INTERNATIONAL
Annual Report 2023
KRM22 Plc
Company number: 11231735
CONTENTS
Highlights ............................................................................................................................................................ 1
Chairman’s statement ...................................................................................................................................... 2
Chief Executive Officer’s Report...................................................................................................................... 3
Chief Financial Officer’s Report ....................................................................................................................... 5
Our products ..................................................................................................................................................... 10
Principal risks and uncertainties ................................................................................................................... 13
Section 172 statement ................................................................................................................................... 16
Board of Directors ............................................................................................................................................ 20
Corporate Governance statement ................................................................................................................ 22
Audit Committee report .................................................................................................................................. 28
Remuneration Committee report .................................................................................................................. 30
Nomination Committee report ...................................................................................................................... 33
Directors’ report ............................................................................................................................................... 34
Financial Statements ...................................................................................................................................... 39
Independent auditor’s report to the members of KRM22 Plc ................................................................. 40
Consolidated income statement and statement of comprehensive income for the group .............. 48
Consolidated statement of financial position for the group .................................................................... 49
Company statement of financial position ................................................................................................... 50
Consolidated statement of changes in equity for the group ................................................................... 51
Company statement of changes in equity .................................................................................................. 52
Consolidated statement of cash flows for the group ............................................................................... 53
Notes to the consolidated financial statements ........................................................................................ 54
Company information ..................................................................................................................................... 84
1
KRM22 plc
ANNUAL REPORT 2023
HIGHLIGHTS
Financial
• Annualised Recurring Revenue (ARR)1 as at 31 December 2023 of £5.4m (2022: £4.8m as reported, £4.6m at
constant FX rate) – growth of 17.4% at constant FX rate
o New contracted ARR in 2023 of £1.1m (2022: £1.3m)
o Total ARR attributable to the relationship with Trading Technologies International, Inc. (“TT”) of £0.4m
(2022: £0.1m)
• Total revenue recognised of £5.3m (2022: £4.3m) – growth of 23.3%
• Adjusted EBITDA loss2 of £1.4m (2022: loss of £1.7m)
•
• Gross cash as at 31 December 2023 of £0.9m (2022: £1.9m)
• New £5.0m convertible loan provided by TT, of which £4.5m was drawn down in the year, to replace the previous
Loss before tax of £4.9m (2022: loss of £3.3m)
Kestrel £3.0m convertible loan that was due to mature in September 2023
Operational
• 12 new ARR contracts signed in the year including 7 new customers
• First sales of Limits Manager product generated through the TT sales channel
• 42 institutional customers as at 31 December 2023
Post Year-End Events
• Growth in ARR to £6.0m as at the date of this report
• New Limits Manager product contract win worth £0.6m over three years with a major Futures Commission
Merchant (“FCM”), one the of industry’s top 15 largest FCMs
• Group restructure and rationalisation to implement a focused cost savings programme, with annual cost
savings of £1.2m
• Board changes announced on 7 March 2024 with appointment of Dan Carter as CEO and Garry Jones as Non-
Executive Chairman, replacing Stephen Casner and Keith Todd respectively, with Keith Todd remaining on the
Board as Executive Director
1 Annualised Recurring Revenue (ARR) is the value of contracted Software-as-a-Service (SaaS) revenue normalised to a one year
period and excludes one-time fees.
2 Adjusted EBITDA is the reported loss for the year, adjusted for recurring non-monetary costs including depreciation, amortisation,
unrealised foreign exchange (loss)/gain and share-based payment (credit)/charges and non-recurring costs, both monetary and non-
monetary, including impairment of intangible assets, profit on disposal of tangible/intangible assets, deferred consideration write
back, gain on distinguishment of debt and acquisition, funding and debt related costs. A reconciliation of Adjusted EBITDA loss to
the reported operating loss for the year is detailed on page 6.
2
KRM22 plc
ANNUAL REPORT 2023
CHAIRMAN’S STATEMENT
2023 was another year of growth for KRM22, with Annual Recurring Revenue (“ARR”)
continuing to achieve a new high of £5.4m, a 17.4% increase on 2022 at constant FX rates, as
the business added more customers and further developed its broad product offering. Twelve
new ARR contracts were signed during 2023 including seven new customers.
Continued market volatility and turbulent geopolitical conditions have naturally resulted in
some conservatism from companies throughout the year when assessing capital expenditure
on new systems and services. It is exactly these conditions that our risk management
products are built for and can add real value, transparency and security in uncertain times. We continue to be
progressing with extensions to services for existing customers, whilst pushing hard to add new Tier one financial
institutions to our customer portfolio.
Our product range of Limits Manager, Risk Manager, Market Surveillance and Risk Cockpit can be utilised individually, or
in conjunction with each other, to provide a complete range of risk management services.
In March 2024, we made some internal changes and appointed Dan Carter as our new CEO. Dan has been at KRM22
since its inception and has vast experience in the technology services industry. I have every confidence that Dan and
the management team will drive and accelerate our business to new heights. I am also honoured to have been appointed
as KRM22’s chairman at the same time, and look forward to the challenges ahead. I would like to take this opportunity
to recognise Stephen Casner and Keith Todd, our predecessors as CEO and Chairman respectively, for all of their
contributions to the Company since IPO just over six years ago.
The Board and I also wish to thank our loyal customers and investors for their continued commitment to our long-term
vision of delivering high quality products and services to the capital markets and derivatives risk community. The quality
of our customers and their importance to the traded markets gives us much confidence that we are hitting the mark
with industry professionals, who rely on KRM22’s products and services to add value to their business.
I also want to congratulate the entire KRM22 team for another year of progress, and to recognise their continued hard
work and loyalty to the Company.
I look forward to further growth in 2024, a continued increase in ARR, and becoming a cash generative business in due
course. KRM22 has never been in a better position as we progress through 2024 and beyond.
Garry Jones
Non-Executive Chairman
21 May 2024
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KRM22 plc
ANNUAL REPORT 2023
CHIEF EXECUTIVE OFFICER’S REPORT
I am delighted to have been appointed CEO of KRM22 in March 2024. The opportunity that
KRM22 has to be the market leader of risk technology to the capital markets industry is
incredibly exciting. We have very strong foundations in place, implemented under the
leadership of Keith Todd and Stephen Casner, a strong product offering and a motivated and
ambitious team. I have been at KRM22 since our inception in 2018, and in my former roles in
the Sales and Customer Services teams, have seen first hand how KRM22 can satisfy our
customers needs and deliver first class technology to the industry.
Revenue growth
KRM22 continued to make great progress during 2023 with continuing growth in annualised recurring revenue (“ARR”)
year on year with the goal of becoming a £10.0m ARR business firmly in our sights. The value behind the Global Risk
Platform, and the ability to integrate various aspects of a firms risk is starting to be leveraged by firms. At 31 December
2023, we had six of the top 15 Futures Commissions Merchants (“FCMs”) in the world using our Limits Manager product.
The Limits Manager product has embedded itself as a true market leader and is providing firms with a much more
efficient way of managing trading limits whilst at the same time giving firms a full audit of changes made. As we
progress through 2024 we anticipate the Risk Manager product to become another industry standard and achieve similar
demand and success as Limits Manager has before it, allowing firms to manage and control risk in complete sync.
In 2023 we continued to grow ARR through our two distinct sales “channels” – our direct sales team as well as the
product distribution agreements with various distributors including Trading Technologies International, Inc. (“TT”).
KRM22 added new ARR in 2023 of £1.1m with £0.9m from direct sales and £0.2m from the TT sales channel. The
growth in ARR was primarily driven by sales of Market Surveillance (42%), Limits Manager (21%) and Risk Manager
(21%), which incorporates the legacy functionality from the At-Trade P&L and Post-Trade Stress products.
The Customer Services team, made up of industry experts who have many years of experience between them, continue
to ensure our service levels are of the highest quality and thus customer churn is kept to manageable levels.
The partnership with TT continues to go from strength to strength from a sales and revenue perspective. The TT
distribution agreement allows the Limits Manager product to be deployed to their customers on their platform without
the timely and burdensome vendor onboarding processes that KRM22 experiences as a new vendor, thus helping to
reduce the length of sales cycles. In addition to revenue generated through the distribution agreement with TT, the
partnership has also provided other revenue opportunities for KRM22 with both ARR and non-recurring revenue for
specific projects, both internal and external to TT.
Products
In 2023 we simplified KRM22’s product offering under the two key distinct areas of risk: Trading Risk, covering the Limits
Manager and Risk Manager products, and Compliance Risk, covering the Risk Cockpit and Market Surveillance products.
Limits Manager
Having been launched in early 2022, 2023 saw the continued development of Limits Manager with the addition of more
user functionality which benefits both the execution services and risk management teams that use the product, and
therefore created further operational efficiencies for those using the product. Automation workflows have been
delivered and firms are beginning to automate limit change requests that meet specific conditions when raised. As we
look ahead to 2024 we will continue to develop more reporting functions for the Limits Manager product to enhance
visibility and further user understanding of what is happening with their limit change processes.
4
Risk Manager
KRM22 plc
ANNUAL REPORT 2023
When KRM22 launched in 2018, the goal and investment strategy was to bring the various aspects of risk management
together in one place and 2023 saw us invest heavily in the development of Risk Manager, bringing real-time P&L, Margin,
Stress scenario analysis and VaR together in one product. The Risk Manager product also allows time series analysis
of these key data points showing key trend analysis to the user when reviewing the account, or making limit change
approval decisions. We will continue to invest in the product as we migrate existing customers using the legacy At-
Trade and Post-Trade products onto Risk Manager whilst also delivering the product to new customers.
Integration of Limits Manager and Risk Manager
As we progress through 2024, KRM22 is excited to bring the integration of the Limits Manager and Risk Manager
products into production. This integration will allow risk managers the ability to review key risk metrics from Risk
Manager and display it alongside the limit changes raised by a client within Limits Manager. When the risk team within
the financial institution approves the change, these values will be stored in the audit trail - a crucial view of what standing
the account was in and why the decision was made at that time. This will provide risk teams with more visibility and
information in real-time when making these key decisions.
Market Surveillance
The Market Surveillance product continues to adapt with new alerts, including Spoofing by Order Depth, Cross Trades
and Gilt Closing alongside key functional changes. We now have over 80 alert types available to customers in the
application. In 2023 KRM22 signed an agreement with TT to integrate Score, TT's AI/ML surveillance application, with
KRM22’s Market Surveillance product, which is a human calibrated alerting tool, to allow compliance officers to ensure
their calibrations are valid. The planned release date for this integrated product is late 2024 for TT to market and sell
directly. The project has already generated ARR and non-recurring revenue for KRM22 and the integrated product is
expected to generate further revenue for KRM22 once product sales crystalise for TT though a revenue share model.
Outlook
We have continued to make good progress in the year towards our target of becoming a £10.0m ARR business with net
ARR growth in 2023 of 17.4% and the addition of seven new customers using our products. As of the date of this report,
the use of the Limits Manager product by seven of the top 15 FCMs in the world demonstrates that there is demand for
such product and that it, together with the Risk Manager product, has the ability to become the industry standard for
FCMs.
The team is experienced, energised and ready to grow the business and improve on the results reported in 2023 as we
continue the journey towards a £10.0m ARR business generating positive EBITDA and cashflows. The pipeline of sales
opportunities is strong and the reorganisation of our workforce in early 2024 will help us manage the cost base of the
business as we look towards the move to positive adjusted EBITDA and cashflows.
Dan Carter
CEO
21 May 2024
5
KRM22 plc
ANNUAL REPORT 2023
CHIEF FINANCIAL OFFICER’S REPORT
KRM22’s financial results for the year ended 31 December 2023 has seen a continuation of the
financial turnaround initially reported in the prior year, with growth of 23.3% in total revenue
recognised to £5.3m from £4.3m reported for the year ended 31 December 2022.
ARR continued to increase, with ARR exceeding £5.0m for the first time in 2023 since KRM22’s
inception in 2018, to end the year at £5.4m from £4.6m at 31 December 2022 at constant FX
rates – a year-on-year increase of 17.4%.
Adjusted EBITDA loss reported for 2023 was £1.4m, an improvement on the £1.7m reported in 2022. This growth was
set against continued global economic uncertainty and extended sales cycles.
Profit and Loss
Total revenue
Revenue recognised for the year to 31 December 2023 was £5.3m (2022: £4.3m), an increase of 23.3% compared with
the prior year, with 90.6% (2022: 92.3%) of total revenue generated from recurring customer contracts. Non-recurring
revenue for the year ended 31 December 2023 totalled £0.5m (2022: £0.3m) and related principally to customer
implementations, product development and proof of concept work.
Recurring revenue
ARR is a key metric and KPI for KRM22 and as at 31 December 2023, ARR had increased by 17.4% to £5.4m (2022:
£4.8m as reported, £4.6m at constant FX rates), a net increase of £0.8m at constant FX rates (2022: net increase of
£1.0m).
New contracted ARR in the year totalled £1.1m (2022: £1.3m) of which £0.6m (2022: £0.7m) was from seven new
customers and £0.5m (2022: £0.6m) was generated from existing customers. Included within the £0.6m of new ARR
from new customers was £0.2m (2022: £nil) of ARR generated from sales of the Limits Manager product under the
distribution agreement which KRM22 has with TT. The £0.5m of new ARR generated from existing customers was a
combination of these existing customers purchasing additional products and contractual renewals for existing products,
with an increase in ARR and extensions of contractual terms.
The amount of ARR generated through partner products and services, primarily through data and news feeds, with
minimal margin to KRM22, accounted for 4.6% (2022: 6.9%).
Total churn in ARR for the year was £0.4m (2022: £0.6m), from three institutional customers, of which £0.1m was
anticipated as it related to a customer acquired through the acquisition of Object+ in 2019 using a bespoke product that
does not form part of the current product offering. A further £0.1m of churn was from a customer directly impacted by
the SVB collapse in March 2023. The third customer, with churn of £0.1m, related to data feeds which, whilst impacting
ARR and revenue recognition, had minimal profit margin and so the effect on the operating loss is £nil.
Gross profit
Gross profit for the year to 31 December 2023 was £4.1m (2022: £3.3m). There was a small increase in gross profit
margin to 78% compared to the prior year margin of 77% which was due to an improvement in foreign currency rates,
compared with the prior year when there was volatility and adverse movements, with a significant proportion of the
Group’s cost of sales being Amazon Web Services server costs which are invoiced in US dollars.
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KRM22 plc
ANNUAL REPORT 2023
Capitalised development
A total of £1.1m (2022: £0.8m) of development was capitalised in the year to 31 December 2023. Capitalised
development is amortised over three years.
Adjusted EBITDA
Adjusted EBITDA is the key metric that the Company considers in order to understand the cash-profitability of the
business. This is due in particular to the non-cash items that impact the Income Statement under IFRS accounting, such
as non-cash share-based payment charges.
Adjusted EBITDA for the year to 31 December 2023 was a £1.4m loss (2022: loss of £1.7m). Whilst the adjusted EBITDA
loss reported for the year is a £0.3m improvement on the prior year, this reduction is not proportional to the increase in
total revenue recognised in the year compared with the prior year and this was due to the increase in administrative
expenses.
The increase in administrative costs was primarily driven by two factors. Firstly, in 2022 KRM22 used the investment
proceeds from TT’s investment in KRM22 in December 2021 to invest in Revenue, Customer Services and Development
resource to help drive the business forward and the timing of this new resource joining KRM22 occurred throughout
2022. Administrative costs for the year ended 31 December 2023 therefore includes a full year of increased staff costs
compared with the prior year. In addition to the aforementioned investment in resource, the rate of inflation in 2022 and
2023 meant that staff salary reviews, which are completed on an annual basis in the first quarter of each year, resulted
in a significantly higher average pay increase in 2023 compared to 2022. The average pay increase in 2023, whilst being
higher than 2022, was not matched to the rate of inflation.
A reconciliation of Adjusted EBITDA loss to the reported operating loss is provided as follows:
Adjusted EBITDA loss
Depreciation and amortisation
Impairment of intangible assets
Unrealised FX (losses)/gains
Deferred consideration write back
Acquisition and debt expenses
Gain on extinguishment of debt
Share-based payment credit/(expense)
Operating loss
Operating loss
2023
£’m
(1.4)
(1.3)
(1.6)
(0.5)
0.1
0.0
0.1
0.1
(4.5)
2022
£’m
(1.7)
(1.6)
–
0.8
–
–
–
(0.1)
(2.6)
Reported operating loss for the year to 31 December 2023 was £4.5m (2022: loss of £2.6m) and includes an impairment
charge of £1.6m primarily related to a revision in the estimated recoverable amount of goodwill using a value-in-use
model by projecting cashflows for future years using different inputs to the model compared with prior years.
Finance charges
Net finance expense in the year was £0.4m (2022: £0.6m) and includes:
Loan interest of £0.4m (2022: £0.3m);
IFRS16 lease liability interest of £0.0m (2022: £0.1m); and
•
•
• Derivative financial instrument fair value adjustment of £0.0m (2022: £0.2m).
7
Taxation
KRM22 plc
ANNUAL REPORT 2023
The tax credit in the year was £0.3m (2022: credit of £0.2m) which includes a £0.2m (2022: £0.1m) R&D tax credit
received.
Financial position
Assets
The cash balance as at 31 December 2023 was £0.9m (2022: £1.9m).
Current assets at 31 December 2023 include trade and other receivables of £1.1m (2022: £1.5m).
Non-current assets were £5.8m (2022: £7.8m) relating principally to: £4.2m for goodwill and assets acquired (2022:
£6.1m), £1.4m (2022: £1.3m) for capitalised development costs, and £0.1m for right of use assets recognised under
IFRS16 (2022: £0.4m).
Liabilities
As at 31 December 2023, our principal liabilities were:
• £4.5m convertible loan owed to TT plus accrued interest of £0.2m.
• £0.7m (US$0.9m) deferred consideration for earn out payments for the acquisition of Object+. The deferred
consideration can be satisfied in either cash or Company Ordinary Shares in KRM22 at the Company’s
discretion.
• £0.4m for the right of use assets relating to all future payments of leased-office rentals under IFRS16 ‘Leases’
whereby such lease payments are provided for at today’s value. KRM22 has one remaining lease in London
which expires in 2024.
• £2.2m of deferred revenue; contracted and paid services that will be released in a future period.
Investors
As an AIM quoted business, a large proportion of KRM22’s shareholders are professional investment funds. In addition,
the Directors together owned 3,764,958 shares at the year end, representing 10.6% of the Company’s issued share
capital.
Funding
On 17 June 2023, KRM22 entered into an agreement for a new three year £5.0m convertible loan facility (the “TT
Convertible Loan”) with TT, the Company’s largest shareholder. At 31 December 2023, KRM22 had drawn down £4.5m
of the total facility amount and these proceeds were used to replace the Company’s existing convertible loan (the “Kestrel
Convertible Loan”) with Kestrel Partners LLP. The outstanding balance of the Kestrel Convertible Loan, inclusive of
principal and accrued interest was £3.1m.
The interest rate payable on the TT Convertible Loan is the average 90 day Secured Overnight Financing Rate (“SOFR”)
and a margin of 5.5%, subject to a minimum aggregate percentage rate per annum of 9.25%. Interest is payable quarterly
in arrears however KRM22 has the ability to defer interest payments in the initial 18 months (the “Initial Interest Period”),
with the total deferred interest in the Initial Interest Period being paid in two equal instalments on the calendar quarters
ending after the 18th and 21st month anniversary of the facility, i.e. 31 December 2024 and 31 March 2025.
Under the terms of the TT Convertible Loan agreement dated 17 June 2023 (the “TT Loan Agreement”), any amounts
drawn down from the TT Convertible Loan could be converted into new Ordinary Shares in the Company by TT at any
time at the lowest conversion price of: £0.46, the volume weighted average price of the Company’s ordinary shares for
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KRM22 plc
ANNUAL REPORT 2023
the three month period prior to service of conversion notice; or the lowest daily closing price for the 30 completed
calendar days prior to service of conversion notice. On 1 July 2023, the TT Loan Agreement was amended to remove
the variability of the conversion price and replace with a fixed conversion price of £0.46. TT has the right to prevent any
conversion which would trigger a Rule 9 event under the Takeover Code.
The TT Convertible Loan is secured on certain KRM22 assets and includes covenants based on the Group’s financial
performance including ARR, revenue recognition and solvency.
Use of cash in the year
Our net cash outflow in the year was £1.0m, which included £4.5m draw down receipts from the TT Convertible Loan, of
which £3.0m was used to settle the Kestrel Convertible Loan principal, £1.1m was used for capitalised development,
£0.2m was used to pay interest on the Kestrel Convertible Loan and the balance was used to provide working capital for
KRM22.
Going concern
The financial statements have been prepared on a going concern basis based on a range of cashflow forecasts and
scenarios covering a period of at least twelve months from the date of this report. The time to close new customers
and the value of each customer, which are deemed individually as high value and low volume in nature, is key to the
forecast being achieved. Even if the forecast is achieved, there remains a material uncertainty around KRM22 operating
within the financial covenants associated with the TT Convertible Loan. The Board have received a letter of support
from TT that they would be willing to enter into discussions with KRM22 around amending the terms of the TT
Convertible Loan to ensure that KRM22 does not breach the financial covenants. Further analysis of KRM22’s going
concern position is detailed in the Directors report on pages 35 – 36.
Shareholdings and Earnings per share
As at 31 December 2023, KRM22 had 35,666,336 shares in issue and this was also the undiluted weighted average
number of shares for the period. The resulting Earning per Share (“EPS”) is a 13.0p loss per share (2022: loss of 8.7p).
Due to the loss made by the Company in the year, the diluted EPS is the same as EPS.
Conclusion
In 2023, KRM22 has continued to grow with recognised revenue increasing by 23.3% to £5.3m, ARR increasing to £5.4m
which, as at the date of this report, has further increased to £6.0m. Whilst administrative costs increased in 2023
compared with the prior year, the Board took action in early 2024 to review the underlying cost base of the business and
have since implemented a focused cost savings programme to generate annual cost savings of approximately £1.2m.
This cost savings programme, together with significant sales pipeline opportunities, both from direct selling
opportunities and through the TT distribution agreement, will improve the adjusted EBITDA position going forward and
accelerate the Company’s path to profitability.
Approved by the Board and signed on its behalf by:
Kim Suter
CFO
21 May 2024
Strategic Report
10
KRM22 plc
ANNUAL REPORT 2023
OUR PRODUCTS
Built on the Global Risk Platform, KRM22 offer products addressing risk management challenges across Corporate and
Trading risk. By layering on data from throughout a customer’s environment, customers are now able to better assess,
monitor and manage the increasing correlation between these risk areas.
The Global Risk Platform
The KRM22 Global Risk Platform is a cloud-based SaaS service for Corporate and Trading risk that securely connects and
integrates into existing and new client portals from one integrated system.
Corporate Risk
Risk Cockpit
The Risk Cockpit is a digital risk register and incident management portal that brings risk policies and operational controls
to life through a proven risk assessment workflow
• Enforce risk controls
• Capture, assess and
remediate events
• Track and understand
metrics
• Generate regulatory and
historic reporting
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KRM22 plc
ANNUAL REPORT 2023
Market Surveillance
Market Surveillance provides insightful analytics and contextual market surveillance to help capital market firms identify
and manage the potential risks of market abuse, fraud and operational breaches
• Comprehensive suite of
market abuse alerts
including Layering and
Spoofing, Wash Trading
and Insider Trading,
Abnormal Trade, Volatility
Spike and Unusual Price
Movement
Identify the appropriate
actions to manage alerts
•
• Configure and analyse
alert scenarios in real-time
• Sophisticated case
management workflows
Trading Risk
Limits Manager
Limits Manager, formerly called Pre-Trade Centralised Risk Management, combats time consuming and error prone
processes by maintaining, auditing and approving trading limits across multiple platforms in one centralised application
• Submit, review and
approve limit change
requests for software
trading platforms
• Automate pre-approved
limit changes
• View the completed
status of limit requests
• Capture all limit activity
and simplify reporting
• Maintain a database of
account limits by date or
date range, detailing
adjustments since
inception
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Risk Manager
KRM22 plc
ANNUAL REPORT 2023
Risk Manager incorporates the legacy functionality from the At-Trade P&L and Post-Trade Stress products and helps
firms achieve trading control through effective risk management monitoring
• A single place to see Real-time P&L, Real-time
Margin, Value at Risk (VaR) calculations and
Parameterised Stress Risk alongside account
credit in one web based screen
• Drill down across multiple levels, with full
visibility into Positions and P&L down to the
strike level
• Supports Greek calculations and What-if
position evaluation
• Visibility of margin position across exchanges
broken down by either exchange code or
commodity code
• Analyse market stress by applying price shocks
to current positions and ability to take action
based on Risk Slide results through export, alert
notifications and What-if position evaluation
• Ability to apply Parametric, Historic and Monte
levels of account
Carlo calculations to all
hierarchy
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KRM22 plc
ANNUAL REPORT 2023
PRINCIPAL RISKS AND UNCERTAINTIES
The Board considers the risks set out below to be the principal risks to KRM22. The Board continually reviews the risks
facing KRM22 to help monitor and manage these risks, and ensures appropriate steps are taken to mitigate them. If more
than one event occurs, it is possible that the overall effect of such events would compound the possible adverse effects
on KRM22. The Board recognises that the nature and scope of risks can change and there may be other risks to which
KRM22 is exposed so the list is not intended to be exhaustive.
Risk and uncertainty
Potential impact
Mitigating actions
The mitigating actions associated with global economic
uncertainty and inflation related risks and uncertainties
are included in further detail under each risk and
uncertainty component listed below.
Global economic
uncertainty and
inflation
Whilst the levels of UK inflation have subsided
from their peak in October 2022, plus market
forecasts suggest that the rate of inflation is
projected to decline as we progress through
2024, global economic uncertainty continues to
pose a significant risk as it impacts all of
KRM22’s stakeholders. Economic uncertainty
could impact liquidity of existing customers and
the ability by KRM22 to convert new sales
opportunities. If inflation increases to levels
seen in 2022, and does not continue to subside
as market forecasts suggest, this will increase
the cost of goods and services purchased from
third parties, together with expectations from
staff
their salary and
compensation. All of these stakeholders have
the ability to impact the profitability of KRM22.
The potential impacts are detailed further under
the separate risk and uncertainty components.
increases
for
in
Customer retention
Given KRM22’s strategic focus on Annualised
Recurring Revenue (“ARR”), the retention of key
customers is critical to the maintenance of
revenue streams. The loss of key customers
could adversely impact business results.
New contract signings Delays in new customer contract signings will
impact business results and the cash position of
KRM22. Investors are expecting KRM22 to sign
new customer contracts and increase ARR and
any delays in this will impact shareholder
confidence.
Foreign exchange
KRM22 operates internationally and is therefore
exposed to fluctuations in foreign exchange
rates.
Every customer has an account manager who regularly
speaks with
the customer and who ensures
requirements are met.
KRM22 also has a centralised customer support team
with defined service levels to ensure quality product
service to the customer.
All sales opportunities are assigned a key internal
contact at KRM22 who updates the executive team on a
regular basis.
The CFO maintains detailed cash forecasts that include
sensitivity analysis applied to new sales opportunities
including delayed sales, reduced recurring and non-
recurring revenue values and no future sales growth.
These are reviewed and discussed on a regular basis
between the CFO and CEO so that they can manage the
cost base and cashflow accordingly. The forecasts are
also discussed at the monthly Board meetings.
KRM22 relies on a partial natural hedge of GBP, EUR and
USD costs and revenue being in the same currencies.
KRM22 also continuously monitors its foreign exchange
forward currency
exposure
transactions are necessary.
to assess whether
14
KRM22 plc
ANNUAL REPORT 2023
Risk and uncertainty
Potential impact
Mitigating actions
Liquidity of customers KRM22 has a global customer base with these
customers being stakeholders in their own
supply chain. Customer’s liquidity will be
dependent on a number of factors including the
ability of their own customers to pay sales
invoices, their suppliers providing services that
support their own revenue and the availability of
staff to perform the work that drives their
revenue and liquidity of the business. The
actions of these stakeholders will impact the
customers liquidity and their ability to pay
KRM22 sales invoices.
KRM22 has a centralised finance function with accounts
receivable (“AR”) balances reviewed on a regular basis
with account managers and executives of the Company.
The use of automated centralised systems allows AR
balances to be updated daily and, should an AR balance
become overdue, appropriate action can be taken to
resolve payment of any outstanding amounts.
Sensitivity analysis is included on AR receipts when
preparing cash forecasts with any bad or doubtful AR
balances excluded from base case cash forecasts.
Compliance with laws
and regulations
KRM22’s business is the sale of software that
will facilitate compliance with financial services
laws and regulations. A failure by KRM22 to
comply with laws and regulations in its own
business could lead to fines and revocation of
business
licences, as well as significant
reputational loss.
Staff recruitment and
retention
KRM22 is reliant on the skills and knowledge
of its people in a wide range of areas but
especially
in executive management and
software development.
in critical areas could
Failure to recruit, retain and motivate an
appropriate number of suitably qualified
people
lead to a
deterioration in the quality of our products and
services. This could lead to KRM22 failing to
meet its customers’ needs resulting in the loss
of business and a failure to deliver expected
financial returns.
Investor attitude and
confidence
Investors lose faith in KRM22 and the ability to
grow the business at a rate that provides them
with a suitable return on investment.
KRM22 employs fully qualified finance professionals
and external professional advisors, including legal and
tax, to ensure all relevant legal and regulatory codes are
fully complied with.
The Remuneration Committee
reviews KRM22’s
compensation policies to ensure KRM22 continues to
attract, motivate and retain qualified personnel. All
employees are offered equity awards, including share
options and restricted stock units (“RSUs”) in KRM22 so
that they have a vested interest in the long-term success
of KRM22.
KRM22 is committed to the retention of staff by adopting
a friendly and flexible working environment and offering a
broad range of staff benefits.
There is regular staff engagement and communication
including formal monthly internal company meetings
where the Executive team update all staff on business
wide issues and encourage team participation. In
addition, formal staff appraisals are completed two times
a year for employees and their managers to give direct
feedback and to understand staff morale, flight risks and
any gap in skills or qualifications. The output of each
round of appraisals is discussed by the Executive
Directors with any remedial action plans implemented
accordingly.
KRM22 completes salary reviews on an annual basis and,
as part of this review, undertakes a salary benchmarking
exercise to ensure that salaries are in line with current
market trends across the different geographical locations
in which it operates.
The CEO and CFO meet institutional shareholders, fund
managers and analysts at
least twice a year to
understand how the strategy and the Board’s decisions
impact on and are received by investors. In addition, the
CEO and CFO maintain regular contact with Cavendish, as
Broker and Nominated Advisor, who keep in regular
contact with KRM22’s investor base.
15
KRM22 plc
ANNUAL REPORT 2023
Risk and uncertainty
Potential impact
Mitigating actions
Debt facility
the provision of
The convertible loan facility with Trading
Technologies International, Inc. (“TT”) requires
KRM22 to adhere with various obligations
including compliance with financial covenants
and
forward-looking
compliance information, payment of interest
by due dates and
reporting of
information within agreed
management
timeframes. Failure to comply with a financial
covenant will result in an Event of Default
which may result in TT withdrawing the TT
Convertible Loan with all amounts accrued
becoming immediately due and payable which
would impact KRM22’s cashflow.
the
Technology
Information security
The interest rate on the TT convertible loan is
the 90 day average Secured Overnight
Financing Rate (“SOFR”) and a margin of 5.5%,
subject to a minimum rate of 9.25%. Any
adverse movement
the SOFR could
in
adversely affect KRM22 cashflows and the
ability to repay amounts as they become due
which could result in an Event of Default.
To remain successful, KRM22 must ensure
that
its products continue to meet the
requirements of customers. If products do not
meet the requirements of customers, they
could seek alternative solutions, resulting in
loss of revenue.
To be a credible and competitive Software-as-
a-Service (SaaS) organisation who stores,
processes or transmits critical information,
well defined controls and procedures are
required to be defined and adhered to. Without
these controls and procedures, unauthorised
access and theft of customer and Company
data could materialise and be extremely
damaging to the Company, both financially
and reputationally.
The risk of failing to adhere with financial covenants is
mitigated by growth in ARR generated through new
customer
cash,
agreements, management
management of the cost base and ensuring that regular
forecasts are maintained that include sensitivity analysis
applied to new sales opportunities. Forecasts, with
specific reference to the financial covenants are also
reviewed and discussed at each Board meeting.
of
There are defined reporting obligations that KRM22 has to
TT and this includes a process to engage together in
advance of any forecasted issues and risks.
The CFO regularly monitors the SOFR and market
forecasts and ensures that these are factored into cash
forecasts which are reviewed and discussed at each
Board meeting.
KRM22’s Product Managers are subject matter experts in
their fields and understand the trends of the market and
customer needs.
In addition, customer account
managers gather requirements of the existing customer
base and
to product
development. KRM22’s CTO, together with the Product
Managers, use this information and feedback and invest
in the products and underlying technology to enhance the
existing products and develop new features.
information
feedback
that
and
policies
security
SOC 2 requires organisations to establish and follow strict
information
procedures,
encompassing
the security, availability, processing,
integrity and confidentiality of customer data. The
Company is SOC 2 accredited with an audit being
undertaken on an annual basis each year for accreditation
to continue. In addition to mitigating information security
risks, SOC 2 accreditation provides KRM22 with an edge
over competitors who cannot show compliance.
In addition to the risk of customer and
Company data theft, KRM22 is susceptible to
more general fraud and security risks including
spam and phishing emails sent to KRM22
staff. If such emails, and any attachments are
opened by staff, the email and/or attachment
could instal fraud spyware and/or impact
services. If any phishing emails requesting a
payment to be made are received and
actioned, KRM22 could make fraudulent
payments resulting in financial loss.
In addition to SOC 2, all staff are provided with regular
training on information security and fraud and are
expected to review and formally acknowledge the
Company’s Information Security Code of Practice on an
annual basis. KRM22 has anti-virus software installed on
all machines which is managed by central IT services and
audited on a regular basis. KRM22 has Cyber Essentials
accreditation which provides reassurance that it has
sufficient defences against the vast majority of common
cyber attacks. All bank payments require dual approval to
mitigate the risk of an unapproved payment being made
to a fraudulent third party.
16
KRM22 plc
ANNUAL REPORT 2023
SECTION 172 STATEMENT
Under section 172(1) of the Companies Act 2006, the Directors of a company have a duty to promote the success of the
company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to:
the need to foster the company’s business relationships with suppliers, customers and others;
the likely consequences of any decision in the long-term;
a)
b) the interests of the company’s employees;
c)
d) the impact of the company’s operations on the community and environment;
e)
f)
the desirability of the company maintaining a reputation for high standards of business conduct; and
the need to act fairly as between members of the company.
Set out below is a summary of how the Directors have performed their duty under section 172(1) of the Companies Act,
including how the Board has engaged with key stakeholders during the year.
Why engagement is important
How Directors and/or management
engage
Strategic decisions in the year
Customers
Regular customer engagement ensures
that KRM22 understands customer
expectations so that it can meet or exceed
these requirements. In addition, it allows
management to understand the risk of
churn and take corrective action to
mitigate this risk.
Investors
Allows communication of KRM22’s long-
term strategic objectives to secure the
investors ongoing support for strategic
objectives and provides an opportunity for
investors to raise any questions.
Face-to-face meetings with key customers
and sales prospects are held on a regular
basis.
Open dialogue with customers and
understanding their needs influenced the
product roadmap of ongoing development
work and release on new features in the
KRM22 product suite.
With the support of TT, a strategic
the
decision was made
conversion price to a fixed price of 46p to
appease
to
maintain the investors ongoing support of
KRM22’s long-term strategic objectives.
investor discontent and
to amend
with
Loan”)
KRM22 signed a new debt facility (the “TT
Trading
Convertible
Technologies, Inc. (“TT”) on 17 June 2023
and the agreement allowed for TT to
convert the TT Convertible Loan at any
time at the lower of three different price
The Investors contacted the
points.
Executive
and
Cavendish, as NOMAD, to express their
concerns about the variability of the
conversion price and the potential dilutive
impact to existing shareholders. The
Executive Directors,
together with
Cavendish, worked with TT and the
investors to agree a conversion price that
was acceptable to the investors.
Directors
directly
During the year, investors expressed their
concerns directly with
the Executive
Directors about the potential conflict of
interest around the role of Keith Todd as
Executive Chairman of KRM22 whilst also
being CEO of TT, KRM22’s
largest
shareholder and debt provider. The Board
listened to these concerns, and consulting
with Cavendish, as NOMAD, and
Fieldfisher, as its Solicitors, agreed to
review Board composition.
to
Regular Board meetings include a number
of standing items, including conflicts of
interest. Whilst the Board took action to
exclude any Board member with a
potential or actual conflict of interest from
the relevant discussion topic, they made a
strategic decision
review Board
composition to further minimise any
potential conflicts of interest risks. Whilst
to Board
no changes were made
composition
the Board
the year,
in
changes announced on 7 March 2024
demonstrate that action has been taken to
avoid any negative interpretation of one
individual combining leading the Board
whilst also bearing some executive
responsibility for KRM22’s operations.
17
KRM22 plc
ANNUAL REPORT 2023
Strategic decisions in the year
No strategic decisions were made in the
year affecting investors.
No strategic decisions were made in the
year affecting the team.
Why engagement is important
Team
Continuous engagement and two-way
communication with staff allows staff to
understand and deliver KRM22’s long-
term strategic objectives. Transparency
and openness improve motivation and
productivity rates and helps to maintain
low staff turnover.
How Directors and/or management
engage
Following release of the Company’s FY22
full year results and FY23 interim results in
July and September 2023 respectively, the
CEO and CFO met with individual investors
to discuss the results.
Monthly “All Hands” meetings in which
management update staff on company
progress with
two-way participation
encouraged.
Staff appraisals completed twice a year
with a review of accountabilities and the
setting of objectives.
Anonymous monthly
“pulse” survey
completed with results discussed by
management and action taken where
appropriate.
Regular visits to overseas offices by
management.
Suppliers
Engagement with key suppliers ensures
that KRM22 operates
its business
effectively and without disruption.
KRM22 nominates internal resource to
manage key supplier relationships with
regular meetings between these parties
which is reported back to management.
No strategic decisions were made in the
year affecting suppliers.
Trading Technologies International, Inc., as strategic partner
In December 2021, and as part of the TT
investment in KRM22, both parties entered
into a distribution agreement for the
distribution of KRM22 products into the TT
significant
customer
opportunities for growth and cross selling.
Collaborative engagement was important
as it would enable products to be launched
in a timely manner to help drive the growth
of KRM22.
A project team, represented by key
individuals from both parties, continue to
meet on a regular basis to agree on the
order of priority for making KRM22
products available to TT customers. The
team meet on a weekly basis
to
collaborate on ideas and resolve any
operational and technical issues.
base
with
Kestrel Partners, as debt provider
Communication
forward-looking
of
compliance information under the terms
of the Kestrel Convertible Loan allows the
Directors and Kestrel Partners to evaluate
any risks and agree remedial action if
required.
KRM22
reports on compliance with
financial covenants and provides forward-
looking compliance information at the end
of each quarter. In addition. the CEO and
CFO met with Kestrel to discuss the
underlying data and projections.
A strategic decision was made to work
with TT to help develop the next version of
TT’s market surveillance product as there
is potential for significant additional
revenue through a revenue share model,
whilst also generating immediate annual
recurring and non-recurring revenue for
KRM22.
Given that the original Kestrel Convertible
Loan had a maturity date of 15 September
2023, refinancing the debt facility became
a priority at the start of 2023. The CEO and
CFO
explored, and were offered,
alternative sources of funding, including
new terms from Kestrel Partners, however
after detailed consideration the Board
agreed to proceed with the term sheet
received from TT and on 17 June 2023
KRM22 signed a new debt facility with TT
to replace the Kestrel Convertible Loan.
18
KRM22 plc
ANNUAL REPORT 2023
Why engagement is important
How Directors and/or management
engage
Strategic decisions in the year
Trading Technologies International, Inc., as debt provider
the
As with
the Kestrel
terms of
Convertible Loan, the TT Convertible Loan
includes communication of
forward-
looking compliance
information which
allows the Directors and TT to evaluate
any risks and agree remedial action if
required.
KRM22
reports on compliance with
financial covenants and provides forward-
looking compliance information at the end
of each quarter. In addition to the CEO and
CFO meeting with TT to discuss the
underlying data and projections.
No strategic decisions were made in the
year affecting TT as the debt provider.
Corporate Governance
20
KRM22 plc
ANNUAL REPORT 2023
BOARD OF DIRECTORS
Garry Jones
Non-Executive Chairman
Dan Carter
Chief Executive Officer
Kim Suter
Chief Financial Officer
Dan became CEO of KRM22 in
March 2024, having previously
served as Chief Services Officer
and, previous to that, in Business
since KRM22’s
Development
inception. Dan served as part of
the KRM22 leadership team for
two years prior to his appointment
as CEO, leading the Company’s
Services operations across the
entire KRM22 customer base.
in
Dan has 17 years' experience in
SaaS software financial services
technology
capital
firms
markets. Prior to joining KRM22
Dan worked at Colnvestor as Head
of Product Management &
Operations. He also worked at
ION, and prior to its acquisition by
ION, FFastFill where he was
responsible for the firms exchange
connectivity and relationships for
front-office market data and
execution and middle office
clearing connectors.
Kim has significant experience in
building and
finance
functions
to support business
growth.
leading
He started his career in practice,
covering all aspects of audit,
financial reporting and tax for a
range of clients, providing him with
a broad knowledge of how finance
functions operate across different
business sizes and industries. Kim
has since applied this knowledge
to support structured growth at a
number of start-up organisations
prior to joining KRM22.
Kim joined KRM22 in July 2018 as
Head of Finance to set up the
Finance function for the KRM22
group. He has served as CFO since
July 2019, with responsibility for
Finance, HR and Legal, and joined
the KRM22 Board in April 2020.
is a qualified Chartered
Kim
Certified Accountant.
operating
and
Garry Jones is currently CEO of
leading technology
NovaFori, a
in
company
the
marketplace
auction
- overlaying
technology space
platform technology with machine
learning and artificial intelligence.
As well as being Non-Executive
is a
Chairman of KRM22, he
member of the Board of ICBCS, an
emerging markets
investment
bank.
the
three of
He has many years’ experience in
financial services, and has been
CEO of
largest
derivatives and OTC exchanges in
Europe: BrokerTec, LIFFE and the
LME, as well as taking leadership
roles in the parent companies of
NYSE Euronext and HKEX.
the
He has contributed to the business
change, growth, and globalisation
exchange world as
in
technology has
fundamentally
changed the way that we trade,
driving the momentum behind
electronic trading and increased
efficiency
trade
in
environment.
the post
21
KRM22 plc
ANNUAL REPORT 2023
Keith Todd CBE
Executive Director
Sandy Broderick
Non-Executive Director
Steve Sparke
Non-Executive Director
Keith has over 40 years of global
technology business experience
from publicly listed and large multi-
nationals to start-up businesses.
Keith is an Executive Director of
KRM22, having previously held the
role of Executive Chairman and
CEO of KRM22. As well as being
an Executive Director of KRM22, he
is currently CEO of Trading
Technologies International, Inc.
From 2002 to 2017 he served as
Executive Chairman of AIM listed
FFastFill plc, provider of SaaS to
the global derivatives community.
Keith retained this position even
after FFastFill was acquired by Ion
Group in 2013.
to
solutions
He was Non-Executive Chairman
of AIM listed Aferian plc, a provider
of digital TV entertainment and
network
cloud
operators from 2005 to 2019. He
also served as Non-Executive
Chairman of UK Broadband
UK
Stakeholder
Government
board),
Easynet plc and Chief Executive of
ICL plc.
Group
advisory
(a
Sandy was previously Non-
Executive Director of AIM quoted
regulatory reporting and collateral
solutions
risk management
Risk
company,
Management plc, which was
acquired by Vermeg Group.
Lombard
to
Lombard
Risk
Prior
Management he was CEO of DTCC
DerivSERV, where he led the roll
out of its Global Trade Repository
in Europe and Asia, as well as
holding the CEO position of New
York Portfolio Clearing, where he
oversaw
its development and
successful sale to ICE.
During Sandy’s 23 year derivative
trading career at Société Générale
and Bank of America, he was at the
centre
industry
initiatives in clearing and market
infrastructure,
including
development of the LCH Clearnet
SwapClear system.
several
of
Sandy was Chairman of the OTC
Derivnet Board from 2011 to 2012.
Currently Sandy works with a
number of companies as an expert
witness for Regulatory, Trading
and Competition issues.
35
first
years,
has over
years’
Steve
experience in Financial Services,
trading Interest Rate products for
15
the
and
the Exchange
in
subsequently
Traded Derivatives (“ETD”) and
Commodity
with
extensive board-level experience
for global ETD and Commodities
organisations.
industry
Prior to his role as Vice Chairman,
leading the Conduct and Culture
initiatives of Marex, Steve spent 10
years as Group COO, responsible
for
operating
firm’s
IT,
environment,
Operations, Risk, Compliance and
HR.
including
the
Prior to Marex, Steve spent 20
years with UBS where he was
Managing Director and Global
Head
Exchange-Traded
of
Derivatives.
Since retiring from Marex, Steve
holds NED positions on the UK
Regulated Entities of TP ICAP and
was Non-Executive Chairman of
FIA’s European Advisory Board
until the end of 2019, where he
continued as an advisor until
March 2024. Steve was previously
a NED of NYSE Euronext LIFFE
(now ICE Europe) for over 10 years
and was a NED at PATS Systems,
an AIM quoted DMA system
provider.
Steve has a Law degree from
Nottingham University.
Stephen Casner, CEO (resigned 6 March 2024)
22
KRM22 plc
ANNUAL REPORT 2023
CORPORATE GOVERNANCE STATEMENT
In applying a recognised corporate governance code, the Directors have adopted the Quoted Companies Alliance’s (“QCA”)
Corporate Governance Code for small and mid-sized quoted companies (“QCA Code”). The principal means of
communicating our application of
this Annual Report and on our website
(www.krm22.com/investors).
the Code are detailed
in
The Directors believe that, in addition to being responsible for setting the strategic direction and managing risk across the
business, they are responsible for good corporate governance, clear shareholder and stakeholder communications and
monitoring the effectiveness of the Executive Directors. The Directors believe that effective corporate governance,
appropriate to KRM22, considering its size and stage of development, will assist in the delivery of corporate strategy, the
generation of shareholder value and the safeguarding of shareholders’ long-term interests.
This report follows the structure of the QCA Code guidelines and explains how the Board have applied the guidance as
well as the reasons for any departures from the guidance. On 13 November 2023, the QCA issued the third edition of its
QCA code (the “QCA Code (2023)”) for accounting periods commencing on or after 1 April 2024 and the Directors are
working towards compliance with the QCA Code (2023).
At the centre of KRM22’s philosophy are four groups of stakeholders:
• Customers: Customers should enjoy doing business with KRM22, receive value for money and understand that
KRM22 is aligned with their values.
Investors: Investors should receive superior returns from KRM22, governed along established lines.
•
• Team: The team should be highly motivated, well rewarded and believe in the Company vision.
• Community: The local and global community should see KRM22 as an asset.
In adopting QCA principles, the Directors have ensured alignment with the goals of the Company’s stakeholders.
QCA PRINCIPLES
Principle 1: Establish a strategy and business model which promotes long-term value for shareholders
KRM22 was admitted to trading on AIM, via an IPO, on 30 April 2018. As part of this process, the Board determined the
long-term vision of KRM22 and detailed the steps to achieve that strategy.
The Board continues to review and refine the strategy of the business based on customer feedback, additional input from
risk management experts at KRM22, shareholder feedback, debt provider feedback and employee participation which has
led to a clearer definition of KRM22’s strategy.
Corporate status: KRM22 (KRM:L) is a closed-ended investment company (CEIC) quoted on the Alternative Investment
Market of the London Stock Exchange. This means that the number of shares in the Company are known and the shares
are traded on AIM. KRM22 expects to convert to an operating company when its business develops to fit the necessary
criteria.
In adopting Principle 1, KRM22 is assisting investors to obtain longer-term superior returns.
Principle 2: Seek to understand and meet shareholder needs and expectations
The Company’s CEO and CFO meet institutional shareholders, fund managers and analysts at least twice a year to
understand how the strategy and the Board’s decisions impact on and are received by investors.
The Annual General Meeting provides an opportunity for all shareholders to meet the Directors and raise any questions.
Cavendish Capital Markets Limited (“Cavendish”) act as the Company’s NOMAD and broker.
23
KRM22 plc
ANNUAL REPORT 2023
Nominated Advisor (NOMAD): NOMADs are approved by the London Stock Exchange and must meet eligibility
criteria set out in the AIM Rules for NOMADs. In their role, Cavendish advises and guides the KRM22 Board on
its responsibilities as an AIM quoted business and undertakes due diligence and works as the primary advisor of
the business.
Broker: Cavendish is also the appointed broker of KRM22. In this role Cavendish facilitate communications with
existing and potential new investors. The CEO and CFO regularly meet investors together with representatives of
the broker. Cavendish also advise KRM22 on shareholder communications on its website, all RNS releases
(Regulatory News Service – AIM) and will guide communications within the Annual Report.
Investor queries can be directed to KRM22 by email to InvestorRelations@krm22.com. All advisor details, including those
of KRM22’s NOMAD and Auditors can be found on the last page of this report.
In adopting Principle 2, KRM22 assures investors that the Company is aligned to their needs, expectations and values.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term
success
The Board believes that KRM22 should be seen as an asset to its stakeholders, aligned with their values. This is why the
Board is working to establish an Environment, Social and Governance (“ESG”) programme.
The ESG programme will be centred around meeting the United Nations 17 Sustainable Development Goals (“SDGs”)
(https://sdgs.un.org/goals). In order to work towards these SDGs, KRM22 will promote a culture of transparency and
discussion amongst all four stakeholder groups.
The first phase of the ESG programme, which KRM22 is in the process of undertaking, is an exercise to benchmark the
Company against the SDGs with the aim of establishing the areas of focus for the remainder of the programme. During
this benchmarking phase, each stakeholder group will be considered and if necessary, consulted to establish alignment
with their views and values.
In addition to the ESG programme, KRM22 continually gathers feedback from all stakeholder groups.
Methods of two-way communication include:
Investors: See Principle 10 below.
Customers: Regular meetings with existing and potential customers by the Revenue and Customer Service teams.
Team: KRM22 communicates regularly with the cross-country, multi-national and diverse team in multiple ways. Monthly
internal company meetings are held where the Executive team update all staff on business-wide issues and encourage
including team-wide easy-to-use
team participation.
communication tools, formal performance appraisals are completed two times a year, with informal appraisals completed
throughout the year, a monthly “pulse” where staff participate on an anonymous basis to help the Executive team
understand the mood of business and “all-employee” announcements (for example, on new customer contract wins,
customer projects and other business-wide news).
In addition, KRM22 uses centralised
internal systems
Principle 3 provides the main methodology of meeting KRM22’s ESG goals across all stakeholder groups.
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
Good effective risk management is part of KRM22’s DNA and the Company has built the Risk Cockpit as a product to
market and sell and also use internally to effectively manage risk throughout the Company. Therefore, risk management
is embedded in the culture of not only the KRM22 Board, but also the whole team.
24
KRM22 plc
ANNUAL REPORT 2023
Director experience in risk management: All the Directors have experience of building growing multi-national
businesses and understand the risks and challenges that come with the journey. Their sector and professional
mix of skills is particularly relevant – see Principle 6.
Team experience in risk management: The subject matter expertise within the multi-national team is very strong
and includes experts in Trading and Corporate risk. As a company dedicated to risk management technology,
the KRM22 team has a high understanding and experience in managing risk.
Risk Cockpit: The Risk Cockpit is an application that KRM22 has developed to allow CEOs and their teams to see
real-time risk statuses and enable them to take action, in addition to managing specific projects. KRM22 has
implemented the Risk Cockpit internally to monitor and manage risks including the development of customer
dashboards built on the Risk Cockpit framework.
Controls and processes: The Directors are continually reviewing controls and processes in all key areas on an
ongoing basis.
Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair
The Board comprises three executives which, throughout 2023, included Keith Todd as Executive Chairman, and three
non-executives which encourages healthy challenge and debate with the non-executives providing additional
independence. On 7 March 2024 Keith Todd relinquished the role of Executive Chairman, whilst remaining an executive
director of the Company, and Garry Jones was appointed Non-Executive Chairman of KRM22.
The principal role of the Chairman is to manage and to provide leadership to the Board of Directors of the Company and
is accountable to the Board. The principal role of the CEO is to make major corporate decisions, manage the overall
operations and resources and act as the ultimate point of communication with stakeholders. In keeping these two roles
separate, KRM22 is adhering to the QCA guidelines for the role of Chairman and CEO to be held by two different people.
The Board believes strongly that a mix of professional skills, risk management experience and capital market
understanding make a difference, as does diversity, and one of the responsibilities of the Nomination Committee is to
undertake an annual assessment of Board Effectiveness which includes a review of skills, experience and composition.
The KRM22 leadership is described on pages 20 – 21.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
The Directors consider that the mix of professional skills, risk management experience and capital market understanding
is key to the effectiveness of the Board and its Committees. As such, the Board is very satisfied that the resulting mix of
skills is suited to the sector, to the maturity and growth stage and for an AIM quoted business.
Skills: Of the six Directors, five have worked within capital markets and two are qualified accountants. All six Directors
have experience of growing businesses and understand how risks need to be managed within a fast-growth environment.
The Directors maintain their professional experience and skill set through Continued Professional Development (legal and
financial), and constant contact with customers, sector experts and industry influencers, and by listening to feedback
from all stakeholders.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
The KRM22 Board has three Board Committees, each consisting of the three independent Non-Executive Directors. See
more details in Principle 9.
The responsibilities of the Nomination Committee include an annual assessment of Board Effectiveness. The last
assessment was completed in August 2023. The Non-Executive Directors assessed the Board on:
•
risk management (including Going Concern);
25
KRM22 plc
ANNUAL REPORT 2023
the effectiveness of decision processes and decision making;
• adequacy of management information to make decisions and manage risk;
•
• Board composition (mix of skills, experience, diversity, and adequate succession planning);
•
the effectiveness of each Director on the Board, whether Executive or Non-Executive;
• Board communication and organisation; and
• director induction and training.
The Nomination Committee regarded the Board’s performance, effectiveness and composition as appropriate
considering the size of the Company however they continue to monitor the Board’s construction and remit.
Principle 8: Promote a corporate culture that is based on ethical values and behaviours
KRM22 has brought together different business and nationality cultures, through acquisitions and its own organic growth,
and therefore the Board is very people-focused, including all stakeholders, whether internal or external.
Team
The aim of the Directors is to build and maintain a culture of transparency and performance and the Directors believe that
empowerment of employees is key to delivering the strategy.
KRM22’s three key company values are:
focus wins;
•
• business is a team game; and
•
clear accountabilities for all.
All employees have access to an internal HR system which provides the full organisation chart across KRM22 and are
assigned accountabilities which the employee and their line manager are required to review and agree as part of the
appraisal process. This helps each employee understand where they fit within the organisation and how their work
contributes to KRM22’s growth and performance.
KRM22 has adopted corporate policies, staff handbooks and accounting policies which are aligned with the needs of the
Group, each country and team. Each member of the team is expected to sign and adhere to certain policies, including the
Business Code of Conduct which outlines key responsibilities in terms of ethics. As part of compliance with SOC 2, certain
corporate policies and staff handbooks are required to be reviewed by all staff on an annual basis, thus ensuring that staff
are reminded of the corporate culture, ethical values and behaviours which they are expected to uphold.
In addition, and for full transparency, the Board has adopted whistleblowing policies for employees and external
stakeholders, including the choice of reporting to and excluding the CFO.
As discussed in Principle 3, KRM22’s ESG programme is focused on meeting the United Nations 17 SDGs which promotes
a strong ethical culture within all areas of the Company.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making
by the Board
The Board of Directors is responsible for setting the strategic direction of the business, managing risks and monitoring
performance and progress. To help fulfil these responsibilities, the Directors have implemented independent Board
Committees which together with the Matters Reserved for the Board, provide structure and formalisation of corporate
governance.
The Board is provided with monthly financial and non-financial information for monitoring performance and to make
strategic decisions. The Board has a formal schedule of Matters Reserved for the Board including approval of the annual
budget, share subscriptions and acquisitions, together with standing items such as health and safety, conflicts of intertest
and concerns reported through whistleblowing procedures. The Board aims to meet for scheduled Board meetings ten
times per year, plus ad hoc meetings as required.
26
Risk Management
KRM22 plc
ANNUAL REPORT 2023
The Company uses its own Risk Cockpit software tool to assess and monitor risks. This has gradually replaced any list
of risks in Excel or Word (often the basis for a “Risk Register”) and delivers much more visibility to the Directors on the
performance KRM22 as a whole.
Independence
At 31 December 2023 the Board was comprised of the Executive Chairman, two Executive Directors and three Non-
Executive Directors. Three of the Non-Executive Directors are considered independent as they have not previously worked
with the executive team.
On 7 March 2024 Garry Jones was appointed Non-Executive Chairman of KRM22 following the decision by Keith Todd to
relinquish the role of Executive Chairman whilst continuing to remain an executive director of the KRM22. As a result of
this change, KRM22 now has a chair who is a non-executive and independent which provides further clarity to
stakeholders on independence, thus avoiding any negative interpretation of one individual combining leading the Board
whilst also bearing some executive responsibility for KRM22’s operations.
Under their letters of appointment, the Chairman has a time commitment of four days per month and the two remaining
Non-Executive Directors have a time commitment of two days per month. The executives employed as CEO and CFO are
employed full-time (with time allowed for agreed external professional activities), with the remaining Executive Director,
Keith Todd, required to provide sufficient hours as is reasonably required for the performance of his duties and
responsibilities. All Directors are able to allocate sufficient time to KRM22 to fulfil their responsibilities.
Twelve board meetings were held during the year.
20
Board meeting
attendance 2023
Executive Directors
Keith Todd
Stephen Casner
Kim Suter
Non-Executive Directors
Sandy Broderick
Garry Jones
Steve Sparke
Board committees
Maximum possible
meeting attendance
Number of meetings
attended
% of meetings
attended
12
12
12
12
12
12
10
12
11
10
11
9
83
100
92
83
92
75
The Directors have established an Audit Committee, a Nomination Committee and a Remuneration Committee with
formally delegated duties and responsibilities. None of the Executive Directors are members of these Committees and,
when invited to attend Committee meetings, it is to present information and not be part of the decision making.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with
shareholders and other relevant stakeholders
All financial reports and publicly-available information is published in the investor information section of the KRM22
website (www.krm22.com/investors). This includes AIM rule 26, significant shareholder information and details of the
Directors’ roles and experience.
The CEO and CFO meet with institutional fund investors to communicate progress and plans at least twice a year and
have met them at other times where appropriate. In addition, the CEO and CFO meet with Trading Technologies
International, Inc. (“TT”) to report on financial covenants and forward-looking compliance information as part of the
reporting obligations of the TT Convertible Loan.
27
KRM22 plc
ANNUAL REPORT 2023
The Directors believe that these meetings provide valuable two-way communication and allow investors and TT, as debt
provider, to provide feedback. Other investors are provided a channel for communication via the KRM22 investor
information on the website and via email contact at InvestorRelations@krm22.com.
The report of Board Committees is included in our Annual Report and Accounts each year. When General Meetings are
held, the Directors publish the results of votes on the KRM22 website in the Investor Information section.
Internally KRM22 uses multiple team-tools to communicate – see Principle 3.
Board Committees and Secretary
The Board delegates authority to three committees to assist in meeting its business objectives while ensuring a sound
system of internal control and risk management. The committees meet independently of Board meetings.
Audit Committee
The Audit Committee was established by a resolution of the Board on the recommendation of the Nomination Committee.
The Audit Committee, which meets at least two times a year, consisted of Steve Sparke, Garry Jones and Sandy Broderick,
all of whom were non-executive directors of the Company. During the year to 31 December 2023, and to date, the
Committee was chaired by Steve Sparke. The responsibilities of the Audit Committee are detailed in the Audit Committee
report on page 28.
Remuneration Committee
The Remuneration Committee, which meets at least once a year, consisted of Sandy Broderick, Garry Jones and Steve
Sparke, all of whom were non-executive directors of the Company. The Committee was established by a resolution of the
Board on the recommendation of the Nomination Committee. During the year to 31 December 2023, and to date, the
Committee was chaired by Sandy Broderick. The responsibilities of the Remuneration Committee are detailed in the
Remuneration Committee report on page 30.
Nomination Committee
The Nomination Committee, which meets at least once a year, consisted of Sandy Broderick, Garry Jones and Steve
Sparke, all of whom are non-executive directors of the Company. The Committee was established by a resolution of the
Board. During the year to 31 December 2023, and to date, the Committee was chaired by Sandy Broderick. The
responsibilities of the Nomination Committee are detailed in the Nomination Committee report on page 33.
For and on behalf of the Board
Garry Jones
Non-Executive Chairman
21 May 2024
28
KRM22 plc
ANNUAL REPORT 2023
AUDIT COMMITTEE REPORT
The Audit Committee is responsible for challenging the quality of internal and external controls and for ensuring that the
financial performance of KRM22 is properly reviewed and reported.
The Committee reviews reports on the interim and annual accounts, financial announcements, the Company’s accounting
and financial control systems, changes to accounting policies, the extent of non-audit services undertaken by the external
auditor and the appointment of the external auditor.
During the year the Audit Committee reviewed the 2022 annual report, 2023 interim report and the associated
announcements. The Audit Committee considered the accounting policies and principles adopted in these accounts as
well as significant accounting issues and areas of judgement and complexity.
Composition
The terms of reference for the Audit Committee require the committee to consist of preferably three members but not
less than two members and that a majority of the members shall be independent non-executives with at least one of
whom shall have recent relevant financial experience.
Throughout 2023 the Audit Committee was composed of myself, Steve Sparke, as Chairman, Sandy Broderick and Garry
Jones. I have extensive board-level experience and have previously been the Chairman of the Audit and Risk Committee
at NYSE Euronext LIFFE (now ICE Europe) and, whilst working at Marex, the Internal Audit group reported to me, and I was
a standing attendee of the Audit and Compliance committee. The Board is of the view that we have recent and relevant
financial experience. Kim Suter (CFO), members of the Finance team and other Executive Directors may attend
Committee meetings by invitation. The Committee formally met on two occasions during the year. However, other
informal discussions were held by Committee members during the year and since year end. I report to the Board following
an Audit Committee meeting and minutes are available to the Board.
Role of the Committee
The main duties of the Committee are set out in its terms of reference, which are available on KRM22’s website and the
main items of business considered by the Committee in the year included:
•
•
consideration of risk management and internal control systems;
review and approval of the 2022 audit plan presented by KRM22’s auditor, BDO LLP, which set out the proposed
scope of work, audit approach, materiality and identified key audit risk areas;
review of the 2022 audited annual report and financial statements;
consideration of key audit matters and how they are addressed;
review of the unaudited 2023 interim report;
review the suitability of the external auditor; and
•
•
•
•
• meeting with the external auditor without management present.
Financial Reporting
The Committee reviews whether suitable accounting policies have been adopted and whether management has made
appropriate judgements and estimates. The Committee’s remit includes reviews of accounting papers prepared by
management providing details on the main financial reporting judgements as well as assessments of the impact of
potential new accounting standards.
There were no material changes in accounting policy for the Committee to consider during 2023. The Committee have
concluded that the annual report and financial statements are appropriately prepared and provide the information
necessary for shareholders to assess KRM22’s strategy and performance.
29
KRM22 plc
ANNUAL REPORT 2023
Risk management and interim controls
The risk and control management framework of KRM22 is designed to manage rather than eliminate the risk of failure to
meet KRM22’s objectives and the system can only provide reasonable and not absolute assurances against material
misstatement or loss. KRM22 faces a number of risks, the significant ones of which are set out in the section on Principal
risks and uncertainties on pages 13 – 15.
Through the control systems outlined in the Statement of Corporate Governance on pages 22 – 27, KRM22 operates an
ongoing process of identifying, evaluating and managing significant risks faced by the business. This process includes
the following:
• defined organisation structure and appropriate delegation of authority;
•
•
formal authorisation procedure for investments;
clear responsibility for management to maintain good financial control and the production and review of detailed,
accurate and timely financial information;
identification of operational risks and mitigation plans developed by senior management; and
regular reports to the Board from Executive Directors.
•
•
During the year, internal control processes have been monitored and reviewed by the Committee and the Board and, where
necessary improvements, have been identified and implemented.
External Auditor
BDO was appointed auditor of KRM22 in 2018. The Committee considers that its relationship with the auditor is working
well and is satisfied with their effectiveness.
The Committee is responsible for implementing a suitable policy for ensuring that non-audit work undertaken by the
auditor is reviewed so that it will not impact their independence and objectivity. The breakdown of fees between audit
and non-audit services is provided in note 8 to KRM22’s financial statements. The non-audit fees primarily relate to
taxation advice and compliance.
As necessary, the Committee held private meetings with the auditor to review key items within its scope of responsibility.
Taking into account the auditor’s knowledge of KRM22 and experience, the Committee has recommended to the Board
that the auditor is reappointed for the year ending 31 December 2024.
For and on behalf of the Audit Committee
Steve Sparke
Audit Committee Chairman
21 May 2024
30
KRM22 plc
ANNUAL REPORT 2023
REMUNERATION COMMITTEE REPORT
The Board has prepared this report in relation to all Directors who have served during the year to 31 December 2023. As
an AIM quoted company, KRM22 Plc is not required to provide the full disclosures required of fully listed companies,
however, the Board has chosen to provide the following details as a voluntary disclosure. As a result, the Auditor is not
required to and has not audited the information included in this report.
Composition
The terms of reference for the Remuneration Committee require the committee to consist of preferably three members
but not less than two members and that a majority of the members shall be independent non-executives.
Throughout 2023 the Committee was composed of myself (Sandy Broderick) as Chairman, Garry Jones and Steve Sparke.
Role of the Committee
The purpose of the Committee is to ensure that the executive directors and other key employees of KRM22 (together,
“Executive Directors”) are fairly rewarded for their individual contribution to the overall performance of KRM22. The
Committee’s main role and responsibilities are to:
• have responsibility for setting the remuneration policy for Executive Directors and such other members of the
executive management as it is designated to consider;
recommend and monitor the level and structure of remuneration for senior management;
•
• obtain reliable, up-to-date information about remuneration in other companies of comparable scale and
complexity in the light of reviewing the ongoing appropriateness of and relevance of remuneration policy;
review the design of all share incentive plans for approval by the Board; and
•
• approve the design of, and determine targets for, any performance-related pay schemes operated by KRM22 and
approve the annual payments made under such schemes.
Remuneration Policy
In setting the remuneration policy, the Committee recognises the need to be competitive in an international market. The
Committee’s policy is to set remuneration levels which ensure that the Executive Directors are fairly rewarded in line with
high levels of performance and not in excess of market rates for comparable companies. Remuneration policy is designed
to support business growth strategies and to create a strong performance-oriented environment. The policy must also
attract, retain, and motivate high calibre individuals. The Remuneration Committee believes that a successful
remuneration policy must ensure that a significant proportion of the remuneration package is linked to the achievement
of ambitious corporate performance targets and a strong alignment with the interests of shareholders.
Consistent with the pay for performance policy, annual cash bonuses are linked to performance criteria. Share options,
restricted stock units (“RSUs”) and warrant awards (collectively “Equity Incentive Awards”) to Executive Directors are linked
to performance as well as being time vested.
Annual salary
Salaries are set at a level appropriate for the role and the individual and are reviewed annually with effect from 1 April each
year. Adjustments are made, if required, to reflect company and individual performance and competitive pay levels. The
Non-Executive Director salaries were reviewed and amended with effect from 1 April 2023. There were no changes to the
Executive Director salaries or employment contracts in the year.
31
Performance bonus
KRM22 plc
ANNUAL REPORT 2023
These are designed to reflect KRM22’s performance taking into account the performance of its peers, the markets in
which KRM22 operates and the Executive Directors’ contribution to that performance. No cash bonuses were paid to the
Directors in the year.
Equity Incentive Awards
The following Equity Incentive Awards covering share options, RSUs and warrants were held by Directors in the year.
Option holder
Name
Keith Todd
Kim Suter
Sandy Broderick
Garry Jones
Date of grant
18/09/2020
Exercise price
£0.380
Vesting period
18/09/2020 – 17/09/2023
28/09/2018
10/06/2019
10/06/2019
23/12/2019
22/07/2020
18/09/2020
01/10/2020
12/01/2021
16/12/2022
10/06/2019
18/09/2020
01/10/2020
10/06/2019
01/10/2020
£1.000
£0.850
£0.850
£0.525
£0.300
£0.380
£0.380
£0.365
£0.630
£0.850
£0.380
£0.380
£0.850
£0.380
28/09/2018 – 27/09/2021
10/06/2019 – 10/06/2022
10/06/2019 – 01/03/2020
23/12/2019 – 22/12/2022
22/07/2020 – 22/08/2020
18/09/2020 – 17/09/2023
01/10/2020 – 31/10/2020
12/01/2021 – 12/02/2021
16/12/2022 – 15/12/2025
10/06/2019 – 03/04/2022
18/09/2020 – 17/09/2023
01/10/2020 – 31/12/2020
10/06/2019 – 03/04/2022
01/10/2020 – 31/12/2020
Steve Sparke
01/10/2020
£0.380
01/10/2020 – 31/12/2020
Total
RSU holder
Name
Stephen Casner
Kim Suter
Total
Warrant holder
name
Keith Todd
Stephen Casner
Total
award
Date of award
18/09/2020
30/11/2023
Vesting period
18/09/2020 – 17/09/2025
30/11/2023 – 29/11/2028
Date of grant
30/04/2018
24/04/2018
Exercise price
£1.00
£1.00
Vesting period
30/04/2018 – 29/04/2021
24/04/2018 – 23/04/2021
Number of ordinary
shares under option
287,831
287,831
50,000
50,000
30,000
60,000
21,875
124,342
17,270
17,979
100,000
471,466
10,000
59,210
59,211
128,421
176,471
49,342
225,813
59,211
59,211
1,172,742
Number of ordinary
shares under option
253,162
68,685
321,847
Warrants
held
3,300,000
1,200,000
4,500,000
The 50,000 share options awarded to Kim Suter on 28 September 2018 automatically lapsed on 27 September 2023 as
the performance condition, which formed part of the vesting conditions, was not achieved. During the year, a total of
608,344 RSUs were awarded, of which 68,685 were awarded to Kim Suter.
Further information on Equity Incentive Awards is detailed in note 25 to the financial statements.
32
Service contracts
KRM22 plc
ANNUAL REPORT 2023
Following the Board changes announced on 7 March 2024, all Executive Directors have employment contracts which are
subject to six months’ notice from either the executive or KRM22 at any given time. Prior to this, the Executive Director
employment contracts were subject to between six and twelve months notice from either the executive or KRM22.
Non-Executive Directors’ fees are determined by the Executive Directors having regard to the need to attract high calibre
individuals with the right experience, the anticipated time commitment to fulfil their duties and comparative fees paid in
the market to which KRM22 operates. They may be invited to participate in KRM22’s Equity Incentive Award schemes.
Directors’ Emoluments
The remuneration of the Executive and Non-Executive Directors (audited) for the year ended 31 December 2023 was as
follows:
Salary
& Fees
£’000
60
241
161
31
26
31
550
Benefits
£’000
17
–
4
–
–
–
21
2023
Share
based
payments
£’000
6
23
(9)
1
-
–
21
Pension
£’000
–
–
9
–
–
–
9
Total
£’000
83
264
165
32
26
31
601
Salary
& Fees
£’000
60
244
160
31
25
30
550
Benefits
£’000
13
–
4
–
–
–
17
2022
Share
based
payments
£’000
8
32
10
2
2
–
54
Pension
£’000
–
–
9
–
–
–
9
Total
£’000
81
276
183
33
27
30
630
Keith Todd
Stephen Casner
Kim Suter
Sandy Broderick
Garry Jones
Steve Sparke
Total
The benefits relate to private medical insurance, life insurance, critical illness cover and income protection insurance for
Directors and their immediate families.
Directors’ Interests
The Directors who held office at 31 December 2023 had the following interest in the ordinary share capital of the Company
as at that date:
Director
Keith Todd
Stephen Casner
Kim Suter
Sandy Broderick
Garry Jones
Steve Sparke
At 31 December 2023
No. of ordinary shares of 10p each
At 31 December 2022
No. of ordinary shares of 10p each
2,763,677
513,143
26,666
11,765
176,471
273,236
2,763,677
513,143
26,666
11,765
176,471
273,236
Sandy Broderick
Remuneration Committee Chairman
21 May 2024
33
KRM22 plc
ANNUAL REPORT 2023
NOMINATION COMMITTEE REPORT
During 2023 the Nomination Committee was composed of Sandy Broderick, as Chairman, Garry Jones and Steve Sparke.
The main duties of the Committee are set out in its terms of reference, which are available on KRM22’s website. The
Committee met on one occasion in 2023 to undertake an annual review of Board performance.
The annual review of Board performance considered the time spent by Non-Executive board members, the structure, size
and composition of the Board, the Board’s performance and the Nomination Committee’s performance. The Committee
concluded that the Board’s performance, effectiveness and composition was appropriate considering the size of the
Company and would continue to monitor the Board’s construction and remit. In considering the performance of the
Nomination Committee, the Committee deemed their performance as satisfactory and that everything within its scope
had been considered satisfactorily.
In addition to evaluating Board performance, the Committee considered the reappointment of Directors that were required
to retire and offer themselves for reappointment at the AGM in June 2023. Having reviewed their performance, the
Committee recommended to the Board that the retiring Directors be reappointed to the Board.
Sandy Broderick
Nomination Committee Chairman
21 May 2024
34
KRM22 plc
ANNUAL REPORT 2023
DIRECTORS’ REPORT
The Directors present their report and the audited financial statements of KRM22 Plc (the “Company”) and its subsidiary
companies (together “KRM22”, the “Group”), for the year ended 31 December 2023. An indication of likely future
developments in the business is set out in the Strategic Report.
Principal activities
The principal activity of KRM22 is the development and sale of risk management software to the financial services
industry.
Directors
The Directors of the Company who served throughout the year and to the date of signing this report, except as noted
below were:
Garry Jones
Non-Executive Chairman (previously Non-Executive Director until 6 March 2024)
Dan Carter
Chief Executive Officer (appointed 7 March 2024)
Kim Suter
Chief Financial Officer
Keith Todd CBE
Executive Director (previously Executive Chairman until 6 March 2024)
Sandy Broderick
Non-Executive Director
Steve Sparke
Non-Executive Director
Stephen Casner
Previously Chief Executive Officer until 6 March 2024 (resigned 6 March 2024)
Director indemnification and insurance
KRM22 maintains Directors’ and Officers’ liability insurance for each of its directors. The insurance covers any liabilities
that may arise to a third party, other than KRM22 or Company, for negligence, default or breach of trust or duty.
Financial risk management objectives and policies
Further detailed commentary on financial risk management is included in note 27.
35
Liquidity risk
KRM22 plc
ANNUAL REPORT 2023
KRM22 seeks to manage financial risk by ensuring adequate liquidity is available to meet foreseeable needs and to invest
cash assets safely and profitably. Short-term flexibility is achieved by holding significant cash balances in KRM22’s main
operational currencies, notably UK Sterling, US Dollar, Euro and Czech Kroner. In addition, the TT Convertible Loan is for
up to £5.0m and the remaining £0.5m of the £5.0m facility can be drawn down at any point by KRM22.
Credit risk
KRM22 is exposed to credit risk from its operations, primarily from trade receivables. The credit risk is managed through
setting payment terms and credit limits with its customers and, where possible, for revenue to be invoiced in advance of
the service being provided.
Foreign exchange risk
KRM22 has significant operations in both the UK and overseas. Revenue and costs are exposed to variations in exchange
rates and therefore reported losses. There is some natural hedging of transactional foreign exchange risk, however
KRM22 remains subject to translation exchange risk.
Overseas branches
KRM22 has one branch outside the UK located in Czech Republic.
Development
KRM22 continues to dedicate resource to develop the Global Risk Platform and its suite of Trading (Limits Manager and
Risk Manager) and Corporate (Risk Cockpit and Market Surveillance) risk management products.
In accordance with IAS38 ‘Intangible Assets’, expenses are capitalised when it is probable that future economic benefits
will be attributable to the asset and these costs can be measured reliably (see note 3). For the year ended 31 December
2023, total expenditure that has been capitalised on these projects totalled £1.1m (2022: £0.8m).
Going Concern
KRM22’s business activities, together with the factors likely to affect its future development, performance and position
are set out in the Strategic report on pages 9 – 18 and the financial position of KRM22, its cash flows, liquidity position
and borrowing facilities are described in the notes to the financial statements, in particular in the consolidated cash flow
statement on page 53 and in note 27 (financial instruments).
These financial statements have been prepared on the going concern basis. The Directors have reviewed KRM22’s going
concern position taking into account its current activities, budgeted performance and the factors likely to affect its future
development, which are set out in this Annual Report, and include KRM22’s objectives, policies and processes for
managing its capital, its financial risk management objectives and its exposure to credit and liquidity risks.
The Directors have undertaken a significant assessment of the cashflow forecast covering a period of at least twelve
months from the date of approval of the financial statements. Cashflow forecasts have been prepared based on a range
of scenarios including, but not limited to, existing customer churn at different churn rates, no new contracted sales
revenue, delayed sales and a combination of these different scenarios.
Having assessed the sensitivity analysis on cashflows, the key risks to KRM22 remaining a going concern and not being
in breach of the financial covenants associated with the TT Convertible Loan is existing customers paying on payment
terms and within 45 days of invoice, customer churn or up to 10%, conversion of some of the sales opportunities that are
currently at contract negotiation stage and maintaining control of the cost base.
36
KRM22 plc
ANNUAL REPORT 2023
The time to close new customers and the value of each customer, which are deemed individually as high value and low
volume in nature, is key to the forecast being achieved and KRM22 continuing to operate within its existing facilities, this
being KRM22’s current cash balance and the ability to drawdown on the remaining funds available through the TT
Convertible Loan. However, even if the forecast is achieved, there remains a material uncertainty around KRM22 operating
within the financial covenants associated with TT Convertible Loan. The TT Convertible Loan includes financial
covenants, reported at the end of each quarter, based on the Group’s financial performance and there is a risk that KRM22
breaches the Cash Covenant, which requires KRM22 to retain a minimum amount of cash, on the 31 December 2024 and
31 March 2025 measurement dates. Failure to comply with a financial covenant will result in an Event of Default which
may result in TT withdrawing the TT Convertible Loan with all accrued amounts becoming immediately due and payable
which would result in KRM22 becoming insolvent.
The Board have received a letter of support from TT that they would be willing to enter into discussions with KRM22
around amending the terms of the TT Convertible Loan to ensure that KRM22 does not breach the Cash Covenant.
Amendments could include, but are not limited to, reducing the value of the Cash Covenant at each measurement date
so that KRM22’s cash exceeds the minimum cash requirement on each measurement date, and deferring the accrued
interest payments that are due on 31 December 2024 and 31 March 2025 to 30 June 2025 and 30 September 2025
respectively. If the TT Convertible Loan was not amened, KRM22 would be obliged to seek alternative resolution including
implementing extensive cost reduction measures.
The Directors have concluded that the circumstances set forth above indicates the existence of a material uncertainty
that may cast significant doubt on KRM22’s ability to continue as a going concern. However, given KRM22’s forecast,
visible sales pipeline, working capital needs and letter of support from TT, the Directors have considered it appropriate to
prepare the financial statements on a going concern basis and the financial statements do not include the adjustments
that would be required if KRM22 were unable to continue as a going concern.
See note 3 on page 56 for further information on going concern.
Post year-end reporting date events
On 7 March 2024, Dan Carter was appointed CEO of the Company, whilst Stephen Casner, a founder director and former
CEO of the Company, resigned from KRM22. In addition, Keith Todd relinquished his role as Executive Chairman, whilst
remaining an Executive Director of the Company and Garry Jones succeeded Keith Todd as Non-Executive Chairman of
the Company.
On 10 April 2024, the Company issued 140,187 new ordinary shares of 10 pence each in the Company at a price of 85
pence per Ordinary Share as consideration for a partial settlement of the deferred consideration payable in respect of the
historical acquisition of Object+ Holding B.V.
Substantial Shareholders
As at 31 December 2023, the Shareholders listed below had a disclosable interest of 3% or more in the nominal value of
the ordinary share capital of the Company.
Trading Technologies International, Inc.
Kestrel Partners
KRM22 Concert Party
Canaccord Genuity Wealth Management
Cinnober Financial Technology AB
Herald Investment Management
Octopus Investments
Number of
ordinary shares
8,916,584
6,261,922
4,392,827
3,750,000
2,654,434
2,077,624
1,134,308
Percentage of
ordinary shares %
25.0
17.6
12.3
10.5
7.4
5.8
3.2
37
Energy and carbon
KRM22 plc
ANNUAL REPORT 2023
The 2018 Regulations introduced requirements under Part 15 of the Companies Act 2006 for an enhanced group of
companies, which are defined as large by the Companies Act 2006, to disclose their annual energy use and greenhouse
gas emissions, and related information. The Group is not currently defined as large. However given the Group’s values
and taking account of its energy consumption has chosen to apply the 2018 Regulations. KRM22 plc, itself consumes
less than 40MWh and therefore as a low energy user, which negates the need to make detailed disclosures of its energy
and carbon information. Furthermore and taking account of this, it has applied the option permitted by the 2018
Regulations to exclude any energy and carbon information relating to its subsidiaries where the subsidiary would not itself
be obliged to include if reporting on its own account; this applies to all subsidiaries within the group.
Corporate governance
The Company adopts the QCA Corporate Governance Code for Small and Mid-Size Quoted Companies (“QCA guidelines”)
as set out on pages 22 – 27.
Dividends
No interim dividends were paid and the Directors do not recommend payment of a final dividend however the Directors
may wish to do so in future years.
Staff Equity Incentive Schemes
Details of staff Equity Incentive Schemes are set out in note 25 to the financial statements.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual 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, Directors
have prepared the Group and Company financial statements in accordance with UK adopted international accounting
standards in conformity with the requirements of the Companies Act 2006. 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 the affairs of
KRM22 and the Company and for the profit or loss of KRM22 and the Company for that period. The Directors are also
required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies
trading securities on the AIM.
In preparing these financial statements, the Directors are also required to:
• Select suitable accounting policies and apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• State whether they have been prepared in accordance with UK adopted international accounting standards in
conformity with the requirements of the Companies Act 2006; and
• Prepare the financial statements on the going concern basis, unless it is inappropriate to presume the Group and
Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
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 requirements of 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.
38
Website publication
KRM22 plc
ANNUAL REPORT 2023
The Directors are responsible for ensuring that the annual report and the financial statements are made available on the
Company’s website. Financial statements are published on the Company’s website in accordance with legislation in the
United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in
other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The
Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
Disclosure of information to the auditor
Each of the Directors of the Company at the time when this report was approved confirms that:
• So far, as the Director is aware, there is no relevant audit information which the Company’s auditor is unaware;
and
• He has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant
audit information and to establish that the Company’s auditor is aware of that information. This confirmation is
given in accordance with Section 418(2) of the Act.
Auditor
BDO LLP was appointed as auditor to the Company and in accordance with Section 485 of the Companies Act 2006, a
resolution proposing that they be reappointed will be tabled at a General Meeting.
Approval
The Directors’ report was approved on behalf of the Board by:
Kim Suter
Company Secretary
21 May 2024
Financial Statements
40
KRM22 plc
ANNUAL REPORT 2023
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF KRM22 PLC
Opinion on the financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s
affairs as at 31 December 2023 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of KRM22 Plc (the “Parent Company”) and its subsidiaries (the “Group”) for
the year ended 31 December 2023 which comprise the consolidated income statement and the statement of
comprehensive income for the Group, the consolidated statement of financial position for the Group, the Company
statement of financial position, the consolidated statement of cash flows for the Group, the consolidated statement
of changes in equity for the Group, Company statement of changes in equity, and notes to the consolidated financial
statements, including material accounting policy information.
The financial reporting framework that has been applied in the preparation of the Group financial statements is
applicable law and UK adopted international accounting standards. The financial reporting framework that has been
applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom
Generally Accepted Accounting Practice).
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 believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remain 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.
Material uncertainty relating to going concern
We draw attention to note 3 in the financial statements, which indicates that the Group and the Parent Company are
dependent on amending the terms of the convertible loan to ensure the cash covenants are not breached, which is
not guaranteed. These events or conditions, along with other matters as set forth in Note 3, indicate that a material
uncertainty exists that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as
going concerns. Our opinion is not modified in respect of this matter.
Because of the material uncertainty noted above, judgements made by management, and the significance of this area,
we have determined going concern to be a key audit matter. Our evaluation of the directors’ assessment of the Group
41
KRM22 plc
ANNUAL REPORT 2023
and the Parent Company’s ability to continue to adopt the going concern basis of accounting and in response to the
key audit matter included:
• We obtained an understanding of the business model, objectives, strategies and related business risk, the
measurement and review of the entity’s financial performance including forecasting and budgeting processes
and the entity’s risk assessment process.
• We assessed Director’s assumptions including the reliability of underlying data used to make the
assumptions, whether assumptions and changes to assumptions from prior years are appropriate and
consistent with each other.
• We challenged Directors’ plans for future actions in relation to the going concern assessment including
whether such plans are feasible in the circumstances.
• We evaluated the base case of the cash forecast prepared by the Directors and performed appropriate audit
procedures around the various scenarios. We also reviewed correspondence with the lender regarding the
future plans for the debt facility.
• We critically evaluated the reasonableness of the proposed mitigations and Director's ability to implement
them within 12 months from the date of approval of the financial statements.
• We assessed adequacy and appropriateness of disclosures in the financial statements regarding the going
concern assessment.
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage
91% (2022: 90%) of Group loss before tax
95% (2022: 94%) of Group revenue
95% (2022: 95%) of Group total assets
Key audit matters
2023
2022
Revenue Recognition
Impairment of intangible assets
(including Goodwill)
Going Concern
✓
✓
✓
✓
✓
-
Materiality
Group financial statements as a whole
£198,000 (2022: £198,000) based 2% of Total expenditures (2022: 6.05% of Loss
before tax).
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including assessing whether there was evidence of
bias by the Directors that may have represented a risk of material misstatement.
42
KRM22 plc
ANNUAL REPORT 2023
In establishing the overall approach to the Group audit, we assessed the audit significance of each component in the
Group by reference to both its individual financial significance to the Group or other specific nature or circumstances.
We identified four individually significant components and two entities with specific procedures which makes up 91%
of Group loss before tax and also covers 95% of the total assets of the Group.
The significant components in all territories were audited by the Group audit team, as the Group’s finance team and
information for all territories are based within the UK and to this extent:
• The Group audit team performed full scope audits for KRM22 Plc and its subsidiaries KRM22 Central Limited,
KRM22 Americas Inc and KRM22 ProOpticus LLC.
• The Group audit team performed specified audit procedures around Intangibles, Deferred consideration for
KRM22 Development Ltd and KRM22 Netherlands BV due to their significance to the Group; and
• The remaining components not subject to full scope audit or specific procedures have been reviewed for
Group reporting purposes, by the Group auditor, using analytic procedures to corroborate the conclusions
reached that there are no significant risks of material misstatement of the aggregated financial information
of these components.
The Group audit team performed the audit of 95% of the Group revenue using the materiality levels set out above.
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, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters
were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters. In addition to the matter described in the Material
uncertainty related to going concern section above, we have determined the matters below to be the key audit matters
to be communicated in our report.
Key audit matter
Revenue
Recognition
(Note 3,4 and
5)
As disclosed in Note 3, the Group, as a software
business, generates revenue primarily from the
sale of recurring software as a service license,
from software
and non-recurring
implementation and set up services.
revenue
•
•
The key audit matter related to revenue
recognition is a risk of material misstatement in
•
relation to the disclosure of ARR (annual
revenue). While a non-statutory
recurring
measure it is one of the key performance
•
to ensure each revenue stream had a
indicators and a financial covenant for the
standalone value and that revenue is not
borrowings which means there exists a fraud
risk over completeness, accuracy and disclosure
recorded
inaccurately
recognised
of the balance.
prematurely.
/
•
•
Impairment
of intangible
assets
(including
Goodwill)
(Note 3 and
13)
Taking account of the Group’s accounting policy
in note 3, and as disclosed in note 13, the
Directors have determined an impairment in the
current year of £1.5m of goodwill.
This has been determined based on a value in
use model, based on revenue and cost growth
How the scope of our audit addressed the key
audit matter
•
We performed the following specific testing:
to
• We have obtained a listing of the ARR
contracts
completeness,
test
accuracy of the balance to underlying
records and performed substantive
procedures to test the accuracy and
presentation of the revenue by agreeing
the ARR workings to the contracts
sampled within our revenue testing.
Key observations:
Based on the work performed we consider that
ARR has been presented appropriately.
Our audit procedures included the following:
• We challenged management’s inputs to
the impairment assessment - growth
rate, weighted average cost of capital,
terminal value and model based on our
knowledge of the Group’s business and
43
KRM22 plc
ANNUAL REPORT 2023
assumptions, to assess the recoverability of the
intangible assets (including goodwill).
There are significant estimated involved in the
determination of the recoverable amount of the
intangibles (including goodwill).
to date. We
further
performance
involved our internal valuation team
(experts) to review the model and inputs
to
impairment
assessment.
the management
• We considered whether the discounted
cash flow model applied to value the
recoverable amount of the intangibles
appropriately supports the asset value
following
being
recognised
impairment
the
• We checked that the forecast figures
included within the model had been
approved by the Board and the base
case scenario was consistent with
information obtained
in other audit
procedures as well as considering the
overall sales pipeline
identified by
management.
• We assessed the adequacy of the
financial reporting requirements of the
and
related
disclosures in the financial statements
against
the
the
accounting standards.
requirements of
accounting
policies
• We have assessed and compared the
current market capitalisation with the
carrying value of the Goodwill and
Intangibles.
Key observations
that management’s estimates
the procedures performed, we
Based on
in
consider
determining
recoverable amount of
intangibles including goodwill are reasonable.
We consider the disclosure within the accounts
is appropriate
the
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
44
KRM22 plc
ANNUAL REPORT 2023
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
Group financial statements
Parent company financial statements
2023
2022
2023
2022
Materiality
£198,000
£198,000
£5,800
£31,240
2%
expenditures
of
total
6.05%
before tax
of
losses
2% of total assets
1.3% of total assets
A primary driver for
the results in the year
as the group remains
loss making.
A primary KPI used
by management to
assess the
performance of the
business.
As a holding company an asset-based metric
was considered most appropriate.
£138,000
£138,000
£4,000
£21,868
A number of factors including the expected total value of known and likely misstatements
(based on past experience and other factors) and management’s attitude towards proposed
adjustments.
A number of conditions leading to setting performance materiality closer to materiality.
Basis for
determining
materiality
Rationale for the
benchmark applied
Performance
materiality
Basis for
determining
performance
materiality
Rationale for the
percentage
applied for
performance
materiality
Component materiality
For the purposes of our Group audit opinion, we set materiality for each significant component of the Group, apart
from the Parent Company whose materiality is set out above, based on a percentage of between 50% and 75% (2022:
50% and 75%) of Group materiality dependent on the size and our assessment of the risk of material misstatement of
that component. Component materiality ranged from £95,000 to £148,500, (2022: £55,000 to £148,500). In the audit
of each component, we further applied performance materiality levels of 70% (2022: 70%) of the component
materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately
mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £9,900
(2022:£9,900). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
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. 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
45
KRM22 plc
ANNUAL REPORT 2023
knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to
a material misstatement in the financial statements themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required
by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report
and Directors’
report
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic report and the Directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
the Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
Matters on which
we are required to
report by
exception
In the light of the knowledge and understanding of the Group and 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.
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the Parent Company, or returns
•
adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting
records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent Company
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
46
KRM22 plc
ANNUAL REPORT 2023
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
• Our understanding of the Group and the industry in which it operates;
• Discussion with management and those charged with governance including Audit Committee; and
• Obtaining and understanding of the Group’s policies and procedures regarding compliance with laws and
regulations;
we considered the significant laws and regulations to be the applicable accounting framework, UK tax legislation, AIM
Listing Rules and Companies Act 2006..
The Group is also subject to laws and regulations where the consequence of non-compliance could have a material
effect on the amount or disclosures in the financial statements, for example through the imposition of fines or
litigations. We identified such laws and regulations to be the health and safety legislation.
Our procedures in respect of the above included:
• Review of minutes of meeting of those charged with governance for any instances of non-compliance with
laws and regulations;
• Review of correspondence with regulatory and tax authorities for any instances of non-compliance with laws
and regulations; and
• Review of financial statement disclosures and agreeing to supporting documentation;
Fraud
We assessed the susceptibility of the financial statements to material misstatement, including fraud. Our risk
assessment procedures included:
• Enquiry with management and those charged with governance also considered Audit Committee regarding
any known or suspected instances of fraud;
• Obtaining an understanding of the Group’s policies and procedures relating to:
o Detecting and responding to the risks of fraud; and
o
Internal controls established to mitigate risks related to fraud.
• Review of minutes of meeting of those charged with governance for any known or suspected instances of
fraud;
• Discussion amongst the engagement team as to how and where fraud might occur in the financial
statements;
• Performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks
of material misstatement due to fraud; and
• Considering remuneration incentive schemes and performance targets and the related financial statement
areas impacted by these;
Based on our risk assessment, we considered the areas most susceptible to fraud to be Management override and
revenue recognition.
Our procedures, in addition to those set out in the Key Audit Matter regarding Management override, in respect of the
above included:
• A review and verification of specific journal entries made in the year, agreeing the journals to supporting
documentation and considering whether they are appropriate. We determined key risk characteristics, such
as unusual pairings with a particular emphasis on revenue journals;
47
KRM22 plc
ANNUAL REPORT 2023
• A critical review of the consolidation and, in particular, manual “top side journals” or late journals posted at
consolidated level;
• A review of estimates and judgements applied by Management in the financial statements to assess their
appropriateness and the existence of any systematic bias; and
• Review of unadjusted audit differences for indications of bias or deliberate misstatement
Our procedures, in addition to those set out in the Key Audit Matter regarding Revenue in respect of the above included:
• Testing journal entry data through the year for completeness and reliability of the data;
• Testing a sample of journal entries throughout the year, which met a defined risk criteria, such as unusual
journals by agreeing to supporting
combination with particular emphasis on revenue and cash
documentation;
• Assessing significant estimates made by management in the financial statement and to assess their
appropriateness and the existence of any systematic bias;
• Review of unadjusted audit differences for indications of bias or deliberate misstatement; and
• A critical review of the consolidation and, in particular, manual “top side journals” or late journals posted at
consolidated level;
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members who were all deemed to have appropriate competence and capabilities and remained alert to any indications
of fraud or non-compliance with laws and regulations throughout the audit.
Our audit procedures were designed to respond to risks of material misstatement in the financial statements,
recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations or
through collusion. There are inherent limitations in the audit procedures performed and the further removed non-
compliance with laws and regulations is from the events and transactions reflected in the financial statements, the
less likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent 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 Parent 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 Parent Company and the
Parent Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Matthew Haverson (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
Date: 22 May 2024
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
48
KRM22 plc
ANNUAL REPORT 2023
CONSOLIDATED INCOME STATEMENT AND
STATEMENT OF COMPREHENSIVE INCOME FOR THE
GROUP
For the year ended 31 December 2023
Revenue
Cost of sales
Gross profit
Other operating income
Administrative expenses
Operating loss before interest, taxation, depreciation, amortisation, share
based payment and exceptional items (“Adjusted EBITDA”)
Depreciation and amortisation
Impairment on intangible assets
Profit on disposal of tangible/intangible assets
Deferred consideration write back
Gain on extinguishment of debt (net)
Unrealised foreign exchange (loss)/gain
Acquisition, funding and debt related expenses
Share-based payment credit/(charge)
Operating loss
Finance charge (net)
Loss before taxation
Taxation credit
Loss for the year
Loss for the year attributable to:
Equity shareholders of the parent
Other comprehensive income
Item that may be reclassified subsequently to profit and loss:
Exchange gain/(loss) on translation of foreign operations
Total comprehensive loss for the year
Total comprehensive loss for the year attributable to:
Equity shareholders of the parent
Loss per ordinary share
Basic losses share
Diluted losses per share
All amounts relate to continuing activities.
Note
5
6
7
10
11
12
12
The notes on pages 54 to 83 form part of these financial statements.
2023
£’000
5,266
(1,145)
4,121
142
(8,788)
(1,399)
(1,298)
(1,593)
–
115
127
(539)
(38)
100
(4,525)
(353)
(4,878)
259
(4,619)
(4,619)
(4,619)
334
(4,285)
(4,285)
(4,285)
(13.0p)
(13.0p)
2022
£’000
4,273
(955)
3,318
131
(6,077)
(1,684)
(1,637)
–
14
–
–
812
–
(133)
(2,628)
(641)
(3,269)
168
(3,101)
(3,101)
(3,101)
(563)
(3,664)
(3,664)
(3,664)
(8.7p)
(8.7p)
49
KRM22 plc
ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF FINANCIAL
POSITION FOR THE GROUP
As at 31 December 2023
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Right of use assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Lease liabilities
Loans and borrowings
Derivative financial liability
Net current liabilities
Non-current liabilities
Trade and other payables
Lease liabilities
Loans and borrowings
Deferred tax liability
Total liabilities
Net (liabilities)/assets
Equity
Share capital
Share premium
Merger reserve
Convertible debt reserve
Foreign exchange reserve
Share-based payment reserve
Retained deficit
Total equity
Note
13
13
14
20
16
18
19
20
21
21
19
20
21
22
24
25
2023
£’000
3,516
2,105
21
136
5,778
1,142
886
2,028
7,806
3,900
369
391
196
4,856
(2,828)
–
–
3,887
164
4,051
8,907
(1,101)
3,567
20,517
(190)
327
(114)
2,945
(28,153)
(1,101)
2022
£’000
5,167
2,244
11
369
7,791
1,462
1,900
3,362
11,153
3,853
493
2,974
255
7,575
(4,213)
30
122
–
245
397
7,972
3,181
3,567
20,517
(190)
224
(448)
3,045
(23,534)
3,181
The financial statements were approved by the Board and authorised for issue on 21 May 2024 and are signed on its
behalf by:
Kim Suter
Company Secretary
The notes on pages 54 to 83 form part of these financial statements.
50
KRM22 plc
ANNUAL REPORT 2023
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
Non-current assets
Investments
Intercompany loans
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Loans and borrowings
Net current liabilities
Non-current liabilities
Loans and borrowings
Total liabilities
Net liabilities
Equity
Share capital
Share premium
Convertible debt reserve
Share-based payment reserve
Retained earnings
Total equity
Note
15
16
16
18
19
21
21
24
25
2023
£’000
1
–
1
82
214
296
297
195
391
586
(289)
3,887
3,887
4,473
(4,176)
3,567
20,517
327
2,945
(31,532)
(4,176)
2022
£’000
732
77
809
96
1,475
1,571
2,380
170
2,974
3,144
(1,573)
–
–
3,144
(764)
3,567
20,517
224
3,045
(28,117)
(764)
As permitted by s408 Companies Act 2006, the Company has not prepared its own statement of comprehensive
Income and related notes. The Company’s loss for the year was £3,415,000 (2022: loss of £3,392,000).
The financial statements were approved by the Board and authorised for issue 21 May 2024 and are signed on its
behalf by:
Kim Suter
Company Secretary
The notes on pages 54 to 83 form part of these financial statements.
51
KRM22 plc
ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY FOR THE GROUP
For the year ended 31 December 2023
At 1 January 2023
Loss for the year
Other comprehensive
gain
Total comprehensive
gain/(loss)
Convertible debt option
Share-based payments
Ordinary
Shares
£’000
3,567
–
Share
premium
£’000
20,517
–
Merger
reserve
£’000
(190)
–
Convertible
debt reserve
£’000
224
Foreign
exchange
reserve
£’000
(448)
–
SBP
Reserve
£’000
3,045
–
Retained
losses
£’000
(23,534)
(4,619)
Total
equity
£’000
3,181
(4,619)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
103
–
327
334
334
–
–
–
–
334
–
–
(100)
(4,619)
–
–
(4,285)
103
(100)
(114)
2,945
(28,153)
(1,101)
At 31 December 2023
3,567
20,517
(190)
For the year ended 31 December 2022
At 1 January 2022
Loss for the year
Other comprehensive
loss
Total comprehensive
loss
Share-based payments
Ordinary
Shares
£’000
3,567
–
Share
premium
£’000
20,517
–
Merger
reserve
£’000
(190)
–
Convertible
debt reserve
£’000
224
–
Foreign
exchange
reserve
£’000
115
–
SBP
Reserve
£’000
2,912
–
Retained
losses
£’000
(20,433)
(3,101)
Total
Equity
£’000
6,712
(3,101)
–
–
–
–
–
–
–
–
–
–
–
–
(563)
(563)
–
(448)
–
–
133
–
(563)
(3,101)
–
(3,664)
133
3,045
(23,534)
3,181
At 31 December 2022
3,567
20,517
(190)
224
The notes on pages 54 to 83 form part of these financial statements.
52
KRM22 plc
ANNUAL REPORT 2023
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2023
As at 1 January 2023
Loss for the year
Convertible debt option
Share-based payments
Ordinary
shares
£’000
3,567
–
–
–
Share
premium
£’000
20,517
–
–
–
Convertible
debt reserve
£’000
224
–
103
–
SBP
Reserve
£’000
3,045
–
–
(100)
Retained
losses
£’000
(28,117)
(3,415)
–
–
Total
Equity
£’000
(764)
(3,415)
103
(100)
As at 31 December 2023
3,567
20,517
327
2,945
(31,532)
(4,176)
For the year ended 31 December 2022
As at 1 January 2022
Loss for the year
Share-based payments
Ordinary
Shares
£’000
3,567
–
–
Share
Premium
£’000
20,517
–
–
Convertible
debt reserve
£’000
224
–
–
SBP
Reserve
£’000
2,912
–
133
Retained
losses
£’000
(24,725)
(3,392)
–
As at 31 December 2022
3,567
20,517
224
3,045
(28,117)
Total
Equity
£’000
2,495
(3,392)
133
(764)
The notes on pages 54 to 83 form part of these financial statements.
53
KRM22 plc
ANNUAL REPORT 2023
CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE GROUP
For the year ended 31 December 2023
Cash flows from operating activities
Loss for the year
Adjustments for:
Tax credit
Net finance expense
Amortisation of intangible assets
Depreciation of property, plant and equipment and right of use assets
Impairment of intangible assets
Profit on disposal of intangible/tangible assets
Deferred consideration write back
Gain on extinguishment of debt
Unrealised loss/(gain) on non-GBP denominated loans
Equity-settled share-based payment (credit)/expense
Income taxes received
Decrease/(increase) in trade and other receivables
Increase in trade and other payables
Net cash flows used in operating activities
Cash flows from investing activities
Acquisition deferred consideration payment
Purchase of intangible assets
Purchase of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Lease payments principal
Lease payments interest
Receipts from borrowings
Interest paid
Repayments of borrowings
Net cash from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of foreign exchange rate changes
Cash and cash equivalents at the end of the year
The notes on pages 54 to 83 form part of these financial statements.
2023
£’000
2022
£’000
(4,619)
(3,101)
(259)
353
1,059
239
1,593
–
(115)
(127)
539
(100)
186
(1,251)
320
52
(879)
(43)
(1,105)
(16)
(1,164)
(232)
(18)
4,500
(208)
(3,000)
1,042
(1,001)
1,900
(13)
886
(168)
641
1,324
313
–
3)
(14)
–
–
3)
(812)
133
3)
97
(1,587)
(721)
187
(2,121)
–
3)
(840)
(8)
(848)
(217)
(33)
–
(285)
–
(535)
(3,504)
5,362
42
1,900
54
KRM22 plc
ANNUAL REPORT 2023
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS
For the year ended 31 December 2023
1. General information
KRM22 Plc, (the “Company”), is a public company, limited by shares and is quoted on the Alternative Investment Market
(“AIM”). The Company is incorporated and domiciled in the UK. The registered office is 5 Ireland Yard, London, EC4V
5EH.
The principal activity of the Company, and together with its subsidiaries (“KRM22”, the “Group”), is to develop and
invest in leading risk tools to support enterprise, market, compliance, operational and technology risks.
2. Basis of Preparation and Consolidation
Basis of preparation
The financial reporting framework that has been applied in their preparation is applicable law and UK Adopted
international accounting standards 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.
The financial information has been prepared on the historical cost basis except that financial instruments are stated
at the fair value.
The financial statements are prepared in Sterling, which is the functional currency of the Parent Company too.
Monetary amounts in these financial statements are rounded to the nearest £’000.
KRM22 applied all standards and interpretations issued by the IASB that were effective as of 1 January 2023. The
accounting policies set out below have, unless otherwise stated, been applied consistently to all years presented in
this financial information.
The preparation of the financial statements, in conformity with UK Adopted international accounting standards,
requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the
process of applying KRM22’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note
4.
Adoption of new and revised standards
The following new accounting standards have been adopted by the Group in the annual financial statements for the
year ended 31 December 2023, and the effect on the Group’s accounting policies is detailed below:
I.
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making
Materiality Judgements – Disclosure of Accounting Policies
In February 2021, the International Accounting Standards Board (IASB) issued amendments to IAS 1 and IFRS
Practice Statement 2. The amendments to IAS 1 require the disclosure of material accounting policy
information rather than significant accounting policies. The amendments to IFRS Practice Statement 2
provide guidance on how to apply the concept of materiality to accounting policy disclosures. The Group have
revised the accounting policy disclosures to align to the amended requirements.
55
II.
KRM22 plc
ANNUAL REPORT 2023
Amendments to IAS 8 Accounting Policies, changes in Accounting Estimates and Errors – Definition of
Accounting Estimates
In February 2021, the IASB issued amendments to IAS 8 to clarify how to distinguish changes in accounting
policies from changes to accounting estimates. This amendment has had no impact on the financial
statements as there have been no changes to accounting policies in the year.
III.
Amendments to IAS 12 Income Taxes – Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
In May 2021, the IASB issued amendments to IAS 12 to require deferred tax to be recognised on transactions
that, on initial recognition, give rise to equal amounts of taxable and deductible temporary differences. This
has had no material impact on the financial statements as the Group’s existing approach does not result in a
materially different outcome to applying the new amendments.
On 23 May 2023, the IASB issued International Tax Reform - Pillar Two Model Rules - Amendments to IAS 12.
The Group has applied the mandatory temporary exception to the accounting for deferred taxes arising from
the jurisdictional implementation of the Pillar Two rules set out therein.
Standards, amendments and interpretations to published standards not yet effective
There are a number of new standards and amendments to and interpretations of existing standards, which have been
published and are not yet mandatory and which the Group has decided not to adopt early, as below:
Amendments to IAS 1: Classification of Liabilities as Current or Non-current
(not EU endorsed)
Amendments to IFRS 16: Leases – Lease Liability in a Sale-and-Leaseback
Amendments to IAS 7: Statement of Cash Flows and IFRS 7 Financial
Instruments – Supplier Finance Arrangements
Amendments to IAS 21: The Effects of Changes in Foreign Exchange Rates –
Lack of exchangeability
Basis of consolidation
Effective date for
annual periods
beginning
on/after
Issue
date
Expected
Impact
23-Jan-20
22-Sep-22
01-Jan-24
01-Jan-24
None
None
25-May-23
01-Jan-24
None
01-Aug-23
01-Jan-25
None
The financial information represents the consolidated financial information of the Company and its subsidiaries
(“KRM22”, the “Group”) as if they are formed as a single entity. Intercompany transactions and balances between
KRM22 companies are therefore eliminated in full. The results of subsidiary undertakings are included in the
consolidated statement of comprehensive income from the date that control commences until the date that control
ceases. The Company controls a subsidiary if all three of the following elements are present:
• power over the investee;
•
•
exposure to variable returns from the investee; and
the ability of the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements
of control. In assessing control, KRM22 takes into consideration potential voting rights that are currently exercisable.
On 19 April 2018, KRM22 Plc, a company under common control of the KRM22 Central Limited shareholders, acquired
KRM22 Central Limited from its shareholders in return for an issue of shares. As a combination of entities under
common control, the transaction falls outside the scope of the standard IFRS 3 ‘Business Combinations’.
Paragraph 10 of IAS8 Accounting Policies, Changes in Accounting Estimates and Errors requires management to use
its judgement in developing and applying a policy that is relevant, reliable, represents faithfully the transaction, reflects
56
KRM22 plc
ANNUAL REPORT 2023
the economic substance of the transaction, is neutral, is prudent and is complete in all material respects when selecting
appropriate methodology for consolidation accounting.
In the absence of IFRS guidance, KRM22 has applied merger accounting in accordance with ‘FRS102: Section 19
Business Combinations and Goodwill’, as the business combination meets the requirements set out in paragraph 27,
namely:
•
•
the use of the merger accounting method is not prohibited by company law or other relevant legislation;
the ultimate equity holders remain the same, and the rights of each equity shareholder, relative to others before
and after the acquisition are unchanged; and
• no non-controlling interest in the net assets of KRM22 is altered by the transfer.
In accordance with merger accounting, consolidated accounts have been prepared for the restructured Group as if it
has always been in existence. The carrying value of assets and liabilities have not been adjusted to fair value. The
difference between the nominal value of the shares issued and the nominal value of the shares received has been
recorded in the merger reserve.
3. Accounting policies
Going concern
These financial statements have been prepared on the going concern basis. The Directors have reviewed KRM22’s
going concern position taking into account of its current business activities, budgeted performance and the factors
likely to affect its future development, which are set out in this Annual Report, and include KRM22’s objectives, policies
and processes for managing its capital, its financial risk management objectives and its exposure to credit and liquidity
risks.
The Directors have undertaken a significant assessment of the cashflow forecast covering a period of at least twelve
months from the date of approval of the financial statements. Cashflow forecasts have been prepared based on a
range of scenarios including, but not limited to, existing customer churn at different churn rates, no new contracted
sales revenue, delayed sales and a combination of these different scenarios.
Having assessed the sensitivity analysis on cashflows, the key risks to KRM22 remaining a going concern and not
being in breach of the financial covenants associated with the TT Convertible Loan is existing customers paying on
payment terms and within 45 days of invoice, customer churn or up to 10%, conversion of some of the sales
opportunities that are currently at contract negotiation stage and maintaining control of the cost base.
The time to close new customers and the value of each customer, which are deemed individually as high value and
low volume in nature, is key to the forecast being achieved and KRM22 continuing to operate within its existing
facilities, this being KRM22’s current cash balance and the ability to drawdown on the remaining funds available
through the TT Convertible Loan. However, even if the forecast is achieved, there remains a material uncertainty
around KRM22 operating within the financial covenants associated with TT Convertible Loan. The TT Convertible
Loan includes financial covenants, reported at the end of each quarter, based on the Group’s financial performance
and there is a risk that KRM22 breaches the Cash Covenant, which requires KRM22 to retain a minimum amount of
cash, on the 31 December 2024 and 31 March 2025 measurement dates. Failure to comply with a financial covenant
will result in an Event of Default which may result in TT withdrawing the TT Convertible Loan with all accrued amounts
becoming immediately due and payable which would result in KRM22 becoming insolvent.
57
KRM22 plc
ANNUAL REPORT 2023
The Board have received a letter of support from TT that they would be willing to enter into discussions with KRM22
around amending the terms of the TT Convertible Loan to ensure that KRM22 does not breach the Cash Covenant.
Amendments could include, but are not limited to, reducing the value of the Cash Covenant at each measurement date
so that KRM22’s cash exceeds the minimum cash requirement on each measurement date, and deferring the accrued
interest payments that are due on 31 December 2024 and 31 March 2025 to 30 June 2025 and 30 September 2025
respectively. If the TT Convertible Loan was not amened, KRM22 would be obliged to seek alternative resolution
including implementing extensive cost reduction measures.
The Directors have concluded that the circumstances set forth above indicates the existence of a material uncertainty
that may cast significant doubt on KRM22’s ability to continue as a going concern. However, given KRM22’s forecast,
visible sales pipeline, working capital needs and letter of support from TT, the Directors have considered it appropriate
to prepare the financial statements on a going concern basis and the financial statements do not include the
adjustments that would be required if KRM22 were unable to continue as a going concern.
Revenue recognition
Revenue comprises recurring revenue, non-recurring revenue and other revenue and is stated exclusive of VAT and
sales tax.
All revenue is only recognised to the extent when services have been delivered and the revenue can be reliably
measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration
received or receivable.
The following specific recognition criteria are applied to each revenue stream:
Recurring revenue
Recurring revenue comprises Software-as-a-Service (“SaaS”) license fees which give the licensee a right to
access the software for a fixed period of time together with ongoing post-contract customer support services
comprising customer support (including designated contacts, telephone and onsite support), hosting and
maintenance services, enhancements and minor and major upgrades. All of the post-contract customer
support services are bundled into one service and are not readily distinguishable in terms of apportioning the
license fee between its constituent parts.
In applying the principles of IFRS15 ‘Revenue from Contracts with Customers’ the Directors consider that
SaaS licenses provide the customer with a right to access the software over a period of time and that revenue
generated from sales of software licenses is recognised over the term of the license.
Where license fees are invoiced in advance, the income is deferred and released over the term of the license
with the balance recorded within accruals and deferred income in the statement of financial position.
Non-recurring revenue
Non-recurring revenue comprises one-off pieces of work including implementation fees related to initial set-up
services, ad-hoc development services which are outside the scope of post-contract customer services
covered by the license fee and any other invoiced revenue that is not recognised as recurring revenue.
Where implementation fees have only been partially completed at the statement of financial position date,
revenue represents the value of service provided to date based on completed implementations as defined in
the contract. Where payments have been received from customers in advance of services provided, the
amounts are recorded within accruals and deferred income in the statement of financial position. The
implementation fee is a distinct obligation and therefore recognised at a point in time.
58
Deferred revenue
KRM22 plc
ANNUAL REPORT 2023
At 31 December 2023, the balance of deferred revenue was £2.2m (2022: £1.8m) and this will be released to
the income statement in full within one year of the statement of financial position date.
Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the Group’s chief
operating decision maker (CODM). The CODM, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Chief Executive Officer.
Business combinations and goodwill
KRM22 applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities assumed by the former owners of the
acquiree and the equity interests issued by KRM22. The consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement.
Identifiable assets and liabilities acquired, and liabilities assumed are measured initially at their fair values at the
acquisition date. Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any
non-controlling interests in the acquired entity measured on the proportionate net asset basis, over the net of the
acquisition-date amounts of the identifiable assets acquired and liabilities assumed. If, after reassessment, the net of
the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the
consideration transferred, the excess is recognised immediately in the income statement as a bargain purchase gain.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of
impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to the KRM22’s
cash-generating unit that is expected to benefit from the combination, irrespective of whether other assets of liabilities
of the acquiree are assigned to that unit.
Intangible assets
Research expenditure is expensed to the income statement in the year in which it is incurred. Expenditure on internal
projects is capitalised if it can be demonstrated that:
it is technically and commercially feasible to develop the asset for future economic benefit;
•
• adequate resources are available to maintain and complete the development;
• KRM22 is able to use the asset;
• use of the asset will generate future economic benefit;
•
•
expenditure on the development of the asset can be measured reliably; and
it is KRM22’s intention to complete the development and use or sell it.
Other development expenditure is recognised in the income statement as an expense as incurred.
Capitalised development expenditure is stated at cost less accumulated amortisation and less accumulated
impairment losses.
Amortisation is charged to the income statement on a straight line basis over the estimated useful lives of intangible
assets. Intangibles assets are amortised from the date they are available for use. The estimated useful lives are as
follows:
Acquired software
Capitalised development costs
Customer contracts and relationships
-
-
-
straight line over 5 – 10 years
straight line over 3 years
straight line over 10 years
59
KRM22 plc
ANNUAL REPORT 2023
Brand (including trademarks)
-
straight line over 3– 10 years
The basis for choosing these useful lives is with reference to the years over which they can continue to generate value
for KRM22.
Amortisation charges are included within administrative expenses in the consolidated statement of income statement.
KRM22 reviews the amortisation year and methodology when events and circumstances indicate that the useful life
may have changed since the last reporting date.
Property, plant and equipment
Property, plant and equipment are initially measured at historical cost and subsequently measured at historical cost,
net of depreciation and any impairment losses.
Depreciation on other assets is calculated on a straight-line method to allocate their cost or revalued amounts to their
residual values over their estimated useful lives, as follows:
Fixtures and fittings
Office and computer equipment
-
-
straight line over 4 years
straight line over 4 years
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the
carrying value of the asset and is recognised in the income statement.
Right of use assets
KRM22 recognises right of use assets for all applicable leases at the lease liability commencement date. The right of
use asset is initially measured at cost, and consists of the amount of:
the initial measurement of lease liability, plus;
•
• any lease payments made to the lessor at or before the commencement date, less;
• any lease incentives received;
•
the initial estimation of restoration costs; and
• any initial direct costs incurred by the lessee.
Depreciation on right of use assets is calculated on a straight line method over the lease term.
Non-current assets
The Company’s interests in subsidiaries are initially measured at cost and subsequently measured at cost less
accumulated impairment losses.
Impairment of tangible and intangibles assets
All tangible and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount might not be recoverable. An impairment loss is recognised for the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are largely independent cash inflows or Cash Generating Units (CGUs).
Financial assets
Financial assets are recognised in KRM22 and the Company’s statement of financial position when KRM22 and the
Company becomes party to the contractual provisions of the instrument. Under IFRS 9 the classification of financial
assets is based both on the business model and cash flow type under which the assets are held. There are three
principal classification categories for financial assets: amortised cost; fair value through other comprehensive income;
60
KRM22 plc
ANNUAL REPORT 2023
and fair value through profit or loss. KRM22 has not classified any of its financial assets as fair value through other
comprehensive income.
Amortised cost
These assets are non-derivative financial assets held under the ‘held to collect’ business model and attracting cash
flows that are solely payments of principal and interest. They comprise trade and other receivables and cash and
cash equivalents. They are initially measured at fair value plus transaction costs and are subsequently carried at
amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions for trade and other receivables are calculated using an expected credit loss model. Under this
model, impairment provisions are recognised to reflect expected credit losses based on a combination of historic and
forward-looking information, the amount of such a provision being the difference between the net carrying amount
and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables,
which are reported net; such provisions are recorded in a separate allowance account. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term highly liquid
investments with maturities of three months or less.
Financial liabilities
Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial
liabilities.
(a) Financial liabilities at fair value through profit or loss
Financial liabilities are stated at fair value with differences taken to the consolidated income statement. Interest on
financial liabilities up to maturity are included as a finance expense in the consolidated income statement.
Financial liabilities are classified as at FVTPL when the financial liability is held for trading or is a derivative (except for
effective hedge) or are designated upon initial recognition as FVTPL.
Gains or Losses, including any interest expense on liabilities held for trading or a derivative, are recognised in the
consolidated income statement.
(b) Trade and other payables
Trade payables and other payables are not interest bearing and are stated at their full value on initial recognition. For
disclosure purposes, the fair values of trade and other payables are estimated at the present value of future cash
flows, discounted at the market rate of interest at the reporting date. As trade payables and other payables are short
term in nature at the reporting date, the carrying value is considered to be a reasonable approximation of fair value.
(c) Other financial liabilities
Other financial liabilities are initially measured at fair value, net of transaction costs. They are subsequently measured
at amortised cost using the effective interest method, with interest recognised on an effective rate basis.
Fair value measurement
Fair value is measured using the following fair value hierarchy that reflects the significance of the inputs used in
making the measurements. The different levels can be defined as follows:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
Level 2: inputs other than quoted prices included within level that are observable for the asset or liability, either
directly (i.e. prices) or indirectly (i.e. derived from prices); and
61
KRM22 plc
ANNUAL REPORT 2023
•
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Taxation
The tax expense represents the sum of tax currently payable and deferred tax.
(a) Current tax
Any current tax payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the
income statement because it excludes certain items of income or expense that are either taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is
calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Companies within the Group may be entitled to claim special tax allowances in relation to qualifying research and
development expenditure, e.g. R&D tax credits. The Group accounts for such allowances as tax credits which means
they are recognised when it is probable that the benefit will flow to the Group and that the benefit can be reliably
measured. R&D tax credits reduce current tax expense and, to the extent the amounts are due in respect of them and
not settled by the statement of financial position date, reduce current tax payable.
(b) Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets
and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit
and is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable
temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will
be available against which deductible temporary differences can be utilised. Such assets and liabilities are not
recognised if the temporary difference arises from goodwill or the initial recognition (other than in a business
combination) of assets and other liabilities in a transaction that affects neither the tax profit or loss nor the accounting
profit or loss.
The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the
asset is realised. Deferred tax is charged or credited to the income statement, except when it relates to items
charged or credited directly to ‘other comprehensive income’, in which case the deferred tax is dealt with in ‘other
comprehensive income’. Deferred tax assets and liabilities are offset when the Company has a legally enforceable
right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by
the same tax authority.
Provisions
Provisions are recognised when KRM22 has a legal or constructive present obligation as a result of a past event, it is
probable that KRM22 will be required to settle that obligation and a reliable estimate can be made of the amount of
KRM22’s obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation
at the reporting end date, taking into account the risks and uncertainties surrounding the obligation. Where a provision
is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value
of those cash flows.
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third
party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount
of the receivable can be measured reliably.
62
Employee benefits
KRM22 plc
ANNUAL REPORT 2023
The costs of short-term employee benefits are recognised as a liability and as an expense, unless those costs are
required to be recognised as part of the cost of inventories or non-current assets. The cost of any unused holiday
entitlement is recognised in the year in which the employee’s services are received.
Retirement benefits
KRM22 operates a defined contribution plan, under which KRM22 pays contributions to independently administered
pension plans on a mandatory, contractual or voluntary basis. KRM22 has no further payment obligations once the
contributions have been paid. The contributions are recognised as an employee benefit expense in the income
statement when they are due.
Share-based payments
The Company issues equity-settled share-based payments to certain employees and these payments are measured
at fair value (excluding the effect of non-market-based vesting conditions) at the date of the grant using appropriate
pricing models. The fair value determined at the grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the Company’s estimate of shares that will eventually vest
and adjusted for the effect of non-market-based vesting conditions.
At the date of each statement of financial position, the Company revises its estimate of the number of equity
instruments that are expected to become exercisable. It recognises the impact of the revision of original estimates, if
any, in the income statement, and a corresponding adjustment is made to equity over the remaining vesting period.
The fair value of the awards and ultimate expense are not adjusted on a change in market vesting conditions during
the vesting period.
The value of share-based payment is taken directly to reserves and the charge for the period is recorded in the income
statement.
KRM22’s scheme, which awards shares in the parent entity, includes recipients who are employees in all subsidiaries.
In the consolidated financial statements, the transaction is treated as an equity-settled share-based payment, as
KRM22 has received services in consideration for KRM22’s equity instruments. An expense is recognised in the Group
income statement for the fair value of share-based payment over the vesting period, with a credit recognised in equity.
In the subsidiaries’ financial statements, the awards, in proportion to the recipients who are employees in said
subsidiary, are treated as an equity-settled share-based payment, as the subsidiaries do not have an obligation to
settle the award. An expense for the grant date fair value of the award is recognised over the vesting period, with a
credit recognised in equity. The credit is treated as a capital contribution, as the parent is compensating the
subsidiaries’ employees with no cost to the subsidiaries as there is no expectation to recharge the cost. In the parent
company’s financial statements, there is no share-based payment charge where the recipients are employed by a
subsidiary, with the parent company recognising an increase in the investment in the subsidiaries as a capital
contribution from the parent and a credit to equity.
Earnings per share
Earnings per share are calculated by dividing profit or loss after tax attributable to equity shareholders of the parent
company by the weighted average number of ordinary shares in issue during the period.
Diluted earnings per share requires that the weighted average number of ordinary shares in issue is adjusted to assume
conversion of all dilutive potential ordinary shares. These arise from awards made under share-based incentive
schemes. Instruments that could potentially dilute basic earnings per share in the future have been considered but
were not included in the calculation of diluted earnings per share because they are anti-dilutive for the periods
presented. This is due to the KRM22 incurring losses on continuing operations for the year.
63
Leases
KRM22 plc
ANNUAL REPORT 2023
Under IFRS16 ‘Leases’, KRM22 recognises a lease liability at the commencement date of the lease at an amount equal
to the present value of the lease payments during the lease term that are not yet paid. The present value of the lease
payments is based on applying a discount rate which is either the interest rate implicit in the lease or the incremental
borrowing rate. The interest rate is treated as an interest expense and charged to the income statement.
KRM22 also recognises a right of use asset at the lease liability commencement date and is measured at cost as
detailed in the Right of use assets accounting policy. The right of use asset is depreciated over the term of the lease.
Where a lease has less than twelve months until the lease expiry date from the date of commencement, KRM22
continues to classify these as operating leases and are charged as an expense to the income statement on a straight
line basis.
Where KRM22 sublets office space for periods of less than twelve months from the date of commencement of the
sublease or where the terms of the sublease differ significantly to the terms of the headlease, these subleases are
classified as operating leases. Operating lease income, net of agency management charges, is accounted for as other
operating income and credited to the income statement on a straight line basis over the term of the sublease.
Foreign currency
Foreign currency transactions are translated at the exchange rates prevailing at the date of transactions. Monetary
assets and liabilities denominated in foreign currencies are translated at rates of exchange at the statement of
financial position date. Any gain or loss arising from a change in the exchange rates of exchange subsequent to the
date of the transaction is included as a gain or loss in the income statement.
The statement of financial position of the foreign subsidiaries are translated into Sterling at the exchange rate at the
year end. The results of foreign subsidiaries are translated into Sterling at the average rate of exchange during the
financial year. Exchange differences which arise from the translation of opening net assets of the foreign subsidiary
undertakings are included in the consolidated statement of comprehensive income and transferred to the KRM22’s
translation reserve.
Descriptions of nature of each component of equity
The components of KRM22’s equity can be described as follows:
• Share capital – The amount for the nominal value of shares issued.
• Share premium – The amount subscribed for share capital in excess of nominal value after deducting certain
costs of issue.
• Merger reserve – See note 2.
• Convertible debt reserve – This relates to the residual amount of any liability component from the fair value
of debt instruments as a whole where the debt instrument includes a liability and embedded equity feature.
• Foreign exchange reserve – This reserve relates to exchange differences arising on the translation of the
statement of financial position of the KRM22’s foreign operations at the closing rate and the translation of the
income statement of those operations at the average rate.
• Share-based payment (SBP) reserve – This relates to the fair value of share options, warrants and restricted
stock units (“RSUs”) determined at the grant date of the equity- settled share-based payments.
• Retained deficit – The net gains and losses recognised in the consolidated statement of comprehensive
income.
64
KRM22 plc
ANNUAL REPORT 2023
4. Critical accounting judgements and key sources of estimation uncertainty
IAS 1 requires disclosure of the judgements, apart from those involving estimations, that management has made in
the process of applying the entity’s accounting policies that have the most significant effect on the amounts
recognised in the financial statements.
In the application of KRM22 and Company’s accounting policies, the Directors are required to make certain
judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily
apparent from other sources. The estimates and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results may differ from these estimates. The Directors believe
that there are two areas within the financial statements which constitute critical accounting judgements and estimates
as follows:
I.
Capitalisation of development costs
Development costs are capitalised based on an assessment on whether they meet the criteria specified in IAS
38 for capitalisation. During each reporting period, an assessment is performed by management to determine
time spent developing the intangible assets as a proportion of total time spent in the year. This represents an
area of judgement and impacts the value of intangible costs capitalised.
II.
Impairment of goodwill and other intangible assets
The Group has carried out an impairment review of its cash generating unit (“CGU”). The recoverable amount
of the CGU is based on estimates of future cash flows discounted using an appropriate discount rate.
Estimates of future cash flows are inherently uncertain and, to take account of this uncertainty, management
have used the “expected cash flow approach” which involves probability weighting several alternate scenarios.
It is possible that changes in economic conditions or deviations in actual performance from forecast could
result in a material adjustment to the carrying value of the CGU within the next financial year. The key
estimates made by management are set out in note 13.
5. Segmental reporting
The Board of Directors, as the chief operating decision maker in accordance with IFRS 8 Operating Segments, has
determined that KRM22 have identified two areas of risk management as operating segments, together with a third
segment where the two areas of risk management are not easily separable, however for reporting purposes into a
single global business unit and operates as a single operating segment, as the nature of services delivered are
common.
The internal management accounting information has been prepared in accordance with IFRS but has a non-GAAP
‘Adjusted EBITDA’ as a profit measure for the overall group. This amount is reported on the face of the income
statement.
KRM22’s revenue from external customers and information about its non-current assets, excluding deferred tax, by
geography is detailed below:
UK
Europe
USA
Rest of world
Total
2023
Revenue
£’000
1,906
792
2,215
353
5,266
2023
Non-current
assets
£’000
2,109
1,466
2,203
–
5,778
2022
Revenue
£’000
1,712
716
1,520
325
4,273
2022
Non-current
assets
£’000
2,694
1,955
3,141
1
7,791
65
KRM22 plc
ANNUAL REPORT 2023
The Directors consider that the business has two areas of risk management: Trading Risk and Corporate Risk as is
described in the Strategic Report. Within these segments, there are two revenue streams with different characteristics,
which are generated from the same assets and cost base.
For the year ended 31 December 2023, no customer generated more than 10% of total revenue recognised in the year.
For the year ended 31 December 2022, one customer, reported within the UK segment, generated more than 10% of
total revenue and the total revenue received from this customer was £0.5m.
Non-current assets include goodwill and intangible assets recognised on consolidation and are classified by reference
to the geographical location of the KRM22 group company which initially acquired the acquiree.
Recurring revenue is recognised over the period of time and non-recurring revenue is recognised at a point in time.
Recurring revenue
Non-recurring revenue
Total revenue
Trading Risk
Corporate Risk
Multiple Risk
TT Platform
Total
6. Other operating income
Operating lease income (net)
Total revenue
2023
£’000
4,769
497
5,266
2023
£’000
2,487
2,593
72
114
5,266
2023
£’000
142
142
2022
£’000
3,945
328
4,273
2022
£’000
1,867
2,258
148
–
4,273
2022
£’000
131
131
In April 2023, KRM22 entered into an agreement to extend the sublease of some of its office space until the end term
of the headlease which ends in July 2024. The terms of the sublease differ to the terms of the headlease, which
KRM22 recognises as a finance lease, and therefore the sublease is treated as an operational lease with net income
generated in the year of £0.1m (2022: £0.1m).
7. Operating loss
Operating loss for the year has been arrived at after charging/(crediting) the following:
Depreciation of property, plant and equipment
Depreciation of right of use assets
Amortisation of intangible assets
Impairment of intangible assets
Acquisition, funding and debt expenses (refer to note below)
Deferred consideration write back (refer to note below)
Operating lease costs
Foreign currency exchange losses/(gains)
2023
£’000
6
233
1,054
1,593
38
(115)
38
544
2022
£’000
48
265
1,324
–
–
–
28
(843)
66
I.
II.
KRM22 plc
ANNUAL REPORT 2023
Acquisition, funding and debt related costs
Total acquisition, funding and debt related costs of £0.04m were incurred in the year ended 31 December
2023 in connection with the replacement of the Kestrel Convertible Loan facility with the TT Convertible Loan
facility. There were no acquisition, funding and debt related costs incurred in the year ended 31 December
2022.
Deferred consideration write back
On 19 December 2023, the Company signed an addendum (the “2023 Addendum”) to the Object+ Share
Purchase Agreement dated 29 May 2019. Under the terms of the 2023 Addendum, the deferred consideration
of US$1.1m (£0.9m) associated with the third and final performance milestone, which the Directors believe
has been achieved, was reduced by US$0.2m (£0.2m) to US$0.9m (£0.7m) in return for a cash payment of
US$0.1m (£0.04m) to the Seller of Object+. There was no deferred consideration write back or charge
recognised in the year ended 31 December 2022.
8. Auditor’s remuneration
For audit services
Audit of the financial statements of the Company
For other services
Tax services of the Company
Tax services for the Company’s subsidiaries
9. Employee information
I.
Employee numbers
2023
£’000
152
152
8
25
33
2022
£’000
106
106
3
32
35
The average monthly number of people, including Executive Directors, employed by KRM22 during the year was
as follows:
UK
Europe
USA
Rest of world
Total
II.
Employee benefits
The aggregate payroll cost of these persons were as follows:
Wages and salaries
Social security costs
Pension costs to defined contribution schemes
Share-based payments (credit)/expense
Total
III.
Directors’ remuneration
2023
No.
25
10
14
1
50
2023
£’000
3,802
270
149
(100)
4,121
2022
No.
23
9
11
2
45
2022
£’000
3,597
252
145
133
4,127
The remuneration of the Directors, who also represent the key management personnel of KRM22, during the
year was as follows:
67
KRM22 plc
ANNUAL REPORT 2023
Remuneration for qualifying services
Pension contributions to defined contribution schemes
Share-based payments
Total
2023
£’000
571
9
21
601
2022
£’000
567
9
54
630
Full details of Directors’ remuneration is presented in the Remuneration Committee report on page 30. Remuneration
disclosed above includes the following amounts paid to the highest paid director:
Remuneration for qualifying services
Total
2023
£’000
241
241
2022
£’000
244
244
The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to
1 (2022: 1).
10. Finance expense
Interest income
Interest expense on financial liabilities
Interest expense on lease liabilities
Net finance expense
11. Taxation
Current tax
UK Corporation tax at 23.5% on loss for the year (2022:19%)
Income tax on foreign subsidiaries
Research and Development tax credits
Total current tax
Deferred tax
Origination and reversal of temporary differences
Intangible assets recognised on acquisition
Total deferred tax (note 22)
Total tax credit
2023
£’000
(4)
339
18
353
2023
£’000
–
(2)
(186)
(188)
–
(71)
(71)
(259)
2022
£’000
(2)
610
33
641
2022
£’000
–
8
(97)
(89)
–
(79)
(79)
(168)
The tax expense differs from the standard rate of corporate tax in the UK for the year of 23.5% for the following
reasons:
Losses before tax
Loss before tax based on corporation tax 23.5% (2022: 19%)
Expenses not deductible for tax purposes
Intangible assets recognised on acquisition
Income tax on foreign subsidiaries
Losses carried forward
Total tax credit
For information on the Group’s total available tax losses, see note 22.
2023
£’000
(4,619)
(1,085)
68
(71)
(2)
831
(259)
2022
£’000
(3,269)
(621)
21
(79)
8
503
(168)
68
12. Loss per share
KRM22 plc
ANNUAL REPORT 2023
Basic earnings per share is calculated by dividing the loss attributable to the equity holders of KRM22 by the weighted
average number of shares in issue during the year.
KRM22 has dilutive ordinary shares, this being warrants, restricted stock awards and share options granted to
employees. As KRM22 has incurred a loss in the year, the diluted loss per share is the same as the basic earnings per
share as the loss has an anti-dilutive effect.
Loss for the year attributable to equity holders of the parent
Basic weighted average number of shares in issue
Diluted weighted average number of shares in issue
13. Intangible assets
2023
£’000
(4,619)
35,666,336
46,492,491
(13.0p)
2022
£’000
(3,101)
35,666,336
46,671,529
(8.7p)
Goodwill on
Consolidation
£’000
Acquired
software and
related assets
£’000
Capitalised
development
costs
£’000
Cost
At 1 January 2023
Additions
Foreign exchange movements
At 31 December 2023
Accumulated amortisation
At 1 January 2023
Amortisation for the year
Impairment charge for the year
Foreign exchange movements
At 31 December 2023
At 31 December 2022
At 31 December 2023
8,053
–
(246)
7,807
2,886
–
1,497
(92)
4,291
5,167
3,516
2,944
–
(57)
2,887
1,976
228
–
19
2,223
968
664
Total
£’000
14,561
1,105
(323)
15,343
7,150
1,054
1,593
(75)
9,722
7,411
3,564
1,105
(20)
4,649
2,288
826
96
(2)
3,208
1,276
1,441
5,621
Goodwill that arose in prior periods is not amortised. Impairment testing is carried out at Cash Generating Units (CGU)
level on an annual basis.
During the year ended 31 December 2023, the Group’s share price declined and, whilst management remain confident
about KRM22’s future revenue growth, they have used a lower level of revenue growth than that used in last year’s
impairment assessment. Accordingly, the Company has reassessed the recoverability of goodwill and intangible
assets and this has resulted in an impairment of £1.6m.
The Company has estimated the recoverable amount of intangible assets at £5.6m using a value-in-use model by
projecting cashflows for the next five years together with a terminal value using a growth rate. The five-year
projections used in the model are based on the FY24 budget approved by the Directors and discounted to 15% to
account for the uncertainty involved in predicting long-term projections. The other key assumptions used were:
• The discount rate (WACC) of 13% (2022: 20%). An increase of 1% in WACC rate would result in a further
•
£0.7m impairment.
Long-term growth rate of 2.0% (2022: 1.5%). An increase of 1%, in the long-term growth rate would have
resulted in a £0.5m reduction in the impairment.
69
KRM22 plc
ANNUAL REPORT 2023
14. Property, plant and equipment
Cost
At 1 January 2023
Additions
Disposals
Foreign exchange movements
At 31 December 2023
Accumulated depreciation
At 1 January 2023
Depreciation charge for the year
Disposals
Foreign exchange movements
At 31 December 2023
Net book value at 31 December 2022
Net book value at 31 December 2023
15. Investment in subsidiaries
Cost
At 1 January 2023
Additions
Adjustments
Impairment
At 31 December 2023
Carrying amount
At 1 January 2023
At 31 December 2023
Fixtures and
Fittings
£’000
Office
equipment
£’000
Total
£’000
164
–
–
(7)
157
164
–
–
(7)
157
–
–
£’000
103
16
(30)
(2)
87
92
6
(30)
(2)
66
11
21
2023
£’000
732
48
(162)
(617)
1
732
1
267
16
(30)
(9)
244
256
6
(30)
(9)
223
11
21
2022
£’000
£’000
642
90
–
–
732
642
732
The additions recognised in 2022 and 2023 represents share capital contributions made to the Company’s
subsidiaries in respect of the share option expense recognised on share options issued by the Company to employees
of the appropriate subsidiaries. The adjustments in 2023 represents the write back of previously recognised share
capital contributions from share options issued by the Company to employees of the appropriate subsidiaries and
where the performance condition attached to these share options has lapsed resulting in the write back of share option
expense recognised in the appropriate subsidiaries. The capital contribution transaction is a non-cash transaction.
70
KRM22 plc
ANNUAL REPORT 2023
Details of the Company’s subsidiaries at 31 December 2023 are as follows:
Name of undertaking
Registered office
KRM22 Central Limited *
KRM22 Development Limited
KRM22 Americas Inc.
KRM22 ProOpticus LLC
KRM22 Netherlands B.V.
KRM22 Market Surveillance
Limited
Object+ Holding B.V.
Object+ B.V.
Object+ Financial Services B.V.
Object+ Financial Products B.V.
Object+ Americas LLC
* Shares held directly by KRM22 Plc
5 Ireland Yard
London, EC4V 5EH
England
5 Ireland Yard
London, EC4V 5EH
England
1 South Wacker Drive,
Suite 1200, Chicago
IL 60606
USA
1 South Wacker Drive,
Suite 1200, Chicago
IL 60606
USA
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
The Old Brewhouse
49 – 51 Brewhouse Hill
St Albans, AL4 8AN,
England
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
Kleine-Gartmanplantsoen 21-2
1017RP, Amsterdam
The Netherlands
1 South Wacker Drive,
Suite 1200, Chicago
IL 60606
USA
Ownership interest and
voting rights
Nature of business
100%
Administrative and sales
company
100%
Development services
100%
100%
100%
Administrative and sales
company
Administrative and sales
company
Non-trading intermediate
holding company
100%
In liquidation
100%
100%
Non-trading intermediate
holding company
Non-trading intermediate
holding company
100%
Administrative company
100%
Sales company
100%
Sales company
The following subsidiaries have been granted exemption from audit of their individual accounts under section 479A
of the Companies Act 2006 following a guarantee given by the parent entity, KRM22 Plc:
• KRM22 Development Limited (Company number: 11082447)
• KRM22 Market Surveillance Limited (Company number: 10754403)
71
KRM22 plc
ANNUAL REPORT 2023
16. Trade and other receivables
Trade receivables disclosed below are classified as loans and receivables and are therefore measured at amortised
cost.
Amounts falling due within one year:
Trade receivables
Other receivables
Prepayments and accrued income
Total trade and other receivables due within one year
Amounts falling due after more than one year:
Amounts due from group undertakings
Total trade and other receivables due in more than one year
2023
Group
£’000
706
227
209
1,142
–
–
2023
Company
£’000
2022
Group
£’000
2022
Company
£’000
–
6
76
82
–
–
939
276
247
1,462
–
–
2
9
85
96
77
77
The carrying value of trade and other receivables approximates fair value.
At 31 December 2023, the Group had trade receivables falling due within one year of £0.7m including provisions of
£0.1m (2022: £0.9m including provisions of £nil), other receivables falling due within one year of £0.2m including
provisions of £nil (2022: £0.3m including provisions of £nil). At 31 December 2023, the Company had amounts due
from group undertakings falling due after more than one year of £nil including provisions of £nil (2022: £0.1m with
provisions of £0.3m).
KRM22 has elected to apply the simplified approach available under IFRS 9:5.5.15 for its trade receivables. KRM22’s
trade receivables result from transactions in the scope of IFRS 15 ‘Revenue from Contracts with Customers’. Under
this simplified approach, a lifetime expected loss allowance is always recognised (both at initial recognition and
throughout the life of the trade receivable).
KRM22’s trade receivables have a short duration of less than twelve months, and do not have a contractual interest
rate. Therefore an EIR of zero has been applied to cash flows. KRM22 has used a provision matrix to determine the
lifetime ECL of the portfolio. It is based on KRM22’s historical, observed default rates, and is adjusted by a forward
looking estimate of future economic conditions.
KRM22 group revenue was derived from organic customer growth and acquired customer growth through the
previous acquisitions: KRM22 Market Surveillance, KRM22 ProOpticus and the Object+ Group. Based on historical
observed default rates of the acquired companies, the estimated impairment loss is immaterial. Furthermore, since
acquisition the Group has managed customer credit risk in line with Group policy and outstanding receivables are
actively monitored and discussed by management. There are no doubts as to the future recoverability of these
balances. Therefore, any impairment would be immaterial.
Amounts due from group undertakings have been classified as falling due after more than one year based on the
agreed terms of repayment by subsidiaries in future periods. The Company provides regular funding to KRM22 Central
Limited at an appropriate interest rate of 8.14%. The Directors consider the terms of the transaction to be at arm’s
length.
There are significant doubts as to the future recoverability of these intercompany balances, and as such, a provision
for bad and doubtful debts of £4.0m (2022: £0.3m) has been raised against the amounts due from group undertakings
in the Company statement of financial position and recorded as a charge in the Company income statement.
72
KRM22 plc
ANNUAL REPORT 2023
17. Trade receivables – credit risk
Aging of due and past due but not impaired receivables
0 – 30 days
31 – 60 days
61 – 90 days
91+ days
Total trade and other receivables due in less than one year
18. Cash and cash equivalents
Cash at banks and on hand
19. Trade and other payables
Amounts falling due within one year:
Trade payables
Accruals and deferred income
Social security and other taxation
Other payables
Provision for dilapidations
Total due within one year
Amounts falling due after more than one year:
Provision for dilapidations
Total due in more than one year
2023
£’000
357
–
272
77
706
2022
£’000
897
30
12
–
939
2023
Group
£’000
886
886
2023
Company
£’000
214
214
2022
Group
£’000
1,900
1,900
2022
Company
£’000
1,475
1,475
2023
Group
£’000
2023
Company
£’000
2022
Group
£’000
2022
Company
£’000
367
2,494
138
871
30
3,900
–
–
38
157
–
–
–
195
–
–
393
2,137
325
998
–
3,853
30
30
32
138
–
–
–
170
–
–
The fair value of trade and other payables are the same as the carrying values.
Provisions for dilapidation for expected future expenditure in accordance with lease obligations are based on the
Group’s best estimate of the likely committed cash outflow. These costs are expected to be incurred at the end of the
lease and therefore have been classified as non-current.
Other payables at 31 December 2023 of £0.9m (2022: £1.0m) include £0.7m (2022: £1.0m) related to deferred
consideration associated with the acquisition of Object+. The deferred consideration is payable subject to earnout
conditions and performance milestones and the Directors believe that the third and final performance milestone was
achieved. The liability can be satisfied in either cash or Company ordinary shares at the Company’s discretion.
73
KRM22 plc
ANNUAL REPORT 2023
20. Leases – right of use assets and lease liabilities
Right of use assets
Cost
At 1 January 2023
Disposals
Foreign exchange movements
At 31 December 2023
Accumulated depreciation
At 1 January 2023
Depreciation charge for year
Disposals
Foreign exchange movements
At 31 December 2023
Net book value at 31 December 2022
Net book value at 31 December 2023
Lease liabilities
Cost
At 1 January 2023
Interest expense
Lease payments
Foreign exchange movements
At 31 December 2023
The maturity of the lease liabilities is as follows:
Amounts payable under leases
Within one year
In two to five years
Total
£’000
1,092
–
–
1,092
723
233
–
–
956
369
136
Total
£’000
615
18
(250)
(14)
369
2022
£’000
493
122
615
2023
£’000
369
–
369
KRM22’s leases relate to various office leases held by subsidiary undertakings and include a liability associated with
a lease that expired in 2022.
21. Loans and borrowings
Current
Secured loans
Non-Current
Secured loans
2023
£’000
391
391
3,887
3,887
4,278
2022
£’000
2,974
2,974
–
–
2,974
74
KRM22 plc
ANNUAL REPORT 2023
The fair value of loans and borrowings are the same as the carrying values.
On 17 June 2023, the Company entered into an agreement for a new three year £5.0m convertible loan facility (the
“TT Convertible Loan”) with Trading Technologies International, Inc. (“TT”), of which an initial £4.0m was drawn down
on 23 June 2023 and these proceeds were used to replace the Company’s outstanding balance, inclusive of principal
and accrued interest of £3.1m, of the existing convertible loan (the “Kestrel Convertible Loan”) with Kestrel Partners
LLP. A further £0.5m was drawn down on the TT Convertible Loan on 28 November 2023 for working capital purposes.
At 31 December 2023, the total amount dawn down on the TT Convertible Loan was £4.5m. The term of the TT
Convertible Loan can be extended by a further year to a total of four years.
The interest rate payable on the TT Convertible Loan is the average 90 day Secured Overnight Financing Rate (“SOFR”)
and a margin of 5.5%, subject to a minimum aggregate percentage rate per annum of 9.25%. Interest is payable
quarterly in arrears however the Company has the ability to defer interest payments in the initial 18 months (the “Initial
Interest Period”), with the total deferred interest in the Initial Interest Period being paid in two equal instalments on the
calendar quarters ending after the 18th and 21st month anniversary of the facility, i.e. 31 December 2024 and 31 March
2025.
Under the terms of the TT Convertible Loan agreement dated 17 June 2023 (the “TT Loan Agreement”), any amounts
drawn down form the TT Convertible Loan could be converted into new Ordinary Shares in the Company by TT at any
time at the lowest conversion price of: £0.46, the volume weighted average price of the Company’s ordinary shares
for the three month period prior to service of conversion notice; or the lowest daily closing price for the 30 completed
calendar days prior to service of conversion notice. On 1 July 2023, the TT Loan Agreement was amended to remove
the variability of the conversion price and replace with a fixed conversion price of £0.46. TT has the right to prevent
any conversion which would trigger a Rule 9 event under the Takeover Code. The TT Convertible Loan is secured on
certain KRM22 assets and includes covenants based on the Group’s financial performance, based on ARR, revenue
recognition and solvency.
The TT Convertible Loan contains a host liability and embedded (fixed-for-fixed) equity conversion feature on the basis
that there is a contractual cash obligation to pay quarterly interest, which can be deferred for the initial 18 months and
paid on the calendar quarters ending after the 18th and 21st month anniversary of the facility, and a requirement to
repay the principal amount at the end of three-year TT Convertible Loan term, subject to the conversion option not
being exercised by TT. The TT Convertible Loan is classified as being a compound financial instrument and on this
basis IAS 32 requires that the TT Convertible Loan is split into equity and liability components. The fair value of the
liability component, included in current and non-current borrowings, at initial recognition was calculated using a market
interest rate that would apply to a stand-alone loan without a conversion feature (12.427%). The equity component is
assigned as the residual amount of £0.3m (see SOCE on page 51), by deducting the amount calculated for the liability
component from the fair value of the instrument as a whole. As the TT Convertible Loan is not quoted on an active
market, the total amounts drawn down of £4.5m for the instrument is its fair value. The carrying amount of the liability
component of the TT Convertible Loan is adjusted for total transaction costs incurred of £0.2m.
22. Deferred tax
Deferred tax liability at 1 January 2022
Income statement (credit)
Foreign exchange movements
Deferred tax liability at 31 December 2022
Income statement (credit)
Foreign exchange movements
Deferred tax liability at 31 December 2023
Intangible assets recognised
on acquisition
£’000
301
(79)
23
245
(71)
(10)
164
Total
£’000
301
(79)
23
245
(71)
(10)
164
KRM22 has tax losses of £16.2m (2022: £19.8m) that are available for offset against future taxable profits of those
subsidiary companies in which the tax losses arose. Deferred tax assets have not been recognised in respect of these
losses as they may not be used to offset taxable profits elsewhere in the Group and they have arisen in subsidiaries
75
KRM22 plc
ANNUAL REPORT 2023
whose future taxable profits are uncertain. The estimated value of the deferred tax asset not recognised is £4.0m
(2022: £5.0m).
In addition to the above operating tax losses, a potential deferred tax asset could relate to pre-acquisition tax losses
of KRM22 ProOpticus. The availability and future utilisation of these losses remains under consideration, taking
account of both its legacy ownership structure and Section 382 of the US Internal Revenue Code, whereby the ability
to utilise net operating losses arising prior to a change of ownership is limited to a percentage of the entity value of
the entity at the date of change of ownership. These potential operating tax losses (and related potential deferred tax
asset) have not been included in the available operating tax losses (and related deferred tax asset) owing to current
uncertainties on their actual usability.
A deferred tax liability of £0.2m (2022: £0.2m) has been recognised in relation to intangible assets of £2.9m (2022:
£2.9m) that arose on the acquisition of KRM22 Market Surveillance, KRM22 ProOpticus and the Object+ group in prior
periods.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in that jurisdiction in the
year when the asset is realised or the liability settled, based on tax rates that have been enacted or substantively
enacted at the statement of financial position date and therefore these have been measured at 25% UK and an
effective rate of 26% on our overseas jurisdictions.
23. Operating leases
KRM22 operates from various leased properties around the world and the terms of property leases vary by location.
Any property leases that have less than twelve months at the date of inception until termination date are deemed to
be short–term leases and recognised as operating leases.
KRM22 has total minimum future lease commitments under non–cancellable operating leases as set out below:
Due within one year
24. Share capital
Issued and fully paid 10p Ordinary shares
At 1 January
At 31 December
25. Share–based payments
Warrants
2023
£’000
3
3
2023
No.
2023
£’000
2022
No.
35,666,336
35,666,336
3,567
3,567
35,666,336
35,666,336
2022
£’000
–
–
2022
£’000
3,567
3,567
On 24 April 2018, the Company passed a resolution for a total of 6,000,000 warrants to be granted to certain directors
and members of staff conditional on the Company’s admission to the AIM. The warrants are exercisable in full in
three equal tranches, in the event that the Company’s share price equals or exceeds three separate hurdles at the
relevant testing or vesting date. The earliest testing date for tranche one was two years following admission to the
AIM, i.e. 30 April 2020, with the earliest testing date for tranche two and three being one year later, i.e. 30 April 2021.
If these conditions are met the warrants are exercisable at a 100 pence per share. The vesting period is three years
and the warrants can be exercised if, at a testing date, the specific performance conditions are met, or the Directors,
in their absolute discretion, determine that a warrant may be exercised at any other time and in any other
circumstances. If the warrants remain unexercised after a period of ten years from the date of the grant the warrants
expire.
76
Employee share option plan
KRM22 plc
ANNUAL REPORT 2023
The KRM22 Employee Share Option Plan (“ESOP”), a UK tax authority approved Enterprise Management Incentive
(“EMI”), was set up on 24 April 2018. No options were granted to employees during the year ended 31 December 2023
however in prior years, the Company has granted a combination of LTIP Options, Salary Sacrifice Options, Salary
Deferral Options and Salary Deferral Bonus Options under the ESOP.
LTIP Options are awarded as part of a long-term incentive plan. The LTIP Options vest over a three-year period and
are exercisable on the third anniversary of the grant date provided that the share price has increased by 5%
compounded during the period and provided the employee remains employed by KRM22. If the share price
performance has not been achieved by the third anniversary of the grant date, the vesting period is extended for a
further two years to the fifth anniversary of the grant date, provided the employee remains employed by KRM22. If
the share price performance has not been achieved by the fifth anniversary of the grant date, the LTIP Options
automatically lapse.
Salary Sacrifice Options have previously been awarded to employees who waived a proportion of their salary on a
short-term basis to help the Company’s cashflow. Salary Sacrifice Options granted to Executive Directors and
employees vest over a one-month period from the date of grant and the Salary Sacrifice Options granted to Non-
Executive Directors vest over a three-month period from the date of grant. All Salary Sacrifice Options lapse on
termination of employment with the Company and are not subject to any share price performance conditions.
Salary Deferral Options were granted in 2019 to employees who accepted a temporary salary deferral to help the
Company’s cashflow and who were due to be paid the amount of salary deferred as a cash bonus (the “Salary Deferral
Cash Bonus”) when the Company’s cashflows permitted. The Salary Deferral Options vested over a one-year period,
are not subject to any share price performance conditions and lapse on termination of employment with the Company.
Salary Deferral Bonus Options were granted in 2020 to employees who waived their right to receive their Salary Deferral
Cash Bonus to help the Company’s cashflow. The Salary Deferral Bonus Options vest over a three-year period in thirty-
six equal monthly instalments, are not subject to any share price performance conditions and do not lapse if an
employee ceases to be employed by KRM22.
Under the terms of the ESOP, the Directors can exercise their discretion to allow employees to retain their LTIP Options,
Salary Sacrifice Options and Salary Deferral Options if an employee ceases to be employed by KRM22. All other terms
within the ESOP and individual option agreements remain, and in respect of the LTIP Options, are subject to the
performance conditions being achieved.
All options unexercised after a period of ten years from the date of grant expire. KRM22 has no legal or constructive
obligation to repurchase or settle the options for cash.
Options are exercisable at a range of between 30.0 pence per share and 85.0 pence per share. The weighted average
remaining contractual life of the share options outstanding at 31 December 2023 is 11 months (2022: 1 year and 2
months).
77
KRM22 plc
ANNUAL REPORT 2023
Outstanding at 1 January
Granted during the year
Forfeited during the year
Lapsed during the year
Outstanding at 31 December
Weighted
average
exercise price
£
2023
Number
0.79 10,556,004
–
(12,481)
(673,000)
9,870,523
–
0.52
1.01
0.80
Weighted
average
exercise price
£
0.80
0.58
0.51
–
0.79
2022
Number
10,146,447
425,557
(16,000)
–
10,556,004
The fair value of options subject to non–market based vesting conditions are measured using a Black Scholes model
and those options with market based conditions are measured using a Monte Carlo pricing model.
The fair value of the outstanding options without performance conditions was measured using the Black Scholes
options valuation model. The inputs to that model in respect of the share options outstanding under each issue
were as follows:
Grant month
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Note
Grant month
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Note
Grant month
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Note
Note:
(a) LTIP Share Options
(b) Salary Deferral Options
(c) Salary Sacrifice Options
(d) Salary Deferral Bonus Options
Jun
2019
£0.770
£0.850
3 years
30%
–
0.86%
(a)
Jul
2020
£0.280
£0.300
3 years
30%
–
0.86%
(c)
May
2021
£0.475
£0.500
3 years
30%
–
0.86%
(a)
Jun
2019
£0.770
£0.850
1 year
30%
–
0.86%
(b)
Sep
2020
£0.380
£0.380
3 years
30%
–
0.86%
(d)
Feb
2022
£0.450
£0.450
3 years
30%
–
1.07%
(c)
Nov
2019
£0.535
£0.850
3 years
30%
–
0.86%
(a)
Oct
2020
£0.380
£0.380
3 years
30%
–
0.86%
(c)
Dec
2022
£0.480
£0.630
3 years
30%
–
3.30%
(a)
Dec
2019
£0.525
£0.525
3 years
30%
–
0.86%
(a)
Jan
2021
£0.365
£0.365
3 years
30%
–
0.86%
(c)
78
KRM22 plc
ANNUAL REPORT 2023
The fair value of the outstanding warrants with performance conditions was measured using the Monte Carlo
simulation model and the inputs to that model in respect of the share options outstanding under each issue were as
follows:
Weighted average share price at grant date
Exercise price
Weighted average contractual life
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Restricted Stock Units
2018
£1.3198
£1.00
3 years
30%
–
0.8287%
KRM22 has awarded staff Restricted Stock Units (“RSUs”) to employees, including Executive Directors, as part of a
long-term incentive plan. The RSUs vest over a period of five years from the date of award and lapse if an employee
ceases to be employed by KRM22.
Outstanding at 1 January
Awarded during the year
Forfeited during the year
Outstanding at 31 December
2023
Number
253,162
608,344
(18,429)
843,077
2022
Number
253,162
–
–
253,162
At 31 December 2023, the remaining balance of RSUs that had been awarded, and which had not been forfeited, was
843,077 (2022: 253,162) and the RSUs vest of the fifth anniversary of the award date.
Award date
Number
Sep
2020
253,162
Aug
2023
520,230
Nov
2023
69,685
Total
843,077
The net share-based payment expense recognised for the year ending 31 December 2023 arising from equity-settled
share-based payment transactions, including Warrants, ESOP and RSUs amounted to a credit of £0.1m (2022: expense
of £0.1m) and the share-based payment reserve as at 31 December 2023 amounted to £2.9m (2022: £3.0m).
26. Capital commitments
At 31 December 2023 KRM22 had no material capital commitments (2022: £nil).
27. Financial instruments and financial risk management
KRM22’s principal financial liabilities comprise trade and other payables and borrowings. The primary purpose of
these financial liabilities is to finance the operations. KRM22 has trade and other receivables and cash that derive
directly from its operations.
The Company has limited financial liabilities as its primary purpose is to hold investments in other group companies.
The Company’s receivables largely relate to its funding of the operations of KRM22. All items below are stated at
amortised cost unless explicitly stated. The Company measures fair values using the following fair value hierarchy
that reflects the significance of the inputs used in making the measurements.
79
KRM22 plc
ANNUAL REPORT 2023
The table below analyses financial instruments carried at fair value by hierarchy level.
Financial assets
Cash at banks and on hand – unrestricted
Trade receivables group companies
Trade and other receivables
Financial liabilities
Trade and other payables
Accruals
Borrowings
Derivative financial liability at FVTPL (Level 1)
Finance lease obligations
2023
Group
£’000
2023
Company
£’000
2022
Group
£’000
2022
Company
£’000
886
–
933
1,819
1,238
330
4,278
196
369
6,411
214
–
6
220
38
157
–
–
–
195
1,900
–
1,215
3,115
1,421
293
2,974
255
615
5,558
1,475
77
–
1,552
32
138
–
–
–
170
The Directors consider that the carrying amount for all financial assets and liabilities which are not held at fair value
through profit or loss approximates to their fair value.
In conjunction with a debt facility (the “Debt Facility”) arranged with Harbert European Growth Capital Fund II
(“Harbert”) in 2019, the Company constituted warrants over 495,049 Ordinary shares. Whilst the balance of the Debt
Facility was settled during the year ended 31 December 2020, the warrants remain in place and are exercisable by
Harbert until 29 April 2029. The warrants are treated as a derivative financial instrument and recorded at fair value as
a current liability with any adjustment in fair value at the statement of financial position dated recognised within
finance charge on financial liabilities in the income statement.
The fair value of the warrant instrument was measured using the binomial option valuation model. The inputs to the
model are as follows:
Share price at reporting date
Exercise price
Expiry period
Expected volatility
Expected dividend growth rate
Risk-free interest rate
Financial risk management
2023
£0.315
£1.01
5 years
30%
–
4.19%
KRM22 is exposed to market risk, which includes interest rate risk and currency risk, credit risk and liquidity risk. The
senior management oversees the management of these risks and ensures that the financial risk taken is governed by
appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with
KRM22’s policies and risk appetite.
The Board of Directors review and agree polices for managing each of these risks, which are summarised below:
a) Market risk
KRM22’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and
interest rates.
80
KRM22 plc
ANNUAL REPORT 2023
Financial currency risk management
KRM22 is exposed to transactional exchange risk. Transactional foreign exchange risk arises from sales or
purchases by a group company in a currency other than that Company’s functional currency. Further the
Group and the Company have inter-company loans made in currencies other than their functional currency.
Year ended 31 December 2022
Average rate
Year-end spot rate
Year ended 31 December 2023
Average rate
Year-end spot rate
Foreign currency sensitivity analysis
USD
EUR
CZK
SGD
1.23
1.21
1.25
1.27
1.17
1.13
1.15
1.15
28.68
27.28
27.59
28.48
1.70
1.62
1.67
1.68
The following table details KRM22’s sensitivity analysis to a 10% (2022: 10%) decrease in Sterling against the
relevant foreign currencies which the Directors believe could have the most significant impact on the
performance of KRM22. For a 10% (2022: 10%) strengthening of Sterling against the relevant currency there
would be a comparable impact on financial performance.
US Dollar
Euros
Czech Kroner
Singapore Dollar
Loss
2023
£’000
(79)
(4)
(89)
(1)
(173)
Other equity
2023
£’000
(250)
(9)
(355)
–
(614)
Loss
2022
£’000
(151)
(19)
(185)
(6)
(361)
Other equity
2022
£’000
(386)
(15)
(555)
(3)
(959)
Interest rate sensitivity analysis
Interest rate risk is the risk that the fair value of future cash flows or a financial instrument will fluctuate
because of changes in market interest rates. The interest rate payable on the TT Convertible Loan is the
average 90 day Secured Overnight Financing Rate (“SOFR”) and a margin of 5.5%, subject to a minimum
aggregate percentage rate per annum of 9.25%. The Directors therefore believe that any movement in the 90
day SOFR could have a significant impact on the amount of interest paid on the TT Convertible Loan on an
annual basis compared with the annual interest being paid of £0.5m based on the 90 day SOFR at 31
December 2023 of 5.35531%.
Change in 90 day
average SOFR rate
0.0%
(1.5%)
1.5%
3.0%
5.0%
b) Credit risk
Total sensitised interest rate
(90 day average SOFR plus margin)
10.85531%
9.35531%
12.35531%
13.85531%
15.85531%
Annual interest charge
£’000
488
421
556
623
713
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer
contract, leading to a financial loss. KRM22 is exposed to credit risk from its operations, primarily from trade
receivables, and from loans provided to related parties.
81
Trade receivables
KRM22 plc
ANNUAL REPORT 2023
Customer credit risk is managed subject to KRM22’s established policy, procedures and control relating to
customer credit risk management. Outstanding receivables are regularly monitored and discussed at
executive management and Board level of group companies.
Financial instruments and cash deposits
Credit risk from cash balances with banks and financial institutions is managed in accordance with KRM22
policy. Credit risk with respect to cash is managed by carefully selecting the institutions with which cash is
deposited.
Impairment
The financial assets of the Group comprise cash at banks, trade receivables and other receivables. Having
reviewed the recoverability of KRM22’s financial assets since the reporting date, as well as the likelihood of
future losses over the next twelve months and the lifetime of the assets, the Directors have recognised credit
losses in respect of other receivables, as detailed in note 17.
c) Liquidity risk
KRM22 is not currently cash generative, however funds were raised as part of the IPO, subsequent share
placements and the TT Convertible Loan facility. The Board carefully monitors the levels of cash and is
comfortable that it has sufficient cash for normal operating requirements. KRM22 has no committed lines of
credit.
The following table details KRM22’s remaining contractual maturity for its financial liabilities based on
contractual payments:
At 31 December 2022
Trade and other payables
Secured loans (gross)
Finance lease obligations
At 31 December 2023
Trade and other payables
Secured loans (gross)
Finance lease obligations
Capital risk management
Within 1 year
£’000
1 to 2 years
£’000
2 to 5 years
£’000
2,009
3,210
493
1,736
391
369
–
–
122
–
893
–
–
–
–
–
4,733
–
Total
£’000
2,009
3,210
615
1,736
6,017
369
KRM22 manages its capital to ensure that it will be able to continue as a going concern while also maximising
the operational potential of the business. The capital structure of KRM22 consists of cash and cash
equivalents and equity attributable to equity holders of the Company, comprising issued capital and reserves
as disclosed in the consolidated statement of changes in equity. KRM22 is not exposed to externally imposed
capital requirements.
28. Business combinations
Object+ Holding B.V.
On 30 May 2019 KRM22 Netherlands B.V., a wholly owned subsidiary of KRM22 Central Limited, acquired Object+
Holding B.V. and its subsidiaries Object+ B.V., Object+ Financial Services B.V., Object+ Financial Products B.V. and
Object+ Americas LLC (collectively “Object+”), a risk management and post-trade services technology business
focused on capital markets.
82
KRM22 plc
ANNUAL REPORT 2023
The acquisition included deferred consideration which was payable in three tranches subject to earn-out conditions
which can be satisfied in either cash or Company ordinary shares at the Company’s discretion. The first two earn-out
conditions were not achieved however the Directors believe that the third and final performance milestone has
previously been achieved.
During the year ended 31 December 2023, the third and final tranche of deferred revenue of US$1.1m was reduced by
US$0.2m in consideration for a cash payment of US$0.1m (£0.04m). The fair value of the third tranche of
consideration has been reduced to US$0.9m to reflect the reduced consideration. As detailed in note 30, US$0.2k of
the deferred consideration was settled in Company ordinary shares on 10 April 2024.
29. Related party transactions
Remuneration of key management personnel
The remuneration of key management personnel, including Directors, is set out in aggregate for each of the categories
specified in IAS 24 Related Party Disclosures as follows:
Short-term employee benefits
Retirement benefits
Share-based payment benefits
Total
Related party transactions
2023
£’000
571
9
21
601
2022
£’000
567
9
54
630
Trading Technologies International, Inc. (“TT”) is a 25% shareholder of the Company and during the year, the Group
recognised revenue from TT of £0.5m (2022: £0.1m) under normal commercial terms. At 31 December 2023, the
balance due to the Group from TT was £0.1m (2022: £0.02m). In addition, TT provided services to the Group of
£0.02m and the balance due to TT from the Group at 31 December 2023 was £0.01m (2022: £0.01m).
On 17 June 2023, the Company entered into an agreement for a new £5.0m convertible loan facility (the “TT
Convertible Loan”) arranged by TT, with an initial £4.0m drawn down on 23 June 2023 of which £3.1m was used to
repay the outstanding Kestrel Convertible Loan debt of £3.0m plus interest of £0.1m and to support future business
growth. A further draw down of £0.5m on 28 November 2023 which was used for working capital purposes.
The interest rate payable on the TT Convertible Loan is the average 90 day Secured Overnight Financing Rate (“SOFR”)
and a margin of 5.5%, subject to a minimum aggregate percentage rate per annum of 9.25%. Interest is payable
quarterly in arrears however KRM22 has the ability to defer interest payments in the initial 18 months (the “Initial
Interest Period”), with the total deferred interest in the Initial Interest Period being paid in two equal instalments on the
calendar quarters ending after the 18th and 21st month anniversary of the facility, i.e. 31 December 2024 and 31
March 2025. The total interest charged in the year ended 31 December 2023 was £0.2m (2022: £nil). At 31 December
2023, the total amount of loan, including accrued interest, due to TT from the Company was £4.7m (2022: £nil).
Under the terms of the TT Convertible Loan agreement dated 17 June 2023 (the “TT Loan Agreement”), any amounts
drawn down form the TT Convertible Loan could be converted into new Ordinary Shares in the Company by TT at any
time at the lowest conversion price of: £0.46, the volume weighted average price of the Company’s ordinary shares
for the three month period prior to service of conversion notice; or the lowest daily closing price for the 30 completed
calendar days prior to service of conversion notice. On 1 July 2023, the TT Loan Agreement was amended to remove
the variability of the conversion price and replace with a fixed conversion price of £0.46. TT has the right to prevent
any conversion which would trigger a Rule 9 event under the Takeover Code. The TT Convertible Loan is secured on
certain KRM22 assets and includes covenants based on the Group’s financial performance including ARR, revenue
recognition and solvency.
On 23 June 2023, KRM22 repaid the £3.0m loan facility (the “Kestrel Convertible Loan”) with Kestrel Partners LLP
(“Kestrel”) plus accrued interest at the settlement date of £0.1m. The interest rate payable on the Kestrel Convertible
83
KRM22 plc
ANNUAL REPORT 2023
Loan was 9.5% per annum and the total interest charged in the year ended 31 December 2023 was £0.1m (2022:
£0.3m). Kestrel, inclusive of beneficial interests, is a 17.6% shareholder of the Company.
30. Events after the reporting date
On 7 March 2024, Dan Carter was appointed CEO of the Company, whilst Stephen Casner, a founder director and
former CEO of the Company, resigned from KRM22. In addition, Keith Todd relinquished his role as Executive
Chairman, whilst remaining an Executive Director of the Company and Garry Jones succeeded Keith Todd of Non-
Executive Chairman of the Company.
On 10 April 2024, the Company issued 140,187 new ordinary shares of 10 pence each in the Company at a price of 85
pence per Ordinary Share as consideration for a partial settlement of the deferred consideration payable in respect of
the historical acquisition of Object+ Holding B.V.
84
KRM22 plc
ANNUAL REPORT 2023
COMPANY INFORMATION
The board of directors
Garry Jones
Non-Executive Chairman (previously Non-Executive
Director until 6 March 2024)
Dan Cater
Chief Executive Officer (appointed 7 March 2024)
Kim Suter
Chief Financial Officer
Keith Todd CBE
Executive Director (previously Executive Chairman
until 6 March 2024)
Sandy Broderick
Non-Executive Director
Steve Sparke
Non-Executive Director
Stephen Casner
Registered office
5 Ireland Yard, London, EC4V 5EH
Company number
11231735
Company Secretary
Kim Suter
Nominated Adviser and Broker
Cavendish Capital Markets Limited, 1 Bartholomew
Close, London, EC1A 7BL
Solicitors
Fieldfisher LLP, Riverbank House, 2 Swan Lane,
London, EC4R 3TT
Auditor
BDO LLP, 55 Baker Street, London, W1U 7EU
Registrars
Previously CEO until 6 March 2024 (resigned 6 March
2024)
Equiniti, Aspect House, Spencer Road, Lancing, West
Sussex, BN99 6DA
ANNUAL REPORT 2023 |
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