(445)

(78)

PCG
£’000

2,039

Consolidated
£’000

13,941

(838)

(233)

(3)

(400)

(42)

(1,516)

(100)

(288)

(1,904)

472

(1,432)

Ingenta
Commercial
products
£’000

Vista
£’000

Ingenta Content
products
£’000

PCG
£’000

Consolidated
£’000

4,239

4,240

2,661

3,634

1,076

1,495

2,073

1,777

821

3,737

239

13,608

17,620

6,744

7,250

13,994

17,620

Refer to note 11 and 12 for the estimates used in valuation of cash generating units.

In 2015, unallocated corporate liabilities included bank overdrafts of £6,730K and Social security and other taxes of £505K.
In 2016, there were no bank overdrafts and Social security and other taxation liabilities have been allocated to the relevant segments of the business.

6. Profit from operations

Profit from operations has been arrived at after charging:

Research and development costs

Net foreign exchange (profit) / loss

Depreciation of property, plant and equipment:

- owned assets

- assets under finance leases

Operating lease rentals:

- land and buildings

- other

Auditor’s remuneration

Restructuring costs

A more detailed analysis of auditor’s remuneration on a worldwide basis is provided below.

Fees payable to the Group’s auditor for:

The audit of the parent Company and consolidated financial statements

For other services:

The audit of the accounts of the subsidiaries pursuant to legislation

Taxation compliance services

Other

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

2,208

(288)

139

303

142

608

2,535

159

316

400

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

142

A description of the work of the Audit Committee is set out in the corporate governance statement on page 19 and includes an explanation of how
auditor objectivity and independence is safeguarded when non-audit services are provided by the auditor.

An analysis reconciling the profit from operations to adjusted EBITDA is provided below.

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

716

(1,516)

234

(1)

608

(288)

1,269

233

400

(838)

Profit / (loss) from operations

Add back:

Depreciation

(Gain) / loss on disposal of fixed assets

Restructuring costs

Foreign exchange (gains) / losses

EBITDA / (LBITDA) before gain / loss on disposal of fixed assets,
foreign exchange gains / losses and restructuring costs

Annual ReportFor the year ended 31 December 2016
7. Staff numbers and costs

Staff numbers:

Operations

Sales and marketing

Administration

Staff numbers exclude contractors

Their aggregate remuneration comprised:

Wages and salaries

Social security costs

Contribution to defined contribution plans

Health Insurance

Share based payments

Other staff costs

Total staff costs

Year ended
31 Dec 16
Average number

Year ended
31 Dec 15
Average number

138

119

163

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

8,033

8,609

888

362

286

990

393

439

9,637

10,451

Remuneration in respect of Directors was as follows:

Non-Executive Director fees

Executive Directors' emoluments

Company pension contributions to money purchase schemes

Compensation to directors for loss of office

Remuneration of the highest paid Director (aggregate emoluments)

173

538

761

401

Further unaudited information on Directors’ remuneration is provided in the Directors’ remuneration report. Key management personnel within
the business are considered to be the Board of Directors. Pension contributions of £41K were paid in respect of the highest paid Director (2015:
£37K). There were two (2015: two) Directors in a money purchase pension scheme.

The Group operates defined contribution retirement benefit schemes for all qualifying employees. The assets of the scheme are held separately
from those of the Group in an independently administered fund.

The total cost charged to income of £362K (2015: £393K) represents contributions payable to these schemes by the Group at rates specified in
the rules of the plans. As at 31 December 2016, contributions of £41K (2015: £37K) due in respect of the current reporting period were included in
the Statement of Financial Position for payment in January 2017.

The Group operates an Unapproved EMI Share Option plan. A charge of £50K (2015: nil) has been recognised in the income statement during the
year. Further details on share options are included in note 22.

128

328

175

670

318

8. Finance costs

Interest payable:

Interest on bank overdraft and loans

Interest on finance leases

Interest on other loans

Interest on other loans relates to the loan note and the short term loans. Further details are provided in note 17.

9. Tax

Analysis of credit in the year

Current tax:

Current research and development tax credit - UK

Current year State tax - US

Adjustment to prior year charge - UK

Deferred tax credit

Taxation

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

105

162

288

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

150

(5)

(15)

138

405

472

The Group has unutilised tax losses at 31 December 2016 in the UK and the USA of £15.0m (2015: £15.1m) and $17.8m (2015: $16.4m) respectively.
These losses are still to be agreed with the tax authorities in the UK and USA. The Board intends to make use of all losses wherever possible.

The US tax losses are restricted to $491K per annum as a result of change of control legislation. Losses carried forward from the change of control in
April 2008 are restricted and must be used within 20 years. The Board believes the Group will be able to make use of $10.8m (2015: $9.9m) of the total
unutilised losses at 31 December 2016.

No deferred tax has been recognised in accordance with advice from US tax accountants on the basis that the US losses are restricted and there is
uncertainty on the value of losses which will be able to be used.

No deferred tax assets have been recognised in relation to any other Group tax losses due to uncertainty over their recoverability.

The differences are explained below:

Reconciliation of tax credit

Profit / (loss) on ordinary activities before tax

Tax at the UK corporation tax rate of 20.00% (2015: 20.25%)

Expenses not deductible for tax purposes

Additional deduction for Research and Development expenditure

Surrender of losses Research and Development tax credit refund

Unrelieved UK losses carried forward

Utilisation of US losses

Difference in timing of allowances

Adjustment to tax charge in respect of prior years

Refund of deferred tax liability

Effect of foreign tax rates

Unrelieved China losses carried forward

Unrelieved Brazilian losses carried forward

Unrelieved US losses carried forward

Total taxation

Year ended
31 Dec 16
£’000

861

172

(311)

(105)

(34)

(138)

Year ended
31 Dec 15
£’000

(1,904)

(386)

(307)

143

(67)

(472)

United Kingdom Corporation tax is calculated at 20.00% (2015: 20.25%) of the estimated assessable profit for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

Annual ReportFor the year ended 31 December 201610. Earnings per share and dividends

Earnings per share

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary
shares outstanding during the year.

For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive ordinary share
options. Management estimate 134,000 ordinary shares will be issued (2015: none) in respect of share options. There were none in 2015 because the
Group held enough unallocated shares within the Employee Share Ownership Trust (‘ESOT’) to fulfil their exercise. For the year ended 31 December
2015, almost all outstanding options had an exercise price in excess of the average market price in the year, therefore there is no material dilutive
impact from options granted and the basic and diluted earnings per share figures are the same.

Attributable profit / (loss)

Weighted average number of ordinary shares used in basic earnings per share (‘000)

Shares deemed to be issued in respect of share based payments

Weighted average number of ordinary shares used in dilutive earnings per share (‘000)

Basic profit / (loss) per share arising from both total and continuing operations

Diluted profit / (loss) per share arising from both total and continuing operations

Dividends

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

999

(1,432)

16,568

134

16,702

6.03p

5.98p

12,696

(11.28p)

After the year end, the directors declared their intention to pay a dividend of 1 pence per share. No liability in this respect has been recognised in 2016.

11. Goodwill

Gross carrying amount

Balance at 1 January

Acquired through business combination

Total goodwill

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

3,737

1,163

3,737

4,900

3,737

As at 31 December 2015 and 31 December 2014 the goodwill reported in the Group accounts arose from the reverse acquisition of Ingenta plc in
2007. The acquired goodwill in 2016 resulted from the acquisition of 5 Fifteen Limited. Goodwill is reviewed at the end of each financial period for
impairment.

At the year end, management carried out an impairment review of goodwill attached to each business unit. Following that review, management are of
the opinion that no impairment has taken place. In its review of other assets, management is also of the opinion that the carrying value of such assets is
reasonably stated and that no impairment has occurred.

For the purpose of annual impairment testing, goodwill is allocated to the following cash-generating units (CGUs), which are the units expected to
benefit from the synergies of the business combinations in which the goodwill arises.

Content products division

PCG

Advertising division

Total goodwill

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

2,661

1,076

1,163

2,661

1,076

4,900

3,737

The recoverable amounts of the cash generating units were determined based on value in use calculations for the next five years which management
believe will reflect the minimum period during which the business will benefit from the resulting cash generation.

The value in use calculation is based on the latest 5 year forecast for the Group. Over 70% of the revenue is regarded as recurring and unlikely to be
adversely affected by technological change. Where applicable, management have assumed a forecast growth rate of 1-10% (2015: 1-2%). PCG has
higher growth rates because there is an active programme to increase the customer base.

Details are shown below.

Content sales revenue growth

Teleservices revenue growth

GO! product hosting revenue growth

Hosting revenue growth

Time-based service revenue growth

Cost base growth

PCG
%

5-10

2-5

Content Division
%

Advertising
Division
%

1-2

Although management have determined the value in use calculations based on the next 5 year forecast management recognise that a period in excess
of five years is relevant in determining the value in use and consider that an average growth percentage of 2% would be applicable after year five.
Management consider that extrapolating using this growth percentage would increase the value in use and therefore no impairment would result.

Carrying amount

Recoverable amount

5 year gross profit reduction for fair value to equal carrying amount

PCG
£’000

Content Division
£’000

Advertising Division
£’000

1,076

1,421

459

2,661

5,491

3,699

1,163

3,743

3,571

Total
£’000

4,900

10,655

7,729

Management assumptions include stable profit margins based on past experience in this market which the management see as the best available
information for the market. Management consider a pre-tax discount factor of 10% will reflect the CGU’s cost of capital during the review period
(2015: 20%) and that this is applicable to all cash-generating units. The discount factor has changed due to significant changes in the business profile
which required a recalculation to be performed.

The key assumption in the recoverable amount calculations is gross profit. This item can reasonably be expected to change and the table above shows
the total 5 year reduction in gross profit that would be required for the recoverable amount to be equal to the carrying amount.

12. Other Intangibles

Cost

At 31 December 2014 and 2015

Acquisition through business combination

At 31 December 2016

Accumulated amortisation and impairment

At 31 December 2014 and 2015

Amortisation

At 31 December 2016

Carrying amount

At 31 December 2014 and 2015

At 31 December 2016

Acquired Software
Technology
£’000

500

458

The cost of the acquired software was calculated by discounting expected cashflows from the acquired advertising software business over a 5 year
period. Management expect a minimum of 5 years useful life from the product as current customers are on long term contracts and any customer
migrations are very protracted in nature.

The discount rates used in the calculation of intangibles was 10%.

Amortisation has been charged on a straight-line basis from date of acquisition. All amortisation and impairment charges are included within
depreciation, amortisation and impairment of non-financial assets.

Annual ReportFor the year ended 31 December 201613. Property, plant and equipment

Cost

At 1 January 2015

Additions

Retirements

Exchange differences

At 31 December 2015

Additions

Disposals

Transfers in

Exchange differences

At 31 December 2016

Accumulated depreciation and impairment

At 1 January 2015

Charge for the year

Exchange differences

At 31 December 2015

Charge for the year

Disposals

Transfers in

Exchange differences

At 31 December 2016

Carrying amount

At 31 December 2016

At 31 December 2015

At 31 December 2014

Leasehold
improvements
£’000

Fixtures
and fittings
£’000

Computer
equipment
£’000

Total
£’000

(2)

267

(2)

274

338

222

250

319

1,984

2,276

109

2,129

119

(326)

171

162

2,255

1,672

212

1,917

169

(326)

163

151

2,074

181

200

312

109

(4)

2,426

126

(326)

187

204

2,617

1,913

233

2,187

191

(326)

173

189

2,414

203

239

363

Assets held under finance leases with a net book value of £113K (2015: £188K) are included in property, plant and equipment and £139K (2015: £159K)
of depreciation was charged on these assets in the year, see note 19 for further details.

14. Trade and other receivables

Trade and other receivables comprise the following:

Trade receivables - gross

Allowance for credit losses

Trade receivables - net

Other receivables

Accrued income

Financial assets (loans and receivables)

Prepayments

Non-financial assets

As at 31 Dec 16
£’000

As at 31 Dec 15
£’000

As at 31 Dec 14
£’000

3,716

(45)

3,671

153

1,189

5,013

372

3,256

(18)

3,238

588

3,774

(188)

3,586

514

3,922

4,158

312

219

Trade and other receivables

5,385

4,234

4,377

All amounts are short term. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

Trade receivables at the reporting date comprise amounts receivable from the sale of goods and services of £3.7m (2015: £3.3m, 2014: £3.8m).

The average credit period taken on sales of goods is 62 days (2015: 64 days, 2014: 65 days).

All of the Group’s trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were found to be individually
impaired and an allowance for credit losses of £45K (2015: £18K, 2014: £188K) has been recorded accordingly within “sales and marketing” in the
statement of comprehensive income. This allowance has been determined by reference to expected reciepts.

The movement in the allowance for credit losses can be reconciled as follows:

As at 31 Dec 16
£’000

As at 31 Dec 15
£’000

As at 31 Dec 14
£’000

(8)

188

(188)

162

188

Balance as at 1 January

Amounts written off (collected)

Additional allowance in year

Balance as at 31 December

Annual ReportFor the year ended 31 December 201615. Cash and cash equivalents

Cash at bank and in hand:

Cash at bank:

- GBP

- USD

- EUR

- BRL

- CNY

Cash in hand - GBP

As at 31 Dec 16
£’000

As at 31 Dec 15
£’000

As at 31 Dec 14
£’000

576

1,215

172

5,758

1,371

1,612

1,627

1,070

2,027

8,807

2,790

Bank Overdraft - GBP

(6,730)

(4,519)

Net cash and cash equivalents

2,027

2,077

(1,729)

‘Net cash and cash equivalents’ is used for the Statement of Group Cash Flows. The net carrying value of cash and cash equivalents is considered a
reasonable approximation of fair value.

16. Trade and other payables

Trade payables and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken
for trade purchases is 39 days (2015: 46 days, 2014: 52 days).

The Directors consider that the carrying amount of trade payables approximates to their fair value.

Payables falling due within one year:

Trade payables

Accruals

Finance lease liabilities

Other payables

Financial liabilities at amortised cost

Social security and other taxes

Non-financial liabilities

As at 31 Dec 16
£’000

As at 31 Dec 15
£’000

As at 31 Dec 14
£’000

414

1,987

1,293

3,789

560

415

694

170

1,817

3,096

505

843

1,062

155

2,618

4,678

548

Trade and other payables

4,349

3,601

5,226

Included within accruals is an amount of £476K related to restructuring (2015: £175K).

Annual ReportFor the year ended 31 December 201617. Borrowings

Bank overdrafts (note 15)

Short term loans

Loan note

On demand or within one year (shown under current liabilities)

In the second year

As at 31 Dec 16
£’000

As at 31 Dec 15
£’000

As at 31 Dec 14
£’000

6,730

4,519

1,050

1,500

7,069

5,569

1,500

Bank overdrafts were wholly offset as at 31 December 2015 by positive bank balances held in accounts with the same bank. Interest is only charged on
the net balance (if negative) of all accounts held in UK bank accounts.

Interest rates:

Bank overdrafts

Short term loans

Loan Note

Loan Note - default interest

Year ended
31 Dec 16

Year ended
31 Dec 15

Year ended
31 Dec 14

4% above base

12%

As at 31 December 2016, there was no overdraft facility (2015: £Nil, 2014: £3.0m). During the year, the average effective interest rate on bank
overdrafts approximates to 0% (2015: 4.5%, 2014: 4.5%) per annum.

At the year-end there was no consolidated overdraft facility in place. The facility with HSBC has consisted of an overdraft which has varied from £1.5m
to £3.5m during the year to 31 December 2015.

The Directors believe the carrying value of the bank overdrafts is a reasonable approximation of their fair value.

The loan notes were debt instruments.

The short term loans were loans received from Directors, employees and related parties. Amounts due relating to Directors of the Company or other
related parties are disclosed within related parties transactions (note 26).

All borrowings are measured at amortised cost. During the year, £8k was credited to the Statement of Comprehensive Income (see note 4 for further
details).

Loan note

The Group redeemed the loan note and paid all interest to redemption on 15 June 2015.

Prior to redemption, the Group was in default under the loan agreement and the loan note was therefore accruing interest at 12% per annum. Interest
was accrued and paid half yearly in arrears on 30 June and 31 December. The base interest rate on the loan note was 8%, however the loan note
agreement stipulated that if the Group did not pay any sum payable under the agreement within 14 days of its due date, the balance owing would be
subject to default interest. Default interest was set at 4% above the base interest rate.

18. Deferred tax

A deferred tax liability of £100K has arisen from the intangible assets recognised during the business combination in the year. The deferred tax liability
balance unwinds as the intangible is amortised. During the year, £8K was credited to the Statement of Comprehensive Income (see note 4 for further
details).

Subject to agreement with HM Revenue and Customs, the Group has unrealised losses in the UK of £15.0m (2015: £15.1m). The Group also has
unutilised losses in the USA of $17.8m (2015: $16.4m), these losses have yet to be agreed with the US tax authorities. The US tax losses have become
restricted under US change of control laws after the capital raising in April 2008. At year end $10.8m (2015: $9.9m) could potentially be used going
forward but due to US regulations and restrictions this is inherently uncertain. As a result, the Board believe conditions for the recognition of a deferred
tax asset have not been met and consequently no deferred tax asset is recognised in respect of the losses (2015: £Nil).

19. Finance lease arrangements

The Group as lessee

Elements of the Group’s IT equipment are held under finance lease arrangements. As at 31 December 2016, the net carrying amount of equipment
under finance lease arrangements was £113K (2015: £188K). Finance lease liabilities are secured by the related assets. Future minimum finance lease
payments are as follows:

Year ended 31 December 2016

Lease payments

Finance charges

Net present value

Year ended 31 December 2015

Lease payments

Finance charges

Net present value

< 1 year
£’000

1 – 5 years
£’000

5 years
£’000

101

(6)

(2)

< 1 year
£’000

1 – 5 years
£’000

5 years
£’000

183

(13)

170

(5)

Total
£’000

138

(8)

130

Total
£’000

257

(18)

239

The lease agreements include fixed payments and a purchase option at the end of the three year lease. The agreement is non cancellable and
does not contain any further restrictions.

Annual ReportFor the year ended 31 December 201620. Operating lease arrangements

The Group as lessee

At the reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which
fall due as follows:

Land and buildings

Minimum lease payments due within one year

Minimum lease payments due in the second to fifth years inclusive

Minimum lease payments due after the fifth year

Other

Minimum lease payments due within one year

Minimum lease payments due in the second to fifth years inclusive

As at 31 Dec 16
£’000

As at 31 Dec 15
£’000

As at 31 Dec 14
£’000

457

975

274

899

148

338

894

297

1,432

1,321

1,529

131

Operating leases for Land and Buildings represent contracts on the following offices: Oxford, UK; Bath, UK; Slough, UK; Somerset, NJ, USA, New
Brunswick, NJ, USA; and Boston, MA, USA. Other Operating leases represent car leases, photocopier leases and sundry equipment leases.

The Group’s operating lease agreements do not contain any contingent rent clauses. None of the operating lease agreements contain renewal or
purchase options or escalation clauses or any restrictions regarding dividends, further leasing or additional debt.

21. Share capital

Issued and fully paid:

As at 31 Dec 16
£’000

As at 31 Dec 15
£’000

As at 31 Dec 14
£’000

16,919,609 (2015: 16,319,609, 2014: 8,413,610) ordinary shares of 10p each

1,692

1,632

841

Share issues

During the year, the company issued 600,000 ordinary shares of 10p each at an issue price of 130p per share raising £0.78m before costs (2015: issued
7,905,999 ordinary shares of 10p each at an issue price of 120p raising £9.5m before costs). A reconciliation of the movements in share capital is shown
within the Group and Company Statements of Changes in Equity.

22. Share options

The Group have an unapproved Executive Management Incentive (EMI) share option scheme and had an approved scheme which closed in 2015.
Further details on both schemes are detailed below.

Unapproved EMI scheme

This scheme is part of the remuneration package of the Group’s senior management. Options will vest if certain conditions, as defined in the scheme,
are met. It is based on group performance compared to budget over the next 3 years. One third of the options will vest at the end of 2016 and each of
the subsequent 2 years. In addition, participating employees have to be employed at the end of each period to which the options relate. Upon vesting,
each option allows the holder to purchase ordinary shares at the market price on date of grant.

Share options and weighted average exercise prices are as follows:

Outstanding at 1 January 2016

Granted

Lapsed

Outstanding at 31 December 2016

Number of shares

Weighted average
exercise price per share
(£’s)

556,000

(155,000)

401,000

1.27

The fair value of options granted were determined using the Black Scholes method. The following principle assumptions were used in the valuation:

Grant date

Vesting period ends

Share price at grant

Volatility

Risk free investment rate

Fair value of option – 31 December 2016 vesting period

Fair value of option – 31 December 2017 vesting period

Fair value of option – 31 December 2018 vesting period

January 2016

February 2016

August 2016

31 Dec 16

31 Dec 17

31 Dec 18

£1.27

26%

18p

26p

32p

£1.27

26%

18p

26p

32p

£1.32

16%

17p

23p

The underlying volatility was determined with reference to the historical data of the Company’s share price. In total £50K (2015: £nil) of employee
remuneration expense has been included in the profit for the year and credited to retained earnings.

Approved scheme

The Group had an approved option scheme, which was an HM Revenue and Customs approved scheme, available to eligible Directors and employees.
As at 31 December 2016, no options are outstanding which have been granted and not exercised or lapsed. (2015: Nil, 2014: 5,100).

The change from 31 December 2014 is due to options lapsing as they reached the 10th anniversary of the grant date during the year, due to staff
ceasing to be eligible employees or due to options lapsing due to criteria for their vesting not being met. No charge has been made for the year under
IFRS 2 as the Directors do not consider there is a material impact on the reported result.

The approved option scheme is now out with the operative period of 10 years from adoption date as set down in the scheme rules. Therefore, no more
options will be granted under this approved scheme and it was closed before 31 December 2015.

Annual ReportFor the year ended 31 December 201623. Investment in own shares

Investment in own shares relates to shares held by the Spread Trustee Company Limited as trustees of the Vista International Limited 1998 Employee
Share Ownership Trust. The trust holds shares in which employees have a beneficial interest and over which employees hold fully vested options to
purchase.

The Group is deemed to have control of the assets, liabilities, income and costs of the trust.

As at 31 December 2016 all options had either lapsed or been exercised and no shares remained in the trust.

At 31 December 2014

At 31 December 2015

At 31 December 2016

Ingenta Shares
held in trust
Number

Treasury
Shares
Number

203,319

30,322

Nominal
value £

20,332

3,032

Cost £

6,081

907

24. Notes to the cash flow statement

Bank balances and cash comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The carrying
amount of these assets approximates their fair value. Refer to note 15 ‘cash and cash equivalents’. The initial recognition of finance lease liabilities are
non-cash transactions excluded from the statement of cash flows.

During the year, cash was transferred between Group accounts to ensure all overdrafts were paid down. This had no effect on the net cash position at
year end.

25. Contingent liabilities

There were no contingent liabilities at 31 December 2016, 31 December 2015 or 31 December 2014.

26. Related party transactions

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

Remuneration of key management personnel

The remuneration of the Directors, who are the key management personnel of the Group, is set out below in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures. Further information about the remuneration of individual Directors is provided in the Directors’
remuneration report on page 21.

Short term employee benefits

549

463

432

As at
31 Dec 16
£’000

As at
31 Dec 15
£’000

As at
31 Dec 14
£’000

Directors’ transactions

The amounts outstanding as at 31 December 2016 relate to amounts due from Ingenta plc to Directors in connection with invoiced Non-Executive
fees. The amounts outstanding as at 31 December 2015 also relate to amounts due from Ingenta plc to Directors in connection with short term loans
to the Group and interest on short term loans to the Group.

Amounts outstanding with Directors

259

184

1,095

As at
31 Dec 16
£’000

As at
31 Dec 15
£’000

As at
31 Dec 14
£’000

Short term loans

There were no short term loan transactions in 2016, all balances were settled in 2015.

£200K was borrowed from the directors in March 2015 and £200K in May 2015.

All short term loans were repaid in full with interest on 15 June 2015.

All short term loans had an interest rate of 12% per annum.

Loan notes

There were no loan note transactions in 2016, all balances were settled in 2015.

Prior to redemption in 2015, the note holder of the £1.5m loan notes was a trust in which M C Rose, the Non-Executive Chairman of the Group, is a
trustee. Interest of £83K was accrued and paid in the year to 31 December 2015.

Joint Venture transactions

The Joint Venture loan amounts to £149K (2015: £110K). During the year, the Joint Venture provided services to the company of £65K and was paid
£26K.

Annual ReportFor the year ended 31 December 2016
27. Financial risk management

The Group is exposed to various risks in relation to financial assets and liabilities. The main types of risk are foreign currency risk, interest rate risk,
market risk, credit risk and liquidity risk.

The Group’s risk management is closely controlled by the Board and focuses on actively securing the Group’s short to medium term cash flows by
minimising the exposure to financial markets. The Group does not actively trade in financial assets for speculative purposes nor does it write options.
The most significant financial risks are currency risk and certain price risks.

Foreign currency sensitivity

The Group trades in Sterling (GBP), US Dollars (USD) and Euros (EUR). Most of the Group’s transactions are carried out in Sterling and US Dollars.
Exposure to currency exchange rates arise from the Group’s overseas sales and purchases, which are primarily in USD, through the trading divisions
in the USA (Ingenta Inc. and Publishers Communication Group Inc.). The Group does not borrow or invest in USD other than an intercompany loan
denominated in USD between Vista International Ltd and Vista North America Holdings Ltd, the currency movement on which offsets within the
Group Statement of Comprehensive Income.

In order to mitigate the Group’s foreign currency risk, non GBP cash flows are monitored and excess USD and EUR not required for foreign currency
expenditure are translated into GBP on an on-going basis. The Group is a net importer of USD being cash flow positive by approximately $2.5m per
annum. No further hedging activity is undertaken. The Group does not enter into forward exchange contracts.

Foreign currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows:

Short-term exposure
USD
£’000

Long-term exposure
USD
£’000

31 December 2016

Financial assets

Financial liabilities

Total exposure

31 December 2015

Financial assets

Financial liabilities

Total exposure

1,679

(1,401)

278

2,212

(1,545)

667

The following table illustrates the sensitivity of profit and equity with regard to the Group’s financial assets and financial liabilities and the USD / GBP
exchange rate “all other things being equal”. Transactions in EUR are immaterial and therefore movements of the EUR / GBP exchange rate have not
been analysed.

It assumes a + / - 10% change of the USD / GBP exchange rate for the year ended 31 December 2016 (2015: 10%). This percentage has been
determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Group foreign
currency financial instruments held at each reporting date.

If GBP had strengthened against USD by 10% (2015: 10%) then this would have had the following impact:

31 December 2016

31 December 2015

Profit for the year
USD
£’000

(94)

(40)

Equity
USD
£’000

(153)

(202)

If GBP had weakened against USD by 10% (2015: 10%) then this would have had the following impact:

31 December 2016

31 December 2015

Profit for the year
USD
£’000

115

Equity
USD
£’000

187

246

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is
considered to be representative of the Group’s exposure to currency risk.

Interest rate sensitivity

The Group’s policy is to minimise interest rate cash flow risk exposures on long term financing. Long term borrowings are therefore usually at fixed
rates. At 31 December 2016 the Group is exposed to changes in market interest rates through bank borrowings at variable interest rates. Other
borrowings (being the loans see note 17) are at fixed interest rates.

The following table illustrates the sensitivity of profit and equity to a reasonably possible change in interest rates of + / - 1%. These changes are
considered to be reasonably possible based on market movements and current market conditions. The calculations are based on a change in the
average market interest rate for each year, and the financial instruments held at each reporting date that are sensitive to changes in interest rates.
All other variables are held constant.

Profit for the year
and Equity
£’000

+ 1%

(17)

(24)

- 1%

31 December 2016

31 December 2015

31 December 2014

Annual ReportFor the year ended 31 December 2016Credit risk analysis

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:

Cash and cash equivalents (note 15)

Trade receivables - net (note 14)

2016
£’000

2,027

3,671

5,698

2015
£’000

8,807

3,238

12,045

2014
£’000

2,790

3,586

6,376

The Group continuously monitors defaults of customers and incorporates this information into its credit risk controls. Where available at reasonable
cost, external credit ratings and reports on customers are used. The Group’s policy is only to deal with creditworthy customers.

The Group’s management considers that the financial assets above, that are not impaired or past due for each of the reporting dates under review, are
of good credit quality.

None of the Group’s financial assets are secured by collateral or other credit enhancements.

Some of the unimpaired trade receivables are past due at the reporting date.

Financial assets not impaired can be shown as follows:

Not more than 3 months

More than 3 months but less than 6 months

More than 6 months but not more than 1 year

More than 1 year

2016
£’000

3,454

262

2015
£’000

2,742

308

154

2014
£’000

3,026

558

142

3,716

3,256

3,774

In respect of trade and other receivables, the Group is not exposed to any significant credit risk from any single customer or group of customers having
the same characteristics. Trade receivables consist of a large number of customers in different sectors of the market and geographical locations.

The carrying amount of financial assets whose terms have been renegotiated, that would otherwise be past due or impaired is £Nil (2015: £Nil,
2014: £Nil).

The credit risk for cash and cash equivalents is considered negligible, since the funds are held with various reputable banks.

Liquidity risk analysis

The Group manages its liquidity needs by monitoring scheduled debt repayments for long term financial liabilities as well as forecast cash flows due
in day to day business. Liquidity needs are monitored in various time bands. Short term cash flow is monitored daily using known daily inflows and
outflows for cash within 8 to 12 weeks. Medium term cash flows within 12 months are monitored using monthly rolling forecast data. Longer term cash
flows are monitored using higher level management strategy documents. Net cash requirements are compared to cash balances and forecast in order
to determine headroom or any shortfalls. This analysis shows if available cash is expected to be sufficient over the lookout period of 15 months to
March 2018.

The Group maintains sufficient cash balances and enters into finance lease arrangements to meet its liquidity requirements for the medium term
forecast period (1 year).

As at 31 December 2016, the Group’s financial liabilities have contractual maturities (including interest payments where applicable) as summarised
below:

31 December 2016:

Bank borrowings (note 17)

Finance lease obligations

Trade and other payables (note 16)

Total

Current £’000

Non-current £’000

Within 6 months

6 to 12 months

1 to 5 years

Later than 5 years

3,694

3,744

This compares to the Group’s financial liabilities in the previous reporting period as follows:

31 December 2015:

Bank borrowings (note 17)

Finance lease obligations

Trade and other payables (note 16)

Total

Current £’000

Non-current £’000

Within 6 months

6 to 12 months

1 to 5 years

Later than 5 years

6,730

2,926

9,747

The above amounts reflect the contractual undiscounted cash flows, which may differ to the carrying value of the liabilities at the reporting date.
Where the customer has a choice of when an amount is paid the liability has been included on the earliest date on which payment can be required.

Annual ReportFor the year ended 31 December 2016The carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities.

An analysis of the Group’s assets is set out below:

As at 31 December 2016

As at 31 December 2015

Trade receivables

Other receivables

Prepayments and
accrued income

Cash and cash
equivalents

Loans and
receivables
£’000

Non-financial
assets
£’000

Total for financial
position heading
£’000

Loans and
receivables
£’000

Non-financial
assets
£’000

Total for financial
position heading
£’000

3,671

153

1,189

2,027

7,040

372

3,671

153

1,561

2,027

7,412

3,238

588

8,807

12,729

312

3,238

900

8,807

13,041

An analysis of the Group’s liabilities is set out below:

Trade payables

Social security and
other taxes

Finance leases

Other payables

Accruals

Deferred income

Bank overdrafts

As at 31 December 2016

As at 31 December 2015

Loans and
receivables
£’000

Non-financial
assets
£’000

Total for financial
position heading
£’000

Loans and
receivables
£’000

Non-financial
assets
£’000

Total for financial
position heading
£’000

414

1,293

1,987

3,694

652

130

3,608

4,390

414

652

130

1,293

1,987

3,608

8,084

415

1,817

694

6,730

9,656

505

239

3,594

4,338

415

505

239

1,817

694

3,594

6,730

13,994

28. Capital management policies and procedures

The Group’s capital management objectives are:

•
•

To ensure the Group’s ability to continue as a going concern; and
To provide an adequate return to shareholders

The Group monitors capital on the basis of the carrying amount of equity plus any loan notes less cash and cash equivalents. The Group’s goal in capital
management is a capital to overall financing ratio of 1:6 to 1:4.

The Group sets the amount of capital in proportion to its overall financing structure, i.e. equity and financial liabilities other than loan notes. The Group
manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying
assets. In order to maintain or adjust the capital structure, the Group may adjust the amounts of dividends paid to shareholders, return capital to
shareholders, issue new shares, or sell assets to reduce debt.

Capital for the reporting periods under review is summarised as follows:

Total equity

Loan notes

Short term loans

Cash and cash equivalents

Capital

Total equity

Borrowings

Overall financing

2016
£’000

5,407

(2,027)

3,380

5,407

2015
£’000

3,726

(2,077)

1,649

3,726

6,730

10,456

2014
£’000

(4,049)

1,500

1,050

1,729

230

(4,049)

7,069

3,020

Capital to overall financing ratio

0.63

0.16

0.08

29. Post balance sheet events

The Board reiterated its intention to pay an interim dividend of 1 pence per share. The dividend has not been included in the results for the year.

Annual ReportFor the year ended 31 December 2016Company Statement of Financial Position

As at 31 December 2016

Non current assets

Investments

Current assets

Trade and other receivables

Cash and cash equivalents

Total assets

Equity

Called up share capital

Share premium account

Share option reserve

Retained earnings

Total equity

Current liabilities

Trade and other payables

Non-current liabilities

Borrowings

note

31 Dec 16
£’000

Restated
31 Dec 15
£’000

Restated
31 Dec 14
£’000

4,309

3,269

7,251

9,504

110

9,614

3,765

5,785

9,550

7,251

13,923

12,819

7,251

1,692

8,999

1,435

12,176

1,632

8,294

1,668

11,594

841

1,971

2,812

1,747

1,225

2,939

1,500

Total liabilities

1,747

1,225

4,439

Total equity and liabilities

13,923

12,819

7,251

The loss recognised in the year was £233K (2015:£303K)

The financial statements were approved by the Board of Directors and authorised for issue on 31 March 2017 and were signed on its behalf by:

M C Rose
Director

D R Montgomery
Director

Registered number: 837205.
The accompanying notes form part of these financial statements.

Company Statement of Changes in Equity

For the year ended 31 December 2016

Share capital
£’000

Share Premium
£’000

Share Option
Reserve
£’000

Balance at 1 January 2016

1,632

8,294

Share issue

Share options granted

Transactions with owners

Loss for the year

Total comprehensive income /
(expense) for the year

705

Balance at 31 December 2016

1,692

8,999

Restated for the year ended 31 December 2015

Share capital
£’000

Share Premium
£’000

Share Option
Reserve
£’000

Balance at 1 January 2015

841

Share issue

Transactions with owners

Loss for the year

Total comprehensive income /
(expense) for the year

791

8,294

Balance at 31 December 2015

1,632

8,294

Retained
earnings
£’000

1,668

(233)

Total
£’000

11,594

765

815

(233)

582

1,435

12,176

Retained
earnings
£’000

1,971

(303)

Total
£’000

2,812

9,085

(303)

8,782

1,668

11,594

Annual ReportFor the year ended 31 December 2016Company Statement of Cash Flows

For the year ended 31 December 2016

Loss before taxation

Adjustments for

Decrease / (increase) in trade and other receivables

(Decrease) / increase in trade and other payables

Share based payment expense

Cash outflow from operations

Cash flows from financing activities

Costs associated with share raising

Share raising proceeds

(Repayment of) / Proceeds from short term borrowings

Net cash from financing activities

Note

Year ended
31 Dec 16
£’000

Restated
Year ended
31 Dec 15
£’000

(233)

(303)

(6,779)

522

(6,440)

(15)

780

765

217

(154)

(240)

(396)

9,487

(2,550)

6,541

Net (decrease) / increase in cash and cash equivalents

(5,675)

6,301

Cash and cash equivalents at the beginning of the year

5,785

(516)

Cash and cash equivalents at the end of the year

110

5,785

The accompanying notes form part of these financial statements.

Notes to the Company financial statements

1. Accounting Policies

Statement of compliance

These financial statements have been prepared in accordance with IFRS.

Accounting policies

A summary of the principal Company accounting policies, which have been applied consistently, is set out below.

Investments
Investments held as fixed assets are stated at cost less any provision for impairment in value. Intercompany loans are long term in nature and have
been classified as investments. The Directors do not believe the investments have been impaired based on the findings of the wider impairment review
detailed in note 11 of the Group accounts.

Borrowings
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.

Going concern
The accounts are prepared on a going concern basis. In assessing whether the going concern assumption is appropriate, management have taken
into account all relevant available information about the future including a profit and cash forecast, the continued support of the shareholders and
Directors, banking facilities and management’s ability to affect costs and revenues.

Management regularly forecast profit, financial position and cash flows for the Group. The rolling annual forecast is normally updated monthly.

Having reviewed the latest forecast, management regard the forecast to be robust. Revenue streams are forecast in detail with all recurring revenue
contracts individually listed and ranked by firmness from firm to prospect. Management have reviewed forecast costs for reasonableness against prior
years and with knowledge of expected movements and concluded that forecast costs are robust (refer to the Group Strategic report on page 15 and
the Group accounting policies).

Share options
Please refer to the Group accounting policies note for full details. Within the parent company accounts, share based payments are recorded as an

increase to investments and credited to the share option reserve within equity.

Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date.

Transactions in foreign currencies during the year are recorded at a monthly estimated rate set at the beginning of each month. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates are
recognised in profit or loss. Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction
and not subsequently retranslated.

Deferred taxation
Provision is made for deferred taxation, using the full provision method, on all taxable temporary differences. Deferred taxation has been recognised
as a liability or asset if transactions have occurred at the balance sheet date that give rise to an obligation to pay more taxation in the future, or a right
to pay less taxation in the future. An asset is not recognised to the extent that the transfer of economic benefits in the future is uncertain.

Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation,
provided they are enacted or substantively enacted by the end of the reporting period. Deferred tax liabilities are always provided for in full.

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. Finance costs and gains or losses
relating to financial liabilities are included in the profit and loss account. Finance costs are calculated so as to produce a constant rate of return on the
outstanding liability.

Annual ReportFor the year ended 31 December 2016Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity
instrument. Dividends and distributions relating to equity instruments are debited direct to equity.

Intercompany loans
Intercompany receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less
provision for impairment.

Intercompany payable balances are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

A prior period restatement has been applied to the intercompany receivables to reflect the net present value of the likely repayment cash flows. These
balances have been reclassified within trade and other receivables having been previously included within investments.

Prior period restatement
Due to a review of the accounting treatment of intercompany balances, following the FRC enquiry during the year, referenced in the audit committee
report, these amounts, previously held as investments on the Company Statement of Financial Position, have been restated within trade and other
receivables and trade and other payables. These balances have also been subject to an impairment review. The impairment charge recognised in 2016
was £41K and has resulted in a prior period restatement with charges recognised in 2015 of £158K and 2014 of £83K.

Prior to restatement, investment balances were £6,177K in 2015 (2014: £6,236K) and included intercompany balances. Trade and other payables were
£127K in 2015 (2014: £1,841K). Intercompany balances have been reclassified from investments and £9,504K has been recorded within trade and other
receivables in 2015 (2014: £3,765K). In addition, £1,098K has been reclassified within trade and other payables (2014: £1,098K). The intercompany
receivables have been impaired by £158K in 2015 (2014: £83K)

These adjustments have also impacted on the Company Statement of Cash Flows. The cash and cash equivalents balance at the beginning and end
of each year remain unchanged, however, changes are reflected within the loss before taxation and movements in trade and other receivables and
also within the movement of trade and other payables. The Statement of Changes in Equity has also been restated for the loss in the year which has
increased to £303K in 2015.

2. Loss for the financial year

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 loss for the year was £233K (2015: £303K).An audit fee of £20K was paid in respect of the parent
Company audit (2015: £20K).

Tax fees for the Group of £60K (2015: £42K) have been borne by the subsidiary companies.

The Company employed two Executive Directors (2015: two), four Non-Executive Directors (2015: One) and the Non-Executive Chairman. The costs of
these employees and the fees for the other Non-Executive Director were borne by the subsidiaries.

3. Staff Numbers and Costs

Staff numbers:

Operations

Their aggregate remuneration comprised:

Wages and salaries

Other staff costs

Total staff costs

Year ended
31 Dec 16
Average number

Year ended
31 Dec 15
Average number

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

157

167

109

119

4. Investments

Cost

At 1 January

Investment in 5 Fifteen Limited

Share options issued to employees of subsidiaries

At 31 December

Year ended
31 Dec 16
£’000

Restated Year
ended 31 Dec 15
£’000

3,269

990

4,309

3,269

Investments are investments in subsidiary and Joint Venture undertakings.

Details of subsidiary undertakings, in which the Company holds majority shareholdings and investments in which the Company holds significant
interest and which have been consolidated and disclosed respectively in the Group financial statements, are as follows:

Company

Country of
registration

Holding

Proportion held Nature of the business

Catchword Limited

England

Ordinary shares

100%

Dormant

Ingenta Limited

England

Ordinary shares

100%

Dormant

Ingenta US Holdings Inc.

USA

Ordinary shares

100%

Holding Company

Preference shares

100%

Publishers Communication Group Inc.

USA

Ordinary shares

100%

Marketing and Sales Consultancy

Ingenta UK Limited

England

Ordinary shares

100%

Publishing Software and Services

Ingenta Inc.

USA

Ordinary shares

100%

Publishing Software and Services

Publishing Technology do Brasil LTDA

Brazil

Ordinary shares

100%

Publishing Software and Services

Publishing Technology Australia Pty
Ltd

Australia

Ordinary Shares

100%

Publishing Software and Services

Vista Computer Services Limited

England

Ordinary shares

100%

Dormant

Vista Computer Services LLC

USA

Ordinary shares

100%

Dormant

Vista Holdings Limited

England

Ordinary shares

100%

Dormant

Vista International Limited

England

Ordinary shares

100%

Holding Company

Vista North America Holdings Limited

England

Ordinary shares

100%

Non Trading Holding Company

Uncover Inc.

Beijing Ingenta Digital Publishing
Technology Limited

USA

China

Ordinary shares

100%

Dormant

Ordinary shares

49%

Publishing Software and Services

5 Fifteen Limited

England

Ordinary shares

100%

Digital Advertising Solutions

5 Fifteen Inc.

USA

Ordinary shares

100%

Digital Advertising Solutions

Annual ReportFor the year ended 31 December 20165. Trade and other receivables

Amounts falling due within one year

Other debtors:

Amounts due from subsidiary undertakings

Movement in intercompany loans

Impairment

Year ended
31 Dec 16
£’000

Restated year ended
31 Dec 15
£’000

3,765

5,780

(41)

9,504

3,981

(58)

(158)

3,765

A prior period restatement has been performed on amounts due from subsidiary undertakings. Previously these items were included within investments
and had not been impaired. The impairment charge relates to the present value of repayment.

6. Trade and other payables

Amounts falling due within one year

Other creditors:

Amounts due to subsidiary undertakings

Accruals

7. Share Capital

Issued and fully paid:

Year ended
31 Dec 16
£’000

Restated year ended
31 Dec 15
£’000

1,098

649

1,747

1,098

127

1,225

Year ended
31 Dec 16
£’000

Year ended
31 Dec 15
£’000

16,919,609 (2015: 16,319,609) ordinary shares of 10p each

1,692

1,632

Share issues

During the year, the Company issued 600,000 ordinary shares of 10p each at an issue price of 130p per share raising £780K before costs.

The holders of ordinary shares are entitled to receive dividends from time to time and are entitled to one vote per share at meetings of the Company.

8. Borrowings

Interest rates:

Bank overdrafts

Short term loans

Loan note

Loan note – default interest

Year ended
31 Dec 16

Year ended
31 Dec 15

No facility in place

4% above base

No loans

12%

The Company bank accounts form part of the wider Group facility with HSBC. These accounts are linked and any facility limit is based on the net
balance of all Group accounts taken together. There was no net Group overdraft facility in place during 2016.

There were no overdrafts at year-end (2015: £Nil). The average effective interest rate on bank overdrafts in the year to 31 December 2015 before they
were paid down approximated 4.5% per annum.

There were no Directors loan transactions in 2016. The Company took loans from Directors in the year to 31 December 2015 (“short term loans”) which
are detailed in note 9 to the Company accounts ‘related party transactions’.

Loan note

The Company redeemed the £1.5m loan note and paid all interest to redemption on 15 June 2015.

9. Related party transactions

Loan notes

Please refer to note 26 of the Group financial statements.

Short term loans

Please refer to note 26 of the Group financial statements.

Other related party transactions

Please refer to note 26 of the Group financial statements.

A summary of related party transactions and balances is shown herein:

Ingenta UK Limited

Ingenta Inc.

Publishers Communication Group Inc.

Publishing Technology Australia Pty Ltd

Vista International Limited

Catchword Limited

Ingenta US Holdings Inc.

Year ended
31 Dec 15
£’000

1,148

482

175

1,960

(429)

(669)

2,667

Recharges
£’000

(222)

(1)

Impairment
£’000

(42)

Funding
£’000

6,000

(218)

(41)

6,000

Year ended
31 Dec 16
£’000

6,926

443

177

1,960

(429)

(669)

8,408

Annual ReportFor the year ended 31 December 201610. Financial assets and liabilities

An analysis of the company’s assets is set out below:

As at 31 December 2016

As at 31 December 2015

Loans and
receivables
£’000

Non-financial
assets
£’000

Total for financial
position heading
£’000

Loans and
receivables
£’000

Non-financial
assets
£’000

Total for financial
position heading
£’000

Other receivables

Cash and cash
equivalents

9,504

110

9,614

9,504

110

9,614

3,765

5,785

9,550

3,765

5,785

9,550

The accompanying notes form part of these financial statements.

As at 31 December 2016

As at 31 December 2015

Financial liabilities
at amortised cost
£’000

Non-financial
liabilities
£’000

Total for financial
position heading
£’000

Financial liabilities
at amortised cost
£’000

Non-financial
liabilities
£’000

Total for financial
position heading
£’000

Other payables

Accruals

1,098

649

1,747

1,098

649

1,747

1,098

127

1,225

1,098

127

1,225

ingenta.com

Annual ReportFor the year ended 31 December 2016