MIND GYM PLC    NOTES TO THE GROUP FINANCIAL STATEMENTS

                                                                                                                                                                   

1.   General information

Mind Gym plc ('the Company') is a public limited company incorporated in England and Wales, and its ordinary shares are traded on the Alternative Investment Market of the London Stock Exchange ('AIM'). The address of the registered office is 160 Kensington High Street, London W8 7RG. The group consists of Mind Gym plc and its subsidiaries, Mind Gym (USA) Inc., Mind Gym Performance (Asia) Pte. Ltd, and Mind Gym (Canada) Inc. (together 'the Group').

 

The principal activity of the Group is to apply behavioural science to transform the performance of companies and the lives of the people who work in them. The Group does this primarily through research, strategic advice, management and employee development, employee communication and related services.

 

2.   Summary of significant accounting policies

Basis of preparation

These consolidated financial statements have been prepared in accordance with UK adopted international accounted standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards, including interpretations issued by the International Financial Reporting Interpretations Committee ('IFRIC'), and with the Companies Act 2006 applicable to companies reporting under IFRS.

 

The consolidated financial statements have been prepared on a going concern basis under the historical cost convention.

 

The consolidated financial statements are presented in Pound Sterling. All values are rounded to £1,000 except where otherwise indicated.

 

The principal accounting policies in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated.

Going concern

The Group meets its day-to-day working capital requirements from the cash flows generated by its trading activities and its available cash resources. As at 31 March 2022, the Group had £10.0 million of cash and £2.2m of lease liabilities. Adjusted cash conversion in the year ended 31 March 2022 was 95% (2021: 418%).

 

The Group prepares cash flow forecasts and re-forecasts regularly as part of the business planning process.  The Directors have reviewed forecast cash flows for the forthcoming 12 months for the Group from the date of the approval of the financial statements and consider that the Group will have sufficient cash resources available to meet its liabilities as they fall due.  These cash flow forecasts have been analysed in light of COVID-19 and other expected medium-term macro-economic impacts and subjected to stress testing and scenario modelling which the Directors consider sufficiently robust.  The Group continued to be impacted by COVID-19 but has been protected from more severe consequences by our digitally enabled revenue. The impact of the war in Ukraine and inflationary pressures are further discussed in the Board Chair's report.  The scenario modelling has assessed the impact of various degrees of downturn in medium-term revenues generated.  The Directors note that in a downturn scenario the Group also has the option to rationalise its cost base, including cuts to discretionary capital and overhead expenditure. The Directors consider that the required level of change to the Group's forecast cash flows to give rise to a material risk over going concern is sufficiently remote.

 

As a result of these assessments, the Group's strong cash position and clients predominantly comprising blue-chip corporates, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

 

New standards and interpretations applied for the first time

 

The Group adopted the following new or amended IFRSs and IFRIC interpretations from 1 April 2021:

Amendments to IFRS 3 Business Combinations Amendments to IAS 16 Property, Plant and Equipment Amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets

Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16: Interest Rate Benchmark Reform (Phase 2) Annual Improvements to IFRS Standards 2018-2020 Cycle

The adoption of these amended IFRSs did not have a material impact on the financial statements.

 

New standards and interpretations not yet applied

At the date of authorisation of these financial statements the following standards and interpretations were in issue but not yet effective for the financial period and have not been applied. The Directors plan to adopt these standards in line with their effective dates.

	Applicable from
Amendments to IAS 1: Classification of Liabilities as Current or Non-current	1 January 2023
Amendments to IAS 8: Definition of Accounting Estimates	1 January 2023
Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting policies	1 January 2023
Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a Single Transaction	1 January 2023
Amendments to IFRS 17 - Initial Application of IFRS 17 and IFRS 9 - Comparative information	1 January 2023

*Not yet endorsed by the UK.

The Directors anticipate that the adoption of these standards and amendments will have no material impact on the financial statements.

Basis of consolidation

The consolidated financial statements incorporate those of Mind Gym plc and its subsidiary undertakings (i.e. entities that the Group controls when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity). Subsidiaries are fully consolidated from the date on which control is transferred to the Group.

All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Where necessary, amounts reported by subsidiaries have been adjusted to conform with the Group's accounting policies.

Foreign currency translation

The Group's presentation currency is Pound Sterling. The results and financial position of subsidiaries that have a functional currency different from Sterling are translated into Sterling as follows:

·      Assets and liabilities are translated at the closing rate at the balance sheet date

·      Income and expenses are translated at average rates of exchange prevailing during the year

All resulting exchange differences are recognised in equity.

Foreign currency transactions are initially recorded at the exchange rate ruling at the date of the transaction. Foreign exchange gains and losses resulting from settlement of such transactions and from the translation at exchange rates ruling at the balance sheet date of monetary assets or liabilities denominated in foreign currencies are recognised in profit or loss.

 

Revenue recognition

Revenue is recognised when control over a product or service is transferred to a customer. Due to the short-term nature of the trade receivables, the Group measures them at the original transaction price invoiced without discounting.

The Group generates revenue from business-to-business customers by satisfying the following performance obligations:

·      Delivering coach-led face-to-face and virtual training sessions. Revenue is recognised at a point in time on the date of delivery of the session.

·      Developing training programmes customised to specific needs. Revenue is recognised at a point in time on the completion of all development work or, at the end of a stage of work when the contract provides an enforceable right to payment on completion of a stage.

·      Licensing digital training modules to clients. When non-cancellable digital modules are provided to the client and hosted on the client's servers, revenue is recognised at a point in time on the date the modules are provided to the client. Where the client has a right to cancel, revenue is recognised at the start of each committed period. When digital modules are hosted on the Group's servers, revenue is recognised over time across the life of the agreement.

·      Training and certifying client staff to act as coaches. Revenue is recognised at a point in time on the date of delivery of the certification course.

·      Digital coaching platform and coaching sessions. Revenue is recognised over time, across the life of the agreement and in line with expected customer usage levels.

Any advance consideration received from clients represents a contract liability and is disclosed in Note 17 under the heading deferred income. When the performance obligation has been satisfied but the income has not yet been invoiced, the amount represents a contract asset and is disclosed in Note 16 as accrued income.

The incremental costs of obtaining a contract principally consist of commissions paid to the Group's sales team. The sales team earn commission over time as the revenue they have generated is recognised. Commission costs are not therefore capitalised.

Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in finance costs.

Share-based payments

Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the Consolidated Statement of Comprehensive Income over the vesting period. Non-market performance conditions are taken into account by adjusting the number of equity instruments expected to vest at each Statement of Financial Position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market performance conditions are factored into the fair value of the options granted. The cumulative expense is not adjusted for failure to achieve a market performance condition.

The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors that are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme).

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the Consolidated Statement of Comprehensive Income over the remaining vesting period.

Defined contribution pension plan

The Group operates a defined contribution plan for its employees. A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. Once the contributions have been paid the Group has no further payment obligations.

The contributions are recognised as an expense in the Statement of Comprehensive Income when they fall due.

Government grants

Government grants are not recognised until there is reasonable assurance the grants will be received and that the Group will comply with any conditions attached to them. Government grants are recognised in the income statement over the same period as the costs for which the grants are intended to compensate.

Government grant income under the Coronavirus Job Retention Scheme and other schemes reimbursing employee wages is netted against staff costs and is disclosed in Note 8.

Taxation

The tax expense represents the sum of the tax currently payable and deferred tax.

The current tax payable is based on taxable profit for the year. Taxable profit differs from accounting profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the period-end date.

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is not recognised on temporary differences arising from the initial recognition of goodwill or other assets and liabilities in a transaction, other than a business combination, that affects neither the accounting nor the taxable profit.

Deferred tax is measured on a non-discounted basis using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised, or deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities, and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.

The Group has taken advantage of HMRC's Small-Medium Enterprise (SME) Research and Development tax relief scheme.  This has resulted in an enhanced deduction on eligible activities and is a significant component of both the tax credit in the Consolidated Statement of Comprehensive Income and deferred tax asset recognised in the balance sheet.

Tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also recognised in equity.

Intangible assets

Externally acquired intangible assets are initially recognised at cost. Expenditure on internally developed assets is capitalised if it can be demonstrated that it is technically feasible to develop the product for it to provide expected future economic benefits, adequate resources are available to complete the development, there is an intention to complete the project and expenditure on the project can be measured reliably.

Other research and development costs that do not meet the above criteria are recognised as expenses as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

After recognition intangible assets are measured at cost less any accumulated amortisation and impairment losses. Amortisation is charged to administrative expenses on a straight-line basis from the date on which the asset is available for use. Intangible assets are amortised over their estimated useful lives as follows:

·      Internally developed software                      Three to five years

·      Other intangible assets                                One to five years

The assets' residual values, useful lives and amortisation methods are reviewed and adjusted prospectively if appropriate at each reporting date.

Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Subsequent costs are included in the asset's carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group. All other repairs and maintenance costs are charged to profit or loss during the period in which they are incurred.

Assets are depreciated to their estimated residual value using the straight-line method over their estimated useful lives as follows:

·      Leasehold improvements                             Over the period of the lease

·      Fixtures, fittings and equipment                   Two to five years

The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate at each balance sheet date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Consolidated Statement of Comprehensive Income.

Impairment of property, plant and equipment and intangible assets

At each reporting date, the Group reviews the carrying amounts of its property, plant and equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset, for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

Leases

Lease identification

At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identifiable asset for a period of time in exchange for consideration.

 

Right-of-use asset

The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any 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 depreciated on a straight-line basis over the shorter of the estimated useful life of the asset and the lease term. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.

 

Lease liability

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable.

 

The lease liability is measured at amortised cost using the effective interest method.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option. It also applies the low-value assets recognition exemption to leases of assets below $5,000. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.

 

As a lessor

When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.

 

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset.

 

Amounts due from lessees under finance leases are recognised as finance lease receivables at the amount of the Group's present value of the lease receipts. The finance lease receivable is subsequently measured by increasing the carrying amount to reflect interest on the finance lease receivable (using the discount rate used at commencement) and by reducing the carrying amount to reflect the lease payments received.

Inventories

Inventories comprise pack materials used in the delivery of courses and are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in, first out basis. Work in progress and finished goods include labour and attributable overheads. Net realisable value is the estimated selling price less costs to complete and sell.

At each reporting date, inventories are assessed for impairment. If stock is impaired, the carrying amount is reduced to its realisable value. The impairment loss is recognised immediately in profit or loss.

Financial instruments

Financial instruments are recognised when the Group becomes party to the contractual provisions of the instrument. The Group only enters into basic financial instruments and does not have any hedging instruments.

Financial assets and liabilities are offset, with the net amounts presented in the Financial Statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial assets - Loans and receivables

All of the Group's financial assets fall into the loans and receivables category. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Financial assets included in loans and receivables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost, using the effective interest rate method, less any impairment losses.

Financial assets are assessed for indicators of impairment at each reporting date.

A provision for impairment of trade receivables is made for expected lifetime credit losses based on past experience and general economic factors. Further provisions are made against specific trade and other receivables when there is objective evidence that one or more loss events that occurred after the initial recognition of the financial asset, have had an impact on the estimated future cash flows of the financial asset. The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate. Impaired debts are derecognised when they are assessed as uncollectible.

Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the Group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.

Financial liabilities - Other financial liabilities

All of the Group's financial liabilities fall into the other financial liabilities category. Such financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition.

Financial liabilities are derecognised when the Group's contractual obligations expire or are discharged or cancelled.

Cash and cash equivalents

In the Statement of Cash Flows, cash and cash equivalents comprise cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. In the Statement of Financial Position, bank overdrafts are shown within borrowings in current liabilities.

Dividends

Dividend income is recognised when the right to receive payment is established.

Dividends payable are recognised when paid, or as a liability in the period in which the dividends are approved by the shareholders of the Company.

 

3.   Use of judgements and estimates

In preparing these consolidated Financial Statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

 

Judgements

Judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements are:

 

Going concern

 

As noted in Note 2, the financial statements have been prepared on a going concern basis, following detailed scenario testing and review.

 

Capitalisation of internally developed intangibles

 

Costs of £5.6 million incurred on developing software and new digital products have been capitalised in the year (see Note 13). Initial capitalisation is based on management's judgement on which costs meet the definition of development costs. Costs capitalised include directly attributable labour costs and purchases of directly attributable products and services. No overheads have been capitalised. Initial capitalisation and any subsequent impairment is also based on management's judgement that technological and economic feasibility is demonstrated and assumptions regarding the expected future cash generation of the projects and the expected period of benefits.

 

 

 

Assumptions and estimation uncertainties

 

Assumptions and estimation uncertainties at 31 March 2022 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year are:

Provisions against trade receivables and accrued income

 

A provision is initially made against trade receivables and accrued income for expected lifetime credit losses. Historic credit losses have been low and the provision rate is based on experience over the last three years and current and expected economic conditions. Balances are reviewed on a regular basis and provisions are increased to reflect any increase in credit risk where appropriate. The review takes into account factors such as the age of the debt, current economic indicators for the industry of the customer, recovery since the reporting date and discussions with the customer. Provisions are raised where debtors are not considered recoverable in full or in part. Provisions are released when subsequent information supports the recovery.

 

Share-based payments

 

The Group has share-based payment remuneration for employees under a Long-Term Incentive Plan. The fair value of share options at the date of grant is estimated using the Black-Scholes model based on certain assumptions. The fair value of the share options for the more complex share scheme granted on 14 July 2021 is estimated using the Monte Carlo model based on certain assumptions. These assumptions are set out in Note 23 and include expected share price volatility, dividend yield, expected life and the numbers of options expected to vest.

 

Useful economic life of intangible assets

 

The useful economic lives of capitalised development costs, which are key estimates, are assessed by management. In assessing the useful economic lives of the coaching platform, Performa, management took factors into account such as the speed of change in technology used across these types of Digital products. The useful economic lives have been benchmarked against the market and are deemed reasonable. A sensitivity analysis was performed to assess the impact of changing the useful economic life of the coaching platform from three to five years. This would have reduced amortisation charge for the year ending 31 March 2022 by £103,000.

 

4.   Segmental analysis

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker, who is responsible for allocating resources and assessing performance of the business. The chief operating decision-maker has been identified as the Board. The Group has two operating segments: EMEA (comprising the United Kingdom and Singapore) and America (comprising the United States and Canada).

Both segments derive their revenue from a single business activity, the provision of human capital and business improvement solutions.

The Group's business is not highly seasonal, and the Group's customer base is diversified with no individually significant customer.

 

 

Segment results for the year ended 31 March 2022

 

Segment result

	EMEA	America	Total
	£'000	£'000	£'000
Revenue	19,715	28,953	48,668
Cost of sales	(2,572)	(3,712)	(6,284)
Administrative expenses	(23,705)	(19,028)	(42,733)
(Loss)/profit before inter-segment charges	(6,562)	6,213	(349)
Inter-segment charges	5,084	(5,084)	-
Operating (loss)/profit - segment result	(1,478)	1,129	(349)
Finance income			19
Finance costs			(152)
Loss before taxation			(482)

 

Management does not report segmental assets and liabilities internally and as such an analysis is not reported.

 

The mix of revenue for the year ended 31 March 2022 is set out below.

	EMEA	America	Group
Delivery	60.2%	66.0%	63.7%
Design	13.4%	9.8%	11.2%
Digital	11.9%	10.7%	11.2%
Licensing and certification	5.8%	6.3%	6.0%
Other	6.8%	6.2%	6.5%
Advisory	1.9%	1.0%	1.4%

 

The vast majority of the Group's contracts are for the delivery of services within the next 12 months. The Group has therefore taken advantage of the practical expedient in paragraph 121(a) of IFRS 15 not to disclose information about remaining performance obligations.

Segment results for the year ended 31 March 2021

 

Segment result

	EMEA	America	Total
	£'000	£'000	£'000
Revenue	17,241	22,142	39,383
Cost of sales	(2,237)	(2,730)	(4,967)
Administrative expenses	(18,349)	(16,286)	(34,635)
(Loss)/Profit before inter-segment charges	(3,345)	3,126	(219)
Inter-segment charges	2,258	(2,258)	-
Operating (loss)/profit - segment result	(1,087)	868	(219)
Finance income			30
Finance costs			(167)
Loss before taxation			(356)

 

Adjusted profit before tax

	EMEA	America	Total
	£'000	£'000	£'000
Operating profit - segment result	(1,087)	868	(219)
Employee options surrender costs	587	75	662
Adjusted EBIT	(500)	943	443
Finance income			30
Finance costs			(167)
Adjusted profit before taxation			306

 

The mix of revenue for the year ended 31 March 2021 is set out below.

	EMEA	America	Group
Delivery	59.7%	52.5%	55.6%
Design	12.7%	13.3%	13.0%
Digital	15.3%	16.8%	16.2%
Licensing and certification	6.3%	9.0%	7.8%
Other	4.2%	6.9%	5.7%
Advisory	1.8%	1.5%	1.7%

The vast majority of the Group's contracts are for the delivery of services within the next 12 months. The Group has therefore taken advantage of the practical expedient in paragraph 121(a) of IFRS 15 not to disclose information about remaining performance obligations.

 

5.   Operating profit

Operating (loss)/profit is stated after charging:

	31 March 2022	31 March 2021
	£'000	£'000
Coach costs	5,025	3,369
Staff costs (Note 8)	32,977	26,491
Amortisation of intangible assets	325	52
Depreciation of property, plant and equipment	1,252	1,084
Short-term and low-value lease expense	23	35
(Write-back)/impairment of trade receivables	(11)	(41)

 

6.   Adjustments

	31 March 2022	31 March 2021
	£'000	£'000
Restructuring costs	-	662
	-	662

 

Restructuring costs in the year ended 31 March 2021 include redundancy costs related to the headcount reduction exercise undertaken in response to the COVID-19 impact on the business.

The cash cost of Adjustments in 2021 was £662,000.

7.   Auditor remuneration

	31 March 2022	31 March 2021
	£'000	£'000
Fees for audit of the Company and consolidated financial statements	97	88
Fees for audit of the Company's subsidiaries pursuant to legislation	16	15
Total audit fees	113	103
Tax compliance services	69	82
Tax advisory services	6	15
Other services	11	10
Total fees payable to the auditor	199	210

 

 

8.   Employees

Staff costs were as follows:

	31 March 2022	31 March 2021
	£'000	£'000
Wages and salaries	28,828	22,464
Social security costs	2,825	2,249
Pension costs - defined contribution plans	983	897
Share-based payments	341	298
Restructuring payroll costs included in adjusted items	-	583
	32,977	26,491

 

Wages and salaries in 2021 are stated net of £216,000 of government grants under the UK Coronavirus Job Retention Scheme and similar schemes.

The average number of the Group's employees by function was:

	31 March 2022	31 March 2021
Delivery	196	170
Support	86	61
Digital	50	20
	332	251

 

The year-end number of the Group's employees by function was:

	31 March 2022	31 March 2021
Delivery	206	174
Support	88	67
Digital	41	35
	335	276

 

Key management personnel include all Directors and a number of senior managers across the Group who together have responsibility and authority for planning, directing and controlling the activities of the Group. The compensation paid to key management personnel for services provided to the Group was:

	31 March 2022	31 March 2021
	£'000	£'000
Salaries, bonuses and other short-term employee benefits	2,955	2,583
Post-employment benefits	130	53
Termination benefits	311	-
Share-based payments	111	207
Total compensation	3,507	2,843

 

 

 

9.   Net finance costs

	31 March 2022	31 March 2021
	£'000	£'000
Finance income
Bank interest receivable	12	15
Finance lease income	7	15
	19	30

 

Finance costs
Bank interest payable	(27)	-
Lease interest	(125)	(167)
	(152)	(167)
Net Finance Costs	(133)	(137)

 

 

10.  Tax

The tax (credit)/charge for the year comprises:

	31 March 2022	31 March 2021
	£'000	£'000
UK current tax	-	(191)
UK adjustment in respect of prior periods	(42)	(97)
Foreign current tax	326	299
Foreign adjustment in respect of prior periods	19	(2)
Total current tax charge	303	9
Deferred tax - current year	(1,317)	(6)
Deferred tax - adjustment in respect of prior periods (R&D claims)	(429)	(127)
Effect of changes in tax rates	(641)	-
Total deferred tax credit	(2,387)	(133)
Total tax (credit)/charge	(2,084)	(124)

 

 

Tax on items credited to equity:

	31 March 2022	31 March 2021
	£'000	£'000
Current tax credit on share-based payments	-	(48)
Deferred tax (credit)/charge on share-based payments	17	(17)
Total tax credit in equity	17	(65)

 

 

The tax charge for the year can be reconciled to accounting profit as follows:

	31 March 2022	31 March 2021
	£'000	£'000
(Loss)/profit before tax	(482)	(356)
Expected tax (credit)/charge based on the standard rate of tax in the UK of 19% (2021: 19%)	(91)	(68)
Differences in overseas tax rates	91	71
Expenses not deductible for tax purposes	717	21
Adjustments to tax in respect of prior periods (R&D claims)	(452)	(226)
Enhanced R&D deduction	(1,722)	-
Tax rate changes	(641)	-
Other tax adjustments	14	78
Total tax (credit)/charge	(2,084)	(124)

 

The main categories of deferred tax assets recognised by the Group are:

 

	Tax losses	Share-based payments	Other	Total
	£'000	£'000	£'000	£'000
At 1 April 2010	-	85	-	85
Credited/(charged) to income	-	31	102	133
Credited/(charged) to equity	-	17	-	17
Exchange differences	-	-	(5)	(5)
At 31 March 2021	-	133	97	230
Credited to income	4,049	15	(1,438)	2,626
Credited to equity	-	(17)	-	(17)
Exchange differences	-	-	7	7
At 31 March 2022	4,049	131	(1,334)	2,846

 

The standard rate of corporation tax in the UK is 19%. The March 2022 Budget Statement announced an increase in the main corporation tax rate to 25%, with effect from April 2023. This increase was substantively enacted at the balance sheet date.

 

The Group has recognised £4 million of deferred tax assets relating to carried forward tax losses.  These losses have been recognised as it is probable that future taxable profits will allow these deferred tax assets to be recovered.  The Group has performed a continuing evaluation of its deferred tax asset valuation allowance on an annual basis to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets.

 

11.  Earnings per share

Basic earnings per share (EPS) is calculated by dividing the earnings attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the year. The Company has potentially dilutive shares in respect of the share-based payment plans (see Note 23). Adjusted earnings per share removes the effect of restructuring costs in 2021.

	31 March 2022	31 March 2021
Weighted average number of shares in issue	100,009,727	99,660,395
Potentially dilutive shares (weighted average)	442,548	587,629
Diluted number of shares (weighted average)	100,452,275	100,248,024

 

	31 March 2022			31 March 2021
		Basic EPS	Diluted EPS		Basic EPS	Diluted EPS
	£'000	pence	Pence	£'000	pence	pence
Net profit/(loss) attributable to shareholders	1,602	1.60	1.59	(232)	(0.23)	(0.23)
Exclude:
Adjustments	-	-	-	662	0.66	0.66
Tax on adjustments	-	-	-	(133)	(0.13)	(0.13)
Adjusted net profit after tax	1,602	1.60	1.59	297	0.30	0.30

 

 

12.  Dividends

 

No dividends have been paid or proposed for the year ended 31 March 2022 (2021: nil).

 

 

13.  Intangible assets

	Patents	Development costs	Total
	£'000	£'000	£'000
Cost
At 1 April 2020	63	1,927	1,990
Additions	-	2,834	2,834
At 31 March 2021	63	4,761	4,824
Additions	-	5,623	5,623
At 31 March 2022	63	10,384	10,447
Amortisation
At 1 April 2020	63	1,832	1,895
Amortisation charge	-	52	52
At 31 March 2021	63	1,884	1,947
Amortisation charge	-	325	325
At 31 March 2022	63	2,209	2,272
Net book value
At 31 March 2021	-	2,877	2,877
At 31 March 2022	-	8,175	8,175

Development cost additions in the year to 31 March 2022 include software development costs directly incurred in the creation of new digital assets.

 

 

14.  Property, plant and equipment

	Right-of-use asset	Leasehold improvements	Fixtures, fittings and equipment	Total
	£'000	£'000	£'000	£'000
Cost
At 1 April 2020	4,194	254	1,772	6,220
Additions	34	72	316	422
Disposals	-	-	(561)	(561)
Exchange differences	(307)	(5)	(83)	(395)
At 31 March 2021	3,921	321	1,444	5,686
Additions	39	186	328	553
Disposals	-	-	(301)	(301)
Exchange differences	128	12	38	178
At 31 March 2022	4,088	519	1,509	6,116
Depreciation
At 1 April 2020	379	229	1,217	1,825
Depreciation charge	903	5	176	1,084
Disposals	-	-	(553)	(553)
Exchange differences	(32)	-	(44)	(76)
At 31 March 2021	1,250	234	796	2,280
Depreciation charge	885	53	314	1,252
Disposals	-	-	(301)	(301)
Exchange differences	49	-	21	70
At 31 March 2022	2,184	287	830	3,301
Net book value
At 31 March 2021	2,671	87	648	3,406
At 31 March 2022	1,904	232	679	2,815

At 31 March 2021, capital expenditure of £135,000 in respect of property, plant and equipment was contracted for but not provided for in the accounts.

 

15.  Inventories

	31 March 2022	31 March 2021
	£'000	£'000
Finished goods	7	-

 

Write-down of inventory amounted to nil (2021: £70,000).

The cost of inventories recognised as an expense and included in cost of sales amounted to £112,000 (2021: £18,000).

 

16.  Trade and other receivables

	31 March 2022	31 March 2021
	£'000	£'000
Non-current
Net investment in sub-lease	-	79
Prepayments in respect of property deposits	217	260
	217	339
Current
Trade receivables	7,999	9,138
Less provision for impairment	(212)	(227)
Net trade receivables	7,787	8,911
Net investment in sub-lease	81	172
Other receivables	82	143
Prepayments	1,170	688
Accrued income	943	706
	10,063	10,620

 

The maturity analysis of the net investment in sub-lease is set out in Note 18.

Trade receivables have been aged with respect to the payment terms as follows:

	31 March 2022	31 March 2021
	£'000	£'000
Not past due	7,274	8,128
Past due 0-30 days	401	530
Past due 31-60 days	109	185
Past due 61-90 days	25	22
Past due more than 90 days	190	273
	7,999	9,138

The movement in the allowance for impairment losses was:

	31 March 2022	31 March 2021
	£'000	£'000
At the beginning of the period	227	303
(Write-back)/charges	(14)	(41)
Utilisation of provision	(7)	(22)
Foreign exchange adjustment	6	(13)
At the end of the period	212	227

 

The Group has applied the simplified approach to measuring expected credit losses, as permitted by IFRS 9, and recognises a loss allowance based on the lifetime expected credit loss.

 

17.  Trade and other payables

	31 March 2022	31 March 2021
	£'000	£'000
Trade payables	1,401	2,514
Other taxation and social security	663	549
Other payables	690	536
Accruals	5,257	5,578
Deferred income	4,718	4,636
	12,729	13,813

 

18.  Lease liability

The lease liabilities included in the statement of financial position are:

	31 March 2022	31 March 2021
	£'000	£'000
Current	856	1,085
Non-current	1,349	2,081
	2,205	3,166

 

There are no significant variable leases costs or lease term judgements. The related right-of-use asset is disclosed in Note 14.

The movements in the lease liability were as follows:

	31 March 2022	31 March 2021
	£'000	£'000
At the beginning of the year	3,166	4,386
Lease payments	(1,226)	(1,075)
Finance cost	121	166
Additions	39	34
Exchange differences	105	(345)
At the end of the year	2,205	3,166

 

The maturity analysis of the contractual undiscounted cash flows is:

	31 March 2022	31 March 2021
	£'000	£'000
Less than one year	934	1,204
Between one and five years	1,412	2,213
Total future lease payments	2,346	3,417
Total future interest payments	(141)	(251)
Total lease liability	2,205	3,166

 

 

The Group sub-leased its New York office in March 2021.  The Group has classified the sub-lease as a finance lease, because the sub-lease is for the whole of the remaining term of the head lease.

 

The following table sets out a maturity analysis of lease receivables, showing the undiscounted lease payments to be received after the reporting date. The related net investment in sub-lease is disclosed in Note 16.

 

	31 March 2022	31 March 2021
	£'000	£'000
Less than one year	82	180
One to two years	-	80
Total undiscounted lease payments receivable	82	260
Unearned finance income	(1)	(9)
Net investment in the lease	81	251

 

19.  Redeemable preference shares

 

The Company allotted and issued 50,000 redeemable preference shares of £1.00 each to Octavius Black in June 2018. The shares are fully paid up. Under the Articles of Association, the Company may redeem the preference shares at their nominal amount at any time specified by either the Directors or the preference share holder. The preference share capital, however, counts towards the £50,000 minimum share capital required under the Companies Act 2006 and cannot therefore be redeemed unless the Company increases its other share capital. The preference shares are non-voting, give no rights to dividends or interest and entitle the holder to the return of the nominal value on a winding up.

 

20.  Borrowings

The Group entered into a £10 million debt facility (£6 million Revolving Credit Facility, £4 million accordion) on 30 September 2021 which matures after three years.  The facility remains undrawn as at 9 June 2022.

 

21.  Financial instruments and financial risk management

Financial instruments by category

Trade and other receivables (excluding prepayments), cash and cash equivalents and trade and other payables are initially measured at fair value and subsequently held at amortised cost.

	31 March 2022	31 March 2021
	£'000	£'000
Net trade receivables	7,787	8,911
Other receivables	82	143
Prepayments in respect of property deposits	217	260
Cash and cash equivalents	10,021	16,833
Financial assets at amortised cost	18,107	26,147
Trade payables	1,401	2,514
Other payables	690	536
Lease liabilities	2,205	3,166
Financial liabilities at amortised cost	4,296	6,216

 

The Group holds no assets or liabilities that are held at fair value through income statement or OCI.

As the trade and other receivables and trade and other payables have a maturity of less than one year, the notional amount is deemed to reflect the fair value.

Capital risk management

 

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern, to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure.

 

The Group's sources of funding currently comprise cash flows generated from operations, and equity contributed by shareholders. The Group has no borrowings and is not subject to any externally imposed capital requirements.

 

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders to the extent allowed by the Company's articles or issue new shares.

 

Financial risk management

 

The Group's risk management is overseen by the Audit and Risk Committee. The Group is exposed to a variety of financial risks that result from its operations, including credit risk, liquidity risk and foreign currency risk. Since the Group has no debt it is not significantly exposed to interest rate risk. The Group has not entered into any derivative transactions, such as interest rate swaps or forward foreign exchange contracts.

 

There have been no substantive changes in the Group's exposure to financial instrument risks, its objectives, policies and processes for managing those risks, or the methods used to measure them from previous periods unless otherwise stated in this note.

 

 

Credit risk

 

Credit risk arises principally from the Group's trade receivables from customers and monies on deposit with financial institutions.

 

Credit risk on trade receivables is considered to be relatively low as the Group's customers mainly consist of large credit-worthy organisations. Credit exposure is spread over a large number of customers and so there is no significant concentration of credit risk. Outstanding and overdue balances are regularly reviewed and resulting actions are put in place on a timely basis. The Group establishes an allowance for impairment. This is based on a review of individual balances taking into account the results of credit control communications and our knowledge about the customer relationship. See Note 16 Trade and other receivables for further information on ageing and impairment of trade receivables.

 

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions, only independently rated parties are accepted, and management maintain a close relationship with the Group's banks.

 

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

 

	31 March 2022	31 March 2021
	£'000	£'000
Trade receivables	7,787	8,911
Other receivables	82	143
Prepayments in respect of property deposits	217	260
Cash and cash equivalents	10,021	16,833
At the end of the period	18,107	26,147

 

 

Liquidity risk

The Group ensures, as far as possible, that it has sufficient funds to meet foreseeable operational expenses. Cash flow forecasting is performed by Group Finance who monitor rolling forecasts of the Group's liquidity requirements. Such forecasting takes into consideration expected cash receipts, regular spending and payment of taxes such as VAT, payroll and corporate income tax.

 

Currently, the Group's liquidity risk is low as it is has a surplus of cash in all entities and the £10 million debt facility available (set out in Note 20). All Group liabilities in the current and prior year are due within three months of the reporting date, apart from lease liabilities. The maturity of the lease liability is set out in Note 18.

 

Foreign currency risk

The Group operates internationally and is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than Sterling. The currencies giving rise to this risk are primarily the US Dollar and the Euro. Where possible the exposure is mitigated by a natural hedge. For example, US Dollar revenues are partially matched by US Dollar costs in the US subsidiary.

 

The Group holds cash in the UK in Sterling, Euro and US Dollar bank accounts and in the USA in US Dollar and Canadian Dollar bank accounts.

 

Trade receivables and cash and cash equivalents are analysed by currency as follows:

 

	GBP	USD	EUR	Other	Total
	£'000	£'000	£'000	£'000	£'000
At 31 March 2022
Net trade receivables	2,592	4,581	468	146	7,787
Cash and cash equivalents	6,725	3,018	95	183	10,021
At 31 March 2021
Net trade receivables	2,509	4,806	1,451	145	8,911
Cash and cash equivalents	14,465	1,974	80	314	16,833

 

The Group does not currently use forward foreign exchange contracts or currency options to hedge currency risk.

 

22.  Share capital

	31 March 2022	31 March 2022	31 March 2021	31 March 2021
		Cost		Cost
	Number	£'000	Number	£'000
Ordinary shares of £0.00001 at 1 April	99,791,784	1	99,493,210	1
Issue of shares to satisfy options	313,876	-	298,574	-
Ordinary shares of £0.00001 at 31 March	100,105,660	1	99,791,784	1

 

An Employee Benefit Trust ('EBT') has been established in connection with the Group's Share Incentive Plan. The movements in own shares held by the Employee Benefit Trust and the market value of the shares held at the year-end are shown below.

 

	31 March 2022	31 March 2022	31 March 2021	31 March 2021
		Cost		Cost
	Number	£'000	Number	£'000
As at 1 April	119,875	-	130,835	-
Issue of new shares to EBT	(8,220)	-	(10,960)	-
Ordinary shares of £0.00001 at 31 March	111,655	-	119,875	-
Market value at 31 March		151		156

 

 

23.  Share-based payments

The Group awards options to selected employees under a Long-Term Incentive Share Option Plan ('LTIP'). The options granted to date vest subject only to remaining employed up to the vesting date. Unexercised options do not entitle the holder to dividends or to voting rights.

 

The Group operates the Mind Gym plc Share Incentive Plan (SIP). An initial award of £1,000 of free shares was granted in October 2018 to all employees at the IPO price of 146 pence. The shares are held in an employee benefit trust and vest after three years subject only to remaining employed up to the vesting date. The holder is entitled to dividends over the vesting period.  Many employees have elected to leave their shares in the trust a further two years for tax purposes.

 

On 30 September 2019, the Group launched a Save As You Earn scheme ('SAYE') and an Employee Share Purchase Plan ('ESPP') for all eligible employees in the UK and USA respectively.

The total share-based payments expense was:

 

	31 March 2022	31 March 2021
	£'000	£'000
Equity settled share-based payments	341	298

 

The movements in the number of share awards and share options and the weighted average exercise price of awards are:

		31 March 2022		31 March 2021
	Number	Weighted average exercise price £	Number	Weighted average exercise price £
Outstanding at the beginning of the period	2,287,024	0.66	2,183,257	0.63
Granted during the period	2,448,318	0.14	741,070	0.67
Forfeited during the period	(2,166,334)	0.14	(327,768)	0.97
Exercised during the period	(322,096)	0.17	(309,535)	0.17
Outstanding at the end of the period	2,246,912	0.66	2,287,024	0.66
Exercisable at the end of the period	4,110		2,055
Weighted average fair value of awards granted (£)	1.69		0.27

 

The range of exercise prices and weighted average remaining contractual life of share awards and share options outstanding at 31 March were:

 

	31 March 2022	31 March 2021
	£'000	£'000
£ nil	428,770	463,705
£0.00001	584,580	427,129
£0.77000	316,987	592,537
£1.04000	201,981	306,843
£1.44500	217,784	-
£1.46000	496,810	496,810
	2,246,912	2,287,024
Weighted average remaining contractual life (years)	5.8	5.4

 

Simple share options awarded under the LTIP, SAYE and ESPP are valued using the Black-Scholes model.  Complex share options awarded under the LTIP are valued using the Monte Carlo model.  Shares awarded under the SIP are valued directly by reference to the share price at date of grant. The principal assumptions used in these valuations were:

 

 

	Date of grant	Share price at grant	Exercise price	Expected life	Expected volatility	Dividend yield	Risk-free rate	Fair value
		£	£	years	%	%	%	£
LTIP (2 year vesting)	27 Apr 2018	1.24	Nil	2	n/a	1.4%	n/a	1.20
LTIP (3 year vesting)	27 Apr 2018	1.24	Nil	3	n/a	1.4%	n/a	1.19
LTIP (2 year vesting)	25 Jun 2018	1.46	1.46	10	19%	1.4%	1.0%	0.28
LTIP (3 year vesting)	25 Jun 2018	1.46	1.46	10	19%	1.4%	1.0%	0.28
SIP	8 Oct 2018	1.67	Nil	n/a	n/a	n/a	n/a	1.67
SAYE	30 Sep 19	1.22	1.04	3	19%	1.4%	1.0%	0.25
ESPP	30 Sep 19	1.22	1.04	1	19%	1.4%	1.0%	0.20
LTIP (3 year vesting)	31 Mar 20*	1.00	Nil	3	n/a	1.4%	n/a	0.96
LTIP (4 year vesting)	31 Mar 20*	1.00	Nil	4	n/a	1.4%	n/a	0.95
LTIP (5 year vesting)	31 Mar 20*	1.00	Nil	5	n/a	1.4%	n/a	0.93
SAYE	1 Sep 20	0.90	0.77	3	19%	1.4%	1.0%	0.25
ESPP	1 Sep 20	0.90	0.77	1	19%	1.4%	1.0%	0.20
LTIP (3 year vesting)	14 Jul 21**	1.90	Nil	3	36%	0%	0.15%	1.90
LTIP (3 year vesting)	14 Jul 21**	1.90	Nil	3	36%	0%	0.15%	1.69
LTIP (4 year vesting)	14 Jul 21**	1.90	Nil	4	36%	0%	0.23%	1.90
LTIP (4 year vesting)	14 Jul 21**	1.90	Nil	4	36%	0%	0.23%	1.70
LTIP (5 year vesting)	14 Jul 21**	1.90	Nil	5	36%	0%	0.31%	1.90
LTIP (5 year vesting)	14 Jul 21**	1.90	Nil	5	36%	0%	0.31%	1.73
SAYE	1 Aug 21	1.70	1.445	3	36%	0%	0.31%	0.53
ESPP	1 Aug 21	1.70	1.445	1	34%	0%	0.15%	0.36
LTIP (3 year vesting)	3 Dec 21	1.675	Nil	3	36%	0%	0.15%	1.675
LTIP (4 year vesting)	3 Dec 21	1.675	Nil	4	36%	0%	0.23%	1.675
LTIP (5 year vesting)	3 Dec 21	1.675	Nil	5	36%	0%	0.31%	1.675

 

* includes further options granted on 12 Jun 2020 on the same terms and with the same valuation assumptions.

* *includes further options granted on 3 Dec 2021 on the same terms and with the same valuation assumptions.

 

24.  Controlling party

The Group was controlled by O. Black and J. Cash by virtue of their joint shareholding in the Company throughout the period.

There were the following related party transactions during the year and balances at the end of the year:

·      Key management compensation as disclosed in Note 8.

·      Trevor Phillips, a non-executive director of Mind Gym plc, is also chairman and director of Green Park Interim and Executive Search which provided services to the Group totalling £105,500 in the year ended 31 March 2022.

·      David Nelson, a non-executive director of Mind Gym plc is also a partner of Dixon Wilson. Dixon Wilson provided services to the Group totalling £6,410 in the year ended 31 March 2022.

·      Zarina Ward, a key management person is the spouse of Simon Ward.  Simon Ward Search provided services to the Group totalling £75,000 in the year ended 31 March 2022.

 

25.  Events after the reporting period

There were no post balance sheet events.