Annual Report and Accounts
2020
Sustainable futures
through digital
transformation
1
Strategic Review
Financial Highlights
Letter to Shareholders
Market Overview
Our Business Model
Our Values
Commercial Vision &
2020 Key Metrics
Acquisition Strategy
Chairman’s Statement
CEO’s Statement
Financial Review
Sustainable Futures
Risk and Risk Management
Corporate Governance
Board of Directors
Corporate Governance Report
Remuneration Report
The Audit, Risk and AIM Rules
Compliance Committee
Directors’ Report
Statement of Directors’
Responsibilities
Financial Statements
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of
Financial Position
Consolidated Statement of
Changes in Equity
Consolidated Statement of
Cash Flow
Company Statement of
Financial Position
Company Statement of
Changes in Equity
Company Statement of
Cash Flow
Notes to the Consolidated
Financial Statements
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24
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40
46
48
55
57
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60
64
70
71
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73
74
75
76
77
Directors, Secretary and Advisers
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Key Highlights and Key Takeaways
Key Highlights
REVENUE
GROSS PROFIT
£31.5m
(20191: £22.1m)
£12.0m
(20191: £9m)
PUBLIC SERVICES REVENUE
CASH3
£20.1m
(20191: £12.3m)
£4.6m
(2019: £5.7m)3
NORMALISED ADJUSTED EBITDA2
ADJUSTED PROFIT AFTER TAX4
£3.4m
(20191: £2.1m)
£2.7m
(20191: £0.2m)
ADJUSTED DILUTED EARNINGS PER SHARE5
CURRENT RATIO7
3.6p
(2019: 0.7p)
NET DEBT6
£0.4m
(20191: Net Cash £5.7m)
1.7
(2019: 2.4)
1. Normalised results are prepared on the assumption that the four initial companies acquired at IPO were owned for a full period and the results
of subsequent acquisitions from the date of completion adjusted for normalised salaries and bonuses and the same central costs as reported
in the current year. Normalised numbers are used where the Directors believe it provides a more appropriate measure when comparing the
year on year performance of the Group.
2. Normalised adjusted EBITDA is a non-IFRS measure that the Group uses to measure its performance and is defined as earnings before interest,
taxation, depreciation and amortisation and after add back of costs related to acquisitions, restructuring and other one off costs made by the
Group, fair value adjustments, share-based payment charges and pre IFRS 16 adjustments.
3. Cash decreased due to impact of acquisitions made in the year.
4. Adjusted profit after tax is a non-IFRS measure and is, in the director’s opinion, more representative of the underlying performance of the Group.
To arrive at adjusted profit after tax, adjustments made include the add back of acquisition , restructuring and other one off costs, amortisation
related to acquired intangibles, share-based payments, the impact of fair value adjustments and IFRS 16 adjustments and the tax impact of
these adjustments.
5. Adjusted diluted earnings per share is calculated based on adjusted profit after tax as defined above. An adjusted diluted share count is
calculated by taking the weighted average basic shares and including the maximum shares to be issued in respect of contingent consideration
to be paid based on performance measures met in the period, together with the maximum Share-based payments outstanding.
6. Net debt is calculated as cash balances less borrowings.
7. Current ratio calculated before the impact of IFRS 16.
Key Takeaways
• Acquisition of FutureGov and Ameo
• Revolving Credit Facility (RCF) of £5m secured
with HSBC
• Growth in customer base with 265 customers
billed in the year (2019: 191)
• 75% of customers billed in 2020 were also billed
in 2019 and/or 2018
• Top 10 customers represented 35% of revenue
(2019: 54%)
• Clients billed where work was performed by
two or more Group companies totalled £8.9m
representing 28% of total revenue
• Collaborations within the Group
(2020: 51 / 2019: 8)
• Average headcount in the year of 361 employees
across the UK, Bulgaria and Norway including
220 in technology roles
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Letter to Shareholders
I am delighted that we have been able to support all
of our staff throughout the pandemic without calling
upon government support through either the furlough or
business loans schemes. Although the roles of many of
our support staff have been impacted by the restrictions
enforced by lockdown, our enduring sense has been to
provide from within and leave the government support
to those more in need. By doing so, we can also allocate
future capital with a clear conscience and maintain
control of our destiny.
Today, the Panoply represents approximately 400
members of staff and within that, a true reflection of
the diverse nature of our wonderful society. Our male to
female ratio in senior leadership positions is now 61:39
with BAME representation at 12% and LGBT at 7%. Rather
than celebrating this though, we believe it shows us that
we still have a way to go. This coming year will see us
setting long term diversity and inclusion targets across
all groups and publishing them and our annual results
on our website. The recent Black Lives Matter movement
has shown us that to some extent, we have all been
blindsided by the Black, Asian and Minority Ethnic (BAME)
term. The reality is that in the tech industry, people of
Asian descent have a very different life experience to
our black colleagues. After all, the CEOs of Microsoft and
Alphabet are of Indian origin and as such are great role
models for others with the same background. However
notable black leaders in our industry are few and far
between. For that reason, moving forwards, we will split
BAME into B and AME and report each separately so that
we begin to do our bit to address this issue.
Our purpose will continue to be at the forefront of
everything that we do, helping us to solve problems and
deliver outcomes of which we can be truly proud. In turn,
this will be reflected in our financial performance. This
year has seen us increase revenues by 43%8 , normalised
adjusted EBITDA9 by 62% with a cash conversion ratio of
91% versus normalised 2019 figures. On a statutory basis,
revenue has increased by 284%, adjusted EBITDA by 850%
and operating loss has increased by 87.5% as a result of
4 months of trading in 2019 versus a whole year’s worth of
trading in 2020. That performance has continued into the
current financial year with Q1 unaudited revenue of £10.1m
representing 10% organic growth and adjusted EBITDA
of £1.7m which is up 55% on a like for like basis. These are
numbers that the whole group can be proud of but I can
speak with near certainty that they wouldn’t have been
possible to achieve without a deep sense of purpose
running through our core.
Thank you for your continuing support.
Neal Gandhi
18 August 2020
8. Normalised results are prepared on the assumption that the four initial companies acquired
at IPO were owned for full period and the results of subsequent acquisitions from the date
of completion adjusted for normalised salaries and bonuses and the same central costs
as reported in the current year. Normalised numbers are used where the Directors believe it
provides a more appropriate measure when comparing the year on year performance of
the Group.
9. Normalised adjusted EBITDA is a non-IFRS measure that the Group uses to measure its
performance and is defined as earnings before interest, taxation, depreciation and
amortisation and after add back of costs related to acquisitions, restructuring and other
one off costs made by the Group, fair value adjustments, share-based payment charges
and pre IFRS 16 adjustments.
Dear Shareholders,
It is hard to believe that the results to 31 March 2020
represent our first full year as a listed company,
and indeed as an entity at all given that the IPO in
December 2018 was the catalyst to create the Panoply.
The macro-economic headwinds that we have faced
in that time are surely unprecedented. The uncertainty
caused by any one of Brexit, the US-China trade war
and the current Covid-19 pandemic makes plotting a
corporate path difficult, let alone the combination of
all three and, as I write, all three are still very much in
full force.
Given this backdrop it is a source of immense pride
to reflect on quite how much we have achieved since
December 2018 and, in particular, in the twelve months
to 31 March 2020. From the outset, our goal has been to
establish the optimal model to help deliver the digital
transformation programmes fit for the 21st century.
Fundamentally we do this by recognising that small,
diverse, expert, multidisciplinary teams can and do have
incredible impact on client outcomes. Furthermore,
forward thinking clients now want their service partner
to work alongside in-house teams; upskilling them on
modern tools and processes along the way. It is this
recognition, along with the fact that we are cloud and
agile native, that sets us apart from larger monolithic
companies that are struggling to embrace this new
model of delivery.
I have no doubt that the single most meaningful
contributor to our success to date has been our collective
sense of purpose. We fundamentally believe that
serving our wider community and building increasing
shareholder returns do not need to be mutually exclusive.
We have been able to attract exciting companies and
highly talented, driven individuals into the Panoply
Group because together we can deliver outcomes
that will have a positive effect on society as well driving
financial value. This has been epitomised by the work
that we have been doing since the onset of Covid-19.
The pandemic highlighted many of the shortcomings
in digital services and we have worked tirelessly with all
levels of government to help transform them and make a
meaningful difference to the lives of citizens up and down
the country in difficult circumstances.
4
Market Overview
We are living in turbulent times. A world already
grappling with political, environmental, social and
technological change happening at a pace not
seen in our lifetime, has been turned on its head by
the Covid-19 pandemic.
Recent events have exposed just how far most
organisations have to go to make digital-first a reality.
For organisations across the private and public sector
digital transformation has been high on the agenda
for a number of years, yet not enough have taken the
bold steps needed to build organisations fit for 2020
and beyond. Digital transformation means more than
transitioning to remote working practices and video calls.
It means seizing the opportunities of technology and
data, to fundamentally reshape the way we
deliver services.
While no organisation could have accurately predicted
the many challenges we face today, those that have
adapted best are those that had already developed
digital-first strategies and ways of working. The
importance of agility and of the central role of digital
has been brought into sharp focus. In a period of just
a few months, we’ve seen more purposeful discussion
around the need to build resilient, digitally-driven
business than in many months and years before. We are
seeing organisations across every sector beginning to
question their operating models, workspaces, culture,
responsibilities towards employees, supply chains,
management structures, and more.
In the public sector, departments which have traditionally
been slow-moving have proven that they can deliver
impactful, innovative services at speed. The Panoply are
proud to have worked on several initiatives to support the
government’s emergency response to Covid-19.
In partnership with Camden Council, FutureGov designed
and built Beacon – an open source service directory tool
which helps the council and local public service partners
match vulnerable residents with relevant support.
Notbinary created a system with the Competition and
Markets Authority via the Department for Business, Energy
& Industrial Strategy which allows businesses to be held
to account for unfair behaviour during the crisis.
In addition, FutureGov and Notbinary both built
dashboards to help manage the provision of ventilators
and personal protective equipment (‘PPE’) for health
workers in North East London NHS Trust. In an example of
how highly skilled, agile teams can make a difference
with technology, these dashboard tools were taken
from the initial concept stage to being operational in
little over a week. This is a true testament to the power
of technology to deliver business solutions and make a
difference to peoples’ lives. It also heralds a new age for
service delivery, as organisations realise the benefits of
moving away from the slow, monolithic approaches of
transformation in the past.
An uncertain future
Understandably, organisations have a range of concerns
as we enter an economic slowdown and a world
operating under very different rules. Yet the dominant
business impact of the pandemic can be most helpfully
framed in terms of increased uncertainty. Institutions
attempting to forecast for future scenarios risk wasted
resources as circumstances change. Instead, agility and
flexibility must be built into organisational DNA to flourish
on the road ahead.
With the right mindset, every organisation has the
potential to turn these events to their advantage. It is rare
to face such a large and varied set of challenges. But it
is also rare to be presented with such a strong catalyst
for change. This is an unmissable opportunity to refocus
services around the true needs of their users. To move
away from the one-size-fits-all, rigid systems of the past
to a more individualised approach.
The Directors believe in two clear ways of meeting this
need. The first approaches digital transformation from
a top-down, organisational perspective – asking what
the end user need is and adopting working practices,
business models, and technologies to achieve this.
This user-centric approach is seen in our work at
FutureGov, where we improve the relevance and delivery
of public sector services, making a real difference to the
lives of individuals.
The second looks at digital transformation through the
power of technology. Our Group-wide expertise in data,
automation, and engineering gets to the heart of the
legacy technology infrastructure that still plagues many
organisations today. By working with our clients to solve
their deep-seated technical issues, we help them to
remain competitive and deliver world-class experiences
for their customers.
The Panoply has been expressly designed to provide
digital transformation services in both of these ways,
in a flexible and agile manner. This enables us to work
alongside our clients at the fast pace that they require.
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Guided by values
The past few years have seen social and
environmental concerns pushed up the
corporate agenda, as organisations
have increasingly woken up to their
responsibilities beyond pure shareholder
profit. We now see businesses committing
to initiatives around the UN’s sustainability
goals, to fostering increased diversity in
talent pipelines, and making a positive
impact in the local communities in which
they operate.
6
Our Business Model
We believe an
increasingly complex
world needs a new
business model to
achieve high impact
outcomes for clients
and their employees
and more value for
stakeholders.
We combine the dynamism and agility
of smaller, expert teams with the scale
required to confidently address our
clients’ most pressing needs, as they
navigate the rapidly changing nature of
society and business.
Using our model of consistent autonomy,
we embrace a culture of cultures to
deliver impactful work and to drive
profitable organic growth. And we’re
collectively entrepreneurial, creating a
regenerative spirit of innovation, which
delivers the transformative work our
clients need.
Impactful Work
We deliver outcomes
that have impact beyond
financial gains.
Consistent
Autonomy
Operating
Model
Culture
of Cultures
We retain our individuality
whilst delivering collectively.
Profitable
Organic Growth
We achieve growth and
profit as clients recognise
our value through delivery.
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The concept of consistent autonomy
Historically, there have only been two models for
groups that are highly acquisitive. The first is a holding
company with minimal cross fertilisation of clients,
projects, ideas, systems and processes. The second is
when a fully integrated single company with smaller
acquisitions is swallowed whole by a larger acquirer.
The problem with the first is that it leaves value on the
table and fails to generate the kind of transformational
and aspirational engagements that the collective can
take on. The problem with the second, particularly in
services, is that often the best people from acquired
companies become disillusioned, and within a few short
years, they leave. Both are unsatisfactory outcomes
for investors, acquired companies, founders, and
employees – leading to the often quoted view that ‘buy
and builds don’t work’.
With the collective experience of creating numerous
services companies that went on to be acquired, we
have distilled this experience into what we call our
consistent autonomy model. This enables acquired
companies to retain much of what makes them
special, particularly their culture, while at the same
time ensuring that clients experience the benefits of the
group’s collective range of services.
Group companies are bound together by a collective
belief that business can be a force for good and that the
work we undertake delivers impact beyond just financial
gain. At the same time, by being allowed to retain their
culture, they’re able to retain and attract the experts that
make the difference in client projects.
Our approach ensures clients get the best possible
outcomes, rather than being bogged down in agendas
that differ from what they are actually looking for. As
clients recognise the benefits they receive as a result of
engaging with us, this enables the group to continue to
deliver profitable, organic growth.
8
Our Values
One of the pillars of our
Consistent Autonomy
model is Culture of
Cultures; we retain
our individuality whilst
delivering collectively.
To enable this, we share
a core set of values
that inform and inspire
those of our individual
companies.
Relationship with
individual company values
The Group’s values inform and inspire the
values of all of our companies. We use
this consistency as a tool to evaluate the
culture fit of companies joining the Group
through M&A activity.
These 4 shared values are:
Collaboration
for impact
We work together effectively. We
believe that together we can achieve
and deliver more and amplify our
impact.
Ambition with
inclusion
We are bold, challenging ourselves to
be better. We know we need to bring
people along on this journey.
Difference with
authenticity
We value difference not just in gender,
ethnicity and class but in personality,
talent and perspective. It takes all types
of attributes to make a great team.
Agility with trust
We are dynamic, modern, and agile
as well as professional and safe. We
bring the benefits of a small business
together with the security larger
businesses provide.
Commercial Vision & 2020 Key Metrics
9
Our Commercial Vision
We are one year into our three-year plan of achieving a run rate revenue
of £100m by 31 March 2023.
• Our ambition is to drive 10% to 15% organic
revenue growth per annum over the next three
years with maintained or improving margins.
• We plan that 70%+ of our operating profit
will drop through into positive cash flow to
generate significant cash reserves.
• We plan to use this cash to set up a progressive
dividend policy for shareholders at approx
15%-20% of net income.
• We plan to use a mixture of positive cash flow
and our listed shares to make further earnings
enhancing acquisitions over the next 3 years to
add more than £35m of revenue.
• On this basis we aim to achieve a run rate
revenue of £100m by FY 2023 and deliver
£12m-£14m EBITDA.
• Given our size and scale we believe that
liquidity is important and will therefore keep
leverage low at below 1x EBITDA.
2020 Key Metrics
Key financial and non-financial metrics:
(i) Key financial metrics
•
•
Revenue growth 43% (2020: £31.5m / 20191: £22.1m)
Public services revenue totalled 64% (20191: 56%)
•
• Gross Profit growth 33% (2020: £12m / 20191: £9m)
Normalised adjusted EBITDA2 growth 62%
•
(2020: £3.4m / 20191: £2.1m)
Net debt of £0.4m (2019: net cash £5.7m)3
Adjusted profit after tax4 of £2.7m (20191: £0.2m)
Adjusted diluted earnings per share5 of 3.6p
(2019 0.7p)
Backlog6 as at the 31 March 2020 of £15m to
31 March 2021 (sales backlog as 30 September 2019
of £12.8m to 31 March 2020)
•
•
•
(ii) Non-financial metrics
•
•
Acquisition of FutureGov and Ameo
RCF facility of £5m secured with HSBC
• Growth in customer base with 265 customers
billed in the year (2019: 191)
•
•
75% of customers billed in 2020 were also billed
in 2019 and/or 2018
Top 10 customers represented 35% of revenue
(2019: 54%)
• Clients billed where work was performed by two or
more Group companies totalled £8.9m representing
28% of total revenue
•
Number of customers where there have been
collaborations within the Group of 51 (2019: 8)
Other key metrics
• Current ratio of 1.7 (2019: 2.4)7
•
•
•
•
•
Brand awareness via website visits
(2020: 20,265 / 2019: 11,675)
Brand awareness via social media (Twitter and
LinkedIn) (2020: 1,633 / 2019: 658)
Employees scored an overall satisfaction rating
of 7.5 out of 10
The carbon intensity ratio per FTE employee was
0.34 tCO2e
904 working hours donated to community
investment projects
1. Normalised results are prepared on the assumption that the four initial companies acquired at IPO were owned for a full period and the results of subsequent acquisitions from the date of
completion adjusted for normalised salaries and bonuses and the same central costs as reported in the current year. Normalised numbers are used where the Directors believe it provides a more
appropriate measure when comparing the year on year performance of the Group.
2. Normalised adjusted EBITDA is a non-IFRS measure that the Company uses to measure its performance and is defined as earnings before interest, taxation, depreciation and amortisation and after
add back of costs related to acquisitions, restructuring and other one off costs made by the Group, fair value adjustments, share-based payment charges and pre IFRS 16 adjustments.
3. Net debt is calculated as cash balances less borrowings. Cash decreased due to impact of acquisitions made in the year.
4. Adjusted profit after tax is a non-IFRS measure and is, in the director’s opinion, more representative of the underlying performance of the Group. To arrive at adjusted profit after tax, adjustments
made include the add back of acquisition , restructuring and other one off costs, amortisation related to acquired intangibles, share-based payments, the impact of fair value adjustments and IFRS
16 adjustments and the tax impact of these adjustments.
5. Adjusted diluted earnings per share is calculated based on adjusted profit after tax as defined above. An adjusted diluted share count is calculated by taking the weighted average basic shares
and including the maximum shares to be issued in respect of contingent consideration to be paid based on performance measures met in the period, together with the maximum Share-based
payments outstanding.
6. The value of contracted revenue that has yet to be recognised.
7. Current ratio calculated before the impact of IFRS 16.
2020 ANNUAL REPORT & ACCOUNTS | STRATEGIC REVIEW
10
Acquisition
Strategy
The Panoply was
founded in 2016, with the
aim of identifying and
acquiring best-of-breed
specialist information
technology, design and
innovation consulting
businesses. The Group
collaborates with its
clients to deliver the
technology outcomes
they’re looking for at the
pace that they expect
and demand.
In the last three and a half years, The Group has
identified and met numerous potential target
companies and has completed ten acquisitions.
Unlike many buy and build models that have
preceded The Panoply, the Directors are focused
on creating an agile, decentralised group where
employees join a culture of autonomy, purpose,
collaboration and innovation. The Directors believe
that this consistent autonomy operating model,
embracing a culture of cultures and shared values,
allows Group Companies to collaborate,
providing clients with innovation and the rapid
delivery of services.
The Panoply has developed an efficient, formulaic
approach for acquiring companies. With an extensive
acquisition pipeline, the Directors intend to continue
to supplement the organic growth of existing
Enlarged Group Companies through the addition of
complementary companies largely originated by our
own in-house team.
We continue to:
•
Add further capabilities around the following
technology stacks:
• Microsoft, Azure, Power Platform, Power Apps
& Power Automate, and Office365 &
Dynamics CRM
• Amazon Web Services, AWS
• Google Cloud Platform, GCP
• Software & Data Engineering
• DevOps, DevSecOps
• Automation
• AI / ML
•
•
•
Bolster capabilities that enhance our
customer offering in the public, health
and adjacent sectors.
Ensure acquisitions are not seen as exits for their
founders but incentivised to build long term
sustainable growth through a consideration
make-up that is majority share based.
Ensure acquisitions are immediately
earnings enhancing.
Investment Case
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Strong financials with exposure to cutting edge
technology, solving 21st century problems with
21st century solutions.
3. A unique, 21st century proposition for clients
• Cloud/Agile native
•
Deep expertise on every engagement,
collective strength
•
Drives ability to take market share
4.
•
•
Investing for growth:
Proven capability to quickly build competitive
offerings in key areas.
Prepared for the move to conversational AI and
Robotic Process Automation to solve the problems
of legacy technology
REVENUE: GREENSHOOT LABS
REVENUE: HUMAN+
£457,533
£902,503
5. Laser focused acquisition strategy
• Originated from within
• Making only accretive acquisitions
•
Adding scale or capability
6. Management buy-in:
• With significant stakes in the Company and
invested in its Purpose
Why invest
•
•
Approximately 70% public services revenue -
Covid-19, the need for fundamental structural
change and sentiment, mean that this is a great
place to be
Approximately £40m revenue Group created since
IPO, with ambition to grow to £100m in the next
3 years through acquisition and organic growth
• Marquee clients and great reputation
•
Strong management team that are all
significant shareholders
1. Strong financial fundamentals
•
Profitable (normalised adjusted EBITDA)
• Cash generative
•
Intention to commence dividend payment in 2021
NORMALISED ADJUSTED EBITDA
£3.4mCASH & CASH EQUIVALENTS
£4.6m
2. Access to structural growth markets
•
Digital transformation within the UK public sector
alone will represents a total addressable market
of £20bn by 2025
• Global digital transformation market is expected
to grow from USD 469.8 billion in 2020 to USD 1009.8
billion by 2025, at a Compound Annual Growth Rate
(CAGR) of 16.5%
•
70% Public Sector Weighted, across Central
and Local Government, Healthcare and
education sectors
2020 ANNUAL REPORT & ACCOUNTS | STRATEGIC REVIEW
12
Case Studies
Manifesto - Diabetes UK
Generating
bigger returns
on event
acquisition
spend
Challenge
Manifesto’s partnership with Diabetes UK focuses
on helping the charity boost fundraising through
its participation events programme. This is a major
source of fundraising revenue for Diabetes UK,
with sponsorship money from swimmers, runners
and walkers helping fund vital research work and
supporting people with the disease. But with an ad
hoc approach to planning, executing and evaluating
digital acquisition campaigns, the charity was
struggling to systematically improve the return it
saw on digital advertising spend designed to drive
sign ups.
Approach
Working collaboratively across a range of established
and new events, Manifesto is helping Diabetes UK
better plan, execute and gain insight from its paid
search, display and social campaigns. We helped
the charity adopt a more far-sighted approach to
event acquisition, using live reports and custom
dashboards to combine data from a variety of
campaigns and channels, to gain insight and
optimise activity for maximum value. As well as
maintaining regular contact to develop a shared pool
of strategic insight, we’re also helping Diabetes UK
trial new channels and technologies, like Spotify Ads,
for reaching and engaging target audiences more
cost effectively.
+227% funds raised
+93% sign ups
+98% average amount raised
Impact
During the first two years of the Manifesto and
Diabetes UK partnership, the participation events
programme has raised a projected £2.3m, a 227%
increase over the prior period. The partnership
has also boosted the total number of event
participants by 93% and led to a 98% increase
in the average amount raised per participant.
Continuous knowledge sharing and regular
reviews have also helped Diabetes UK expand
the scope of their paid acquisition to encompass
more channels and execute campaigns with
greater confidence.
“We’re really impressed with the
continuous improvements Manifesto
have implemented to our paid search,
display and social campaigns over the
past couple of years. It’s a pleasure
working with the team and we’ve
learnt so much from their expertise.
It’s brilliant to see our participation
events programme grow so effectively,
and we look forward to our continued
partnership.”
– Daniel Larcey, Senior Events and Mass
Participation Manager, Diabetes UK
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Impact
FamilyStory reduces the administrative burden
placed on social workers and increases the time
they have available to work directly with families.
FamilyStory aims to increase productivity by up
to 30% and improve the ability for families and
social workers to collaborate by:
•
•
•
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significantly reducing report writing and time
taken on administrative tasks
improving transparency, increasing the
quality of relationships and trust between
practitioners and families
improving collaboration between social work
teams and other professionals
collaboratively building a picture of need,
supporting social workers to manage risk
and informing decision-making
“FamilyStory is really useful, especially
for initial assessment - the location,
who was there - it all helps. Right now
we do so much copying and pasting
from different places.”
– Social Worker, London Borough of
Hammersmith and Fulham
FutureGov - FamilyStory
Improving
outcomes for
families by
radically rethinking
social care
Challenge
Legacy case management systems, focused on
collecting information, are costing local authorities
hundreds of thousands per year in licensing and
maintenance. Social workers achieve amazing things
with families, but are held back by the systems and
technology they work with.
Hammersmith and Fulham, Kensington & Chelsea
and Westminster Children’s Services recognise this
problem and asked FutureGov to help them radically
rethink how technology can support children’s
social care. Together, we’ve been exploring how we
approach child protection in a more user-centred
way, that supports the people working hard to
improve the lives of families and young people, so
that we all help keep children safe.
Approach
During our initial Discovery phase, user research
helped us explore the current experience of social
workers and families. We found that on average,
social workers can spend 60% of their time on a
computer writing, recording and processing data.
With a design-led approach, we started working with
frontline teams across the child protection journey,
from referrals to leaving care. Meeting with a range
of stakeholders, we worked with the councils to
turn insights into a future journey, putting the user’s
experience at the heart of the entire service.
Spending time with families and young people, we
sought to understand what it feels like to be using
and going through these services. Challenges around
transparency, having ownership over their story
and tense relationships with practitioners showed
an opportunity to improve the experiences and
relationships for both families and social workers.
We created FamilyStory - a set of simple digital case
management tools for social care that is designed to
meet the needs of social workers, partner agencies
and families.
14
Case Studies
continued
FutureGov and Notbinary -
Good Work Camden
Helping local
residents to
secure and
sustain good work
Challenge
Camden Council’s 2025 vision is that jobs will
pay people what they need to earn to live and
businesses will provide jobs flexible for modern
lives. Camden borough has over eleven
thousand council tenant households not in
work, meanwhile, there are growing numbers
of people in work who are struggling to meet
their outgoings.
The Council wanted to leverage the rich
assets in their borough to widen the impact
of the work of their partners and local support
services. FutureGov was invited to take the
lead in preparing the borough to grow a
support system of services that can help
residents in their job search.
Approach
The Good Work Camden project took a whole system
view to improving employment outcomes, working
across the entire employment landscape from
support providers to employers. A human-centred
approach throughout ensured the Camden job
market is inclusive and accessible for all.
• Neighbourhood focused: Camden wanted
to extend their employment support via a
neighbourhood approach that was bespoke
to local people and the lives they lead. We
developed a neighbourhood hub, building
neighbourhood profiles, integrating assets,
and ensuring the service serves long term
resident needs.
•
Strategic collaboration: Residents often found
it hard to know where to go for employment
support. We built on existing collaboration
and joint working amongst providers in the
Employment and Skills Network (ESN), running
ESN workshops, reshaping the existing ESN
format and prioritising opportunity areas.
• Digital platform: Before Good Work Camden,
there wasn’t one centralised place for
employment support. We ran a provider
workshop and three rounds of resident interviews
and test sessions to understand what information
people need, and how different digital solutions
could help.
•
•
Inclusive business: Residents on employment
support lacked a clear and consistent path to
move into good work. Inclusive job opportunities
were not readily available, and poor employment
practices meant that people in low-paid roles
couldn’t progress. We ran a literature review
into interventions and ‘good work’ practices,
and conducted research via workshops and
employer interviews to refine the most
promising interventions.
Earn and grow: As of September 2019, over
five thousand households in Camden were in
in-work poverty. The council wanted to design an
intervention for residents for whom the ‘welfare
and work relationship’ presented a fundamental
challenge. Our work in this area was informed
by policy, service design and data: we explored
external examples of similar interventions for
inspiration; used a test and learn approach by
engaging with residents to understand their
experience; and used data to understand users
and prioritise our work.
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Impact
During the first phase of the Good Work
Camden project, we provided the Council with
outcomes within each focus area, contributing
to their vision of a human-centred approach to
employment within the borough.
•
Extended the employment support available
in Camden through the development of a
neighbourhood hub and job hub.
• Working with the Employment and Skills
Network, we prioritised opportunity areas
and built a clear pathway for residents
receiving employment support.
•
•
Presented the Council with four
recommendations around a digital platform.
We advised that they conduct more testing
with residents and providers to develop their
ideas for a digital offer, its backend systems,
and how it connects with offline services.
Identified further interventions for Camden
to test and pilot. These included the provision
of free technology devices to enable people
to access the support they need; increasing
access to employment opportunities
and services through free transport; a
discretionary social fund to support single
parents with unexpected costs; and a
support package for residents transitioning
onto Universal Credit.
16
Case Studies
continued
Notbinary - Food Standards Agency
A portfolio of
Discovery projects
to identify potential
improvements to
services
Challenge
At Notbinary we support clients at every point in the
delivery lifecycle, from Discovery through Alpha and
Beta all the way to supporting live services. Working
with the Food Standards Agency (FSA), we led a
portfolio of Discovery Projects across the organisation
to consider potential improvements to its services.
Before you commit to building or improving a service,
you need to understand the problem to be solved.
This means finding out about your users and what
they’re trying to achieve, any pain points and where
opportunities to improve things lie. During a Discovery,
it is our responsibility to understand individual user
needs, how the current service operates, and its
systems and data flows.
Approach
The FSA had not been as exposed to the Government
Digital Service standard ways of working due to falling
outside of the GOV.UK remit. They therefore wanted
us to help set their internal standards and build their
capability. We worked closely with them to develop
a repeatable and highly efficient, user-focused
approach to conducting holistic Discoveries across
the agency.
We held 50 qualitative interviews with representatives
from across the FSA. This helped us to understand
key service components in enough detail to analyse
how the people, processes and technology involved
were interacting. Our work ensures that a service will
be built that is more robust and is able to flex to meet
modern standards, and that data can flow and be
used more easily.
Our teams were collocated with the FSA business
teams and their Digital, Data & Technology (DDAT)
team. We worked across multiple sites across the
UK; travelling to meet users at their places of work to
get hands-on experience of being a food business
operator. DDAT colleagues were paired up with key
members of our team to encourage upskilling and
coaching throughout our Discoveries.
Impact
Over a year of working with the FSA, we
successfully completed more than a dozen
Discoveries across a vast range of domains
including: incident management and reporting,
allergen reporting, business advice, business
registration and approvals, local authority data
flows, intelligence and surveillance, science
committee content, HR and financial processing,
customer services, field operations and
inspections, and digital badges.
As part of our drive to instill robust and effective
practices for the FSA, we introduced Government
Digital Service standard assessments for our
Discoveries to ensure they were being run
well across the organisation. Another key
development we introduced was working in the
open, documenting our Discovery findings as
we went. This meant that our research, insights
and analysis was constantly available to all to
see, comment on and challenge. This helped
with getting feedback as early as possible and
negated any surprises at the final playback
sessions. It also helps open up our research to
the wider digital community who can access our
open repositories.
Human+ - UCL
Driving efficiency
savings in higher
education with
intelligent automation
Challenge
HR Services at University College London (UCL)
were interested in the potential benefits Intelligent
Robotic Process Automation (RPA) could bring to their
department. The team dealt with many repetitive,
manual tasks, and faced large fluctuations in
workload throughout the year, leading to additional
stress and the need to hire temporary workers. The
characteristics of these processes were ideal for
Intelligent RPA, but the university had little or no
experience with automation solutions, and staff
were understandably wary of a potential threat to
their jobs.
Approach
Human+ worked with HR Services at UCL to select
and implement two automation solutions in the
first quarter of 2019. Aware of the need to get all
staff on board with the project, the team selected a
widely unpopular process as the first contender for
automation. This dealt with payroll for casual workers
– a manual, repetitive task which consisted of making
1500-2000 one-off payments per month. A human
employee was capable of approving around 100
payments per day, but no one enjoyed completing
this task and it was always put off until the last
minute.
When speaking to departmental staff about the
technology, HR leaders were careful to position
Intelligent RPA as an automation solution – capable
of relieving them of unpleasant tasks – rather than
a more threatening sounding “robot”. The team
collectively named their RPA solution “Barbara”,
quickly coming to see it as another member of staff
who could take care of the jobs no one wanted to do..
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Barbara was particularly impactful in helping
the team to deal with fluctuations in workload.
In October, for example, payroll volumes at the
university typically double in value, making
it difficult for the HR team to cope. When
Barbara was built, every new staff member was
successfully added to the October payroll on
time – a feat which had never been achieved
before.
The automation of the payroll process resulted in
a yearly saving of approximately 750 employee
hours in the HR department. When combined
with the second automation solution which
dealt with the resignation process for staff - the
HR team saved around 1000 hours annually.
As a result they worked less overtime in busy
periods and temporary staff costs were reduced.
As testament to the success of this project,
a Continuous Improvement team has been
created within the UCL shared service centre and
two finance solutions have already been built
with Intelligent RPA. The team is also now working
to take the technology in-house by training their
own RPA developer.
• 1000 employee hours
saved
• October payroll
successfully completed for
the first time ever
• “Barbara the bot” became
a central part of the team
18
Chairman’s Statement
I am delighted with the continued
progress that the Group has
made this year. As set out in
last year’s annual report, the
Group’s strategy was to scale up
the business through accretive
acquisitions, whilst investing
in the group companies to
accelerate our competitive edge.
I am pleased to confirm that we
have executed on this strategy
well, as demonstrated through
our enhanced services offering,
notable new contract wins and
good financial performance.
We acquired best-of-breed businesses FutureGov and
Ameo in the year, adding technology services business
Arthurly to the Group post period. Through these actions,
together with continual internal development, we have
cemented The Panoply’s position in the public sector. We
provide a truly compelling offering in this space, with the
breadth of capability and expertise to be able to take
on the most well-regarded industry heavyweights,
and to win.
The digital transformation market has continued to
develop throughout the year and has undoubtedly
accelerated since March 2020 as companies respond
to the Covid-19 crisis. We are at the cutting edge of new
developments with strength in many key technologies of
the future, such as conversational AI and robotic process
automation, and have seen these grow in importance. As
a progressive, future-facing company we will continue to
embrace new ideas.
Our purpose
The Panoply continues to be a purpose-driven company,
seeking to help people and organisations navigate the
challenges presented in the modern era. It is increasingly
important for companies to take responsibility for their
actions in supporting environmental and social mobility
and change for the better. I am proud to say that the
motivation to help our clients achieve this is a huge
driver for our teams and a key differentiator from many
of our peers.
The Group’s entire Board fully supports this purpose and
endorses initiatives such as The Panoply’s employee
volunteer programmes and annual Community Action
Day, which provides staff with the skills and time that
they need to contribute to a purpose that they feel
strongly about.
As stated last year, the Group focuses on four key areas
within its Sustainable Futures work. The four areas are:
helping communities to thrive in a digital future; making
the tech industry fair and accessible; putting employee
wellbeing first; and minimising our environmental impact.
In order to provide transparency and accountability, the
Group has published targets set in 2019 and the progress
made against them in 2020, these can be found on page
27 and 37. It was particularly pleasing to see that 116 of our
employees logged a total of 904 hours of donated work
across 37 different community investment activities over
the year.
We are looking to build on the success of our purpose
led approach to date through closer alignment to the UN
Sustainability Development Goals (SDGs) going forward.
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Corporate governance
The Group’s risk management is up to date and
appropriate and the Board will continue to monitor
its principal risks as events concerning Covid-19 and
the wider economy unfold. The Panoply’s Board has
committed to a corporate governance approach
commensurate with more mature businesses and
has applied the principles set out in the QCA code to
the Group.
We highly value our shareholders, for whom we are
ultimately seeking to deliver value which has been
achieved with purpose. Therefore, we deem it a priority
to keep all shareholders up-to-date and engaged and
we are committed to transparency in all our corporate
communications.
People
I would like to take this opportunity to thank our team for
their continued commitment throughout this year, and
to welcome the FutureGov, Ameo and Arthurly teams to
the Group. The growth of the business has undoubtedly
been assisted by the dedication of our staff, whilst the
continued high level of new contract wins and cross-
selling of services is testament to the strength of our
service offering, talented consultants and customer
relationships.
Despite the difficult period that the world has recently
entered, our team has worked tirelessly to continue to
service customers, in a safe and efficient manner, and
I am extremely grateful for everyone’s effort and
ongoing support.
Outlook
At the time of writing this, the Covid-19 pandemic has
altered the world as we know it. The Group has done very
well to not only withstand this extreme period of market
uncertainty, but also to grow during this time. We are
pleased to have continued to win new clients and to
deliver a high levels of work to our existing clients.
Looking forward, as The Panoply benefits from the growth
and enhanced service offering it has created, we have a
clear opportunity to take on our monolithic competitors
with projects on an even greater scale, delivered at speed
and to an outstanding quality. We also continue to look
for best-in-class companies to join the Group through
acquisition.
I am confident that we have the right resources and
management team in place to enable the Company to
deliver growth in line with our commercial vision, which
will ultimately create greater value for all our stakeholders.
Mark Smith
Chairman
18 August 2020
20
Chief Executive’s Review
The year to 31 March 2020 was
transformative for the Group,
as we made great strides to
cement our position as a leading
alternative provider of digital
transformation to the UK public
services sector. It was our first
full 12 month period as a public
company, and as such sets the
benchmark for which all future
performance can be compared,
with full PLC and central costs
for the whole period, along with
normalised market salaries for
the incoming entrepreneurs.
The year also proved our
collaboration model with £8.9m
of revenue (28% of total) spread
across 51 client projects involving
two or more group companies.
Collaboration is now a way of
life across the group and paves
the way for the next phase of
our journey, described in more
detail below.
Alongside our strategic progress we delivered a robust
financial performance with both revenue and adjusted
EBITDA up 5% on consensus forecasts. Our acquisition
strategy produced significant revenue growth, up 43%1 to
£31.5m in the year, with normalised adjusted EBITDA2 up
62% to £3.4m (2019: £22.1m revenue and £2.1m adjusted
EBITDA3). The statutory 2019 comparatives are revenue
of £8.2m, adjusted EBITDA of £0.4m and operating loss
of £1.6m. The 2020 operating loss is £3.0m. See financial
review for more detail. Had both the acquisition of Ameo
and FutureGov been included from the beginning of the
year, revenue would be up 79% and adjusted EBITDA up
136% against 2019 normalised numbers.
The statutory loss after tax increased by 76% to £3.0m
(2019: £1.7m). The adjusted profit after tax was £2.7m
(2019: £0.2m). The Directors believe that this ‘adjusted
profit after tax’ measure is most representative of the
underlying performance of the Group. To arrive at
adjusted results, adjustments made include acquisition
expenses, amortisation related to acquired intangibles
and share-based payments, the impact of fair value
adjustments and IFRS 16 adjustments along with the
corresponding tax impact of the adjustments.
Net cash generated from operations before tax and
including IFRS 16 lease payments was £2.1m, delivering
a cash conversion ratio4 of 91%. Adjusted EBITDA margin
for the year was 18% after accounting for investments
made in our automation businesses (human+ and
GreenShoot Labs).
Following a year of major developments to our
operations, we now have all the right pieces in place to
execute on our exciting growth strategy. We also now take
this opportunity to lay out our commercial vision, detailed
further below, based around the core ambition to achieve
significant profitable growth over the next three years.
Growth strategy
From inception, the vision of the Group was to bring
together a panoply of companies and skills in order to
provide an entrepreneurial, full service capability at scale
to deliver outcomes to large clients at a fraction of the
cost and time of their traditional suppliers. This year saw
us deliver on that vision with approximately 400 members
of staff and capabilities ranging from hyperscale cloud
transformations, robotic process automation and AI,
through to organisation and service design. During the
1. Revenue growth calculated against the normalised revenue in FY19 of £22.1m. Normalised
results for comparatives are prepared on the assumption that the four initial companies
acquired at IPO were owned for full period and the results of subsequent acquisitions
from the date of completion adjusted for normalised salaries and bonuses and the same
central costs as reported in the current year.
2. Normalised adjusted EBITDA is a non-IFRS measure that the Company uses to measure
its performance and is defined as earnings before interest, taxation, depreciation and
amortisation and after add back of costs related to acquisitions, restructuring and other
one off costs made by the Group, fair value adjustments, share-based payment charges
and pre IFRS 16 adjustments.
3. Comparative normalised adjusted EBITDA figures are calculated using the same principles
as current year adjusted for normalised salaries and bonuses and the same central costs
as reported in the current year.
4. Cash conversion is calculated based on cash from operations pre tax and pre IFRS 16
adjustments and adjusted profit before tax figures which include adjustments made for
amortisation related to acquired intangibles, share-based payments, the impact of fair
value adjustments and IFRS 16 adjustments.
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Covid-19 pandemic, the Group is proud to have not
furloughed any staff and kept all staff on full pay.
It is clear we are now at a scale where we are trusted
to deliver mission critical programmes of work and we
see that credibility increasing as we grow further. It is
clear to us that our time is now, as the UK Government
recognises that it is time to address the stranglehold of
the incumbent suppliers to deliver better outcomes for
service users and better value for taxpayers.
As always, we foster an environment where we will
continue to attract high calibre practitioners and
where the entrepreneurialism of our leadership teams
continues to flourish. We work with clients in a way
which is both end-to-end and collaborative, separating
ourselves from our peers.
Cementing our position in the public sector
We completed two major acquisitions in the year, both
predominantly in the public sector:
•
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FutureGov Limited, a leader in digital service design;
and
Ameo Professional Services Ltd, a consultancy
specialising in delivering business change
Following these acquisitions we are now in a position
to offer a true end to end offering to our clients,
particularly in public services, ranging from strategy
and organisational and service design through to a
full complement of technology skills including full stack
software development, data, AI and automation.
Financially, both have performed in line with
expectations since acquisition but their true value
has been far higher. With reference clients such as
Buckinghamshire Council, Camden Council, MHCLG,
Food Standards Agency, DVLA, UK Hydrographics Office,
NHS, UCL and many others, we are now able to prove
that we are an alternative to the incumbent suppliers
and provide much needed innovation in a sector now
eager to embrace new models of delivery and new
partners to assist them.
64% (£20.1m) of revenue in the year came from the
public sector (2019: 56%, £12.3m normalised) from
a wide range of projects ranging from hyperscale
cloud migration programmes through to high level
organisational change initiatives. This would have
reached 68% of 2020 revenues if Ameo and FutureGov
were included for the full year.
Example projects include:
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Transitioning legacy on premise systems to an
open source cloud based model for the Ministry
of Housing, Communities and Local Government
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Launching a public service modernisation
programme for Trafford Council
Automating pharmacy processes for NHS Wales
Implementation of a chatbot based Clearing
process for Brunel University
Building an audience centred digital strategy
for NSPCC
Consolidating our end to end propositions under
two full stack brands: FutureGov and Foundry4
Now that we can offer an end-to-end service and
provide case studies of our experience in doing so, we
have been working to position FutureGov (FG) as our
change-led brand and introduce Foundry4 (F4) as our
technology-led brand. Both are positioned to win larger,
multi-million-pound opportunities by presenting the
entire capability of the Group under a single brand but
with distinct messaging selling to differing audiences.
In FutureGov’s case, the audience is typically CEO/COO
type economic buyers looking at digital transformation
through the lens of organisational change and end-
to-end service design including technology, whereas
Foundry4 is focused on CTO/CIOs looking to enable
digital transformation through the adoption of hyper
scale cloud, data analytics, machine learning and
automation. The two brands will have their own distinct
messaging and brand promise aimed at those two sets
of buyers.
Our other brands will continue to operate in their own
right but will assist with sales opportunities that both
FG and F4 uncover as required. Both FG and F4 and all
other brands will adopt a visual identity that provides a
strong family link between each other to facilitate even
greater levels of leverage and collaboration.
Winning large scale, high profile engagements
Over the period we have won and delivered numerous
high profile engagements, several with public sector
clients. It is important to note that many of these
contracts are multi-disciplinary and could only have
been won through several group companies working
together interchangeably.
Examples of collaborative projects with wide reaching
impact include work with NHSx, the Food Standard
Agency, Camden Council, British Film Institute and many
others. Over the year more than one company worked
on a client engagement for over 51 customers out of
a total of 265, representing 19% of clients and £8.9m
of revenue.
22
Chief Executive’s Review
continued
Post period end we have seen our teams secure
contracts which will extend our influence even further.
For example, through the previously announced US$5.2m
contract with a large, global philanthropic organisation,
which will see FutureGov advising EU capital cities, and
our work on the Government’s major Towns Fund project,
which will impact 100 towns across the UK. Our brand
strategy as outlined above is designed to further facilitate
the winning of these types of larger engagements.
Robust, recurring performance in commercial sector
36% of revenue came from the commercial sector in
the period (reducing to 32% of revenues when a full year
of FutureGov and Ameo’s revenue is included). Of that,
approximately two thirds is recurring revenue from clients
like News UK, Funding Circle, Cargill and Dow Jones (post
period end win). The roster of recurring revenue clients
has now successfully transitioned from largely SMEs 2-3
years ago to mainly large scale corporate clients today.
Post period end we were contracted to help build Times
Radio as part of a £1.5m contract over the next 12 months.
This demonstrates the scale of commercial work the
Group is involved with, co-creating with its clients and
working alongside client team members but also taking
responsibility for specific workstreams.
Our Covid-19 response
Of course, a key event came in the latter part of the
financial year as the Covid-19 crisis hit. Having flagged
the risk relatively early and putting the welfare of our
teams first, the Group instigated work from home plans
during the week commencing 8 March 2020, two clear
weeks ahead of UK Government instructions to do so.
As expected from a cloud native 21st century company,
the transition was straightforward, and we saw no loss
in productivity during that time. The head start over
our clients enabled us to perfect how we would deliver
remote workshops so projects could continue as normal.
Staff utilisation remained stable at approximately 70%.
We are also proud to have assisted in the Covid-19
emergency effort, building a personal protective
equipment (“PPE”) stock level dashboard for North
East London NHS Trust, building a system to bring
manufacturers together to manufacture ventilators,
creating a system and processes for Camden Council to
ensure shielding residents received the assistance they
needed and supporting the Competition and Markets
Authority via the Department for Business, Energy &
Industrial Strategy to create a system which allows
businesses to be held to account for unfair behaviour
during the crisis.
Previous investments demonstrating strong progress
In the previous financial year we invested in GreenShoot
Labs (conversational AI) and human+ (robotic process
automation). Both of these businesses have since gained
excellent momentum and together generated £1.4m
revenue in the year, over 600% up on the previous year
(FY2019: £0.2m). Clients include UCL, NHS Wales, Defence
Science and Technology Lab, Avaya and Mitel to name
but a few.
To support our teams, we set up an employee assistance
programme, and encouraged any under-utilised staff to
volunteer in their communities. We have not furloughed
any staff and have kept all staff on full pay. Thanks to our
robust performance we were able to make the decision
not to take government aid and believe this will provide
us with greater financial flexibility in the future, particularly
around potential for introducing a progressive
dividend policy.
Their achievements demonstrate the success of
The Panoply’s strategy to expand its portfolio of
complementary businesses, both organically and
through targeted investments, offering a diversified range
of services and creating synergies to maximise value. We
anticipate that these two startups will together generate
meaningful revenues during the current financial year,
from a standing start in April 2019.
The Group continues to closely monitor and manage
its costs in a prudent fashion. As at 31 March 2020 the
Group’s financial position showed retained cash reserves
of approximately £4.6m and a net debt1 position of £0.4m.
As of 30 June 2020 the Group held £6.8m2 of cash and
cash generation is expected to remain strong. As one
might expect with high quality clients such as those the
Group works with, we have not suffered from any bad
debts and all debtors in the year to date are within their
usual payment profiles. As the Covid-19 crisis started and
following the year end the Group has agreed a £1.5m
overdraft facility with HSBC which is currently unutilised.
1. Net debt is calculated as cash balances less borrowings.
2. Actual cash at £8.8m taking into account £2.0m of deferred statutory taxes (VAT, PAYE and
National Insurance) that is being paid down in the current quarter.
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The impact on digital transformation
As businesses across the globe are now finding out,
digital transformation goes beyond simply working from
home. It means genuine changes to your operating
model and ongoing strategic delivery, inextricably linked
with embracing new technologies.
We believe that the impact of the pandemic will be to
accelerate widespread understanding and demand for
our services. During the pandemic we have proven our
ability to complete entire projects, from design through
to delivery, in an agile way over a very short timeframe.
Once clients have seen our teams’ capacity to do this,
they cannot unsee it. They will not go back to being
satisfied with the long and unwieldy projects offered
by our monolithic competitors. This is a change for the
long term. Indeed, this has already been recognised
at the highest levels of HM Government. At his Ditchley
Lecture, delivered on 27 June 2020, The Rt Hon Michael
Gove MP said:
“It is a cliché to say of Government
that no-one ever lost their job for
recommending the contract go to IBM…
We need to move to a system where
those who propose the innovative, the
different, the challenging, are given
room to progress and, if necessary, fail.
But we must then ensure that we learn
quickly, adjust and respond.”
Evidence indeed that sufficient public sector buyers are
aware that the best outcome are often delivered by
engaging mid-sized partners. This is distinct from small
who are typically too small, or very large, who more
often than not are slow, expensive and do not deliver.
Commercial vision
We take this opportunity to lay out a six step commercial
vision which we aspire to achieve over the next three
years:
• We aim to produce 10% to 15% organic revenue
growth per annum
• We aim for c.70% of operating profit dropping
through into positive cash flow to generate
significant cash reserves
• We aim to use this cash to set up a progressive
dividend policy for shareholders at approximately
15%-20% of net income
• We aim to use a mixture of positive cash flow
and our listed shares to make further earnings
enhancing acquisitions to add more than £35m of
revenue
• Given our size and scale we believe that liquidity is
important and will therefore aim to keep leverage
low at below 1x EBITDA
• On this basis we aim to achieve a run rate revenue
of £100m by March 2023 and deliver £12m-£14m
EBITDA
Current trading and outlook
Coming into the current financial year, the Group had
a confirmed backlog deliverable in the year, including
annualised recurring revenue, of approximately £15m.
The first quarter of FY2021 has been strong, and, as
previously reported, we saw £13m of new contracts
signed in the three months to 30 June 2020. Revenue for
the first three months was £10.1m with adjusted EBITDA
of £1.7m, up 10% and 54% respectively on a true like-for-
like basis. Cash balances as at 30 June 2020 was £6.8m
(after taking into account £2m of deferred statutory
taxes that is being paid down in the current quarter)
with £2.3m cash inflow in the period.
With our operating system and our two full stack brands
in place, we are now in a very strong position to address
the market opportunity ahead of us and drive true like-
for-like organic growth.
In addition, we will continue to target acquisitions that
will add to our capabilities or help us further strengthen
our position within the UK public services market. As
mentioned above, all future capabilities, brought into
the Group either through acquisitions or through internal
investment, will immediately be made available through
either the FG or F4 brands to further facilitate integration.
We face the future with a great deal of excitement over
what is to come. Having completed 10 acquisitions and
launched one start up over the last 20 months, we have
the breadth of capability and sufficient size to become
a true challenger in the UK public services sector.
Our attention now turns to the build phase, dialling in
predictable organic growth, improving margins and
ensuring strong cash conversion. We will continue to
look for acquisitions that add to our capabilities or our
reach in a particular sub-sector of UK public services,
although moving forwards, they will be integrated more
fully to further leverage our scale benefits, yet all the
while retaining that all important entrepreneurialism.
We are convinced that our time is now.
Neal Gandhi
Chief Executive Officer
18 August 2020
24
Financial Review
The results for the year reflect
the first full year of The Panoply
as a revenue generating entity
having completed the IPO and
its first four acquisitions eight
months into the prior period. As
such numbers for the current
year are compared against
normalised numbers (referenced
as “Normalised”) or statutory
numbers (referenced as “Stat”)
as most appropriate. Normalised
numbers are used where the
Directors believe it provides a
more appropriate measure
when comparing the year on
year performance of the Group.
All numbers are also reported
before the impact of IFRS 16.
The Panoply reported revenue of £31.5m (2019: £22.1m
Normalised) representing an increase of 43%. The
increase in revenue reflects organic growth as well as
the acquisitions of FutureGov in June 2019 and Ameo in
March 2020. 64% of revenue in the period related to
public services, up from 56% in the prior period on a
normalised basis.
Actual statutory revenue for 2020 represents an increase
of 284% compared to 2019 statutory revenue of £8.2m. This
is as a result of the benefit of a full year’s worth of trading
compared to 4 months of trading as a Group in 2019.
We continued to see a large amount of repeat business
from customers, with 70% of customers billed in FY2020
also billed in FY2019.
Gross Margins remained strong at 38% against prior year
41%. The reduction was largely as a result of a strong
performance of our dedicated teams business that
whilst providing longer term contracts also attracts lower
gross margins than other parts of the Group as well as
investments made into Human+ and Greenshoot Labs.
Adjusted EBITDA was £3.4m up from £2.1m in 2019
(Normalised). After removing the investments into
loss making subsidiaries, normalised adjusted EBITDA
pre central costs was up 65% to £3.8m (2019: £2.3m
Normalised). Statutory operating loss was £3.0m
(2019: £1.6m) due to the reasons noted in more
detail below.
Central costs in the period were £1.9m meaning that
the underlying EBITDA of our subsidiaries after removing
investments into loss making subsidiaries was up 73% to
£5.7m (2019: £3.3m Normalised).
The statutory loss after tax pre IFRS 16 increased by
76% to £3.0m (2019: £1.7m Stat). The loss for the year
has increased due to an increase in loss on fair value
movement in contingent consideration and an increase
in amortisation of intangibles offset by a decrease
in costs due to listing and acquisitions. The Directors
believe that an ‘adjusted profit before tax’ measure is
more representative of the underlying performance of
the Group. To arrive at adjusted results, adjustments
made include acquisition expenses, amortisation related
to acquired intangibles and share-based payments
the impact of fair value adjustments and IFRS 16
adjustments along with the corresponding tax impact
of the adjustments.The following table summarises the
adjustments:
Statutory loss before tax
(3,140)
(1,636)
2020
£’000s
2019
£’000s
Amortisation of intangible
assets relating to acquisitions
Loss on fair value movement of
contingent consideration
Share-based payments
Costs relating to acquisition,
restructuring and listing
IFRS 16 adjustment
1,558
3,764
129
591
31
Adjusted profit before tax
2,933
339
54
239
1,352
–
348
Tax (including impact of
amortisation and costs relating
to acquisition, restructuring and
listing adjustments)
Adjusted profit after tax
(230)
2,703
(105)
243
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Additional consideration
As a result of the strong performance of Group
companies during the current and prior period, further
consideration is payable and will be satisfied through
the issue of new ordinary shares. The total value of
consideration that is currently payable is £17.1m resulting
in maximum further shares to be issued totalling 22.8m.
Value
£’000s
Minimum
share price
Max shares to
be issued
£‘000s
15,262
219
1,649
17,130
0.74
0.825
0.875
20,624
265
1,885
22,774
The expected timeframe for the additional
consideration to be paid is set out below.
10 days post
publication of
annual report
£’000s
Up to
12 months post
publication of
annual report
£’000s
Beyond
12 months post
publication of
annual report
£‘000s
Total
£‘000s
Consideration
payments
6,569
8,110
2,451
17,130
Oliver Rigby
Chief Financial Officer
18 August 2020
As a result of the acquisitive nature of the Group
and its earn out model, the Directors believe that an
adjusted share count for the purposes of calculating
earnings per share is required. As such the Directors
calculate an adjusted diluted share number by taking
the weighted average basic shares and including the
maximum shares to be issued in respect of contingent
consideration to be paid based on performance
measures met in the period, together with the maximum
Share-based payments outstanding. The following table
summarises the adjustments:
Weighted average basic
shares
Shares relating to future
contingent consideration
Shares relating to
Share-based payments
2020
£’000s
2019
£’000s
48,162
18,186
22,774
14,666
3,885
74,821
3,928
36,780
Adjusted diluted earnings
per share (pence)
3.6
0.7
Based on these alternative non GAAP measures the
Group achieved adjusted profit after tax of £2.7m (2019:
£0.2m) resulting in earnings per share of 3.6p (2019: 0.7p).
The statutory loss per share for the period was 6.3p
(2019: 9.2p Stat).
Net cash generated from operations before tax and
including IFRS 16 lease payments was £2.1m. Cash
conversion, calculated by reference to the adjusted
profit before tax but after deducting costs relating to
acquisition and restructuring was 91%. This is despite
record debtor and accrued income levels as at 31 March
2020 caused by an incredibly strong final quarter.
In total, cash decreased in the year from £5.7m to £4.6m
as a result of the acquisitions of Ameo and FutureGov.
The cash consideration for the acquisitions was £9.6m
with £2.4m respectively being funded from the Group’s
cash reserves, £2.2m funded from cash acquired and
£5.0m funded through a new revolving credit facility put
in place during the year with HSBC. This results in the
Group having a small net debt at year end of £0.4m.
26
Sustainable
Futures
The Panoply is committed to creating
sustainable change in our world by
enabling communities and organisations
to be more effective in shaping inclusive,
equitable and productive societies.
The past few years have seen social and
environmental concerns pushed up the
corporate agenda, as organisations
have increasingly woken up to their
responsibilities beyond pure shareholder
profit. We now see businesses committing
to initiatives around the UN’s Sustainable
Development Goals, fostering increased
diversity in talent pipelines, and making a
positive impact in the local communities
in which they operate.
The Panoply was founded as a values-
driven business. Our values are the glue
that bonds us together; a shared outlook
on the world that underpins our culture,
our principles, and everything we do. In
times of uncertainty we – as all other
businesses – must look to these core
values for guidance.
27
Sustainable Development Goals
Our sustainable futures strategy is aligned with the UN Sustainable Development Goals.
We contribute towards these goals through the work we do with our clients, through the jobs
we create, through the investments we make in our wider communities and through the way
in which we protect the environment.
We have integrated information on our work that aligns to the SDGs throughout this report.
The table below show the targets and indicators we are committed to contributing to.
Target
Indicator
Page
number
4.4 By 2030, substantially increase the number of youth and adults
who have relevant skills, including technical and vocational skills, for
employment, decent jobs and entrepreneurship
• Programs and processes to ensure the
37, 38
availability of a skilled workforce
4.7 By 2030, ensure all learners acquire knowledge and skills needed
to promote sustainable development, including among others
through education for sustainable development and sustainable
lifestyles, human rights, gender equality, promotion of a culture
of peace and non-violence, global citizenship, and appreciation
of cultural diversity and of cultures contribution to sustainable
development
• Sustainability initiatives designed to raise
awareness, share knowledge and impact
behavior change
29, 32, 38
5.5 Ensure women’s full and effective participation and equal
opportunities for leadership at all levels of decision-making in
political, economic, and public life
• Female share of employment in senior
29
management
• Number of female board members
8.1 Sustain per capita economic growth in accordance with national
circumstances and, in particular, at least 7 per cent gross domestic
product growth per annum in the least developed countries
• Direct economic value generated and
24-25
distributed
• Revenue and/or (net) value added.
• Tax payments
8.2 Achieve higher levels of economic productivity through
diversification, technological upgrading and innovation, including
through a focus on high-value added and labour-intensive sectors
• Number, type and impact of physical and
11-17
technological legacies
• Significant indirect economic impacts,
including the extent of impacts
8.3 Promote development-oriented policies that support productive
activities, decent job creation, entrepreneurship, creativity and
innovation, and encourage the formalization and growth of micro-,
small- and medium-sized enterprises, including through access to
financial services
• Company policies and/or structured
36-39
programmes for: i) training ii) access to
finance
• Estimated number of micro, small and
medium enterprises (MSMEs) with
significant increases in revenue and
employment generation as a result of the
initiative. These are existing MSMEs that
received training, financing, linkages with
supply chain or other contributions from
the company
8.4 Improve progressively, through 2030, global resource efficiency in
consumption and production and endeavour to decouple economic
growth from environmental degradation, in accordance with the
10-year framework of programmes on sustainable consumption and
production, with developed countries taking the lead
• Energy Intensity ratio
• Scope 1 & 2 emissions and energy
consumption by country/region
• Reduction of energy consumption
33
8.5 By 2030, achieve full and productive employment and decent
work for all women and men, including for young people and
persons with disabilities, and equal pay for work of equal value
• Breakdown of employees per employee
category according to gender, minority
group membership, and other indicators of
diversity
• Explicitly recognize payment of living wage
29, 30, 31
8.6 By 2020, substantially reduce the proportion of youth not in
employment, education or training
•
Investments made in youth training and
employability skills
37-38
8.7 Take immediate and effective measures to eradicate forced
labour, end modern slavery and human trafficking and secure
the prohibition and elimination of the worst forms of child labour,
including recruitment and use of child soldiers, and by 2025 end
child labour in all its forms
• Measures taken by the organization in the
reporting period intended to contribute to
the effective abolition of child labor.
• Company modern slavery statement
31
10.2 By 2030, empower and promote the social, economic and
political inclusion of all irrespective of age, sex, disability, race,
ethnicity, origin, religion or economic or other status
• Type and impacts of initiatives to create an
28-29
accessible environment
• Ratio of basic salary and remuneration of
women to men
2020 ANNUAL REPORT & ACCOUNTS | STRATEGIC REVIEW 28
Sustainable Futures
People
Sustainable
Futures for
our people
39%of the senior positions
within The Panoply are
filled by women.
Inclusive workplaces
The Panoply aims to ensure sustainable futures
for all our people through the creation of inclusive
and nurturing workplaces where employees
can achieve personal and professional growth
irrespective of age, sex, disability, race, ethnicity,
origin, religion or economic or other status.
The Group prides itself on being able to deploy
uniquely diverse teams to clients, made up of
different personalities, opinions and capabilities.
The Group will voluntarily publish its pay gap
results each year to hold itself accountable to
closing the gap. Our mean and median pay gap
is currently 16% and 17% respectively. We are proud
that, whilst only 5% of the leadership roles in tech
in the UK are held by women, they make up 39% of
the senior positions within The Panoply.
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Gender
Gender by seniority
52%
48%
C-Suite
Leadership
Senior
Intermediate
Entry Level
Women
Men
0%
20%
40%
60%
80%
100%
Female
Male
Our commitments
C-Suite
Last year we did a baseline diversity and inclusion (D&I)
survey to assess the current make-up of the business.
Using the results of that survey we set ourselves some
targets and made commitments in order to help us
achieve them.
Leadership
To deliver unconscious bias training for all
hiring managers
We went beyond just hiring managers and rolled out
the training for all interested employees. The training
was delivered by local facilitators and over a third of the
Entry Level
Group’s workforce have participated to date.
Intermediate
Senior
To ensure that the interview process is consistent
and objective
Our HR teams have been working to ensure that the whole
recruitment process is consistent and objective by:
0%
•
•
•
•
Introducing blind CVs at shortlist stages
Setting diversity requirements for applicants at
shortlisting stage
Ensuring that the interview panels are diverse
Having a consistent and transparent approach to
salary decisions
To create networking opportunities for
under-represented Groups within the business
We piloted a global LGBT network this year by elevating
an existing, self-organised group within the business.
The network exists to influence policy and culture and to
ensure that The Panoply is an inclusive, safe-space for the
LGBT community. We intend to roll out this model for other
groups within the company, focusing this year on black
talent and working parents.
To invest in a pipeline of diverse talent through
partnerships and volunteering
We have looked to diversify our recruitment channels
this year, in part by strengthening our relationships with
community partners. We take a long-term approach
to investing in our talent pipeline and therefore are
sponsoring talent from secondary school age onwards.
Further details can be found on pages 37 and 38.
To increase
representation of people
from BME backgrounds*
20%
40%
60%
2020
(target)
2020
(actual)
2019
17%
80%
20
100%
16%
Other ethnic minority
To increase female
White
representation in senior
roles
Black
To increase the
representation of those
from less privileged
backgrounds (Lower
middle class and below)
To increase
representation of people
with a disability
To increase female
directors on company
boards
32%
37%
39%
19%
24%
28%
0%
5%
3%
26%
30%
32%
30
30
C-Suite
Leadership
Senior
Sustainable Futures
People continued
Intermediate
Entry Level
0%
20%
40%
60%
80%
100%
Female
Male
Ethnicity
Ethnicity by seniority
14%
3%
C-Suite
Leadership
Senior
83%
Intermediate
Entry Level
White
Black
Other minority ethnic
0%
20%
40%
60%
80%
100%
White
Black
Other ethnic minority
This year we took a deeper dive not only into our diversity
metrics but also our inclusivity indicators by exploring the
current attitude and sense of belonging of key diverse
groups. Through an anonymous global staff survey we
have established an inclusivity score for employees from
different groups to identify where the gaps are and to see
where we need to be focusing our attention. These scores
were taken from an average of four inclusivity responses
scored out of 5.
Overall inclusivity score
4.25Scored out of 5
We broke down the inclusivity scores to compare the
following employees:
•
BAME vs white
• With disability vs without disability
• Women vs men
•
LGBT vs heterosexual
• Working class vs middle class background
In all instances the latter, ‘dominant’ group scored more
highly than the underrepresented groups. The largest
disparities were between BAME/white employees and
those with a disability. We will work to close the gap so
that all employees are able to experience the same sense
of inclusion and belonging at work. This in turn will help
us to achieve an authentically diverse and representative
workforce.
2021 targets
When setting diversity targets The Panoply values a
long-term view with short term focus. It understands
that what gets measured gets done and will therefore
invest in making its annual diversity and inclusion reports
comprehensive, transparent and public.
Long-term, with continued investment in inclusivity
for all staff, the group believes that it will achieve true
representation of the diverse communities in which it
operates. In the short term, it will set more focussed
data-based targets by leveraging employee
demographics, surveys and market segmentation
to identify the gaps and opportunities.
•
•
•
•
To increase representation of people from BAME
backgrounds* in senior positions to 20%
To increase representation of people with a disability
to 5%
To close the inclusivity gap** between white and
BAME employees
To increase female representation for senior roles to
44%
*UK only
** The gap is currently 0.58pts. Scored out of 5 from an average of 4 indicators.
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Employee wellbeing
The Panoply prides itself on providing decent
employment for its people and is constantly looking for
ways in which it can improve the mental, physical and
financial wellbeing of its staff. Each office within the Group
pays above the living wage to every employee and
delivers a programme of culturally relevant wellbeing
initiatives. It measures the success of this work through
a bi-annual employee satisfaction survey. Overall, our
employee satisfaction score this year was 7.5/10.
We will target all business areas to achieve an average
satisfaction score of 8.0.
As well as job satisfaction, the emotional wellbeing of its
people whilst at work is another priority for the business.
This year it has trained and mobilised a team of mental
health first aiders across its offices and launched an
employee assistance programme for all staff. The
average employee wellbeing score was 7.2/10.
Human rights
Upholding human rights, particularly worker rights, is a
core priority at The Panoply. This year it took the steps to
address the risk of human trafficking and modern slavery
including;
•
Promoting awareness of modern slavery through the
distribution of training materials in all offices
• Completing a risk assessment of all global suppliers
using the vulnerability guidelines from the 2019 Global
Slavery Index
•
Publishing a full modern slavery statement
32
Sustainable Futures
Planet
Sustainable
Futures for
our planet
Our planet is being irrevocably
changed by humans. To meet
the Paris agreement obligations,
human emissions need to reduce
year on year by 8% for the next
decade. The latest calculations
from the Breakthrough Institute
shows that our emissions will be
reduced by about that amount
in 2020 because of the Covid-19
lockdown. This demonstrates the
scale of the issue.
The digital industry that The Panoply operates within
is a significant, yet not widely understood, contributor
to the climate and ecological emergency. The most
widely accepted, and peer reviewed research by
Ericson Research (2018), shows that between 2010-
2015 the global digital industry was responsible for
1.4% of global emissions. This puts it on a par with the
aviation industry. The Panoply company websites
have contributed almost a tonne of CO2e to our
overall emissions of 129.29 tonnes of CO2e.
Our actions
In this financial year we:
•
increased the breadth and depth of our
carbon reporting;
• welcomed external speakers to educate us
on the graveness of the climate situation;
• matched leave for people attending the
September climate strikes;
•
•
supported our companies in building
environmental impact products and services;
empowered our passionate teams to make
changes to reduce our impact, and;
• promoted one of the team to lead on
measuring, offsetting and reducing our
carbon footprint.
The increased breadth and depth of reporting,
alongside our acquisition of two new companies in
the year and an additional office for Manifesto, has
significantly increased the carbon we’re responsible for
from 54.31 tonnes of CO2e to 129.49 tonnes of CO2e. This
has also increased our carbon intensity per FTE by 25%
from 0.27 to 0.34 tCOe/FTE.
33
33
Carbon Emissions
Scope 1
Gas emissions (tCO2e)
Total Scope 1 cost (£)
Scope 2
Group
UK
Norway
Bulgaria
3.20
3.20
0
0
£1,182.09
£1,182.09
£0.00
£0.00
Purchased district heating emissions (tCO2e)
Purchased electricity emissions (tCO2e)
5.16
38.36
0
26.74
5.16
0.41
0
11.21
Total Scope 2 cost (£)
£15,280.39
£8,281.12
£2,483.27
£4,516.00
Total Scope 1 and Scope 2 CO2e (tCO2e)
46.72
29.94
5.57
11.21
Total Scope 1 and Scope 2 cost (£)
£16,462.48
£9,463.21
£2,483.27
£4,516.00
Scope 3
Vehicle emissions
Flight emissions
Website emissions
Total Scope 3 CO23 (tCO2e)
3.63
78.26
0.87
82.76
3.63
66.48
0.75
70.86
Total Scope 1,2 and 3 CO23 (tCO2e)
129.48
100.80
0
6.55
0.01
6.56
12.13
0
5.23
0.11
5.34
16.55
Carbon Intensity (tCO2e)
Per employee (equivalent FTE)
0.34
0.84
1.01
0.09
One of our companies’ flights alone made up 20% of the Group’s total emissions. Flights right across the Group
contributed to 60% of the Group’s total emissions. Our investments in remote working will ensure this figure is significantly
reduced for the next financial year.
Source
Electricity emissions
Gas emissions
District heating emissions
Vehicle emissions
Flight emissions
Website emissions
CO2e tonnes
38.36
3.20
5.16
3.63
78.26
0.87
2020 ANNUAL REPORT & ACCOUNTS | STRATEGIC REVIEW 34
Sustainable Futures
People continued
Planet continued
29.60%
29.50% 29.80%
60.40%
0.70%
Electricity emissions
Gas emissions
District heating emissions
Vehicle emissions
Flight emissions
Website emissions
A greener future
We will continue to deepen the measurement of, and
action on, all of our emissions in the next financial year.
We need to understand the variance in the energy
consumption across the various properties we rent and
the other factors behind the difference in the employee to
emissions ratios across our companies. We will also focus
on fully measuring our scope three emissions; employee
commuting, waste disposal, supply chain, climate
conflicts, investments and the products and services we
have helped create.
This means we have ambitious plans for carbon neutrality
certification, carbon budgets, employee incentivisation
and continued growth of the products and services our
companies are offering to help our clients understand,
measure and reduce their impact on the planet.
However, because there is still more to measure for a
complete baseline and because of the significant impact
coronavirus induced working from home will have, it is not
possible to set meaningful KPIs for the level of reduction
for the 2020/21 financial year. We will instead focus on
constantly reprioritising our roadmap based on the
latest social context and scientific research to reduce our
impact on the planet.
The Panoply Group’s strategy is based around impactful
companies joining the group, therefore acquisitions could
take place at any point during the financial year. When
this happens we will use whatever data is available to
account for, and offset, the emissions of that company
for the entire financial year, not from the day they join.
Emissions are a debt to the planet that we want to help
future Panoply Group companies to pay back.
Finally, to offset the emissions we have identified, plus
an additional 5% to compensate for the things we
have undoubtedly missed, we will be partnering with
organisations who can help us offset the 135 tCO2e
through UK flora and fauna restoration. We believe it is
crucial for offsetting not to be seen as a cheap way to
expunge the impact organisations have on the planet.
As a UK headquartered company it is crucial to drive
change within the UK and help the nation achieve it’s
Paris agreement obligations. The partnerships we form
will also highlight that tree planting is not the only way to
offset emissions.
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36
Sustainable Futures
Communities
Sustainable
Futures for
our
communities
1% Pledge
The Panoply donates 1% of its
pre-tax profits and pledges
1% of employee time to invest
in sustainable futures for the
communities in which our
employees live and work.
By leveraging the success
of the business to achieve
social good and donating a
percentage of its profits and
time to charitable projects
each year, this pledge helps
to ensure that the Group’s
philanthropic giving keeps
pace with the growth of
the business.
In FY 19/20 The Panoply committed £32k
to charitable projects based on it’s pretax
profits. £11.4k of this amount was distributed
to community projects throughout the year in
addition to £36.7k of charitable funds committed
in FY 18/19.
In addition to its 1% pledge, Neal Gandhi, CEO, and
Oliver Rigby, CFO each transferred respectively
323,529 and 58,823 ordinary shares to Founders
Pledge, a charity which receives and administers
charitable gifts, and reviews and distributes
grants to qualified organisations suggested
by donors. The shares were transferred at nil
consideration and had a value of approximately
£275,000 and £50,000 respectively.
37
Donating time
The Panoply believes in the power of people to transform their
communities. Therefore it aims to donate 1% of time each
year to supporting local communities to build sustainable
futures. We encourage employees to get involved through
our volunteer programme which was implemented in all
business areas this year and gives full-time staff an annual
benefit of at least 16 paid hours for community engagement.
In FY 2019/2020, 116 of our
employees logged 904 hours
across 37 different community
investment activities.
Community Action Day
The Panoply hosted the first annual Community Action
Day this year which saw employees across Europe coming
together to show the impact they can make.
Our first event saw 99 employees
support 13 projects and together
donate 408 hours.
The Christmas Give
Last Christmas, to celebrate the season of giving,
The Panoply donated £25 on behalf of every employee to a
charity of their choice. Some of the impacts the charities were
able to make with our donations included:
•
•
•
Providing tea, breakfast and shower services for over 67
rough sleepers
Paying annual internet costs for 30 refugees so that they
can participate in digital training
Training costs for a rescue dog handler in Norway
BASH Festival
The Panoply wants to invest in sustainable futures for its
communities and that means futureproof jobs for everyone.
Therefore last year the Group partnered with BASH Festival to
provide opportunities for 13 - 17 year old girls who are interested
in tech, to participate in a week long festival of code.
Employee Volunteering Grant
To complement the incredible work that Panoply volunteers
do for local charities and to celebrate the commitment
of the employees, the company offers the opportunity to
apply for a £1,000 grant to any member of staff who logs 1%
of their time by the end of the FY. The grant, which is given
directly to charities, strengthens the relationships between
The Panoply and community organisations and helps our
partners to do more work in providing sustainable futures
for beneficiaries.
The Panoply Enterprise Challenge
The Panoply Enterprise Challenge is designed to inspire
secondary school students from underrepresented
backgrounds to be entrepreneurial. Throughout the
programme, students are exposed to lots of different
people, skills and careers through a mixture of classwork
and volunteer interaction.
Students are challenged, in teams, to come up with a
business idea and pitch their plan in return for a £50
investment. Successful teams then have 6 weeks to run
their businesses for the maximum profit.
In total, the Group donated £5,430
to charities local to where its
employees live and work.
Sponsored spaces for 38 girls.
£5,000 donated through the
employee volunteering grant
programme.
60 students participated and
created 12 micro-enterprises.
2020 ANNUAL REPORT & ACCOUNTS | STRATEGIC REVIEW
38
Sustainable Futures
People continued
Communities continued
The Future Leaders
Programme
2019 marked the first edition of
our Future Leaders Programme.
The Mission was to shake up the
boardrooms of tomorrow by
investing in underrepresented
talent today.
Women, ethnic minorities and people from
low-income backgrounds are still massively
underrepresented at senior levels in business.
The Future Leaders incubator sought out young
entrepreneurs from these communities and gave
them the skills, network and support they will need
for success.
Following the footprint of The Panoply, the Future
Leaders programme was open to young people in
London, Canterbury, Oslo and Sofia. Working with
grassroots organisations, applicants came from the
following backgrounds.
Successful participants were offered a weekly
stipend, free desk space, a business coach, weekly
professional development workshops and the
chance to pitch to real investors at the end of
the programme. Five young entrepreneurs were
supported through the pilot. Here is what they said
about the experience.
Our applicants were
79%BAME
19%with disability
Natalie Angelova
‘The program really makes you experiment, push out
your comfort zone, and think fast. It was great.’
Awo Abdulqadir
‘I’ve grown into a more secure and structured person.
If I’d feel like I’m having a bad week, I could tell my
coach and they’d assure me that it’s normal but that I
need to be stronger and more focused the next week.’
Emily Banks
‘There is definitely a lack of support out there for
young entrepreneurs and it can feel quite lonely at
times... I’m so glad I took the risk to do this.’
70%Low income
57%Female
Miranda Hatson
‘My experience has been pretty life changing... I have
had a space to work, learn and be around others. I
have had support that I really needed’
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Why do you think there is a need
for programmes like this?
Fundamentally, the Future Leaders
Programme is a beacon of hope
in a world which still has not fully
appreciated the value which a
diverse talent pool can provide. To
reiterate my earlier idea – talent
is indiscriminate and exist within
everyone regardless of race, gender,
and economic background. For
example, without this programme I
would not have been able to meet
and interact with the other founders
on the programme. These founders
have the most amazing ideas and it
is a shame to think without a platform
like Future Leaders their ideas would
not be nurtured. We need to shake
up the boardrooms of tomorrow by
supporting diverse entrepreneurial
talent today – and this programme
does just that.
boardroom of the future will need
to accommodate this reality to
ensure the best talents make it into
the boardroom.
Can you talk a little bit about your
experience on the programme?
My experience on the programme
was amazing. I thoroughly enjoyed
the overall structure and guidance
provided by the programme. I was
able to gain valuable insight on
various aspects of running a business
i.e. accounting & tax, pitching,
identifying target customers and
more. The exposure to working in a
business environment also allowed
me to connect with CEO’s to get an
idea of what the position entailed.
“Fundamentally, the Future Leaders
Programme is a beacon of hope
in a world which still has not fully
appreciated the value which a
diverse talent pool can provide.”
In what ways have you grown
professionally or personally
through the incubator?
In terms of professional growth I
believe the exposure to various
individuals in a business environment
has improved my understanding of
business and what it takes to build
one. For example, interacting with
CEO’s allowed me to understand their
mind-set and approach to business.
As a result, I was then able to adopt
many of their traits and instill them
within my own personality. In terms
of personal growth, I believe I have
learnt a lot about myself and how I
communicate with others. Being in
this new environment has forced me
to constantly introspect and improve
my understanding of the world.
Case Study
Chi Nguyen
Tell us a little bit about your
business?
RISE FITNESS is an online platform
which connects personal trainers
to clients in their area. The workouts
are provided at home, at the office,
a local park – essentially, anywhere
the client wishes. The business aims
to tap into the growing sharing
economy by providing an
on-demand service for individuals
who are seeking to empower
themselves through personal fitness.
Why did you apply for the Future
Leaders Programme?
I applied for the Future Leaders
Programme because it offered an
outlet for me to explore my business
ideas. I believe it is important to
surround yourself with people who
are willing to push you to dream
big and I felt the incubator could
provide me that. Prior to attending
the programme my main difficulty
was the psychological aspect of
starting a business due to self doubt
and imposter syndrome. However,
the programme has helped me
overcome these fears by helping
me understand that entrepreneurial
pursuits are available to anyone
and everyone.
Why do you think it is important
that boardrooms of the future
look different than the
boardrooms of today?
I think it is important the boardrooms
of tomorrow look different than
the boardrooms of today because
the world is changing. Traditional
corporate structures dominated
by a particular demographic at
the pinnacle of every organisation
is now being challenged by a new
globally interdependent and diverse
world. The economy of the future will
undoubtedly operate within a new
framework which values diversity and
inclusion. Talent is indiscriminate and
exists within everyone - regardless
of your gender, race, economic
background and so forth. The
40
Risk and Risk Management
The success of the Group depends on the proper management of risk. The Group has a governance structure to identify
and monitor relevant risks at both a subsidiary and a Group level. The risks identified are ranked by likelihood and
potential impact, then tracked through monthly board meetings. Once risks are identified, the Group will formulate and
deploy mitigating strategies.
The principal risks and uncertainties that the Board believed could have a significant adverse impact on the Group’s
business are set out below. The table is not intended to be exhaustive and the principal risks are not listed in order of
seriousness or potential impact. There may also be risks that are not currently considered to be serious or which are
currently unknown and risks that are outside of the Group’s control. Where reasonably possible, The Panoply has taken
steps to manage or mitigate the risks, or potential risks, but it cannot entirely safeguard against all of them.
Risk
Description
Impact
Mitigation
Macro-economic risk - events outside of The Panoply’s control
Adverse
developments
in the global
economy could
impact the level
of demand for
the Group’s
services
Strategic risk
Identification
and integration
of investment
opportunities
The global economy is likely
to suffer slower growth than
current levels, impacting
consumer and business
spending and investment,
in light of a new strain of
coronavirus, Covid-19. The virus
has quickly spread resulting
in severe illness and, in many
cases, death, and has prompted
the World Health Organisation
to declare a pandemic. This has
resulted in the implementation
by governments and businesses
across the world of drastic
measures to halt the spread of
the virus and safeguard lives
and health services.
The Groups’ strategy is to grow
both organically and through
acquisitions.
Group’s clients may be forced to
respond to such circumstances
by reducing their digital
transformation and non-
essential consulting budgets,
thereby reducing the demand
for the Group’s services.
Likely to be a significant amount
of economic uncertainty and
disruption to businesses and the
wider economy in the short term.
There is a risk that failure to
complete on transactions will
leave the Group with substantial
unrecovered costs; or that
a company that has been
successfully acquired does not
integrate effectively.
The Group has evaluated
the impact on the Covid-19
pandemic across all our
operations and key risks
identified. Weekly meetings have
been held to assess the risks
and we have developed short
term responses and long term
strategic actions to minimise the
impact to our business.
Finally, we have performed
additional financial stress testing
and liquidity impact analysis in
order to reflect the impacts from
the Covid-19 pandemic in the
assessment of the Group’s long-
term viability.
The Group has a comprehensive
M&A process to ensure that
companies who join the
Group aligns with the Groups’
purpose, values and vision; adds
strategic value to the Group
and strengthens our proposition
adding greater depth or breadth
and has leaders who can work
collaboratively.
The Group makes use of
expert advisers to conduct
due diligence. In addition,
warranties and indemnifications
are included in transaction
documents.
Once companies are part of the
Group, the Group integrates the
newly-merged company into
its standard monthly reporting
cycle where (financial) risks, if
any, are identified.
Furthermore, the Group has
appointed a COO who will
further improve the Group
processes.
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Risk
Description
Impact
Mitigation
Operational risk - People
Retention of
key personnel
throughout
the whole
organisation
The quality of the services
provided by the Group’s
businesses are fundamentally
derived from the quality of the
Group’s people. The Group’s
performance could therefore
be adversely affected if it is
not able to recruit, train and
retain key talent in the Group’s
businesses and at the Group
level.
A number of individuals are
key to the management and
performance of the Group
and Group subsidiaries. Four
of the companies acquired at
IPO are now approaching their
earn out.
The Directors believe that
the loss of key people could
significantly impede the
Group’s financial plans,
product development, project
completion, marketing and
other plans.
Inability to
recruit and
retain a diverse
workforce
We are a people business,
requiring high calibre people
to work alongside clients to
meet their needs.
Failure to recruit employees
with suitable qualifications at
all required levels is a key risk in
our operational strategy.
This could impact the Group’s
ability to provide contracted
solutions and services
exposing the Group to liability,
negatively impacting profit
and cash flow in the short
term and causing damage
to reputation, customer
relationships and staff morale.
Impact on
employees due
to Covid-19
As a result of Covid-19,
the Government have
implemented lock-down
processes.
Prolonged lock-down and
home working may have a
negative impact on the mental
wellbeing of team members.
Retention of key people is
supported by the Share
Purchase Agreements
(SPAs) which provide certain
restrictive covenants.
Furthermore, members of key
management hold significant
equity interests in the Group
which are subject to certain
lock-in and orderly market
provisions.
In order to retain key personnel,
the Group actively discusses
opportunities throughout the
Group and has a succession
plan for senior management
and for up and coming
leaders.
Our goal is to have a diverse
workforce that replicates the
diversity of where we operate.
The Group puts culture and
purpose in the forefront
of what we do to become
an employee of choice for
employees.
Proactive measures to
encourage social interaction
between team members via
video call/chats including
regular check-ins with line
managers to identify any
emerging issues early.
Use of mental health first
aiders to inform how we can
best support team members
through this uncertain period.
An employee assistance
programme has been
implemented throughout the
Group.
42
Risk and Risk Management
continued
Risk
Description
Impact
Mitigation
Operational risks - IT and legal
Breach of legal,
regulatory and
contractual
information
security and
data privacy
legislation
Cyber security
risk
Financial risk
Customer
defaults
General compliance with legal,
regulatory and contractual
information security and data
privacy requirements.
Non-compliance could expose
the Group to liability and fines
(for example under GDPR), and
negatively impact profit and
cash flow in the short term,
cause reputational damage and
damage customer relationships
and credibility in the market.
The Group relies upon the
confidentiality, integrity and
availability of its IT systems
internally and as part of its
service offerings to customers.
Cyber security events are
occurring more frequently
and attacks are designed with
greater complexity.
A major cyber security event
causing loss of availability or
loss of customer data could limit
the Group’s operations, expose
the Group to fines and cause
reputational damage, and
damage customer relationships
due to reduced credibility in the
market.
The Group has exposure
to credit risk through the
default of a client or other
counterparty.
Risk that a client or other
counterparty is unable to pay
all or any of an amount due to
the Group.
The Group’s operating
business are generally paid for
their services in arrears.
EU Exit
Financial or trading risks
associated with the UK leaving
the European Union.
Potential to limit or harm the
Group’s trading activities,
overheads and staff mobility.
The Group reviews the impact
of new information security and
data privacy regulations and
legislation on the Group and its
customers. The output of these
reviews influences the Group’s
internal controls and processes
and the design of products,
solutions and working practices.
Furthermore, the Group has
appointed a COO who will focus
on key Group risks and operating
effectiveness.
Cyber security threats are
monitored by each individual
company and any risks of cyber
security are communicated
throughout the whole group on a
timely basis.
The Group makes credit
checks and monitors its
exposure to individual clients
and negotiates payment terms
in light of the credit worthiness
of its counterparties. The
Group is cash generative and
the Board maintains focus on
the Group’s working capital
needs.
The Group has evaluated
scenarios associated with
‘Brexit’ and concluded that
there is no substantial risk to
operations in the next two to
three years. The Group is not
overly reliant on UK-EU trade,
its most significant customers
being UK public sector
organisations.
Risk
Description
Impact
Mitigation
Risk of fraud or
theft
Unauthorised access or
misuse of the Group’ bank
accounts or other resources
leads to loss of funds.
Competitive environment
Impact the financials and cash
flows of the Group.
System, review and approval
controls are in place restricting
access to accounts and are
regularly monitored.
Competitors
with the ability
to undercut our
businesses
The Group’s competitors
include large consultancies and
technology companies, as well
as smaller niche companies.
There is a risk that larger
companies may be able to
undercut with prices.
It is part of the Group’s strategy
to exploit the current disruption
of the digital transformation
services industry and to focus on
working with clients to meet their
needs.
The Group is focused on
delivering first class services to
clients and working hand-in-
hand with clients to meet their
needs.
We believe that the way we
provide services sets us apart
from competitors so that our
clients can see the value of the
work that we perform.
We continue to monitor the bid
to win ratios to identify potential
risks.
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Corporate Governance 45
2020 ANNUAL REPORT & ACCOUNTS | CORPORATE GOVERNANCE 46
Board of Directors
Mark William Smith, aged 65,
Non-Executive Chairman
Neal Narendra Gandhi, aged 52,
Co-Founder and Chief Executive Officer
Mark has held several senior roles in creative and
innovative communication businesses. He began his
career as a chartered accountant at Touche Ross
& Co. (Deloitte). He then spent 30 years at Chime
Communications, which was acquired by Providence
Private Equity in 2015.
Mark is currently chairman of Holiday Extras, a market
leader in the provision of online ancillary travel services,
a position which he has held for 15 years. He is also a
non-executive director and acting Chairman at The Dods
Group, an AIM listed intelligence, media, training and
events company, operating in over 50 countries.
Neal is a serial tech entrepreneur having co-founded
four companies that exited successfully with a combined
value of £117m. He co-founded his first company at the
age of 21 and, under the brand name of Jungle.com, that
company went on to be sold to GUS for £37m. In 1996 he
co-founded Xplora and sold it to Nasdaq-listed USWeb
in 1998.
Neal then co-founded Attenda, a managed services
consultancy which went on to be sold for £72m; one part
to Telecity Plc and the other to Darwin Private Equity. In
2006 he founded QuickStart Global, an off-shore IT service
provider, which grew rapidly, and in 2010 was listed in the
Sunday Times Tech-Track 100 at number 3, his second
company in that list with Attenda having been listed at
number 2 in 2001.
Oliver James Rigby, aged 39,
Co-Founder and Chief Financial Officer
Oliver qualified as an accountant with MRI Moores
Rowland LLP in 2006 before spending six years as an
adviser in corporate finance with Daniel Stewart and
Deloitte. Oliver acted as a Nominated Adviser to the AIM
Market of the London Stock Exchange and was one of their
youngest Qualified Executives.
Prior to co-founding The Panoply, Oliver set up Growth
Company FD Limited in 2012 to provide part time CFO and
corporate finance support to growing businesses.
4747
Christopher Paul Sweetland, aged 65,
Non-Executive Director
Isabel Jane Kelly, aged 54,
Non-Executive Director
Chris qualified as a chartered accountant with KPMG
before spending 9 years overseas in a variety of
financial roles with PepsiCo Inc. In 1989, when he was
CFO for the Central Europe Beverages Division, he was
recruited by WPP to be part of their small central team.
Isabel is the founder of Profit with Purpose, a social
purpose consultancy working with companies and
nonprofits. She is also an Industry Careers Advisor for
MBA students at the Saïd Business School, focused on
social impact.
Chris retired from his role as WPP Deputy Group Finance
Director in 2016 having spent 27 years helping build the
company and having been involved in all aspects of
operations, investor relations and the many acquisitions
that built that Group. Chris also represented WPP on
the boards of a number of companies both in the UK
and overseas.
In 2002 Marc Benioff, CEO of Salesforce.com, hired Isabel
to establish the Salesforce Foundation internationally
(now Salesforce.org). For 12 years she grew and led an
international team delivering technology, grants and
programmes in 110 countries, as well as generating
revenue of $12m to fund the work. Isabel worked at
Oxfam and Amnesty International for 12 years prior to
joining Salesforce.
2020 ANNUAL REPORT & ACCOUNTS | CORPORATE GOVERNANCE
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Corporate Governance Report
The Panoply Holdings plc is committed to operating
proper standards of good corporate governance and
has established a corporate governance model based
on the key principles of the Quoted Companies Alliance
Corporate Governance Code (“QCA Code”). The following
outlines how the Company addresses the ten broad
governing principles defined in the QCA Code. The
Non-Executive Chairman is responsible for corporate
governance and the overall leadership of the Board and
ensuring its effectiveness.
The Panoply Holdings plc operates a business model and
growth strategy that promotes the generation of
shareholder value through its growth. The company
promotes professionalism, openness, honesty and
integrity between its customers, staff, shareholders and
suppliers.
Principle 1 – Establish a strategy and
business model which promote long-term
value for shareholders.
The Panoply is a digitally native technology enabled
services group, at the forefront of a growing market,
focused on sustainable digital transformation and
positive, purposeful organisational change.
We believe an increasingly complex world needs a new
business model to achieve high impact outcomes for
clients and their employees and more value for
stakeholders.
We combine the dynamism and agility of smaller, expert
teams with the scale to confidently address our clients’
most pressing needs as they navigate the rapidly
changing nature of society and business. Using our
model of Consistent Autonomy, we embrace a culture of
cultures to deliver impactful work and to drive profitable
organic growth. And we’re collectively entrepreneurial,
creating a regenerative spirit of innovation, which delivers
the transformative work our clients need.
In the last three and half years, The Group has identified
and met numerous potential target companies and has
completed ten acquisitions.
Unlike many buy and build models that have preceded
The Panoply, the Directors are focused on creating an
agile, decentralised group where employees join a
culture of autonomy, purpose, collaboration and
innovation. The Directors believe that this consistent
autonomy operating model, embracing cultures of
cultures and shared values will allow Group Companies
to collaborate, providing clients with innovation and rapid
delivery of services.
The Panoply has developed an efficient, formulaic
approach for acquiring companies. With an extensive
acquisition pipeline, the Directors intend to continue to
supplement the organic growth of existing Enlarged
Group Companies through the addition of
complementary companies.
Key Strengths
The Directors believe that the Enlarged Group’s key
strengths include:
•
•
•
•
•
•
•
Significant market opportunity – independent
research house, International Data Corporation
(IDC), estimates that the market for digital
transformation services in EMEA will rise from
$45 billion in 2017 to $82 billion by 2021.
Group platform – The Panoply provides a platform
for companies which join the Enlarged Group to
accelerate their organic growth through
cross-selling, leveraging The Panoply brand,
network, listed status and balance sheet.
Alignment of interests – The Panoply’s acquisition
model involves a significant proportion of the
consideration for an acquisition being issued in
Ordinary Shares thereby ensuring alignment of
interests with existing shareholders.
Consistent Autonomy model – The Panoply’s model
allows companies within The Panoply Group to
continue to remain entrepreneurial and creative,
unstifled by bureaucracy;
–
–
Central control is provided by a non-executive
director appointed by the Board to the board
of each Panoply Group Company to provide
governance as well as guidance and oversight
on growth strategy and collaboration with
other Panoply Group Companies;
The benefits of this model to clients are better
outcomes, faster execution and lower cost for
higher quality work.
Profitable and cash-generative – the Enlarged
Group is, cash generative and only intends to make
accretive acquisitions going-forward.
Focused growth strategy
–
–
The Panoply’s acquisition model is designed to
attract ambitious companies, confident in their
ability to grow profitably and rewards
cross-selling and collaboration;
The Panoply’s management has an extensive
network to help identify, attract and execute
future acquisitions.
Experienced Management and Board with proven
track record – The Panoply is managed by highly
experienced executive and non-executive directors
combining strong sector, public company and
international mergers and acquisitions expertise
with a track record of building, growing and exiting
services companies.
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Principle 2 – Seek to understand and meet
shareholder needs and expectations.
The Panoply proactively engages with its shareholders
and potential shareholders alike. This is through a series
of mechanisms:
•
•
•
•
•
•
•
•
Formal announcements – as a London Stock
Exchange (LSE) AIM listed company, we make all
statutory announcements through the LSE’s
regulatory news service (RNS). A feed is maintained
on our investor area (see below). The Panoply
reports formally to shareholders by the publication
of its annual and half-yearly financial statements.
Analyst and investor presentations – the Executive
Directors present the half-yearly and annual results
to institutional investors, analysts and the media.
The presentations are available on the investor
section of the website.
AGM – Notification of the date of the AGM is sent to
shareholders at least 21 working days in advance of
the meeting. Details are set out in the Notice of
Meeting. The Directors (and the external auditor) are
available at the AGM to answer questions, both
during the course of the meeting, and informally
afterwards. All details can be found on the Investor
Announcements and the Investor Documents
pages.
News releases – in addition to statutory
announcements, we use RNS Reach to present
regular business news and updates to shareholders.
We also have a full news service available on The
Panoply website.
Interactive sessions – The Panoply’s Executive
Directors arrange regular (six monthly) face to face
sessions with any interested shareholders or
potential shareholders, and are also available for
updates at any point in the year. See contact details
below.
Investor focused micro-site – we maintain a full
section on the main Panoply website for investors.
This includes the Financial Calendar and real-time
RNS announcements; the latest Investor Documents,
presentations and reports; share information and
share dealing interactive feeds; this corporate
governance statement; a full list of investor related
contacts.
LSE Profile – we also maintain a profile on the
London Stock Exchange Issuer services website.
Investor Email – we also manage an investor email
account for any direct queries –
investors@thepanoply.com.
other matters directly with major shareholders. At every
Board meeting, the Board is provided with the latest
brokers’ reports and a summary of the contents of any
meetings with shareholders. The Board considers that the
provision of these documents is a practical and efficient
way for both the Chair and Senior Independent Director
to be informed of major shareholders’ opinions on
governance and strategy and to understand any
shareholder issues and concerns.
If you would like to know more about The Panoply as a
shareholder, or potential shareholder, please contact us
through our investors email address and we will put you
in touch with one of our Executive Directors.
Principle 3 – Take into account wider
stakeholder and social responsibilities and
their implications for long-term success.
Please see further details in the People, Planet and
Community Section of our Annual Report and Financial
Statements.
Principle 4 – Embed effective risk
management, considering both
opportunities and threats, throughout the
organisation.
Risk management activity is overseen by the Chief
Executive Officer and Chief Financial Officer, with the
support of the Executive Management Team.
Our framework enables us to remain vigilant to all known
and emerging risks and opportunities. Effective risk
management supports informed decision making;
enables us to minimise impact from unforeseen internal
or external events; and allows us to fully exploit emerging
opportunities. Our objectives for risk management are to:
•
•
•
•
•
•
Identify, measure, control and report on business risk
that may undermine the achievement of objectives,
both strategically and operationally, through
appropriate analysis and assessment criteria
Effectively allocate effort and resources for the
management of key and emerging risks
Build an accurate picture at the highest level of the
key risks facing our business, and use this
information to drive business improvements in a
considered and coordinated way
Support and develop our reputation as a well
governed and trusted organisation
Minimise costs and drive efficiencies in the way that
pervasive risk is controlled across the business
Identify weaknesses in, and opportunities to
improve, our business processes
Contact with major shareholders is principally
maintained by the Executive Directors, who ensure that
their views are communicated to the Board as a whole.
The Chair is also available to discuss governance and
Risk Registers
At the Operational level, a risk register is maintained
within every business of the Group. Risks are recorded
50
Corporate Governance Report continued
and managed within as required and are reviewed
regularly by the management of each business.
At a central level, there is a single central risk register for
Group Significant risks, which records the top risks to the
business.
Risk registers are reviewed on a quarterly basis which
supports the escalation of any risks with a high residual
impact, or potentially pervasive risks, to a higher level risk
register as appropriate.
Risk Appetite
The Board determines the amount and type of risk that
The Panoply is willing to take on in pursuit of its strategic
objectives. The Board’s appetite for risk is influenced by
various key factors including (but not limited to) the
overall economic, regulatory and operational landscape
in which we operate.
The Executive Management Team advise the Board of
these key influences which enables the Board to adjust
the amount of risk that The Panoply takes on. Risk
tolerance may, by business choice, differ in different parts
of the company.
Review and Assurance
Risk registers are updated as and when required. A full
review is undertaken quarterly. The highest rated risks are
presented to the Board every quarter by the CEO. Every six
months the Board is presented with the detailed risk
registers for each line of business. Further details can be
found in our Risk Section of the Annual Report and
Financial Statements on pages 40 to 43.
Principle 5 – Maintain the Board as a well-
functioning, balanced team led by the
Chair.
The PLC Board (“the Board”) is responsible for the
Company’s corporate governance systems and
processes that support good decision making.
The Non-Executive Directors, Mark Smith (Chair), Isabel
Kelly and Chris Sweetland are considered independent of
management and free from any business or other
relationships that could materially interfere with the
exercise of their independent judgement. Both Mark Smith
and Chris Sweetland own shares in The Panoply and all
three Non-Executive Directors hold options, however this
is not considered to alter their independent status.
Director’s Commitment to The Panoply
The Directors acknowledge the importance of the
principles set out in the QCA Code.
Our Non-executive Directors have committed in their
letters of appointment to attend all reasonable board
and committee meetings in addition to being reasonably
available at other times for The Panoply business. Our
Executive Directors have entered into employment
contracts which require them to attend all board and
committee (of which they are a member) meetings.
The Non-Executive Directors meet at least once a year
without the Executive Directors present. All Directors
submit to re-election each year at the Annual General
Meeting (“AGM”) of the Company.
The Board meets at least four times each year with
additional meetings when circumstances and urgent
business dictate. At each meeting the Board reviews a
schedule of reserved matters including trading
performance, financial strength, strategy (including
investment and acquisition opportunities), risk
management, controls, compliance, reports to
shareholders and succession management.
The Directors have established two committees of its
Board, namely the Audit, Risk and AIM Rules Compliance
Committee and the Remuneration Committee.
The Audit, Risk and AIM Rules Compliance Committee is
chaired by Chris Sweetland and has primary
responsibility for monitoring the quality of internal
controls, ensuring that the financial performance of the
Company is properly measured and reported on and
reviewing reports from the Company’s auditors relating to
the Enlarged Group’s accounting and internal controls, in
all cases having due regard to the interests of
Shareholders. The Audit, Risk and AIM Rules Compliance
Committee meets at least twice a year. Mark Smith is the
other member of the Audit, Risk and AIM Rules
Compliance Committee. Oliver Rigby, CFO, attends Audit,
Risk and AIM Rules Compliance Committee meetings by
invitation.
The Remuneration Committee is chaired by Isabel Kelly,
and reviews the performance of the Executive Directors
and determines their terms and conditions of service,
including their remuneration and the grant of options,
having due regard to the interests of Shareholders. The
Remuneration Committee meet at least once a year.
Mark Smith is the other member of the Remuneration
Committee.
The Remuneration Committee also considers Board
policy in relation to the remuneration of the Chairman of
the Board. Non-Executive Director remuneration is a
matter for the Chairman and the executive members of
the Board. No Director is involved in any decisions as to
their own remuneration or benefits.
Principle 6 – Ensure that between them the
Directors have the necessary up-to-date
experience, skills and capabilities.
The Board members and their relevant experience and
skills are detailed on pages 46 and 47. The Non-Executive
Chairman believes that, as a whole, the Board has a
suitable mix of skills and competencies covering all
essential disciplines bringing a balanced perspective that
is beneficial both strategically and operationally and will
enable the Company to deliver its strategy. The Board
consists of two executive directors and three non-
executive directors, all of whom are independent. The
nature of the Company’s business requires the Directors
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to keep their skillset up to date. Updates to the Board on
regulatory matters are given by Company’s professional
advisers when appropriate.
See further details on our behaviours in the People, Planet
and Community section of our Annual Report & Financial
Statements on pages 26 to 37 and our Values on page 8.
In addition to the support provided by the Company’s
retained professional advisers (Nominated Advisor,
lawyers, auditor and M&A advisor), external consultants
have been engaged to advise on a number of matters
including tax planning and market research. External
advisers attend Board meetings or committee meetings
as invited by the Non-Executive Chairman to report
and/or discuss specific matters relevant to the Company.
Principle 7 – Evaluate Board performance
based on clear and relevant objectives,
seeking continuous improvement.
Board performance effectiveness process
The Chairman is responsible for the regular evaluation of
the Board’s performance and that of its committees and
individual Directors.
Succession planning and Board
appointments
The Remuneration Committee meet as and when
necessary to consider the appointment of new executive
and non-executive directors, although the Board as a
whole take responsibility for succession planning. Board
members all have appropriate notice periods so that if a
Board member indicates his/her intention to step down,
there would be sufficient time to appoint a replacement,
whether internal or external.
The Company’s Articles of Association require that
one-third of the Directors must stand for re-election by
shareholders annually in rotation and that any new
Directors appointed by the Board during the relevant year
must stand for election at the annual general meeting
immediately following their appointment. Any Directors
who are not employed by the Company or holding
executive office who have served on the Board for at
least nine years will be subject to annual re-election.
Board appointments are made after consultation with
advisers including the Nominated Advisor who
undertakes due diligence on all new potential Board
candidates.
Principle 8 – Promote a corporate culture
that is based on ethical values and
behaviours.
The Board recognises that core values provide a
framework which influences every level of the Group. One
of the Group’s four key values is “Difference with
authenticity”. This means we value difference not just in
gender, ethnicity and class but in personality, talent and
perspective. It takes all types of attributes to make a
great team.
Principle 9 – Maintain governance
structures and processes that are fit for
purpose and support good decision-
making by the Board.
On behalf of the Board, the Managing Director of the
trading business of subsidiaries has overall responsibility
for managing the day to day operations of that entity
and the Board as a whole is responsible for monitoring
performance against the Company’s goals and
objectives. The individual Board members’ specific
responsibilities, contributions and skills are set out on
pages 46 and 47.
The Board has established two standing Committees, the
Audit, Risk and AIM Rules and Compliance Committee
(Audit Committee) and the Remuneration Committee.
Membership of both the Audit Committee and the
Remuneration Committee during the year under review
was exclusively Non-Executive.
Principle 10 – Communicate how the
Company is governed and is performing by
maintaining a dialogue with shareholders
and other relevant stakeholders.
The Company maintains a regular dialogue with key
stakeholders including shareholders to enable interested
parties to make informed decisions about the Group and
its performance.
Historical annual reports and notices of general meetings
can be found in the Financial Reports section of the
Group’s website.
The Board discloses the results of Annual General
Meetings and these can be found in the Regulatory News
section of the website.
The Audit Committee meets at least twice a year,
although the Company’s Auditors or any member of the
Audit Committee may request a meeting at any time,
should they consider that one is necessary. The role of the
Audit Committee is to make recommendations to the
directors and shareholders, in relation to the
appointment, re-appointment and removal of the
Company’s External Auditors and to approve their
remuneration and terms of engagement. Prior to the
commencement of each annual or interim audit, the
Audit Committee will discuss and agree the nature and
scope of the audit with the External Auditors and in
discussion with them, will monitor the integrity of the
financial statements of the Group and approve any
formal announcements relating to the Company’s
financial performance.
The Audit Committee develops and implements policies
on the engagement of the External Auditors to supply
non-audit services and will report to the Directors,
52
Corporate Governance Report continued
identifying any matters where the Audit Committee
considers that action or improvement is needed, making
recommendations as to the steps to be taken.
The Audit Committee is authorised by the Board to
investigate any activity within its terms of reference and
may seek information it requires from any employee of
the Company. The Audit Committee may seek outside
professional advice at the cost of the Company, in order
to secure any relevant experience or expertise it
considers necessary to fulfil its duties.
The terms of reference of the Remuneration Committee
and its report can be found in Remuneration Report on
pages 55 and 56.
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Our Section 172 Statement
The directors of The Panoply and all those of all UK
Companies must act in accordance with a set of general
duties. Section 172 of the Companies Act requires
Directors to take into consideration the interests of
stakeholders in their decision making and is summarised
as follows:
A Director of a company must act in a way they consider,
in good faith, would most likely to promote the success of
the Company for the benefit of its shareholders as a
whole and, in doing so have regard (amongst other
matters) to:
The likely consequences of any decisions in the
long-term
The interests of the Company’s employees
The need to foster the Company’s business
relationships with suppliers, customers and others
The impact of the Company’s operations on the
community and environment
The desirability of the Company maintaining a
reputation for the high standards of business
conduct, and
•
•
•
•
•
•
The Following sections summarise how the Directors’ fulfil
their duties and responsibilities:
Risk Management:
The Group is affected by a number of risks and
uncertainties, not all of which are wholly within its control
as they relate to the wide macroeconomic and legislative
environment within which the Group operates. Therefore
it is vital that we effectively identify, evaluate, manage
and mitigate the risks we face, and that we continue to
evolve our approach to risk management.
For details of our principal risks and uncertainties, and
how we manage our risk environment, please see
pages 40 to 43 and our Risk Committee report on
pages 57 and 58.
Our People:
We understand how important it is to have a workforce
with different skills, perspectives and experiences. Across
the Group, we are making sure that our workplaces are
inclusive and supportive enough to attract the diversity of
talent that will enable us to grow.
For further details on our people, please see pages 28 to
31.
The need to act fairly between shareholders of the
Company
Our Planet:
This section serves as our Section 172 statement.
The Board considers, both individually and together, that
they have acted in the way they consider, in good faith,
would be most likely to promote the success of the
Company for the benefit of its shareowners as a whole
(having regard to the stakeholders and matters set out in
Section 172(i)(a-f) of the Act in the decisions taken during
the year ended 31 March 2020).
Our vision is to create a Panoply of experts, opinions,
ideas and cultures that can deliver genuine change
within our world to maximise the opportunities of the
21st century.
The Board recognises that engagement with the
Company’s stakeholders is critical to the success of the
business in realising this vision. The Directors continue to
have regards to the interest of our people and the
Company’s other stakeholders, including the impact of its
activities on the community, the environment and the
Company’s reputation when making decisions. We
recognise that promoting the long-term sustainability
and success of the Company is intertwined with creating
value for, and engagement with, our stakeholders. It
should therefore be at the core of our business.
Engagement with stakeholders is not new and has been
a part of the business since its inception, but the
obligation to include the Section 172 statement presents
an opportunity to illustrate to you how your Board
engages with stakeholders and how this has impacted
on your Company’s decisions and strategies.
The environmental impact of the fourth industrial
revolution has been vastly underestimated. With a carbon
footprint today equal to the aviation industry, we want to
raise awareness of this and work with our industry to
minimise its impact.
We believe that there is a better, more sustainable way to
do business. We’re investing in training and research to
build teams of technology experts within the Group who
deeply understand the environmental impact of digital
products and are able to design and advocate for better
alternatives.
For further details on how we interact and protect our
planet, please see pages 32 to 35.
Our Communities:
During periods of upheaval, communities face the threat
of being left behind, we want to ensure those
communities thrive and have a meaningful stake in the
future. Our work is transforming the way that businesses
operate. We want to make sure that we are equipping
people with the skills they will need to thrive in the future
workplace.
Our community investment work is focused on
empowering vulnerable communities through technology
and providing access to employment for diverse talent.
For further details on how we interact with our
communities, please see pages 36 to 39.
54
Our Section 172 Statement continued
Our Shareholders:
The Board is actively committed to engaging with our
shareholders, as we recognise the importance of
continuing effective dialogue, whether with major
institutional investors, private or employee shareholders. It
is important to us that shareholders understand our
strategy and objectives, so these must be explained
clearly. Any feedback received is collated with any issues
or questions identified being properly considered.
For further details on how we engage with our
shareholders, please see page 49.
Remuneration Report
Remuneration Committee
The Remuneration Committee determines, on behalf of the Board, the Group’s policy for executive remuneration and
the individual remuneration packages for the Executive Directors. In setting the Group’s remuneration policy, the
Remuneration Committee considers a number of factors, including the following:
•
•
•
salaries and benefits available to Executive Directors of comparable companies;
the need to attract and retain Executives of an appropriate calibre; and
the need to ensure continued commitment of Executives to the Group’s success through appropriate incentive
schemes.
The Committee meets at least once a year.
Remuneration of Executive Directors
The remuneration packages comprise the following components:
•
•
•
•
Base salary
The Remuneration Committee sets the base salary by reference to responsibilities and the skills, knowledge and
experience of the individual.
Bonus scheme and other benefits
There is no annual bonus scheme or other benefits in place currently.
Share Incentive Schemes
An EMI and unapproved option scheme were implemented in the prior period and options were awarded to each
of the Executive Directors.
Other benefits
Private medical and life cover for employees including the Directors have been provided in the current year.
Remuneration of Non-Executive Directors
The fees paid to the Non-Executive Directors are determined by the Board. They are not entitled to receive any bonus or
other benefits but did receive unapproved Share-based payments at the time of their appointment. Non-Executive
Directors’ letters of appointment are on a three-month rolling basis.
Directors’ remuneration
Details of individual Directors’ emoluments for the year (excluding employer’s National Insurance contributions) are as
follows:
Salary
£’000
Pension
£’000
Share
Option
£’000
Other
benefits
£’000
Non-Executive
Mark Smith (appointed 18 October 2018)
Christopher Sweetland (appointed 18 October 2018)
Isabel Kelly (appointed 18 October 2018)
Executive
Neal Gandhi (appointed 20 December 2016)
Oliver Rigby (appointed 20 December 2016)
Total
50
35
30
259
141
515
–
–
–
18
20
38
4
3
2
17
17
43
–
–
–
1
2
3
2020
total
£’000
54
38
32
295
180
599
2019
total
£’000
21
14
12
148
150
345
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Remuneration Report continued
Directors’ interests in shares
The interests of the Directors in the Ordinary Shares of the Company at 31 March 2020.
Name of Director
Christopher Paul Sweetland
Isabel Kelly
Mark William Smith
Neal Gandhi
Oliver Rigby
31-Mar
2020
Number
–
–
–
9,306,885
5,066,107
14,372,992
31-Mar
2019
Number
30,000
–
122,000
9,786,884
5,124,930
15,063,814
Directors’ interests in Share-based payments
The directors have been granted options over the shares of the Company as follows:
Granted
in 2019
Lapsed during
the year
Type
31-Mar-19 &
31-Mar-20
Exercise
price
Date when
Exercisable
Christopher Paul Sweetland
Christopher Paul Sweetland
Christopher Paul Sweetland
Isabel Jane Kelly
Isabel Jane Kelly
Isabel Jane Kelly
Mark William Smith
Mark William Smith
Mark William Smith
Neal Gandhi
Neal Gandhi
Neal Gandhi
Oliver Rigby
Oliver Rigby
Oliver Rigby
By order of the Board
20,300
20,300
20,302
20,300
20,300
20,302
33,834
33,834
33,836
135,338
135,338
135,340
135,338
135,338
135,340
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Isabel Kelly
Chairman, Remuneration Committee
18 August 2020
Unapproved scheme
Unapproved scheme
Unapproved scheme
Unapproved scheme
Unapproved scheme
Unapproved scheme
Unapproved scheme
Unapproved scheme
Unapproved scheme
EMI scheme
EMI scheme
EMI scheme
EMI scheme
EMI scheme
EMI scheme
20,300
20,300
20,302
20,300
20,300
20,302
33,834
33,834
33,836
135,338
135,338
135,340
135,338
135,338
135.340
74p
74p
74p
74p
74p
74p
74p
74p
74p
74p
74p
74p
74p
74p
74p
31/03/21
31/03/22
31/03/23
31/03/21
31/03/22
31/03/23
31/03/21
31/03/22
31/03/23
31/03/21
31/03/22
31/03/23
31/03/21
31/03/22
31/03/23
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Audit, Risk and Aim Rules Compliance Committee
During the year The Audit, Risk and AIM Rules Compliance
Committee (“the Committee”) comprised Christopher
Sweetland and Mark Smith. Both members are
independent Non-Executive Directors and details of their
skills, experience and qualifications set out on pages 46
and 47. The Chief Financial Officer and the Group
Financial Controller attend the meetings. The Committee
will also invite divisional leaders and specialists relevant
and external auditors to the Committee’s agenda if
appropriate.
Main responsibilities
The terms of reference for the Committee are based on
the Guidance on Audit Committees issued by the
Financial Reporting Council. The main responsibilities of
the Committee are summarised below:
•
•
•
•
•
review the integrity of the financial statements of
the Group and any formal announcements relating
to the Group’s financial performance
review the Group’s internal controls established to
identify, assess, manage and monitor risks, and
receive reports from management on the
effectiveness of the systems it has established, and
the conclusions of any testing performed by the
external auditor
make recommendations to the Board in relation to
the appointment of the external auditor and
approve the remuneration and terms of
engagement of the external auditor
assess the independence, objectivity and
effectiveness of the external auditor and develop
and implement policy on the engagement of the
external auditor to supply non-audit services
review the integrity of the statement in the Annual
Report on being fair, balanced and understandable,
as required under the Companies Act 2006
Summary of activities in 2020
In 2020, the Committee’s core work programme focused
on a number of significant issues and other accounting
judgements where the Committee believed the highest
level of judgement was required and with the highest
potential impact on the Group’s financial statements.
There were four meetings held in the year from the 1 April
2019 to the 31 March 2020 which included meeting with
the external auditors to discuss their audit planning
document and their audit findings report.
Financial reporting
The Committee reviewed and evaluated the
appropriateness of the interim and annual financial
statements (including the announcements thereof to the
London Stock Exchange) with management and the
annual financial statement with the external auditor,
including:
•
at the Board’s request, the Audit Committee
determines whether the Annual Report and
Financial Statements, taken as a whole, is fair,
balanced and understandable and provides the
information necessary for shareholders to assess
the Group’s position and performance, business
model and strategy
the clarity of disclosures and compliance with
financial reporting standards and relevant financial
and governance
discussing the critical accounting policies and use
of assumptions and estimates, as noted on
pages 85 to 87 of this Annual Report and Financial
Statements, and concluding that the estimates,
judgements and assumptions used were
reasonable based on the information available and
had been used appropriately in applying the
Group’s accounting policies
reviewing the going concern and viability of the
Group over the longer term as part of its
assessment of the Group’s risks
•
•
•
The Committee is able to question management at both
Group and business unit levels to gain further insight into
the issues addressed in these reports. The key significant
financial reporting issues and other accounting
judgements are set out below and further explained on
pages 85 to 87 under section critical accounting
judgements and key sources of estimation uncertainty.
Significant accounting judgements
Revenue and margin recognition
•
The Committee discuss whether revenue
recognition within the Group is aligned to IFRS 15.
This includes finding out any challenges subsidiaries
may have in implementing IFRS 15 in their finance
framework and accounts.
•
Carrying value of goodwill and other intangibles
The judgement largely relates to the assumptions
underlying the value in use of the cash-generating
units, primarily the macroeconomic assumptions
(such as discount rates) underpinning the valuation
process. The Committee received reports from
management setting out the allocation of the
purchase price between goodwill and other
intangibles. The Committee also received reports
from management outlining the impairment model
and the assumptions used.
•
Carrying value of investments
The judgement largely relates to the assumptions
underlying the value of investments held by the
parent company. The Committee received reports
from management indicating their assessment of
the potential impairment of investments including
consideration of triggering events, the calculation of
value in use and discount rates and sensitivity
analysis.
•
Cash generating units (CGUs)
IFRS 3 Business combination requires management
to assess the CGU as part of purchase price
allocation process. The Board uses their judgement
58
Audit, Risk and Aim Rules Compliance Committee continued
in deciding the number of CGU per entity acquired
during the year. The Committee has reviewed
managements judgement regarding the
assessment of CGUs.
•
Fair value of contingent consideration
The Committee has reviewed the assumptions used
to calculate the fair value of contingent
consideration. This primarily includes a review and
challenge of any EBITDA adjustments used in the
calculation of valuations.
•
Share-based payments
The Committee has reviewed the change in
valuation model used in estimating the fair value of
Share-based payments in the year. The Committee
received reports from external advisors which
concluded that the Monte Carlo and Binomial
methods were more suitable than the Black Scholes
model given the vesting conditions attached to the
share-based payment arrangements. The
Committee reviewed management reports that
outlined the assumptions used.
•
Going concern
In order to satisfy itself that the Group has adequate
resources to continue in operation for the
foreseeable future and that there are no material
uncertainties that could lead to significant doubt as
to the Group’s ability to continue as a going
concern, the Committee considered the Group’s
budgets and forecasts, cash position (both existing
and projected), bank facilities and covenants.
External auditor independence and
effectiveness
The Committee carries out a formal review each year, to
assess the independence and effectiveness of the
external auditor, Nexia Smith and Williamson (NSW). The
Committee has satisfied itself as to NSW’s independence.
Christopher Sweetland
Chairman of the Audit, Risk and AIM Rules and
Compliance Committee
18 August 2020
59
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E
The names and biographical details of the current
Directors of the Company are given on pages 46 and 47.
During the year under review, all Non-Executive Directors
were independent of management and any business or
other relationships which could interfere with the exercise
of their independent judgement.
Details of Directors’ interests in the Company’s shares,
service contracts and remuneration are set out in the
Directors’ Remuneration Report on pages 55 and 56.
Post-balance sheet events
Details of post-balance sheet events are given in Note 27.
Political donation
The Group has not made any political donations during
the year.
Financial risk management and objectives
Details of financial risk management and objectives are
contained in Note 25 to the Consolidated Financial
Statements.
Awareness of relevant audit information
Each of the Directors who held office at the date of
approval of this Directors’ Report confirms that, so far as
they are aware:
•
•
there is no relevant audit information of which the
Auditor is unaware; and
the Directors have taken all the steps they ought to
have taken to make themselves aware of any
relevant audit information and to establish that the
Auditor is aware of that information.
Annual General Meeting
The Annual General Meeting will be held in London on
14 September 2020 - at 09:00am. Notice of the Annual
General Meeting will be sent to shareholders on
20 August 2020.
Independent Auditor
The auditors are required to be reappointed annually at
the AGM.
By order of the Board
Oliver Rigby
Company Secretary
18 August 2020
Directors’ Report
The Directors present their Annual Report on the affairs of
the Group, together with the Financial Statements and
Auditor’s report, for the year ended 31 March 2020.
Principal activities
The principal activity of the Group is the provision of
digitally native technology services to clients within the
commercial, government and non-government
organisations (NGO) sectors.
General information
The Panoply Holdings Plc is a public limited company
listed on the AIM market of the London Stock Exchange on
4 December 2018 and is incorporated and domiciled in
the UK. The Company’s registered number is 10533096.
Corporate governance
The statement on corporate governance on pages 48 to
52 is included in the Directors’ Report by way of reference.
Results and dividends
The Group’s loss on ordinary activities after taxation was
£3.0m (2019: loss £1.7m). The audited financial statements
of the Group are set out on pages 70 to 117. The Directors
do not propose a dividend for the year ended 31 March
2020 (2019: £Nil).
Strategic review
The information satisfying the strategic review
requirements is set out in this report on pages 3 to 43.
Going concern
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out on pages 3 to 25. The financial
position of the Group, its billings, gross profit and
profitability are described on pages 24 and 25. Details of
the key risks and uncertainties in the business, including
the operational impact of Covid-19 and expected impact
on the economy, along with the mitigation has been
presented in the risks and uncertainties is presented on
pages 40 to 43.
Having considered the Group’s cash flows, liquidity
position and borrowing facilities, and after reviewing the
budgets and cash projections for the next twelve months
and beyond, the Directors believe that the Group and the
Company have adequate resources to continue
operations for the foreseeable future and for this reason
they continue to adopt the going concern basis in
preparing the financial statements.
Directors
The present membership of the Board is as follows:
Mark Smith, Non-Executive Chairman Chris Sweetland,
Non-Executive Director Isabel Kelly, Non-Executive Director
Oliver Rigby, Chief Financial Officer, Neal Gandhi, Chief
Executive Officer.
60
Statement of Directors Responsibilities
The Directors are responsible for preparing the Annual
Report and the Financial Statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have elected to prepare the Group and
Company financial statements in accordance with
applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and,
as regards the Company financial statements, as applied
in accordance with the provisions of the Companies Act
2006. Under company law the Directors must not approve
the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of the Group and of the profit or loss of the
Group for that period. In preparing these financial
statements, the Directors are required to:
•
•
•
•
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that
are reasonable and prudent;
state whether applicable IFRSs and UK accounting
standards have been followed, subject to any
material departures disclosed and explained in the
financial statements; and
prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Group’s transactions, disclose with reasonable
accuracy at any time the financial position of the
Company and the Group and enable them to ensure that
the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the
assets of the Company and the Group and hence for
taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for ensuring that the
Directors’ Report and the Strategic Report, in addition to
any other information included in the Annual Report and
Financial Statements, is prepared in accordance with
United Kingdom company law. They are also responsible
for ensuring that the Annual Report & Financial
Statements include information required by the AIM Rules.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in the
United Kingdom governing the preparation and
dissemination of the financial statements and other
information included in annual reports may differ from
legislation in other jurisdictions.
61
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[Intentionally left blank]
Financial
Statements
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64
Independent Auditor’s Report to the members of
The Panoply Holdings plc
Opinion
We have audited the financial statements of The Panoply Holdings plc (the ‘Company’) and its subsidiaries (the ‘Group’)
for the year ended 31 March 2020 which comprise the Consolidated Income Statement, the Consolidated and
Company Statements of Financial Position, the Consolidated and Company Statements of Changes in Equity, the
Consolidated and Company Statements of Cash Flows and the notes to the financial statements, including a summary
of significant accounting policies. The financial reporting framework that has been applied in their preparation is
applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as
regards the Company financial statements, as applied in accordance with the provisions of the Companies Act 2006.
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at 31
March 2020 and of the Group’s loss for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union;
the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the
European Union and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the
financial statements section of our report. We are independent of the Group and Company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to SME listed entities, and we have fulfilled our other ethical responsibilities in accordance with
these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you
where:
•
•
the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the Directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the Group’s or the Company’s ability to continue to adopt the going concern basis of
accounting for a period of at least twelve months from the date when the financial statements are authorised for
issue.
Emphasis of matter – impact of Covid-19
We draw attention to note 1.1 of the financial statements which describes the impact of Covid-19 on the Group and the
Company. Our opinion is not modified in respect of this matter.
65
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Key audit matters
We identified the key audit matters described below as those which were most significant in the audit of the financial
statements of the current period. Key audit matters include the most significant assessed risks of material
misstatement, including those risks that had the greatest effect on our overall audit strategy, the allocation of resources
in the audit and the direction of the efforts of the audit team.
In addressing these matters, we have performed the procedures below which were designed to address the matters in
the context of the financial statements as a whole and in forming our opinion thereon. Consequently, we do not provide
a separate opinion on these individual matters.
Key audit matter
Description of risk
Business combinations
accounting – Group (See
Note 8)
The Group has a business model based
on acquiring business and during the
year, two acquisitions have taken place.
There is a high degree of judgments
and assumptions involved to perform
valuations of separately identifiable
intangible assets arising from the
acquisition of a business.
There is a risk that the values and
allocations of intangible assets and
goodwill recognised are not in
accordance with International Financial
Reporting Standard (IFRS) 3 ‘Business
combinations’.
How the matter was addressed in
the audit
We challenged management on the identification
of intangible assets and the inputs and
assumptions used in the purchase price allocation
to determine the value of the identifiable assets
and liabilities:
As part of our procedures we:
•
•
•
•
•
•
•
•
Performed an assessment of the accounting
for acquisitions in the year to check if it was in
accordance with IFRS 3.
Obtained the business combination workings
for each acquisition and checked the
mathematical accuracy of these, obtaining
support for any judgements used by
management.
Agreed the calculation of residual goodwill
based on the consideration payable and
identifiable assets and liabilities.
Used our internal valuations team to assess
the valuation models prepared in respect of
each acquisition, including the basis and
methodology adopted for identifying
separate intangibles distinct from goodwill
and the fair value of contingent consideration
recognised.
Considered the appropriateness of the useful
lives applied to the intangible assets
identified.
Considered the overall valuation of intangible
assets identified relative to similar companies
in the industry.
Reviewed acquisition costs to ensure these
have been expensed within the Income
Statement in line with IFRS 3.
Checked the appropriateness of discount
factors applied.
66
Independent Auditor’s Report to the members of
The Panoply Holdings plc continued
Key audit matter
Description of risk
Fair Value of contingent
consideration – Group and
Company (See Note 20)
The Share Purchase Agreements (SPAs)
contain clauses for contingent
consideration and clawback provisions
based on the acquired entities’
performance over the first two to four
years of acquisition.
Management are required to apply
judgement to determine the fair value of
the consideration payable, in accordance
with IFRS 3.
Revenue – Group (See
Note 3)
The Group’s activities include the
provision of business IT management,
design, implementation and support
services. These services have multiple
deliverables and can be a fixed or
variable price. A number of contracts are
expected to span the year end and the
acquisition dates.
Judgement will be involved in determining
the levels of revenue to be recognised in
line with IFRS 15 ‘Revenue recognition’,
particularly for contracts which span the
year end and acquisition dates.
How the matter was addressed in
the audit
We challenged the inputs and assumptions
used to determine the fair value of the
contingent consideration payable at acquisition
and subsequently at the reporting date.
As part of our procedures we:
•
•
•
•
•
Reviewed the Share purchase agreements
(“SPA’s”) to obtain an understanding of
consideration payable and agreed this
back to the supporting business
combination workings.
Reviewed and challenged management’s
future forecasts of revenues and results
which underpinned how the overall
contingent consideration was calculated.
Compared historical forecasts against
actual results and corroborated
management’s assertions where
reasonably practicable.
Confirmed the appropriateness of
discount factors applied.
Assessed if any of the contingent
consideration should be treated as
employee benefits given that some of the
vendors have been retained in the
business.
As part of our procedures we:
•
•
•
•
Gained an understanding of the design
and implementation of controls over
revenue recognition which have been
designed by the Group to prevent and
detect fraud and errors in revenue
recognition.
Performed tests of detail on the different
revenue streams testing from the nominal
ledger and separately from contracts.
Reviewed terms of major contracts and
assessed the accounting for each revenue
stream for compliance with IFRS 15.
Performed cut off testing around the
subsidiary acquisition dates and the year
end to determine if revenue is recognised
in the correct period.
67
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Key audit matter
Description of risk
Carrying value of goodwill –
Group (See Note 9)
The Group has a significant carrying
value of goodwill arising on the
acquisition of businesses in the prior year
and current year.
An annual impairment review is required
to assess the carrying value of goodwill
for each cash generating unit (CGU).
Management uses a discounted cash
flow model and compares the resulting
valuation to the carrying value of goodwill
for each CGU to assess if any impairment
is required.
There are significant judgements and
assumptions, such as growth rates and
discount factors, used by management in
determining the valuation.
How the matter was addressed in
the audit
We reviewed management’s assessment of
impairment of goodwill. We challenged
assumptions and assertions made by
management in their assessment and
considered whether the presence of
impairment indicators should result in an
impairment charge.
As part of our audit procedures we:
•
•
•
•
•
Obtained the discounted cash flow
models and the underlying valuations for
each cash generating unit and checked
the mathematical accuracy of these.
Reviewed the basis of support for
judgements and assumptions used by
management.
Reviewed and challenged management’s
forecasts of future results which underpins
how the valuations are calculated.
Compared historical forecasts against
actual results and corroborated
management’s assertions where
reasonably practicable.
Used our internal valuations team to
assess the valuation models and the
appropriateness of the discount rates
applied.
Performed sensitivity analysis on key
assumptions used in the calculations.
Carrying value of
investments in subsidiaries –
Company (See Note 11)
The Company has significant balances
relating to investments in subsidiaries.
The investments relate to the acquisition
of subsidiaries in prior year and current
year.
The carrying value of the investments in
subsidiaries is also underpinned by the
future financial viability of the subsidiaries.
We reviewed management’s assessment of
impairment of the carrying value of investments
in subsidiaries. We challenged assumptions and
assertions made by management in their
assessment and considered whether the
presence of impairment indicators should result
in an impairment charge.
As part of our audit procedures we:
•
•
•
•
Obtained the discounted cash flow
models and the underlying valuations for
each investment in subsidiary and
checked the mathematical accuracy of
these. Reviewed the basis of support for
judgements and assumptions used by
management.
Considered the Company’s market
capitalisation value as at 31 March 2020
against the carrying value of the
investments in subsidiaries for indicator of
impairment.
Reviewed and challenged management’s
forecasted future results of the
subsidiaries, which underpins how the
valuations are calculated, and
corroborated management’s assertions
where reasonably practicable.
Performed sensitivity analysis on key
assumptions used in the calculations.
68
Independent Auditor’s Report to the members of
The Panoply Holdings plc continued
Materiality
The materiality for the Group financial statements as a whole was set at £460,000. This has been determined with
reference to the benchmark of the Group's revenue, which we consider to be one of the principal considerations for
members of the Company in assessing the performance of the Group. Materiality represents 1.5% of revenue as
presented on the face of the Consolidated Income Statement.
The materiality for the Company financial statements as a whole was set at £299,000. This has been determined with
reference to the benchmark of the Company’s assets, which we consider to be an appropriate measure as the
Company exists only as a holding company for the Group and carries on no trade in its own right. Materiality represents
0.5% of total assets as presented on the face of the Company’s Statement of Financial Position.
An overview of the scope of our audit
Of the Group's eighteen reporting components, nine were subject to audit for group reporting purposes. The nine
components covered: 95% of group revenue, 97% of group loss before tax, 97% of group assets and 95% of group
liabilities.
For the remaining components, we performed analysis at a group level to re-examine our assessment that there were
no significant risks of material misstatement within these.
One of the nine components and two of the nine components subject to audit for group reporting purposes were
based in Norway and Bulgaria respectively and its audits were carried out by component auditors based in Norway and
Bulgaria. We held a telephone meeting with the component auditors in Norway and Bulgaria as part of planning and
discussed the component auditors’ risk assessments and directed their planned audit approach. In addition to these
meeting, we sent detailed instructions to the component auditors’ audit teams and reviewed their key audit working
papers.
Other information
The other information comprises the information included in the Annual Report and Financial Statements, other than the
financial statements and our auditor’s report thereon. The Directors are responsible for the other information. Our
opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Company and their environment obtained in the
course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to
you if, in our opinion:
•
•
•
•
adequate accounting records have not been kept by the Company, or returns adequate for our audit have not
been received from branches not visited by us; or
the Company financial statements are not in agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 60, the Directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such
internal controls as the Directors determine is necessary to enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as
a body, for our audit work, for this report, or for the opinions we have formed.
Stephen Drew
Senior Statutory Auditor, for and on behalf of
Nexia Smith & Williamson
Statutory Auditor
Chartered Accountants
25 Moorgate
London
EC2R 6AY
18 August 2020
69
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70
Consolidated Income Statement
for the year ended 31 March 2020
Revenue
Cost of sales
Gross profit
Administrative expenses
Other income
Operating loss
Adjusted EBITDA
Amortisation of intangible assets
Depreciation
Loss on fair value movement contingent consideration
Share-based payments
Costs relating to business restructuring
Costs directly attributable to business combination and listing
Operating loss
Finance income
Finance costs
Net finance expense
Loss before taxation
Taxation
Loss for the period
Other comprehensive income
Exchange differences on translation of foreign operations
Total comprehensive loss for the period
Loss per share
Basic and fully diluted
Note
3
2020
£’000
31,533
(19,526)
12,007
2019
£’000
8,152
(4,811)
3,341
(15,149)
(4,992)
184
24
4
(2,958)
(1,627)
10
12,13
20
5
4
4
3,846
(1,583)
(737)
(3,764)
(129)
(155)
(436)
(2,958)
7
(189)
(182)
402
(339)
(45)
(54)
(239)
–
(1,352)
(1,627)
5
(14)
(9)
(3,140)
(1,636)
6
96
(41)
(3,044)
(1,677)
104
(2,940)
(38)
(1,715)
7
(6.32)p
(9.22)p
The accompanying accounting policies and notes on pages 77 to 117 are an integral part of these Consolidated
Financial Statements.
71
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Consolidated Statement of Financial Position
as at 31 March 2020
Non-current assets
Goodwill
Intangible assets
Property, plant and equipment
Right-of-use assets
Deferred tax asset
Total non-current assets
Current assets
Trade and other receivables
Contract asset
Other taxes and social security costs
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Other taxes and social security costs
Deferred and contingent consideration
Lease liabilities
Borrowings
Contract liability
Total current liabilities
Non-current liabilities
Deferred tax liability
Deferred and contingent consideration
Borrowings
Provisions – Dilapidations
Lease liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Other reserves
Retained earnings
Total equity
31 March
2020
£’000
31 March
2019
£’000
Note
9
10
12
13
22
14
18
19
15
16
19
20
13
17
18
22
20
17
13
21
21
21
21
35,672
20,585
8,591
290
1,045
–
5,214
280
–
14
45,598
26,093
8,590
1,413
206
4,614
14,823
60,421
(4,343)
(3,001)
(10,685)
(609)
(29)
(1,454)
(20,121)
(1,623)
(5,998)
(5,000)
(23)
(390)
(13,034)
(33,155)
27,266
551
31,477
5
434
(5,201)
27,266
3,918
232
–
5,650
9,800
35,893
(2,210)
(1,539)
(3,270)
–
–
(406)
(7,425)
(925)
(8,292)
–
–
–
(9,217)
(16,642)
19,251
423
20,779
5
201
(2,157)
19,251
These financial statements were approved and authorised for issue by the Board of Directors on 18 August 2020. Signed
on behalf of the Board of Directors by
Oliver Rigby
Director
Neal Gandhi
Director
The accompanying accounting policies and notes on pages 77 to 117 form an integral part of these financial
statements.
72
Consolidated Statement of Changes in Equity
for the year ended 31 March 2020
Share
Capital
premium redemption
£’000
£’000
At 1 April 2018
Loss for the period
Exchange differences on
translation of foreign
operations
Transactions with owners
Shares cancellation
Shares issued
Share issue costs
Share-based payments
Share
capital
£’000
–
–
–
(5)
428
–
–
490
–
–
–
20,543
(254)
–
Equity at 31 March 2019
423
20,779
–
–
–
5
–
–
–
5
At 1 April 2019
Loss for the period
Exchange differences on
translation of foreign
operations
Transactions with owners
Shares issued
Share-based payments
Equity at 31 March 2020
Share
capital
£’000
423
–
–
128
–
551
Share
Capital
premium redemption
£’000
£’000
20,779
–
–
10,698
–
31,477
5
–
–
–
–
5
Foreign
exchange
reserve
£’000
Share
option
reserve
£’000
–
–
(38)
–
–
–
–
(38)
Foreign
exchange
reserve
£’000
(38)
–
104
–
–
66
–
–
–
–
–
–
239
239
Share
option
reserve
£’000
239
–
–
–
129
368
Retained
earnings
£’000
(480)
(1,677)
–
–
–
–
–
Total
£’000
10
(1,677)
(38)
–
20,971
(254)
239
(2,157)
19,251
Retained
earnings
£’000
(2,157)
(3,044)
–
–
–
Total
£’000
19,251
(3,044)
104
10,826
129
(5,201)
27,266
The accompanying accounting policies and notes on pages 77 to 117 form an integral part of these financial
statements.
73
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&
A
C
C
O
U
N
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I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Consolidated Statement of Cash Flows
for the year ended 31 March 2020
Cash flows from operating activities
Loss before taxation
Adjustments for:
Depreciation
Amortisation
Share-based payments
Loss on disposal of property, plant and equipment
Foreign exchange losses
Finance expense
Finance income
Movement in fair value contingent consideration
Working capital adjustments:
(Increase)/decrease in trade and other receivables
Increase/(decrease) in trade payables, accruals and contract liability
Net cash generated from/(used in) operations
Tax (paid)/received
Cash flows from investing activities
Acquisition of subsidiaries (paid)
Acquisition of subsidiary cash inherited from acquisition
Deferred consideration paid
Purchase of property, plant and equipment
Additions to intangibles
Interest received
Note
2020
£’000
2019
£’000
(3,140)
(1,636)
12
10
5
20
8
8
20
12
10
737
1,583
129
–
104
189
(7)
3,764
3,359
(2,586)
1,978
2,751
(44)
(9,587)
3,711
(1,088)
(131)
(196)
8
45
339
239
2
7
14
(5)
54
(941)
384
(650)
(1,207)
27
(5,613)
6,978
–
(33)
–
5
Net cash (used in)/generated from investing activities
(7,283)
1,337
Cash flows from financing activities
Issue of ordinary share capital
Cost relating to the issue of shares
New borrowings
Costs relating to the issue of new borrowings
Repayment of borrowings
Payment of lease liabilities
Finance costs
Net cash generated from financing activities
Net (decrease)/increase in cash
Cash at bank and in hand at beginning of period
Cash at bank and in hand at end of period
Comprising:
Cash at bank and in hand
–
–
5,000
(148)
(507)
(629)
(176)
3,540
(1,036)
5,650
4,614
5,659
(254)
–
–
(24)
–
(14)
5,367
5,524
126
5,650
4,614
5,650
15
15
The accompanying accounting policies and notes on pages 77 to 117 are an integral part of these Consolidated
Financial Statements.
74
Company Statement of Financial Position
for the year ended 31 March 2020
Non-current assets
Investments
Property, plant and equipment
Total non-current assets
Current assets
Trade and other receivables
Other taxes and social security costs
Amounts owed by Group undertakings
Cash and cash equivalents
Total current assets
Total assets
Current liabilities
Trade and other payables
Other taxes and social security costs
Deferred and contingent consideration
Amounts owed to Group undertakings
Total current liabilities
Non-current liabilities
Deferred and contingent consideration
Borrowings
Total non-current liabilities
Total liabilities
Net assets
Equity
Share capital
Share premium account
Capital redemption reserve
Other reserves
Retained earnings
Total equity
31 March
2020
£’000
31 March
2019
£’000
Note
11
54,952
32,499
1
–
54,953
32,499
14
19
23
15
16
19
20
23
20
17
21
21
21
21
183
–
1,337
147
1,667
56,620
(494)
(157)
(10,547)
(3,227)
(14,425)
(5,998)
(5,000)
(10,998)
(25,423)
31,197
551
31,477
5
368
(1,204)
31,197
21
137
628
2,762
3,548
36,047
(310)
(19)
(3,270)
–
(3,599)
(8,292)
–
(8,292)
(11,891)
24,156
423
20,779
5
239
2,710
24,156
The Panoply Holdings Plc has elected to take the exemption under section 408 of the Companies Act 2006 from
presenting the company profit and loss account.
The Company’s loss for the year ended 31 March 2020 was £3.9m (2019: £3.2m profit).
The financial statements were approved by the Board of Directors on 18 August 2020 and were signed on its behalf by:
Oliver Rigby
Director
Neal Gandhi
Director
The accompanying accounting policies and notes on pages 77 to 117 form an integral part of these financial
statements.
Company Statement of Changes in Equity
for the year ended 31 March 2020
At 1 April 2018
Profit and total comprehensive
income for the period
Transactions with owners
Share cancellation
Shares issued
Share issue costs
Share-based payments
Equity at 31 March 2019
At 1 April 2019
Loss and total comprehensive
loss for the period
Transactions with owners
Shares issued
Share-based payments
Equity at 31 March 2020
Share
capital
£’000
–
–
(5)
428
–
–
Share
premium
£’000
490
–
–
20,543
(254)
–
423
20,779
Share
capital
£’000
423
Share
premium
£’000
20,779
–
128
–
551
–
10,698
–
31,477
Capital
redemption
reserve
£’000
Share
option
reserve
£’000
–
–
5
–
–
–
5
Capital
redemption
reserve
£’000
5
–
–
–
5
–
–
–
–
–
239
239
Share
option
reserve
£’000
239
–
–
129
368
Retained
earnings
£’000
(480)
Total
£’000
10
3,190
3,190
–
–
–
–
–
20,971
(254)
239
2,710
24,156
Retained
earnings
£’000
2,710
Total
£’000
24,156
(3,914)
(3,914)
–
–
(1,204)
10,826
129
31,197
The accompanying accounting policies and notes on pages 77 to 117 form an integral part of these financial
statements.
75
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0
2
0
A
N
N
U
A
L
R
E
P
O
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&
A
C
C
O
U
N
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I
F
I
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A
N
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A
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M
E
N
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S
76
Company Statement of Cash Flow
for the year ended 31 March 2020
Cash flows from operating activities
(Loss)/profit before taxation
Adjustments for:
Dividends received
Share-based payments
Impairment of intercompany loans
Finance expense
Movement in fair value contingent consideration
Working capital adjustments:
Increase in trade and other receivables
Increase in trade payables, accruals and contract liability
Net cash used in operations
Tax received/(paid)
Cash flows from investing activities
Acquisition of subsidiaries (paid)
Deferred consideration paid
Loans provided to subsidiary undertakings
Purchase of property, plant and equipment
Dividends received
Net cash used in investing activities
Cash flows from financing activities
Issue of ordinary share capital
Cost relating to the issue of shares
Proceeds from loan from subsidiary undertakings
New borrowings
Cost relating to the issue of new borrowings
Finance costs
Net cash generated from financing activities
Net (decrease)/increase in cash
Cash at bank and in hand at beginning of period
Cash at bank and in hand at end of period
Comprising:
Cash at bank and in hand
Note
2020
£’000
2019
£’000
5
20
8
20
15
(3,914)
3,190
(1,678)
(5,438)
129
450
120
3,764
(1,129)
(392)
322
(1,199)
173
–
3
54
(2,018)
(745)
172
(2,591)
–
–
(7,360)
(5,613)
(713)
(765)
(1)
1,678
(7,161)
–
–
1,000
5,000
(148)
(107)
5,745
(2,615)
2,762
147
–
–
–
5,438
(175)
5,659
(254)
–
–
–
(3)
5,402
2,636
126
2,762
147
2,762
The accompanying accounting policies and notes on pages 77 to 117 form an integral part of these financial
statements.
77
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Notes to the Consolidated Financial Statements
1. General information
The Panoply Holdings plc is a public limited company incorporated in England and Wales under the Companies Act
2006 with registered number 10533096. The Company’s shares are publicly traded on the AIM Market of the London
Stock Exchange.
The address of the registered office is 141-143 Shoreditch High Street, London, England, E1 6JE. The principal activity of the
Group is the provision of digitally native technology services to clients within the commercial, government and non-
government organisation (NGO) sectors.
The following subsidiaries included in the consolidated financial statements of The Panoply Holdings plc have taken
advantage of the exemption from audit conferred by s479A of the Companies Act 2006:
•
•
•
•
•
•
•
•
•
•
•
Manifesto Digital Limited (Registered number 7885631)
Not Binary Limited (Registered number 10686321)
iDisrupted Limited (Registered number 9496322)
Human Plus Limited (Registered number 11771564)
Questers Global Group Limited (Registered number 8116392)
Questers Resourcing Limited (Registered number 5640907)
Deeson Group Holdings Limited (Registered number 11418077)
Deeson Group Limited (Registered number 1073356)
Greenshoot Labs Limited (Registered number 10967409)
FutureGov Limited (Registered number 6472420)
US-Creates Limited (Registered number 5938821)
1.1
Basis of preparation
The consolidated financial statements have been prepared in accordance with applicable International Financial
Reporting Standards (IFRSs) as adopted by the EU and in accordance with the Companies Act 2006 and the AIM rules
for Companies. The measurement bases and principal accounting policies of the Group are set out below. These
policies have been consistently applied to all years presented unless otherwise stated.
As detailed further in the Directors’ Report, after reviewing the budgets and cash projections for the next twelve months
and beyond, the Directors believe that the Group and the Company have adequate resources to continue operations
for the foreseeable future and for this reason they have adopted a going concern basis in preparing these financial
statements.
In considering the business activities for the forthcoming 12 months, the directors have assessed the impact of principal
risks and uncertainties through scenario modelling. This includes an assessment of the impact of Covid-19 and the
probable resulting recession by assessing the impact on our services, sector, customers and through looking at trends
in the digital transformation sector. We have the ability to draw on a pre-agreed overdraft with HSBC of £1.5m and
strong cash reserves within the Group. Furthermore, trading for the 3 months to 30 June 2020 has been strong with a
cash balance of £8.7m as at the 30 June 2020.
After performing all the above assessments and through modelling scenarios, it is concluded that we would maintain
sufficient undrawn capacity and satisfy all borrowing facility covenants in the next 12 months.
The financial statements include the financial results of the subsidiaries listed in Note 11 for the full year and the following
subsidiaries from the date of acquisition. All subsidiaries are incorporated in the UK unless otherwise stated:
•
•
FutureGov Group consisting of the following entities – acquired on 11 June 2019
•
•
•
FutureGov Limited
FutureGov Australia Pty (incorporated in Australia)
US Creates Limited
Ameo Professional Services Limited – acquired on 10 March 2020
Further details of the above acquisitions can be found in Note 8 Business Combination.
1.2 New IFRS accounting standards adopted in the year
The following standards, amendments and interpretations are new and effective for the year ended 31 March 2020 and
have been adopted. Details of the impact of new standards on the Group’s consolidated results, assets or liabilities are
included in the notes to the accounts as indicated.
•
IFRS 16 Leases (effective 1 January 2019)
78
Notes to the Consolidated Financial Statements continued
On 1 April 2019, the Group adopted IFRS 16 Leases. The standard requires recognition of right-of-use assets and lease
liabilities, representing the obligation to make lease payments for almost all lease contracts. Depreciation of the right-
of-use assets and recognition of interest on the lease liabilities replaced amounts recognised as rent expense under
IAS 17 in the consolidated income statement. The Group adopted IFRS 16 on a modified retrospective basis. Accordingly,
prior year financial information has not been restated and will continue to be reported under IAS 17 Leases. The lease
liability has initially been measured at present value of the remaining lease payments, and the right-of-use asset has
been set equal to the lease liability adjusted for prepayments and accruals.
The following practical expedients have been taken on transition to IFRS 16:
•
•
•
•
•
For contracts in place at the date of initial application, the Group has elected to apply the definition of a lease
from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously not identified as lease
under IAS 17 and IFRIC 4.
The Group has elected not to include initial direct costs in the measurement of the right-of-use asset for
operating leases in existence at the date of initial application of IFRS 16, being 1 April 2019. At this date, the Group
has also elected to measure the right-of-use assets, at an amount equal to the lease liability adjusted for any
prepaid or accrued lease payments that existed at the date of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial application, the Group
has relied on its historic assessment as to whether leases were onerous immediately before the date of initial
application of IFRS 16.
On transition, for leases previously accounted for as operating leases with a remaining lease term of less than 12
months and for leases of low-value assets, the Group has applied the optional exemptions to not recognise right-
of-use assets but to account for the lease expense on a straight-line basis over the remaining lease term.
The Group has benefited from the use of hindsight for determining lease term when considering options to extend
and terminate leases.
The weighted average incremental borrowing rate applied to lease liabilities on initial recognition at 1 April 2019 was
3.25%. There was no material difference between the operating lease commitments disclosed at 31 March 2019 under
IAS 17, discounted using the incremental borrowing rate on initial recognition, and the lease liabilities recognised in the
Group statement of financial position at 1 April 2019.
The implementation of IFRS 16 resulted in:
•
•
•
•
A recognition of right-of-use assets and lease liabilities in relation to property leases and other leases recognised
in the consolidated statement of financial position as of 1 April 2019 of £1.5m.
a reduction in trade and other receivables (prepayments) of £61k, which is now recognised in the right-of-use
assets and lease liabilities; and
a decrease of net result for the 2020 reporting period of £31k, consisting of a decrease of lease expenses
recognised under operating expenses of £594k, an increase of depreciation recognised under net operating
expenses of £583k and an increase in interest expenses recognised under finance expenses of £42k.
New and amended IFRS accounting standards and interpretations issued but not yet effective
There are new IFRS accounting standards and amendments to existing accounting standards not yet effective in
the current year, but none of these are expected to have a material impact on the Group in the following financial
period.
1.3
Significant changes in the current reporting period
The financial position and performance of the Group was particularly affected by the following events and transactions
during the reporting period:
•
•
•
•
The acquisition of FutureGov Group in June 2019 (see note 8) which resulted in the recognition of goodwill (see
note 9) and other intangible assets (note 10).
The acquisition of Ameo Professional Services Limited in March 2020 (see note 8) which resulted in the recognition
of goodwill (see note 9) and other intangible assets (note 10).
The adoption of the new accounting standard for leases (see note 13).
A change in accounting estimate in calculating the fair value of share-based payments under IFRS 2 (see note 5).
79
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T
A
T
E
M
E
N
T
S
For a detailed discussion about the Group’s performance and financial position please refer to our operating and
financial review on pages 24 and 25.
2.
a)
Principal accounting policies
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to
31 March 2020. A subsidiary is an entity controlled by the Company. Control is achieved where the Company has
existing rights that give it the current ability to direct the activities that affect the Company’s returns and exposure or
rights to variable returns from the entity. The results of subsidiaries acquired or disposed of during the year are included
in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as
appropriate.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts reported in the
financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting
policies adopted by the Group.
Acquisitions of subsidiaries are dealt with using the purchase method. The purchase method involves the recognition at
fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date,
regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On
initial recognition, the assets and liabilities of the subsidiary are included in the Consolidated Statement of Financial
Position at their fair values, which are also used as the cost bases for subsequent measurement in accordance with the
Group accounting policies.
The consideration transferred in the acquisition is measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in the profit or
loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts, to the extent that they exceed the settlement amounts, are generally recognised in the profit or loss. Any
deferred contingent consideration payable is measured at fair value at the acquisition date. If an obligation to pay
contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not
remeasured, and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at
fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are
recognised in profit or loss.
Goodwill is stated after separating out identifiable intangible assets. Goodwill represents the excess of consideration
payable over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of
acquisition.
b)
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating
decision-maker as required by IFRS 8 “Operating Segments”. The chief operating decision-maker, who is responsible for
allocating resources and assessing performance of the operating segments, has been identified as the Board of
Directors.
The accounting policies of the reportable segments are consistent with the accounting policies of the Group as a
whole. Segment adjusted EBITDA represents earnings before interest, tax, depreciation, amortisation, share-based
payments, fair value of this is the measure of profit that is reported to the Board of Directors for the purpose of resource
allocation and the assessment of segment performance.
When assessing segment performance and considering the allocation of resources, the Board of Directors review
information about segment assets and liabilities. For this purpose, all assets and liabilities are allocated to reportable
segments with the exception of borrowings.
The Group is organised into, and managed through, the following three operating segments, which are based on
service and supported by central functions:
•
•
•
Consulting and innovation – Services include strategy consulting and service design
Software development – Services include digital transformation, technical software development, cloud based
services and IT implementation
Automation – Services include automation, robotics, chatbots and AI
80
Notes to the Consolidated Financial Statements continued
c) Goodwill
The Group measures goodwill at the acquisition date as:
•
•
•
the fair value of the consideration transferred; plus
the recognised amount of any non-controlling interests in the acquiree; plus, if the business combination is
achieved in stages, the fair value of the existing equity interest in the acquiree; less
the net recognised amount of the identifiable assets acquired, and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such
amounts are generally recognised in profit or loss.
Costs related to acquisition, other than those associated with the issue of debt or equity securities that the Group incurs
in connection with a business combination, are expensed as incurred.
Goodwill is carried at cost less accumulated impairment losses. Impairment review is carried out annually. If there is an
impairment, the cost is reduced by the accumulated impairment amount.
d)
Revenue and revenue recognition
Revenue consists of the value of work delivered to clients during the year exclusive of VAT and is recognised as
performance obligations are met in accordance with the terms of the contract which are primarily on a time and
materials basis. Revenue is wholly attributable to the principal activities of the Group. The Group adopt IFRS 15 principles
in recognising the revenue. Revenue recognised in excess of invoices raised is included within contract asset. Where
amounts have been invoiced in excess of revenue recognised, the excess is included within contract liability.
The majority of the services are provided on a time and material basis where clients are billed monthly for the time
spent on a project which corresponds directly with the value to the customer of the entity’s performance completed to
date and accordingly revenue is recognised at the amount billed. For fixed-price contracts where criteria to recognise
performance obligations over time have been met, revenue is recognised based on the actual service provided to the
end of the reporting period as a proportion of the total services to be provided. This is determined by actual labour
hours and cost incurred relative to the total expected labour hours and cost. The use of labour hours and costs is a
faithful depiction of the transfer of services as it directly relates to the effort required to satisfy the performance
obligation. Only inputs relating directly to the performance in transferring the services are included when measuring
progress to date. Due to changing circumstances, extent of progress and completion may be revised which may affect
revenue and costs. Any resulting increases or decreases in estimated revenues or costs are reflected in profit or loss in
the period in which the circumstances that give rise to the revision become known by management.
The majority of the contracts are one single performance obligation. However, some contracts include multiple
deliverables. In most cases, the deliverable is separately identifiable from other promises in the contract; therefore, it is
accounted for as a separate performance obligation. In this case, the transaction price will be allocated to each
performance obligation based on the stand-alone selling prices.
Standard terms of payment within 30 or 60 days are typically adopted. There is therefore no financing component.
Revenue is recognised when the Group satisfies the performance obligations, the timing of which is set out in Note 3.2.
For the majority, contracts are for performance obligations that are satisfied over time. However, there are some
contracts which contain performance obligations that are only satisfied at a point in time. The revenue for these
contracts is recognised when the performance obligation has been satisfied, for project development work this occurs
when the customer accepts the final output.
When the customer has a right to return the product within a given period, the entity is obliged to refund the purchase
price. For instance, if potential candidates put forward are considered unsuitable by the client and no one is recruited.
The contract stipulates reimbursement of 50% – 100% of the fee, under the agreed terms of contract. Under IFRS15,
revenue is only recognised to the extent it is highly probable there will not be a significant reversal of revenue in a future
period and is usually therefore recognised only when a successful candidate is recruited.
A small number of contracts have variable consideration associated with it, whereby a bonus is paid if certain cost
savings are made by the client. These are recognised using the ‘most likely amount method’ once it has been identified
that a significant reversal in the amount of cumulative revenue will not occur.
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Foreign currencies
e)
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the
primary economic environment in which the entity operates (‘the functional currency’). The Consolidated Financial
Statements are presented in pounds sterling, which is the Company’s functional and presentation currency and the
Group’s presentation currency.
Transactions and balances
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the Statement of Financial
Position date. All exchange differences are recognised in the Consolidated Income Statement.
As at the reporting date, the assets and liabilities of overseas subsidiaries are translated into pounds Sterling at the rate
of exchange applicable at the reporting date and their Income Statements are translated at the average exchange
rates for the period. The exchange differences arising from the retranslation of foreign operations are taken directly to
foreign exchange reserve.
Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or
loss. Translation differences on goodwill and fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the rates of exchange at the reporting date.
Currency translation differences arising are transferred to the Group’s foreign exchange reserve and are recognised in
the Income Statement on disposal of the underlying investment.
f)
Property, plant and equipment
Property, plant and equipment are stated at cost, net of depreciation and any provision for impairment.
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and
the carrying amount of the asset and is recognised in the Consolidated Income Statement.
Depreciation is calculated on a straight-line basis so as to write off the cost of an asset, less its estimated residual
value, over the useful economic life of that asset as follows:
Leasehold improvements
Fixtures and fittings
Computer equipment
3 – 10 years (depending on the length of the lease)
4 – 5 years
3 – 5 years
Useful economic lives and estimated residual values are reviewed annually and adjusted as appropriate.
g)
Intangible assets acquired as part of a business combination and amortisation
In accordance with IFRS 3 “Business Combinations”, an intangible asset acquired in a business combination is
recognised at fair value at the acquisition date. A fair value calculation is carried out based on evaluating the net
recurring income stream from each type of intangible asset. Intangibles are initially recognised at fair value, and are
subsequently carried at this fair value, less accumulated amortisation and impairment. The following items were
identified as part of the acquisitions of entities by the Group and were still owned at 31 March 2020:
•
•
•
•
brand amortised over two to five years;
customer lists amortised over three to six years;
database over five years; and
Intellectual property over ten years.
The allocation of fair values to the tangible assets and the identification and valuation of intangible assets affect the
calculation of goodwill recognised in respect of an acquisition and as such represent a key source of estimation
uncertainty.
h) Other intangible assets
Costs associated with maintaining computer software programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable software products controlled
by the Group are recognised as intangible assets when the following criteria are met:
•
•
•
It is technically feasible to complete the software product so that it will be available for use;
Management intends to complete the software product and use or sell it;
There is an ability to use or sell the software product;
82
Notes to the Consolidated Financial Statements continued
•
•
•
It can be demonstrated how the software product will generate probable future economic benefits;
Adequate technical, financial and other resources to complete the development and to use or sell the software
product is available; and
The expenditure attributable to the software product during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software product include the software development
employee costs and an appropriate portion or relevant overheads. Other development expenditures that do not meet
these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are
not recognised as an asset in subsequent periods.
Computer software development costs recognised as assets are amortised over their estimated useful lives, which
does not exceed 3 years.
i)
Impairment testing of goodwill
Impairment reviews are tested at cash generating unit (“CGU”) level. Goodwill is allocated to those CGUs that are
expected to benefit from synergies of the related business combination. During the year, the each acquired entity is
equivalent to one CGU.
Impairment reviews are carried out using multi-year cash flow projections from the approved budgets of the Group.
These are discounted using a weighted average cost of capital (“WACC”) specific to each CGU. The internal rate of
return for each CGU reflects the time value of money and the nature and risks of the CGU. Cash flows are estimated
over a maximum of five years and a terminal value.
An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount. The
recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on
an internal discounted cash flow evaluation. Impairment losses are credited to the carrying amount of the relevant
goodwill.
j)
Investment in subsidiaries and impairment
The investment in the Company’s subsidiaries is recorded at cost less provisions for impairment. Carrying values are
reviewed for impairment annually to determine if there is any indication that any of the investments might be impaired.
The Company uses forecast cash flow information and estimates of future growth to assess whether investments are
impaired.
If the results of operations in a future period are adverse to the estimates used for impairment testing, an impairment
may be triggered at that point.
k)
Taxation
Current tax is the tax currently payable based on taxable profit for the year. Deferred income taxes are calculated using
the liability method on temporary differences. Deferred tax is generally provided on the difference between the carrying
amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of
goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or
affects tax or accounting profit.
In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for
recognition as deferred tax assets. Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are
recognised to the extent that it is probable that the underlying deductible temporary differences will be able to be
offset against future taxable profit. Current and deferred tax assets and liabilities are calculated at tax rates that are
expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the
reporting date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the Consolidated Income
Statement, except where they relate to items that are charged or credited directly to equity, in which case the related
deferred tax is also charged or credited directly to equity.
l)
Financial instruments
Financial assets and financial liabilities are recognised in the Statement of Financial Position when the Group becomes
a party to the contractual provisions of the instrument.
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Financial assets
The Group classifies its financial assets as follows:
Amortised cost
These assets arise principally from the provision of services to customers (e.g. trade receivables), but also incorporate
other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and interest. They are initially recognised at the transaction
price that is directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions for trade receivables and contract assets are recognised based on the simplified approach
within IFRS 9 using the lifetime expected credit losses. During this process the probability of the non-payment of the
trade receivables and contract assets is assessed. This probability is then multiplied by the amount of the expected loss
arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which
are reported net, such provisions are recorded in a separate provision account with the loss being recognised within
administration expenses in the Consolidated Income Statement. On confirmation that the trade receivable and
contract assets will not be collectable, the gross carrying value of the asset is written off against the associated
provision.
Impairment provisions for loans to related parties are recognised based on a forward-looking expected credit loss
model. The methodology used to determine the amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of the financial asset. For those where the credit risk has not
increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with
gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit
losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime
expected credit losses along with interest income on a net basis are recognised.
Cash and cash equivalents include cash in hand, deposits held at call with banks and other short term highly liquid
investments with original maturities of three months or less.
Financial liabilities and equity
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the
contractual arrangements entered and the definitions of a financial liability and an equity instrument. An equity
instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its
liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.
Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest
rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the
balance of the liability carried in the Consolidated Statement of Financial Position. For the purposes of each financial
liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any
interest or coupon payable while the liability is outstanding.
Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
The effective interest rate method is a method of calculating the amortised cost of a financial asset or liability and
allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash flows through the expected life of the financial asset or liability, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
Fair value on contingent consideration
Contingent consideration is classified either as equity or as a financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value, with changes in fair value recognised through profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held
equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
m) Employee benefits
Share-based payments – equity-settled
All material share-based payment arrangements are recognised in the financial statements. All goods and services
received in exchange for the grant of any share-based remuneration are measured at their fair values. Fair values of
employee services are indirectly determined by reference to the fair value of the share-based payments awarded.
84
Notes to the Consolidated Financial Statements continued
Their value is appraised at the grant date and excludes the impact of non-market vesting conditions (for example,
profitability and sales growth targets).
All share-based remuneration is ultimately recognised as an expense in the Consolidated Income Statement with a
corresponding credit to “share-based payment reserve”. If vesting periods or other non-market vesting conditions
apply, the expense is allocated over the vesting period, based on the best available estimate of the number of
share-based payments expected to vest. Estimates are subsequently revised if there is any indication that the number
of share-based payments expected to vest differs from previous estimates.
Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense
recognised in prior periods if share-based payments ultimately exercised are different to that estimated on vesting.
Upon exercise of share-based payments, the proceeds received, net of attributable transaction costs, are credited to
share capital and share premium.
The fair value for the share-based payment is measured using the binomial model for share-based payments with no
market performance conditions and the monte carol method for options with market performance conditions.
n)
Pensions
Contributions to defined contribution schemes are charged to the Consolidated Income Statement as they become
payable in accordance with the rules of the scheme. Differences between contributions payable in the year and
contributions actually paid are shown as either accruals or prepayments in the Consolidated Statement of Financial
Position.
o)
Presentation of results
In some instances, Alternative Performance Measures (APMs) such as adjusted EBITDA (refer to Financial Review on
page 24) are used by the Group to provide ‘adjusted’ results. This is because Management are of the view that these
APMs provide a more meaningful basis on which to analyse business performance and is consistent with the way that
financial performance is measured by Management and reported to the Board. Furthermore, the statutory numbers for
the year ended 31 March 2019 does not reflect a true picture of trading given the number of acquisitions made in the
latter part of the year and the exceptional costs due to listing. Therefore, management believe that the APMs provide a
more meaningful picture rather than statutory actuals to actuals.
Adjusted EBITDA is a non-IFRS measure, defined as the Group’s operating profit before expensing depreciation of
tangible fixed assets, amortisation, costs relating to listing, acquisitions and restructuring, impairment, gain or loss on
fair value movement contingent consideration and share-based payments.
p)
Leases
Under IFRS 16
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for annual lease
payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs
to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less
any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to
the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful
economic lives of the right-of-use assets are determined on the same basis as those of property and equipment. In
addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the Group’s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the
discount rate.
Lease payments included in the measurement of the lease liabilities comprise the following:
•
•
•
Fixed payments, including in-substance fixed payments
Variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date
Amounts expected to be payable under a residual value guarantee; and
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The exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an
optional renewal period if the Group is reasonable certain to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a
change in future lease payments arising for a change in an index or rate, if there is a change in the Group’s estimate of
the amount expected to be payable under a residual value guarantee, or if the Group changes its assessment of
whether it will exercise a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the
right-of-use asset, or is recorded in the profit and loss If the carrying amount of the right-of-use asset has been
reduced to zero.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that
have a lease term of 12 months or less and leases of low value assets including IT equipment. Assets with a value less
than £5,000 are considered low value. The Group recognises the lease payments associated with these leases as an
expense on a straight-line basis over the lease term.
Under IAS 17
In the comparative period, as a lessee the Group held operating leases that were not recognised in the Group’s
Statement of Financial Position. Payments made under operating leases were recognised in profit and loss on a
straight-line basis over the term of the leases. Lease incentives were recognised as an integral part of the total lease
expense, over the term of the lease.
q) Grant income
Government grants are not recognised until there is reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be received.
Government grants are generally recognised in the Consolidated Income Statement on a systematic basis over the
periods in which the Group recognises as expenses the related costs for which the grants are intended to compensate.
Judgement is applied in assessing when there is reasonable assurance the grant conditions have been complied with
and that the grant money will be received.
r)
Research and development
Research and development expenditure is recognised in the Consolidated Income Statement as an expense until it can
be demonstrated that the conditions for capitalisation under IAS 38 ‘Intangible Assets’ apply. The criteria for
capitalisation include demonstration that the project is technically and commercially feasible, the Group has sufficient
resources to complete development and the asset will generate probable future economic benefit.
During the year, research and development costs are within Administrative expenses and are not identifiable with its
own subheading. The allocation of the administrative costs that relates to research and development for the Group is
carried out annually at the point of assessing for R&D tax credit relief as part of the tax work.
The Group benefits from both small, medium enterprises for R&D tax credits and research and development credits
(RDEC).
RDEC research and development credits are accounted for as having the substance of a government grant and
recognised in other income. The grants are recognised on the basis of the fair value of claims made. A corresponding
other receivable is recognised at the time the claims are accepted and will subsequently be offset against tax payable.
s) Critical accounting judgements and key sources of estimation uncertainty
In preparing these financial statements, management is required to make estimates and assumptions that affect the
reported amount of revenues, expenses, assets, liabilities and the disclosure of contingent liabilities. The resulting
accounting estimates, which are based on management’s best judgment at the date of these financial statements, will
seldom equal the subsequent actual amounts. The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are summarised
below.
86
Notes to the Consolidated Financial Statements continued
Critical judgements:
1.
Revenue recognition
The main judgements are:
•
•
•
Deciding what are the performance obligations in a contract
Deciding whether the contract should be measured over time or at a point in time
The cost to complete contracts to determine the percentage completion
Under IFRS 15, measurement and recognition of revenue required the Group to make judgements and estimates. In
particular, there are a large number of contracts within the business which may require significant contract
interpretation to determine the appropriate accounts such as whether promised goods and services specified in an
arrangement are distinct performance obligations and based on the contract terms, whether the performance
obligation should be recognised at a point in time or over time (refer to Note 3.2).
Cash generating units (CGUs)
2.
IFRS 3 Business combination requires the management to assess the CGU as part of purchase price allocation process.
The Board uses their judgement in deciding the number of CGU per entity acquired during the year. CGU is defined as
the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows
from other assets or groups of assets. The board determines the number of CGU by ascertaining the number of main
income stream generating from an entity. Each entity acquired during the year, was deemed as one CGU. There are a
total of 9 CGUs as a result from the business combination in 2020. (2019: 7).
Intangible assets from acquisition
3.
Acquiring a business entity would include purchasing its intangible assets even when there were no intangible assets
on its Statement of Financial Position. The board uses judgement in identifying the types of intangible assets as a result
of business combination. During the year the board identified several intangibles such as customer list, brand, client
database and software. Details of intangible assets identified on acquisitions are in notes 8 and 10.
Key source of estimation uncertainty:
Valuation of intangible assets
1.
Intangible assets (2020: £8.6m, 2019: £5.2m) are non-physical assets which have been obtained as part of an
acquisition and which have an identifiable future economic benefit to the Group at the point of acquisition. Each
intangible asset is valued at acquisition by measuring the future discounted cash flows over a range of two to ten-year
period from the date of acquisition, depending on class. For example, ‘customer list’ uses assumptions such as using
the average retention rate, revenue growth over the prior three to five-year period. All future cash flows are discounted
using a WACC, based on the internal rate of return for each asset, calculated over its useful economic life.
Impairment of goodwill
2.
Impairment of goodwill requires an estimate of whether there is an impairment indicator. The key estimate for the
carrying value of CGU is the cash flows associated with the CGU and the WACC. Each of the CGU held by the Group is
measured regularly to ensure that they generate discounted positive cash flows.
The Group determines CGUs are impaired on at least an annual basis. This requires an estimation of the ‘value in use’ of
the cash-generating units to which the intangible value is allocated. Estimating a value in use amount requires
management to make an estimate of the expected future cash flows from the cash-generating unit and also to
choose a suitable discount rate in order to calculate the present value of those cash flows. Where there is indication of
impairment, the goodwill is impaired by a charge to the Consolidated Income Statement. The key area of uncertainty is
the revenue growth. Management perform sensitivity analysis to ascertain the level of growth rate that will start to
impair the goodwill on a yearly basis. Further explanation is included in Note 9 – Goodwill and impairment.
Impairment of investments
3.
An assessment of impairment of investments is performed if there is an indicator of impairment. The key estimate for
the carrying value of the investment is the cash flows associated with the investment and the WACC. Each investment is
reviewed regularly to ensure that they generate discounted positive cash flows.
The same principles used in the assessment of impairment of goodwill is used for estimating the ‘value in use’ of the
cash flows of the investment. Where there is an indication of impairment, the investment is impaired by a charge to the
consolidated income statement. The key area of uncertainty is the revenue growth. Management perform sensitivity
analysis to ascertain the level of growth rate that will start to impair the investment on a yearly basis.
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4. Measuring the fair value of contingent consideration
The fair value of contingent deferred consideration is determined by reference to the future EBITDA of the acquired
business and applying the contingent deferred consideration formula as specified in the asset or share purchase
agreement and discounting the net present value of the future cash flows. The total fair value of consideration for the
businesses acquired during the year was £22m (2019: £32m) and the goodwill was calculated as £15m (2019: £21m). The
range of contingent consideration in the current period was £Nil to £6.1m; further details are included in Note 8.
5. Valuation of share-based payments
The valuation of share-based payments is calculated using valuation models. In the prior year, the estimated fair value
of the share-based payments was calculated by applying a Black Scholes valuation model. In the current year, the
appropriateness of the valuation model used was reassessed taking note of the vesting conditions, including any
performance-based conditions. It was concluded that the Binomial and Monte Carlo valuation models would be more
suitable give the vesting conditions attached to the share-based payment arrangements. This change in accounting
estimate resulting in an immaterial change to the prior year charge which has been recorded in the current year
3. Segment reporting
The Group has identified its operating segments based on the internal reports reviewed and used by the Chief
Operating Decision Maker (CODM), being the Board of Directors, in assessing the Group’s performance and in
determining the allocation of resources.
The Board has concluded that it monitors the Group’s performance and makes business decisions around investments,
resource allocation and acquisitions based on the Group’s services. These services are noted below and consists of 3
reportable segments. All other revenue that is not classified as a reportable segment are classified as ‘All other
Segments’ or ‘Central Services’.
•
•
•
•
Consulting and innovation – This part of the business provides strategy consulting and service /organisational
design services to external clients in the government, commercial and NGO sectors
Software development – Services within this sector Business IT Management, include digital transformation,
technical software development and implementation, cloud based services, data based services and support
services.
Automation – Services include automation, robotics, chatbots and artificial intelligence
All other segments – Other segments not included in the above. This primarily relates to the Group’s operations
comprising of magazine publication and events management services which are not core to the Group.
The Board of Directors primarily uses a measure of revenue and adjusted EBITDA which is taken as earnings before
interest, tax, depreciation, amortisation, costs relating to business acquisitions and restructuring, costs relating to
share-based payments and fair value movement in contingent consideration to assess the performance of the
operating segments. Information about segment revenue is disclosed in the tables below.
Revenue by service
3.1.1 Revenue
i)
Included in revenues arising from ‘Software development’ service are revenues of £3.2m (2019: £2.4m) which arose from
the Group’s largest customer and represents 10% of the Group’s total revenue.
Consulting and innovation
Software development
Automation
All other segments
Intersegment eliminations
Total Revenue
2020
£’000
9,581
21,242
1,361
278
(929)
31,533
2019
£’000
769
7,389
35
20
(61)
8,152
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Notes to the Consolidated Financial Statements continued
ii)
Revenue by geography
United Kingdom
Norway
Switzerland
Rest of EU
USA
Other
Total Revenue
iii)
Revenue by sector
Commercial
Government
NGO
Total Revenue
3.1.2 Adjusted EBITDA by service
Consulting and innovation
Software development
Automation
All other segments
Central services
Total Adjusted EBITDA
Finance costs
Finance income
Depreciation and amortisation
Restructuring costs
Costs directly attributable to business combinations
Fair value movement for contingent consideration
Share-based payments
Loss before tax from continuing operations
3.1.3 Segment assets
2020
£’000
25,279
2,046
1,814
902
1,488
4
31,533
2020
£’000
11,476
13,207
6,850
31,533
2020
£’000
1,548
4,575
(236)
(200)
(1,841)
3,846
(189)
7
(2,320)
(155)
(436)
(3,764)
(129)
(3,140)
2019
£’000
6,511
769
552
28
291
1
8,152
2019
£’000
2,871
3,050
2,231
8,152
2019
£’000
60
1,227
(58)
(137)
(690)
402
(14)
5
(384)
–
(1,352)
(54)
(239)
(1,636)
Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the
operations of the segment and the physical location of the asset.
Consulting and innovation
Software development
Automation
All other segments
Total Segment Assets
Intersegment eliminations
Unallocated:
Central services
Total assets per the Statement of Financial Position
2020
£’000
29,985
32,565
1,425
204
64,179
2019
£’000
3,522
29,045
272
54
32,893
(5,425)
(548)
1,667
60,421
3,548
35,893
89
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
3.1.4 Segment liabilities
Segment assets are measured in the same way as in the financial statements. These assets are allocated based on the
operations of the segment and the physical location of the asset.
The Group’s borrowings are not considered to be segment liabilities, but are managed by the Group finance function
Consulting and innovation
Software development
Automation
All other segments
Total Segment Liabilities
Intersegment eliminations
Unallocated:
Central services
Total liabilities per the Statement of Financial Position
3.2 Disaggregation of revenue from contracts with customers
2020
£’000
7,324
20,272
1,768
338
29,702
(5,425)
8,878
33,155
2019
£’000
1,640
14,702
340
179
16,861
(548)
329
16,642
The Group derives revenue from the transfer of services over time and at a point in time in the following service line:
Year ended 31 March 2020
External revenue
Inter-segment revenue
Total revenue
Recognised at a point in time
Recognised over time
Total revenue
Year ended 31 March 2019
External revenue
Inter-segment revenue
Total revenue
Recognised at a point in time
Recognised over time
Total revenue
Consulting and
Software
innovation development
£’000
£’000
Automation
£’000
All other Adjustments(1)
segments & Eliminations
£’000
£’000
9,238
343
9,581
23
9,558
9,581
20,672
570
21,242
7,408
13,834
21,242
1,345
16
1,361
1
1,360
1,361
278
–
278
159
119
278
–
(929)
(929)
–
(929)
(929)
Consulting and
Software
innovation development
£’000
£’000
Automation
£’000
All other Adjustments(1)
segments & Eliminations
£’000
£’000
769
–
769
–
769
769
7,378
11
7,389
1,768
5,621
7,389
35
–
35
–
35
35
20
–
20
20
20
–
(61)
(61)
–
(61)
(61)
Total
£’000
31,533
–
31,533
7,591
23,942
31,533
Total
£’000
8,202
(50)
8,152
1,768
6,384
8,152
(1) Inter-segment revenues are eliminated on consolidation and reflected in the adjustments and eliminations column.
90
Notes to the Consolidated Financial Statements continued
4. Operating loss
Operating loss is stated after charging:
Depreciation of property, plant & equipment (see note 12)
Depreciation of right-of-use assets (see note 13)
Amortisation of intangible assets (see note 10)
Employee costs (see note 5.2)
Costs directly attributable to the business combination and listing (see note 4.1)
Costs relating to restructuring*
Disposal of fixed assets
Loss on fair value movement contingent consideration (see note 20)
Share-based payments (see note 5.5)
Operating lease rentals (see note 13)
2020
£’000
154
583
1,583
18,080
436
155
34
3,764
129
317
2019
£’000
45
–
339
4,346
1,352
–
2
54
239
245
* Business restructuring costs were incurred in the year relating to the closure of the publication part of the business and in relation to restructuring of personnel.
4.1 Costs directly attributable to the business combination and listing/IPO:
Acquisition costs attributable to business combination
Listing costs
4.2 Auditors remuneration
Fees payable to the Company’s auditors and its associates for the audit of parent company
and consolidated financial statements
Fees payable to Company’s auditors and its associates for the audit of Company’s subsidiaries
Fees payable to Company’s auditors and its associates for other services:
Audit-related assurance services
Other assurance services
Other services
Tax compliance and other tax advisory services
4.3 Finance income and costs
Finance income
Interest income from financial assets held for cash management purposes
Finance income
Finance costs
Interest payable on bank loan and overdrafts
Interest and finance charges paid/payable for lease liabilities and financial liabilities not at
fair value through profit or loss
Finance costs expensed
Net finance costs
2020
£’000
436
–
436
2020
£’000
145
27
2
–
4
131
309
2019
£’000
473
879
1,352
2019
£’000
106
16
29
335
–
23
509
2020
£’000
2019
£’000
7
7
147
42
189
182
5
5
–
14
14
9
5.
Employee costs
5.1 Directors and employees
The average number of staff employed by the Group during the financial year is 361 (2019: 77) as follows:
Consultant **
Administrative staff ***
Management
Total
** Consultant include consultants employed by Questers solely for clients’ projects.
*** Administrative staff also participate in income generating activities, sales and marketing.
Employee numbers are stated including Directors.
5.2 Employee remuneration
Wages and salaries
Pension contributions
Share-based payments
Social security costs
Other benefits
Total
5.3 Key management personnel
Number of key personnel for the parent company.
Number of key personnel for the Group
Group key personnel comprises of Directors of the parent company and the directors of the principal operating
companies.
5.4 Key management emoluments
Emoluments for the key management personnel for the parent company.
Wages and salaries
Pension contributions
Share-based payments
Social security costs
Other benefits
Total
The total emolument for the Group key personnel for the year:
Wages and salaries
Pension contributions
Share-based payments
Social security costs
Other benefits
Total
2020
£’000
515
38
43
65
3
664
2020
£’000
2,310
98
70
295
13
2,786
91
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
2020
2019
220
115
26
361
2020
£’000
16,144
494
129
1,313
–
37
34
6
77
2019
£’000
3,807
87
133
281
38
18,080
4,346
2020
5
2020
26
2019
5
2019
18
2019
£’000
296
9
40
28
–
373
2019
£’000
757
41
77
56
–
931
92
Notes to the Consolidated Financial Statements continued
The aggregate of remuneration of the highest paid director (including Employer NI) of the Company was £329k (2019:
£164k). The amount of pension contribution paid into the defined contribution scheme for the highest paid director
totalled £18k in the year. The full breakdown of other benefits are detailed in the remuneration report.
Details of individual Directors’ emoluments for the year (including employer’s National Insurance (“NI”) contributions)
are as follows:
Fees and salaries
–––––––––––––––––––
Employer’s NI
–––––––––––––––––––
Other benefits (refer to
remuneration report)
–––––––––––––––––––
Total
––––––––––––––––––––
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
2020
£’000
2019
£’000
Non-Executive
Chris Sweetland
Mark Smith
Isabel Kelly
Executive
Neal Gandhi
Oliver Rigby
Total
35
50
30
259
141
515
12
17
10
128
129
296
4
6
3
34
18
65
1
2
1
16
8
28
3
4
2
36
39
84
2
4
2
20
21
49
42
60
35
329
198
664
15
23
13
164
158
373
Share-based payment plans for employees
5.5 Share-based payments
(i)
The Company has an HMRC-approved EMI share-based payment scheme for certain staff and senior management.
There is also an unapproved share-based payment scheme in place which is used where the individuals do not fall
under the rules of the approved scheme.
Outstanding at 1 April
Granted
Forfeited
Outstanding at 31 March
2020
Number
of options
3,680,119
–
(42,631)
3,637,488
2020
Weighted
average
exercise price
74p
–
–
74p
2019
Number
of options
–
3,680,119
–
3,680,119
2019
Weighted
average
exercise price
–
74p
–
74p
Weighted average remaining contractual useful life is 8.68 years
(ii) Non-employee share-based payments
The total non-employee share-based payments are:
Outstanding at 1 April
Granted
Outstanding at 31 March
2020
Number
of options
247,669
–
247,669
2020
Weighted
average
exercise price
74p
–
74p
2019
Number
of options
–
247,669
247,669
2019
Weighted
average
exercise price
–
74p
74p
In the prior year, the estimated fair value of the share-based payments was calculated by applying a Black Scholes
valuation model. In the current year, the appropriateness of the valuation model used was reassessed taking note of
the vesting conditions, including any performance-based conditions. It was concluded that the Binomial and Monte
Carlo valuation models would be more suitable given the vesting conditions attached to the share-based payment
arrangements. The Binomial model was deemed to be the best model to value shares where there are no market-
based performance conditions. There are a number of shares where the awards contain a market performance
condition. These share-based payments were valued using the Monte Carlo model as it was deemed more accurate in
estimating the impact of market conditions.
Total share-based payments
(iii)
The number of outstanding options under each valuation method has been disclosed in the table below.
Number of outstanding options as at 31 March 2020
Binomial Monte Carlo
model
model
Total
2,856,579
1,028,578
3,885,157
The change in the accounting estimate has resulted in an immaterial reduction to the charge recognised in the prior
year and this has been credited to the Consolidated Income Statement in the current year.
The changes in estimate around model inputs for the options granted in 2019 were as follows:
Exercise price
Share price at grant date
Risk-free interest rate
Expected volatility1
Dividend yield
Contractual life of option (years)
The total share-based payments expense included in the Consolidated Income Statement is:
Share-based payments to employees
Share-based payments to non-employees
Total
The total share-based payments expense relating to Directors of the Company:
Share-based payments
Total
The total share-based payments expense relating to key personnel of the Group:
Share-based payments
Total
Binomial
and Monte
Carlo model
£0.74
£0.74
0.88%
31.95%
1.00%
10
2020
£’000
171
(42)
129
2020
£’000
43
43
2020
£’000
70
70
Black
Scholes
Model
£0.74
£0.74
0.87%
48.80%
0.00%
10
2019
£’000
133
106
239
2019
£’000
40
40
2019
£’000
77
77
93
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
1 The expected price volatility is based on the historical volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due
to publicly available information
94
Notes to the Consolidated Financial Statements continued
6.
Taxation
Current tax
UK corporation tax for the period at 19% (2019: 19%)
Adjustments in respect of prior period provisions
Adjustments in respect of prior period R&D credits
Overseas current tax charge on income for the year
Total current tax
Deferred tax
Current year
Change in deferred tax rate
Adjustments in respect of prior periods
Total deferred tax
Total tax credit/(charge)
2020
£’000
(581)
121
461
(95)
(94)
268
(77)
(1)
190
96
2019
£’000
(121)
–
–
(1)
(122)
81
–
–
81
(41)
During 2020 a deferred tax credit of £296k (2019: £64k) was attributable to deferred tax on intangible assets acquired as
part of business combination. For further deferred tax information – see Note 22.
The relationship between expected tax expense based on the effective tax rate of the Group of 4% (2019: 3%) and the tax
expense recognised in the Consolidated Income Statement can be reconciled as follows:
Loss for the year before tax:
Tax rate
Expected tax credit
Principal differences due to:
Fixed asset differences
Expenses not deductible for tax purposes
Non taxable income
Additional deduction for R&D expenditure
Adjustments in respect of prior period provisions
Adjustments in respect of prior period R&D credits
Difference in tax rates
Movement in deferred tax rates
Deferred tax asset not recognised
Deferred tax credit on intangible assets arising on business combinations
7.
Earnings per share
Loss attributable to ordinary shareholders
Weighted average number of Ordinary Shares in issue, basic
Basic and diluted loss per share
2020
£’000
(3,140)
19%
597
–
(956)
(3)
–
121
461
39
(80)
(83)
–
96
2019
£’000
(1,636)
19%
311
(14)
(376)
–
98
–
–
(8)
(13)
(103)
64
(41)
2020
£’000
(3,044)
2019
£’000
(1,677)
2020 Number 2019 Number
48,162,078
18,186,006
(6.32)p
(9.22)p
Earnings per ordinary share has been calculated using the weighted average number of shares in issue during the year.
There is no difference between basic loss per share and diluted loss per share as the share-based payments are anti-
dilutive.
95
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
The Group have a number of share-based payments (see note 5) and share purchase agreements (see note 8) where
the terms and conditions could affect the measurement of basic and diluted earnings per share. A number of shares
that were issued during the period are contingent on certain conditions being met and therefore these have been
excluded from the calculation of the weighted average number of Ordinary Shares in issue.
8. Business combinations
During the year the Company completed two acquisitions; the first acquisition was of FutureGov Limited (‘FutureGov’), a
group of 3 companies consisting of FutureGov Limited, FutureGov Australia Pty Limited and US Creates Limited.
Additionally, the Company completed the acquisition of Ameo Professional Services Limited (‘Ameo’) in the period. A
summary of the acquisitions is shown below.
Summary
Business combination summary
as at 31 March 2020
Date of acquisition
Consideration payable
% acquired
Acquisition related costs
Intangible assets acquired on acquisition
Net assets
Total identifiable net assets acquired at fair value
Cash
Shares (including contingent deferred consideration)
Total fair value consideration
Goodwill
Cash flow
Note
FutureGov
£’000
Ameo
£’000
Total
£’000
11
11
4
10
8 (iv)
8 (iv)
8 (iv)
11 June 2019
10 March 2020
Cash & Shares Cash & Shares
100%
208
2,842
694
3,536
6,060
7,252
13,312
9,776
100%
109
1,922
1,800
3,722
3,527
5,506
9,033
5,311
317
4,764
2,494
7,258
9,587
12,758
22,345
15,087
Acquisition of business (net of cash acquired)
Total cash flow from acquisition of business
(net of cash acquired)
3,909
1,967
5,876
5,876
Revenue and profit/(loss) if acquired from 1 April 2019
(i)
The consolidated pro-forma revenue and profit/(loss) for the year ended 31 March 2020, had the acquisitions occurred
on 1 April 2019 are shown below. These amounts have been calculated using the subsidiary’s results adjusted for:
•
•
differences in the accounting policies between the Group and the subsidiary; and
the additional depreciation and amortisation that would have been charged, assuming the fair value adjustments
to property, plant and equipment and intangible assets had applied from 1 April 2019, together with the
consequential tax effects.
Revenue
FutureGov
Ameo
Profit/(loss) before tax
FutureGov
Ameo
Acquisition to
31 March 2020
£’000
(from 1 April 2019)
FY 12m
£’000
6,792
737
7,529
8,223
7,262
15,485
Acquisition to
31 March 2020
£’000
(from 1 April 2019)
FY 12m
£’000
900
173
1,073
1,345
1,325
2,670
96
Notes to the Consolidated Financial Statements continued
(ii) Cashflows from investing activities – acquisition of subsidiaries
The cash paid for acquiring the companies and the cash inherited are summarised as follows:
Paid by the Group during the year
Cash paid for acquisition of subsidiaries
£’000
Cash inherited from acquisition
£’000
Entity
FutureGov
Ameo
Total
6,060
3,527
9,587
2,151
1,560
3,711
–
–
–
The cash paid by the parent company only is as follows
Entity
FutureGov
Ameo
Total
Cash paid for acquisition of subsidiaries
£’000
5,160
2,200
7,360
FutureGov
Business combination explained by entity
a.
On 11 June 2019 the Company acquired the entire issued share capital of FutureGov for an initial consideration of £11.8m
being £5.7m in shares and £6.1m payable in cash. Further contingent deferred consideration may be payable, in shares,
dependent upon the performance of FutureGov post-acquisition. As at 31 March 2020, this was estimated to be £1.5m.
The Panoply also procured, on Completion, the repayment of loan notes issued by FutureGov to certain shareholders
with a principal amount totalling £500,000 by FutureGov (the “Loan Notes”).
As with previous transactions, all Panoply Shares allotted and issued under the SPA (including the shares issued as part
of the Initial Consideration) are subject to customary lock-in arrangements and subject to claw-back by The Panoply if
FutureGov’s EBITDA decreases over the 2 year earn-out period.
The partial or full clawback subject to the future EBITDA performance of FutureGov (based on EBITDA) during the
15 month period 1 January 2019 to 31 March 2020 (annualised) and 12 month period from 1 April 2020 to 31 March 2021. In
addition to the Initial Consideration, the shareholders of FutureGov will be entitled to receive deferred earn-out
consideration, of which 96% will be payable by the allotment and issue of shares in The Panoply (“Panoply Shares”) and
4% in cash following the agreement of the relevant EBITDA calculations at the end of each of those financial periods. The
number of Panoply Shares to be allotted and issued shall be calculated by dividing the earn-out price payable by a
price per share in The Panoply which is the greater of 87.5 pence and the volume-weighted average mid-market price
over the 30 business days prior to the issue of the relevant Panoply Shares. Any Panoply Shares allotted and issued by
way of deferred consideration will be allotted and issued as follows:
•
•
in four equal tranches over a 24-month period following the determination of the accounts in respect of the
financial year ending 31 March 2020 and the publication of the Group’s results for the same period; and
in four equal tranches over a 24-month period following the determination of the accounts in respect of the
financial year ending 31 March 2021 and the publication of the Group’s results for the same period.
The total consideration payable by The Panoply in respect of the Acquisition is capped at a maximum of £21m.
IFRS 3 requires that consideration to be measured at fair value. The total consideration (before calculating its fair value)
of £13.8m is further analysed based on the timing of the consideration payments and an estimation of the contingent
consideration likely payable as at the transaction date to work out the fair value (net present value) of the
consideration as at the transaction date using cost of debt 3.7% for calculating cash consideration and completion
shares using WACC of 14.4%. The fair value of the total consideration is calculated to be £13.3m.
At 31 March 2020, the actual EBITDA for the year and the fair value forecast EBITDA for March 2020 are assessed to be
higher than the total EBITDA forecast calculated at completion date. The estimated total consideration was calculated
at £13.6m, a debit of £286k has been recognised in the Statement of Total Comprehensive Income in respect of the
movement on the deferred contingent consideration liability.
FutureGov Limited was incorporated in 2008. For over more than a decade FutureGov has built an enviable reputation
for the delivery of scaled digital transformation and organisational change across government organisations, saving
money and improving outcomes for citizens at local and national level across health and public services. Digital
transformation in the public sector follows a defined process from Discovery, where the suitability and need for a new
97
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
service is assessed, through to Alpha where a proof of concept is created, then to Beta where a scaled full version is
delivered and then to Live. Historically, FutureGov has had a reputation for Discovery and Alpha phases, typically ending
their engagements there or partnering with third party organisations for the Beta and Live phases.
The acquisition will significantly increase the Group’s revenue originating from the health and public sectors. The
combination of FutureGov’s wealth of experience and The Panoply’s extended capabilities creates a very strong
disrupter in these sectors, challenging the status-quo of larger organisations. The Group is now able to offer public
sector clients an end-to-end service from discovery through to live digital transformation programmes, which is entirely
tailored to the needs of the industry.
Futuregov
Intangibles
Brand
Customer lists
Goodwill
Tangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other liabilities
Non-current liabilities
Borrowings
Deferred consideration
Deferred tax
Net assets
Cash
Share issued (Contingent to performance until FY2020)
Contingent consideration (Equity)
Fair value of total consideration
Goodwill
Fair value
Book cost adjustments
£’000
£’000
Fair value
£’000
–
–
722
30
1,493
2,151
293
2,549
(722)
–
–
–
293
2,549
–
30
1,493
2,151
(1,272)
(149)
(1,421)
(507)
(513)
(3)
2,101
–
–
(536)
1,435
(507)
(513)
(539)
3,536
6,060
5,786
1,466
13,312
9,776
Acquisition-related costs of £208k that were not directly attributable to the issue of shares are included in
administrative expenses in the Consolidated Income Statement and in operating cash flows in the Statement of Cash
Flows.
The trade and other receivables are all considered recoverable. The goodwill is related to assemble workforce and the
high profitability of the acquired business. It will not be deductible for tax purposes.
Ameo
b.
On 10 March 2020 the Company acquired the entire issued share capital of Ameo for an initial consideration of £8.3m
being £4.8m shares plus £2.2m, cash and an additional cash payment of £1.3m made to the vendors at completion
representing cash held on Ameo’s statement of financial position in excess of its normalised working capital
requirements. Further deferred contingent consideration may be payable, in shares, dependent upon the performance
of Ameo post-acquisition. As at 31 March 2020, this is estimated to be £0.7m. As with other acquisitions, there may be a
partial or full clawback of the initial share consideration in the event of underperformance of Ameo post acquisition. The
deferred contingent consideration or clawback will be determined by reference to the forecast during the 17 month
period 1 November 2019 to 31 March 2021 (annualised) and 12 month period from 1 April 2021 to 31 March 2022.
The number of Panoply Shares to be allotted and issued shall be calculated by dividing the earn-out price payable by a
price per share in The Panoply which is the greater of 82 pence and the volume-weighted average mid-market price
(VWAP) over the 30 business days prior to the issue of the relevant Panoply Shares. Any Panoply Shares allotted and
issued by way of deferred consideration will be allotted and issued in one tranche following the publication of the
98
Notes to the Consolidated Financial Statements continued
Group’s results for the relevant period for financial year end 31 March 2021 and 31 March 2022 of the acquired business
and applying the deferred contingent consideration formula as specified in the share purchase agreement.
IFRS 3 requires that consideration to be measured at fair value. The total consideration (before calculating its fair value)
of £9.2m is further analysed based on the timing of the consideration payments and an estimation of the contingent
consideration likely payable as at the transaction date to work out the fair value (net present value) of the
consideration as at the transaction date using cost of debt of 3.4% for calculating cash consideration and WACC of
14.3% for calculating completion shares. The fair value of the total consideration is calculated to be £9.0m.
At 31 March 2020, the actual EBITDA for the year and the fair value forecast EBITDA for March 2020 are assessed to be
lower than the total EBITDA forecast calculated at completion date. The estimated total consideration was calculated at
£9.0m, a credit of £52k has been recognised in the Statement of Total Comprehensive Income in respect of the
movement on the deferred contingent consideration liability.
Ameo, founded in 2009, based in UK, is a consultancy specialising in delivering business change, with a strong focus on
the public sector. Ameo has been working with businesses for over 10 years seeking to deliver long-lasting, cost-
effective change across a wide range of areas, from financial reporting and process design to digital innovation.
Ameo’s ethos is to seek to work as a partner with its clients in order to develop sustainable solutions and improve the
skills of its clients’ teams. In addition, to Public sector, Ameo also has considerable experience delivering projects across
other sectors such as higher education, energy and utilities, and various industries within the private sector.
The Acquisition will bring additional and complementary capabilities to the Group’s public sector offering, as well as
extending its reach into this key market. The strategy and change delivery capability of Ameo, alongside the
organisational and service design capability of FutureGov, and the backing of The Panoply’s first-in-class technology
businesses provides the basis for targeting and winning increasingly large digital transformation projects in the UK
public sector.
Ameo
Intangibles
Brand
Customer lists
Tangible assets
Property, plant and equipment
Current assets
Trade and other receivables
Cash and cash equivalents
Current liabilities
Trade and other liabilities
Taxes and social security costs
Non-current liabilities
Deferred tax
Net assets
Ameo
Cash
Share issued (Contingent to performance until FY2020)
Contingent consideration (Equity)
Fair value of total consideration
Goodwill
Fair value
Book cost adjustments
£’000
£’000
Fair value
£’000
–
–
2
1,649
1,560
(694)
(352)
233
1,689
–
–
–
–
233
1,689
2
1,649
1,560
(694)
(352)
–
2,165
(365)
1,557
(365)
3,722
Fair value
Book cost adjustments
£’000
£’000
Fair value
£’000
3,527
4,800
706
9,033
5,311
Acquisition-related costs of £109k that were not directly attributable to the issue of shares are included in administrative
expenses in the Consolidated Income Statement and in operating cash flows in the Statement of Cash Flows.
The trade and other receivables are all considered recoverable. The goodwill is related to assemble workforce and the
high profitability of the acquired business. It will not be deductible for tax purposes.
99
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
The total consideration payable by The Panoply in respect of the Acquisition is capped at a maximum of £10.5m, which
includes the reimbursement payment of £1.3m meaning that the effective cap is £9.2m.
8.1 Acquisitions post year end
The Panoply Holdings Plc acquired the entire issued share capital of Arthurly, a technology services business with
strength in the Microsoft Technology Stack on the 10 June 2020. The initial consideration for the Acquisition was £0.4m,
satisfied though the payment of circa £0.2m cash and the issue of 365,853 new ordinary shares in The Panoply.
£100,000 worth of the shares are subject to claw back in the event of underperformance in accordance with the Group’s
acquisition formula. Further consideration may be payable based on revenue generated for the 16 months to
30 September 2021. Any such additional consideration shall be calculated following the agreement of the relevant
revenue calculations and publication of the Group’s results relating to the financial period ending on 30 September 2021
and shall be payable by the allotment and issue of shares in The Panoply. The number of such shares to be allotted and
issued shall be calculated by dividing the deferred consideration payable by a price per share in The Panoply which is
the greater of 82 pence and the volume-weighted average mid-market price over the 30 business days prior to the
relevant issue date. Any shares in The Panoply which are allotted and issued as part of the deferred consideration will
be allotted and issued in 4 tranches at six-month interval.
The total consideration payable by The Panoply in respect of the Acquisition is capped at a maximum of £1.5m.
Acquisition costs of £44k were incurred. These are recorded in the financial statements year ended 31 March 2021.
All Panoply Shares allotted and issued under the SPA (including the shares issued as part of the Initial Consideration)
are subject to customary lock-in arrangements and subject to claw-back.
The acquisition is expected to be immediately margin and earning enhancing to Notbinary.
The Group is currently performing a fair value review of Arthurly’s assets and liabilities and will report these within its next
published financial statements.
Arthurly Limited, company registration number 11560054 is incorporated in England and Wales. Its registered office is 17
Sunnybank Road, Griffithstown, Pontypool, United Kingdom, NP4 5LT.
9. Goodwill and impairment
As at 1 April 2018
On acquisitions
As at 31 March 2019
On acquisitions
As at 31 March 2020
Accumulated
impairment
losses
£’000
–
–
–
–
–
Cost
£’000
–
20,585
20,585
15,087
35,672
Carrying
amount
£’000
–
20,585
20,585
15,087
35,672
Management have concluded the acquisitions in the year are separate cash generating units. In the year ended
31 March 2020, there are nine cash generating units (CGU), being one CGU per entity acquired.
Impairment tests for goodwill
The value of CGUs is assessed according to the projected performance of the business. This is performed by calculating
the recoverable amount of all CGUs based on value-in-use calculations. These calculations uses a post-tax cash flow
projects based on latest forecasts by each CGU which are extrapolated to cover a 5 year period. The forecasts used are
latest forecasts which have been adjusted for the impact of Covid-19 and the expected resulting market downturn. A
risk-free discount rate is based on WACC using the CAPM model. A risk free rate has been used to mitigate the risk of
double counting risk adjustments as these have been taken into account in the cash flows. As the WACC used in the
value-in-use calculation are post- tax WACC, the implied pre-tax WACC has been subsequently calculated and
disclosed below.
Each reporting period, management compares the resulting cash flow projections by CGU to the carrying value of
goodwill. Any material variance in this calculation results in an impairment charge to the Consolidated Income
Statement. The following table sets out the key assumptions for those CGUs that have significant goodwill allocated to
them. The growth rate used varies between years, with the maximum growth rate shown in the table below. As well as
the following assumptions, EBITDA margin based on historic and latest forecasts have been used for each CGU and
100
Notes to the Consolidated Financial Statements continued
ranges from 10% to 21%. A long term growth rate of 1.9% based on CPI as at 31 March 2020 was used to extrapolate cash
flows beyond the budget period.
CGU
Ameo
Bene Agere
Deeson
FutureGov
Greenshoot Labs
Manifesto
Not Binary
Questers
Carrying value
31 March
2020
£’000
Annual
revenue
growth rate
%
Pre-tax
discount
rate
%
5,311
1,845
1,239
9,776
130
6,092
8,287
2,992
35,672
10.0%
12.5%
10.0%
12.5%
12.5%
10.0%
12.5%
12.5%
15.5%
14.8%
13.1%
14.5%
13.1%
13.1%
13.1%
18.8%
Based on the impairment review carried out at the end of 31 March 2020, the management believe that the projection
of cash flow from the CGUs exceeded the carrying value of the goodwill.
Sensitivity analysis:
Management concluded that the key factor for sensitivity analysis is the growth rate (revenue). The discount factor is
assumed to be easily determined by way of the known risk of the market and the cost of debt which is based on the
credit facility from HSBC at 2.5% plus LIBOR. If the existing annual revenue for each CGU falls by the following growth rate
shown in the table below, goodwill impairment would be required:
CGU
Ameo
Bene Agere
Deeson
FutureGov
Greenshoot Labs
Manifesto
Not Binary
Questers
Annual revenue growth/
(contract) rate
%
(11.6)%
(4.4)%
(36.0)%
(1.8)%
(39.0)%
(6.1)%
(6.0)%
(10.1)%
101
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Intangible assets
10.
Intangible assets are non-physical assets which have been obtained as part of an acquisition or research and
development activities, such as innovations, introduction and improvement of products and procedures to improve
existing or new products. All intangible assets have an identifiable future economic benefit to the Group at the point the
costs are incurred. Customer lists and brands are amortised over a maximum period of six years from the date of
acquisition.
Intangible assets
Cost
At 1 April 2018
Acquired on acquisition
At 31 March 2019
Additions
Acquired on acquisition
At 31 March 2020
Accumulated amortisation
At 1 April 2018
Charge for the year
At 31 March 2019
Charge for the year
At 31 March 2020
Carrying amount
At 31 March 2020
At 31 March 2019
11.
Investment in subsidiaries
As at 1 April 2018
Additions in the year
As at 31 March 2019
Additions in the year
As at 31 March 2020
Brand
£’000
Customer
Lists
£’000
Data base
£’000
Software (IP)
£’000
Software
£’000
Total
£’000
–
1,051
1,051
–
526
1,577
–
73
73
319
392
1,185
978
–
4,400
4,400
–
4,238
8,638
–
263
263
1,224
1,487
7,151
4,137
–
50
50
–
-
50
–
2
2
10
12
38
48
–
50
50
–
-
50
–
1
1
5
6
44
49
–
2
2
196
–
198
–
–
–
25
25
173
2
–
5,553
5,553
196
4,764
10,513
–
339
339
1,583
1,922
8,591
5,214
Accumulated
impairment
losses
£’000
–
–
–
–
–
Cost
£’000
–
32,499
32,499
22,453
54,952
Carrying
amount
£’000
–
32,499
32,499
22,453
54,952
Investments in Group undertakings are recorded at cost, which is the fair value of the consideration paid plus the fair
value of contingent consideration determined at the acquisition date.
102
Notes to the Consolidated Financial Statements continued
At 31 March 2020, the Company had the following subsidiaries:
Registered address
Principal activity
Companies
Country of
incorporation
Bene Agere Norden AS
Norway
Not Binary Limited
England & Wales
Manifesto Digital Limited England & Wales
Manifesto Digital Pty
Limited
Australia
Questers Global Group
Limited
England & Wales
Questers Resourcing
Limited
England & Wales
Questers Bulgaria EOOD
Bulgaria
Questers Techpark RS
Limited
Serbia
Deeson Group Holdings
Limited
England &
Wales
Deeson Group Limited
England & Wales
iDisrupted Limited
England & Wales
Greenshoot Labs Limited England & Wales
Human Plus Limited
England & Wales
FutureGov Limited
England & Wales
Postboks 573 Sentrum
O105 Oslo
141-143 Shoreditch
High Street, London,
E1 6JE
141-143 Shoreditch
High Street,
London, E1 6JE
Manifesto Australia
7 Winton Street
Warrawee NSW 2074
141-143 Shoreditch
High Street,
London, E1 6JE
141-143 Shoreditch
High Street,
London, E1 6JE
Sofia, 17 H. Ibsen Str., fl.5
BG175406553
Živka petrovića 52
11080 Beograd-Zemun
27 Castle Street,
Canterbury, Kent,
CT1 2PX
27 Castle Street,
Canterbury, Kent,
CT1 2PX
Platform, New Station
Street, Leeds, LS1 4JB
27 Castle Street,
Canterbury, Kent,
CT1 2PX
141-143 Shoreditch
High Street, London,
England, E1 6JE
Runway East
(Second Floor)
20 St. Thomas Street,
London, SE1 9RG
Strategic and management
consultancy with a focus on
digital transformation
Digital service consultancy
mainly in transformation,
software development, data
and automation
Shareholding
100%
100%1
Digital experience agency
100%
Digital experience agency –
Ceased trading in the year
Holding company
Provides dedicated highly skilled
IT teams from its technology
centre in Sofia, Bulgaria, a leading
European talent pool, to businesses
located in Europe and worldwide
100%2
100%3
100%
Bulgaria, a leading European talent
pool, to businesses located in Europe
and worldwide
100%
Dormant – Ceased trading in the year
100%
Holding company
Digital experience agency
100%
100%4
Publish content on websites/
magazines in the technology industry
and provide collaborative membership
in technology space
100%
IT development mainly in
conversational interfaces and AI
IT focus in Robotic Process
automation (RPA)
Digital and service design
consultancy
100%
100%
100%5
100%
FutureGov Australia Pty
Limited
Australia
Level 4, 29 Kiora Road,
Miranda NSW 2228
Dormant
1 Not Binary Limited owns 100% of Human Plus Limited
2 Manifesto Digital UK owns 100% Manifesto Australia
3 Questers Global Group Limited fully own Questers Resourcing Limited, Questers Techpark and Questers Bulgaria
4 Deeson Group Holdings Limited owns 100% of Deeson Group Limited
5 FutureGov Limited owns 100% of FutureGov Australia Pty Limited and US Creates Limited
103
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Companies
Country of
incorporation
US Creates Limited
England & Wales
Ameo Professional
Services Limited
England & Wales
12. Property, plant and equipment
Cost of assets
1 April 2018
Acquisition of subsidiaries
Additions
Disposals
At 31 March 2019
Depreciation
1 April 2018
Charge for the year
Disposal
At 31 March 2019
Net book value
At 31 March 2019
Cost of assets
At 1 April 2019
Acquisition of subsidiaries
Additions
Disposals
At 31 March 2020
Depreciation
Accumulated depreciation b/f
Charge for the year
Disposal
At 31 March 2020
Net book value
At 31 March 2020
At 31 March 2019
Registered address
Principal activity
Dormant
Shareholding
100%
Runway East
(Second Floor)
20 St. Thomas Street,
London, SE1 9RG
The Grange,
37 Alcester Road,
Studley,
Warwickshire B80 7LL
Strategic and management
consultancy focusing on digital
transformation
100%
IT equipment
£’000
Fixtures &
Fittings
£’000
Leasehold
Improvements
£’000
Total
£’000
–
295
33
(3)
325
–
45
–
45
–
185
–
–
185
–
23
–
23
–
67
25
(2)
90
–
14
–
14
76
–
43
8
(1)
50
–
8
–
8
42
162
280
IT equipment
£’000
Fixtures &
Fittings
£’000
Leasehold
Improvements
£’000
90
30
114
(34)
200
14
70
–
84
116
76
50
37
17
–
104
8
16
–
24
80
42
185
–
–
–
185
23
68
–
91
94
162
Total
£’000
325
67
131
(34)
489
45
154
–
199
290
280
104
Notes to the Consolidated Financial Statements continued
13. Leases
The Group leases various offices and office equipment. Rental contracts vary from rolling 3 month contracts to fixed
contracts up to several year.
Contracts may contain both lease and non-lease components. The Group allocates the consideration in the contract
to the lease and non-lease components based on their relative stand-alone prices. However, for leases of real estate
for which the Group is a lessee, it has elected not to separate lease and non-lease components and instead accounts
for these as a single lease component.
Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The
lease agreements do not impose any covenants other than the security interests in the leased assets that are held by
the lessor. Lease assets may not be used as security for borrowing purposes.
Until 31 March 2019, leases of property, plant and equipment were classified as operating leases. From 1 April 2019, leases
are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available
for use by the Group.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being
the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value
to the right-of-use asset in a similar economic environment with similar terms, security and conditions.
To determine the incremental borrowing rate, the Group uses recent third-party financing received by the individual
lessee as a starting point, adjusted to reflect changes in financing conditions since third party financing was received.
Amounts recognised in the Statement of Financial Position
13.1
Right-of-use assets relates to property rentals where the lease term is greater than 12 months in duration. Items that do
not meet the criteria of a right-of-use asset has been recorded in the income statement and is summarised below.
The Statement of Financial Position shows the following amounts relating to leases:
Right-of-use assets
Leased buildings
Lease liabilities
Current
Non-current
Maturity analysis
The maturity profile of the Group’s lease liabilities is as follows:
Within one year
In more than one year but less than two years
In more than two years but less than three years
Effect of discounting
Lease liability
2020
£’000
1,045
1,045
609
390
999
£’000
614
345
73
1,032
(33)
999
2019
£’000
–
–
–
–
–
£’000
–
–
–
–
–
105
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Right-of-use assets
Cost of assets
1 April 2019
Adjustment on adoption of IFRS 16
Additions
At 31 March 2020
Depreciation
1 April 2019
Charge for the year
At 31 March 2020
Net book value
At 31 March 2020
The income statement shows the following amounts relating to leases:
Amounts recognised in Consolidated Income Statement
Interest on lease liabilities
Expenses relates to short term leases
Expenses relating to leases of low-value assets, excluding short term leases of low-value assets
Amounts recognised in the Consolidated Statement of Cash Flows
Total cash outflow for leases
IAS 17 Operating leases
Leased
buildings
£’000
–
1,501
127
1,628
–
583
583
Total
£’000
–
1,501
127
1,628
–
583
583
1,045
1,045
2020
£’000
42
317
1
360
2020
£’000
629
2019
£’000
–
245
–
245
2019
£’000
–
The Group’s minimum non-cancellable lease payments relate to short term properties that do not meet the criteria of a
right-of-use asset under IFRS 16.
At 31 March 2020
At 31 March 2019
14. Trade and other receivables
Group
Trade receivables
Prepayments
Other receivables
Trade and other receivables
Due within 1 year
£’000
304
9
2020
£’000
7,734
335
521
8,590
Total
£’000
304
9
2019
£’000
3,426
176
316
3,918
Trade receivables at the reporting date comprise amounts receivable from the provision of the Group’s products and
services.
The average credit period taken on the provision of these services is 87 days (2019: 56 days).
The breakdown of the trade receivables by currency is explained under financial instrument section.
Trade receivables are non-interest bearing and generally have a 30 to 60 day payment term. The age of trade
receivables before impairment is as follows:
106
Notes to the Consolidated Financial Statements continued
Not yet due
Past due 1-30 days
Past due 31–60 days
Past due 61–90 days
Past due 91–120 days
Past due 121+ days
Trade receivables before impairment
Provision for bad debt
Trade receivables as at March
2020
£’000
5,694
1,800
174
96
(23)
75
2019
£’000
2,310
718
242
10
246
–
7,816
3,526
(82)
7,734
(100)
3,426
Loss rates are calculated based on actual credit losses over the past three years and adjusted to reflect differences
between the historical credit losses and the Group’s view of the economic conditions over the expected lives of the
receivables. The Group’s provision for the loss allowance is £82k (2019: £100k).
Company
Other receivables
Trade and other receivables
15. Cash and cash equivalents
Group
Cash at bank and in hand
£’000
£’000
183
183
2020
£’000
4,614
21
21
2019
£’000
5,650
Cash balances are held with a small number of counterparties, with high credit rating. Borrowings were taken out
during the year. These are discussed in note 17.
Company
Cash at bank and in hand
2020
£’000
147
2019
£’000
2,762
The Directors consider that the carrying amount of these assets is a reasonable approximation of their fair value. The
credit risk on liquid funds is limited because the counterparty is a bank with a high credit rating.
16. Trade and other payables
16.1 Current
Group
Trade payables
Accruals and other payables
Trade and other payables
Company
Trade payables
Accruals and other payables
Trade and other payables
2020
£’000
2,560
1,783
4,343
2020
£’000
236
258
494
2019
£’000
1,061
1,149
2,210
2019
£’000
57
253
310
17. Borrowings
The Group entered into a three year £5m revolving credit facility (“RCF”) with HSBC UK Bank Plc (“HSBC”) on 11 June 2019.
On the same day, £3.55m was drawn-down to pay a proportion of the cash consideration payable pursuant to the
acquisition of FutureGov Group. The remaining amount of £1.45m was drawn-down on 10 March 2020 in relation to the
acquisition of Ameo.
Interest is payable on a quarterly basis at a margin of 2.5% plus LIBOR.
107
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2
0
A
N
N
U
A
L
R
E
P
O
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&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
HSBC has taken security over The Panoply and all of the Group’s subsidiaries and their assets in connection with the RCF
Facility. The RCF Facility contains customary terms and covenants, including financial covenants.
Under the terms of the RCF facility, the Group is required to comply with the following financial covenants:
•
•
the adjusted leverage (based on adjusted EBITDA over net debt) should be less than 2 and
the interest cover taken as adjusted EBITDA over net finance costs must be not more than 4.
Adjusted EBITDA is taken on a proforma basis, assuming that all companies have been part of the Group for 12 months.
The Group has complied with these covenants throughout the reporting period. As at 31 March 2020, the adjusted
leverage was 0.11 and the interest cover was 31.
Group secured
Bank loans
Total secured borrowings
Group unsecured
Credit cards
Total unsecured borrowings
Total borrowings
Company secured
Bank loans
Total secured borrowings
Total borrowings
2020
£’000
5,000
5,000
29
29
5,029
2020
£’000
5,000
5,000
5,000
2019
£’000
–
–
–
–
–
2019
£’000
–
–
–
18. Assets and liabilities related to contracts with customers
All revenue relates to contracts with customers. The Group have a number of contracts where it receives payments
from customers based on a billing schedule. Revenue recognised in excess of invoices raised is included within contract
asset. Where amounts have been invoiced in excess of revenue recognised, the excess is included within contract
liability.
Group
Current contract asset
Loss allowance
Total contract asset
Contract liability
Total contract liability
2020
£’000
1,413
–
1,413
1,454
1,454
2019
£’000
232
–
232
406
406
Contract assets have increased mainly due to the acquisition of two new businesses in the year (see note 8) alongside
strong trading in the last three months of the year in line with the public sector procurement timeline. Similarly, contract
liabilities have increased due to overall contract activity where customers are paying in advance for performance
obligations that have yet to be satisfied.
Revenue recognised in relation to contract liabilities
The following table shows how much of the revenue recognised in the current reporting period relates to carried-
forward contract liabilities and how much relates to performance obligations that were satisfied in a prior year:
Group
Revenue recognised that was included in the contract liability taken over on acquisition
Revenue recognised that was included in the contract liability balance at the beginning
of the period
Revenue recognised from performance obligations satisfied in previous periods
2020
£’000
78
398
16
2019
£’000
126
–
–
108
Notes to the Consolidated Financial Statements continued
Unsatisfied long-term contracts
The majority customer contracts for the Group as at 31 March 2020 are 12 months or less. Long term contracts with
unsatisfied performance obligations as at 31 March 2020 is nil (2019: £486k).
19. Other taxes and social security costs
Group
Current Liability
Corporation tax
VAT
Other taxes and social security costs
Total
Current Asset
Corporation tax
VAT
Total
Company
Current Liability
Other taxes and social security costs
VAT
Total
Current Asset
VAT
Total
2020
£’000
861
1,471
669
3,001
2020
£’000
197
9
206
2020
£’000
33
124
157
2020
£’000
–
–
2019
£’000
609
573
357
1,539
2019
£’000
–
–
–
2019
£’000
19
–
19
2019
£’000
137
137
20. Gain/(loss) on the fair value movement of deferred and contingent consideration
The consideration payment of the acquired businesses includes deferred consideration, in the form of equity payment,
contingent upon certain results being achieved over relevant periods.
Group
Fair value at April 2019
Initial fair value for deferred contingent consideration on acquisitions in the year
Settlement of deferred consideration
Movement on fair value contingent consideration
Fair value at 31 March
Deferred consideration measured at amortised cost
Acquired as part of business combination
Settlement in the year
Amortised cost at 31 March
Total
Deferred and contingent consideration as at 31 March:
Deferred and contingent consideration due less than one year
Deferred and contingent consideration due more than one year
As at 31 March
2020
£’000
10,849
2,172
(240)
3,764
16,545
713
513
(1,088)
138
16,683
10,685
5,998
16,683
2019
£’000
–
10,795
–
54
10,849
713
–
–
713
11,562
3,270
8,292
11,562
109
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Company
Fair value at April 2019
Initial fair value for deferred contingent consideration on acquisitions in the year
Settlement of deferred consideration
Movement on fair value contingent consideration
Fair value at 31 March
Deferred consideration measured at amortised cost
Settlement in the year
Amortised cost at 31 March
Total
Deferred and contingent consideration as at 31 March:
Deferred and contingent consideration due less than one year
Deferred and contingent consideration due more than one year
As at 31 March
2020
£’000
10,849
2,172
(240)
3,764
16,545
713
(713)
–
16,545
10,547
5,998
16,545
2019
£’000
–
10,795
–
54
10,849
713
–
713
11,562
3,270
8,292
11,562
The fair value movement resulted from the fair value of the actual EBITDA to what was initially forecasted as part of the
consideration. The contingent consideration more than one year has a range of years due from 1 April 2021 to 31 March
2024.
As a result of the exceptional performance of Deeson for the 12 months to 30 September 2019 further consideration of
£0.96m is payable in respect of the acquisition of Deeson Group Holdings Limited in ordinary shares in the Group. These
shares are to be issued at the higher of 82.5p and the prevailing market price at the time. This is payable in four
tranches on publication of the 30 September 2019 half year results, over a period of 18 months. The initial tranche of
£0.24m was paid in December 2019. In order to incentivise the management team of Deeson we have increased the
cap of total consideration from £3.6m to £4.1m.
21. Share capital and reserves
Share capital and reserves comprise of the following categories:
•
•
•
•
•
•
Share capital: The nominal value of shares in issue.
Share premium: The excess of the value received for shares issued over their nominal value less transaction costs
and amounts used to fund bonus issues.
Capital redemption reserve: The nominal value of shares cancelled.
Foreign exchange reserve: Cumulative gains or losses recognised on retranslation of overseas operations.
Share-based payment reserve: The cumulative charge recognised under international financial reporting
standards less amounts exercised.
Retained earnings: Cumulative gains or losses not recognised elsewhere
Shares issued and fully paid
Beginning of year
Issued during year
Shares issued and fully paid
Share capital allotted, called up and fully paid
Ordinary shares of £0.01 each
At 31 March
2020
£’000
423
128
551
2019
£’000
–
423
423
2020
2019
55,052,267
42,295,147
110
Notes to the Consolidated Financial Statements continued
Movement in ordinary shares
Opening balance 1 April 2018
Share issue during the year (between May 18 to November 18)
Bonus shares (October 18 and November 18)
Share cancellation (October 18)
Shares at placing (IPO) (December 18)
Acquisition of subsidiaries (between December 18 to January 2019)
Less transaction costs arising on share issues
As at 31 March 2019
Acquisition of subsidiaries (between June 2019 and March 2020)
Settlement of contingent consideration (December 2019)
As at 31 March 2020
Number of shares
thousands
Par value
£’000
Share
premium
£’000
10.5
13.8
15,502
(481)
6,757
20,493
42,295
12,466
291
55,052
–
–
155
(5)
68
205
–
423
125
3
551
490
660
(155)
–
4,932
15,106
(254)
20,779
10,461
237
31,477
Total
£’000
490
660
–
(5)
5,000
15,311
(254)
21,202
10,586
240
32,028
The share price with reference to the acquisitions in the year ranged from 82.0p to 86.5p. The settlement of contingent
consideration in the year relates to the prior year acquisition of Desson Group Holdings. The consideration payable is
calculated based on the performance of Deeson Group Holdings for the 12 months to 30 September 2019. These shares
will be issued in 4 tranches over an 18 month period, with the first tranche issued in December 2019
22. Deferred tax
Deferred tax liability
Accelerated capital allowances and intangible assets arising from acquisition of subsidiaries:
As at 1 April
Deferred tax arising from acquisition of subsidiaries
Changed in deferred tax rate
Movement in income statement for the year
As at 31 March
Deferred tax is recognised at 19% (2019: 17%).
Deferred tax asset
Accelerated capital allowances:
As at 1 April
Deferred tax arising on acquisition of subsidiaries
Movement in income statement for the year
As at 31 March
Tax losses
Unused tax losses for which no deferred tax asset has been recognised
2020
£’000
925
903
77
(282)
1,623
2019
£’000
–
989
–
(64)
925
2020
£’000
2019
£’000
14
–
(14)
–
2020
£’000
691
–
(3)
17
14
2019
£’000
1,500
Potential tax benefit available for offset against future profits in the jurisdiction in which
the loss arises.
131
533
Ultimate controlling party and related party transactions
23.
In the opinion of the Directors there is no ultimate controlling party. All other transactions and balances with related
parties, which are presented for the Group and the Company, are detailed below.
Transaction Company (to and from) subsidiaries:
Transactions with subsidiaries
(i)
Transactions with subsidiaries comprise sale and purchase of services in the ordinary course of business at normal
commercial terms. Total income accrued in the Company as a result of management fee was £1,231k (2019: £365k).
During the year the Company received £1,678k (2019: £5,438k) dividends from its subsidiaries (refer to Company
111
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Statement of Cash Flow). There was also purchases totalling £169k (2019: £2k). Intercompany loans to and from
subsidiaries for the year are noted in the table below.
Balances outstanding at 31 March 2020 and 2019 in respect of the transactions between Company and its subsidiaries
are shown below:
Outstanding balances between Company and subsidiaries
Other receivables from Group undertakings
Intercompany loans to Group undertakings*
Intercompany loans from Group undertakings
Total
2020
£’000
760
577
(3,227)
(1,890)
2019
£’000
365
263
–
628
*Intercompany loans are interest free loans to subsidiaries which are repayable on demand. As at 31 March 2020, the
balance was £1,027k (2019: £263k) with a provision of £450k (2019: £nil).
In addition, the Company owed £2k (2019: £8k) to subsidiaries which is included within the trade payables.
The expected credit loss on intercompany receivables and loans are £450k based on actual credit losses over the past
three years and adjusted to reflect differences between the historical credit losses and the Company’s view of the
economic conditions over the expected lives of the receivables. The Company’s provision for the loss allowance as at
31 March 2020 was £450k (2019: £nil).
Transaction amongst subsidiaries:
(ii)
Transactions with subsidiaries comprise sale and purchase of services in the ordinary course of business at normal
commercial terms. Total intercompany sales excluding to parent Company were £853k (2019: £58k).
Transactions with Directors
Details of Directors’ interests in the Company’s shares, service contracts and remuneration are set out in the report of
the Board to the members on Remuneration report on pages 55 and 56. .
During the year ending 31 March 2020 there were no payments made by the Group to Growth Company FD Limited (a
company controlled by Oliver Rigby) (2019: £63k). The director’s loan provided to Neal Gandhi of £50k in the year ending
31 March 2019 from its subsidiary, Questers Resourcing Limited remains outstanding as at 31 March 2020.
In the prior year, the Group acquired Not Binary Limited. Neal Gandhi and Oliver Rigby owned shares in Not Binary
Limited totalling 5 per cent and 1 per cent respectively. The fair value of deferred contingent consideration shares due to
the directors is valued at £383k (£325k being deferred consideration less than one year and £58k due from 31 March
2021 to 31 March 2022).
In the prior year, the Group acquired Questers Global Group Limited. Neal Gandhi owned shares in Questers Global
Group Limited totalling 46.2 per cent. The fair value of deferred contingent consideration shares due to him is valued at
£1,450k (£528k being deferred consideration less than one year and £922k due from 31 March 2021 to 31 March 2022).
24. Financial instruments
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. The significant accounting policies regarding financial instruments are disclosed in Note 2.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows:
•
•
•
•
•
•
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred and contingent consideration
Lease liabilities
Borrowings
112
Notes to the Consolidated Financial Statements continued
Financial assets and liabilities measured at amortised cost
The book values of the financial instruments (excluding equity shares) used by the Group, from which financial risk
arises, are as follows (note prepayments and other receivables are not financial assets under IFRS 9 but are disclosed
for ease of reconciliation):
Group
Financial assets at amortised cost*
Trade receivables
Prepayments
Other receivables
Cash and cash equivalents
As at 31 March
2020
£’000
7,734
335
521
4,614
13,204
2019
£’000
3,426
176
316
5,650
9,568
Financial assets at amortised cost include the following debt investments which is included within ‘Other receivables’:
Loans to related parties
As at 31 March
2020
£’000
50
50
2019
£’000
50
50
*The fair value of financial assets carried at amortised cost approximates to the carrying amounts because of the short
maturity of these instruments.
Financial liabilities at amortised cost less than one year
Trade payables
Other payables
Accruals
Borrowings
Deferred and contingent consideration
Lease liabilities
As at 31 March
Financial liabilities at amortised cost greater than one year
Borrowings
Lease liabilities
As at 31 March
2020
£’000
2,560
756
1,027
29
138
609
5,119
2020
£’000
5,000
390
5,390
2019
£’000
1,061
660
489
–
713
–
2,923
2019
£’000
–
–
713
At a Company level, the principal financial instruments used from which financial instrument risk arises, are as follows:
•
•
•
•
•
•
Intercompany loans and other receivables due from Group undertakings
Cash and cash equivalents
Trade and other payables
Deferred and contingent consideration
Borrowings
Intercompany loans due to Group undertakings
Company
Financial assets at amortised cost
Other receivables
Other receivables from Group undertakings
Intercompany loans to Group undertakings*
Cash and cash equivalents
As at 31 March
2020
£’000
183
760
577
147
1,667
2019
£’000
21
365
263
2,762
3,411
113
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Financial liabilities at amortised cost due on demand or within one year
Trade payables
Accruals and other payables
Deferred consideration
Amounts owed to Group undertakings
As at 31 March
Financial liabilities at amortised cost due greater than one year
Borrowings
As at 31 March
Fair value measurement
2020
£’000
236
258
–
3,227
3,721
2020
£’000
5,000
5,000
2019
£’000
57
253
713
–
1,023
2019
£’000
–
–
Financial instruments in the category “fair value through profit or loss” are measured in the Consolidated Statement of
Financial Position at fair value. Fair values of financial instruments are recognised and measured of measurements are
disclosed by level of the following fair value measurement hierarchy:
•
•
•
Level 1 – Quoted prices (unadjusted) in an active market for identical assets or liabilities
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for assets or liability, either
directly (that is, as prices) or indirectly (that is, derived from prices)
Level 3 – Inputs for asset or liability that are not based on observable market data (that is unobservable inputs)
The following table presents the Group’s and Company’s assets and liabilities that are measured at fair value at
31 March 2020:
Level 1
£’000
–
Level 2
£’000
–
2020
Level 3
£’000
16,545
Level 1
£’000
–
Level 2
£’000
2019
Level 3
£’000
–
10,849
Group and Company
Contingent consideration (See below)
Reconciliation for level 3 is shown below:
Opening balance
Additions
Settlements
Fair value movement deferred contingent consideration (reflected in Consolidated
Income Statement)
Deferred contingent consideration (See Note 20)
25. Risk management
The Group finances its activities through equity and bank financing. No speculative treasury transactions are
undertaken, and no derivative contracts were entered into. Financial assets and liabilities include those assets and
liabilities of a financial nature, namely cash and borrowings. The Group is exposed to a variety of financial risks arising
from its operating activities, which are monitored by the Directors and are reported in the Risk and Risk Management
section on pages 40 to 43.
25.1 Cash and liquidity risk
The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs and to
invest cash assets safely and profitably. The Group policy throughout the year has been to ensure continuity of funding
by a combination available bank facility and the issue of equity. The following table shows the contractual maturities of
financial liabilities measured at amortised cost:
2020
£’000
10,849
2,172
(240)
3,764
16,545
2019
£’000
–
10,795
–
54
10,849
114
Notes to the Consolidated Financial Statements continued
Contractual maturities of financial liabilities at 31 March 2020:
Group
Company
Less than
1 year
£’000
1 to
Effect of
2 to
2 years 5 years discounting
£’000
£’000
£’000
Total
£’000
Less than
1 year
£’000
1 to
Effect of
2 to
2 years 5 years discounting
£’000
£’000
£’000
Trade and other
payables
Borrowings (Note 17)
Deferred consideration
(Note 20)
Lease liabilities
(Note 13)
Amount owed to Group
undertakings
4,343
173
–
–
– 4,343
144
5,048
(336) 5,029
138
614
–
–
345
–
–
73
–
–
138
(33)
999
–
–
5,268
489
5,121
(369) 10,509
Contractual maturities of financial liabilities at 31 March 2019:
Total
£’000
494
494
144
–
–
3,227
3,721
–
–
144
5,048
(336) 5,000
–
–
–
–
–
–
–
–
3,227
144
5,048
(336) 8,721
6 months
or less
£’000
2,152
713
2,865
Group
6 to 12
months
£’000
58
–
58
Total
£’000
2,210
713
2,923
6 months
or less
£’000
255
713
968
Company
6 to 12
months
£’000
55
–
55
Total
£’000
310
713
1,023
Trade and other payables
Deferred consideration (Note 20)
25.2 Capital risk management
Covid-19
The macro economic impact of the Covid-19 pandemic is uncertain, and continues to evolve, with potential disruption
to financial markets including to currencies, interest rates, borrowing costs and the availability of debt financing.
However, the Group’s financial risk management strategies seek to reduce our potential exposure in relation to these
risks.
The Group has a combined cash and cash equivalent of £4.6m, providing significant headroom over short term liquidity
requirements.
The Group’s operating activities result in customer credit risk, for which provisions for expected credit losses are
recognised. This customer related credit risk is generally short term in duration and while Covid-19 impacts on our
customers had no material impact on credit loss provisioning at 31 March 2020 there remains a risk in relation to this
matter for the year ending 31 March 2021.
The Group’s policy on capital structure is to maintain a level of gross cash available, which the Board considers to be
adequate to fund a range of potential EBITDA movements, taken from a series of business projections and scenarios.
Based on these business projections which takes into account the impact of Covid-19 the Board believes it has
sufficient cash resources at its disposal to pursue its chosen strategy of maximising shareholder returns from its
customer base.
The Group manages its capital to ensure that trading entities in the Group will be able to continue as going concerns,
while maximising the returns to shareholders through the organisation of cash and equity balances. The capital
structure of the Group consists of cash at bank and in hand and equity attributable to equity holders of the parent,
comprising issued share capital, reserves and retained earnings as disclosed in the Consolidated Statement of
Changes in Equity on page 72.
The Directors seek to promote recurring revenues to a wide range of business customers, to reduce the risks associated
with fluctuations in the UK economy and to increase the long-term value to customers and shareholders.
The declaration and payment by the Group of any future dividends on the Ordinary Shares and the amount will depend
on the results of the Group’s operations, its financial condition, cash requirements, future prospects, profits available for
distribution and other factors deemed to be relevant at the time. In order to maintain or adjust the capital structure, the
Group may adjust the amount of any pay-outs to the shareholders, return capital to the shareholders, issue new shares
and make borrowings or sell assets to reduce debt.
115
2
0
2
0
A
N
N
U
A
L
R
E
P
O
R
T
&
A
C
C
O
U
N
T
S
I
F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Due to the ongoing risks with Covid-19, the Director are not proposing a dividend for financial year ended 31 March 2020.
The Board will regularly review the appropriateness of its dividend policy.
25.3 Credit risk
The Group’s policy is to monitor trade and other receivables and avoid significant concentrations of credit risk. The
principal credit risk arises from trade receivables. Aged receivables reports are reviewed monthly as a minimum. The
credit control function follows a policy of sending reminder letters that start once an invoice is over 30 days overdue.
These culminate in a legal letter with the threat of legal action. In a limited number of cases, legal action has been
pursued. An aged analysis of receivables is shown in Note 14 to the financial statements.
In line with IFRS 9, the Group assesses the credit risk balances at each reporting date, to assess whether the credit risk
on a financial instrument has increased significantly since initial recognition. The simplified approach has been applied
to trade debtors to measure the loss allowance at an amount equal to the lifetime expected credit loss (ECL) at initial
recognition and throughout its life. The credit risk is assessed by reviewing the contract income amount compared to
the amount subsequently recovered. The Group does not identify specific concentrations of credit risk with regards to
trade and other receivables, as the amounts recognised represent a large number of receivables from various
customers, including some government authorities. Assessment of the average expected credit loss across the Group is
deemed to be nil over a period of 36 months to 31 March 2020 with the exception of Questers. The bad debt provision as
at 31 March 2020 was assessed to be £82k. Trade receivables are stated net of an impairment for estimated
irrecoverable amounts of £7.7m (2019: £3.4m). This impairment has been determined by reference to known issues.
Write-offs are made when the irrecoverable amount becomes certain. During the year £82k of bad debt was written off
against the provision which relates to pre-acquisition of Questers. The Group’s main risk relates to trade receivables
which are stated net of the provisions above. No collateral is held as security against these debtors and the carrying
value represents the fair value.
The expected loss rates are based on the payment profiles of sales over a period of 36 months before 31 March 2020
and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to
reflect current and forward- looking information on macroeconomic factors affecting the ability of the customers to
settle the receivables. The group has identified that the GDP and the unemployment rate of the countries in which it
sells its goods and services are the most relevant factors, and accordingly adjusts the historical loss rates based on
expected changes in these factors.
25.4 Foreign currency risk
The Group’s main foreign currency risk is the short-term risk associated with accounts receivable and payable
denominated in currencies that are not the subsidiaries functional currency. The risk arises on the difference in the
exchange rate between the time invoices are raised/received and the time invoices are settled/paid. For sales
denominated in foreign currencies the Group will try to ensure that the purchases associated with the sale will be in the
same currency. Most monetary assets and liabilities of the Group were denominated in pound sterling except for the
following currency in the table below, and which are included in the financial statements at the sterling value based on
the exchange rate ruling at the Statement of Financial Position date.
Sensitivity analysis in foreign exchange rates show an increase or decrease by 10% with all other variables held
constant, the net assets attributable to shareholders would increase or decrease by approximately £181k (2019: £208k).
The maximum exposure to foreign currency risk for the Group trade receivables at the reporting date was:
Norwegian Krone (NOK)
European Union currency (EUR)
United States of America Dollar (USD)
As at 31 March
2020
£’000
248
181
40
469
2019
£’000
230
–
–
230
116
Notes to the Consolidated Financial Statements continued
The maximum exposure to foreign currency risk for Group cash and cash equivalent at the reporting date by was:
European Union currency (EUR)
Norwegian Krone (NOK)
Australian Dollar (AUD)
Bulgarian Lev (BGN)
Serbian Dinar (RSD)
United States of America Dollar (USD)
As at 31 March
2020
£’000
150
475
–
–
58
13
2019
£’000
15
1,064
56
38
1
21
696
1,195
The maximum exposure to foreign currency risk for the Group trade and other payables at the reporting date was:
USD
EUR
NOK
AUD
RSD
BGN
As at 31 March
2020
£’000
12
90
441
–
–
103
646
2019
£’000
–
–
336
3
1
310
650
25.5 Interest rate risk
In the year ended 31 March 2020, the Group has taken out an RCF facility of £5m denominated in GBP. The facility has
been taken out on a floating rate basis (LIBOR) for a period of 3 years up to June 2022. Interest rate risk arises on the
change in LIBOR which affects the interest payable the interest payable by the Group.
Sensitivity analysis in interest rates show that with an increase in 100 basis points, with all other variables held constant,
the net assets attributable to shareholders would increase or decrease by approximately £7k. Management periodically
reviews the interest rates with lenders to manage the interest rate risk associated with the loans.
26. Non-cash investing and financing activities
Non-cash investing and financing activities disclosed in other notes are:
•
•
Partial settlement of a business combination through the issue of shares (see note 8)
Acquisition of right-of-use assets (see note 13)
Net debt reconciliation
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Group
Liabilities from financing activities
Net cash at 1 April 2018
Cash flows
Net cash as at 31 March 2019
Recognised on adoption of IFRS 16 (see note 13)
Net (debt)/cash as at 1 April 2019
New leases
New borrowings
Loans acquired on acquisition
Cash flows
Net (debt)/cash at 31 March 2020
Borrowings
£’000
Leases
£’000
Sub-total
£’000
Cash/bank
overdraft
£’000
–
–
–
–
(5,029)
(507)
507
(5,029)
–
–
(1,501)
(1,501)
(127)
–
–
629
(999)
–
–
(1,501)
(1,501)
(127)
(5,029)
(507)
1,136
(6,028)
126
5,524
5,650
–
5,650
–
–
–
(1,036)
4,614
Total
£’000
126
5,524
5,650
(1,501)
4,149
(127)
(5,029)
(507)
100
(1,414)
Cash has decreased in the year as a result of acquisitions completed in the year offset by an increase in trading and
cash acquired on acquisition.
Company
Liabilities from financing activities
Borrowings
£’000
Intercompany
loans
£’000
Sub-total
£’000
Cash/bank
overdraft
£’000
Net cash at 1 April 2018
Cash flows
Net cash as at 31 March 2019
New borrowings
New borrowings - non cash items
Cash flows
–
–
–
(5,000)
-
–
–
–
–
(1,000)
(2,227)
–
–
–
–
(6,000)
(2,227)
–
Net (debt)/cash at 31 March 2020
(5,000)
(3,227)
(8,227)
126
2,636
2,762
–
-
(2,615)
147
Total
£’000
126
2,636
2,762
(6,000)
(2,227)
(2,615)
(8,080)
Cash has decreased in the year as a result of acquisitions completed in the year where the Company utilised cash
reserves to pay for the consideration due.
27. Post-balance sheet events
The Panoply Holdings Plc acquired Arthurly Limited on the 10 June 2020. Further details are disclosed in note 8.1.
The Group agreed a £1.5m overdraft facility with HSBC on 7 May 2020.
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118
Directors, Secretary and Advisers
Registered Auditor
Nexia Smith & Williamson
25 Moorgate,
London EC2R 6AY
Bankers
HSBC UK Bank plc
4th Floor,
3 Temple Quay,
Bristol BS1 6DZ
Handelsbanken
Staines Upon Thames Branch,
Staines upon Thames TW18 3BA
Registrars
Neville Registrars
Neville House,
Steelpark Road,
Halesowen B62 8HD
Directors
Mark Smith
Non-Executive Chairman
Chris Sweetland
Non-Executive Director
Isabel Kelly
Non-Executive Director
Neal Gandhi
Chief Executive Officer
Oliver Rigby
Chief Financial Officer
Secretary
Oliver Rigby
Company number
10533096
Registered office
141-143 Shoreditch High Street,
London E1 6JE
Nominated adviser and broker
Stifel Nicolaus Europe Ltd
150 Cheapside,
7th Floor,
London EC2V 6ET
Solicitors
Harbottle & Lewis LLP
14 Hanover Square,
London W1S 1HP
First Floor,
141-143 Shoreditch High St,
London E1 6JE
www.thepanoply.com