Annual Report
Ingenta plc
For the year ended
31 December 2020
Registered number: 00837205
Annual Report
For the year ended 31 December 2020
Contents
Directors and advisers............................................................................................................................... 1
Highlights .................................................................................................................................................. 2
Board members ........................................................................................................................................ 3
Chairman’s statement ............................................................................................................................... 11
Group strategic report .............................................................................................................................. 12
Directors’ report ....................................................................................................................................... 16
Corporate governance statement ............................................................................................................. 18
Directors’ remuneration report ................................................................................................................ 21
Independent auditor’s report to the members of Ingenta plc .................................................................. 22
Group statement of comprehensive income ............................................................................................ 32
Group statement of financial position ...................................................................................................... 33
Group statement of changes in equity ...................................................................................................... 34
Group statement of cash flows ................................................................................................................. 35
Notes to the Group financial statements .................................................................................................. 36
Company statement of financial position ................................................................................................. 62
Company statement of changes in equity ................................................................................................. 63
Notes to the Company financial statements ............................................................................................. 64
The Directors submit to the members their report and accounts of the Group for the year ended
31 December 2020. 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
Banker
G S Winner, Chief Executive Officer
J R Sheffield, Chief Financial Officer
Non-Executive Directors
M C Rose, Chairman
M A Rowse
N W Kirton
S J G White (appointed 1 April 2020)
B H Holmström
Company Secretary
J R Sheffield
Registered Office
8100 Alec Issigonis Way
Oxford
OX4 2HU
Auditor
Grant Thornton UK LLP
Registered Auditor
Seacourt Tower
Botley
Oxford
OX2 0JJ
HSBC Bank plc
71 Queen Victoria Street
London
EC4V 4AY
Solicitor
Memery Crystal LLP
165 Fleet Street
London
EC4A 2DY
Registrar
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Nominated Adviser and Broker
Cenkos Securities plc
6-8 Tokenhouse Yard
London
EC2R 7AS
1
Annual Report
For the year ended 31 December 2020
Highlights
Financial Key Points
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Revenues of £10.2m (2019: £10.9m) reflecting a focus on core software offerings.
Annual Recurring Revenue of 86% (2019: 77%).
• Operating cash inflows of £0.8m in the year (2019: £1.7m inclusive of £0.5m of accelerated receipts).
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Cash balances at year end of £2.3m (2019: £2.6m).
Adjusted EBITDA* of £1.2m (2019: £1.3m).
Net profit of £0.3m (2019: loss of £1.4m).
Proposed dividend of 1.5 pence per share, subject to shareholder approval at the 2021 AGM (2019: 1.5 pence).
Earnings per share of 1.61 pence (2019: loss 7.98 pence).
Operational Key Points
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3 new customer sales and 5 Go-lives across the product portfolio during the year.
Vista as a service operational within key customers sites.
Company profile substantially de-risked with an ongoing annual cost base of approximately £9.7m.
Remote working capability fully operational across all areas of the Group.
* Adjusted EBITDA – EBITDA before impairment, amortisation, gain / loss on disposal of fixed assets, foreign exchange gain / loss and exceptional
non-recurring costs. A calculation is provided in note 5 to the accounts.
2
Board members
Scott Winner,
Chief Executive Officer
As CEO, Scott Winner builds and drives the
organisation to deliver successfully across all
areas of Professional Services, Research and
Development, Customer Service and Service
Delivery. Scott is responsible for overseeing
and evolving how Ingenta creates and delivers
new products, for deploying its innovations to
Jonathan Sheffield,
Chief Financial Officer and Company
Secretary
As Chief Financial Officer, Jon is
responsible for the financial well-being and
stability of the organisation, as well as
communicating with the investor
community. Jon leads the Enterprise
Services division of Ingenta with
customers and managing the overall operational execution, all with a strong
metrics and analytics driven approach. Prior to his role as COO, Scott was EVP,
Global Projects for Ingenta, but has previously held roles managing product
line P&L, driving product development efforts and building successful
organizations to deliver. He has worked across several different industries,
including educational publishing, manufacturing and financial services, and has
held roles at Pearson Education, Amplify Learning, McGraw-Hill and the
Fireman’s Fund insurance company.
responsibility for HR, Facilities and Technology Infrastructure. Prior to his
appointment as CFO, as Group Financial Controller, Jon managed the Ingenta
Finance function, including all aspects of compliance, forecasting and
reporting. An ACA qualified accountant, Jon spent the early part of his career
in practice, latterly at Pricewaterhousecoopers LLP, managing audits and
compliance over a broad range of companies and market sectors. Prior to
joining Ingenta, he held similar finance roles in the IT and Retail industry. Jon
qualified as a chartered accountant in 2001 before joining Ingenta in 2010.
Mark Rowse,
Non-executive Director
Mark Rowse is a media and publishing
entrepreneur who specialises in creating
and developing businesses where content
meets the internet, particularly in the areas
of digital publishing and online television.
After graduation from the University of
Cambridge with a first-class honours
degree in Law, Mark worked at investment bank NM Rothschild & Sons
Limited in mergers and acquisitions. Following this he entered the media
industry and since the mid 1990’s Mark has principally worked in the areas of
the internet and digital television, pioneering digital interactive TV on airlines,
co-founding Yes TV, now one of the major operators of on-demand TV in
Asia, and launching Luxury Life, an international digital satellite TV channel. In
1998 he founded Ingenta plc, taking the company to a £120m flotation in
2000 and is now a non-executive director of Ingenta as a result of the merger
of Ingenta and VISTA International Limited in 2007.
Sebastian White,
Non-executive Director
Sebastian is an Investment Director at
Kestrel Partners. Prior to joining Kestrel, he
had 14 years as head of corporate
development at UK AIM listed Alternative
Networks plc, a communications and
hosting provider to the mid-market.
Sebastian’s responsibilities included
business planning, M&A process
management, commercial due diligence and acquisition integration.
Martyn Rose,
Chairman
Martyn Rose is an entrepreneur specialising
in refinancing and restructuring smaller
companies and Chairman and a non-
executive director of Ingenta. Martyn has
helped steer the company toward its
continued growth, stability and success since
1999 before the merger of Ingenta and VISTA
International Limited to become Ingenta in 2007. Martyn is also a qualified
barrister and became Chairman of his first publicly listed company at the age of
34. Since that time, he has been Chairman of over twenty five public and
private companies with a present involvement in publishing software, online
academic research, financial services, manufacturing, recruitment and
commercial radio. In addition to his other commercial interests, Martyn has
been a trustee of the Cystic Fibrosis Trust since 2000, a school governor and
co-chaired the National Citizen Service.
Neil Kirton,
Non-executive Director
Neil Kirton is currently a Managing Director
and Head of Business Intelligence in the
London office of Kroll, a global leader in
corporate investigations and risk consultancy.
Prior to joining Kroll he was a Group Board
Director at The Arbuthnot Banking Group plc
having been Head of Corporate Finance and
Chief Executive Officer of its securities business. Previously he held a range of
senior equity market positions with Bridgewell Securities and ABN AMRO Hoare
Govett Limited (now known as RBS HG (UK) Limited) where he was Deputy
Chief Executive and Global Head of Equity Sales.
Henrik Holmstrom,
Non-executive Director
Henrik founded the content management
company Polopoly AB in 2000 which focuses
on online media. He developed the business
until it was acquired by Atex in 2008, after
which Henrik became Group Chief Architect
and later Chief Technology Officer heading up
the global R&D function. Since 2014, Henrik has been building online security
products and acting as an advisor to a number of unlisted Swedish companies.
Henrik holds a M.Sc. in Computer Science and Engineering from the Royal
Institute of Technology, Stockholm
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Annual Report
For the year ended 31 December 2020
Ingenta Products
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
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• Online Sales & Marketing
Digital & Print Distribution
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Subscription Management
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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.
Semantic Enrichment
• Online Platforms
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• Mobile
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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.
• Multimedia bookings
Packages and bundles
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Inventory management
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Finance/credit control
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CRM
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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.
Ingenta Services
Publishers Communication Group
Publishers Communication Group (PCG), 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.
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The Ingenta suite of products has been developed to mirror the needs and anticipate the future direction of global content providers. Many of
world’s leading publishers turn to Ingenta to advance their content strategies. We can assist clients every step of the way, from editorial acquisition
through to the 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 Express.
Product family
Product
Implementation Methodology
Enterprise
Express
Contracts, Rights and Royalties (CRR)
Content Lifecycle Manager (CLM)
Order to Cash (O2C)
Ingenta Aperture
Ingenta ConChord
Vista
Ingenta Edify
Ingenta Connect
Ingenta Connect Unity
Ingenta Link
Ingenta ad DEPOT
Ingenta Audience
Ingenta Market Place
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Enterprise deployments will be product-based but allow for bespoke changes and customisations to be made to the software. Express deploys an
“off the shelf” software package which allows the Group to sell at a lower price point with a standard implementation. Express 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 Express offerings.
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Annual Report
For the year ended 31 December 2020
Ingenta Commercial
The Ingenta Commercial suite is an ERP solution for publishers which supports any product from ideation, contract management through to order
fulfilment and cash collection.
The following components of the Commercial system can be purchased separately, in any combination, or as a complete enterprise system:
Content lifecycle manager (CLM)
This module helps manage product processes and control workflow. It provides a central repository in which core bibliographic data, associated
assets and rights can be stored and organised.
Users can create highly configurable product types at a granular level or building block level. Being product agnostic any complex combination, set,
collection of physical or digital bundle can be set up, decreasing time to market.
Contracts, Rights and Royalties (CRR)
Managing electronic rights, sub rights, fragments and permissions, the Rights element of CRR ensures that content owners get the most from their
assets, no matter the size, format, or fine details of the transaction.
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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, CRR 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 CRR underpins the system and enables
consistency and compliance across your organisation, to avoid potentially costly disputes.
CRR 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.
The Royalties element of the CRR 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. CRR is considered the only system on the market able to handle the complexities and nuances of today’s most creative
deals.
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Complex royalty calculations
Support for multiple currencies and international tax reporting
Streamlined operations and cash flow forecasting
Improved author care with user-friendly interface
Order to Cash (O2C)
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. O2C 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.
Ingenta Aperture
Launched in 2018, Ingenta Aperture allows customers to create a view into their data which can be accessed on demand, regardless of where the
information is stored. Access rights can be set to make sure sensitive information is shared on a ‘need to know’ basis. This allows business to share
insights, securely, on their own terms. Typical uses include:
Authors accessing royalty statements
Detailed product, pricing, bundling and order information; on demand for bookstores
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• Metadata access for project contributors
• On-the-go access for representatives
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Ingenta ConChord
Ingenta ConChord is a configurable browser-based platform that helps manage the complexities of music contracts, copyright, and associated
royalties. It provides a complete solution for music publishers wanting more control and better visibility over licenced content. It also allows you to
sell the music rights onto third parties and track earnings received. Music can be experienced in different ways and Ingenta ConChord provides the
flexibility to handle:
• Mechanical royalties
Print royalties
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Performance royalties
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Sync royalties
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Vista
Vista, a legacy enterprise level product family, provides a range of applications enabling Book Fulfilment, Subscription Management, Third Party
Distribution and Royalties Management, delivered through several managed services, including:
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Applications Implementation Services (AIS)
Applications Support and Updates (ASU)
Applications Management Services (AMS)
Applications Hosting Services (AHS)
Vista continues to be an important part of Ingenta’s product portfolio. Service of the product and existing customers continues to evolve. 2018
marked the first “Vista as a service” deployment of the product; a modern cloud-based service, in-line with today’s expectations of software services.
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Annual Report
For the year ended 31 December 2020
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 Edify 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 Edify
The Ingenta Edify 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 solution has been built from the ground up using a powerful combination of industry standard
architecture and semantic web technologies. Ingenta Edify 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.
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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 Connect
Ingenta Connect hosts content for around 140 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 32 million page views per year,
delivering over 200,000 downloads per month. 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.
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Data conversion & enhancement
Secure web hosting
Flexible E-commerce
Linking and distribution
Ahead-of-publication solutions
Continuous publishing models
Collection bundling and Virtual Publication creation
Archival Digitisation and delivery
Ingenta Connect Unity
The Ingenta Connect Unity option provides publishers with a branded view of Ingenta Connect. It is ideal for publishers wanting to utilise all the
features the Ingenta Connect platform offers through their own website.
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Ingenta Advertising
Ingenta Advertising is the division of products which caters for advertising and media products which are used by a variety of consumer, media,
broadcast and media organisations:
Ingenta ad DEPOT
Ingenta ad DEPOT 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 ad DEPOT manages:
CRM
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• Multimedia bookings
Packages and bundles
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Inventory management
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Traffic
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Finance/credit control
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Features:
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In-house and third-party CRM integration
Finance production integrations
Billing invoicing and accruals
Receivables
Print, digital and events bookings managed as single order
Contact management
Reporting, analysis and interactive dashboards
Traffic and ad copy tracking
Internal and external inventory management
Ingenta Audience
Ingenta Audience is an audience profiling platform. It provides customer intelligence to help users engage the right audiences and make better
informed marketing decisions. The profiling platform provides tools to segment audiences. These audience insights help optimise advert positioning by
helping to determine which areas of content are most likely to be relevant and of interest to target audiences.
Ingenta Audience ingests multiple data sources to gain a holistic view of the customers digital platform visitors. Ingenta Audience has the ability to
interpret data such as consumers’ interests and attractions across digital channels and interact with other data points to create a ‘single consumer view’
of the customers, this first party data provides the opportunity to serve relevant content and ads albeit from the customers own inventory or via ad
exchanges.
Ingenta Market Place
Ingenta Market Place provides a means for suppliers to book advertising space(s) on a retailer’s website. This enables the retailer to easily view, select
and confirm optimum suppliers’ product(s) for each position, to maximise revenues. One of our customer’s, J Sainsbury plc, is successfully using this
platform.
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Annual Report
For the year ended 31 December 2020
Publishers Communication Group
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 more than $50 million for clients in sales.
Established in 1990, PCG manages strategic sales and marketing operations for publishers including The Royal Society of London, Mary Ann Liebert
and SAE International, and conducts individual and repeat projects for a variety of 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 and medical libraries, subscription agents and publishers including, Wiley, Mango Languages,
OCLC, Ingram, Lyrasis, LexisNexis, the MIT Press, Elsevier, Cengage, NEJM, JBJS, 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
PCG’s multilingual team consistently develops new relationships with key decision-makers across the world.
10
Chairman’s statement
Overview
During a year of significant disruption, Ingenta’s strategic focus remained the generation of recurring revenue by selling rapidly deployable, productised
offerings with a clear upgrade path to future enhancements. This strategy is firmly in place within our Ingenta Content business where we won 3 new
contracts in the second half of the year with 2 of them subsequently going live before the year end. The next stage is to replicate this strategy fully in the
Commercial product portfolio where historically, implementations have included a significant element of bespoke development work.
On an operational front, we also went live with 3 Commercial customers during the year and have transitioned them to support which further
supplements recurring revenue. In addition, our hosted services offering has also been taken up by several customers, most notably under the guise of
Vista as a Service which allows our partners to concentrate on their core business rather than peripheral technology.
Traction in adjacent vertical markets has been slower than expected, partly due to uncertainty in the global economy as potential partners delayed or
cancelled purchasing decisions. However, we remain confident that the product remains relevant for the wider contracts, rights and royalties challenges
encountered by industries outside of our normal trade publishing partners. As previously announced, we already have a product specifically tailored to
the music industry, however the core Commercial software engine can be readily adapted to other target markets as applicable.
Results
As anticipated, Group revenue decreased slightly from the prior year as the business refocussed itself towards its core software offering and reduced
reliance on the sales consultancy services delivered by PCG. Further details of this are found in note 2 of the financial statements. The Group now
has recurring revenues of 86% and reported stable gross profit margins compared to the prior year.
The global pandemic led to a reduction in sales and marketing spend as the traditional trade events calendar was severely restricted. Administrative
expenses remained broadly stable but also include £0.4m of non-recurring costs associated with premises exit costs and professional fees. There
were no impairments charged in 2020 and the Group delivered a profit from operations of £0.3m compared to a loss of £1.2m in the prior year. The
Group has brought forward tax losses of over £20m and will use them to offset future tax liabilities.
The Group’s balance sheet remains strong and the business generated £0.8m of cash inflows from operations to close the year with £2.3m of cash
reserves. To support a stronger recurring revenue profile, substantial investments have been made in the Group’s fixed asset base to provide
increased hosting capabilities which are being utilised by our customers as they look to outsource internal IT infrastructure.
Shareholders’ returns and dividends
During the year, the Company announced a second share buyback programme and over the course of 2020 repurchased a further 81,000 ordinary
shares. At the year end, the Company had 16,919,609 ordinary shares in issue, with a total of 147,104 shares held in treasury and 16,772,505 ordinary
shares with voting rights.
The Directors declare their intention to pay a dividend in 2021 of 1.5 pence per share (2019: 1.5 pence) subject to approval at the forthcoming AGM.
Outlook
After the economic upheaval of 2020, Ingenta is now better placed to move forward with renewed optimism. The Group has streamlined its
operations, improved its operational resilience, and refined its approach to capitalise on market opportunities as they arise. The strategy to enhance
recurring revenue growth has started to deliver results driven by a focussed product set tailored to meet the needs of our customers, whilst
providing a clear upgrade path as required.
M C Rose
Chairman
28 May 2021
11
Annual Report
For the year ended 31 December 2020
Group strategic report
Business Strategy
The Group’s focus is to accelerate growth of its recurring revenue streams. To facilitate this, the Group are moving away from selling perpetual licences
and promoting a software as a service model wherever possible. Operationally, the Group has moved to a product agnostic services architecture so that
it can offer an integrated approach to servicing customers whereby service levels are standardised, and resources are utilised more efficiently. In
conjunction with this, the Group is now looking to offer standardised functionality to its product set which has led to the ‘Express’ software version which
will be available across the Ingenta product portfolio.
Product review
Ingenta Commercial
Ingenta Commercial provides a variety of modular publishing management systems for both print and digital products. A core area of expertise is within
Intellectual Property and the Group is looking to leverage its existing expertise in contracts, rights and royalty’s management by expanding into adjacent
verticals. ConChord, a solution designed for the music industry, has already been released and we believe there are further opportunities in other
verticals where IP management is an increasing concern.
Reported revenues increased by £0.4m to £6.6m and the Group announced 3 further go lives in the year to add to the recurring revenue base. These
deployments were for SME businesses which the Group has identified as a good fit for its standardised products. Unfortunately, the Covid pandemic
restricted new sales activity as customers delayed making significant investment decisions and consequently this has also impacted on the Group’s aim
to diversify into adjacent verticals.
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.
Ingenta’s Edify content management solution is offered in an ‘’Express’ format as well as the full enterprise version. During the year, 3 new customer
‘Express’ sales were made, 2 of which went live before year end, which aligns with the strategy of efficiently adding to the Groups recurring revenues. In
total, full year revenues declined marginally to £2.3m because of customer migrations.
Ingenta Advertising
Ingenta Advertising provides a complete browser-based multimedia advertising, CRM and sales management platform for content providers.
The business anticipates that the Group’s Advertising offering will become a component of the larger Commercial and Content Products divisions and in
time its revenues will be less clearly distinguished as a separate CGU. Reported revenue remained stable at £0.8m.
PCG
The PCG consulting arm provides a range of non-software services designed to support and drive a business’s sales strategy.
As outlined in the prior year, PCG revenues were expected to decline after the termination of a significant contract. The business has been refocused on
its key customer base and the team’s skills are being increasingly used to drive sales pipeline for the wider Group. Reported revenue for the year was
£0.4m.
Financial Performance
Group revenues for the year were £10.2m (2019: £10.9m) reflecting the PCG contract loss, the Group’s focus towards recurring software revenue and
challenging end markets. Encouragingly, the Ingenta Commercial business has performed well increasing turnover by £0.4m.
The Group’s cost of sales declined in line with revenue to deliver stable gross margins. Sales and marketing spend was reduced due to the cancellation
of a significant number of trade shows in 2020. Administrative costs were broadly stable however included £0.5m of non-recurring costs relating to
premises and professional fees.
No tax charge is anticipated for 2020 as the Group continues to utilise brought forward tax losses.
Financial Position
Non-current assets include goodwill and intangibles recognised on historic acquisitions. In 2020 Goodwill relates solely to the core Content platform
software and the intangibles to Advertising software technology acquired in 2016. Goodwill relating to historic acquisitions is tested for impairment each
year using discounted cashflows. No impairment was identified in 2020. Property, plant and equipment increases are because of additional investment in
hosting infrastructure to support the growing service offering.
Current assets have decreased compared to 2019 mainly driven by reduced debtors as the business transitions away from upfront annual billing to a
more even software as a service model with monthly invoicing.
Total liabilities have also declined compared to 2019 in part because of less upfront annual billing which reduces deferred income. Further, significant
creditor balances were aligned with the terminated PCG contract and these were all paid off during the year.
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Cashflow
The Group generated a cash inflow from operations of £0.8m compared to £1.7m in 2019. Timing of renewal receipts is a key factor and with a transition
towards software as a service there will be less upfront annual receipts. The unwinding of the PCG contract mentioned above also yielded a net
repayment of cash as Ingenta acted as the sales receivable function on the contract. Other significant cash outflows were for hosting infrastructure
purchased to support the growing hosting services offering.
Key Performance Indicators
The Board and senior management review a number of KPI’s continually throughout the year, all of which form part of the monthly management
accounts process and include:
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Revenue versus budget and monthly reforecast
Adjusted EBITDA (see note 5 for calculation) versus budget
Group cashflow versus budget
Sales pipeline growth and conversion analysis
Time utilisation statistics
Any deviations or anomalies are investigated, and corrective action taken where appropriate.
Full year revenues were below budget largely because of shortfalls on new sales targets as the Covid pandemic severely restricted activity. However,
new sales activity in Ingenta Content products increased towards the end of the year.
Adjusted EBITDA was also lower than budget driven by the same new sales shortfalls mentioned above.
Year-end cash balances were only £0.1m below budget which reflects the careful management of cash throughout the pandemic.
The Group monitor sales activity with reference to monthly sales pipeline reports. These reports detail sales opportunities by product with metrics
around expected project timelines and revenue recognition estimates so that management can deploy resources adequately to ensure the best
chance of success in the bidding process. When any items are removed from the pipeline due to either a successful sale or a lost opportunity,
management carry out a detailed analysis to ensure the reasons are understood and any actions required are taken.
The business monitors time utilisation at a contract level to enable accurate pricing decisions to be made ensuring profitable service delivery.
Internal development costs are also reviewed to ensure the appropriate effort is spent supporting the products and deliver an effective product
roadmap.
Section 172(1) Statement
The Directors continually monitor the operations of the business and take decisions to promote the success of the Group for the benefit of all its
members. As described in the Business Strategy section of this report, the Directors have selected a business model and operational structure designed
to maximise the effectiveness of the business for all stakeholders. The likely consequences of any decisions are modelled to provide assurance that they
are in the long-term interest of stakeholders and, as detailed in the Corporate Governance Report included in the 2020 Annual Report, risk management
and internal controls are a key oversight to ensure objectives are met. The Group have also adopted the QCA Corporate Governance code which is
designed to foster strong relations with all stakeholders and details are included on the Group’s website. In addition to our shareholders, the Board
considers the employees, customers and suppliers to be critical to the long-term success of the business.
Shareholder engagement
The Board is committed to maintaining active dialogue with its shareholders to ensure that its strategy, business model and performance are
understood. The AGM is the main forum for dialogue between retail shareholders and the Board. The notice of the AGM is sent at least 21 days before
the meeting which is held at the Group’s Head Office and all Board members routinely attend. For each vote, the number of proxy votes received for,
against and withheld is announced at the meeting. During the meeting, the Board members are available to answer any questions raised by
shareholders. The results of the AGM are subsequently published via a Regulatory Information Service on the Company’s corporate website. The Chief
Executive Officer and Chief Financial Officer are primarily responsible for shareholder liaison and can be contacted on 01865 397 800. The executive
management make presentations to institutional shareholders and analysts each year following the release of full year and half year results.
Conversations, when requested, are also held at other points in the year. The corporate website also includes details of recent annual and interim results
and all of the Group’s RNS and RNS Reach announcements.
Employee engagement
Staff are invited to Companywide meetings where the Executive Team share information and updates on strategy and recent news. At these meetings,
there is also a forum where all members of staff can ask questions. Ingenta also retain an independent HR resource to ensure all HR issues are dealt with
in accordance with best practice and all rules and regulations are adhered to.
Customer engagement
The Group has many customers of differing sizes and complexity with a variety of requirements. To best service them, the business has rolled out a new
operating model to standardise its approach to all customers and provide a consistent level of service and support. The business also keeps regular
contact with customers via account managers and user groups where demand exists so that our customers can feed back any issues, share experiences
and help shape the development of our products. To ensure the business is keeping abreast of wider industry challenges, we actively participate in a
variety of annual trade events.
13
Annual Report
For the year ended 31 December 2020
Supplier engagement
The Group makes every effort to ensure our suppliers are treated fairly and paid on time and on average they are paid within 29 days. Ingenta opposes
modern slavery in all its forms and endeavours to make sure any concerns raised are investigated. Where offshore resourcing is used, the business
meets the suppliers prior to contract signing to satisfy itself that they are operating in a responsible manner.
Company culture
The Board and senior management expect everyone in the company to act in a responsible and ethical manner because the reputation of the business is
key to our success. The Group does not let cost concerns override its ethics and behaviour. For example, we only contract with offshore resourcing
entities who commit to fair working practices. The Company is committed to minimising negative environmental impact in terms of energy usage at our
offices, digitising our content and using responsible methods to dispose of electrical equipment. The Company and staff are also active in the local
community supporting charities and sponsoring good causes. Feedback from all stakeholders allow the Board to monitor the Company’s culture, as well
as the ethical values and behaviours within the business.
Going concern
The core fundamentals of the Group remain strong with cash reserves of over £2m and no debt beyond leasing arrangements. In addition, further
cost saving opportunities have been identified as the Group look to reduce their physical premises cost and associated overheads as leases naturally
expire over the coming years. Management have assured themselves that cash is sufficient for the needs of the business based on the cash flow
forecast.
The COVID-19 outbreak continues to add some uncertainty to financial forecasting and modelling. However, at an operating profit level, the Group’s
results for the first quarter of 2021 have been in line with budget. New sales activity remains subdued with the timing of any uplift difficult to predict.
The Group continues to embrace established remote working practices without any significant impact to services. Any ongoing implementations
and professional services can also be delivered remotely by Ingenta personnel. The internal business infrastructure is contracted with large
multinational corporations and remains resilient. The Group has modelled various downside scenarios and consider it appropriate to use the going
concern basis to compile these financial statements. Further details on going concern are included in the accounting policies section of the financial
statements.
Outlook
The Group’s core Commercial and Content software solutions provide a mission critical service enabling publishers to run their business and
manage their IP assets. Recent data suggests that the publishing market has performed well during the pandemic and is forecast to continue
growing. In response, the Group is actively looking to broaden service provision to customers to enable them to concentrate on core activities and
capitalise on growth opportunities as they arise. The Group sees further opportunities in adjacent markets where concepts of IP and its inherent
complexity are increasingly prevalent. In many cases, existing solutions often struggle to keep pace with industry changes and Ingenta believes the
Group’s core royalty software engine can be readily integrated to provide a robust and flexible upgrade. These factors, combined with an ongoing
drive to improve efficiency, give the Board an optimistic outlook for 2021 and beyond.
Risks and uncertainties
COVID-19
The COVID-19 pandemic continues to be considered a principal risk to the business bringing with it many significant uncertainties although to date they
have been successfully mitigated. The Group has analysed the potential impacts and tailored its business continuity plan in response to the anticipated
threats. All staff within the business have remote working capabilities and for many this is a normal operating procedure. In addition, the Group’s new
operating structure has fostered teams with interchangeable skills across the product offerings and technology stacks which, along with remote working,
provides a more flexible staffing model better equipped to deal with illness and absence. The Group’s IT infrastructure is hosted on resilient platforms
using large corporate providers ideally suited to providing uninterrupted service.
The Group’s customer base is reasonably diverse including trade and academic publishers who are not deemed to be at high risk at the present time.
The Group also considers over 80% of its revenue to be recurring in nature with many customers on multiyear contracts. The Ingenta systems are central
to the operations of its customer base and not deemed to be a discretionary spend although some project work may be impacted as customers wait to
see what the implications of COVID-19 hold for them. The key concern identified by management is the inevitable delay in new sales as major
investment decisions are put off. However, the Group has modelled various potential future scenarios including delayed cash receipts and restrictions in
new sales activity and predict the business will continue to operate profitably with sufficient working capital headroom. Also, a significant amount of the
Group’s renewals and cash are received in the first quarter of each year and at 31 March 2021 cash balances remained over £2m.
Sales risk
The major risks for future trading are converting sales of Ingenta Edify and the Commercial product suite (Ingenta Rights, Royalties, Product Manager
and Order to Cash). 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 undertakes detailed monthly
revenue forecasting and assesses risk on an ongoing basis. Customer procurement processes remain difficult to predict, and any delays during contract
negotiation will impact on the timing of project commencement and the level of revenue that can be recognised in the year. This is considered a
principal risk for the business.
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.
14
Fixed price project 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 further mitigate the risk by taking on new projects on a time and materials basis wherever possible.
Projects requiring bespoke development also carry the risk that the development will 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 complexities of
building bespoke elements. This is considered a principal risk for the business.
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 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. The new product agnostic operational structure has also accelerated knowledge sharing within
groups.
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 and the majority of its revenue is within the UK and US markets. At present, the main risks identified are currency fluctuations
which have been reviewed above.
On behalf of the Board.
G S Winner
Chief Executive Officer
28 May 2021
15
Annual Report
For the year ended 31 December 2020
Directors’ report
The Directors present their report and the audited financial statements for the year ended 31 December 2020.
Directors
The Directors of the Company who held office during the year were:
Executive Directors:
G S Winner, Chief Executive Officer
J R Sheffield, Chief Financial Officer
Non-Executive Directors:
M C Rose, Chairman
M A Rowse
N W Kirton
B H Holmström
M M E Royde (resigned 1 April 2020)
S J G White (appointed 1 April 2020)
The interests of Directors in the shares of the Company at 31 December 2020 are disclosed in the Directors’ remuneration report.
Corporate governance
Details of corporate governance for the year to 31 December 2020 are disclosed in the corporate governance statement. The Directors of the
company pay particular attention to maintain good working relationships with the Group’s shareholders, customers, employees and suppliers.
Further details are included on the Company website. The main effort in the year has been embedding the new Group structure which has the
benefit of removing risk from the business ensuring a stable foundation is in place for the benefit of all stakeholders.
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 Group Statement of Comprehensive Income as incurred.
The charge to the Group Statement of Comprehensive Income was £1.4m (2019: £1.4m) in the year to 31 December 2020.
Substantial shareholdings
As at 4 January 2021, 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
Canaccord Genuity Wealth Management
Emslie Family
Financial risk management
Details of the Group’s financial risks are given in note 26.
Number of ordinary 10p
shares
4,645,412
Percentage of issued
ordinary share capital
27.70%
4,636,754
1,224,590
827,785
1,543,207
679,250
27.64%
7.30%
4.94%
9.20%
4.05%
Employment policy
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.
16
Future developments
The business is looking to leverage its expertise in rights and royalty’s management into other adjacent vertical markets. The Group’s first venture is
into the music industry with its Conchord product. If this proves successful, then other verticals will also be explored.
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).
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.
G S Winner
Director
28 May 2021
17
Annual Report
For the year ended 31 December 2020
Corporate governance statement
The Board of Ingenta plc have adopted the Quoted Companies Alliance Corporate Governance Code (the QCA Code).
It is the Board’s responsibility to ensure that the Ingenta Group is managed in the long-term interests of all shareholders and stakeholders in the
business. The Board believes a strong and effective corporate governance culture is critical in this respect as we endeavour to grow a resilient and
sustainable business for the benefit of our shareholders, customers, people and suppliers.
The QCA code is constructed around 10 broad principles which are detailed in full on the Company’s website.
Strategy and business model
Ingenta seeks to solve the unique problems faced by information providers. We tailor our suite of industry-specific technology products to create
robust solutions to manage our customers’ IP, content and advertising requirements.
Our business model is to deliver profitable services enabling us to invest in the development of software solutions that help our customers manage
and monetise their content. We generate revenue via professional service fees for implementing our solutions, providing ongoing licence, hosting
and support services plus a range of ancillary consulting services. We then reinvest some of these profits into our products and the development of
next generation solutions to ensure we have the required product capabilities to deliver revenue and profit into the future.
The Group strategic report provides further information on the results of the business.
Risk management
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 Directors and management have considered the risks facing the business with the key items discussed in the Group strategic report section of
the financial statements. These are assessed on an ongoing basis. 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 Company has an established framework of internal controls covering the following areas:
•
The Board reviews and approves company strategy and the associated annual budgets.
•
• Monthly management information packs are produced which report performance to the Board and management team. These include income
statements, balance sheets and cash flows. Actual results are reported against budget, latest forecast and prior year with an updated forecast
for the expected full year outcome.
Any new business goes through a deal review meeting to determine expected profitability and identify any risks and how they can be
mitigated in the contract. New contracts must be signed by a member of the Board and where material they are reviewed by the Companies
advisors.
A Company-wide timesheet system is in place to enable management to effectively monitor projects, both internal and external, and report
on profitability throughout the duration of the work.
A clear organisational structure with defined levels of authority and approval.
Close supervision of the daily operations by the Executive Directors and management team.
Central control over banking facilities with defined authority limits.
The Audit Committee reviews the independent audit findings report each year to ensure compliance with financial reporting regulations and
that its internal control procedures are being adhered to and remain effective.
•
•
•
•
•
The Group continues to review its internal controls and will be including further key performance indicators into the monthly reporting cycle to
assist management and the Board in understanding the performance of the business. The Board considered the usefulness of appointing a
dedicated legal counsel and internal audit function but decided in view of the size of the Group it was not effective to do so. This will be kept under
review.
Further detail on the key risks faced by the business are set out in the Group strategic report.
Management framework
Ultimate responsibility for corporate governance lies with the Chairman of the Board. At present the Board comprises the Non-Executive Chairman,
four Non-Executive Directors and two Executive directors. N W Kirton and B H Holmstrom are deemed to be independent Board members.
The Board is satisfied that it has the right mix of skills covering finance, investor relations, technology and industry experience to enable it to
discharge its duties and responsibilities effectively and is supported by an Audit and a Remuneration Committee which meet separately through the
year. Any conflicts of interest at Board level are reviewed regularly through the year and disclosed at the Board meeting as appropriate.
18
There are normally eleven Board meetings scheduled as standard through the year with further meetings set up as required. In the year to 31
December 2020 there were 11 Board meetings held with attendance records below:
Name
G S Winner
J R Sheffield
M C Rose
M A Rowse
N W Kirton
M M E Royde
B H Holmström
S J G White
Attendance
11 out of 11
11 out of 11
11 out of 11
10 out of 11
10 out of 11
0 out of 3
11 out of 11
8 out of 8
Each month the Board is supplied with a comprehensive management information pack covering financial performance for the month and forecast
for the full year. The management team also provide an in-depth commentary on the divisional operations of the business to ensure the Board is
kept abreast of the latest developments.
Board of Directors
Between them, the Board members provide skills in finance and reporting, public markets, investor relations, technology and the publishing
industry. These skills are kept up to date via training courses and current on the job experience. The Company’s Nomad strengthens the Board’s
professional development by providing guidance and updates on corporate governance and regulatory matters as required.
The Board composition is under regular review and has widened over recent years to include specialists in public markets and technology where the
Board felt there was a need for additional expertise. All Directors can take independent professional advice in order that they can effectively carry
out their duties and have access to the services of the Company secretary as required.
Each board member’s biography is available on the Company’s website and on page three of the financial statements and detail their skills,
experience and capabilities.
The Company secretary is responsible for guiding the Chairman and Board on their responsibilities and how those responsibilities should be
discharged. This includes ensuring good information flows within the Board and its committees and also between senior management. Other
responsibilities include shareholder relations, administration of the Company’s records and ensuring compliance with legal and statutory
requirements.
Board performance
The Chairman continually monitors performance of the Board at the regular board meetings. The Executive Director roles of Chief Executive Officer
and Chief Financial Officer are clearly defined with performance targets relating to Revenue, EBITDA, Earnings per share and cash balances set each
year. The Company’s auditors provide an annual finding report which is used as a tool to identify any areas of improvement for the Board, and these
are reviewed and acted upon as appropriate. Where further training requirements have been identified, the Company then ensures that these are
carried out.
In terms of succession planning, the Board are encouraged to maintain dialogue regarding individual member’s future plans to enable the Company
to complete an orderly transition. The succession process involves a thorough review of potential internal and external candidates to ensure the best
person is selected. While no formal nomination committee has been established, board and other senior management appointments are regularly
considered at a board level.
Corporate culture
The Board and senior management expect everyone in the company to act in a responsible and ethical manner because the reputation of the
business is key to our success. The company does not let cost concerns override its ethics and behaviour. For example, we only contract with
offshore resourcing entities who commit to fair working practices. The Company is committed to minimising negative environmental impact in
terms of energy usage at our offices, digitising our content and using responsible methods to dispose of electrical equipment.
The Company and staff are also active in the local community supporting charities and sponsoring good causes. Feedback from all stakeholders, as
described in further detail on the Company’s website, allow the Board to monitor the Company’s culture, as well as the ethical values and
behaviours within the business.
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.
19
Annual Report
For the year ended 31 December 2020
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. The Group only use the auditing firm for
compliance and corporation tax related work when fees are competitive. Any significant project work would be awarded to an independent firm of
accountants.
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.
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 to prepare the financial
statements in accordance International Financial Reporting Standards (IFRSs) as adopted by the European Union. 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 as adopted by the European Union 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 also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The directors 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
28 May 2021
20
Directors’ remuneration report
The AIM Rules for Companies require the disclosure of certain information regarding the remuneration earned by each director. 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 2020 in the shares of the Company were as follows:
Name
M C Rose
M A Rowse
N W Kirton
S J G White
G S Winner
J R Sheffield
Number of ordinary shares of 10p in Ingenta plc
31 December 2020
Number of ordinary shares of 10p in Ingenta plc
31 December 2019
4,645,412
440,277
44,250
4,636,754
22,000
13,872
4,645,412
440,277
44,250
4,601,754
22,000
13,872
S J G White is a partner of Kestrel Partners LLP (appointed 1 April 2020)
Directors’ interests
The Directors at 31 December 2020 had an interest in 648,912 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 86.0p and the price ranged in the year between 40.5p and 87.5p.
Directors’ remuneration
Salary
and
fees
£’000
200
120
36
0
30
0
0
0
Benefits
£’000
12
0
0
0
0
0
0
0
Sums paid
to a third-
party for
Directors’
services
£’000
0
0
48
30
0
8
30
22
386
12
138
Pension
contribution
£’000
Total
remuneration
£’000
Group
National
Insurance
costs
£’000
2020 Total
cost of
employment
£’000
2019 Total
remuneration
£’000
2019 Total
cost of
employment
£’000
4
36
0
0
0
0
0
0
40
216
156
84
30
30
8
30
22
576
12
15
4
0
3
0
0
0
34
228
171
88
30
33
8
30
22
610
215
143
84
30
30
30
30
-
562
226
159
88
30
33
30
30
-
586
Name
G S Winner
J R Sheffield
M C Rose
M A Rowse
N W Kirton
M M E Royde
B H Holmström
S J G White
M M E Royde resigned 1 April 2020. S J G White appointed 1 April 2020.
On behalf of the Remuneration Committee.
M C Rose
Chairman
28 May 2021
21
Annual Report
For the year ended 31 December 2020
Independent auditor’s report to the members of Ingenta
plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of Ingenta PLC (the ‘parent company’) and its subsidiaries (the ‘group’) for the year ended 31 December
2020 which comprise the Group statement of comprehensive income, the Group statement of financial position, the Group statement of changes
in equity, the Group statement of cash flows, the Company statement of financial position, the Company statement of changes in equity and
notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied
in their preparation is applicable law and International Financial Reporting Standards (IFRSs) in conformity with the requirements of the
Companies Act 2006 and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies
Act 2006.
In our opinion:
•
•
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2020 and of
the group’s profit and the parent company’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006;
the parent company financial statements have been properly prepared in accordance with international accounting standards in conformity with
the requirements of the Companies Act 2006 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent
of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
The impact of macro-economic uncertainties on our audit
Our audit of the financial statements requires us to obtain an understanding of all relevant uncertainties, including those arising as a consequence
of macro-economic uncertainties such as Covid-19 and Brexit. All audits assess and challenge the reasonableness of estimates made by the directors
and the related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on
assessments of the future economic environment and the group’s future prospects and performance.
Covid-19 and Brexit are amongst the most significant economic events currently faced by the UK, and at the date of this report its effects are subject
to unprecedented levels of uncertainty, with the full range of possible outcomes and their impacts unknown. We applied a standardised firm-wide
approach in response to these uncertainties when assessing the group’s future prospects and performance. However, no audit should be expected
to predict the unknowable factors or all possible future implications for a group associated with these particular events.
22
Conclusions relating to going concern
We are responsible for concluding on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the group’s and the parent
company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our report to the
related disclosures in the financial statements or, if such disclosures are inadequate, to modify the auditor’s opinion. Our conclusions are based on the
audit evidence obtained up to the date of our report. However, future events or conditions may cause the group or the parent company to cease to
continue as a going concern.
A description of our evaluation of management’s assessment of the ability to continue to adopt the going concern basis of accounting, and our results
arising with respect to that evaluation is included in the key audit matters section of our report.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively,
may cast significant doubt on the group’s and the parent company’s ability to continue as a going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
The responsibilities of the directors with respect to going concern are described in the ‘Responsibilities of directors for the financial statements’
section of this report.
Overview of our audit approach
Overall materiality:
Group: £155,000, which represents 1.5% of the group’s revenue.
Parent company: £84,000, which represents 1% of the parent company’s net assets.
Key audit matters were identified as:
•
•
•
Revenue recognition, same as previous year;
Impairment of intangible assets, same as previous year;
Impairment of investments, same as previous year; and
Materiality
Key audit
matters
Scoping
• Going concern assumption (new this year).
Our auditor’s report for the year ended 31 December 2019 did not include any key audit matters that
have not been reported as key audit matters in our current year’s report.
We performed an audit full scope audit of the financial information of the parent company, Ingenta plc,
and of the financial information of Ingenta (UK) Limited, Vista International Limited, and Vista North
America Holdings Limited using component materiality (“full scope audit”).
We performed an audit of one or more account balances on the financial information of Ingenta Inc
and PCG Inc (“specific scope procedures”).
23
Annual Report
For the year ended 31 December 2020
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those that had the
greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Description
Audit response
KAM
Disclosures
Our results
In the graph below, we have presented the key audit matters, significant risks and other risks relevant to the audit.
Revenue
recognition
Impairment of
intangible
assets
Intercompany
recoverability
Payroll
Trade debtors
and accrued
income
Impairment of
investments
Going
concern
assumption
Management
override of
controls
Deferred
income
Extent of management judgement
High
Key audit matter
Significant risk
Other risk
High
Potential
financial
statement
impact
Low
Low
24
Key Audit Matter - Group
Revenue recognition
We have identified revenue recognition as a significant risk, which was
one of the most significant assessed risks of material misstatement
due to fraud.
Group revenue of £10,177,000 has been recognised in the year ended
31 December 2020, arising substantially from the sales of services.
Revenue is the most significant item in the Group statement of
comprehensive income and impacts several key performance
indicators, and key strategic indicators, as set out in the Chief
Executive’s Statement and Strategic Report on page 12.
The application of IFRS 15 is an area requiring significant judgement
by management. In particular, there is an elevated risk of material
misstatement due to fraud in contracts which are invoiced in advance
of the work being performed, where management are required to
determine the level of accrued or deferred income to be recognised at
the year end (Hosting, Managed Services and Support and upgrade).
As a result, there is an element of judgement in determining the
amount of revenue to be recognised in each reporting period. There
is a risk that revenue could be misstated if the timing of revenue
recognition is not appropriate and in line with the contract.
Relevant disclosures in the Annual Report and Accounts 2020
•
Financial statements: Note 2, Revenue
Impairment of Intangible Assets
We identified the goodwill and intangible assets impairment review as
a significant risk, which was one of the most significant assessed risks
of material misstatement due to error.
Management are required to make an annual assessment to
determine whether the Group’s goodwill and intangible assets, which
are valued at £2,719,000 in the Group statement of financial position,
are impaired.
The process for assessing whether impairments exist under
International Accounting Standards, IAS 36 ‘Impairment of assets’ is
complex. The process of determining the value in use, through
forecasting cash flows related to cash generating units (CGU’s) and
the determination of the appropriate discount rate and other
assumptions to be applied can be highly judgmental and can
significantly impact the result of the impairment review.
How the matter was addressed in the audit - Group
In responding to the key audit matter, we performed the following audit
procedures:
•
Assessed whether the accounting policies adopted by the
directors are in accordance with the requirements of IFRS 15,
and whether management accounted for revenue in
accordance with the accounting policies;
•
•
•
Understood the design of processes and controls through
which the business initiates, records and recognises revenue
transactions;
Utilised audit software to perform audit data analytics over the
managed services, hosting, maintenance and time-based
revenue streams for the year to identify unusual transactions.
All unusual revenue transactions were inspected for
appropriateness and assessed against supporting
documentation;
For contract based revenue (Hosting, Managed services and
Support and upgrade), we tested a sample of individual
revenue items during the year, by:
- Agreeing the selected items to underlying contractual
agreements, the related remittance advice or cash
received, and communications between the project
manager and customer to support delivery of the service;
and
- Recalculating any accrued or deferred income, assessing
the reasonableness of management’s judgement for
timing of revenue raised against evidence of the
performance, and services contracted.
Our results
Based on our audit work, we did not identify any material
misstatement in revenue recognition. Revenue was recognised in
accordance with the group’s accounting policy and IFRS 15 ‘Revenue
from Contracts with Customers.
In responding to the key audit matter, we performed the following audit
procedures:
•
Understood the design of the group’s process and key controls
around the carrying value of goodwill. In particular, those
assessing the selection of key assumptions within the
impairment assessment;
• Obtained management’s assessment of the relevant CGU’s
used in the impairment calculation (covering a five-year period)
and ensured that assessment reflected our understanding of
the business units and operating structure of the group with
consideration of the appropriateness of the forecast revenue,
growth rates and the discount factor used;
•
•
•
•
Challenged management’s assumptions and checking the
arithmetical accuracy of management’s impairment model;
Performed sensitivity analysis to assess the impact of different
assumptions utilised in the impairment models, including the
key assumptions of revenue growth rates and discount rates;
Assessed the accuracy of management’s historic forecasting
through a comparison of prior year impairment reviews to
actual results; and
Read the detailed disclosure to ensure information provided in
the financial statements is compliant with the requirements of
IAS 36 and consistent with the results of the impairment review.
25
Annual Report
For the year ended 31 December 2020
Key Audit Matter - Group
Relevant disclosures in the Annual Report and Accounts 2020
Financial statements: Note 10, Intangible assets
•
Going concern assumption
We identified going concern as a significant risk, which was one of the
most significant assessed risks of material misstatement due to fraud
and error as a result of the judgment required to conclude whether
there is a material uncertainty related to going concern.
Due to the ongoing impact of the uncertainty Covid-19 pandemic, the
Group may not be able to continue as a going concern. The existence
of the pandemic creates significant estimation uncertainty when
forecasting and therefore errors may occur.
The directors have concluded, based on the various scenarios
developed, that the Group has sufficient resources available to meet
its liabilities as they fall due and have concluded that there are no
material uncertainties that cast significant doubt over the entity’s
ability to continue as a going concern.
How the matter was addressed in the audit - Group
Our results
Based on our audit work, we did not identify any material
misstatement in the impairment review. Management’s impairment
review was carried out in accordance with IAS 36.
In responding to the key audit matter, we performed the following audit
procedures:
• Obtaining management’s forecasts covering the period to the
end of June 2022, assessing how these cash flow forecasts were
compiled and assessing their appropriateness by applying
relevant sensitivities to the underlying assumptions, and
challenging those assumptions;
•
•
•
•
•
•
•
•
•
Assessed the mathematical accuracy of the models provided;
Assessing management’s cash position at the year end and
throughout the forecast period;
Evaluated the Board approved stress test forecast to June 2022
which support the use of the going concern basis of
preparation and challenged the key assumptions made by
management in preparing the stress test forecast;
Assessed the accuracy of managements past forecasting by
comparing prior year forecast figures to the current year actual
results;
Compared post year-end management accounts against the
base line and stress test forecast prepared by management to
assess the accuracy of the forecast prepared;
Performed sensitivity analysis of their stress test forecast and
assessed if this appropriately considers reasonably possible
adverse movements,
Corroborated key assumptions, such as on-going contracted
income, expected timings of payments from customers and
forecast outlay of expenditure, challenging management where
necessary;
Evaluated significant events that occurred post balance sheet
date and challenged management as to whether these have
been correctly reflected in the forecasts prepared, focussing on
the timing of payments from customers post year end; and
Assessing the adequacy of the going concern disclosures
included within the annual report & financial statements.
Relevant disclosures in the Annual Report and Accounts 2020
•
•
Financial statements: Note 1, Going concern
Directors’ report: Going concern
Our results
We have nothing to report in addition to that stated in the
‘Conclusions relating to going concern’ section of our report.
26
Key Audit Matter - Parent
Impairment of investment
We identified the impairment of investments as a significant risk,
which was one of the most significant assessed risks of material
misstatement due to error.
Investments in subsidiaries are carried at cost less necessary
impairments and valued on an individual basis. The investments in
subsidiaries are included within the company only balance sheet of
Ingenta Plc and recorded at £3,296,000.
Management assesses whether there are any losses in the carrying
value of the investments in subsidiaries.
The determination of whether an investment in subsidiary needs to be
impaired includes assumptions about the profitability of the
underlying business and growth, which involves management’s
judgment.
Relevant disclosures in the Annual Report and Accounts 2020
•
Financial statements: Note 4, Investments
How the matter was addressed in the audit - Parent
In responding to the key audit matter, we performed the following audit
procedures:
•
Understood the design of the parent company’s process and
key controls around the carrying value of investments. In
particular, those assessing the selection of key assumptions
within the impairment assessment;
• Obtained management’s assessment of the relevant CGU’s
used in the impairment calculation (covering a five-year period)
and ensured that assessment reflected our understanding of
the business units and operating structure of the group with
consideration of the appropriateness of the forecast revenue,
growth rates and the discount factor used;
•
•
•
•
Challenged management’s assumptions and checking the
arithmetical accuracy of management’s impairment model;
Performed sensitivity analysis to assess the impact of different
assumptions utilised in the impairment models, including the
key assumptions of revenue growth rates and discount rates;
Assessed the accuracy of management’s historic forecasting
through a comparison of prior year impairment reviews to
actual results; and
Read the detailed disclosure to ensure information provided in
the financial statements is compliant with the requirements of
IAS 36 and consistent with the results of the impairment review.
Our results
Based on our audit work, we did not identify any material
misstatement in the impairment review. Management’s impairment
review was carried out in accordance with IAS 36.
Our application of materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified misstatements on the audit and
of uncorrected misstatements, if any, on the financial statements and in forming the opinion in the auditor’s report.
Materiality was determined as follows::
Materiality measure
Materiality for financial
statements as a whole
Group
We define materiality as the magnitude of misstatement in the financial statements that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of the users of these financial
statements. We use materiality in determining the nature, timing and extent of our audit work.
Parent company
Materiality threshold
£155,000 which is 1.5% of group’s revenue
£84,000 which is 1% of the group’s net assets.
Significant judgements
made by auditor in
determining the
materiality
In determining materiality, we made the following
significant judgements:
Revenue is considered to be the most appropriate
benchmark with revenue being a key performance
metric for the Group.
In determining materiality, we made the following
significant judgements:
Net assets is considered to be the most appropriate
benchmark as Ingenta plc is a holding company
with intention of realising its assets through
underlying performance of investments held.
Materiality for the current year is lower than the
level that we determined for the year ended 31
December 2019 due to lower revenues being
recognised in 2020.
Materiality for the current year is lower than the
level that we determined for the year ended 31
December 2019 as a result of the impact of the
component materiality restriction applied in the
current year.
Performance materiality
used to drive the extent
of our testing
We set performance materiality at an amount less than materiality for the financial statements as a whole to
reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole.
Performance materiality
threshold
£116,250 which is 75% of financial statement
materiality.
£63,000 which is 75% of financial statement
materiality.
27
Annual Report
For the year ended 31 December 2020
Materiality measure
Significant judgements
made by auditor in
determining the
performance materiality
Specific materiality
Specific materiality
Communication of
misstatements to the
audit committee
Threshold for
communication
Group
In determining materiality, we made the following
significant judgements
Parent company
In determining materiality, we made the following
significant judgements
• Our prior year experience with auditing the financial
• Our prior year experience with auditing the financial
statements;
statements; and
• Few adjustments being identified in prior years; and
•
• Few adjustments being identified in prior years.
• The number of components within the Group and
the extent of audit procedures planned and
performed in respect of these components.
We determine specific materiality for one or more particular classes of transactions, account balances or
disclosures for which misstatements of lesser amounts than materiality for the financial statements as a whole
could reasonably be expected to influence the economic decisions of users taken on the basis of the financial
statements.
We determined a lower level of specific materiality
for certain areas such as Directors’ remuneration
and related party transactions.
We determined a lower level of specific materiality
for certain areas such as Directors’ remuneration
and related party transactions.
We determine a threshold for reporting unadjusted differences to the audit committee.
£7,750 and misstatements below that threshold that,
in our view, warrant reporting on qualitative
grounds.
£4,200 and misstatements below that threshold
that, in our view, warrant reporting on qualitative
grounds.
The graph below illustrates how performance materiality interacts with our overall materiality and the tolerance for potential uncorrected
misstatements.
Overall materiality – Group
Overall materiality – Parent company
Revenue
£10,177,000
PM
£116,250,
75%
FSM
£155,000,
1.5%
TFPUM
£38,750, 25%
Total Assets
£8,387,441
PM
£63,000,
75%
FSM
£84,000, 1%
TFPUM
£21,000, 25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
28
An overview of the scope of our audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in particular matters related to:
Understanding the group, its components, and their environments, including group-wide controls
• We obtained an understanding of the group and its environment. The group’s accounting process is primarily resourced through a central function
within the UK, with local finance functions in the United States of America. Each local finance function reports into the central Group finance
function based at the Group’s head office in the UK.
Identifying significant components
• We identified and evaluated the components to assess their significance and to determine the planned audit response based on a measure of
materiality. We determined significance as a percentage of the Group’s total assets, revenues and profit before taxation.
Type of work to be performed on financial information of parent and other components (including how it addressed the key audit matters)
•
A full scope audit of the financial statements of the Ingenta plc (“parent” company) and Ingenta UK Limited;
•
•
Specific scope procedures, most significantly in respect of revenue, for group purposes for Ingenta Inc and PCG Inc for the purpose of forming a
group opinion;
At the Group level we also tested the consolidation process and carried out analytical procedures on the financial information of Vista International
Limited, and Vista North America Holdings Limited to confirm our conclusion that there were no significant risks of material misstatement of the
aggregated financial information of those remaining components;
Performance of our audit
100% of the Group’s revenue, gross assets and profit were included in the scope of our full scope and specific-scope audit procedures based on the
above strategy, which is consistent with the prior year.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report, other than the
financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is
consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
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 the parent company and its environment obtained in the course of the audit, we
have not identified material misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our
opinion:
•
•
•
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches
not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
29
Annual Report
For the year ended 31 December 2020
Responsibilities of directors for the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. Owing to the inherent limitations of an audit, there is an
unavoidable risk that material misstatements in the financial statements may not be detected, even though the audit is properly planned and
performed in accordance with the ISAs (UK).
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
• We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and determined that the most significant
which are directly relevant to the financial statements are those related to the reporting frameworks (IFRS, the Companies Act 2006 and the QCA
Corporate Governance Code) and AIM rules. In addition, we concluded that there are certain significant laws and regulations, such as Employment
Law that may have an effect on the determination of the amounts and disclosures in the financial statements and those laws and regulations
relating to employee matters;
• We understood how Ingenta Plc is complying with those legal and regulatory frameworks by making enquiries of management and the company
secretary. We corroborated our enquiries through our review of board minutes and correspondence received from regulatory bodies; and
• We assessed the susceptibility of the group and parent company’s financial statements to material misstatement, including how fraud might occur,
by making enquires of management and those charged with governance. We utilised internal and external information to corroborate these
enquiries and to perform a fraud risk assessment. We considered the risk of fraud to be highest through the potential for management override of
controls.
Our audit procedures involved:
•
•
•
•
•
evaluation of the design effectiveness of controls that management has in place to prevent and detect fraud;
journal entry testing, with a focus on material manual journals, those posted directly to cash and subledger control accounts, and those impacting
areas of estimation uncertainty;
challenging assumptions and judgements made by management in its significant accounting estimates;
assessing the extent of compliance with the relevant laws and regulations as part of our procedures on the related financial statement item.
In addition, we completed audit procedures to conclude on the compliance of disclosures in the annual report and accounts with applicable
financial reporting requirements
In assessing the potential risks of material misstatement, we obtained an understanding of:
•
the entity’s operations, including the nature of its objectives and strategies to understand the classes of transactions, account balances, expected
financial statement disclosures and business risks that may result in risks of material misstatement;
•
the applicable statutory provisions.
We assessed the appropriateness of the collective competence and capabilities of the engagement team, including consideration of the
engagement team’s:
•
understanding of, and practical experience with audit engagements of a similar nature and complexity through appropriate training and
participation;
knowledge of the industry in which the client operates;
understanding of the legal and regulatory requirements specific to the entity including:
-
-
the provisions of the applicable legislation;
the applicable statutory provisions.
•
•
30
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and
the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Mark Bishop FCA
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Oxford
28 May 2021
31
Annual Report
For the year ended 31 December 2020
Group statement of comprehensive income
note
2
5
7
8
9
9
Year ended
31 Dec 20
£’000
10,177
(5,741)
Year ended
31 Dec 19
£’000
10,920
(6,184)
4,436
4,736
(671)
(3,479)
-
286
(22)
264
7
271
41
(819)
(3,502)
(1,663)
(1,248)
(18)
(1,266)
(83)
(1,349)
(4)
312
(1,353)
1.61
1.55
(7.98)
(7.98)
Group revenue
Cost of sales
Gross profit
Sales and marketing expenses
Administrative expenses
Impairment of intangibles and investments
Profit / (Loss) from operations
Finance costs
Profit / (Loss) before income tax
Income tax
Profit / (Loss) for the year attributable to equity holders of the parent
Other comprehensive expenses which will be reclassified subsequently to profit or
loss:
Exchange differences on translation of foreign operations
Total comprehensive profit / (loss) for the year attributable to equity holders of the
parent
Basic Gain / (Loss) per share (pence)
Diluted Gain / (Loss) per share (pence)
All activities are classified as continuing.
The accompanying notes form part of these financial statements.
32
Group statement of financial position
31 Dec 20
£’000
31 Dec 19
£’000
1 Jan 19
£’000
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Investments classified as held for sale
Research and Development tax credit receivable
Cash and cash equivalents
Total assets
Equity
Share capital
Share Premium
Merger reserve
Reverse acquisition reserve
Share option reserve
Translation reserve
Retained earnings
Total equity
Non-current liabilities
Deferred tax liability
Leases
Current liabilities
Trade and other payables
Deferred income
Total liabilities
Total equity and liabilities
note
10
11
12
13
3,14
8
15
21
19
20
16
2,661
58
1,119
3,838
2,226
-
-
2,323
4,549
8,387
1,692
-
11,055
(5,228)
61
(839)
(3,175)
3,566
12
430
442
2,061
2,318
4,379
4,821
8,387
2,661
158
473
3,292
3,219
-
-
2,600
5,819
9,111
1,692
-
11,055
(5,228)
23
(880)
(3,131)
3,531
32
206
238
2,459
2,883
5,342
5,580
9,111
The financial statements were approved by the Board of Directors and authorised for issue on 28 May 2021 and were signed on its behalf by:
J R Sheffield
Director
G S Winner
Director
Registered number: 00837205
The accompanying notes form part of these financial statements.
4,324
258
583
5,165
4,627
-
336
1,323
6,286
11,451
1,692
-
11,055
(5,228)
16
(876)
(1,477)
5,182
52
355
407
2,757
3,105
5,862
6,269
11,451
33
Annual Report
For the year ended 31 December 2020
Group statement of changes in equity
For the year ended 31 December 2020
Share
capital
£’000
Merger
reserve
£’000
Reverse
acquisition
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Share
option
reserve
£’000
Total
attributable
to owners
of parent
£’000
Balance at 1 January 2020
1,692
11,055
(5,228)
(880)
(3,131)
23
Dividends paid
Shares bought back into treasury
Share options granted in the year
Transactions with owners
Profit for the year
Foreign exchange differences on translation
foreign operations
Total comprehensive income for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
41
41
(252)
(63)
-
(315)
271
-
271
-
-
38
38
-
-
-
3,531
(252)
(63)
38
(277)
271
41
312
Balance at 31 December 2020
1,692
11,055
(5,228)
(839)
(3,175)
61
3,566
For the year ended 31 December 2019
Share
capital
£’000
Merger
reserve
£’000
Reverse
acquisition
reserve
£’000
Translation
reserve
£’000
Retained
earnings
£’000
Share
option
reserve
£’000
Total
attributable
to owners
of parent
£’000
Balance at 1 January 2019
1,692
11,055
(5,228)
(876)
(1,477)
16
Dividends paid
Shares bought back into treasury
Share options lapsed in the year
Transactions with owners
Loss for the year
Foreign exchange differences on translation
foreign operations
Total comprehensive expense for the year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4)
(4)
(254)
(51)
-
(305)
(1,349)
-
(1,349)
-
-
7
7
-
-
-
5,182
(254)
(51)
7
(298)
(1,349)
(4)
(1,353)
Balance at 31 December 2019
1,692
11,055
(5,228)
(880)
(3,131)
23
3,531
34
Group statement of cash flows
Profit / (Loss) before taxation
Adjustments for
Impairment of intangibles
Depreciation
Loss / (profit) on disposal of fixed assets
Interest expense
Unrealised foreign exchange differences
Decrease in trade and other receivables
Decrease in trade and other payables and deferred income
Cash inflow from operations
Research and Development tax credit received
Tax paid
Net cash inflow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Payment of lease liabilities
Dividend paid
Costs of buy back of shares into treasury
Net cash used in financing activities
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange difference on cash and cash equivalents
Cash and cash equivalents at the end of the year
The accompanying notes form part of these financial statements.
15
15, 23
note
Year ended
31 Dec 20
£’000
264
Year ended
31 Dec 19
£’000
(1,266)
-
439
(2)
22
41
993
(953)
804
-
(13)
791
(200)
(200)
(5)
(550)
(252)
(63)
(870)
(279)
2,600
2
2,323
1,663
372
2
18
(4)
1,408
(499)
1,694
282
(49)
1,927
(132)
(132)
(4)
(213)
(254)
(51)
(522)
1,273
1,323
4
2,600
35
Annual Report
For the year ended 31 December 2020
Notes to the Group financial statements
For the year ended 31 December 2020
General information and nature of operations
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 00837205 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 28 May 2021.
1.
Principal accounting policies
New Standards adopted as at 1 January 2020
There are no other IFRSs or IFRIC interpretations that are not yet effective that
would be expected to have a material impact on the Group.
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.
Having reviewed the latest forecast to the end of June 2022, 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 forecast. As part of the review, management stress tested the forecast model
for a variety of potential scenarios including another surge in Covid and
impacts it may have on new sales activity and customer payment cycles.
Management believes these risks can be managed and do not impact on the
going concern assessment.
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 2020 the Group had net current assets of £0.2m (2019:
£0.5m), of which £2.3m (2019: £2.9m) relates to deferred income which will be
recognised in the year ending 31 December 2021.
The Group has positive cash balances of £2.3m as at 31 December 2020 (2019:
£2.6m). The Group held linked accounts with HSBC Bank plc 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 Edify 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.
The COVID-19 outbreak continues to add some uncertainty to financial
forecasting and modelling. However, at an operating profit level, the Group’s
results for the first quarter of 2021 have been in line with budget. New sales
activity remains subdued with the timing of any uplift difficult to predict. The
Group continues to embrace established remote working practices without any
significant impact to services. Any ongoing implementations and professional
services can also be delivered remotely by Ingenta personnel. The internal
business infrastructure is contracted with large multinational corporations and
remains resilient. The Group have modelled various downside scenarios and
consider it appropriate to use the going concern basis to compile these
financial statements.
36
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.
Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Accounting Standards (“IASs”) in conformity with the requirements
of the Companies Act 2006, the International Financial Reporting
Interpretations Committee (“IFRIC”), interpretations issued by the International
Accounting Standards Boards (“IASB”) that are effective or issued and adopted
as at the time of preparing these financial statements, and in accordance with
the provisions of the Companies Act 2006 that are relevant to companies that
report under IFRSs.
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. The area where significant management judgement is applied is in
estimating project percentage complete assessments for any fixed price
elements of work.
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
uncertainties 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 Group
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.
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 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 10 for details of the review.
Basis of consolidation
The Group financial statements consolidate those of the parent Company and
all of its subsidiaries as of 31 December 2020. 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.
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 Group Statement of
Comprehensive Income.
Intangible assets
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.
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.
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.
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 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.
The financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases.
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.
Share options
The Group operates an unapproved Executive Management Incentive (EMI)
Share Option plan. £38K (2019: £7K) has been recognised during the year as an
increase of the fair value of the options. 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
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
included within depreciation, amortisation and impairment of non-financial
assets.
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
Classification and initial measurement of financial assets
Except for those trade receivables that do not contain a significant financing
37
Annual Report
For the year ended 31 December 2020
component and are measured at the transaction price in accordance with IFRS
15, all financial assets are initially measured at fair value adjusted for transaction
costs (where applicable).
Financial assets, other than those designated and effective as hedging
instruments, are classified as at amortised cost. In the periods presented the
corporation does not have any financial assets categorised as FVOCI.
The classification is determined by both:
•
•
the entity’s business model for managing the financial asset
the contractual cash flow characteristics of the financial asset.
All income and expenses relating to financial assets that are recognised in profit
or loss are presented within finance costs, finance income or other financial
items, except for impairment of trade receivables which is presented within
other expenses.
Subsequent measurement of financial assets
Financial assets are measured at amortised cost if the assets meet the following
conditions (and are not designated as FVTPL):
•
they are held within a business model whose objective is to hold the
financial assets and collect its contractual cash flows
the contractual terms of the financial assets give rise to cash flows that
are solely payments of principal and interest on the principal amount
outstanding
•
After initial recognition, these are measured at amortised cost using the
effective interest method. Discounting is omitted where the effect of
discounting is immaterial. The Group’s cash and cash equivalents, trade and
most other receivables fall into this category of financial instruments as well as
listed bonds that were previously classified as held-to-maturity under IAS 39.
Trade receivables
Trade receivables are recognised initially at transaction price in accordance with
IFRS 15 and subsequently reviewed for expected credit losses in line with IFRS 9.
In measuring the expected credit losses, the trade receivables have been
assessed on an individual basis. Where trade receivables were found to be
individually impaired an allowance for credit losses has been recorded within
“sales and marketing” in the Group Statement of Comprehensive Income. This
allowance has been determined by reference to expected receipts after
considering historical experience, readily available external indicators and
forward-looking information. Trade receivables are written off (i.e.
derecognised) when there is no reasonable expectation of recovery. Failure to
make payments within 6 months from the invoice date, failure to engage with
the Group on alternative future payment arrangements and bankruptcy or
administration of the customer are indicators of a potential expected credit loss.
The Group has a stable customer base with strong relationships built up over
time allowing it to make reasonable assessments of recoverability. Most trade
receivables relate to customers ongoing ability to function and past experience
indicates the balances are recoverable subject to any future information that
becomes available. Where an expected credit loss is recognised it will be
significantly influenced by additional forward-looking information such as
industry discussion papers, repayment plan reasonableness and direct account
management negotiation. When a trade receivable is uncollectible, it is written
off against the credit loss provision. Subsequent recoveries of amounts
previously provided for are credited against ‘Sales and marketing expenses’ in
the Group 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 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
38
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 Group 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.
Cash and cash equivalents
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 Bank plc) 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.
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.
To determine whether to recognise revenue, the Group follows a 5-step
process:
1 Identifying the contract with a customer
2 Identifying the performance obligations
3 Determining the transaction price
4 Allocating the transaction price to the performance obligations
5 Recognising revenue when/as performance obligation(s) are satisfied.
The Group often enters into transactions involving a range of the Group’s
products and services, for example for the delivery of licences, consulting
services, hosting services, managed services and support and upgrade services.
These services and performance obligations are separately identifiable and
contracted for allowing a reasonable allocation of price to each component.
Revenue is recognised either at a point in time or over time, when (or as) the
Group satisfies performance obligations by transferring the promised goods or
services to its customers.
The Group recognises contract liabilities for consideration received in respect of
unsatisfied performance obligations and reports these amounts as other
liabilities in the statement of financial position. Similarly, if the Group satisfies a
performance obligation before it receives the consideration, the Group
recognises either a contract asset or a receivable in its statement of financial
position, depending on whether something other than the passage of time is
required before the consideration is due.
Where certain products are sold as multi element arrangements, the Group
evaluates the separability of the goods or services based on whether they are
distinct. A good or service is distinct if both:
•
•
the customer benefits from the item either on its own or together with
other readily available resources, and
it is ‘separately identifiable’ (i.e. the Group does not provide a significant
service integrating, modifying or customising it).
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.
Hosting revenue is recognised over time with reference to the contracted
period. The performance obligation of hosting customers content on servers
does not materially change over time and is recognised evenly over the
contract period.
Pay per view revenue is recognised at a point in time when the documents are
delivered to a customer. The performance obligation is to deliver content to an
end user and facilitate a transfer of money for the purchase.
Consulting Services:
Consulting services includes revenues from the processing of e-journal content
and ongoing services.
The consulting fees are based on a per article charge and are recognised at a
point in time when the article is processed. The performance obligation is to
convert a specified piece of content into a format suitable for ingestion onto
the Ingenta Connect platform.
Recognition of Ingenta Commercial products, Ingenta Edify (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:
Licences can be sold as perpetual or under a software as a service (SaaS)
agreement.
Perpetual software licence revenues are recognised at a point in time 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 perpetual software licences require consulting services to make the
licences usable, the licence revenue is linked to the consulting services and is
recognised over the period of the associated consulting services on a
percentage complete basis. The software is deployed immediately onto the
customer network and consulting services are used to perform integration work
which enhances the software’s functionality. The customer has benefit from the
software over the implementation and gains increased benefit as the
functionality extends. The percentage complete assessment is made 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.
For SaaS licence arrangements, licences are deemed to be a right to access and
revenue is recognised over time and taken in equal instalments over the period
of the contract from the point the software is functional.
Consulting Services:
Revenue recognition from long term contracts within consulting services
depends on the contractual terms.
Fixed price consulting contracts are recognised over time 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. The performance
obligation is to provide man time to deliver a specified level of functionality
within the software. The customer has access to the software throughout the
consulting phase and gets benefit from the consulting work as functionality is
expanded over time.
Other consulting services contracts are on a time and materials basis and
revenue is recognised over time as work is performed. The amount of revenue
is calculated by the number of days worked at the contracted day rate. As
under a fixed price contract, the customer has access to the software during the
implementation phase and gets benefit from the consulting services as
functionality is expanded over time.
Consulting services for a software implementation normally last for less than 12
months and payment terms are always in instalments during the period. As
such, the Group does not adjust the receivable amounts for the effects of
financing.
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 evenly over the period to which the service relates. In all cases, the
performance obligation is to provide a service evenly over a contracted period
of time.
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 over time as the
performance obligation is to provide a dedicated sales representative over a
contracted period.
Some revenues are earned on a commission basis associated with selling
publishers’ content. This revenue is recognised at a point in time 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 at a point in time 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.
39
Annual Report
For the year ended 31 December 2020
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.
Leased assets
The Group as a lessee
For any contracts entered into the Group considers whether a contract is or
contains a lease. A lease is defined as ‘a contract, or part of a contract, that
conveys the right to use an asset (the underlying asset) for a period of time in
exchange for consideration’. To apply this definition the Group assesses
whether the contract meets three key evaluations which are whether:
•
•
the contract contains an identified asset, which is either explicitly
identified in the contract or implicitly specified by being identified at the
time the asset is made available to the Group
the Group has the right to obtain substantially all of the economic
benefits from use of the identified asset throughout the period of use,
considering its rights within the defined scope of the contract
the Group has the right to direct the use of the identified asset throughout the
period of use. The Group assess whether it has the right to direct ‘how and for
what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a
lease liability on the balance sheet. The right-of-use asset is measured at cost,
which is made up of the initial measurement of the lease liability, any initial
direct costs incurred by the Group, and any lease payments made in advance of
the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the
lease commencement date to the earlier of the end of the useful life of the
right-of-use asset or the end of the lease term. The Group also assesses the
right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the
present value of the lease payments unpaid at that date, discounted using the
interest rate implicit in the lease if that rate is readily available or the Group’s
incremental borrowing rate.
40
Lease payments included in the measurement of the lease liability are made up
of fixed payments (including in substance fixed), variable payments based on an
index or rate, amounts expected to be payable under a residual value
guarantee and payments arising from options reasonably certain to be
exercised.
Subsequent to initial measurement, the liability will be reduced for payments
made and increased for interest. It is remeasured to reflect any reassessment or
modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is
reflected in the right-of-use asset, or profit and loss if the right-of-use asset is
already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value
assets using the practical expedients. Instead of recognising a right-of-use asset
and lease liability, the payments in relation to these are recognised as an
expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included
in property, plant and equipment and lease liabilities have been included in
trade and other payables.
Operating expenses
Operating expenses are recognised within profit or loss within the Group
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 Group Statement of Comprehensive Income. Interest
payable is recognised in the Group Statement of Comprehensive Income as it
accrues, using the effective interest method.
Income taxes
The tax expense recognised within profit or loss within the Group 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.
Deferred income taxes are calculated using the liability method on 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.
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.
Foreign currency transactions are translated into the functional currency of the
respective Group entity, using 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.
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.
41
Annual Report
For the year ended 31 December 2020
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
An analysis of the Group’s revenue by business division is as follows:
Commercial product division
Content products division
PCG
Advertising
A geographical analysis of the Group’s revenue is as follows:
UK
USA
Rest of the World
Year ended
31 Dec 20
£’000
240
1,367
3,702
2,317
2,170
381
10,177
Year ended
31 Dec 20
£’000
6,636
2,337
382
822
10,177
Year ended
31 Dec 20
£’000
5,258
3,705
1,214
10,177
Year ended
31 Dec 19
£’000
244
1,565
3,234
2,269
2,234
1,374
10,920
Year ended
31 Dec 19
£’000
6,247
2,442
1,374
857
10,920
Year ended
31 Dec 19
£’000
4,475
5,206
1,239
10,920
Revenue is allocated to geographical locations based on the location of the customer. All business divisions are active in each of the geographic
areas.
Joint Venture / Investment
3.
The Group holds a 49% voting and equity interest in Beijing Ingenta Digital Publishing Technology Limited (BIDPT) which was purchased during the
year to 31 December 2012.
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. Dividends are subject to the approval of at least 51% of all shareholders of BIDPT. The Group has received no dividends.
In the 2017 financial statements, the Group outlined it has been actively engaged in discussions to sell or dispose of its shareholding in the Chinese
Joint Venture and had reclassified it as an asset held for sale. The Board does not believe a deal is imminent and in 2018 reclassified the Group’s
holding in the Joint Venture as an investment. Given the inherent uncertainty around valuing a Chinese non-listed, minority shareholding combined
with flat earnings and an increasingly uncertain mechanism to repatriate funds, the Group fully impaired the investment. The Group’s strategy going
forward is to concentrate on its core product set and given the lack of control it exerts over the Joint Venture, it does not consolidate results into the
Group.
42
4. 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; PCG and Ingenta Advertising. This split of business
segments is based on the products and services each offer. The segmental analysis is under review given the business is changing its operating
model away from a product siloed structure and is beginning to blend its offerings together making them less discrete.
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. 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 10. All revenues are derived from trade with external parties.
Property, plant and equipment held in the UK totals £942K (2019: £177K) and the USA £55K (2019: £53K).
Two customers each contributed more than 10% of revenue (2019: two) and this amounted to £3,364K (2019: £2,935K). 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 2020
External sales
Segment result (adjusted EBITDA, see note 5)
Depreciation
Unallocated corporate expense
Restructuring
Foreign exchange loss
Impairment of intangibles & investments
Operating loss
Finance costs
Loss before tax
Tax
Loss after tax
Other information
Statement of Financial Position
Assets
Attributable Goodwill and intangibles
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
Commercial products
£’000
6,636
Content products
£’000
2,337
847
(296)
322
(104)
PCG
£’000
381
-156
(2)
Advertising
£’000
823
Consolidated
£’000
10,177
197
(37)
1,210
(439)
2
(447)
(40)
-
286
(22)
264
7
271
Commercial products
£’000
Content products
£’000
PCG
£’000
Advertising
£’000
Consolidated
£’000
-
669
2,687
2,661
307
1,232
-
4
70
58
139
560
2,827
1,296
109
589
2,719
1,119
4,549
-
8,387
4,821
-
4,821
8,387
43
Annual Report
For the year ended 31 December 2020
Year to 31 December 2019
External sales
Segment result (adjusted EBITDA, see note 5)
Depreciation
Unallocated corporate expense
Restructuring
Foreign exchange loss
Impairment of intangibles
Operating loss
Finance costs
Loss before tax
Tax
Loss after tax
Other information
Statement of Financial Position
Assets
Attributable Goodwill and intangibles
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
Commercial products
£’000
Content products
£’000
6,247
1,041
(241)
2,442
266
(94)
PCG
£’000
1,374
35
(4)
Advertising
£’000
Consolidated
£’000
857
(3)
(33)
10,920
1,339
(372)
(2)
(513)
(37)
(1,663)
(1,248)
(18)
(1,266)
(83)
(1,349)
Commercial products
£’000
Content products
£’000
PCG
£’000
Advertising
£’000
Consolidated
£’000
-
280
3,160
2,661
128
1,448
-
6
552
158
58
658
3,046
1,396
502
635
2,819
472
5,818
2
9,111
5,579
1
5,580
9,111
Refer to note 10 and 11 for the estimates used in valuation of cash generating units.
In 2019 & 2020 there were no bank overdrafts. Social security and other taxation liabilities have been allocated to the relevant segments of the
business.
44
5. Profit from operations
Profit from operations has been arrived at after charging:
Research and development costs
Net foreign exchange loss
Depreciation of property, plant and equipment:
- owned assets
- leasehold property
- assets under leases
Amortisation
Auditor’s remuneration
Exceptional non-recurring costs
A more detailed analysis of auditor’s remuneration on a worldwide basis is provided below
Fees payable to the Group’s auditor for:
Fees payable to the company’s auditor for the audit of the company’s annual accounts
Fees payable to the company’s auditor and its associates for other services:
Audit of the accounts of subsidiaries
Other assurance services
Tax advisory services
Tax compliance services
Year ended
31 Dec 20
£’000
1,409
40
110
122
107
100
83
447
Year ended
31 Dec 19
£’000
1,398
37
92
122
58
100
150
513
Year ended
31 Dec 20
£’000
Year ended
31 Dec 19
£’000
20
51
-
-
12
83
20
45
-
-
85
150
A description of the work of the Audit Committee is set out in the corporate governance statement on pages 18 to 20 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 / (loss) from operations to adjusted EBITDA is provided below.
Year ended
31 Dec 20
£’000
286
Year ended
31 Dec 19
£’000
(1,248)
Profit / (Loss) from operations
Add back:
Depreciation and amortisation
Impairment of intangibles & investments
(Gain) / Loss on disposal of fixed assets
Exceptional non-recurring costs
Foreign exchange losses
EBITDA before impairment, amortisation, gain / loss on disposal of fixed assets, foreign exchange gain
/ loss and exceptional non-recurring costs
439
-
(2)
447
40
1,210
Exceptional non-recurring costs include restructuring costs, premises exit costs, non-recurring professional fees and debt write offs.
372
1,663
2
513
37
1,339
45
Annual Report
For the year ended 31 December 2020
6.
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
Remuneration in respect of Directors was as follows:
Non-Executive
Executive Directors’ emoluments
Company pension contributions to money purchase schemes
Remuneration of the highest paid Director (aggregate emoluments):
Salaries
Other Benefits
Contribution to defined contribution plans
Year ended
31 Dec 20
Average number
Year ended
31 Dec 19
Average number
59
15
7
81
67
19
7
93
Year ended
31 Dec 20
£’000
Year ended
31 Dec 19
£’000
4,987
539
254
146
39
11
5,976
204
332
40
576
200
12
4
216
5,208
549
236
173
7
14
6,187
204
339
19
562
200
11
4
215
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 £12K were paid in respect of the highest paid Director (2019: £4K).
There were two (2019: 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 £254K (2019: £236K) represents contributions payable to these schemes by the Group at rates specified in the
rules of the plans. As at 31 December 2020, contributions of £28K (2019: £27K) due in respect of the current reporting period were included in the
Group Statement of Financial Position for payment in January 2021.
The Group operates an Unapproved EMI Share Option plan. An increase of £38K (2019: £7K) has been recognised in the income statement during
the year. Further details on share options are included in note 22.
46
7.
Finance costs
Interest payable:
Interest on Right of Use lease
Interest on leases
Interest on other loans
8. Tax
Analysis of (charge) / credit in the year
Current tax:
Current year State tax – US
Adjustment to prior year charge – UK
Deferred tax credit
Taxation
Year ended
31 Dec 20
£’000
Year ended
31 Dec 19
£’000
10
7
5
22
14
3
1
18
Year ended
31 Dec 20
£’000
Year ended
31 Dec 19
£’000
(10)
(3)
20
7
(49)
(54)
20
(83)
The Group has unutilised tax losses at 31 December 2020 in the UK and the USA of £15.6m (2019: £15.6m) and $14.2m (2019: $15.4m) 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 $7.7m (2018: $8.7m) of the
total unutilised losses at 31 December 2020.
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.
47
Annual Report
For the year ended 31 December 2020
The differences are explained below:
Reconciliation of tax charge / (credit)
Profit / (loss) on ordinary activities before tax
Tax at the UK corporation tax rate of 19% (2019: 19%)
Expenses not deductible for tax purposes
Unrelieved UK losses carried forward
Utilisation of UK losses
Utilisation of US losses
Difference in timing of allowances
Adjustment to tax charge in respect of prior years
Total taxation
Year ended
31 Dec 20
£’000
264
50
14
245
(102)
(77)
(129)
(8)
(7)
Year ended
31 Dec 19
£’000
(1,266)
(241)
297
149
(110)
(103)
(13)
104
83
United Kingdom Corporation tax is calculated at 19% (2019: 19%) of the estimated assessable profit for the year.
Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.
9. 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 681,000 ordinary shares will be issued (2019: 685,000) in respect of share options.
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
On 28th November 2020 the Company paid a dividend of 1.5 pence per share to holders of ordinary shares.
The Directors declared their intention to pay a dividend in 2021 of 1.5 pence per share (2020: 1.5 pence).
Year ended
31 Dec 20
£’000
271
Year ended
31 Dec 19
£’000
(1,349)
16,834
681
17,515
1.61 p
1.55 p
16,908
685
17,593
(7.98)p
(7.98)p
48
10. Goodwill
Gross carrying amount
Balance at 1 January
Impairment
Total goodwill
Year ended
31 Dec 20
£’000
Year ended
31 Dec 19
£’000
2,661
-
2,661
4,324
(1,663)
2,661
Goodwill has been recognised on historic acquisitions and is reviewed at the end of each financial period for impairment.
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 20
£’000
2,661
-
-
Year ended
31 Dec 19
£’000
2,661
-
-
2,661
2,661
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 needs to be recognised against the goodwill.
The recoverable amounts of the cash generating units were determined based on value in use calculations for the next five years which
management believe they have reasonable knowledge in predicting and will benefit from the resulting cash generation. The 5 year forecast horizon
is reasonable based on past experience, contracted terms and the long lead times required for transition off software platforms. Where applicable,
management have assumed a forecast growth rate of 1-2% (2019: 1-2%).
Details are shown below.
Content sales revenue growth
Express product hosting revenue growth
Hosting revenue growth
Time-based service revenue growth
Cost base growth
PCG
%
2
-
-
-
2
Content
Division
%
Advertising
Division
%
-
2
2
2
2
-
-
1-2
1-2
2
49
Annual Report
For the year ended 31 December 2020
Carrying amount
Value of intangibles
Total goodwill and intangibles
Recoverable amount
5-year gross profit reduction for fair value to equal carrying amount
Content
Division
£000
Advertising
Division
£000
2,661
-
2,661
5,067
3,200
-
58
58
380
500
Total
£’000
2,661
58
2,719
5,447
3,700
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
(2019: 10%) and that this is applicable to all cash-generating units.
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.
11. Other Intangibles
Cost
At 31 December 2019
At 31 December 2020
Accumulated amortisation and impairment
At 1 January 2019
Amortisation
At 31 December 2019
Amortisation
At 31 December 2020
Carrying amount
At 31 December 2018
At 31 December 2019
At 31 December 2020
Acquired Software
Technology
£’000
500
500
242
100
342
100
442
258
158
58
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.
50
12. Property, plant and equipment
Office
building
£’000
Leasehold
improvements
£’000
Fixtures
and fittings
£’000
Computer
equipment
£’000
Cost
At 1 January 2019
Additions
Disposals
Transfers in
Exchange differences
At 31 December 2019
Additions
Disposals
Transfers in
Exchange differences
At 31 December 2020
Accumulated depreciation and impairment
At 1 January 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2019
Charge for the year
Disposals
Exchange differences
At 31 December 2020
Carrying amount
At 31 December 2020
At 31 December 2019
At 1 January 2019
853
-
-
-
-
853
-
-
-
-
853
488
122
-
-
610
121
-
-
731
122
243
365
24
-
(6)
-
-
18
-
-
-
-
18
23
1
(6)
-
18
-
-
-
18
0
0
1
327
-
(238)
-
(2)
87
-
-
-
-
87
322
1
(238)
(1)
84
1
-
-
85
2
3
5
Total
£’000
3,699
165
(1,107)
-
(11)
2,746
986
-
-
(8)
2,495
165
(863)
-
(9)
1,788
986
-
-
(8)
2,766
3,724
2,283
148
(863)
(7)
1,561
216
-
(6)
1,771
995
227
212
3,116
272
(1,107)
(8)
2,273
338
-
(6)
2,605
1,119
473
583
The Office Building category consists of a single right-of-use asset.
Right of Use Assets held under leases with a net book value of £753K (2019: £107K) are included under computer equipment in property, plant and
equipment and £107K (2019: £58K) of depreciation was charged on these assets in the year, see note 20 for further details.
51
Annual Report
For the year ended 31 December 2020
13. 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 at amortised cost
Prepayments
Non-financial assets
Trade and other receivables
As at 31 Dec 20
£’000
As at 31 Dec 19
£’000
1,834
(143)
1,691
64
254
2,009
217
217
2,226
2,238
(57)
2,181
68
643
2,892
327
327
3,219
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 £1.8m (2019: £2.2m, 2018: £3.3m).
The average credit period taken on sales of goods is 53 days (2019: 56 days, 2018: 58 days).
In measuring the expected credit losses, the trade receivables have been assessed on an individual basis. Certain trade receivables were found to be
individually impaired and an allowance for credit losses of £90K (2019: £57K, 2018: £40K) has been recorded within “sales and marketing” in the
Group Statement of Comprehensive Income. This allowance has been determined by reference to expected receipts after considering historical
experience, readily available external indicators and forward-looking information. Trade receivables are written off (i.e. derecognised) when there is
no reasonable expectation of recovery. Failure to make payments within 6 months from the invoice date, failure to engage with the Group on
alternative future payment arrangements and bankruptcy or administration of the customer are considered to be indicators of a potential expected
credit loss. The Group has a stable customer base with strong relationships built up over time allowing it to make reasonable assessments of
recoverability. The majority of trade receivables relate to customers ongoing ability to function and past experience indicates the balances are
recoverable subject to any future information that becomes available. Where an expected credit loss is recognised it will be significantly influenced
by additional forward looking information such as industry discussion papers, repayment plan reasonableness and direct account management
negotiation.
On the above basis the expected credit loss for trade receivables is as follows:
Balance as at 1 January
Amounts collected
Additional allowance in year
Balance as at 31 December
14. Investments classified as held for sale
49% investment held in BIDPT
Impairment
Balance as at 31 December
As at 31 Dec 20
£’000
As at 31 Dec 19
£’000
57
(5)
91
143
40
(38)
55
57
As at 31 Dec 20
£’000
As at 31 Dec 19
£’000
320
(320)
-
320
(320)
-
In the 2017 financial statements, the Group outlined it has been actively engaged in discussions to sell or dispose of its shareholding in the Chinese
Joint Venture and had reclassified it as an asset held for sale. The Board does not believe a deal is imminent and in 2018 reclassified the Group’s
holding in the Joint Venture as an investment. Given the inherent uncertainty around valuing a Chinese non-listed, minority shareholding combined
with flat earnings and an increasingly uncertain mechanism to repatriate funds, the Group fully impaired the investment. The Group’s strategy going
forward is to concentrate on its core product set and given the lack of control it exerts over the Joint Venture, it does not consolidate results into the
Group.
52
15. Cash and cash equivalents
Cash at bank and in hand:
Cash at bank:
- GBP
- USD
- EUR
Bank Overdraft – GBP
Net cash and cash equivalents
As at 31 Dec 20
£’000
As at 31 Dec 19
£’000
1,793
485
45
2,323
-
2,323
941
1,424
235
2,600
-
2,600
Net cash and cash equivalents’ is used for the Group Statement of Cash Flows. The net carrying value of cash and cash equivalents is considered a
reasonable approximation of fair value.
At 31 December 2020, HSBC held security in the form of a Debenture including a Fixed Charge over all present freehold and leasehold property;
First Fixed Charge over book and other debts, chattels, goodwill and uncalled capital, both present and future; and First Floating Charge over all
assets and undertaking both present and future dated 28 July 2011 and Composite Company Unlimited Multilateral Guarantee dated 28 July 2011
given by Ingenta PLC, Ingenta UK Limited, Catchword Ltd. The security was released in February 2021.
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 29 days (2019: 34 days, 2018: 34 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
Lease obligations
Other payables
Financial liabilities at amortised cost
Social security and other taxes
Non-financial liabilities
Trade and other payables
Included within accruals is an amount of £Nil related to restructuring (2019: £59K).
As at 31 Dec 20
£’000
457
589
441
313
1,800
261
261
As at 31 Dec 19
£’000
448
468
203
948
2,067
392
392
2,061
2,459
53
Annual Report
For the year ended 31 December 2020
17. Borrowings
As at 31 December 2020, there was an overdraft facility of £250K (2019: £250K & 2018: £250K). During the year, the average effective interest rate on
bank overdrafts approximates to 2.5% over base rate (2019: 2.5%, 2018: 2.5%) per annum. All borrowings are measured at amortised cost.
18. Reconciliation of liabilities arising from financing activities
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
Balance as at 1 January 2019
Cash-flows:
– Repayment
Non-cash:
– New leases
– Interest
Balance as at 31 December 2019
Cash-flows:
– Repayment
Non-cash:
– New leases
– Interest
Balance as at 31 December 2020
Lease
Liabilities
£’000
578
(274)
89
16
409
(451)
899
15
872
19. Deferred tax
A deferred tax liability of £100K has arisen from the intangible assets recognised during the business combination in 2016. The deferred tax liability
balance unwinds as the intangible asset is amortised. During the year, £20K was credited to the Group Statement of Comprehensive Income. The
closing balance was £12K (2019: £32K).
Subject to agreement with HM Revenue and Customs, the Group has unrealised losses in the UK of £15.6m (2019: £15.6m). The Group also has
unutilised losses in the USA of $14.2m (2019: $15.4m), 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 $7.7m (2019: $8.7m) 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 (2019: £Nil).
54
20. Lease arrangements
The Group as lessee – IT equipment
Elements of the Group’s IT equipment are held under lease arrangements. As at 31 December 2020, the net carrying amount of equipment under
lease arrangements was £753K (2019: £116K). Lease liabilities are secured by the related assets. Future minimum lease payments are as follows:
Year ended 31 December 2020
Lease payments
Finance charges
Net present value
Year ended 31 December 2019
Lease payments
Finance charges
Net present value
< 1 year
£’000
282
(18)
264
1 – 5 years
£’000
461
(31)
430
< 1 year
£’000
1 – 5 years
£’000
85
(8)
77
33
(4)
29
Total
£’000
743
(49)
694
Total
£’000
118
(12)
106
The lease agreements include fixed payments and a purchase option at the end of the lease. The agreement is non-cancellable and does not
contain any further restrictions.
The Group as lessee - Buildings
At the reporting date, the Group had outstanding commitments for future minimum lease payments under non-cancellable 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
As at 31 Dec 20
£’000
As at 31 Dec 19
£’000
151
-
151
120
149
269
Leases for Land and Buildings represent contracts on the following offices: Oxford, UK and New Brunswick, NJ, USA.
The office building at 8100 Alec Issigonis Way, Oxford has been classified as a Right of Use asset. The lease runs until January 2022 and has no
further extension options, payments are fixed, there is no option to purchase nor any further termination options.
The group has elected not to recognise a lease liability for short term leases (leases with an expected term of 12 months or less) or for leases of low
value assets. Payments made under such leases are expensed on a straight-line basis. In addition, certain variable lease payments are not permitted
to be recognised as lease liabilities and are expensed as incurred. Short-term leases amount to £78K.
The Group’s lease agreements do not contain any contingent rent clauses. None of the lease agreements contain renewal or purchase options or
escalation clauses or any restrictions regarding dividends, further leasing or additional debt.
55
Annual Report
For the year ended 31 December 2020
21. Share capital
Issued and fully paid:
As at 31 Dec 20
£’000
As at 31 Dec 19
£’000
16,919,609 (2019: 16,919,609, 2018: 16,919,609) ordinary shares of 10p each
1,692
1,692
Share issues
During the year 81,000 shares (2019: 66,104) were purchased for £63,386 by the company and retained as treasury shares. There were no shares
issued during the year (2019: None).
22. Share options
The Group have an unapproved Executive Management Incentive (EMI) share option scheme. Further details 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 a 3 year period and one third of the options will vest in each of the 3
reporting periods if the performance targets are met in that period. 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 2019
Granted
Lapsed
Outstanding at 31 December 2019
Granted
Lapsed
Outstanding at 31 December 2020
Number of shares
Weighted average
exercise price per share
(£’s)
101,333
612,245
(29,000)
684,578
-
(3,333)
681,245
1.33
0.74
1.28
0.80
-
1.27
0.79
At 31 December 2020, the weighted average remaining contractual life of options was 101 months.
The fair value of options granted were determined using the Black Scholes method. The following principle assumptions were used in the valuation:
Grant date
January 2016
February 2016
August 2016
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
Fair value of option – 31 December 2019 vesting period
Fair value of option – 31 December 2020 vesting period
Fair value of option – 31 December 2022 vesting period
31 Dec 16
31 Dec 17
31 Dec 18
31 Dec 16
31 Dec 17
31 Dec 18
£1.27
26%
5%
18p
26p
32p
-
-
-
£1.27
26%
5%
18p
26p
32p
-
-
-
31 Dec 16
31 Dec 17
31 Dec 18
£1.30
16%
5%
9p
17p
23p
-
-
-
September
2019
31 Dec 22
September
2017
31 Dec 18
31 Dec 19
31 Dec 20
£1.56
16%
5%
-
-
16p
24p
31p
-
£0.74
27%
5%
-
-
-
-
-
18p
The underlying volatility was determined with reference to the historical data of the Company’s share price. In total £38K (2019: £7K) of employee
remuneration expense and has been included in the profit for the year and released to retained earnings.
56
23. 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 lease liabilities
are non-cash transactions excluded from the statement of cash flows.
24. Contingent Liabilities
The Group have no contingent liabilities at year end.
25. 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
Year ended
31 Dec 20
£’000
576
Year ended
31 Dec 19
£’000
562
Directors’ transactions
The amounts outstanding as at 31 December 2020 relate to amounts due from Ingenta plc to Directors in connection with invoiced Non-Executive
fees.
Amounts outstanding with Directors
Joint Venture transactions
The Joint Venture loan amounts to £149K (2019: £149K).
As at
31 Dec 20
£’000
15
As at
31 Dec 19
£’000
22
57
Annual Report
For the year ended 31 December 2020
26. 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 $2.0m 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:
31 December 2020
Financial assets
Financial liabilities
Total exposure
31 December 2019
Financial assets
Financial liabilities
Total exposure
Short-term exposure
USD
£’000
Long-term exposure
USD
£’000
687
(191)
496
1,321
(644)
677
-
-
-
-
-
-
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 2019 (2018: 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% (2019: 10%) then this would have had the following impact:
31 December 2020
31 December 2019
Loss for the year
USD
£’000
(15)
(108)
If GBP had weakened against USD by 10% (2019: 10%) then this would have had the following impact:
31 December 2020
31 December 2019
Profit for the year
USD
£’000
18
132
Equity
USD
£’000
(69)
(123)
Equity
USD
£’000
85
151
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.
58
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 2020 the Group is exposed to changes in market interest rates through bank borrowings at variable 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.
31 December 2020
31 December 2019
31 December 2018
Profit for the year
and Equity
£’000
+ 1%
Profit for the year
and Equity
£’000
- 1%
-
-
-
-
-
-
Credit 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 13)
Other receivables (note 13)
Accrued income (note 13)
2020
£’000
2,323
1,691
64
254
4,332
2019
£’000
2,600
2,181
68
643
5,492
The credit risk in respect of cash and cash equivalents is considered negligible as they are held with major reputable financial institutions only.
None of the Group’s financial assets are secured by collateral or other credit enhancements.
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.
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 and the Group’s policy is only to deal with creditworthy customers. The credit terms
range between 30 and 75 days and support and maintenance customers are required to pay the annual amount upfront, mitigating the credit risk.
The ongoing credit risk is managed through regular review of ageing analysis. Some of the unimpaired trade receivables are past due at the
reporting date.
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 (2019 & 2018:
£Nil).
59
Annual Report
For the year ended 31 December 2020
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 2022.
The Group maintains sufficient cash balances and enters into lease arrangements to meet its liquidity requirements for the medium-term forecast
period (1 year).
As at 31 December 2020, the Group’s financial liabilities have contractual maturities (including interest payments where applicable) as summarised
below:
31 December 2020:
Bank borrowings (note 17)
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
-
141
1,359
1,500
-
141
-
141
-
461
-
461
-
-
-
-
This compares to the Group’s financial liabilities in the previous reporting period as follows:
31 December 2019:
Bank borrowings (note 17)
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
-
43
1,864
1,907
-
43
-
43
-
32
-
32
-
-
-
-
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.
The carrying amounts presented in the statement of financial position relate to the following categories of assets and liabilities.
An analysis of the Group’s financial assets is set out below:
Trade and other receivables
Cash and cash equivalents
Total financial assets
As at 31 December 2020
Amortised cost
£’000
2,009
2,323
4,332
FVTPL
£’000
-
-
-
Total
£’000
2,009
2,323
4,332
Amortised cost
£’000
As at 31 December 2019
FVTPL
£’000
2,892
2,600
5,492
-
-
-
An analysis of the Group’s financial liabilities is set out below:
As at 31 December 2020
As at 31 December 2019
Other liabilities
(amortised cost)
£’000
442
Other liabilities
at FVTPL
£’000
-
441
1,800
2,683
-
-
-
Total
£’000
442
441
1,800
2,683
Other liabilities
(amortised cost)
£’000
238
Other liabilities
at FVTPL
£’000
-
203
2,067
2,508
-
-
-
Non-current lease obligations
Current lease obligations
Trade and other payables
Total financial liabilities
Total
£’000
2,892
2,600
5,492
Total
£’000
238
203
2,067
2,508
60
27. 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 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
Capital to overall financing ratio
28. Post balance sheet events
There are no post balance sheet events.
2020
£’000
3,531
-
-
(2,323)
1,208
3,531
-
3,531
0.34
2019
£’000
3,531
-
-
(2,600)
931
3,531
-
3,531
0.26
61
Annual Report
For the year ended 31 December 2020
Company statement of financial position
note
31 Dec 20
£’000
31 Dec 19
£’000
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
Total liabilities
Total equity and liabilities
4
5
7
6
8
3,296
3,258
6,336
3
6,339
9,635
1,692
-
61
6,635
8,388
6,017
3
6,020
9,278
1,692
-
23
6,316
8,031
1,247
1,247
-
1,247
9,635
-
1,247
9,278
The profit recognised in the year was £634K (2019: £540K loss)
The financial statements were approved by the Board of Directors and authorised for issue on 28 May 2021 and were signed on its behalf by:
J R Sheffield
Director
G S Winner
Director
Registered number: 00837205
The accompanying notes form part of these financial statements.
62
Company statement of changes in equity
For the year ended 31 December 2020
Balance at 1 January 2020
Dividends paid
Shares bought into treasury
Share options granted
Transaction with owners
Profit for the year
Total comprehensive income / (expense) for year
Share
capital
£’000
1,692
-
-
-
-
-
Balance at 31 December 2020
1,692
Share option
reserve
£’000
23
-
38
38
-
38
61
Retained
earnings
£’000
6,316
(252)
(63)
-
(315)
634
319
Total
£’000
8,031
(252)
(63)
38
(277)
634
357
6,635
8,388
For the year ended 31 December 2019
Balance at 1 January 2019
Dividends paid
Shares bought into treasury
Share options granted
Transaction with owners
Loss for the year
Total comprehensive income / (expense) for year
Share
capital
£’000
1,692
-
-
-
-
-
Share option
reserve
£’000
16
-
7
7
-
7
Balance at 31 December 2019
1,692
23
Retained
earnings
£’000
7,161
(254)
(51)
-
(305)
(540)
(845)
6,316
Total
£’000
8,869
(254)
(51)
7
(298)
(540)
(838)
8,031
63
Annual Report
For the year ended 31 December 2020
Notes to the Company financial statements
1. Accounting Policies
Statement of compliance
These financial statements have been prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (FRS 101). The
preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates and management are required
to exercise judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed below.
The following exemptions from the requirements of IFRS have been applied in the preparation of these financial statements, in accordance with FRS
101:
•
•
•
•
•
•
•
•
Paragraph 45(b) and 46 to 52 of IFRS 2 ‘Share based payment’ including details of the number and weighted average exercise prices of
share options and how the fair value of goods or services received was determined.
IFRS 7 ‘Financial instruments’ disclosures
Paragraph 91 to 99 of IFRS 13 ‘Fair value measurement’ disclosures relating to valuation techniques and inputs used for fair value
measurement of assets and liabilities.
The following paragraphs of IAS 1 ‘Presentation of financial statements’:
-
-
-
-
-
-
10(d) statement of cashflows
16 statement of compliance with all IFRS
38A requirement for a minimum of two primary statements, including cashflow statements
38B-D additional comparative information
111 Statement of cashflow information
134-136 Capital management disclosures
IAS 7 ‘Statement of cashflows’
Paragraph 30 and 31 of IAS 8 ‘Accounting policies, changes in accounting estimates and errors’ and the requirement for the disclosure of
information when an entity has not applied a new IFRS that has been issued but is not yet effective.
Paragraph 17 of IAS 24 ‘Related party disclosures’ and the requirement to present key management compensation
IAS 24 ‘Related party disclosures’ and the requirement to disclose related party transactions entered into between two or more members
of a group.
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. The Directors have impaired the investments as
appropriate based on the findings of the wider impairment review detailed in note 10 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 statement of financial position 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 pages
12 to 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 statement of financial position
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.
64
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 statement of financial position. 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.
Where 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.
Loss for the financial year
2.
The parent Company has taken advantage of section 408 of the Companies Act 2006 and has not included its own income statement in these
financial statements. The parent Company’s profit for the year was £634K (2019: £540K loss), impairment for intercompany debtors was £Nil (2019:
£394K) and impairment of investments was £Nil (2019: £824K). An audit fee of £20K was paid in respect of the parent Company audit (2019: £20K).
Tax fees for the Group of £(7)K (2019: £85K) have been borne by the subsidiary companies.
The Company employed two Executive Directors (2019: two), four Non-Executive Directors (2019: four) and the Non-Executive Chairman. The costs
of these employees and the fees for the other Non-Executive Directors 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
4.
Investments
Cost
At 1 January
Impairment of China JV investment
Impairment of 5 Fifteen Limited investment
Share options issued / (lapsed) to employees of subsidiaries
At 31 December
Investments are investments in subsidiary and Joint Venture undertakings.
Year ended
31 Dec 20
Average number
Year ended
31 Dec 19
Average number
7
7
Year ended
31 Dec 20
£’000
Year ended
31 Dec 19
£’000
204
7
211
204
7
211
As at
31 Dec 20
£’000
As at
31 Dec 19
£’000
3,258
-
-
38
3,296
4,075
-
(824)
7
3,258
65
Annual Report
For the year ended 31 December 2020
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
Catchword Limited
Ingenta Holdings Limited
Ingenta US Holdings Inc.
Publishers Communication Group Inc
Ingenta UK Limited
Ingenta Inc
Publishing Technology do Brasil LTDA
Country of
registration
Holding
Proportion
held
England
Ordinary shares
Preference shares
England
Ordinary shares
USA
USA
Ordinary shares
Ordinary shares
England
Ordinary shares
USA
Brazil
Ordinary shares
Ordinary shares
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
49%
100%
100%
Nature of the business
Dormant
Dormant
Holding Company
Marketing and Sales Consultancy
Publishing Software and Services
Publishing Software and Services
Publishing Software and Services
Publishing Software and Services
Dormant
Dormant
Dormant
Holding Company
Non-Trading Holding Company
Dormant
Publishing Software and Services
Digital Advertising Solutions
Digital Advertising Solutions
As at
31 Dec 20
£’000
22,003
(15,667)
6,336
As at
31 Dec 19
£’000
21,684
(15,667)
6,017
As at
31 Dec 20
£’000
As at
31 Dec 19
£’000
1,098
149
1,247
1,098
149
1,247
Publishing Technology Australia Pty Ltd
Australia
Ordinary shares
Vista Computer Services Limited
England
Ordinary shares
Vista Computer Services LLC
Vista Holdings Limited
Vista International Limited
Vista North America Holdings Limited
Uncover Inc
USA
England
England
England
USA
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Ordinary shares
Beijing Ingenta Digital Publishing Technology Limited
China
Ordinary shares
5 Fifteen Limited
5 Fifteen Inc.
England
Ordinary shares
USA
Ordinary shares
5. Trade and other receivables
Amounts falling due within one year
Other debtors:
Amounts due from subsidiary undertakings
Provision for intercompany debtors
6. Trade and other payables
Amounts falling due within one year
Other creditors:
Amounts due to subsidiary undertakings
Accruals
66
7.
Share Capital
Issued and fully paid:
As at
31 Dec 20
£’000
As at
31 Dec 19
£’000
16,919,609 (2019: 16,919,609) ordinary shares of 10p each
1,692
1,692
Share issues
During the year 81,000 (2019: 66,104) shares were purchased for £63,386 (2019: £50,501) by the company and retained as treasury shares. There were
no shares issued during the year (2019: None).
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
Bank overdrafts
Year ended
31 Dec 20
Year ended
31 Dec 19
£250K facility in place
£250K facility in place
The Company bank accounts form part of the wider Group facility with HSBC Bank plc. These accounts are linked and any facility limit is based on
the net balance of all Group accounts taken together. There was a Group overdraft facility in place during 2020 of £250K (2019: £250K).
9. Related party transactions
Other related party transactions
Please refer to note 25 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.
Catchword Limited
Ingenta US Holdings Inc.
As at
31 Dec 19
£’000
5,000
1,016
1
(429)
(669)
4,919
Recharges
£’000
(13)
332
-
-
-
319
Impairment
£’000
-
-
-
-
-
-
As at
31 Dec 20
£’000
4,987
1,348
1
(429)
(669)
5,238
67
Annual Report
For the year ended 31 December 2020
10. Financial assets and liabilities
An analysis of the company’s assets is set out below:
Other receivables
Cash and cash equivalents
Other payables
Other creditors
As at 31 December 2020
As at 31 December 2019
Loans and
receivables
£’000
Total for financial
position heading
£’000
Loans and
receivables
£’000
Total for financial
position heading
£’000
6,336
3
6,339
6,336
3
6,339
6,017
3
6,020
6,017
3
6,020
As at 31 December 2020
As at 31 December 2019
Financial liabilities at
amortised cost
£’000
Total for financial
position heading
£’000
Financial liabilities at
amortised cost
£’000
Total for financial
position heading
£’000
1,098
149
1,247
1,098
149
1,247
1,098
149
1,247
1,098
149
1,247
68
69
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