RNS Number : 6036S
Merit Group PLC
17 November 2021
 

17 November 2021

                                                                                                  

("Merit", the "Company" or "the Group")

 

UNAUDITED INTERIM RESULTS TO 30 SEPTEMBER 2021

Merit Group plc (AIM: MRIT), the data and intelligence business, announces its unaudited interim results for the half year ending 30 September 2021.

Financial Highlights

·    Strong year on year growth in Net Income, Gross Margin and Earnings;

·    Adjusted EBITDA of £1.3m (H1 2021 Adjusted EBITDA loss of £0.2m)

·    Recovery on track with first half loss before tax falling by £2.0m to £0.6m; (H1 2021 loss £2.6m);

·    Operating cash inflow, before deferred liabilities and exceptional items, of £0.6m; (H1 2021 £0.2m inflow);

·    Cash balance of £2.8m and Net Debt of £1.8m as at 30 September, against total debt facilities of £4.6m.

 

 

 

 

 

H1 2022

Restated* H1 2021

 

 

30 Sept 21

30 Sept 20

 

Total revenue

£12.3m

£10.2m

+21%

Net Income 1

£10.8m

£9.4m

+15%

Gross margin

39%

31%

+26%

Adjusted EBITDA  2

£1.3m

(£0.2m)

N/A

Adjusted EBIT 3

(£0.3m)

(£1.9m)

-84%

Loss before tax

(£0.6m)

(£2.6m)

-77%

Adjusted basic EPS4

(0.33p)

(8.55p)

+8.22p

Basic EPS

(3.10p)

(12.88p)

+9.78p

 

 

1. Net income is total revenue less pass through cost directly related to provision of services to customers.

2.  Adjusted EBITDA is calculated as earnings before interest, tax, depreciation, amortisation of intangible assets, share based payments and non-recurring items.

3. Adjusted EBIT is calculated as operating profit (loss) less non-recurring costs.

4. Adjusted EPS is loss attributable to shareholders add back non-recurring items, amortisation of intangible assets acquired via business combinations, net exchange difference and share based payment expenses.

*Details of the restatement are found on note 14 on page 22 under the header of "Condensed consolidated statement of financial position".

Operational Highlights

·    Continued investment in technology to drive growth, including new investment and commercial agreements with DataWorks and the development of a new Political Intelligence technology platform which is progressing well and on track to launch in H2;

·    Completion of strengthened new management team with David Beck confirmed as CEO and joined the Board in September 2021, and the arrival of a new CFO, Philip Machray, in October and joining the Board today;

·    Strong overall recovery with further anticipated in the second half as some parts of the business were still being impacted by Covid-19 restrictions in H1;

·    Good progress towards targeted significant reduction in UK property overhead.

 

 

Mark Smith, Chairman of Merit Group plc, said;

"The recovery in trading we saw in the second half of the last financial year has continued into FY22. We are confident Merit is trading in line with market expectations for EBITDA in the full year. The newly strengthened management team are making good progress in addressing the key drivers that will improve the Group's prospects and returns to shareholders."

 

For further information, please contact: 

 

Merit Group plc

Mark Smith - Non-Executive Chairman                                            020 7593 5500

David Beck - CEO

www.meritgroupplc.com

 

 

Canaccord Genuity Limited (Nomad and Broker)

Bobbie Hilliam                                                                                     020 7523 8150

Georgina McCooke

 

This announcement is released by Merit Group plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"), and is disclosed in accordance with the Group's obligations under Article 17 of MAR.

 

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Group by David Beck, Chief Executive Officer.

 

 

 

 

 

 

BUSINESS AND OPERATIONAL REVIEW

 

The interim results are in line with market expectations, despite some residual impact from the ongoing global pandemic. Adjusted EBITDA of £1.3m in the first half compared to a first half EBITDA loss of £0.2m in the prior year, driven by both higher revenue and improvements in gross margin.

 

Strategy

 

The Group's strategy is built around using technology to provide high quality data and intelligence to its customers. Through a combination of technology led data capture and delivery, tight cost controls and a focus on growth markets we are seeking to grow gross margins in both our operating divisions; Merit Data & Technology and Dods.

 

Merit Data & Technology

 

Merit Data & Technology uses its proprietary technology, including machine learning and Artificial Intelligence (AI) to enhance industry intelligence and marketing data.  The business, which was acquired by the Group in 2019, has longstanding customers that provide the business with high levels of recurring revenue. We provide a range of data and intelligence products and services to largely UK based customers.

 

Merit Data & Technology reported an Adjusted EBITDA of £1.0m in the first half against £0.7m in the same period in the previous year.

 

The strength of customer relationships and the nature of the work undertaken allowed the Merit Data & Technology division to continue to trade well through the worst of the pandemic, with only its marketing data segment being significantly affected, as clients were restricted in their ability to hold face to face events.

 

The software and technology resourcing part of Merit Data & Technology operates in a particularly buoyant market for people with technology skills. Growth in this segment has been tempered by a significant shortage of supply of good people which has led to both recruitment issues and wage inflation.

 

The industry data segment has secured new 'big data' projects in the pharmaceutical and publishing spaces and developed new products. We are particularly pleased to have increased our footprint with large existing clients including Lexis Nexis, the biggest division of Relx and Informa Intelligence. Expansion of our work for existing clients is a strong vote of confidence in our delivery, we have further projects under consideration with both companies.

 

The investment in DataWorks announced earlier in the year is progressing with advanced user testing underway and a comprehensive marketing plan in place for launch later in the financial year.

 

Dods

 

The Dods business comprises a leading political intelligence offering that has approximately 1,400 customers; a media portfolio of influential political titles largely delivered online; an events business that supports our clients in their engagement with political audiences and a growing training business aimed at both the UK civil service and international NGOs.

 

In the first half Dods made an adjusted EBITDA of £0.2m, after central overheads of £0.5m, against a loss of £0.9m in the same period last year. All areas of the business grew revenues, with particularly strong recovery in the events and training businesses.

 

Political Intelligence is at the centre of the Dods business, we are an industry leader with an enviable reputation for the comprehensiveness of our service and the quality of analysis we provide customers. In the second half of the current financial year we will complete the upgrade of our online platform to enhance the user experience and allow our customers to derive even more value from the service we provide through tailored reports and consultancy.

 

Our media business earned a higher proportion of revenue from online advertising and growing user numbers for our websites, notably Politics Home www.politicshome.com, our political news website, which now averages 500,000 unique users per month. We have four other core media properties, three centred around the workings of parliaments; The House, Holyrood and The Parliament, and Civil Service World an essential source of news and analysis for those that work in the UK civil service.

 

The Dods events business has recovered from the most severe impacts of the pandemic however it has further to go to achieve a full recovery as customers still have concerns, and face some ongoing restrictions, on full scale face to face events. We ran a number of successful and high profile events during the half including the NHS awards in June. We saw the return of in person events at the political party conferences, and our prestigious annual Holyrood Garden Party returned in September.

 

Dods' Training business has also recovered quickly and recent strong sales activity gives us increasing confidence that there is further growth to come from this segment.  In the first half we won a significant three year training contract with the Welsh Government.

 

London Premises

 

The Group has targeted to make significant overhead savings by reducing its real estate costs in London where we are halfway through a ten year lease in The Shard. Since the period end the Company has agreed its five year rent review with its Landlord at a net effective rent of £66.50 per sq ft (representing a 1% per annum increase). The Group and its property advisers believe this new rent and the certainty of having concluded our mid lease review will improve our ability to assign or sublet the space we currently occupy in The Shard.

 

Board Appointments

 

David Beck was confirmed as CEO and joined the Board in September. The Board are pleased to announce that Philip Machray, who joined the Company as CFO in October 2021, has today been appointed to the Board. The Company can confirm that save as disclosed in the announcement on 7 September 2021, there is no further information to be disclosed in relation to Philip Machray's appointments pursuant to AIM Rule 17 or paragraph (g) of Schedule Two of the AIM Rules for Companies.

 

Simon Bullock will be stepping down from the Board following release of today's interim results. Cornelius Conlon, was appointed CTO in September in recognition of the importance the Board places on the Group continuing to develop innovative and market leading technologies.

 

Outlook

 

The Group is confident of meeting market expectations for EBITDA in the full year. Our growth prospects beyond the current year are underpinned by investments we have been making in our businesses. Our market leading political intelligence service will benefit from a major platform upgrade. Our data business continues to win new clients in new sectors and is confident of entering the very large e-commerce sector, enabled by the Group's strategic investment in DataWorks made earlier this year.

 

 

David Beck

CEO

Merit Group plc                                                          

 

 

FINANCIAL REVIEW    

 

Income Statement

 

The Group's revenue increased by 21% to £12.3m (H1 2021: £10.2m).

 

Revenues from Merit Data and Technology increased by £0.1m (2%). Dods revenue increased by 38% from £5.2m to £7.2m. The increase is largely attributable to Events (from £0.2m to £1.4m), Training (from £0.4m to £0.9m) and Media (from £1.1m to £1.6m).

 

During the period gross profit increased by 47% to £4.8m (H1 2021: £3.2m). Gross margin increased from 31% to 39% in the period.

 

Adjusted EBITDA increased by £1.5m to £1.3m (H1 2021: £0.2m EBITDA loss) Other operating income was £44k (H1 2021: £0.5m), as less staff were on furlough and supported the improvement in revenue. Operating loss fell by £1.8m to £0.5m (H1 2021: £2.3m loss), after a right-of-use assets charge of £0.7m (H1 2021: £0.7m), an amortisation on acquired intangibles under business combinations of £0.4m (H1 2021: £0.4m), a charge of £0.2m (H1 2021: £0.2m) for intangible assets amortisation, a charge of £0.3m (H1 2021: £0.3m) for depreciation of tangible assets and non-recurring costs of £0.2m (H1 2021: £0.5m). 

 

Net finance costs have decreased for the period to £0.2m (H1 2021: £0.3m) reflecting favourable foreign exchange movements.

 

Adjusted earnings per share, basic and diluted, in the period were a loss of 0.33 pence and 0.33 pence respectively (H1 2021: loss of 8.55 pence) and were based on the adjusted loss for the period of £0.1m (H1 2021: £1.7m loss) with a weighted average number of shares in issue during the period of 20,788,375 (diluted 20,844,161).

 

Earnings per share, both basic and diluted, from continuing operations in the period were a loss of 3.10 pence (H1 2021: loss of 12.88 pence) and were based on the loss after tax for the period of £0.6m (H1 2021: loss of £2.6m).

 

Whilst the Company's focus remains on cash preservation and repositioning the business for future growth, the Board is not proposing a dividend (H1 2021: £nil).

 

Going Concern

 

The Directors assessed the Group's prospects, both as a going concern and its longer term viability, at the time of approval of the Group's 2021 Annual Report. Further information is set out on page 19 of the 2021 Annual Report.  At the half year, the directors have reviewed the going concern assessment, including the ongoing impact of Covid-19 and the mitigating actions in place to manage cost and cash flow. Having regard to the financial position of the Group, it's cash, liquidity position and borrowing facilities as detailed further in the Statement of Financial Position, the Directors are satisfied that the Group is able to continue to meet its financial liabilities as they fall due for the foreseeable future. Accordingly, the Directors have adopted the going concern basis of accounting in the preparation of the Group's interim results report.

 

 

Statement of Financial Position

 

Assets

 

Non-current assets consisted of goodwill of £28.9m (FY 2021: £28.9m), intangible assets of £10.4m (FY 2021: £10.4m) and tangible fixed assets of £2.1m (FY 2021: £2.2m).

 

The Group holds a 40% stake in the issued share capital of Sans Frontières Associates (SFA) with a carrying amount of £0.2m (FY 2021: £0.2m) and has loaned SFA £0.4m (FY 2021: £0.6m) at the period end. The loan is unsecured and carries no interest charge. Additionally, the Group holds a 30% stake in Social 360 at cost of £0.5m (FY 2021: £0.5m). The Group acquired a 10.9% stake in DataWorks Ltd for £0.5m during the period.

 

The Group had a cash balance of £2.8m (FY 2021: £5.6m) and gross borrowings of £4.5m at the period end (FY 2021: £4.6m).

 

Total assets of the Group were £58.2m (FY 2021: £60.7m) with the main movements being a reduction in cash and cash equivalents of £2.8m and an increase in investments in associate of £0.5m for DataWorks Ltd investment.

 

Equity and Liabilities

 

The Group has a bank term loan of £2.6m (FY 2021: £2.6m). The current amount due is £0.5m (FY 2021: £0.3m) and non-current is £2.0m (FY 2021: £2.4m). The loan has a repayment schedule through to June 2024. The Group also has a RCF loan facility of £2.0m available through to December 2023.  This RCF facility was fully drawn throughout the period and stood at £2.0m at the period end (FY 2021: £2.0m). Due to its revolving nature, this loan is all shown as due within one year.

 

Current liabilities fell by £1.1m to £16.3m (FY 2021: £17.4m). Excluding the term loan and RCF, the current liabilities decreased primarily because of payments of £0.5m of VAT, paid between April 2021 and September 2021, which was deferred from FY21 under an arrangement made available as part of the UK Government's support for businesses impacted by Covid-19. Deferred VAT at the period end was £0.9m (FY21 £1.4m).

 

Deferred tax liability was £0.2m (FY 2021: £0.2m).

 

Total equity reduced by £0.6m to £33.4m (FY 2021: £34.0m), reflecting the loss for the period.

 

Liquidity and capital resources

 

Net cashflow from operating activities amounted to a £0.3m outflow in the period (H1 2021 £0.7m outflow) as operating cashflows were utilised in the repayment of operating liabilities deferred from prior periods in response to Covid-19.  The total net movement in working capital of £1.4m during the period , reflected a reversal of some of the working capital measures taken during FY21 in response to Covid-19, including £0.5m partial repayment of the deferred VAT liability. Operating liabilities of £1.0m in relation to these measures remain deferred at the period end.

 

Operating cash inflow, before repayment of deferred liabilities and exceptional items amounted to £0.6m; (H1 2021 £0.2m inflow).

 

The cash position at the period end was £2.8m (H2 2021: £4.1m). As at 30 September 2021 the Group had a net debt position of £1.8m (H1 2021: net cash £1.1m).

 

On 30 June 2021 the Group agreed revised facilities with Barclays Bank which included:

 

·    Term Loan: reduced payments in the current year with offsetting increases in subsequent years although no increase in overall duration of the loan; a change in pricing from 3.25% above LIBOR to 3.75% above the Bank of England interest rate;

·    RCF: a change in pricing, effective January 2022; from 3.50% above LIBOR to 4.00% above the Bank of England interest rate;

·    Covenants: revised leverage and debt service covenants with effect from 1 April 2021 for the balance of the facility (June 2024);

·    Cash: the requirement to maintain a minimum cash balance, across the Group, of £0.5m.

 

 

 

Simon Bullock

Chief Financial Officer

 

 

 

Condensed consolidated income statement

For the half year ended 30 September 2021

 

 

 

 

 

 

 

 

Note

Unaudited

Half year ended

30 Sept 2021

£'000

Restated Unaudited

Half year ended

 30 Sept 2020

£'000

Audited

Year ended

31 Mar 2021

£'000

 

 

 

 

 

Revenue

 

2

 

12,338

 

10,227

24,690

 

Cost of sales

 

 

(7,565)

(7,051)

(16,402)

 

Gross profit

 

 

4,773

 

3,176

 

8,288

 

 

 

 

 

Administrative expenses*

 

(3,566)

(3,873)

(6,979)

Other operating income

3

44

500

688

 

Adjusted EBITDA

 

1,251

(197)

1,997

Depreciation of tangible fixed assets*

 

(273)

(297)

(612)

Depreciation of right-of-use assets*

 

(660)

(704)

(1,330)

Amortisation of intangible assets acquired through business combinations*

 

(431)

(426)

(862)

Amortisation of software intangible assets*

 

(184)

(228)

(488)

Total administrative expense(1)

 

(5,114)

(5,028)

(10,271)

Non-recurring items

4

 

 

 

         People-related costs

 

(158)

(415)

(995)

         Other non-recurring items

 

 

(20)

(35)

(210)

 

Operating loss

 

(475)

(2,302)

(2,500)

 

 

 

 

 

Net finance costs

 

(171)

(300)

(669)

Share of profit of associate

 

 

-

-

56

Loss before tax

 

(646)

(2,602)

(3,113)

 

 

 

 

 

Income tax credit

 

 

-

3

389

 

Loss for the period

 

 

(646)

(2,599)

(2,724)

 

 

 

Loss per share (pence)

 

Basic

5

(3.10p)

(12.88p)

(13.28p)

 

Diluted

 

5

(3.10p)

(12.88p)

(13.28p)

 

(1)    Total of all line items marked (*)

 

The notes on pages 15 to 23 form part of these unaudited interim results.

 

Restatement:

-       £500k of other operating income has been reclassed from "Administrative expenses" and shown separately in "Other operating income" to bring into conformity with the FY21 Annual report, the £500k relates to the UK Governments Coronavirus Job Retention scheme. This has no impact on the prior results and is only a reclassification. Previously "Administrative expenses" was stated as £3,373k and "other operating income" as £nil.

-       £272k has been restated within Non-recurring items to "people related costs", previously was part of "Non-recurring acquisition costs and professional fees". This has no impact on the prior results and is only a reclassification. Previously "Non-recurring acquisition costs and professional fees" was £272k and "people related costs" was £143k.

 

Condensed consolidated statement of comprehensive income

For the half year ended 30 September 2021

 

 

 

 

 

Unaudited

Half year ended

30 Sept 2021

£'000

Unaudited

Half year ended

 30 Sept 2020

£'000

Audited

Year ended

31 Mar 2021

£'000

 

Loss for the period

 

(646)

 

(2,599)

 

(2,724)

 

 

 

 

Items that may be subsequently reclassified to Profit and loss

 

 

 

Exchange differences on translation of foreign operations

 

28

117

(19)

Remeasurement of defined benefits obligation

20

-

(45)

Other comprehensive income for the period

48

117

(64)

Total comprehensive loss for the period

(598)

(2,482)

(2,788)

 

The notes on pages 15 to 23 form part of these unaudited interim results.

 

 

 

 

 

                                                                                      

 

 

 

 

Condensed consolidated statement of financial position

As at 30 September 2021

 

 

 

 

Note

Unaudited

30 Sept 2021

£'000

Restated* Unaudited

30 Sept 2020

£'000

Audited

31 Mar 2021

£'000

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill

6

28,911

28,845

28,911

Intangible assets

7

10,358

11,042

10,449

Property, plant and equipment

8

2,082

1,879

2,184

Right-of-use asset

 

6,541

7,412

6,688

Investment in associates

 

1,167

690

717

Long-term loan receivable

 

-

560

-

Total non-current assets

 

49,059

50,428

48,949

 

 

 

 

 

Current assets

 

 

 

 

Work in progress and inventories

 

119

434

36

Trade and other receivables

 

5,786

5,544

5,584

Loan receivable

 

420

-

560

Cash and cash equivalents

 

2,804

4,100

5,565

Total current assets

 

9,129

10,078

11,745

 

 

 

 

 

Total assets

 

58,188

60,506

60,694

 

 

 

 

 

Capital and reserves

 

 

 

 

Issued capital

10

5,821

19,501

19,501

Share premium

 

-

20,866

20,866

Merger reserves

 

-

415

409

Retained profit/(loss)

 

13,958

(6,473)

(6,671)

Redemption reserve

 

13,680

-

-

Share option reserve

 

58

85

58

Other reserves

 

(25)

-

(45)

Translation reserve

 

(52)

(72)

(80)

Total equity

 

33,440

34,322

34,038

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

10,966

12,495

12,582

Pension obligation

 

78

54

73

Deferred consideration

 

1,046

1,046

1,046

Bank loan & RCF

 

2,541

857

2,253

Lease liability

 

1,680

1,515

1,467

Total current liabilities

 

16,311

15,967

17,421

 

 

 

 

 

Non-current liabilities

 

 

 

 

Deferred tax liability

 

222

862

222

Pension obligation

 

146

84

166

Bank loan

 

2,024

2,143

2,378

Lease liability

 

6,045

7,128

6,469

Total non-current liabilities

 

8,437

10,217

9,235

 

 

 

 

 

Total equity and liabilities

 

58,188

60,506

60,694

 

The notes on pages 15 to 23 form part of these unaudited interim results.

 

*Restatements:

·      "Trade and other payables" from £12,633k to £12,495k due to the separate disclosure of the "Pension obligation", the difference of £138k is now shown as a separate line item "Pension obligation" of £54k in "Current liabilities" and £84k in "Non-current liabilities". Previously "Pension obligation" was not separately disclosed.

·      Upon the acquisition of Meritgroup Limited the Company became obligated, under certain conditions, to make payments to two employees, these were originally recorded in "Deferred consideration" and "Trade and other receivables" effectively grossing up the balance sheet assets and liabilities, however subsequently it was decided this is not the correct treatment as these are contingent liabilities. "Deferred consideration" of £272k has been removed from both "Current liabilities" and "Non-current Liabilities" restating the balance from £1,318k to £1,046k and £272k to £nil respectively. "Trade and other receivables" have also been reduced by £544k from £6,088k to £5,544k.

 

Due to the above restatements the balances of "Current assets" have changed from £6,088k to £5,544k, "Total assets" from £61,050k to £60,506k. "Current liabilities" has changed from £16,323k to £15,967k and "Non-current liabilities" from £10,405k to £10,217k, "Total equity and liabilities" has changed from £61,050k to £60,506k.

 

 

Condensed consolidated statement of changes in equity

For the half year ended 30 September 2021

 

 

 

 

 

Issued capital

£'000

 

 

Share premium reserve1

£'000

 

 

 

Merger reserve2

£'000

 

 

Retained earnings

£'000

 

 

Redemption

reserve

£'000

 

 

Share option reserve4

£'000

 

 

 

Other reserve

£'000

 

 

Translation reserve3

£'000

 

Total shareholders' funds

£'000

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At 1 April 2020

19,239

20,082

409

(3,991)

-

75

-

(61)

35,753

Total comprehensive income

 

 

 

 

 

 

 

 

 

      Loss for the period

-

-

-

(2,482)

-

-

-

-

(2,482)

Transactions with owners

 

 

 

 

 

 

 

 

 

      Issue of ordinary shares

262

784

-

-

-

-

-

-

1,046

Other comprehensive loss

 

 

 

 

 

 

 

 

 

Currency translation differences

-

-

6

-

-

-

-

(11)

(5)

Share-based payment

-

-

-

-

-

10

-

-

10

At 30 September 2020

19,501

20,866

415

(6,473)

-

85

-

(72)

34,322

 

 

 

 

 

 

 

 

 

 

At 1 April 2021

19,501

20,866

409

(6,671)

-

58

(45)

(80)

34,038

Total comprehensive income

 

 

 

 

 

 

 

 

 

      Loss for the period

-

-

-

(646)

-

-

 

-

(646)

Currency translation             Differences

-

-

-

-

 

-

 

-

 

-

28

28

Remeasurement of defined benefits obligations

-

-

-

-

 

-

-

 

20

-

20

Total comprehensive income

 

 

 

 

 

 

 

 

598

Transactions with owners

 

 

 

 

 

 

 

 

 

      Issue of ordinary shares

-

-

-

-

-

-

-

-

-

Other comprehensive loss

 

 

 

 

 

 

 

 

 

Share consolidation

(13,680)

(20,866)

(409)

21,275

13,680

-

-

-

-

Share-based payment

-

-

-

-

-

-

-

-

-

At 30 September 2021

5,821

-

-

13,958

13,680

58

(25)

(52)

33,440

1    The share premium reserve represents the amount paid to the Company by shareholders above the nominal value of shares issued.

2    The merger reserve represents accounting treatment in relation to historical business combinations.

3    The translation reserve comprises foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities into sterling.

4    The share option reserve represents the cumulative expense recognised in relation to equity-settled share-based payments.

 

The notes on pages 15 to 23 form part of these unaudited interim results.

 

 

Condensed consolidated statement of cash flows

For the half year ended 30 September 2021

 

 

 

 

 

 

 

 

Unaudited

Half year ended

30 Sept 2021

£'000

Restated* Unaudited

Half year ended

30 Sept 2020

£'000

Audited

Year ended

31 Mar 2021

£'000

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

Loss for the period

 

(646)

(2,599)

(2,724)

Depreciation of property, plant and equipment

 

273

297

612

Depreciation of right-of-use assets

 

660

704

1,330

Amortisation of intangible assets acquired through business combinations

 

431

426

862

Amortisation of other intangible assets

 

184

228

488

Share-based payments charge

 

-

10

27

Share of profit of associate

 

-

-

(56)

Lease interest expense

 

195

228

422

Net finance (income) / costs

 

(24)

62

247

Income tax credit

 

-

(3)

(389)

Operating cash flows before movement in working capital

 

1,073

(647)

819

Change in inventories

 

(83)

(161)

237

Change in trade and other receivables

 

(202)

1,720

852

Change in trade and other payables

 

(1,137)

388

670

Cash generated by operations

 

(349)

1,300

2,578

Taxation paid

 

(85)

3

-

Net cash from operating activities

 

(434)

1,303

2,578

Cash flows from investing activities

 

 

 

 

Interest and similar income received

 

7

-

16

Additions to property, plant and equipment

 

(127)

(304)

(662)

Additions to intangible assets

 

(568)

(196)

(561)

Investment in associates

 

(450)

(29)

-

Repayment of loan by associate

 

140

-

-

Net cash used in investing activities

 

(998)

(529)

(1,207)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Interest and similar expenses paid

 

(87)

(300)

(262)

Payment of lease liabilities

 

(913)

(579)

(1,181)

Payment of lease interest

 

(280)

(177)

(362)

Net proceeds from bank loan

 

-

-

2,000

Repayment of bank loan

 

(101)

-

(369)

Net cash from / (used in) financing activities

 

(1,381)

(1,056)

(174)

Net decrease in cash and cash equivalents

 

(2,813)

(282)

1,197

Opening cash and cash equivalents

 

5,565

4,368

4,368

Effect of exchange rate fluctuations on cash held

 

52

14

-

Closing cash at bank

 

2,804

4,100

5,565

Comprised of:

 

 

 

 

Cash and cash equivalents

 

2,804

4,100

5,565

Closing cash at bank

 

2,804

4,100

5,565

 

The notes on pages 15 to 23 form part of these unaudited interim results.

 

*Restatement of "Non-recurring acquisition costs and professional fees" from £450k to £nil in "Cash flows from operating activities", and from (£272k) to £nil in "Cash flows from Investment activities" as these should not have been included in the condensed consolidated statement of cashflows. Restatement of "Change in trade and other payables" from £210k to £388k. As a result of the restatements the line items of "Non-recurring acquisition costs and professional fees" have been removed from presentation.

 

Restatement of "Payment of lease liabilities" previously (£756k) and "Payment of lease Interest" previously £nil, the new presentation has the payment now split between the two lines, no impact in the overall "Cash flow from financing activities".

 

Due to the above: "Operating cashflows before movement in working capital" restated from (£197k) to (£647k). "Cash generated by operations" restated from £1,572k to £1,300k. "Net cash from operating activities" restated from £1,575k to £1,303k. "Net cash used in investing activities" restated from (£801k) to (£529k).

                                                           

 

 

Notes to the condensed consolidated financial statements
For the half year ended 30 September 2021

 

 

1.    Basis of preparation                             

                                                                                                                               

Merit Group plc is a Company incorporated in England and Wales.          

                                                  

This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the UK. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) in conformity with the requirements of the Companies Act 2006.  As required by AIM Rules, the condensed set of financial statements has been prepared, and applying accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 March 2021.

 

The comparative figures for the year ended 31 March 2021 have been extracted from the Group's statutory accounts for that financial period.  Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies.  The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006. The comparative figures for the six months ended 30 September 2021 have been restated, see note 14 for details.

 

The taxation charge for the six months ended 30 September 2021 is based on the utilisation of accumulated tax losses.

 

Going concern

 

The Directors have considered the financial projections of the Group, including cash flow forecasts and the availability of committed bank facilities for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.

 

Accounting estimates and judgements

 

The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the interim financial statements and concluded that the main areas of judgement and estimates are:

 

Significant Financial Judgements

·    Going concern

·    Recognition of deferred tax assets

·    Capitalisation of development costs

·    Accounting for acquisitions

·    Identification of cash generating units for goodwill impairment testing

·    Non-recurring administrative expenses

·    Contingent cash pay-out

·    Investments

 

Significant Financial Estimates

·    Carrying value of goodwill

·    Bad debt allowance

·    Pensions

 

The condensed set of interim financial statements have been prepared on a going concern basis and were approved by the Board on 16 November 2021

 

2.    Segmental information

                                                                                                                                 

Business segments 

                                                                                                           

The Group considers that it has two operating business segments, Dods and Merit Data & Technology.

 

Dods business segment concentrates on the provision of key information and insights into the political and public policy environments around the UK and the European Union.

 

The Merit Data & Technology segment focuses on the fields of data engineering, machine learning, and artificial intelligence.

 

The following table provides an analysis of the Group's segment revenue by business segment.

 

Unaudited

 Half year ended

30 Sept 2021 £'000

 

Unaudited

Half year ended

30 Sept 2020

£'000

Audited

Year ended

31 Mar 2021

£'000

 

 

 

 

Dods

 

7,227

5,210

14,394

Merit Data & Technology

 

5,111

5,017

10,296

 

 

12,338

10,227

24,690

 

No client accounted for more than 10 percent of total revenue.

 

 

Group Revenue by stream

Unaudited

 Half year

ended

30 Sept

2021

£'000

 

Unaudited

Half year ended

30 Sept 2020

£'000

Audited year ended

31 Mar 2021

£'000

 

 

 

 

Political Intelligence

3,425

6,839

Events

207

2,952

Training

437

1,616

Media

1,141

2,987

Industry Intelligence

1,922

3,586

Marketing Data

1,031

2,239

Software & Technology Resourcing

1,416

2,875

BPO

 

648

1,596

 

 

12,338

10,227

24,690

 

 

 

 

 

Dods business segment profit before tax

Unaudited

 Half year

ended

 

30 Sept

2021

£'000

 

Restated

Unaudited

Half year ended

30 Sept 2020

£'000

Audited year ended

 

 

 2021

£'000

 

Adjusted EBITDA

 

209

(893)

503

Depreciation of tangible fixed assets

(205)

(182)

(392)

Depreciation of right-of-use assets

(396)

(368)

(753)

Amortisation of intangible assets acquired through business combinations

(176)

(176)

(351)

Amortisation of software intangible assets

(114)

(228)

(488)

Non-recurring items

 

 

 

         People-related costs

(158)

(415)

(995)

         Other non-recurring items

 

(20)

(35)

(168)

Operating loss

(860)

(2,297)

(2,644)

Net finance Cost

(185)

(191)

(424)

Share of profit of associate

-

-

56

Loss before tax

(1,045)

(2,488)

(3,012)

 

Restated: £272k has been restated within Non-recurring items to "people related costs", previously was part of "Non-recurring acquisition costs and professional fees". This has no impact on the prior results and is only a reclassification. Previously "Non-recurring acquisition costs and professional fees" was £272k and "people related costs" was £143k.

 

 

Merit business segment profit before tax

Unaudited

 Half year ended

30 Sept 2021 £'000

 

Dods Unaudited

Half year ended

30 Sept 2020

£'000

Audited year ended 2021

£'000

 

Adjusted EBITDA

 

1,042

696

1,494

Depreciation of tangible fixed assets

(68)

(115)

(220)

Depreciation of right-of-use assets

(264)

(336)

(577)

Amortisation of intangible assets acquired through business combinations

(255)

(250)

(511)

Amortisation of software intangible assets

(70)

-

-

Non-recurring items

 

 

 

         Non-recurring acquisition costs and professional fees

-

-

-

         People-related costs

-

-

-

         Other non-recurring items

 

-

-

(42)

Operating profit/(loss)

385

(5)

144

Net finance Cost

14

(109)

(245)

Share of profit of associate

-

-

-

Profit/(loss) before tax

399

(114)

(101)

 

Total loss from both segments for H1 2022 equal to £646k which is equal to the total Group's loss before tax as shown in the income statement.

 

3.    Other operating income

 

During the period the Group participated in the UK Government's Coronavirus Job Retention Scheme (CJRS) for its London and Edinburgh based employees.

 

The Group has accounted for this scheme using the accrual model; all amounts received are recognised as Other Income in the Condensed Consolidated Income Statement. There are no unfulfilled conditions and other contingencies attaching to the government assistance.

 

The number of employees who were put on the CJRS varied from month to month up to a maximum of 10. Total amount received during the period was £41,000 (H1 2021: 69 employees and £500,000).

 

In August 2021 the Group also received a grant from the Scottish Government. The grant was issued by the Pivotal Event Businesses Fund (the Issuer) and was for £2,500 (H1 2021: £nil).

 

Again, the Group has accounted for this scheme using the accrual model; all amounts received are recognised as Other Income in the Consolidated Income Statement.

 

4.    Non-recurring items

 

Unaudited

 Half year ended

30 Sept 2021

£'000

 

Restated Unaudited

Half year ended

30 Sept 2020

£'000

Audited

Year ended

31 Mar 2021

£'000

 

 

 

 

People-related costs

 

158

415

995

Other

 

 

 

    - Professional services and consultancy

 

20

-

85

    - Other

-

35

125

 

 

178

450

1,205

 

Restated: £272k has been restated within Non-recurring items to "people related costs", previously was part of "Non-recurring acquisition costs and professional fees" which is now £nil. Previously "Non-recurring acquisition costs and professional fees" was £272k and "people related costs" was £143k.

 

5.    Earnings per share

 

Unaudited

 Half year ended

30 Sept 2021

£'000

 

Unaudited

Half year ended

30 Sept 2020

£'000

Audited

Year ended

31 Mar 2021

£'000

 

 

 

 

Loss attributable to shareholders

 

(646)

(2,599)

(2,724)

Add: non-recurring items

 

178

450

1,205

Add: amortisation of intangible assets acquired through business combinations

 

431

426

862

Add: net exchange (gains) / losses [included within net finance costs]

 

(32)

(12)

68

Add: share-based payment expense

 

-

10

27

Adjusted post-tax profit / (loss) attributable to shareholders

(69)

(1,725)

(562)

 

 

Unaudited

 Half year ended

30 Sept 2021

Ordinary shares

 

Restated Unaudited

Half year ended

30 Sept 2020

Ordinary shares

Restated

Year ended

31 Mar 2021

Ordinary shares

 

 

 

 

Weighted average number of shares

 

 

 

 

In issue during the period - basic

 

20,788,375

20,170,945

20,512,125

Adjustment for share options

 

55,786

59,358

57,870

In issue during the period - diluted

 

20,844,161

20,230,303

20,569,995

 

 

Unaudited

 Half year ended

30 Sept 2021

Pence per share

 

Restated Unaudited

Half year ended

30 Sept 2020

Pence per share

Restated

Year ended

31 Mar 2021

Pence per share

 

 

 

 

Earnings per share - continuing operations

 

 

 

 

Basic

(3.10)

(12.88)

(13.28)

Diluted

(3.10)

(12.88)

(13.28)

Adjusted earnings per share - continuing operations

 

 

 

 

Basic

(0.33)

(8.55)

(2.74)

Diluted

(0.33)

(8.55)

(2.74)

 

Prior periods have been restated per IAS 33 due to share consolidation and subdivision and ordinary shares of 1p were consolidated and subdivided reducing the number of shares by a factor of 28 and increasing the value of the shares to 28p

 

6.    Goodwill

 

Unaudited

 Half year ended

30 Sept 2021

£'000

 

Unaudited

Half year ended

30 Sept 2020

£'000

Audited

Year ended

31 Mar 2021

£'000

 

 

 

 

Cost and net book value

 

 

 

 

Opening balance

 

28,911

28,911

28,911

Reclass to intangibles

-

(66)

-

Closing balance

28,911

28,845

28,911

 

 

7.    Intangible assets

 

 

 

Assets acquired through business combinations

 

 

Software

 

Under Construction Capitalised Costs

 

 

Total

 

£'000

 

£'000

£'000

£'000

 

 

 

 

 

Cost

 

 

 

 

 

At 1 April 2020

 

28,042

3,715

1,304

33,061

Additions - internally generated

 

-

200

316

516

Additions - other

-

45

-

45

Reclass to Software

-

874

(874)

-

 

At 31 March 2021

 

 

28,042

 

4,834

746

 

33,622

Reclass to PPE

-

-

(44)

(44)

Additions - internally generated

 

-

22

546

568

At 30 September 2021

28,042

4,856

1,248

34,146

 

Accumulated amortisation

 

 

 

 

 

At 1 April 2020

 

18,421

3,402

-

21,823

Charge for the year

 

862

488

-

1,350

 

At 31 March 2021

 

19,283

3,890

-

23,173

Charge for the period

 

431

184

-

615

At 30 September 2021

19,714

4,074

-

23,788

 

Net book value

 

 

 

 

 

 

At 31 March 2020 - audited

 

 

9,621

 

313

1,304

 

11,238

 

At 31 March 2021 - audited

 

 

8,759

 

944

746

 

10,449

At 30 September 2021 - unaudited

8,328

782

1,248

10,358

 

8.    Property, plant and equipment

 

 

 

 

 

Leasehold Improvements

Equipment and Fixtures and Fittings

 

 

 

Total

 

 

£'000

 

£'000

£'000

 

 

 

 

 

Cost

 

 

 

 

 

At 1 April 2020

 

 

2,025

1,714

3,739

Additions

 

 

12

650

662

Disposals

 

-

(109)

(109)

 

At 31 March 2021

 

 

 

2,037

 

2,255

 

4,292

Additions

 

 

-

127

127

Reclass from Intangible

 

-

44

44

At 30 September 2021

 

2,037

2,426

4,463

 

Accumulated depreciation

 

 

 

 

 

At 1 April 2020

 

 

 

692

 

913

 

1,605

Charge for the year

 

 

226

386

612

Disposals

 

-

(109)

(109)

 

At 31 March 2021

 

 

 

918

 

1,190

 

2,108

Charge for the period

 

 

105

168

273

At 30 September 2021

 

1,023

1,358

2,381

 

Net book value

 

 

 

 

 

 

At 31 March 2020 - audited

 

 

 

1,333

 

801

 

2,134

 

At 31 March 2021 - audited

 

 

 

1,119

 

1,065

 

2,184

At 30 September 2021 - unaudited

 

1,014

1,068

2,082

 

 

 

 

 

 

9.    Interest-bearing loans and borrowings

                                                                                    

On the 30 June 2021 the Group agreed revised facilities with Barclays Bank which included:

 

·    Term Loan: reduced payments in the current year with offsetting increases in subsequent years although no increase in overall duration of the loan; a change in pricing from 3.25% above LIBOR to 3.75% above the Bank of England interest rate;

·    RCF: a change in pricing, effective January 2022; from 3.50% above LIBOR to 4.00% above the Bank of England interest rate;

·    Covenants: revised leverage and debt service covenants with effect from 1 April 2021 for the balance of the facility (June 2024);

·    Cash: the requirement to maintain a minimum cash balance, across the Group, of £0.5m.

 

In the 12 month period from the balance sheet date capital repayments of £2.5m is due be repaid to the bank with the remaining £2.0m due in subsequent periods.

 

During the period, the Group maintained a term loan of £3m (H1 2021: £3m), over a 5-year period carrying a rate of 3.75% over Bank of England interest rate. The balance outstanding on the term loan at 30 June 2021 is £2.6m.

 

In addition, the Group has accessed a credit facility (RCF) of £2.0m carrying a rate of 4.0% above the Bank of England rate. The current balance outstanding on the RCF is £2.0m.

 

In total the Group has a £2.0m RCF liability and £2.6m term loan liability at the balance sheet date.

 

10.  Share Capital

 

9p* deferred shares

Number

28p* ordinary shares

Number

Total

£'000

 

 

 

 

Issued share capital as at 1 April 2021

151,998,453

582,071,380

19,501

Share consolidation & subdivision*

-

(561,283,005)

-

Cancellation of deferred shares

(151,998,453)

-

13,680

Issued share capital as at 30 Sept 2021

 

-

20,788,375

5,821

 

*Deferred shares of 9p were cancelled and ordinary shares of 1p were consolidated and subdivided reducing the number of shares by a factor of 28 and increasing the value of the shares to 28p.

 

11.  Related party transactions

 

During the period, the Group received a repayment of £140,000 (H1 2021: £nil) on its interest free loan to its associate Sans Frontieres Associates (SFA). At 30 September 2021 the balance of this loan was £420,000 (H1 2021: £560,000).

 

During the period, an amount of £55,166 (H1 2021: £29,753) was payable to an associate, Social 360 Limited, in relation to profit-share for monitoring services provided. At 30 September 2021, £55,166 (H1 2021: £nil) was outstanding.

 

On acquisition of Merit, an arm's length non-repairing 7-year lease was entered into between a Merit subsidiary (Letrim Intelligence Services Private Limited) and Merit Software Services Private Limited. Con Conlon, a director of the Group, is the beneficial owner of Merit Software Services Private Limited. The lease relates to the Chennai office of Merit. During the period, payments of £305,000 (H1 2021: £339,000) were made to Merit Software Systems Private Limited in relation to the lease.

 

In addition, Con Conlon was paid £220,000 due to his continued employment, post-acquisition (see note 12).

 

12. Contingent Liabilities

 

Upon the acquisition of Meritgroup Limited the Company became obligated, under certain conditions, to make payments to two employees. In the period £272,000 was paid.

 

A further payment of £272,000 could become due in July 2022 contingent upon their continued employment.

 

13. Subsequent events

 

On 1 October 2021 the Company issued 1,675,749 ordinary shares related to the acquisition of Merit. The Company issued 854,732 ordinary shares of the 1,675,749, to Con Conlon, Managing Director of the Merit Data & Technology division.

 

On 1 October 2021 the Company issued 1,492,000 ordinary shares related to capital fundraising for the company raising £931,000.

 

The shares were issued on the 1 October 2021 at 62.4pence per share, bringing the total issued share capital of the Group to 23,956,124.

 

14. Restatements

 

The flowing restatements have been made to H1 2021 throughout the interim accounts and have been disclosed throughout, for ease of use all the restatement have been listed below:

 

Condensed consolidated income statement:

 

·    £500k of other operating income has been reclassed from "Administrative expenses" and shown separately in "Other operating income" to bring into conformity with the FY21 Annual report, the £500k relates to the UK Governments Coronavirus Job Retention scheme. This had no impact on the prior results and is only a reclassification. Previously "Administrative expenses" was stated as £3,373k and "Other operating income" as £nil.

·    £272k has been restated within Non-recurring items to "people related costs", previously was part of "Non-recurring acquisition costs and professional fees". This had no impact on the prior results and is only a reclassification. Previously "Non-recurring acquisition costs and professional fees" was £272k and "people related costs" was £143k.

 

Condensed consolidated statement of financial position:

 

·    "Trade and other payables" from £12,633k to £12,495k due to the separate disclosure of the "Pension obligation", the difference of £138k is now shown as a separate line item "Pension obligation" of £54k in "Current liabilities" and £84k in "Non-current liabilities". Previously "Pension obligation" was not separately disclosed.

·    Upon the acquisition of Meritgroup Limited the Company became obligated, under certain conditions, to make payments to two employees, these were originally recorded in "Deferred consideration" and "Trade and other receivables" effectively grossing up the balance sheet assets and liabilities, however subsequently it was decided this is not the correct treatment as these are contingent liabilities. "Deferred consideration" of £272k has been removed from both "Current liabilities" and "Non-current Liabilities" restating the balance from £1,318k to £1,046k and £272k to £nil respectively. "Trade and other receivables" have also been reduced by £544k from £6,088k to £5,544k.

 

Due to the above restatements the balances of "Current assets" have changed from £6,088k to £5,544k, "Total assets" from £61,050k to £60,506k. "Current liabilities" has changed from £16,323k to £15,967k and "Non-current liabilities" from £10,405k to £10,217k, Total equity and liabilities from £61,050k to £60,506k.

 

Condensed consolidated statement of cash flows:

 

·    "Non-recurring acquisition costs and professional fees" from £450k to £nil in "Cash flows from operating activities", and from (£272k) to £nil in "Cash flows from Investment activities" as these should not have been included in the condensed consolidated statement of cashflows. Restatement of "Change in trade and other payables" from £210k to £388k. As a result of the restatements the line items of "Non-recurring acquisition costs and professional fees" have been removed from presentation.

·    Restatement of "Payment of lease liabilities" previously (£756k) and "Payment of lease Interest" previously £nil, the new presentation has the payment now split between the two lines, no impact in the overall "Cash flow from financing activities".

 

 

Due to the above: "Operating cashflows before movement in working capital" restated from (£197k) to (£647k). "Cash generated by operations" restated from £1,572k to £1,300k. "Net cash from operating activities" restated from £1,575k to £1,303k. "Net cash used in investing activities" restated from (£801k) to (£529k).

 

 

 

 

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
 
END
 
 
IR UNRRRABUAAUA