REDSTONECONNECT PLC
Annual Report for the Year Ended 31 January 2017
CONTENTS
Highlights
Chairman’s statement
Operational review
Financial Review
Strategic report
Directors and officers
Company information and advisers
Directors report
Auditor’s report
Consolidated income statement
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Company statement of financial position
Company statement of cash flows
Company statement of changes in equity
Notes to the financial statements
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HIGHLIGHTS
FINANCIAL HIGHLIGHTS:
• Profit after tax of £2.1 million (2016: loss of £2.2 million)
• Gross profit up 33% to £9.2 million (2016: £7.0 million), with an increased gross margin
of 22% (2016: 17%)
• Revenue up 3.5% to £41.5 million (2016: £40.1 million)
• Adjusted EBITDA* materially ahead of management expectations, up 56% to £2.0
million (2016: £1.3 million) reflecting the successful implementation of strategy to focus
on higher quality, higher margin business
• Reported Profit before tax** of £1.5 million (2016: loss of £0.8 million)
• Profit before tax from continuing operations of £1.2 million (2016: loss of £0.8 million)
• Profit after tax from continuing operations of £1.8 million (2016: loss of £0.7 million)
• Cash generated from operations of £0.9 million (2016: cash out flow of £2.7 million)
• Cash at year end of £3.2 million (2016: £1.0 million) and net cash of £0.8 million (2016:
£1.0 million)
• Basic earnings per share from continuing operations of 0.11 pence (2016: loss of 0.06
pence)
• Concluded the Group’s financial restructuring with the early exit of the Stokenchurch
office lease saving the Group approximately £0.7m over the remainder of the lease
* results for the period from continuing operations before net finance costs, depreciation, amortisation,
integration costs and transactional items, impairment charge and share based payments.
** reported profit before tax includes; integration and transactional items, share based payment charge and
£0.3 million profits in the period from discontinued operations.
OPERATIONAL HIGHLIGHTS:
• Completed and fully integrated two diversifying and complementary acquisitions:
Connect IB and Commensus, adding owned software IP and extending service
capabilities
• Upgraded OneSpace which is now a strategic module of the Group’s cloud based
Smart buildings software platform
• Significant global master services agreements for OneSpace with UBS and UBM
• Renewal of all significant key customer Managed Service contracts which came up for
renewal in the year on three to five year terms
• Key milestone achieved with Distributed Antenna System ‘DAS’ delivered as a service
(DASaaS), with a contract secured for the design, installation and management at the
London headquarters of a leading global technology group
• Strong order book and new business pipeline achieved from both new and existing
customers as we move into the new financial year
• Successfully rebranded the Group to RedstoneConnect Plc
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CHAIRMAN’S STATEMENT
I am delighted to present the
results for the year ended 31
January 2017, a year in which the
Group has continued to make
significant strategic progress,
achieved key operational
milestones and delivered strong
financial results.
The Group remains firmly on course
to become a leading provider
of software, technology and
services in the Smart Buildings and
Commercial Spaces market. The
acquisition of Connect IB in March
2016 has accelerated our progress,
bringing a scalable cloud-based
software platform along with
significant in-house ‘smart building
software solution’ development
capabilities to the Group. The
combination of OneSpace, our
occupancy management tool,
and the Connect platform’s other
modules, gives us a market leading
Smart Buildings platform that is
unmatched by our peers, especially
as it is IoT ready.
Our platform is cloud-based and
highly scalable, allowing us to
sell on a SaaS pricing model. We
have also mandated the software
team to ensure that our individual
modules are ‘best in class’ if sold
standalone as point solutions. This
enables us to cross-sell and up-sell
across our customer base.
There are clear sales opportunities
for our newly developed software
offering in both the smart building
and commercial office space
markets, however we are also
beginning to see opportunities
arise in the retail, logistics, sports
stadia and government sectors.
With development of our platform
almost complete we will now shift
our focus to building an effective
infrastructure for both direct and
indirect sales, both in the UK and
overseas.
In addition, the Group has delivered
encouraging organic growth from
Redstone, our leading IT and
Smart Buildings infrastructure
business. Redstone operates as a
Systems Integrator and Managed
Service provider and continues
to work with an impressive list of
blue-chip enterprise clients. Both
segments within Redstone have
continued to trade well in the year.
Our Systems Integration business
delivered increased margins as a
result of the strategic shift towards
smart technologies and away from
the commoditised end of this
market. The Managed Services
operation has also been successful
in renewing an impressive range of
key customer contracts, which will
underpin a significant amount of
the division’s revenue over the next
three to five years.
The acquisition in November 2016
of Commensus Plc, a provider of
hosted managed services, not only
provided a complementary fit to
our existing product offering, it
also introduced a higher margin
business that is both scalable and
accretive. The Group is now able to
offer fully managed cloud-based IT
services to both existing and new
customers.
Finally, we completed the
restructuring programme that
was started in 2015, marked by
the early exit of the lease for the
Stokenchurch office in August
2016, along with the conclusion of
a number of other legacy issues,
all of which relate back to assets
disposed of in the prior year. This
is a key milestone for the business
and has enabled management
to focus fully on the future of
RedstoneConnect.
BOARD AND MANAGEMENT
There have been no changes to
the composition of the Board
during the year. This stability has
benefitted the development of the
Group’s strategy, which I believe is
reflected in the achievements and
performance during the year.
In addition to the main Board,
Keith Jump’s appointment during
the year as Group Chief Technical
Officer, following the acquisition of
Connect IB has complemented the
senior leadership team. The Group
CTO role has strategic importance
as we continue to innovate and
build out the Group’s software
product portfolio.
OUTLOOK
We continue to make progress on
improving the financial model of
the business, focusing on higher
quality business that generates
higher margins and a stronger mix
of long-term recurring revenue.
The Group has a unique end-to-
end product, service and software
offering which continues to
appeal across multiple sectors and
significantly in the Smart Buildings
market.
With the successful programme
of software product development
achieved during the year, the
Group now has an enhanced
offering and is well positioned
to achieve further growth. We
are focusing our investment on
building sales capabilities, enabling
the business to rapidly scale and
to fully capitalise on the market
opportunity by becoming a leader
in the supply of smart building
solutions.
I look forward to sharing more of
the same with you in the future.
Frank Beechinor
Chairman
25 April 2017
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OPERATIONAL REVIEW
OVERVIEW
This year has been a period
of operational success for
RedstoneConnect, achieving
growth both organically and
through the successful completion
of two complementary acquisitions.
In addition, we have further
developed our software offering
with the cloud-based platform
acquired with Connect IB and
have completed the integration
of OneSpace, our occupancy
management software, into the
Connect platform suite.
Key priorities to drive future
performance remain as follows:
• To grow our Smart Buildings
offering through a combination of
organic growth and acquisition
• To focus on developing
technology-led intellectual
property, in particular, focusing on
the Connect platform to ensure
we achieve our ‘best in class’
objective for each module
• To grow market share for our IP-
led software solutions, deriving
annuity revenues and profit
from a growing installed base of
customers
• To maintain Redstone’s reputation
as a market leader for service
excellence and technical
competence in its field. We
will focus on continuing to
provide high quality services to
Redstone’s clients by investing
in our talented colleagues who
are experts, well-versed in
the Company’s products and
our clients’ needs alongside
continuing to maintain our
multiple ISO and vendor
accreditations
• To deliver improving profitability
and cash generation
OUR BUSINESS PROPOSITION
The Group’s proposition enables
us to deliver end-to-end smart
building design, installation, service
and software applications. This
offering is not matched by any of
our peers to the same extent.
Our service is comprised of three
segments: Systems Integration,
Managed Services and Software.
Redstone, our market leading
Systems Integration division,
has performed well during the
year, delivering higher margin
business, as the mix of projects
executed moves towards more
complex solutions involving more
innovative products, for example
our work delivering in-building
cellular solutions, often referred
to as distributed antenna systems
(DAS). Our DAS offering ensures
mobile devices work anywhere
within a building, typically for
enterprise-scale commercial
property customers and enables
the servicing of multiple distributed
buildings from a single, remote
base station. This opens the door
to converting what would otherwise
be project-only engagements
into long term ‘DAS as a Service’
(‘DASaaS’) opportunities, the first
of which is being delivered to a
large global internet business for
their campus in central London.
We continue to promote our
Redstone brand; its proven strength
and traction over many years
provides us with a market leading
reputation, which continues to be
reflected in the quality of contracts
won by this division.
Our expertise in Smart Buildings
network design and installation
is also experiencing increased
traction, as both landlords and
occupiers recognise the material
benefits to be gained from owning
and occupying Smart Buildings.
Our design and installation project
for UBS’s new headquarters at
5 Broadgate, London, which we
completed in the summer of
2016, is a perfect example, as this
building is recognised as one of
Europe’s smartest and following
the successful design; installation
project, we have installed both a
DAS solution at the same location
and our workspace management
software, OneSpace.
Our Managed Services offering has
also continued to deliver strong
performance in the year. We
have a number of long standing
service engagements, typically 3-5
years’ duration, all with blue chip
enterprise-level customers. All
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OPERATIONAL REVIEW continued
proposition providing a unique
approach that leverages both
existing technology and new IoT
innovation to deliver significant
gains in space utilisation and
occupancy management.
The platform has a strong
Application Programming Interface
(‘API’) engine that is product
agnostic, making it flexible and
versatile and leverages the platform
capability of the 2D and 3D
mapping engine to rapidly map any
office or commercial environment,
enabling quick software application
deployment. As a result
RedstoneConnect is now well
positioned to develop first mover
advantage in what the market is
referring to as the ‘Connected
Office’; a digital environment where
OneSpace seamlessly integrates
with other key intelligent systems
in and around buildings including
visitor management, car parking,
access control, lift and meeting
room management, food and
beverage, AV facilities, electronic
signage – in fact any digital service
that supports the efficient and
productive use of a building by its
occupants.
PERFORMANCE
The financial performance of the
Company for the year is covered
in more detail in the Financial
Review. In the year to 31 January
2017, revenues were £41.5 million
(2016: £40.1 million) slightly ahead
of the prior year. More importantly
however, gross profit increased by
approximately 33% to £9.2 million
(2016: £7.0 million), as the quality
and mix of revenues improved
enabling gross margin to increase
to 22% (2016: 17%). This headline
performance has been achieved in
part through continued efficiencies
in our core operations as well as the
addition of software applications
with significantly higher gross
margins, which is starting to
have a significant impact on our
profitability.
of the customers with contracts
due for review during the period
committed to renew with us.
This represents 81% of our total
Managed Services contracted
customer base, providing solid
visibility of these revenues for
the next three to five years.
The acquisition of Commensus
in November 2016 builds out
our service proposition, adding
a fully managed IT support
service offering, including a
24/7 monitoring and support
desk capability. This acquisition
also brought with it higher
margin, contracted recurring
revenues delivered through
Commensus’ cloud platform,
with complementary engineering
resources to deliver on-site
services. We now plan on cross-
selling these services across our
existing customer base and new
customer engagements.
Our Software applications business
is the newest division of the Group.
The acquisition of Connect IB has
brought to the Group a scalable
cloud based software platform
and whilst the platform’s heritage
lies in the retail sector, it is both
functionally rich and fully endorsed
by customers in a variety of sectors
including: Pharmaceuticals, Retail,
Sports and Entertainment, Financial
Markets and Real Estate.
The cloud based platform is
modular with core modules and
strengths in: customer relationship
management, analytics, 2D and 3D
mapping and wayfinding, location
based services including visitor
management, meeting room and
occupancy management, ticketing,
cash/frictionless vending and car
parking and content management.
The platform is multi-tenanted,
multi-currency and multi-lingual
and has been deployed in over 28
countries.
OneSpace, our occupancy
management tool, forms a module
of the Connect platform, which can
also be purchased standalone and
is plug and play. It is a compelling
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ACQUISITIONS
During the year the Group
successfully completed two
acquisitions: Connect IB in the first
half of the year and Commensus in
the second part of the year.
It is pleasing to report that both
acquisitions have been fully
integrated into the Group and
made a positive contribution to
the Group’s strong trading during
the year, with adjusted EBITDA
materially ahead of market
expectations at £2.0 million.
OUTLOOK
We have made significant
operational progress, are profitable,
have generated positive operational
cash flow, delivered a net cash
position at the year end and
developed a strong order book and
new business pipeline for 2017.
The acquisitions made during
the year are fully integrated
with a period of post-acquisition
development also being
successfully delivered. The focus
now is on scaling the business,
growing margins, penetrating
the market with our product and
service offerings and a continued
strategic focus to assess the market
for further opportunities to grow
both organically and by acquisition.
Our restructuring is now complete
and provides a stable and robust
balance sheet, which the Company
has not previously had in place.
That, combined with our clear
strategic focus leaves us well
positioned to accelerate our growth
aspirations.
The significant improvement in our
operational performance is a clear
reflection of the passion and quality
of our people. On behalf of the
Board, I wish to personally thank
and acknowledge my colleagues
for what they have achieved
during 2016 and for their ongoing
commitment to RedstoneConnect.
Mark Braund
Chief Executive Officer
25 April 2017
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FINANCIAL REVIEW
OVERVIEW
AQUISITIONS
TRADING PERFORMANCE
Group trading results for the year
have been strong and materially
ahead when compared to the prior
year. As a result of the strategic
progress made during the year
with acquisitions and following a
successful period of restructuring,
this financial review presents a new
segmental view of the Group. The
Board now manages the business
aligned to the types of service and
solutions it delivers. This differs
from previous years, which were
based around the separate legal
entities and not service provision.
The Systems Integration division
delivers projects that cover a
variety of technologies and more
typically are delivering smart
building solutions; the Managed
Services division delivers both
managed services and support
and maintenance services both of
which drive recurring revenue and
contribution; and the Software
Applications division provides
software solutions.
The Company made two
acquisitions during the year,
Connect IB Ltd in March 2016 and
Commensus Plc in November 2016.
Connect IB Ltd was acquired for a
total consideration of £1.328 million,
satisfied by £1.028 million of cash
and £0.3 million in equity. The cash
consideration was funded from
a placing of ordinary shares (see
Equity Financing section below for
details). The equity consideration
was satisfied by the issue of up
to 18,507,094 ordinary shares, of
which 15,422,579 were issued on
completion at a market price of
1.621 pence per share and 3,084,515
were deferred and are conditional
on achieving certain future sales
targets. The equity consideration,
for the benefit of Keith Jump
founder and MD of Connect IB, is
subject to a lock up agreement for
a period of 36 months.
Commensus Plc was acquired
for a total consideration of £2.4
million. The consideration was
satisfied by £2.3 million in cash and
£0.1 million in equity. The equity
consideration was satisfied by the
issue of 11,976,487 ordinary shares
on completion at a market price
of 1.23 pence per share, for senior
Commensus management and
is subject to lock up and orderly
market arrangements for 24
months.
Revenue for the year of £41.5m
(2016: £40.1 million) increased by
£1.4 million. This increased revenue
was achieved as a result of the
acquisitions made during the year.
However, a more important and
relevant performance measure
is gross profit. During the year,
the Group reported a 33% year
on year increase in gross profit to
£9.2 million (2016: £7.0 million),
an increase of £2.2 million (2016:
£1.8 million). The increase in gross
profit resulted from strengthening
margin performance across all
segments and the benefit of higher
margin software products.
As a result of the strong gross
profit performance, adjusted
EBITDA has increased in the year
by 56% to £2.0 million (2016:
£1.3 million). Operating profit
also benefitted from the strong
trading performance, coupled with
the reduction in integration and
transactional items, resulting in £1.2
million profit (2016: loss of £0.7
million). The Group is profitable for
the first time, following its recent
restructuring, recording profit
after tax of £1.8 million (2016: loss
of £0.7 million) from continuing
activities and £2.1 million (2016:
loss of £2.2 million) including
discontinued operations.
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FINANCIAL REVIEW continued
YEAR ENDED 31 JANUARY 2017
System
Integration
Managed
Services
Software
Group
Overhead
Revenue
Gross Profit
Gross Margin
£000
24,586
4,084
16.6%
Adjusted EBITDA /(LBITDA)*
1,082
Operating profit/(loss)
£000
15,310
3,714
24.3%
1,959
£000
1,625
1,426
87.8%
343
£000
-
-
-
(1,374)
Total
£000
41,521
9,224
22.2%
2,010
from continuing operation
874
1,432
(19)
(1,096)
1,191
Profit/(loss) after taxation from
continuing operations
1,478
1,432
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(1,128)
1,789
YEAR ENDED 31 JANUARY 2016
System
Integration
Managed
Services
Software
Group
Overhead
Total
Revenue
Gross Profit
Gross Margin
£000
23,823
3,129
13.1%
Adjusted EBITDA/(LBITDA)*
483
Operating profit/(loss) from
£000
16,275
3,821
23.5%
1,733
£000
£000
£000
-
-
-
-
-
-
(4)
(924)
40,098
6,950
17.3%
1,288
continuing operation
329
1,379
(10)
(2,394)
(696)
(Loss)/profit after taxation
from continuing operations
341
1,429
(10)
(2,456)
(696)
* Result for the year from continuing operations before net finance costs, depreciation, amortisation, integration
and transactional items, impairment charges and share based payment charge.
SYSTEMS INTEGRATION
The Systems Integration division
has recorded strong growth in the
year. Revenues of £24.6 million
have increased £0.8 million from
the prior year to £23.8 million.
This strong revenue performance,
coupled with an increase in gross
margin by 350 basis points to 16.6%
from 13.1%, has generated increased
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gross profit of £4.1 million (2016:
£3.1 million). The increase in gross
profit during the year, has resulted
in a £0.6 million improvement in
adjusted EBITDA at £1.1 million
(2016: £0.5 million) and an increase
of £0.6m in operating profit at £0.9
million (2016: £0.3 million).
MANAGED SERVICES
Revenues of £15.3 million (2016:
16.3 million) and gross profit of £3.7
million (2016: 3.8 million) are both
marginally lower than the prior
year. However, as a result of higher
margin contracts delivered during
the year coupled with a reduction
in overheads, this division has seen
an increase in adjusted EBITDA
of £2.0 million (2016: £1.7 million)
and operating profit of £1.4 million
(2016: £1.4 million).
Encouragingly, a significant
proportion of the Managed Services
contracts that are delivered ‘on the
ground’ have been renewed during
the year, on three to five year terms,
providing good visibility of the
related revenue and contribution
over the next few years.
The acquisition of Commensus
towards the end of the financial
year has contributed to the
Managed Services divisional
performance.
SOFTWARE
This division includes revenues and
profits generated from OneSpace
and Connect IB.
Revenues of £1.6 million (2016:
£nil) generated gross profit of
£1.4 million at a margin of 87.8%
(2016: £nil), resulting in a positive
adjusted EBITDA contribution of
£0.3 million (2016: £0.01 million
loss). Operating loss of £0.02
million is after impairment of
intangible assets of £0.1 million and
integration costs of £0.1 million.
The impairment charge has
arisen as a result of the recent
development of OneSpace
following the acquisition of
Connect IB. The charge results
from the now ‘end of life’ previous
version of the OneSpace product.
GROUP OVERHEAD
The Group reported central
overheads of £1.1 million at an
operating level (2016: £2.4 million).
The reduction in overheads is due
to charges and provisions made in
the prior year, which related to the
then on-going Group restructuring
which is now full concluded.
INTEGRATION AND
TRANSACTIONAL ITEMS
A credit of £0.2 million (2016:
charge £1.4 million) has been
recorded in integration and
transactional items from continued
operations in the year, benefitting
the income statement. This
credit has arisen as a result of the
integration credit of £0.4 million
(2016: charge of £1.1 million) being
offset by transactional charges of
£0.2 million (2016: £0.4 million).
The credit in relation to integration
items, is primarily a result of the
exit and final settlement in August
2016 of the Stokenchurch property
lease. The exit of this lease gave
rise to a reversal of the unused
vacant property provision provided
in the previous year, an analysis is
provided in note 23 ‘Provisions’.
The transactional costs of £0.2
million incurred during the
year directly relate to the two
acquisitions, including the charge
associated with raising the
necessary funds.
TAXATION
The tax credit reported in the
income statement is a result of
recording a deferred tax asset
during the year of £0.6 million
net of the deferred tax charge
associated with the amortisation
of intangible assets from business
combinations. The Group has the
benefit of trading losses which are
available to offset against future
profits. As at 31 January 2017, the
tax losses in the Group totalled
£9.7 million (2016: £5.6 million), of
which we anticipate utilising £3.6
million against future profits and as
such have recognised a deferred
tax asset of £0.6 million (2016: £nil)
during the year.
DISCONTINUED ACTIVITIES
The credit to the income statement
of £0.3 million recorded during the
year is a result of the continued
programme of restructuring,
voluntarily liquidating dormant
Group legal entities, specifically
where the trade and assets
have been previously sold. The
discontinued result, represents one-
off non-cash items and include the
reversal of unused provisions, built
up in relation to supplier disputes
from legacy telecom business
operations; an analysis is provided
in note 23 ‘Provisions’.
EARNINGS PER SHARE –
CONTINUING OPERATIONS
Basic earnings per share (“EPS”)
recorded in the year was 0.11
pence (2016: loss of 0.06 pence) -
significantly ahead of the prior year.
EPS on a diluted basis, allowing
for employee share options and
warrants, was 0.10 pence (2016:
loss of 0.06 pence). An analysis is
provided in note 14 ‘Earnings per
share’.
RESEARCH AND DEVELOPMENT
During the year the Group invested
£0.4 million (2016: £0.1 million)
in developing owned software IP
which includes OneSpace. This
investment is capitalised and
recorded in the balance sheet as
an intangible asset. An analysis
is provided in note 16 ‘Other
intangible assets’.
INTANGIBLE ASSETS AND
GOODWILL
As a result of the acquisitions of
Connect IB Ltd and Commensus
Plc, the Group intangible assets
increased by £2.9 million and
goodwill by £2.4 million. A
breakdown of the intangible assets
and goodwill arising on these
acquisitions is provided in note 6
‘Acquisitions of businesses’.
Amortisation of £0.1 million has
been recognised in the income
statement in respect of the
acquired intangible assets.
As a result of the recent
development of OneSpace, creating
a new separate module in the
Connect IB platform, the previous
investment in OneSpace, which
was also recorded as an intangible
asset, with a carrying value of £0.1
million (2016: £nil) has been fully
impaired during the year.
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issued 15,422,579 shares at a market
price of 1.621 pence per share as
part of the consideration paid for
Connect IB Ltd. In November 2016,
the Company issued 11,976,487 new
ordinary shares at a market price
of 1.23 pence per share, as equity
consideration to part fund the
Commensus acquisition. A detailed
analysis is included in note 25 ‘Share
capital and reserves’.
Spencer Dredge
Chief Financial Officer
25 April 2017
FINANCIAL REVIEW continued
CASHFLOW
Cash and cash equivalents at the
end of the year was £3.2 million
(2016: £1.0 million), an increase of
£2.2 million. This resulted from cash
flows generated from operating
activities of £0.9m, £3.0m raised
from finance activities, and £2.3m
from bank loans offset by outflows
in investing activities of £4.0m. Net
cash at the year end amounted to
£0.8 million (2016: £1.0 million).
Cash flows generated from
operating activities of £0.9 million
(2016: cash out flow of £2.7 million)
resulted from strong trading
performance during the year, offset
by investments in working capital.
Cash out flows from investing
activities of £4.0 million (2016:
cash generated £2.1 million),
resulted from the investments in
both Connect IB and Commensus
totalling £3.1 million (net of
cash acquired), investment in
the development of software
IP including OneSpace of £0.4
million and investment in fixed and
intangible assets of £0.5 million.
Cash flows generated from
financing activities of £5.2m (2016:
£2.0m) was made up of funds
raised from the issue of new equity,
net of issue costs of £3.0m (2016:
£2.1 million) and debt finance of
£2.3 million (2016: £nil) which was
used to fund the acquisition of
Commensus Plc.
During the year the Group incurred
one-off cash outflows relating to
legacy activities of £1.1 million.
Whilst these legacy cash items
relate to discontinued activities,
as some of the contractual
relationships resided in the parent
company, these items had to be
settled. It is not anticipated that
this cash cost will recur. The most
material item contribution to this
cash outflow was the Stokenchurch
property lease, with a cash cost
of £0.7 million (includes cash exit
cost). Other items include various
supplier issues of £0.4 million in
cash.
BORROWING AND BANK FACILITY
On 14 November the Group
entered into new long-term bank
arrangements. The facilities
were established to finance the
acquisition of Commensus Plc for
£2.4 million via a bank loan of £2.35
million and equity consideration
of £0.1 million. The Group banks
with Barclays, who provided the
debt finance in full. The loan is
repayable over four years, with
quarterly repayments, and carries a
coupon of 3.5%.
As a result of the Group’s new
loan and facility arrangements, the
following banking covenants are in
place: -
• Leverage cover: total borrowings
must not exceed 200% of trailing
twelve month EBITDA;
• Debt service: adjusted cash flow
as a ratio to adjusted debt service
shall not fall below 2 times;
• Interest cover: Earnings Before
Interest and Tax, (“EBIT”), must
exceed 2.5 times gross financing
costs; and
• Debtor cover: debtor book cover
less than 90 days cannot fall
below 3 times the drawn facility.
As a result of the fixed term
loan, a reduced revolving loan
facility of £1.65 million was agreed
(previously £2.5 million). This
facility will ratchet back up to a
maximum of £2.5 million in line with
the repayments of the £2.35 million
term loan.
EQUITY FINANCING
During the year the Company
issued 250,613,352 new ordinary
shares for a value of £3.0 million,
net of costs. The Company issued
238,636,865 in new equity in March
2016 via a placing of 223,214,286
ordinary shares at a market price
per share of 1.4 pence, raising a
total of £3.0 million, net of costs.
Also in March 2016, the Company
14
15
STRATEGIC REPORT
The Group continues to make
excellent progress in its stated
strategy of becoming a dominant
player in the Smart Buildings and
Smart Commercial Spaces market.
We have already made notable
success in our aim to positively
change the revenue and related
contribution mix of the Group
towards higher margin annuity
revenues. The gross margin
reported for the year is a blended
22%, which is 500-basis points (5%)
higher than the previous year at
17%. The increase in gross margin
is largely attributed to the positive
impact of the software division, and
I expect, as we grow this area of the
Group we will see a continuation
of this margin improvement with
a shift towards a higher blended
Group gross profit margin.
Another strategic aim has been to
develop our own IP and installed
customer base enjoying these
products and services. We have
made significant progress on this
front in the year, firstly with the
acquisition of Connect IB and more
recently with the productisation of
OneSpace. This period of product
development has resulted in
successful global master framework
agreements for OneSpace with
global investment bank UBS
and the global media events
company UBM. We continue to
develop further opportunities with
OneSpace and already have a
number of revenue generating pilot
projects, which we hope in time will
develop into full deployments of
the solution.
Our strategy is underpinned
by what we see in the market
place as a shift in modern work
practices towards a more flexible
working environment. The
age of Bring Your Own Device
(‘BYOD’) and mobile working is
becoming a reality. This changing
business environment brings
with it challenges for modern
organisations in how to ensure both
effective and efficient working.
This challenge is one that faces
all organisations both big and
small, but one that becomes more
difficult to manage effectively,
the larger and more diverse the
organisation. Staff wellbeing is
becoming an increased focus of
employers and it is accepted that
an effective working environment
creates an environment through
which employers can attract and
retain the best talent. Speaking
with clients, we are finding the key
drivers for creating a successful
office environment are not only the
financial benefits associated with
an efficient working environment
by utilising space effectively, but
also the benefits of a modern
work place when recruiting and
retaining talent. We believe a
digital experience is essential to
achieving employee wellbeing
and retention, through better
engagement with the work place,
empowering employees to enjoy a
more engaging work experience,
driving productivity gains. We
see this change gathering pace as
more of the millennials join today’s
and tomorrow’s work force and as
digitalisation continues to gather
pace.
The value in today’s world of
understanding business data
cannot be underestimated. The
Connect IB platform looks to
collect data from every end point
and product API. The value adding
activities which are enabled from
both the collection and analysis
of this data are what drives the
financial return on investment.
This is certainly the case for the
OneSpace product. Understanding
current working behaviours and
utilisation of office and commercial
spaces enables clients to right size
their office portfolios. We have
already seen a compelling return
on investment from the UBM client
experience, where the installation
of the OneSpace product ahead
of moving offices enabled, with
precision, an understanding of the
requirement for the new office
and delivered multimillion pound
savings in both capital expenditure
and annual operating expense. All
of these savings were generated
from only the initial phase of the
software deployment; further
efficiencies were achieved through
a further period of review. We see
a whole new customer set opening
up to the Group from organisations
that have similar inefficiencies
and a desire to improve employee
17
1616
development strategy and have
a small number of early stage
proof of concept developments
in progress with key customers
to fine tune these developments
before full release
• Loss of key staff:
RedstoneConnect employs
talented and experienced
personnel and loss of such
personnel would be detrimental
to the business. The Board has
put in place remuneration plans to
incentivise staff and encourages
career development where
possible within the organisation
and is establishing an active
succession planning process;
management encourage a culture
of respect and integrity to create
a good work environment.
• Inability to safeguard the
Company’s Intellectual Property:
the Group owns a growing
portfolio of valuable Intellectual
Property. Loss of such Intellectual
Property would be detrimental to
the organisation; the Company
manages this risk through its
patent protection programme
and by managing confidentiality
robustly
• Loss of competitive advantage:
the Group continues to innovate
in its key markets, developing
IP is a crucial component of this
development
• Loss of good credit rating:
many of our partners seek
guidance from the credit scoring
agencies to assess their credit
risk. We monitor our credit
ratings constantly and engage in
dialogue with rating agencies to
ensure they continue to reflect
our business correctly.
STRATEGIC REPORT continued
wellbeing for a variety of beneficial
reasons.
RISK MANAGEMENT
The divisional senior management
is responsible for managing risk
and assessing how this might
prevent the Group from delivering
its strategy with support from the
Group’s executive management
team.
The policy is to identify the key
risks which could affect the Group
and to assess the appropriate
mitigation, including use of
insurance policies.
The Group could potentially
be affected by a number of
uncertainties and risks that are not
wholly within its control.
Some of the key risks and
uncertainties along with the
Group’s approach to mitigation are
as follows:
• Potential deterioration of the UK
economy: this is currently relevant
due to the UK’s pending exit from
the European Union, although
this is some time away and will
be mitigated through delivery of
our strategy, focused on Smart
Building markets, which are
undergoing structural change and
by focusing on selling our own
IP-rich solutions that generate
significant customer advantage
and long term earnings visibility
for the Group
• Regulatory changes, potentially
relevant in light of the new
legislation, which will likely
be enacted following the UK’s
exit from the European Union:
mitigated by the knowledge
and agility of the Group’s skilled
resources, which provides us
with good visibility of any likely
change and enables us to react
quickly to comply. As such,
regulatory change can present
the Group with an advantage over
many of its competitors
• Failing to attract and retain
18
the right calibre of talent: the
Group operates an active talent
management and development
programme. Retention of skilled
resource is high in both Redstone
and the recently acquired
Connect IB and Commensus. We
continue to monitor and develop
this programme to meet the
ambitious requirements of the
business
• Failure to control projects within
their budgets including delivering
the services in accordance
with the project specifications
and to the required standards:
leveraging the Group’s 30-years
of experience it operates a strong
process, which is continuously
monitored, developed and
improved by a dedicated team of
talented programme and project
professionals, with full senior
management oversight
• Loss of ISO and vendor
accreditations: the Group
operates strong processes which
are continuously monitored,
developed and improved by a
dedicated quality manager, with
full senior management oversight.
Vendor accreditations are
managed using a process tailored
to each vendor and managed
by members of the senior
management team
• Health and safety risk: the Group
operates strong processes to
safeguard staff and clients which
are continuously monitored,
developed and improved by a
dedicated health and safety at
work manager, with full senior
management oversight
• Working capital risk on large
construction projects: the Group
negotiates milestone payments
on larger contracts to mitigate
working capital pressure
• Innovation risk from a fast moving
and ever changing customer
requirement: the Group’s
development is customer-centric;
we are actively engaged with
our target markets through
industry research, events and
the strong relationships we have
with customers. We use this as a
means to determine our product
19
DIRECTORS AND OFFICERS
Frank Beechinor (Chairman)
Frank was appointed Chairman of the Board on 10 July 2014 and
is Chairman of the Nominations Committee. He has significant
corporate experience, particularly of IT and Software services and
is also currently Non-Executive Chairman of dotDigital Group plc
and CEO of Cadence Performance Limited. Frank was previously
founder and CEO of OneClick HR plc from 1997 to 2011.
Mark Braund (Chief Executive Officer)
Mark joined the Board as CEO on 1 January 2016, following his
stint as a Non-Executive Director appointed on 9 March 2015.
He is a former director of IBM (EMEA) and an experienced
technology and business services executive with a proven ability
to turn around and grow businesses. He founded, developed and
then sold Barker Personnel Services to Carlisle Holdings plc and
subsequently led the turnarounds of TAC Europe, Lorien plc and
First Advantage Inc., all of which saw rapid increases in market
share and profitability before being sold to private investors. Mark
joined InterQuest Group plc as Chief Executive Officer in April
2011; since then he has transformed the Company into one of
the leading digital technology contract services and recruitment
specialists in the UK.
20
Spencer Dredge (Chief Financial Officer)
Spencer was appointed as Director on 2 September 2015.
Spencer is a qualified Chartered Management Accountant
and has more than a decade of experience in the Technology
sector having held a number of senior positions for quoted
UK technology companies, including his previous role as CFO
of Castleton Technology Plc, where he helped complete the
Groups restructuring. He has experience in corporate finance,
playing a pivotal role in executing successful M&A programs
at Redstone plc, Maxima Holdings plc and Redcentric plc.
Guy van Zwanenberg (Non-Executive Director)
Guy joined the Board on 9 March 2015 and is Chairman of the
Remuneration Committee and a member of the Audit Committee
and the Nominations Committee. Guy has 40 years’ experience in
industry and practice. He qualified as a Chartered Accountant with
Grant Thornton and then spent three years working with James
Gulliver. Guy subsequently moved to become UK Finance Director
of an American computer accessory company which was taken
public in 1989. In 1991, he established his own interim financial
management business and has since been involved in a number of
SME businesses providing strategic and financial help.
Guy joined Gamingking PLC in 1998 on a part time basis as Finance
Director and became Company Secretary and Non-Executive
Director in 2006, remaining until May 2013. He joined Quixant plc
as a Non-Executive in March 2013 as part of the float team.
Guy is both a Fellow of The Institute of Chartered Accountants in
England and Wales and a Chartered Director.
Diana Dyer Bartlett (Non-Executive Director)
Diana was appointed to the Board in October 2013 and is Chairman
of the Audit Committee and a member of the Remuneration
and Nominations Committees. Diana acted as interim FD of the
Company between the end of 2014 and Spencer’s appointment in
September 2015.
With 30 years’ experience in accountancy, investment banking
and finance, Diana has an impressive track record in investments,
mergers and acquisitions, corporate governance and business
transformation in publicly quoted, venture capital and private
equity backed companies. Her recent roles include Company
Secretary for Tullett Prebon plc, Finance Director of Pelamis
Wave Power Limited and Chairman and Honorary Treasurer for
BreastCancer Haven. She is currently CFO of Precious Cells
International Limited.
Diana is an Associate of the Institute of Chartered Accountants in
England and Wales.
21
COMPANY INFORMATION
AND ADVISERS
REGISTERED OFFICE
AUDITOR
40 Holborn Viaduct
London
EC1N 2PB
COMPANY NUMBER
5332126
COMPANY ADVISERS
NOMINATED ADVISER AND
JOINT BROKER
Cantor Fitzgerald
1 Churchill Place
Canary Wharf
London
E14 5RB
JOINT BROKER
Whitman Howard
First Floor
1 – 3 Connaught House,
Mount Street,
London
W1K 3NB
KPMG LLP
Chartered Accountants &
Statutory Auditors
Arlington Business Park
Theale
Reading
Berkshire
RG7 4SD
REGISTRAR
Share Registrars Ltd
Craven House
West Street
Farnham
Surrey
GU9 7EN
BANKER
Barclays Bank Plc
1 Churchill Place
London
E14 5HP
DIRECTORS REPORT
The Directors submit this report
together with the accounts
of RedstoneConnect plc (‘the
Company’) and its subsidiary
undertakings (together ‘the Group’)
for the year ended 31 January 2017.
PRINCIPAL ACTIVITES
During the year the Group’s
principal activities were
infrastructure services, managed
services and software products.
DIRECTORS AND
THEIR INTERESTS
The Directors who held office
during the year were as follows:
RESULTS AND DIVIDEND
The results for the year are set
out in the consolidated income
statement on page 30. The
Directors do not recommend
payment of a dividend (2016: £nil).
REVIEW OF BUSINESS
A review of the business of the
Group, together with comments on
future developments is given in the
Operational Review.
Frank Beechinor
Chairman
Mark Braund
Chief Executive Officer
Spencer Dredge
Chief Financial Officer
Diana Dyer Bartlett
Non-Executive Director
Guy van Zwanenberg
Non-Executive Director
The remuneration of the Directors who held office during the year was as follows:
DIRECTORS’ REMUNERATION
Salary
Bonus
Share
Based
Payment
Benefit
in kind
Total
Pension
2017
Total
2016
Total
£000
£000
£000
£000
£000
£000
£000
£000
59
302
140
38
38
-
-
25
-
-
6
40
16
4
2
-
4
1
-
-
65
346
182
42
40
-
19
8
-
-
65
365
190
42
40
87
96
68
127
33
Frank Beechinor
Mark Braund
Spencer Dredge
Diana Dyer Bartlett
Guy van Zwanenberg
22
23
DIRECTORS REPORT continued
The interests of those Directors serving during the year ended 31 January 2017, as at the year-end, all of which
are beneficial, in the share capital of the Company, were as follows:
DIRECTOR
Ordinary shares of 0.1p each
Frank Beechinor
Mark Braund
Spencer Dredge
Diana Dyer Bartlett
Guy van Zwanenberg
2017
No
9,000,000
14,485,316
3,212,652
4,000,000
3,000,000
2016
No
9,000,000
10,638,888
1,819,795
4,000,000
3,000,000
Mark Braund and Spencer Dredge both took part in the share placing in March 2016 and subscribed for 3,571,428
and 1,392,857 ordinary shares respectively. Mark Braund also purchased 275,000 ordinary shares in the open
market during the year.
The beneficial holdings include, where applicable, the holdings of connected parties.
DIRECTORS’ SHARE WARRANTS AND OPTIONS
As at 31 January 2017 the Company had granted the following warrants and share options to Directors and past
Directors of the Company which remained outstanding at the year-end or at the date of resignation:
NO OF ORDINARY EXERCISE
DIRECTOR
INSTRUMENT SHARES OF 0.1P PRICE GRANT DATE
Frank Beechinor
Share option
10,000,000
Mark Braund
Share option
65,000,000
Spencer Dredge
Share option
26,000,000
Diana Dyer Bartlett
Share option
7,000,000
Guy van Zwanenberg
Share option
3,000,000
0.92p
0.92p
0.92p
0.92p
0.92p
11/12/2015
11/12/2015
11/12/2015
11/12/2015
11/12/2015
Iain Ross
Warrant
4,000,000
5.00p
10/06/2013
None of the Directors had any beneficial interest in the shares of any subsidiary companies.
The movement on Directors share warrants and options during the year is set out below:
2017
2016
Number
Weighted average
exercise price
Number
Weighted average
exercise price
Outstanding at start of year
115,000,000
1.06p
21,380,952
Granted during the year
Forfeited during the year
-
-
Outstanding at end of year
115,000,000
Exercisable at end of year
4,000,000
-
-
1.06p
5.00p
111,000,000
(17,380,952)
115,000,000
4,000,000
3.30p
0.92p
2.91p
1.06p
5.00p
24
SHARE CAPITAL
BOARD OF DIRECTORS
Details of the Company’s share
capital are disclosed in note 25 to
the financial statements.
FINANCIAL INSTRUMENTS
Details of the use of financial
instruments by the Company and
its subsidiary undertakings are
disclosed in note 29 to the financial
statements.
At the year end the Board
consisted of a Chairman, Chief
Executive, Chief Financial Officer
and two Non-Executive Directors.
The Board meets on a regular
basis and the agenda of matters
discussed and approved consists of
matters concerned with the future
direction of the business
available to employees through the
medium of frequent staff meetings,
together with personal appraisals
and feedback sessions.
During the year the Group
introduced a SAYE share incentive
scheme in which all staff were
invited to participate, thereby
aligning their interests with those
of the shareholders.
STATEMENT TO THE AUDITOR
REMUNERATION COMMITTEE
So far as the Directors are
aware, there is no relevant audit
information (as defined by section
418 of the Companies Act 2006)
of which the Company’s auditor
is unaware, and each Director
has taken all the steps that he/
she ought to have taken as a
Director in order to make himself/
herself aware of any relevant audit
information and to establish that
the Company’s auditor is aware of
that information.
CORPORATE GOVERNANCE
Achieving good governance is
key to the long term success
of the business. It ensures we
remain a responsible Company
and underpins our culture and
reputation as an organisation.
As a Board we are conscious of
our obligations to think deeply,
thoroughly and on a continuing
basis regarding our duties.
The Group has Non-Executive
Board members with extensive
experience in areas critical to
the long term future success of
the Company, covering a deep
understanding of technology,
corporate strategy, finance and
investment.
This experience enables the Non-
Executives to add entrepreneurial
leadership, with open and rigorous
debate that provides a valuable
external and balanced perspective
to the proceedings. We believe that
our Board complement each other,
delivering a broad and appropriate
balance of skills.
The Remuneration Committee
agrees the terms and conditions,
including annual remuneration,
of Executive Directors and
reviews such matters for other
senior personnel including their
participation in long term incentive
schemes.
AUDIT COMMITTEE
The Audit Committee recommends
the appointment, scope and fees
of the external auditor, discusses
issues that arise from the audit,
reviews reports of the external
auditors and internal control
procedures and considers any
financial statements before their
publication. The auditor also
attends meetings of the Audit
Committee as required by the
Committee to consider any issues
arising from the audit and their
work.
NOMINATIONS COMMITTEE
The Nominations Committee makes
recommendations to the Board
for all Board appointments and
succession planning.
EMPLOYEES
The Group has continued to give
full and fair consideration to
applications made by disabled
persons, having regard to
their respective aptitudes and
abilities, and to ensure that they
benefit from training and career
development programs in common
with all employees. The Group has
continued its policy of employee
involvement by making information
25
After making appropriate enquiries,
the Directors consider that the
Company and the Group have
adequate resources to continue
in operational existence for the
foreseeable future. For this reason,
they continue to adopt the going
concern basis in preparing the
financial statements.
AUDITOR
In accordance with section 485
of the Companies Act 2006, a
resolution proposing that KPMG
LLP be re-appointed as auditor
will be put to the Annual General
Meeting.
The Report of the Directors was
approved by the Board on 25 April
2017 and signed on its behalf by:
Spencer Dredge
Director
25 April 2017
DIRECTORS REPORT continued
SUBSTANTIAL SHAREHOLDINGS
As at the 5 April 2017, the following interests in 3% or more of the issued ordinary share capital had been notified
to the Company:
SHAREHOLDER
5 APRIL 2017
Helium Special Situations Fund
Henderson Global Investors
259,824,283
90,510,315
15.79%
5.50%
DIRECTORS RESPONSIBILITIES
• prepare the financial statements
pence).
The Directors are responsible
for preparing the Annual Report
and the financial statements, the
Directors’ report in accordance with
applicable law and regulations.
Company law requires the Directors
to prepare group and parent
company financial statements for
each financial year. Under that law
they have elected to prepare both
the group and the parent company
financial statements in accordance
with IFRSs as adopted by the EU
and applicable law. As required
by the AIM Rules of the London
Stock Exchange they are required
to prepare the group financial
statements in accordance with
IFRSs as adopted by the EU and
applicable law and have elected
to prepare the parent company
financial statements on the same
basis.
Under Company law the Directors
must not approve the financial
statements unless they are satisfied
that they give a true and fair view
of the state of affairs of the group
and parent company and of their
profit or loss. In preparing each
of the group and parent company
financial statements, the Directors
are required to:
• select suitable accounting policies
and then apply them consistently;
• make judgements and estimates
that are reasonable and prudent;
• state whether they have been
prepared in accordance with
IFRSs as adopted by the EU; and
on the going concern basis unless
it is inappropriate to presume
that the Company will continue in
business.
The Directors are responsible for
keeping adequate accounting
records that are sufficient to show
and explain the parent company’s
transactions and disclose with
reasonable accuracy at any time
the financial position of the parent
company and enable them to
ensure that its financial statements
comply with the Companies
Act 2006. They have general
responsibility for taking such steps
as are reasonably open to them to
safeguard the assets of the group
and to prevent and detect fraud
and other irregularities.
The directors are responsible for
the maintenance and integrity
of the corporate and financial
information included on the
company’s website. Legislation in
the UK governing the preparation
and dissemination of financial
statements may differ from
legislation in other jurisdictions.
LISTING
The Company’s ordinary shares
have been traded on London’s
AIM Market since 6 September
2006. Cantor Fitzgerald are the
Company’s Nominated Advisor, and
the Company has Joint Brokers,
Cantor Fitzgerald and Whitman
Howard. The closing mid-market
share price at 31 January 2017 was
1.60 pence (31 January 2016: 0.52
PUBLICATION OF FINANCIAL
STATEMENTS
The Company’s financial
statements will be made available
on the Company’s website www.
redstoneconnectplc.com. The
maintenance and integrity of
the website is the responsibility
of the Directors. The Directors’
responsibility also extends to the
financial statements contained
therein. Shareholders who would
like to receive a copy of the
financial statements by post, should
apply to the Company Secretary at
the Company’s registered office.
ANNUAL GENERAL MEETING
The Annual General Meeting
will be held at the offices of
RedstoneConnect plc, 40 Holborn
Viaduct, London, EC1N 2PB, the
date and time of which will be
confirmed in due course.
GOING CONCERN
The Group’s business activities
and performance, and the financial
position of the Group, its cash flows
and borrowing facilities, together
with the factors likely to affect its
future development, performance
and position, are explained in the
Strategic report, the Operational
and Financial Review. Analysis
of the Group’s key risks is also
set out in the Strategic report.
Further information regarding the
assessment of going concern is in
note 1 to the financial statements.
26
27
AUDITOR’S REPORT
Independent Auditor’s report
to the Members of
RedstoneConnect Plc
We have audited the financial
statements of RedstoneConnect
plc for the year ended 31 January
2017 set out on pages 30 to 67.
The financial reporting framework
that has been applied in their
preparation is applicable law and
International Financial Reporting
Standards (IFRSs) as adopted by
the EU and, as regards the parent
company financial statements, as
applied in accordance with the
provisions of the Companies Act
2006.
This report is made solely to the
company’s members, as a body, in
accordance with Chapter 3 of Part
16 of the Companies Act 2006. Our
audit work has been undertaken
so that we might state to the
company’s members those matters
we are required to state to them
in an auditor’s report and for no
other purpose. To the fullest extent
permitted by law, we do not accept
or assume responsibility to anyone
other than the company and the
company’s members, as a body, for
our audit work, for this report, or
for the opinions we have formed.
RESPECTIVE RESPONSIBILITIES
OF DIRECTORS AND AUDITOR
As explained more fully in
the Directors’ Responsibilities
statement set out on page 26,
the directors are responsible for
the preparation of the financial
statements and for being satisfied
that they give a true and fair view.
Our responsibility is to audit, and
express an opinion on, the financial
statements in accordance with
applicable law and International
Standards on Auditing (UK and
Ireland). Those standards require
us to comply with the Auditing
Practices Board’s Ethical Standards
for Auditors.
SCOPE OF THE AUDIT OF THE
FINANCIAL STATEMENTS
A description of the scope of an
audit of financial statements is
provided on the Financial Reporting
Council’s website at www.frc.org.
uk/auditscopeukprivate.
OPINION ON FINANCIAL
STATEMENTS
In our opinion:
• the financial statements give a
true and fair view of the state
of the group’s and of the parent
company’s affairs as at 31 January
2017 and of the group’s profit for
the year then ended;
• the group financial statements
have been properly prepared
in accordance with IFRSs as
adopted by the EU;
• the parent company financial
statements have been properly
prepared in accordance with
IFRSs as adopted by the EU and
as applied in accordance with the
provisions of the Companies Act
2006; and
• the financial statements have
been prepared in accordance
with the requirements of the
Companies Act 2006.
OPINION ON OTHER MATTERS
PRESCRIBED BY THE COMPANIES
ACT 2006
In our opinion 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.
Based solely on the work required
to be undertaken in the course
of the audit of the financial
statements and from reading the
Strategic report and the Directors
report:
• we have not identified material
misstatements in those reports;
and
• in our opinion, those reports have
been prepared in accordance with
the Companies Act 2006.
MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY
EXCEPTION
We have nothing to report in
respect of the following matters
where the Companies Act 2006
requires us to report to you if, in
our opinion:
• adequate accounting records
have not been kept by the parent
company, or returns adequate for
our audit have not been received
from branches not visited by us;
or
• the parent company financial
statements are not in agreement
with the accounting records and
returns; or
• certain disclosures of directors’
remuneration specified by law are
not made; or
• we have not received all the
information and explanations we
require for our audit.
Derek McAllan
(Senior Statutory Auditor)
for and on behalf of KPMG LLP
Chartered Accountants & Statutory
Auditors
Arlington Business Park
Theale
Reading
Berkshire
RG7 4SD
25 April 2017
28
29
CONSOLIDATED INCOME STATEMENT
For the year ended 31 January 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 January 2017
NOTES 2017 2016
NOTES 2017 2016
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit/(loss)
Adjusted EBITDA*
Integration and transactional items included
within administrative expenses
Depreciation
Amortisation
Impairment of intangible assets
Share based payment charge
Operating profit/(loss)
Net finance costs
Profit/(loss) before tax
Taxation
Profit/(loss) for the year after tax
Discontinued operations
Profit/(loss) for the year
4,5
10
8
10
10
9
10
10
12
13c
7
Total comprehensive profit/(loss) for the year attributable to equity holders
Basic earnings/(loss) per share
Continuing operations
Discontinued operations
Total
Diluted earnings/(loss) per share
Continuing operations
Discontinued operations
Total
14
14
14
14
14
14
£000
41,521
£000
40,098
(32,297)
(33,148)
9,224
(8,033)
1,191
6,950
(7,646)
(696)
2,010
1,288
211
(424)
(371)
(146) -
(89)
1,191
(37)
1,154
635
1,789
316
2,105
2,105
0.11p
0.02p
0.13p
0.10p
0.02p
0.12p
(1,439)
(370)
(128)
(47)
(696)
(63)
(759)
63
(696)
(1,487)
(2,183)
(2,183)
(0.06p)
(0.12p)
(0.18p)
(0.06p)
(0.12p)
(0.18p)
* Result for the year from continuing operations before net finance costs, depreciation, amortisation,
integration and transactional items, impairment charges and share based payment charge.
The notes on pages 37 to 67 are an integral part of these consolidated financial statements.
.30
ASSETS
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY and LIABILITIES
Capital and reserves attributable to equity shareholders
Share capital
Share premium
Merger reserve
Reverse acquisition reserve
Accumulated deficit
Total equity
Current liabilities
Overdraft
Bank loans
Trade and other payables
Corporation tax
Provisions
Non-current liabilities
Provisions
Bank loans
Total liabilities
Total equity and liabilities
15
16
17
24
18
19
20
25
25
25
20
22
21
13a
23
23
22
£000
£000
11,087
3,222
906
62 -
15,277
143
8,779
4,468
13,390
28,667
3,687
32,589
1,911
(4,236)
(19,470)
14,481
1,273
653 -
10,318
11 -
-
12,255
169
1,762 -
1,931
14,186
28,667
8,724
309
637
9,670
181
7,982
2,430
10,593
20,263
3,436
29,463
1,911
(4,236)
(21,664)
8,910
1,383
8,503
676
10,562
791
791
11,353
20,263
The financial statements were approved by the Board of Directors and authorised for issue on 25 April 2017.
They were signed on its behalf by:
Spencer Dredge, Chief Financial Officer, 25 April 2017
Company Number: 5332126
31
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 January 2017
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the Company
SHARE REVERSE
PREMIUM AQUISI-
SHARE MERGER/ TION ULATED
NOTES CAPITAL RESERVE RESERVE DEFICIT TOTAL
ACCUM-
£000 £000 £000 £000 £000
3,015
29,727
(4,236)
(19,528)
8,978
At 1 February 2015
Loss for the year
Total comprehensive loss for the year
Transactions with the owners:
Proceeds from shares issued
25
421
Share issue costs
Share based payment charge
-
-
At 31 January 2016
At 1 February 2016
Profit for the year
Total comprehensive profit for the year
Transactions with the owners:
Proceeds from shares issued
25
251
Share issue costs
Share based payment charge
-
-
-
-
-
-
-
-
1,697
(50)
-
-
-
-
-
-
(2,183)
(2,183)
(2,183)
(2,183)
-
-
47
2,118
(50)
47
3,436
31,374
(4,236)
(21,664)
8,910
3,436
31,374
(4,236)
(21,664)
8,910
-
-
3,272
(146)
-
-
-
-
-
-
2,105
2,105
2,105
2,105
-
-
3,523
(146)
89
89
At 31 January 2017
3,687
34,500
(4,236)
(19,470)
14,481
NOTES 2017 2016
9,16
Cash flows from operating activities
Profit/(loss) for the year
Depreciation
Amortisation
Share based payment charge
Net finance costs
Taxation
Intangible asset impairment
Provisions (released)/recognised
Loss on sale of fixed assets
Loss on sale of discontinued operation, net of tax
Operating cash flows before movements in working capital
Decrease in inventories
(Increase)/decrease in receivables
Decrease in payables
Movement in provisions
Operating cash flows after movements in working capital
Tax refunded
Net cash generated from/(used in) operating activities
Cash flows from investing activities
Disposal of assets
Research and development
Acquisition of subsidiaries (net of cash acquired)
Acquisition of intangible assets
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Net cash (used in)/generated from investing activities
Cash flows from financing activities
Proceeds from issues of share capital (net of issue costs)
Loan drawn
Loan repaid
Net finance costs
Net cash generated from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
£000
2,105
424
371
89
37
(635)
146 -
(610)
-
-
1,927
37
(133)
(270)
(687) -
874
39
913
-
(367) -
(3,140) -
(138)
-
(351)
(3,996)
2,979
3,789 -
(1,500) -
(37)
5,231
2,148
1,047
3,195
£000
(2,183)
531
218
47
63
(482)
589
24
576
(617)
32
2,394
(4,543)
(2,734)
49
(2,685)
2,500
(355)
23
(56)
2,112
2,069
(63)
2,006
1,433
(386)
1,047
Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with
maturity of three months or less, as adjusted for any bank overdrafts.
32
33
COMPANY STATEMENT OF FINANCIAL POSITION
As at 31 January 2017
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 January 2017
NOTES 2017 2016
2017 2016
ASSETS
Non-current assets
Investment in subsidiaries
Tangible assets
Current assets
Trade and other receivables
Total assets
EQUITY and LIABILITIES
Capital and reserves attributable to equity shareholders
Share capital
Share premium
Merger reserve
Accumulated deficit
Total equity
Current liabilities
Overdraft
Bank loans
Trade and other payables
Provisions
Non-current liabilities
Provisions
Bank loans
Total liabilities
Total equity and liabilities
30
19
25
25
25
20
22
21
23
23
22
£000
£000
12,975
3 2
12,978
1,519
1,519
14,497
3,687
32,589
1,911
(29,938)
8,249
639
588 -
3,204
-
4,431
55
1,762 -
1,817
6,248
14,497
9,247
9,249
346
346
9,595
3,436
29,463
1,911
(29,172)
5,638
1,383
1,437
491
3,311
646
646
3,957
9,595
The financial statements were approved by the Board of Directors and authorised for issue on 25 April 2017.
They were signed on its behalf by:
Spencer Dredge, Chief Financial Officer, 25 April 2017
Company Number: 5332126
34
Cash flows from operating activities
Loss before taxation
Depreciation and amortisation
Share based payment charge
Net finance costs
Provisions (released)/recognised
Operating cash flow before working capital movement
Increase in receivables
Increase in payables
Movement in provisions
Net cash used in operating activities
Cash flows from investing activities
Investment in subsidiary
Acquisition of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issues of share capital (net of issue costs)
Loans drawn
Loans repaid
Net finance costs
Net cash generated from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
£000
£000
(834)
(7,913)
1
-
68
30
(610)
(1,345)
(113)
660
(473)
(1,271)
(3,281) -
(2)
(3,283)
2,979
3,850 -
(1,500) -
(31)
5,298
744
(1,383) 5
(639)
44
62
589
(7,218)
(55)
3,332
548
(3,393)
(2)
(2)
2,069
(62)
2,007
(1,388)
(1,383)
35
COMPANY STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of the Company
NOTES TO THE FINANCIAL STATEMENTS
SHARE
PREMIUM ACCUM-
SHARE MERGER/ ULATED
NOTES CAPITAL RESERVE DEFICIT TOTAL
At 1 February 2015
Loss for the year
Total comprehensive loss for the year
Transactions with the owners:
£000 £000 £000 £000
3,015
29,727
(21,303)
11,439
-
-
-
-
(7,913)
(7,913)
(7,913)
(7,913)
Proceeds from shares issued
25
421
1,697
(50)
-
-
-
44
2,118
(50)
44
3,436
31,374
(29,172)
5,638
3,436
31,374
(29,172)
5,638
-
-
-
-
(834)
(834)
(834)
(834)
3,272
(146)
-
-
3,523
(146)
-
68
68
3,687
34,500
(29,938)
8,249
-
-
-
-
Proceeds from shares issued
25
251
Share issue costs
Share based payment charge
At 31 January 2016
At 1 February 2016
Loss for the year
Total comprehensive loss for the year
Transactions with the owners:
Share issue costs
Share based payment charge
At 31 January 2017
36
1 GENERAL INFORMATION
RedstoneConnect plc is a company
incorporated in England and Wales
under the Companies Act 2006
and listed on the AIM market. The
address of the registered office
is given on page 22. The nature
of the Group’s operations and its
principal activities are set out in
the Directors’ report and in the
Operational review.
These financial statements are
presented in pounds sterling as
that is the currency of the primary
economic environment in which
the Group operates. There are no
foreign subsidiaries in the Group.
GOING CONCERN
As detailed in the Directors’ report,
the Directors consider that the
Company and the Group have
adequate resources to continue in
existence for the foreseeable future.
In assessing the outlook for the
Company and Group, the Board
took account of the Group’s £1.65
million overdraft facility.
The Directors have assessed the
Group’s current forecasts, taking
into account reasonable changes
in trading performance. The
assessment considered stress tests
and mitigating actions available
to the Group. On the basis of this
review, the Directors believe that
the Group will continue to operate
within the resources currently
available to it. Furthermore the
Directors have reviewed the
projections in accordance with
the banking facility covenants and
current cash flow forecasts indicate
that the Group will not breach
these terms in the forseeable
future. The Directors accordingly
continue to adopt the going
concern basis in preparing these
financial statements.
2 BASIS OF PREPARATION
AND SIGNIFICANT
ACCOUNTING POLICIES
The consolidated financial
statements of RedstoneConnect
plc have been prepared in
accordance with International
Financial Reporting Standards as
adopted by the European Union
(IFRS’s as adopted by the EU),
IFRS Interpretations Committee
and the Companies Act 2006
applicable to companies reporting
under IFRS. The consolidated
financial statements have been
prepared under the historical cost
convention.
The preparation of financial
statements in conformity with
IFRS requires the use of certain
critical accounting estimates. It also
requires management to exercise
its judgement in the process of
applying the Group’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 3.
Except as described below, the
accounting policies applied are
consistent with those of the
annual financial statements for the
period ended 31 January 2016 as
described in those annual financial
statements.
STANDARDS, AMENDMENTS
TO AND INTERPRETATION OF
EXISTING STANDARDS NOT YET
EFFECTIVE
At the date of approval of these
financial statements, the following
standards, interpretations and
amendments were issued but
not yet mandatory for the Group
and early adoption has not been
applied:
International Financial reporting
Standards (IFRS)
Recognition of Deferred Tax
Assets for Unrealised Losses –
Amendments to IAS 12
Disclosure Initiative – Amendments
to IAS 7
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts
with Customers
Clarifications to IFRS 15 Revenue
from Contracts with Customers
Effective date of IFRS 15 –
amendment to IFRS 15
Classification and Measurement of
Share-based Payment Transactions
– Amendments to IFRS 2
IFRS 16 Leases
All other amendments to existing
standards are not yet endorsed by
the EU at the date of approval of
these financial statements.
As at the report date the Board
are not in a position to report on
the impact, if any, of the effect of
adoption of the above standards,
however they will continue to
review and make any necessary
adjustments in line with the
adoption dates.
BASIS OF CONSOLIDATION
The consolidated financial
statements incorporate the financial
statements of the Company and
entities controlled by the Company
(its subsidiaries) made up to 31
January each year. Control is
achieved when the Company is
exposed, or has rights, to variable
returns from its involvement with
the investee and has the ability to
affect those returns through its
power over the investee.
On acquisition, the assets and
liabilities and contingent liabilities
of a subsidiary are measured at
their fair values at the date of
acquisition. Any excess of the cost
of acquisition over the fair values of
37
NOTES TO THE FINANCIAL STATEMENTS continued
separately identifiable component
in order to reflect the substance
of the transaction. The associated
revenue is allocated between the
constituent parts of the bundle on
a relative fair value basis. When
customers are offered discounts on
bundled products and/or services,
the combined discount is allocated
to the constituent elements of the
bundle, based upon market prices
for each component.
The Group reports revenue under
five revenue categories and the
basis of recognition for each
category is described on the facing
page:
the identifiable net assets acquired
is recognised as goodwill.
accounting:
All intra-group transactions,
balances, income and expenses are
eliminated on consolidation.
Where necessary, adjustments are
made to the financial statements of
subsidiaries to bring the accounting
policies used into line with those
used by the Group.
As permitted by section 408 of the
Companies Act 2006 the company
has elected not to present its own
profit and loss account for the year.
The Company reported a loss for
the financial year ended 31 January
2017 of £834,000 (2016: loss of
£7,913,000).
REVERSE ACQUISITION
ACCOUNTING
The acquisition of Coms.com
Limited in the year ended 31
January 2007 was accounted
for as a reverse acquisition of
RedstoneConnect plc by Coms.com
Limited. The consolidated financial
statements prepared following the
reverse takeover were issued in
the name of RedstoneConnect plc,
but they are a continuance of the
financial statements of Coms.com
Limited. Therefore, the assets and
liabilities of Coms.com Limited were
recognised and measured in the
consolidated financial statements
at their pre-combination carrying
values. The financial statements
reflect the continuance of the
financial statements of Coms.com
Limited.
The retained earnings and other
equity balances recognised in these
consolidated financial statements
at the time of the acquisition were
the retained earnings and other
equity balances of Coms.com
Limited immediately before the
business combination.
Under reverse acquisition
• an adjustment within
shareholders’ funds is required to
eliminate the cost of acquisition
in the issuing Company’s books,
and introduce a notional cost
of acquiring the smaller issuing
Company based on the fair value
of its shares
• an adjustment is required to
show the share capital of the
legal parent in the consolidated
balance sheet rather than that of
the deemed acquirer
Both adjustments have been
included in the reverse acquisition
reserve.
MERGER RESERVE
The merger reserve is used when
a share issue is undertaken and
merger relief is available.
The conditions for merger relief
are when the consideration for
shares in another company includes
issued shares of the acquirer and
on completion of the transaction,
the company issuing the shares will
have secured at least 90% equity
holding in the acquiree.
REVENUE RECOGNITION
Revenue is recognised when it is
probable that future economic
benefits will flow to the Group and
those benefits can be measured
reliably. Revenue is measured at
the fair value of the consideration
received or receivable and
represents amounts received or
receivable for good and services
provided in the normal course of
business, net of discounts and VAT.
The revenue recognition criteria as
set out under IAS 18 is applied to
each sales transaction, to ensure
revenue recognition is appropriate
and consistent throughout the
Group. When products are
bundled together in one sales
transaction, it is necessary to apply
the recognition criteria to each
38
CATEGORY AND EXAMPLES ACCOUNTING TREATMENT
System integration projects
Smart cabling & building
installations
Revenue from system integration projects is a mix of revenue from
installation works along with revenue from the sale of hardware used in
those projects.
Revenue generated from the sale of hardware is recognised when
delivered, whilst revenue from installation works is measured and
recognised by reference to the stage of completion of the contract at the
end of the reporting period.
In order to measure the stage of completion, an assessment is made
by comparing the proportion of contract costs incurred to date to
the total expected costs to complete. Revenue from such projects are
typically invoiced at various stages during the contract as specified in the
contract.
Any revenue recognised during the period but not invoiced at the end of
the reporting period is classified as accrued revenue in the balance sheet,
whilst any invoiced revenue at the end of the reporting period which
relates to future periods is classified as deferred income on the balance
sheet.
Recurring revenue is revenue earned from customers for the provision of
services, where risks and rewards are transferred to the customer over
the term of a contract, with the customer getting the benefits of those
services over that period.
Recurring revenue is recognised on a straight-line basis over the term of
the contract.
Revenue invoiced at the end of the reporting period which relates to
future periods is classified as deferred income on the balance sheet.
Recurring revenue
Managed services
Maintenance and support
contracts
Software as a service
DASaaS
Software
Perpetuity and term
software licences
Upgrades to licences
Software licence fees as well as specified upgrades revenue are
recognised when the risks and rewards of ownership relating to the
licence have been transferred and it is probable that the economic
benefits associated with the transaction will flow to the Group.
This is deemed to be when the goods have been delivered to the
customer, either physically or electronically, and when acceptance of
such products has been demonstrated by the client.
In the case of term software licences, revenue is recognised in full at the
point of delivery to the customer as the risk and rewards of the licences
have transferred at that point to the buyer and the Group does not retain
managerial involvement or effective control over the software or the
licences.
Software related products
Hardware
Hardware revenue is recognised when the products have been delivered
to the customer.
Professional services
Consultancy
Installation
Training
Analysis and reporting
Professional services revenue combines consultancy projects as well as
ad-hoc specific consultancy services.
Typically ad-hoc consultancy services include installation days, training
days and analysis and reporting days. These type of services are
purchased in advance by clients and used when required. Revenue from
these services is recognised upon delivery of the services to the client.
Consultancy projects revenue is measured and recognised by reference
to the stage of completion of the contract at the end of the reporting
period.
39
NOTES TO THE FINANCIAL STATEMENTS continued
PROPERTY, PLANT AND
EQUIPMENT
Property, plant and equipment are
stated at cost of acquisition less
accumulated depreciation and
impairment losses. Depreciation
is provided on a straight-line
basis at rates calculated to write
off the cost less the estimated
residual value of each asset over
its expected useful economic life.
The residual value is the estimated
amount that would currently be
obtained from disposal of the asset
if the asset were already of the age
and in the condition expected at
the end of its useful life.
at fair value plus transaction costs
that are directly attributable to
their acquisition or issue, and are
subsequently carried at amortised
cost using the effective interest
rate method, less provision for
impairment. A provision for
impairment is established when
there is objective evidence that the
Group will not be able to collect
all amounts due according to the
original terms of the receivables.
CASH AND CASH EQUIVALENTS:
These include cash in hand,
deposits held at call with banks and
bank overdrafts.
DEPRECIATION
FINANCIAL LIABILITIES
Property, plant and equipment are
depreciated using the straight-line
method based on estimated useful
lives.
The annual rates of depreciation
for each class of depreciable asset
across the Company are:
Fixtures and fittings – 20-25%
straight line
Office equipment – 25-33.3%
straight line
Leasehold improvements – 20%
straight line
The carrying value is assessed
annually and any impairment is
charged to the income statement.
FINANCIAL ASSETS
The Group classifies its financial
assets into one of the categories
below, depending on the purpose
for which the asset was acquired.
TRADE RECEIVABLES AND OTHER
DEBTORS:
The Group’s financial liabilities are
trade payables, bank borrowings
and other financial liabilities. These
are initially recognised at fair
value and subsequently carried at
amortised cost using the effective
interest rate method.
PROVISIONS
A provision is recognised in the
balance sheet when the Group
has a present legal or constructive
obligation as a result of a past
event, and it is probable that an
outflow of economic benefits will
be required to settle the obligation.
If the effect is material, provisions
are determined by discounting
the expected future cash flows
at a pre-tax rate that reflects the
current market assessment of the
time value of money and, where
appropriate, the risks specific to the
liability.
CORPORATION TAX
The tax expense represents the
sum of the tax currently payable
and deferred tax.
These are non-derivative financial
assets with fixed or determinable
payments that are not quoted in an
active market. They arise principally
through the provision of goods and
services but also incorporate other
types of contractual monetary
assets. They are initially recognised
The tax currently payable is based
on taxable profit for the year.
Taxable profit differs from net
profit as reported in the income
statement because it excludes
items of income or expense that are
taxable or deductible in other years
and it further excludes items that
are never taxable or deductible.
The Group’s liability for current tax
is calculated using tax rates that
have been enacted or substantively
enacted by the balance sheet date.
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 balance sheet 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
from the initial recognition (other
than in a business combination)
of other assets and liabilities in a
transaction that affects neither the
tax profit nor the accounting profit.
Deferred tax liabilities are
recognised for taxable temporary
differences arising on investments
in subsidiaries and associates, and
interests in joint ventures, except
where the Group is able to control
the reversal of the temporary
difference and it is probable that
the temporary difference will not
reverse in the foreseeable future.
The carrying amount of deferred
tax assets is reviewed at each
balance sheet 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 in the
income statement, except when it
relates to items charged or credited
directly to equity, in which case the
40
deferred tax is also dealt with in
equity.
OTHER INTANGIBLE ASSETS
All intangible assets excluding
goodwill are stated at cost less
accumulated amortisation and any
accumulated impairment losses.
GOODWILL
Goodwill represents the amount by
which the fair value of the cost of a
business combination exceeds the
fair value of net assets acquired.
Goodwill is not amortised and is
stated at cost less any accumulated
impairment losses.
The recoverable amount of
goodwill is tested for impairment
annually or when events or changes
in circumstance indicate that it
might be impaired. Impairment
charges are deducted from the
carrying value and recognised
immediately in the income
statement. For the purpose of
impairment testing, goodwill is
allocated to each of the Group’s
cash generating units expected to
benefit from the synergies of the
combination. If the recoverable
amount of the cash generating unit
is less than the carrying amount
of the unit, the impairment loss
is allocated first to reduce the
carrying amount of any goodwill
allocated to the unit and then to
the other assets of the unit pro-
rata on the basis of the carrying
amount of each asset in the unit.
An impairment loss recognised
for goodwill is not reversed in a
subsequent period.
RESEARCH AND DEVELOPMENT
Expenditure on research activities
is expensed as incurred.
Internally-generated intangible
assets arising from the
development are recognised only
if all of the following conditions are
met:
• an asset is created that can be
identified (such as software and
new processes);
• it is probable that the asset
created will generate future
economic benefits;
• the development cost of the asset
can be measured reliably;
• an intention to complete the
intangible asset and use or sell it;
• ability to use or sell the intangible
asset, and
• the availability of adequate
technical financial and other
resources to complete the
development and to use or sell
the intangible asset.
ACQUIRED INTANGIBLE ASSETS
Following business combinations,
the assets acquired are classified
into tangible and intangible assets
and fair values applied using the
principles of IFRS 3. This leads
to creation of intangible assets
recognised on the balance sheet.
AMORTISATION
Internally-generated intangible
assets are amortised on a straight-
line basis over their estimated
useful life. Where no internally-
generated intangible asset can
be recognised, development
expenditure is recognised as an
expense in the year in which it is
incurred.
IMPAIRMENT OF TANGIBLE AND
INTANGIBLE ASSETS EXCLUDING
GOODWILL
At each balance sheet date,
the Group reviews the carrying
amounts of its tangible and
intangible assets to determine
whether there is any indication
that those assets have suffered
an impairment loss. If any such
indication exists, the recoverable
amount of the asset is estimated
in order to determine the extent of
the impairment loss (if any). Where
the asset does not generate cash
flows that are independent from
other assets, the Group estimates
the recoverable amount of the
cash-generating unit to which the
asset belongs. An intangible asset
with an indefinite useful life is
tested for impairment annually and
whenever there is an indication that
the asset may be impaired.
Recoverable amount is the higher
of fair value less costs to sell and
value in use. In assessing value in
use, the estimated future cash flows
are discounted to their present
value using a pre-tax discount
rate that reflects current market
assessments of the time value of
money and the risks specific to
the asset for which the estimates
of future cash flows have not been
adjusted.
If the recoverable amount of an
asset (or cash-generating unit)
is estimated to be less than its
carrying amount, the carrying
amount of the asset (cash-
generating unit) is reduced
to its recoverable amount. An
impairment loss is recognised as
an expense immediately, unless
the relevant asset is carried at a
re-valued amount, in which case
the impairment loss is treated as a
revaluation decrease.
Where an impairment loss
subsequently reverses, the carrying
amount of the asset (cash-
generating unit) is increased to the
revised estimate of its recoverable
amount, but so that the increased
carrying amount does not exceed
the carrying amount that would
have been determined had no
impairment loss been recognised
for the asset/cash-generating
unit in prior years. A reversal of
an impairment loss is recognised
as income immediately, unless
the relevant asset is carried at a
revalued amount, in which case the
reversal of the impairment loss is
treated as a revaluation increase.
INVENTORIES
Inventories are stated at the lower
of cost and net realisable value.
Cost comprises materials and,
where applicable, direct labour
costs and those overheads that
have been incurred in bringing
the inventories to their present
location and condition. Cost is
41
NOTES TO THE FINANCIAL STATEMENTS continued
the results and financial position
of each entity are expressed in
pounds sterling which is also
the presentation currency for
the consolidated and Company
financial statements. The functional
currency of the Company is pounds
sterling.
portion of the risks and rewards
of ownership are retained by the
lessor are classified as operating
leases. Payments made under
operating leases (net of any
incentives received from the
lessor) are charged to the income
statement.
calculated using the weighted
average method. Net realisable
value represents the estimated
selling price less all estimated costs
of completion and costs to be
incurred in marketing, selling and
distribution.
SHARE BASED PAYMENTS
Where share options are awarded
to employees, the fair value of
the options at the date of grant is
charged to the income statement
over the vesting period. Non-
market vesting conditions are
taken into account by adjusting
the number of equity instruments
expected to vest at the balance
sheet date so that, ultimately, the
cumulative amount recognised
over the vesting period is based
on the number of options that
eventually vest. Market vesting
conditions are factored into the fair
value of the options granted. As
long as all other vesting conditions
are satisfied, a charge is made
irrespective of whether the market
vesting conditions are satisfied. The
cumulative expense is not adjusted
for failure to achieve a market
vesting condition.
Fair value is measured using an
appropriate option pricing model.
The expected life used in the
model has been adjusted, based on
management’s best estimate, for
the effects of non-transferability,
exercise restrictions and behavioral
considerations.
Where equity instruments are
granted to persons other than
employees, the consolidated
income statement is charged with
the fair value of goods and services
received.
FOREIGN CURRENCY
The individual financial statements
of each group entity are presented
in the currency of the primary
economic environment in which
the entity operates (its functional
currency). For the purpose of the
consolidated financial statements,
42
In preparing the financial
statements of the individual
entities, transactions in currencies
other than the entity’s functional
currency (foreign currencies) are
recorded at the rates of exchange
prevailing on the dates of the
transactions. At each balance sheet
date, monetary items denominated
in foreign currencies are re-
translated at the rates prevailing at
the balance sheet date.
Exchange differences arising on the
settlement of monetary items and
on the re-translation of monetary
items are included in the income
statement.
INVESTMENTS IN SUBSIDIARIES
Investments in subsidiaries
are stated at cost less, where
appropriate, provisions for
impairment.
LEASES
Assets held under finance leases
are initially recognised as assets of
the Group at their fair value at the
inception of the lease or, if lower, at
the present value of the minimum
lease payments. The corresponding
liability to the lessor is included in
the statement of financial position
as a finance lease obligation.
Lease payments are treated as a
reduction of the lease obligation
on the remaining balance of the
liability. Finance expenses are
recognised immediately in the
income statement, unless they are
directly attributable to qualifying
assets, in which case they are
capitalised in accordance with
the Group’s general policy on
borrowing costs. Contingent rentals
are recognised as expenses in the
periods in which they are incurred.
Rental leases in which a significant
IMPAIRMENT OF GOODWILL
The Group is required to test
goodwill for potential impairment
on an annual basis. The recoverable
amount of goodwill relating to
continuing activities is determined
based on the value in use
calculations which require the
estimation of future cash flows and
the selection of a discount rate.
Actual outcomes of this calculation
may vary; further information
concerning issues affecting the
carrying values is given in note 9.
ACQUIRED INTANGIBLE ASSETS
On acquisition of a business, the
Group is required to value the
assets acquired and recognise
intangible assets on the balance
sheet. The valuation of these assets
relies on various assumptions,
including future revenues and
costs derived from these assets
and the selection of an appropriate
discount rate in order to calculate
the present values of those cash
flows. A detailed analysis of the
valuation of assets acquired during
the year is given in note 6.
Ltd and Commensus Plc. In order
to support this, the Board have
amended the segments by which
it reports the business activities of
the Group.
In the opinion of the Directors the
Group’s activities comprise three
material business segments which
reflect the profiles of the risks,
rewards and internal reporting
structures within the Group.
4 SEGMENTAL REPORTING
These are as follows:
The Group has undergone a period
of transformation over the last two
financial periods, with the disposal
of the telecommunications business
and the acquisition of Connect IB
• Systems Integration
• Managed Services
• Software
All activities were conducted within the United Kingdom and it is the opinion of the Directors that this represents
one geographical segment.
3 CRITICAL ACCOUNTING
ESTIMATES AND
JUDGEMENTS
The Group makes estimates and
assumptions concerning the
future, which may differ from
the actual results. The estimates
and assumptions that have a
significant risk of causing a material
adjustment to the carrying amount
of assets and liabilities within the
next financial year are set out
below.
REVENUE RECOGNITION
YEAR ENDED 31 JANUARY 2017
Revenue and expenses on fixed
price contracts are recognised
using the percentage-of-
completion method. Revenue,
expenses, and ultimately profit are
therefore recognised over the life of
the activity of the contract. When
the outcome of a contract cannot
be reliably estimated then revenue
can only be recognised to the
extent that it is recoverable. When
total expected costs exceed the
total contract value the expected
loss is recognised immediately. As
revenue is therefore recognised
on a percentage-of-completion
basis which will be based on
management’s best estimate it
is an area that requires critical
estimation and judgement. The
amounts recognised in the balance
sheet at the year-end in respect
of the percentage-of-completion
approach are included as follows;
accrued revenue disclosed in note
19 under ‘amounts recoverable
on contracts’; deferred cost of
sales included in prepayments
disclosed in note 19; deferred
income disclosed in note 21 under
‘deferred income’; and accrued cost
of sales disclosed in note 21 under
‘accruals’.
System
Integration
Managed
Services
Software
Group
Overhead
Revenue
Cost of sales
Gross Profit
£000
24,586
£000
15,310
(20,502)
(11,596)
4,084
3,714
£000
1,625
(199)
1,426
Administrative expenses
(3,002)
(1,755)
(1,083)
Adjusted EBITDA/(LBITDA)*
1,082
1,959
343
Integration and transactional
costs included within
administrative expenses
Depreciation
Amortisation
(9)
(122)
(70)
Impairment of intangible assets
-
Share based payment charge
Operating profit/(loss)
Net finance costs
Profit/(loss) before taxation
Taxation
(7)
874
(2)
872
606
(50)
(281)
(183)
-
(13)
1,432
(6)
1,426
6
Profit/(loss) after taxation
1,478
1,432
(77)
(20)
(118)
(146)
(1)
(19)
3
(16)
23
7
£000
-
-
-
(1,374)
(1,374)
347
(1)
-
-
(68)
(1,096)
(32)
(1,128)
-
(1,128)
Total
£000
41,521
(32,297)
9,224
(7,214)
2,010
211
(424)
(371)
(146)
(89)
1,191
(37)
1,154
635
1,789
43
RedstoneConnect’s strategy of
delivery performance through both
organic and acquisitive growth.
In addition, both companies
create significant synergies for
the enlarged group in terms
of potential new clients for
RedstoneConnect and additional
products that can be sold across
Redstone’s existing customer base.
NOTES TO THE FINANCIAL STATEMENTS continued
YEAR ENDED 31 JANUARY 2016
System
Integration
Managed
Services
Software
Group
Overhead
Total
Revenue
Cost of sales
Gross Profit
£000
23,823
£000
16,275
(20,694)
(12,454)
3,129
3,821
Administrative expenses
(2,646)
(2,088)
Adjusted EBITDA/(LBITDA)*
483
1,733
Integration and transactional
costs included within
administrative expenses
Depreciation
Amortisation
(3)
(112)
(39)
Share based payment charge
-
Operating profit/(loss)
Net finance costs
329
-
Profit/(loss) before taxation
329
Taxation
Profit/loss) after taxation
12
341
(10)
(253)
(88)
(3)
1,379
(1)
1,378
51
1,429
£000
£000
£000
-
-
-
(4)
(4)
-
(5)
(1)
-
(10)
-
(10)
-
(10)
-
-
-
(924)
(924)
40,098
(33,148)
6,950
(5,662)
1,288
(1,426)
(1,439)
-
-
(44)
(2,394)
(62)
(2,456)
-
(370)
(128)
(47)
(696)
(63)
(759)
63
(2,456)
(696)
* results for the period from continuing operations before net finance costs, depreciation, amortisation, integration
costs and transactional items, impairment charge and share based payments.
5 REVENUE
Sale of goods
Rendering of services
Construction contract revenue
Total revenue
2017
2016
£000
1,108
16,071
24,342
41,521
£000
236
16,275
23,587
40,098
6 ACQUISITION OF
BUSINESSES
On 15 March 2016,
RedstoneConnect acquired 100%
of the share capital of Connect
IB Limited (“Connect”) for a total
consideration of £1.328 million. Deal
costs of £41,000 were incurred and
recorded under integration and
transactional items in the Income
Statement. The transaction was
satisfied by £1.028 million in cash
and £300,000 in equity. The cash
element of the consideration was
financed out of the placing of
223,214,286 new ordinary shares
of 0.1 pence each at a price of 1.4
pence per share, raising £3.125
million, before expenses. Equity
consideration was satisfied by,
15,422,579 ordinary shares of
0.1 pence and deferred equity
consideration of 3,084,516 ordinary
shares of 0.1 pence each, both at a
price of 1.62 pence per share.
On 16 November 2016,
RedstoneConnect acquired 100%
of the share capital of Commensus
Plc (“Commensus”) for a total
consideration of £2.4 million. Deal
costs of £72,000 were incurred and
recorded under integration and
transactional items in the Income
Statement. The transaction was
satisfied by £2,252,290 million in
cash and £147,710 in equity. The
cash element of the consideration
was financed through bank
borrowings, see note 22 for more
details. Equity consideration was
satisfied by 11,976,487 ordinary
shares of 0.1 pence at a price of 1.23
pence per share.
The acquisition of Connect
and Commensus is in line with
44
45
NOTES TO THE FINANCIAL STATEMENTS continued
The book value of Connect and Commensus net assets acquired and their fair values are summarised below:
Connect IB Limited
Commensus Plc
Combined
Book
Value
Fair Value
Adjustments
Fair Value
To Group
Book
Value
Fair Value
Adjustments
Fair Value
To Group
Fair Value
To Group
The fair value of the financial assets
include trade receivables with a fair
value and gross contractual value
of £539,000. The best estimate at
acquisition date of the contractual
cash flows to be collected was
£539,000.
The goodwill arising from the
acquisitions is not deductible for
income tax purposes.
Since acquisition date Connect IB
Limited contributed £1,600,000
in revenue and £83,000 to the
Group’s profit before taxation
in the year, whilst Commensus
Plc contributed £516,000 in
revenue and £48,000 to the
Group’s profit before taxation.
Had both acquisitions occurred
at the beginning of the year, the
Group’s revenue would have been
£44,000,000 and the Group’s
profit before taxation would have
been £1,300,000 for the year.
£000
£000
£000
£000
£000
£000
£000
The identifiable intangible assets and related deferred tax liability are as follows:
Intangible assets
Property, plant and equipment
Trade receivables
Other current assets
Cash
Loans
Trade payables
-
19
258
146
50
(126)
(166)
1,236
1,236
135
1,554
1,689
2,925
-
(26)
(123)
-
-
-
19
232
23
50
(126)
398
307
(79)
-
319
307
346
(240)
106
90
-
-
-
-
90
-
338
539
129
140
(126)
(166)
(219)
(219)
(385)
Other current liabilities
(149)
(379)
(528)
(900)
(182)
(1,082)
(1,610)
Deferred tax liability
-
32
(247)
(247)
-
(338)
(338)
(585)
461
493
157
715
872
1,365
Fair value of net assets acquired
Goodwill
Total consideration
Shares issued at market value
Cash
Contingent equity consideration
Cash
Less: cash acquired
Total cash consideration net
of cash acquired
493
835
1,328
250
1,028
50
1,328
1,028
(50)
978
872
1,365
1,528
2,363
2,400
3,728
148
398
2,252
3,280
-
50
2,400
3,728
2,252
3,280
(90)
(140)
2,162
3,140
Connect IB Limited
Commensus Plc
Combined
Fair Value
To Group
Fair Value
To Group
Fair Value
To Group
Customer contracts
IP
Deferred tax liability
Total
£000
606
630
(247)
989
The Group has applied the ‘Income
Approach’ valuation method
to identify the above acquired
intangible assets.
The Income Approach focuses on
the income-producing capability of
the subject asset. The underlying
premise of this approach is that the
value of an asset can be measured
by the present worth of the net
economic benefit (cash receipts
less cash outlays) to be received
over the life of the subject asset.
The steps followed in applying this
approach include estimating the
expected after-tax cash flows or
profits attributable to the asset
over its life and converting these
after-tax cash flows to present
value. This has been calculated
using the Discounted Cashflow
Methodology (“DCF”).
The discounting process uses a
rate of return, which accounts for
both the time value of money and
investment risk factors. Finally,
£000
1,689
-
(338)
1,351
£000
2,295
630
(585)
2,340
the present value of the after-tax
cashflows over the life of the asset
is totalled to arrive at an indication
of Fair Value of the asset.
For the Customer relationships we
have approached this by way of
ascertaining the post-tax annual
value of these contracts after
applying an attrition rate based on
historical trends.
46
47
NOTES TO THE FINANCIAL STATEMENTS continued
7 DISCONTINUED OPERATIONS
8 INTEGRATION, TRANSACTIONAL AND DECONSOLIDATION ITEMS
NOTES 2017 2016
2017 2016
Revenue
Cost of sales
Gross profit
Administrative expenses
Adjusted LBITDA*
Integration and transactional costs included within
administrative expenses
Depreciation
Amortisation
Impairment charge
Operating profit/(loss)
Profit/(loss) before tax
Taxation
Profit/(loss) for the year after tax
Profit/(loss) for the year
Total comprehensive profit / (loss) for the year
attributable to equity holders
Basic earnings/(loss) per share
4,5
8
10
10
9
10
13c
14
£000
-
-
-
(1)
(1)
318
-
-
-
317
317
(1)
316
316
316
0.02p
£000
5,343
(4,264)
1,079
(2,791)
(1,712)
2,269
(161)
(90)
(2,212)
(1,906)
(1,906)
419
(1,487)
(1,487)
(1,487)
(0.12p)
Integration (credits)/costs
Transactional costs
Deconsolidation credits
£000
(380)
171
(318)
(527)
£000
1,168
403
(2,401)
(830)
The integration costs include both employee and other restructuring costs such as provisions in respect of
onerous contracts. Employee costs include salary, redundancy and other exit costs. In 2017, transactional items
include the costs involved with the acquisition of Connect IB Limited and Commensus Plc as well as fee’s in
respect of the share placing, whilst the 2016 transactional items related to the costs involved in disposing of the
Telephony and Media divisions. The deconsolidation credits in 2016 relate to the removal of the balance sheets
of the Telephony and Media divisions disposed of during the year and provisions made for onerous leases and
supplier disputes. The deconsolidation credits in 2017 represent the unwinding of the balance of provisions made
in 2016 after settlement was reached and £70,000 was paid during the year in relation to those disputes.
The integration, transactional and deconsolidation credit of £527,000 (2016: £830,000 credit) comprises £211,000
credit from continued operations (2016: £1,439,000 charge) and £318,000 from discontinued operations (2016:
£2,269,000 credit).
9 IMPAIRMENT CHARGE
The impairment charge in 2017 relates to research and development costs capitalised in prior periods.
The impairment charge in 2016 relates to discontinued operations.
* results for the period before net finance costs, depreciation, amortisation, integration costs and transactional
items, impairment charge and share based payments.
NOTES 2017 2016
2017 2016
Goodwill
Other intangible assets
15
16
£000
-
146
146
£000
927
1,285
2,212
Net cash flow used in operating activities
Net cash used in investing activities
Net cash from financing activities
Net cash flow for the period
£000
(9)
-
(1) -
(10)
£000
(1,729)
2,488
759
During 2016 the Group disposed of the trade and assets of its Telephony and Media divisions. The subsidiaries that
operated within those divisions were classed as discontinued in 2016, and provisions were made against the costs
to settle supplier disputes within those entities as well as for intercompany balances owing to the Group.
The £316,000 profit from discontinued operations during the year represents the deconsolidation of balance
sheets, which includes provisions made in relation to supplier disputes. During the year, £70,000 was paid in
relation to these supplier disputes. In 2017, all subsidiaries associated with those divisions have been entered into a
voluntary liquidation process, see note 30 for a full list of subsidiaries.
GOODWILL
In 2016, Goodwill was impaired as
a consequence of the performance
of the Telephony Services division,
which was sold on 31 May 2015 to
Timico Ltd, and the Management
Buy Out of the Darkside Studios
business on 8 December 2015.
OTHER INTANGIBLE ASSETS
During 2016, the Board conducted
a review of the carrying value of
the Group’s other intangible assets.
As a result, the Group recorded a
£1,285,000 impairment charge for
the period, specific to the following:
• Intangible assets recognised in
relation to the acquisition of the
Actimax companies (telephony
services) in February 2014.
.
PROPERTY, PLANT AND
EQUIPMENT
During the year, the Directors
concluded a review of the carrying
value of the Group’s property, plant
and equipment. No impairment
charge was deemed necessary for
the year ended 31 January 2017
(2016: no impairment recorded).
48
49
NOTES TO THE FINANCIAL STATEMENTS continued
10 OPERATING PROFIT / (LOSS)
Operating (loss)/profit from all operations is arrived at after charging:
11 STAFF COSTS
The average number of employees was:
GROUP
GROUP
2017 2016
2017 2016
Cost of Inventory is recognised as an expense
Amortisation of intangibles
Depreciation of property, plant and equipment
Loss/(profit) on disposal of property, plant and equipment
Staff costs (see note 11)
Share based payment charge
Loss on foreign exchange
Rentals under operating leases
Impairment charge (see note 9)
Integration and transactional credit/(charge) (see note 8)
Audit fees
-audit of the Company’s financial statements
-audit of the Company’s subsidiaries pursuant to legislation
£000
13,572
371
424
-
£000
16,478
218
531
24
16,359
15,386
89
51
437
146
527
44
35
47
37
813
2,212
(830)
44
18
The analysis of administrative expenses in the consolidated income statement by nature of expense is as follows:
•
•
•
•
Administrative staff costs £2,607,000 (2016: £5,159,000)
Operating leases £437,000 (2016: £813,000)
Depreciation and amortisation £795,000 (2016: £749,000)
Other operating expenses £4,169,000 (2016: £1,732,000)
Sales
Technical support
Administrative
Their aggregate remuneration comprised:
Wages and salaries
Share based payments (see note 32)
Social security costs
Pension costs
Number
Number
28
252
37
317
35
262
46
343
£000
£000
14,355
89
1,607
308
16,359
13,520
47
1,515
304
15,386
£11,180,000 (2016: £10,246,000) of the above staff costs were included in cost of sales in the consolidated income
statement.
12 NET FINANCE COSTS
GROUP
2017 2016
Net finance costs
£000
37
£000
63
50
51
NOTES TO THE FINANCIAL STATEMENTS continued
13A TAXATION
The Group tax charge for the year can be reconciled to the profit/(loss) as disclosed in the statement of
comprehensive income/(loss) as follows:
GROUP
2017 2016
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year after tax
Tax at the UK corporation tax rate of 20.00% (2016: 20.17%)
Overseas tax payable
Non-deductible expenses
Unused tax losses not recognised as assets
Recognition of previously unrecognised tax losses
Research and development relief
Utilisation of previously unrecognised tax losses
Depreciation in excess of capital allowances
Utilisation of tax losses and group relief
Double taxation relief
Over provided in prior years
Taxation credit on continuing operations
£000
1,154
635
1,789
231
(6) -
17 4
129
(624) -
(162) -
(112)
48
(146)
(5) -
(5)
(635)
£000
(759)
63
(696)
(153)
223
(51)
101
(124)
(63)
(63)
At 31 January 2017 the Group had estimated tax losses of £9,730,000 (2016: £5,550,000) to carry forward against
future profits. These tax losses arose through historical trading in specific activities within the Group, and as such,
the losses are ring-fenced and can only be utilised against future profits from the same trade. The directors have
assessed the recoverability of these losses and anticipate utilisation of £3,600,000 of these tax losses against
future profits, and as such a deferred tax asset of £617,000 has been recognised during the year (2016: £nil
deferred asset recognised).
In the 8 July 2015 Budget, the government announced a reduction in the Corporation Tax rate from 20% to 19%
for the Financial Years beginning 1 April 2017, 1 April 2018 and 1 April 2019, with a further reduction from 19% to
18% for the Financial Year beginning 1 April 2020. In the 16 March 2016 Budget the Chancellor announced plans to
further reduce the Corporation Tax rate to 17% for the Financial Year beginning 1 April 2020.
This will reduce the Company’s future current tax charge accordingly. The deferred tax liability at 31 January 2017
has been calculated based on the rate of 17% substantively enacted at the balance sheet date.
13B DEFERRED TAXATION
The analysis of deferred tax assets and deferred tax liabilities is as follows::
GROUP
2017 2016
Deferred tax assets
Deferred tax liabilities
Deferred tax asset
Deferred tax assets comprised of:
Tax losses
Deferred tax liabilities arose on:
Business combinations
13C TAXATION CHARGE
£000
£000
617 -
(555) -
62 -
617
-
(555) -
The taxation credit for the year of £635,000 (2016: £63,000 credit) related to continued operations only and is in
respect of the deferred tax on business combinations as well as the recognition of deferred tax on losses.
14 EARNINGS PER SHARE
Earnings per share data is based on the Group profit/(loss) for the year and the weighted average number of
ordinary shares in issue.
2017
2016
Continued
operations
Discontinued
operations
Total
Continued
operations
Discontinued
operations
Total
Basic earnings/(loss) per share
0.11p
0.02p
0.13p
(0.06p)
(0.12p)
(0.18p)
Diluted earnings/(loss) per share 0.10p
0.02p
0.12p
(0.06p)
(0.12p)
(0.18p)
Profit/(loss) for the year
attributable to owners of the
parent company (£000)
1,789
316
2,105
(696)
(1,487)
(2,183)
2017 2016
Number of shares
No No.
Weighted average number of ordinary shares in issue
1,606,896,215
1,232,295,941
Weighted average number of potentially dilutive
ordinary shares in issue
1,768,526,952
1,232,295,941
Warrants and employee share options are non-dilutive in loss making periods.
52
53
NOTES TO THE FINANCIAL STATEMENTS continued
GROUP
GROUP COMPANY
16 OTHER INTANGIBLE ASSETS
15 GOODWILL
Cost
At 31 January 2015
Additions
At 31 January 2016
Additions
At 31 January 2017
Accumulated impairment charge
At 31 January 2016
Impairment charge
At 31 January 2017
Carrying value at 31 January 2017
Carrying value at 31 January 2016
Carrying value at 31 January 2015
2017 2016
Accumulated amortisation and impairment
£000
16,558
-
16,558
2,363
18,921
7,834
-
7,834
11,087
8,724
9,651
Cost or valuation
At 31 January 2015
Additions
Disposals
At 31 January 2016
Additions at acquisition
Additions
Impairment
Disposals
At 31 January 2017
At 31 January 2015
Charge for the year
Impairment
Disposals
At 31 January 2016
Charge for the year
Impairment
Disposals
At 31 January 2017
Carrying value
At 31 January 2017
At 31 January 2016
At 31 January 2015
Development
costs
Other Intangible
assets
Total
Other Intangible
assets
£000
£000
£000
£000
438
132
(438)
132
-
367
(211)
-
288
333
22
-
(355)
-
67
(65)
-
2
286
132
105
3,308
223
3,746
355
(3,226)
(3,664)
305
2,925
138
-
-
3,368
1,695
196
(1,285)
(478)
128
304
-
-
432
2,936
177
1,613
437
2,925
505
(211)
-
3,656
2,028
218
(1,285)
(833)
128
371
(65)
-
434
3,222
309
1,718
138
-
(138)
-
-
-
-
-
-
138
-
-
(138)
-
-
-
-
-
-
-
-
During the year, the Board conducted a review of the carrying value of the Group’s intangible assets. As a result,
the Group recorded a £146,000 (2016: £1,285,000 charge) impairment charge for the period, as detailed in note 9.
55
Carrying value of goodwill is allocated as follows:
Redstone Converged Solutions Ltd
Connect IB Limited
Commensus Plc
Carrying value of goodwill aligns to the segments as follows:
Systems Integration
Managed Services
Software
£000
8,724
835 -
1,528 -
11,087
£000
8,724
8,724
2017 2016
£000
1,068
9,184
835 -
11,087
£000
8,724
-
8,724
FAIR VALUE
Goodwill on consolidation has
been allocated for impairment
testing purposes between the
cash-generating units (“CGUs”) and
these CGU’s aligned to the Group’s
three business segments; Systems
Integration, Managed Services and
Software. The recoverable amount
of the CGU’s are based on ‘value
in use’ calculations using cash
flow projections approved by the
Directors covering a three-year
period and a terminal growth rate
of 2% thereafter.
The projections for the CGU’s are
based on the assumption that
the Group can realise projected
sales. If the projected sales do
not materialise there is a risk that
the total value of the intangible
assets shown above would be
impaired. The Company, in its
approach has based its projections
on key assumptions of annualised
incremental growth in revenue
and cost of sales of 2% with 2%
attributed to administrative costs.
The calculation of residual value
has utilised 2% growth rates.
Sensitivity analysis indicates that
if revenues declined by 10% or
administrative expenses increased
by 10%, this would not give rise to
an impairment charge.
A pre-tax discount rate of 17.5% has
been used for all CGU’s. This rate
takes into consideration the Group’s
cost of capital, the expected rate of
return and various risks relating to
the relevant CGU. At the year end,
based on these assumptions there
is no indication of impairment in
the remaining goodwill. Sensitivity
analysis indicates that if the pre-
tax discount rate increased by
1% this would not give rise to an
impairment charge.
54
NOTES TO THE FINANCIAL STATEMENTS continued
17 PROPERTY, PLANT AND EQUIPMENT
18 INVENTORIES
GROUP
Cost
At 31 January 2015
Additions
Disposals
At 31 January 2016
Additions at acquisition
Additions
Disposals
At 31 January 2017
Accumulated depreciation
and impairment
At 31 January 2015
Charge for the year
Disposals
At 31 January 2016
Charge for the year
Disposals
At 31 January 2017
Carrying value
At 31 January 2017
At 31 January 2016
At 31 January 2015
Plant &
machinery
Leasehold
improvements
Fixtures &
fittings
Computer
equipment
Total
£000 £000
£000
£000 £000
356
-
999
7
361
-
(356)
(550)
(282)
-
-
-
-
-
249
46
456
-
138
(5)
589
397
126
79
-
57
-
136
251
29
2,553
49
(1,547)
1,055
342
156
(178)
1,375
4,269
56
(2,735)
1,590
342
351
(183)
2,100
1,574
330
2,471
531
(295)
(372)
(255)
(1,127)
(2,049)
-
-
-
-
-
-
107
151
97
(5)
243
346
305
602
25
18
-
43
93
54
110
777
309
(178)
908
467
278
979
953
424
(183)
1,194
906
637
1,798
During the year, the Directors concluded a review of the Group’s property, plant and equipment carrying values,
specifically in light of the Board’s decision to vacate certain Group office locations. No impairment charge was
deemed necessary to the remaining assets following the disposals during the year.
GROUP
2017 2016
Finished goods
19 TRADE AND OTHER RECEIVABLES
£000
143
£000
181
GROUP COMPANY
2017 2016 2017 2016
Current
Financial assets
Trade receivables
Amounts recoverable on contracts
Other receivables
Amounts due from subsidiaries less
impairment provisions
Taxes and social security costs
Accrued income
Non-financial assets
Prepayments
£000
£000
£000
£000
5,177
2,174
230
-
-
-
4,182
2,468
340
-
111
5
-
-
201
1,059 -
-
- -
7,581
7,106
1,260
1,198
876
259
-
-
201
30
231
115
8,779
7,982
1,519
346
The Directors consider that the carrying amount of trade and other receivables equals their fair value.
Amounts recoverable on contracts includes contract costs plus recognised profits of £7,227,000 (2016:
£11,340,000) less progress billings of £6,104,000 (2016: £9,453,000) and retention monies.
56
57
NOTES TO THE FINANCIAL STATEMENTS continued
20 CASH AND CASH EQUIVALENTS
22 FINANCIAL LIABILITIES - BORROWINGS
During the year the Group secured a bank loan to fund the acquisition of Commensus Plc.
The Group’s banking arrangements are secured by a debenture over the assets of the principal operating
businesses and cross guarantees.
GROUP COMPANY
2017 2016 2017 2016
Details of the repayments are set out below:
Bank current account
Bank overdraft
£000 £000
4,468
(1,273)
3,195
2,430
(1,383)
1,047
£000
- -
(639)
(639)
£000
(1,383)
(1,383)
The carrying amount of these assets approximates their fair value. Interest is variable on demand.
21 TRADE AND OTHER PAYABLES
GROUP COMPANY
2017 2016 2017 2016
£000
£000
£000
£000
Financial liabilities
Trade payables
Social security and other taxes
Deferred income
Other payables
Accruals
Deferred consideration
Amounts owed to subsidiary company
4,765
1,601
987
-
2,915
50
-
3,257
602
812
37
3,795
-
-
10,318
8,503
259
379
-
-
429
50 -
2,087 -
3,204
359
20
-
-
1,058
1,437
The amounts owed to subsidiary companies are non-interest bearing and repayable on demand. The Directors
consider that the carrying amount of trade and other payables equals their fair value.
GROUP COMPANY
2017 2016 2017 2016
Amounts due within one year
Amounts due after one year
£000
653
1,762
2,415
£000
-
-
-
£000
588 -
1,762 -
2,350 -
£000
23 PROVISIONS
GROUP
Property
Dilapidations
Other
provisions
Corporate
restructuring
Balance at 1 February 2016
£000
1,018
Provisions made during the year
-
Provisions used during the year
(563)
Provisions reversed during the year
(455)
Balance at 31 January 2017
Non-current
Current
-
-
-
£000
145
24
-
-
169
-
169
£000
240
-
(70)
(170)
-
-
-
£000
64
-
(8)
(56)
-
-
-
Total
£000
1,467
24
(687)
(635)
169
-
169
In 2016 the directors made
provision for certain offices within
the Group where the lease was
deemed to be onerous.
In 2017 settlement of the lease
arrangement was reached and in
total (net of VAT) £674,519 was
paid to exit the lease. Monies held
in Escrow for the rent deposit and
accrued interest of £397,454 was
used to part fund the settlement,
these balances had been fully
written off in prior years. As a
result, £277,065 cash was paid in
2017 (net of VAT) to exit the lease,
this was fully settled on completion
of the exit agreement.
Other provisions related to
customers and supplier issues
where the Directors believed
that there would be a likely cash
outflow. During the year a payment
of £70,000 was made to settle all
claims, and the balance of £170,000
was released to the Statement of
Comprehensive Income during the
year as a discontinued item.
At 31 January 2017 the Parent
Company provisions comprises;
property £nil (2016: £1,018,000),
dilapidations £55,000 (2016:
£55,000), and corporate
restructuring £nil (2016:
£64,000) with the balance of the
dilapidations provision £114,000
(2016: £90,000) other provisions
£nil (2016: £240,000) held within
the operating entities.
58
59
NOTES TO THE FINANCIAL STATEMENTS continued
24 DEFERRED TAX ASSET
GROUP
2017 2016
Deferred tax
An analysis of the above asset is set out in note 13B ‘Deferred taxation’
£000
£000
62 -
62 -
26 RETIREMENT BENEFIT
SCHEMES
£188,000 (2016: £204,000) being
included in cost of sales.
Parent and the subsidiaries during
the year represent transfers of cash
between the Companies.
The Group operates a defined
contribution company pension
scheme for the Executive Directors
and employees. The assets of the
scheme are held separately from
those of the Company. The annual
contributions payable are charged
to the income statement. For the
period, pension costs incurred were
£308,000 (2016: £304,000) with
27 RELATED-PARTY
TRANSACTIONS
Transactions between the Company
and its subsidiaries, which
are related parties, have been
eliminated on consolidation and are
not disclosed in this note.
The transactions between the
25 SHARE CAPITAL AND RESERVES
The Company’s share capital comprises:
At 31 January 2017 the Parent Company had the following balances with subsidiaries:
2017 2016 2017 2016
Allotted, called up and fully paid:
Amounts due from subsidiaries
Number
Number
£000
£000
Amounts owed to subsidiaries
2017 2016
£000
2,087
(1,059)
£000
-
-
Ordinary shares of 0.1p each
1,645,146,151
1,394,532,799
Deferred shares of 1p each
127,144,044
127,144,044
Deferred shares of 0.1p each
770,714,046
770,714,046
1,645
1,271
771
3,687
1,394
1,271
771
3,436
MOVEMENTS IN ISSUED AND FULLY PAID ORDINARY SHARES CAPITAL
Number
Issue Price
Share
Capital
Share
Premium
Merger
Reserve
Total
Placing & open offer
223,214,286
1.4p
223
£000
£000
£000
Placing fee
Acquisition consideration
15,422,579
1.621p
Acquisition consideration
11,976,487
1.233p
Total movement In the year
250,613,352
At 31 January 2016
1,394,532,799
At 31 January 2017
1,645,146,151
-
15
12
251
1,394
1,645
£000
2,902
(146)
235
135
3,126
29,463
32,589
£000
£000
-
-
-
-
-
1,911
1,911
3,125
(146)
250
147
3,377
32,768
36,145
The share premium account
comprises the amount subscribed
for share capital in excess of
nominal value.The merger reserve
arose where equity shares were
allotted on the acquisition of
subsidiaries and represents the
difference between the fair value
attributed to the share allotment in
excess of the nominal value of the
shares allotted.
60
The reverse acquisition reserve
arose on the acquisition of Coms.
com Limited which was accounted
for as a reverse acquisition. Under
IFRS the consolidated accounts of
RedstoneConnect plc are treated
as though they are a continuation
of the consolidated accounts of
Coms.com Limited. The reverse
acquisition reserve represents the
difference between the initial equity
share capital of RedstoneConnect
plc and the share capital and share
premium of Coms.com Limited at
the date of acquisition.
The accumulated deficit represents
the cumulative loss of the Group
attributable to equity shareholders
of RedstoneConnect plc.
REMUNERATION OF
COMPANY DIRECTORS
During the year there were a
number of transactions between
the Company and Directors’ related
parties. The fees below relate to the
Directors of the company and are
included in the ‘Directors and their
interests’ section of the Director’s
report.
Directors’ fees
Director’s fees of £38,000 (2016:
£124,000) were paid to Warspite
Limited, a company connected
to Diana Dyer Bartlett, in respect
of services provided by Diana
Dyer Bartlett; £nil (2016: £nil) was
outstanding at the year end.
Director’s fees of £nil (2016:
£12,000) were paid to Iridian
Consulting Services Limited, a
company connected to Stephen
Foster, in respect of services
provided by Stephen Foster; £nil
(2016: £nil) was outstanding at the
year end.
Director’s fees of £nil (2016:
£24,000) were paid to Wydelta
Limited, a company connected to
Mark Braund, in respect of services
provided by Mark Braund, £nil (2016:
£nil) was outstanding at the year
end.
the period end was £nil (2016:
£nil).
The Company entered into
the following trading activities
with companies or partnerships
connected with Mark Braund:
Director’s fees of £38,000 (2016:
£33,000) were paid to VZ Limited,
a company connected to Guy van
Zwanenberg, in respect of services
provided by Guy van Zwanenberg;
£4,210.60 (2016: £nil) was
outstanding at the year end.
DIRECTORS’ TRANSACTIONS
PRODUCTS AND SERVICES
The Company entered into
the following trading activities
with companies or partnerships
connected with Dave Breith:
• In 2016 the Group purchased
marketing and website services
from Blabbermouth Marketing
Limited on arm’s length terms.
During the year no services were
acquired (2016: £27,000) and the
amount due to Blabbermouth at
* During the year the Group
purchased contract personnel
services from InterQuest on arm’s
length terms. During the year
services provided amounted to
£142,000 (2016: £498,000), and
the amount due to InterQuest
at the period end was £27,000
(2016: £342,000)
61
NOTES TO THE FINANCIAL STATEMENTS continued
28 COMMITMENTS
a) Capital commitments
There were no capital commitments at 31 January 2017 (2016: £nil).
b) Operating lease commitments
The Group leases office buildings and warehousing under licences/leases to occupy.
FUTURE MINIMUM LEASE PAYMENTS 2017 2017 2016 2016
UNDER NON-CANCELLABLE OPERATING Property Vehicles Property Vehicles
LEASES ARE AS FOLLOWS:
Within one year
After one year but not more than 5 years
After 5 years
29 FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS
£000
£000
597
771
-
1,368
67
78
-
145
£000
729
1,632
-
2,361
£000
58
45
-
103
In common with other businesses, the Group is exposed to risks that arise from its use of financial instruments.
This note describes the Group’s objectives, policies and processes for managing those risks and the methods used
to measure them. Further quantitative information in respect of these risks is presented throughout these financial
statements.
The significant accounting policies regarding financial instruments are disclosed in the section ‘Financial assets
and liabilities in note 2’.
There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives,
policies and processes for managing those risks or the methods used to measure them from previous periods
unless otherwise stated in this note.
PRINCIPAL FINANCIAL INSTRUMENTS
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
GROUP COMPANY
NOTES 2017 2016 2017 2016
Financial assets
Financial liabilities
£000
7,581
10,318
£000
7,106
8,503
£000
1,260
3,204
£000
231
1,437
19
21
There were no material differences between the fair value and the carrying amounts of the Group’s financial
instruments.
The risk with any one customer
is limited by constant review of
debtor balances and amounts
receivable on contracts and action
to resolve any issues preventing
discharge of obligations.
FINANCIAL RISK MANAGEMENT
CREDIT RISK
The Board has overall responsibility
for the determination of the
Group’s risk management
objectives and policies and, while
retaining ultimate responsibility for
them, it has delegated the authority
for designing and operating
processes that ensure the effective
implementation of the objectives
and policies to the Group’s finance
function.
The overall objective of the Board
is to set polices that seek to reduce
risk as far as possible without
unduly affecting the Group’s
competitiveness and flexibility.
Further details regarding these
policies are set out below.
Credit risk is the risk that a
counterparty to a transaction
with the Group fails to discharge
its obligations in respect of the
instrument. The Group’s credit
risk arises on (i) transactions with
customers in connection with
delivery of products or services (ii)
cash and cash equivalents placed
with banks and financial institutions
Management focuses strongly
on working capital management
and the collection of due invoices.
Regular reports of overdue
invoices are circulated amongst
senior management and the Board
reviews debtor days each month as
part of the monthly reporting cycle.
The ageing analysis of trade receivables of the Group is as follows:
TOTAL NOT YET DUE 0-60 DAYS 60-90 DAYS
>90 DAYS
2017
2016
£000
5,218
4,304
£000
2,754
2,007
£000
1,093
1,237
£000
527
708
£000
844
352
Credit risk on cash and cash equivalents is reduced by placing funds with banks with high credit ratings.
LIQUIDITY RISK
Liquidity risk is the risk that the
Group cannot meet financial
liabilities when they fall due. The
Group’s policy for managing
liquidity risk is to ensure that the
business has enough financial
resources to carry out its day-to-
day activities at any point in time.
Management believes that the cash
resources on hand, together with
the profits of the business, more
than cover the resources needed to
meet the financial liabilities of the
Group.
INTEREST RATE RISK
Interest-bearing bank loans and
overdrafts are recorded at fair
value, net of direct issue costs.
Finance charges, including
premiums payable on settlement or
redemption and direct issue costs,
are accounted for on an
effective interest method and are
added to the carrying amount of
the instrument to the extent that
they are not settled in the period in
which they relate.
CAPITAL
The Group considers its capital
to comprise its ordinary share
capital, deferred share capital,
share premium, merger reserve,
reverse acquisition reserve and
accumulated retained deficit as
its capital reserves. A summary of
the amounts of capital in each of
these categories is shown in the
consolidated statement of changes
in equity on page 33.
In managing its capital, the Group’s
primary objective is to provide a
return for its equity shareholders
through capital growth. Going
forward the Group will seek to
maintain a gearing ratio that
balances risks and returns at
an acceptable level and also to
maintain a sufficient funding base
to enable the Group to meet its
working capital and strategic
investment needs. In making
decisions to adjust its capital
structure to achieve these aims,
either through new share issues
or the issue of debt, the Group
considers not only its short-
term position but also its long-
term operational and strategic
objectives.
There have been no other
significant changes to the Group’s
management objectives, policies
and processes in the year nor has
there been any change in what the
Group considers to be capital.
62
63
NOTES TO THE FINANCIAL STATEMENTS continued
CURRENCY RISK
The Group occasionally provides
services in markets outside the
UK. In most examples the material
equity and financial liabilities are
contracted in Sterling and hence
there is no significant currency risk.
In the event there is a material
exposure to foreign currencies
other than Sterling the Group will
hedge its exposure, these events
are continuously reviewed on an
on-going basis.
30 FIXED ASSET INVESTMENTS
Details of the Company’s subsidiaries at 31 January 2017 are as follows:
Reference
Place of
incorporation
and operation
Proportion
of ownership
Proportion
of voting
power held
Nature Of
Business
Subsidiary
%
%
Comunica Holdings Limited
England
100
100
Holding company
Redstone Converged
Solutions Limited
1
England
Connect IB Limited
Commensus Plc
England
England
Coms Media Limited
2, 3
England
CloudXL Limited
CloudXL Networks Limited
CloudXL Support Limited
Coms.com Limited
Coms Enterprise Limited
Coms Mobile Ltd
Premium O Limited
Network Resource Limited
3
3
3
3
3
2,3
3
England
England
England
England
England
England
England
England
Network Resource Group Limited 3
England
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Infrastructure
Software
Managed Services
Media
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Reference
1 Redstone Converged Solutions Limited is a wholly-owned subsidiary of Comunica Holdings Limited
2 Premium-O Limited and Coms Media Limited are wholly owned by Coms.com Limited
3 These subsidiaries have been entered into a voluntary liquidation process, and as such control of the entity
has been transferred to Antony Batty & Company LLP Insolvency Practitioners. In 2016, the entities were
deconsolidated in accordance with the Group’s accounting policies resulting in a loss of £221,000.
The registered office for those entities entered into the
voluntary liquidation process is:
Antony Batty & Company LLP,
Second Floor,
3 Field Court,
Gray’s Inn,
London,
WC1R 5EF.
64
The registered office for all other subsidiaries is:
40 Holborn Viaduct,
London,
EC1N 2PB.
INVESTMENT IN SUBSIDIARIES
Cost
At 1 February 2015
At 1 February 2016
Additions
At 31 January 2017
Accumulated amortisation and impairment
At 1 February 2016
Impairment charge
At 31 January 2017
Carrying value
At 31 January 2017
At 31 January 2016
At 31 January 2015
TOTAL
£000
15,236
15,236
3,728
18,964
5,989
5,989
12,975
9,247
9,247
-
-
The carrying value of the investment at the year-end represents investment in Redstone Converged Solutions Ltd,
Connect IB Ltd and Commensus Plc, all of which are wholly owned subsidiaries.
65
NOTES TO THE FINANCIAL STATEMENTS continued
31 OPTIONS AND WARRANTS
The Company had the following share options and warrants outstanding at 31 January 2017:
The fair value of the equity-settled share options granted is estimated as at the date of the grant using a Black
Scholes model taking into consideration the terms upon which the options were granted. During the year ended
31 January 2017 there were 23,677,458 options granted (2016: 130,953,280). The following table lists the inputs
into the model used to calculate the fair value.
Grant date
Option price
Dividend yield
Vesting period (years)
Assumed volatility at date of grant
Risk-free discount rate
Expected life of option
Fair value per option
Share price at grant
1 December 2016
1.265p
nil
3 years
75%
0.22%
3 years
0.723p
1.375p
The expected volatility is based on historic volatility, adjusted for any expected changes to future volatility.
The 1 December 2016 grant of share options were offered to eligible employee’s under the Save as You Earn
Scheme (‘SAYE’). The SAYE scheme is a savings related share scheme whereby the employees can buy 0.1 pence
ordinary shares in the Company for a fixed discounted price of 1.265 pence (a 20% discount to the average share
price at the date of grant). The employee agrees to save a fixed monthly amount (capped at £500) over the three
year term of the scheme, which at the end of the term can be used to buy shares at the fixed price.
Warrants
Options
Options
Options
Number
Date
Granted
Price Per
Share
Vesting Period
4,000,000
12 Jun 13
5.000p
12 Jun 13 - 11 Jun 23
3,000,000
1 Nov 13
3.500p
1 Feb 14 - 31 Jan 17
130,953,280
11 Dec 15
0.920p
31 Dec 18 - 10 Dec 25
23,677,458
1 Dec 16
1.265p
1 Dec 19 – 1 Jul 19
32 SHARE BASED
PAYMENTS
The Group operates three equity
settled share based payments
plans: an EMI scheme, an
Unapproved share scheme and
an all employee SAYE scheme.
During the year the Group issued
23,677,458 options under the
Group’s SAYE scheme (2016:
130,953,280 under the EMI and
Unapproved share option scheme).
Options granted in 2016 under the
EMI and Unapproved share option
scheme over a total of 73,127,192
and 57,826,088 ordinary shares
respectively were outstanding at
the year end.
0.75 pence.
The EMI and Unapproved share
option scheme incorporate the
same general terms and conditions,
with the EMI scheme benefiting
from certain tax advantages.
The outstanding options at the
year-end have an exercise price in
the range of 0.92 pence to 5.00
pence (2016: 0.92 pence to 5.00
pence).
Total options and warrants
outstanding under the EMI and
Unapproved schemes at 31 January
2017 were outstanding over a total
of 161,630,738 (2016: 138,553,280).
The weighted average remaining
contractual life of the share options
outstanding at the year-end is 7
years 10 months (2016: 9 years 7
months).
There were no options exercised
during the year. The weighted
average exercise price for options
exercised during 2016 was
The expense recognised for equity-
settled share-based payments
during the year to 31 January 2017
was £89,000 (2016: £47,000).
2017 2016
Number
Weighted
average
exercise price
Number
Weighted
average
exercise price
Outstanding at start of year
Granted during the year
Lapsed during the year
138,553,280
23,677,458
1.100p
1.265p
55,233,333
130,953,280
-
-
(360,000)
Forfeited during the year
(600,000)
3.500p
(42,273,333)
Exercised during the year
-
-
(5,000,000)
Outstanding at end of year
Exercisable at end of year
161,630,738
7,000,000
1.10p
4.40p
138,553,280
7,600,000
3.38p
0.92p
0.50p
3.13p
0.75p
1.10p
4.29p
66
67
IF YOU WOULD LIKE TO KNOW MORE
REDSTONE
CONNECT IB
COMMENSUS
t: 0845 201 0000
t: 0845 0945 686
t: 0208 661 4652
e: salesenquiries@redstone.com
e: info@connectib.com
e: sales@commensus.com
w: redstone.com
w: connectib.com
w: commensus.com