Drumz Plc - Final Results
PR Newswire
London, April 19
This announcement contains inside information for the purposes of Article 7 of the UK version of Regulation (EU) No 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
20 April 2022
Drumz plc
(the “Company” or the “Group”)
Final results for the year ended 31 December 2021
Drumz plc (AIM: DRUM) the investing company focused on building value in technology, is pleased to announce its final results for the year ended 31 December 2021.
Highlights
- In the year the Company focused on developing the business of Acuity Risk Management Limited (“Acuity”), the award winning cybersecurity software company.
- The Group is considering several new investment opportunities.
Angus Forrest, Chief Executive commented on the results:
“The Company has focused on its first investment, Acuity, much has been achieved to develop and manage the business and its infrastructure for future growth. Risk management and cybersecurity are areas of increasing interest to all organisations of scale, government, private and public organisations. We look forward to Acuity growing its business and are optimistic about its future.”
Annual General Meeting
COVID 19 - Whilst there are currently no restrictions on social contact or meeting, the Board believes it is important that the welfare of shareholders and employees is protected and to minimise public health risks. Shareholders are encouraged to exercise their voting rights by completing and submitting a Form of Proxy in advance of the meeting, appointing the Chairman of Annual General Meeting as proxy rather than a named person. Shareholders are asked not to attend the AGM if they are displaying symptoms of COVID-19 or have had recent contact with anyone who has tested positive.
If there are changes to the UK Government guidelines or regulations which limit gatherings and meetings, new arrangements will be notified to shareholders through the Company’s website www.drumzplc.com and as appropriate through an announcement by the Company on the Regulatory Information Service.
| For further information please contact: | |
| Drumz Plc | www.drumzplc.com |
| Angus Forrest | +44 (0) 20 3582 0566 |
| WH Ireland (NOMAD & Broker) | www.whirelandcb.com |
| Mike Coe / Sarah Mather | 020 7220 1666 |
| Peterhouse Capital Limited (Joint broker) | |
| Lucy Williams / Duncan Vasey | 020 7469 0936 |
Chairman’s Statement
I am pleased to present the results of Drumz for the year ended 31 December 2021.
Results and performance
The Group’s results for the year ended 31 December 2021 showed revenues of £44,000 (2020: £12,000) and an operating loss of £239,000 (2020: loss £149,000).
At the year end, the principal asset of the Group is its investment in Acuity Risk Management Limited (“Acuity”), valued at cost of £625,000. The Group’s original investment was made in September 2020 and Drumz exercised its option to acquire another 5% of Acuity’s equity for £125,000 in September 2021.
Acuity is an award winning business, specialising in risk management for cybersecurity. Acuity’s proprietary software platform STREAM™ provides its blue chip customer base, on a Software as a Service (“SaaS”) basis, with a comprehensive view of critical business risk and compliance on an enterprise wide basis. During the year, Acuity has widened its distribution channels including completing a new partnership agreement with an established developer, distributor and implementor of automated risk management software in the USA. Further details on the progress achieved by Acuity are included in the Chief Executive’s report.
In addition, the Group continues to own its legacy holding in KCR Residential REIT plc (‘KCR’), which owns property in the private rented residential sector, in particular blocks of studio, one and two bedroom apartments which are rented to private tenants in the UK.
The share price of KCR stands at a significant discount to the stated net assets per share. Notwithstanding, the share price performance of KCR has again been disappointing over the year and as a result, the value of the KCR holding has declined further from £573,000 to £390,000, equating to an unrealised loss of £183,000. I am also disappointed to report that the KCR share price has fallen a little further since the year end. Your Board is looking to dispose of this investment, which is no longer core to the Group’s current investment policy, as soon as a buyer can be found. However, in common with many smaller companies, there is limited liquidity in the shares of KCR and therefore the Board is not able to give a view on when a disposal of this investment might be effected.
Therefore, the overall results of the Group for the year ended 31 December 2021, show a loss before taxation of £422,000 (2020: loss of £757,000), of which £183,000 (2019: loss of £608,000) was due to the fall in value of the Group’s investment in KCR. No dividend is being declared for the year (2020: £nil).
Notwithstanding, shareholders’ funds have increased to £1,547,000 (2020: £1,518,000), principally as a result of the fund raising undertaken by the Company in November 2021. The Group raised £450,000 (before expenses of the issue), by the issue of 75,000,000 ordinary shares at a price of 0.6 pence per ordinary share, together with a related warrants issue. I am pleased to be able to report that all the Drumz directors subscribed for new ordinary shares in this placing.
As a result, at the year end the Group had cash balances of £561,000 (2020: £491,000).
Investment Policy
The Company's investing policy is to invest principally, but not exclusively, in the technology sector within Europe. Drumz’s strategy is to invest in and acquire technology businesses, where the Board believes they can be improved by a combination of our own management expertise and the provision of investment to improve the businesses growth prospects.
Although the Company intends the main focus of the investing policy to be on technology businesses, this will not preclude the Company from considering investment in suitable projects in other sectors or geographies, where the Directors believe that there are high-growth opportunities.
Macroeconomic impacts
During the current period there have been two major macroeconomic factors which have impacted the economy, namely:
- COVID-19 – this global pandemic has had a major impact on the world economy and the ways in which people work. On the positive side, the software industry lends itself well to employees working effectively from remote locations, but the broader impact of the pandemic on global demand remains uncertain; and
- further uncertainty to demand caused by rising global inflation and interest rates and disruption to global supply chains.
Outlook
The Board considers that the benefits of the actions already taken at Acuity will be seen over the coming months. We are now considering several new investment opportunities. I would like to thank all shareholders for their continuing support and to thank my colleagues and our advisors for their respective contributions. I look forward to further progress in the current financial year.
Simon Bennett
Chairman
20 April 2022
Chief Executive’s Report
Our strategy
Drumz’ strategy is to invest and acquire, predominantly but not exclusively in the technology sector, in order to achieve capital growth in the medium term. We target operating companies whose activities include the sale of enterprise software or the use of software in B2B markets. The Board seeks opportunities where the value can be grown to achieve appropriate returns and risks are managed given the expertise available.
Over the past 12 months, whilst the focus has been on developing Acuity Risk Management Ltd, many other investment opportunities were reviewed to find a second investment for the Group. Proposals were made to acquire some interesting businesses, but on the final analysis none satisfied both our due diligence examination and value expectations.
Our business model
Our business model is to take established software companies with an excellent offering and potential to grow significantly in their market. We work with companies contributing skills, expertise and knowledge to the business to transform the value. The value will be realised either by way of trade sale or Initial Public Offer (‘IPO’) so Drumz and/or its shareholders can realise all or part of their holdings.
Established businesses not only reduce the risks for Drumz and its shareholders but with the track record and statistical evidence on which to base decisions there is a stronger and faster platform for growth and therefore value creation. It is important that all parties are incentivised and interests aligned to benefit from growth in value. Drumz’ Board believes a combination of scale, growth rate, profitability and cash generation are the most important creators of value.
Investments and Portfolio update
Acuity Risk Management Limited
Acuity Risk Management’s, STREAMÔ software platform was voted by users in Gartner’s 2021 Peer Insights review as a top three risk management software. Acuity was shortlisted for Cyber security solution of the year at the National Technology Awards 2021.
It recently became part of the UK’s space team, Athena. Athena is the UK’s national consortium for the space industry bringing Acuity alongside many leading UK and US defence and space companies and therefore may provide Acuity with commercial opportunities.
Over the past 12 months several appointments were made including a new full time Commercial Director, who has reorganised all marketing, sales and other distribution activities. All marketing activities have been taken in house following which the number and quality of leads has increased and improved significantly. The sales team has been reorganised with further recruitment planned and the distribution channel using VARs strengthened with appointments made during the year, some of which were announced on the Stock Market’s Regulatory News Service.
In September Drumz exercised its existing option to invest a further £125,000 for a further 5% of the equity taking its ownership to 25%.
KCR Residential REIT plc
Whilst the company’s largest shareholder increased its holding in November and took a majority holding the share price of KCR again disappointed and is at a significant discount to Net Asset Value, as disclosed in its accounts. There is a new Chief Executive for KCR. Drumz continues to monitor the company, its share performance and considers KCR to be a passive asset for realisation in due course.
Summary and Outlook
There are opportunities for significant growth in value over the next 12 months within the existing portfolio and potentially with new acquisitions and investments.
Angus Forrest
Chief Executive
20 April 2022
Financial statements
Group statement of comprehensive income
for the year ended 31 December 2021
| Notes | 2021 £’000 | 2020 £’000 | |
| Continuing operations | |||
| Revenue | 44 | 12 | |
| Cost of sales | — | — | |
| Gross profit | 44 | 12 | |
| Administrative expenses | (283) | (161) | |
| Operating profit/(loss) | 2 | (239) | (149) |
| Loss on investments | 4 | (183) | (608) |
| Loss before taxation | (422) | (757) | |
| Taxation | — | — | |
| Loss for the year attributable to shareholders of the parent company | (422) | (757) | |
| Total comprehensive income for the year attributable to shareholders of the parent company | (422) | (757) | |
| Earnings per share | |||
| Basic and diluted earnings per share from total and continuing operations | 3 | (0.12)p | (0.36)p |
Group statement of financial position
as at 31 December 2021
Notes | 2021 £’000 | 2020 £’000 | |
| ASSETS | |||
| Non-current assets | |||
| Investments at fair value through profit or loss | 4 | 1,015 | 1,073 |
| 1,015 | 1,073 | ||
| Current assets | |||
| Trade and other receivables | 23 | 14 | |
| Cash and cash equivalents | 561 | 491 | |
| 584 | 505 | ||
| Total assets | 1,599 | 1,578 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 52 | 60 | |
| Total liabilities | 52 | 60 | |
| Net assets | 1,547 | 1,518 | |
| EQUITY | |||
| Share capital | 5 | 2,688 | 2,613 |
| Share premium | 8,385 | 8,039 | |
| Share option reserve | 30 | - | |
| Convertible loan | - | 88 | |
| Merger reserve | 1,012 | 1,012 | |
| Retained earnings | (10,568) | (10,234) | |
| Total equity | 1,547 | 1,518 |
Company statement of financial position
as at 31 December 2021
Notes | 2021 £’000 | 2020 £’000 | |
| ASSETS | |||
| Non-current assets | |||
| Investments at fair value through profit or loss | 4 | 1,015 | 1,073 |
| 1,015 | 1,073 | ||
| Current assets | |||
| Trade and other receivables | 23 | 13 | |
| Cash and cash equivalents | 561 | 491 | |
| 584 | 504 | ||
| Total assets | 1,599 | 1,577 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 52 | 59 | |
| Total liabilities | 52 | 59 | |
| Net assets | 1,547 | 1,518 | |
| EQUITY | |||
| Share capital | 5 | 2,688 | 2,613 |
| Share premium | 8,385 | 8,039 | |
| Share option reserve | 30 | ||
| Convertible loan | - | 88 | |
| Merger reserve | 1,012 | 1,012 | |
| Retained earnings | (10,568) | (10,234) | |
| Total equity | 1,547 | 1,518 |
Group statement of changes in equity
for the year ended 31 December 2021
| Share capital £’000 | Share premium £’000 | Share Option Reserve £’000 | Convertible loan £’000 | Merger reserve £’000 | Retained earnings £’000 | Total equity £’000 | |
| Balance at 1 January 2020 | 2,392 | 7,189 | — | 88 | 1,012 | (9,477) | 1,204 |
| Issue of shares | 221 | 850 | — | — | — | — | 1,071 |
| Total comprehensive income | — | — | — | — | — | (757) | (757) |
| Balance at 31 December 2020 | 2,613 | 8,039 | — | 88 | 1,012 | (10,234) | 1,518 |
| Balance at 1 January 2021 | 2,613 | 8,039 | 88 | 1,012 | (10,234) | 1,518 | |
| Transactions with owners in their capacity as owners: | |||||||
| Issue of shares | 75 | 375 | — | — | — | — | 450 |
| Share issue costs | — | (29) | — | — | — | — | (29) |
| 75 | 346 | — | — | — | — | 421 | |
| Share options | — | — | 30 | — | — | — | 30 |
| Write-off of convertible equity | — | — | — | (88) | — | 88 | — |
| Total comprehensive income | — | — | — | — | — | (422) | (422) |
| Balance at 31 December 2021 | 2,688 | 8,385 | 30 | — | 1,012 | (10,568) | 1,547 |
Group statement of cash flows
for the year ended 31 December 2021
| 2021 £’000 | 2020 £’000 | |
| Cash flows from operating activities | ||
| Loss before taxation | (422) | (757) |
| Adjustments for: | ||
| Fair value adjustment for listed investments | 183 | 608 |
| Increase / (Decrease) in share option reserve | 30 | — |
| (Increase) / Decrease in trade and other receivables | (9) | (2) |
| (Decrease) / increase in trade and other payables | (8) | ( 25) |
| Net cash used in operating activities | (226) | (176) |
| Cash flows from investing activities | ||
| Purchase of investments | (125) | (500) |
| (125) | (500) | |
| Cash flows from financing activities | ||
| Cash raised through issue of shares (net of transaction costs) | 421 | 1,071 |
| Net increase / (decrease) in cash and cash equivalents | 70 | 395 |
| Cash and cash equivalents at beginning of financial year | 491 | 96 |
| Cash and cash equivalents at end of financial year | 561 | 491 |
Principal accounting policies
for the year ended 31 December 2021
General information
Drumz plc is a company incorporated and domiciled in the United Kingdom. The Company is a public limited company, which is listed on AIM of the London Stock Exchange, incorporated in the UK and domiciled in England and Wales. The address of the registered office is Burnham Yard, London End, Beaconsfield, HP9 2JH.
The principal accounting policies adopted in the preparation of the Group and Company financial statements are set out below.
Basis of accounting
Basis of preparation
The Group and Company financial statements have been prepared under the historical cost convention, except as modified for financial assets at fair value through profit or loss. The financial statements are presented in pounds sterling (£’000), which is also the functional currency of the Company and Group.
The Group and Company financial statements have been prepared in accordance with the accounting policies set out below and international accounting standards in conformity with the Companies Act 2006.
The accounting policies have been applied consistently throughout the Group and the Company for the purposes of the preparation of these financial statements and the same accounting policies, presentations and methods of computation are followed in this set of financial statements as were applied in the previous set of audited financial statements.
Going concern
The financial statements have been prepared on the going concern basis.
The Directors have reviewed the Company’s budgets and considered plans. This combined with a review of the Company’s cash balances, saleable securities and discussions with the advisers have led them to conclude there is a reasonable expectation that the Company and Group has adequate resources to continue operating for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Company’s and Group’s financial statements. This has been assessed using detailed cash flow analysis so that the Board can conclude that the Company and Group has sufficient capital resources for at least 12 months from the approval of these financial statements.
Notes to the Financial Statements
for the year ended 31 December 2021
1. Income and segmental analysis
The Group generates income by charging investee companies fees and for profits or losses on investments. These operating segments are monitored by the Executive Directors and strategic decisions are made on the basis of segment operating results. The segmental analysis of operations is as follows:
Segmental analysis by activity
| 2021 £’000 | 2020 £’000 | |
| Segment result | ||
| Operating income | 44 | 12 |
| Investment activities: | ||
| Administrative expenses | (283) | (161) |
| Operating loss/profit | (239) | (149) |
| Loss in value of quoted investment | (183) | (608) |
| Loss before tax | (422) | (757) |
| 2021 £’000 | 2020 £’000 | |
| Segment assets | ||
| Investment activities: | ||
| Non-current assets – investment | 1,015 | 1,073 |
| Other | 584 | 505 |
| Total assets | 1,599 | 1,578 |
| Segment liabilities | ||
| Investment activities: | ||
| Current liabilities | 52 | 60 |
| Total liabilities | 52 | 60 |
| Total assets less total liabilities | 1,547 | 1,518 |
2. Operating profit / (loss)
Operating profit / (loss) is stated after charging:
| 2021 £’000 | 2020 £’000 | |
| Auditor’s remuneration for: | ||
| Audit services | ||
| – audit of the Group’s and Company’s annual accounts | 16 | 12 |
| – audit of subsidiaries pursuant to legislation | 3 | 3 |
3. Earnings per ordinary share
The earnings per ordinary share is based on the weighted average number of ordinary shares in issue during the year of 351,072,048 ordinary shares of 0.1p (2020: 210,083,568 ordinary shares of 0.1p) and the following figures:
| 2021 | 2020 | |
| Loss attributable to equity shareholders (£’000) | (422) | (757) |
| Loss per ordinary share | (0.12)p | (0.36)p |
Diluted earnings per share is taken as equal to basic earnings per share as the Group’s average share price during the period is lower than the exercise price of the share options and therefore the effect of including share options is anti-dilutive.
4. Investments
| Investment £’000 | |
| Cost | |
| At 1 January 2021 | 2,205 |
| Additions | 125 |
| At 31 December 2021 | 2,330 |
| Fair value movements | |
| At 1 January 2021 | (1,132) |
| Fair value adjustment | (183) |
| At 31 December 2021 | (1,315) |
| Fair value | |
| At 31 December 2021 | 1,015 |
| At 31 December 2020 | 1,073 |
Drumz plc acquired shares in KCR Residential REIT plc at a price of £0.70 per share in 2018. The investment was classed as fair value through profit and loss in accordance with IFRS 9. The investment was valued downwards at the year-end in accordance with IFRS 13. The closing value at 31 December 2021 was £389,713.
Drumz plc acquired shares in Acuity Risk Management Limited in September 2020 and additional shares in September 2021. The value of this investment is shown at cost, £625,000. Although Drumz holds 25% of Acuity’s shares the directors believe that Drumz does not exercises significant influence over Acuity as such it does not need to be accounted for as an associate.
Fair value hierarchy
In accordance with IFRS 13, financial instruments are measured by level of the following fair value measurement hierarchy:
- Level 1: quoted prices in an active market for identical assets or liabilities. The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm’s-length basis. The quoted market price used for financial assets held by the Group is the closing price on the last day of the financial year of the Group. These instruments are included in level 1 and comprise FTSE and AIM-listed investments classified as held at fair value through profit or loss.
- Level 2: the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.
- Level 3: the fair value of financial instruments that are not traded in an active market (for example, investments in unquoted companies) is determined by using valuation techniques such as earnings multiples. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
There have been no transfers between these classifications in the period (2020: none). The change in fair value for the current and previous years is recognised through profit or loss.
All assets held at fair value through profit or loss were designated as such upon initial recognition.
Movements in investments held at fair value through profit or loss are summarised as follows:
| Level 3 Equity investments £’000 | Level 1 Equity investments £’000 | Total investments £’000 | |
| Cost | |||
| At 1 January 2021 | 500 | 1,705 | 2,205 |
| Additions | 125 | 125 | |
| At 31 December 2021 | 625 | 1,705 | 2,330 |
| Fair value losses | |||
| At 1 January 2021 | — | (1,132) | (1,132) |
| Fair value adjustment | — | (183) | (183) |
| At 31 December 2021 | — | (1,315) | (1,315) |
| Fair value | |||
| At 31 December 2021 | 625 | 390 | 1,015 |
| At 31 December 2020 | 500 | 573 | 1,073 |
Level 3 investments are held at fair value at the date of the Consolidated Financial Position with changes in value from cost being accounted for in the Consolidated Statement of Comprehensive Income.
5. Share capital
| 2021 £’000 | 2020 £’000 | |
| Allotted, called up and fully paid | ||
| 419,822,048 (2020: 344,822,048) ordinary shares of 0.1p each | 420 | 345 |
| 2,268,113,165 (2020: 2,268,113,165) deferred shares of 0.1p each | 2,268 | 2,268 |
| 2,688 | 2,613 |
| 2021 Number | 2021 £’000 | 2020 Number | 2020 £’000 | |
| Ordinary shares | ||||
| At 1 January 2021 | 344,822,048 | 345 | 123,912,957 | 124 |
| Additions | 75,000,000 | 75 | 220,909,091 | 221 |
| At 31 December 2021 | 419,822,048 | 420 | 344,822,048 | 345 |
On 30 November the Company issued 75,000,000 new Ordinary shares of 0.1p at 0.6p per share to raise approximately £450,000 before expenses.
Deferred shares
The deferred shares have:
- no right to any dividend;
- the right to receive notice of any general meeting and to attend such meeting but no right to vote thereat; and
- the right on a winding up or other return of capital (after payment of the debts and liabilities of the Company and an amount equal to the amounts paid up, or credited as paid up, including any premium on the ordinary shares of the Company, together with any unpaid arrears of dividend declared on such shares) to an amount equal to the amounts paid up or credited as paid up on such deferred shares.
Share options and warrants
The Group operates an unapproved share option scheme. Awards under each scheme are made periodically to employees. The share options in this scheme vest three years after the date of grant and have an exercise period of seven years. The options may only be exercised by option holders while they are still employees of the Group. If death in service occurs the options can be exercised (to the extent that they have vested) by the option holder’s personal representatives within 12 months from the date of death. If an option holder ceases to be employed and the Directors deem the option holder to be a ‘Good Leaver’ the options can be exercised (to the extent that they have vested) within six months from the date of cessation of employment.
A reconciliation of option movements over the year ended 31 December 2021 is shown below:
| Number | ||
| Outstanding at 31 December 2020 and 31 December 2021 | 15,000,000 | |
At 31 December 2021 outstanding options granted over ordinary shares were as follows:
| Share option scheme | Exercise price | Number | Dates exercisable |
| Company unapproved | 0.65p | 11,000,000 | 15 July 2020 to 14 July 2030 |
| Company unapproved | 0.55p | 4,000,000 | 25 Nov 2020 to 24 Nov 2030 |
The weighted average exercise price for the Group’s options are as follows:
Options outstanding at 31 December 2021: 0.62p
Options exercisable at 31 December 2021: nil
The weighted average remaining contractual life of the share options outstanding at the end of the year is 8 years (2020: 9 years).
The Group has used the Black-Scholes formula to calculate the fair value of outstanding share options. The assumptions applied to the Black-Scholes formula for share options issued and the fair value per option are detailed in the table below for options issued. The charge calculated up to 31 December 2021 is £30,000 (2020: £nil). Volatility was calculated using historical share price information for the six months prior to the date of grant.
| Unapproved share options 2020 grant | |
| Date of grant | 15 July 2020 |
| Expected life of options based on options exercised to date | 3 years |
| Volatility of share price | 87% |
| Dividend yield | 0% |
| Risk free interest rate | 0.01% |
| Share price at date of grant | 0.65p |
| Exercise price | 0.65p |
| Fair value per option | 0.46p |
| Date of grant | 25 Nov 2020 |
| Expected life of options based on options exercised to date | 3 years |
| Volatility of share price | 96% |
| Dividend yield | 0% |
| Risk free interest rate | 0.01% |
| Share price at date of grant | 0.48p |
| Exercise price | 0.55p |
| Fair value per option | 0.35p |
Warrants
Warrants over 75,000,000 ordinary shares of the Company with an exercise price of 1.0 pence per share were issued during the year ended 31 December 2021, in conjunction with the share issues set out in this note. Warrants over 75,000,000 ordinary shares are outstanding as at 31 December 2021. No expense was recorded in the year in respect of these warrants.
Annual Report
The Company confirms the Annual Report and AGM Notice will be available on the Company's website drumzplc.com following the publication of this announcement.
