Drumz Plc - Final Results
PR Newswire
London, May 24
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.
25 May 2023
DRUMZ PLC
("Drumz" or the "Company")
Final results for the year ended 31 December 2022
Drumz plc (AIM: DRUM) is pleased to announce its final results for the year ended 31 December 2022 (the “Period”).
Highlights
· In the Period the Company focused on developing the business of Acuity Risk Management Limited (“Acuity”), the award winning cybersecurity software company.
· Post the Period end the Company acquired the balance of the issued and to be issued share capital of Acuity and as a result the Company is now a trading Company.
Following the acquisition of Acuity the Company’s registered office and place of business is situated at 80 Cheapside, London EC2V 6EE. The Company is in the process of changing the Company’s name to Acuity RM Group Plc and Tradable Instrument Display Mnemonic to “AIM:ACRM”; a further announcement will be made once the timing has been confirmed.
Angus Forrest, Chief Executive commented on the results:
“During the year, Acuity’s performance continued to improve based on all KPI measurements; and Drumz directors decided that the opportunity offered by Acuity merited acquisition of all the outstanding Acuity shares to enable focus on the continuing development of the business for the benefit of Drumz shareholders. I look forward to reporting on the further progress at Acuity over the coming months.”
For further information:
| Acuity RM Group plc | 020 3582 0566 |
| Angus Forrest, Chief Executive Officer | www.drumzplc.com |
| WH Ireland (NOMAD & Joint Broker) | https://www.whirelandplc.com/capital-markets |
| Mike Coe / Sarah Mather | 020 7220 1666 |
| Peterhouse Capital Limited (Joint Broker) | |
| Lucy Williams / Duncan Vasey | 020 7469 0936 |
| Clear Capital Markets Limited (Joint Broker) Andrew Blaylock | 020 3869 6080 |
Chairman’s Statement
I am pleased to present the results of Drumz for the year ended 31 December 2022.
Results and performance
The Group’s results for the year ended 31 December 2022 showed revenues of £60,000 (2021: £44,000) and an operating loss of £256,000 (2021: loss £239,000).
The principal asset of the Group was its investment in Acuity Risk Management Limited (“Acuity”), a supplier of Governance, Risk, Compliance (“GRC”) software and services. At the year end, the Company owned a 25 per cent equity stake in Acuity which was valued at cost of £625,000. Acuity’s award winning proprietary software platform STREAM® collects data about organisations to improve business decisions and management. It is used by around 70 organisations in markets including government, utilities, defence, broadcasting, manufacturing and healthcare. Most customers use it for managing cybersecurity and IT risks and for compliance with ISO 27001 and other standards and regulations. STREAM® is sold on a SaaS or private cloud delivery (on-premise) basis, typically with a three year licence, invoiced annually in advance. Sales are made directly through the Company’s own sales team and via a growing network of partners in the UK and the US. During the year, Acuity has continued to make further progress with its commercialisation, including adding to the number of distributors of the product in the US. Further details on the progress being achieved at 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 performance of KCR once again has been extremely disappointing and as a result, the value of the KCR holding has declined further from £390,000 to £305,000, equating to a loss of £85,000 (2021: loss of £183,000). I am also disappointed to report that the KCR share price has fallen 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 2022, show a loss before taxation of £341,000 (2021: loss of £422,000), of which £85,000 (2021: loss of £183,000) was due to the fall in value of the Group’s investment in KCR. No dividend is being declared for the year (2021: £nil).
As a result of the losses incurred during the year shareholders’ funds have fallen to £1,227,000 (2021: £1,547,000).
Post balance sheet event
I am pleased to be able to report that in April 2023 Drumz completed the acquisition of all the outstanding shares in Acuity that it did not previously own. As a result, the Group is now classified as a trading company .
The Board considers that Acuity is a high growth business with excellent prospects. Further details of the post balance sheet event are set out in the Chief Executive’s report and in note 15 to these financial statements.
Board changes
There have been a number of Board changes during the period under review. Nick Clark joined the Board on 7 June 2022. Nick was the founder and Chief Executive of Torpedo Factory Group, a technology systems integrator, which was recently acquired by Aukett Swanke Group plc, where Nick is now the Group’s Chief Executive.
Post the year end, Nish Malde resigned from the Board on 9 March 2023 in order to focus on his other business commitments. The Board would like to thank Nish for his contribution to the Group and to wish him well in the future.
Following the Company’s acquisition of Acuity, as referred to above, Simon Marvell, one of the founders of that company, joined the Board with effect from 24 April 2023.
Outlook
Acuity is a business with considerable potential and I look forward to reporting on the progress we are making in the coming months. Furthermore, I would like to thank all shareholders for their continuing support and to thank my colleagues and our advisors for their respective contributions throughout the period covered by these financial statements.
Simon Bennett
Chairman
24 May 2023
Chief Executive’s Report
Introduction
Over the past two years the Company has worked with Acuity Risk Management Limited (“Acuity”), it has developed its business and is now intent on developing its potential. The focus for the year ended 31 December 2022 was to work with Acuity to improve its business and make the changes necessary for faster expansion to grow scale and value. Post the year end, we were delighted to announce that we acquired all the remaining shares not already owned by us. The acquisition completed on 24 April 2023 when all the necessary resolutions to complete the acquisition of Acuity and other related matters were duly passed by shareholders in a general meeting. As a result, Acuity is now wholly owned by the Group as a trading company for the purposes of the AIM Rules rather than an investing company.
Following the acquisition of Acuity, the Group’s future strategy will be to develop its business to deliver long term, sustainable growth in shareholder value. In the short to medium term this is expected to come from organic growth and thereafter may also come from complementary acquisitions.
The Group will be focused on key business objectives including to:
- accelerate revenue growth both organically in existing and other global markets;
- further penetrate existing markets by forging stronger customer and partner relationships;
- improve productivity;
- continue to invest in developing STREAM® to enhance its offering; and
- become a profitable and cash generative group.
Acuity
With its headquarters located in London, Acuity is an established provider of GRC risk management software and services via its award-winning software platform STREAM®.
STREAM® collects data about organisations and provides functionality to improve business decisions and management. It is in use with around 70 organisations in sectors including government, utilities, defence, broadcasting, manufacturing and healthcare. Most customers use STREAM® for GRC, managing cybersecurity and IT risks and for compliance with ISO 27001 and other standards and regulations, although it can be configured to manage other risks such as vendor management to provide a comprehensive view of risk and compliance across an organisation.
STREAM® is sold via subscription on a SaaS or private cloud delivery (on-premise) basis (using a customer’s infrastructure) typically on a three year licence, invoiced annually in advance. Sales are made directly through Acuity’s own sales team and via a growing network of partners in the UK and the US.
The principal use of STREAM® by Acuity’s customers is in managing cybersecurity and other IT risks and the product is well rated by leading analysts, including Gartner.
The GRC market is growing; it was valued at $14.9bn in 2022 and is forecast to grow to $27.1bn by 2027. The market is being driven by a combination of legislation (e.g. GDPR) and the requirement of organisations to more effectively manage the risks that are affecting them and so improve decision-making.
The Group acquired its initial stake in September 2020 and at the same time I was appointed Chairman of Acuity. Since our original investment significant progress has been made in the commercialisation of Acuity, with the aim of accelerating its growth and achieving greater scale. The business model has been revised, to a SaaS model, with customers typically signing three year contracts, which are invoiced annually in advance. As a result, Acuity is strongly cash generative and the visibility of future income flows has been significantly improved. At present, Acuity’s customers are mostly in the UK and Europe and the Company’s sales are made by Acuity’s existing sales team. Acuity has also been developing new sales channels, particularly through partnerships, to accelerate sales growth in North America, which represents almost half of the world market for GRC products.
In the table below are a number of Key Performance Indicators (“KPIs”) as sourced from its unaudited management information, which demonstrate the improvement in the performance of Acuity, since the Group made its initial investment:
- monthly recurring revenue: £0.14 million as at 28 February 2023 (30 September 2022: £0.13 million, 31 March 2022: £0.10 million)
- forward contracted revenue: £2.17 million as at 28 February 2023 (30 September 2022: £1.99 million, 31 March 2022: £2.17 million)
- renewal rate: 96 per cent. as at 28 February 2023 (30 September 2022: 96 per cent., 31 March 2022: 82 per cent.)
- sales pipeline: £3.83 million as at 22 March 2023 (30 September 2022: £1.67 million, 31 March 2022: £1.36 million).
| Year to 31 March | 2023* | 2022 | 2021 |
| Annual Revenues £’000 | 1,762 | 1,558 | 1,226 |
| Gross margin % | 92% | 92% | 92% |
| Renewal rate | 96% | 82% | 81% |
| Sales pipeline £’000 | 4,200 (Mar 23) | 2,370 (Sept 22) | 1,549 (Mar 21) |
| Net recurring Revenue % | 125.6% | _ | _ |
*Year to 31 March 2023 unaudited
Further details are set out in note 15 to these financial statements and on the Company’s website:
KCR Residential REIT plc (“KCR”)
The Company’s other investment is its legacy holding in KCR. This continues to be an asset identified for disposal. In the most recent half year to 31 December 2022 KCR did generate higher revenues, but there were higher costs, albeit some of the rise related to a major refurbishment of properties.
Summary and Outlook
Following the acquisition of Acuity post the Period end, the Group is now being treated as a trading company for the purposes of the AIM Rules. The Group is focussed on its strategy to deliver long term, sustainable growth in shareholder value and in the short to medium term this is expected to come from organic growth and thereafter may also come from complementary acquisitions.
We believe that Acuity is an exciting prospect with much potential and I look forward to reporting on the further progress being made in the coming months.
Angus Forrest
Chief Executive
24 May 2023
Group statement of comprehensive income
for the year ended 31 December 2022
| Notes | 2022 £’000 | 2021 £’000 | |
| Continuing operations | |||
| Revenue | 60 | 44 | |
| Cost of sales | — | — | |
| Gross profit | 60 | 44 | |
| Administrative expenses | (316) | (283) | |
| Operating (loss) | 2 | (256) | (239) |
| Loss on investments | 6 | (85) | (183) |
| Loss before taxation | (341) | (422) | |
| Taxation | 4 | — | — |
| Loss for the year attributable to shareholders of the parent company | (341) | (422) | |
| Total comprehensive income for the year attributable to shareholders of the parent company | (341) | (422) | |
| Earnings per share | |||
| Basic and diluted earnings per share from total and continuing operations | 5 | (0.8)p | (1.2)p |
Group statement of financial position
as at 31 December 2022
Notes | 2022 £’000 | 2021 £’000 | |
| ASSETS | |||
| Non-current assets | |||
| Investments at fair value through profit or loss | 6 | 930 | 1,015 |
| 930 | 1,015 | ||
| Current assets | |||
| Trade and other receivables | 7 | 122 | 23 |
| Cash and cash equivalents | 222 | 561 | |
| 344 | 584 | ||
| Total assets | 1,274 | 1,599 | |
| LIABILITIES | |||
| Current liabilities | |||
| Trade and other payables | 8 | 47 | 52 |
| Total liabilities | 47 | 52 | |
| Net assets | 1,227 | 1,547 | |
| EQUITY | |||
| Share capital | 9 | 2,688 | 2,688 |
| Share premium | 8,385 | 8,385 | |
| Share option reserve | 51 | 30 | |
| Merger reserve | 1,012 | 1,012 | |
| Retained earnings | (10,909) | (10,568) | |
| Total equity | 1,227 | 1,547 |
Group statement of changes in equity
for the year ended 31 December 2022
| 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 2021 | 2,613 | 8,039 | — | 88 | 1,012 | (10,234) | 1,518 |
| Issue of shares | 75 | 346 | — | — | — | — | 421 |
| Total comprehensive income | — | — | — | — | — | (422) | (422) |
| Share options | 30 | 30 | |||||
| Write-off of convertible equity | (88) | 88 | |||||
| Balance at 31 December 2021 | 2,688 | 8,385 | 30 | - | 1,012 | (10,568) | 1,547 |
| Balance at 1 January 2022 | 2,688 | 8,385 | 30 | - | 1,012 | (10,568) | 1,547 |
| Transactions with owners in their capacity as owners: | |||||||
| Share options | — | — | 21 | — | — | — | 21 |
| Total comprehensive income | — | — | — | — | — | (341) | (341) |
| Balance at 31 December 2022 | 2,688 | 8,385 | 51 | — | 1,012 | (10,909) | 1,227 |
Group statement of cash flows
for the year ended 31 December 2022
| 2022 £’000 | 2021 £’000 | |
| Cash flows from operating activities | ||
| Loss before taxation | (341) | (422) |
| Adjustments for: | ||
| Fair value adjustment for listed investments | 85 | 183 |
| Increase in share based payments | 21 | 30 |
| (Increase) in trade and other receivables | (99) | (9) |
| (Decrease) in trade and other payables | (5) | (8) |
| Net cash used in operating activities | (339) | (226) |
| Cash flows from investing activities | ||
| Purchase of investments | - | (125) |
| - | (125) | |
| Cash flows from financing activities | ||
| Cash raised through issue of shares (net of transaction costs) | - | 421 |
| Net increase / (decrease) in cash and cash equivalents | (339) | 70 |
| Cash and cash equivalents at beginning of financial year | 561 | 491 |
| Cash and cash equivalents at end of financial year | 222 | 561 |
Principal accounting policies
for the year ended 31 December 2022
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 2nd Floor, 80 Cheapside, London EC2V 6EE.
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 2022
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
| 2022 £’000 | 2021 £’000 | |
| Segment result | ||
| Operating income | 60 | 44 |
| Investment activities: | ||
| Administrative expenses | (316) | (283) |
| Operating loss/profit | (256) | (239) |
| Loss in value of quoted investment | (85) | (183) |
| Loss before tax | (341) | (422) |
| 2022 £’000 | 2021 £’000 | |
| Segment assets | ||
| Investment activities: | ||
| Non-current assets – investment | 930 | 1,015 |
| Other | 344 | 584 |
| Total assets | 1,274 | 1,599 |
| Segment liabilities | ||
| Investment activities: | ||
| Current liabilities | 47 | 52 |
| Total liabilities | 47 | 52 |
| Total assets less total liabilities | 1,227 | 1,547 |
The activity of investments arose wholly in the United Kingdom.
2. Operating profit / (loss)
Operating profit / (loss) is stated after charging:
| 2022 £’000 | 2021 £’000 | |
| Auditor’s remuneration for: | ||
| Audit services | ||
| – audit of the Group’s and Company’s annual accounts | 18 | 16 |
| – audit of subsidiaries pursuant to legislation | 4 | 3 |
3. Directors and employees
Staff costs during the year were as follows:
| 2022 £’000 | 2021 £’000 | |
| Wages and salaries | 119 | 105 |
The average number of employees (including Directors) of the Group was:
| 2022 Number | 2021 Number | |
| Management of investments | 5 | 4 |
4. Income tax
There is no tax charge or credit for the current year. The tax assessed for the prior year is higher than the standard rate of corporation tax in the UK of 19% (2021: 19%). The differences are explained as follows:
| 2022 £’000 | 2021 £’000 | |
| Loss on ordinary activities before taxation | (341) | (422) |
| Loss on ordinary activities multiplied by standard rate of UK corporation tax of 19% (2021: 19%) | (65) | (80) |
| Effect of: | ||
| Disallowable items | 20 | 35 |
| Addition / (utilisation) of tax losses arising | 45 | 45 |
| Total tax charge/(credit) | — | — |
The Group has unrecognised deferred tax assets of £1,504,000 (2021: £1,459,000) as a result of losses in the current year and prior periods carried forward of £8,018,000 (2021: £7,677,000).
5. 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 419,822,048 ordinary shares of 0.1p. The 2022 loss per ordinary share is based on post consolidation number of shares in issue 41,982,204 ordinary shares of 0.1p. (2021: 35,107,204 ordinary shares of 0.1p adjusted for 2023 consolidation) and the following figures:
| 2022 | 2021 | |
| Loss attributable to equity shareholders (£’000) | (341) | (422) |
| Loss per ordinary share | (0.8)p | (1.2)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.
6. Investments
| Investments £’000 | |
| Cost | |
| At 1 January 2022 | 2,330 |
| Additions | - |
| At 31 December 2022 | 2,330 |
| Fair value movements | |
| At 1 January 2022 | (1,315) |
| Fair value adjustment | (85) |
| At 31 December 2022 | (1,400) |
| Fair value | |
| At 31 December 2022 | 930 |
| At 31 December 2021 | 1,015 |
Drumz plc acquired its legacy investment 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 2022 was £304,714.
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 exercise 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 (2021: 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 2022 | 625 | 1,705 | 2,330 |
| Additions | - | - | |
| At 31 December 2022 | 625 | 1,705 | 2,330 |
| Fair value losses | |||
| At 1 January 2022 | — | (1,315) | (1,315) |
| Fair value adjustment | — | (85) | (85) |
| At 31 December 2022 | — | (1,400) | (1,400) |
| Fair value | |||
| At 31 December 2022 | 625 | 305 | 930 |
| At 31 December 2021 | 625 | 390 | 1,015 |
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.
Investments in the subsidiaries are carried by the parent company at £nil (2021: £nil). See notes 12 and 15 for details of subsidiary undertakings.
7. Trade and other receivables
| Group | Company | ||||
| 2022 | 2021 | 2022 | 2021 | ||
| £’000 | £’000 | £’000 | £’000 | ||
| Other debtors | 122 | 23 | 122 | 23 | |
In the opinion of the Directors, fair value is equal to carrying value.
8. Trade and other payables
| Group | Company | |||
| 2022 | 2021 | 2022 | 2021 | |
| £’000 | £’000 | £’000 | £’000 | |
| Current | ||||
| Trade creditors | 2 | 9 | 2 | 9 |
| Other creditors and accruals | 45 | 43 | 45 | 43 |
| Total trade and other payables | 47 | 52 | 47 | 52 |
In the opinion of the Directors, fair value is equal to carrying value.
9. Share capital
| 2022 £’000 | 2021 £’000 | |
| Allotted, called up and fully paid | ||
| 419,822,048 (2021: 419,822,048) ordinary shares of 0.1p each | 420 | 420 |
| 2,268,113,165 (2021: 2,268,113,165) deferred shares of 0.1p each | 2,268 | 2,268 |
| 2,688 | 2,688 |
| 2022 Number | 2022 £’000 | 2021 Number | 2021 £’000 | |
| Ordinary shares | ||||
| At 1 January | 419,822,048 | 420 | 344,822,048 | 345 |
| Additions | 75,000,000 | 75 | ||
| At 31 December | 419,822,048 | 420 | 419,822,048 | 420 |
On 24 April 2023 a resolution was approved by shareholders in general meeting whereby the Ordinary shares were subject to a consolidation and subdivision effectively reducing the number of shares and share options by a factor of 10.
Deferred shares
In November 2022 at a General Meeting of the Ordinary Shareholders and at a separate Class Meeting of the Deferred Shareholders new Articles were approved. The new Articles have amended the rights of the deferred shares so on a distribution of assets on a liquidation or a return of capital (other than a conversion, redemption or purchase of shares) the surplus assets of the Company remaining after payment of its liabilities shall be applied (to the extent that the Company is lawfully permitted to do so), first in paying to the holders of the Deferred Shares, if any, a total of £1.00 for all of the Deferred Shares (which payment shall be deemed satisfied by payment to any one holder of Deferred Shares).
The other rights of the deferred shares are unaltered, they 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.
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 2022 is shown below:
| Number | ||
| Outstanding at 31 December 2021 and 31 December 2022 | 15,000,000 |
On 24 April 2023 a resolution was approved by shareholders in general meeting whereby the Ordinary shares were subject to a consolidation and subdivision effectively reducing the number of shares and share options by a factor of 10. |
At 31 December 2022 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 2022: 0.62p
Options exercisable at 31 December 2022: nil
The weighted average remaining contractual life of the share options outstanding at the end of the year is 7 years (2021: 8 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 2022 is £21,000 (2021: £30,000). 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
The warrants over 75,000,000 ordinary shares of the Company with an exercise price of 1.0 pence per share issued in the year ended 31 December 2021, expired during the year.
10. Transactions with related parties
Group and Company
The key management personnel of the Company are considered to be the Directors.
Acuity Risk Management Limited, a company in which the Group owned 25% of the equity, owed £12,000 for unpaid management fees at the year end. Post the balance sheet date the Group acquired the whole of the share capital of Acuity. Further details are set out in note 15 to these financial statements and on the Company’s website:
11. Financial instruments and risk profile
The Group’s and Company’s financial instruments comprise of its investment portfolio, cash balances, debtors and creditors that arise directly from its operations and derivative instruments. The Group and Company are exposed to risk through the use of financial instruments and specifically to liquidity risk, market price risk and credit risk, which result from the Group’s operating activities.
The Board’s policy for managing these risks is summarised below.
Liquidity risk
The Group and Company make investments for the long term. Accordingly, the Group and Company rarely trade investments in the short term. The Group currently has an investment in KCR Residential REIT plc. Although this is a traded investment it has limited liquidity.
Market price risk
The Group and Company are exposed to market price risk as shown by movements in the value of its equity investments. Any such risk is regularly monitored by the Directors.
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group monitors capital on the basis of the carrying amount of equity, less cash and cash equivalents as presented on the face of the Statement of financial position. The movement in the capital to overall financing ratio is shown below:
| Group | Company | |||
| 2022 | 2021 | 2022 | 2021 | |
| £’000 | £’000 | £’000 | £’000 | |
| Equity | 1,227 | 1,547 | 1,227 | 1,547 |
| Less: cash and cash equivalents | (222) | (561) | (222) | (561) |
| Capital | 1,005 | 986 | 1,005 | 986 |
| Equity | 1,227 | 1,547 | 1,227 | 1,547 |
| Borrowings | — | — | — | — |
| Overall financing | 1,227 | 1,547 | 1,227 | 1,547 |
| Capital to overall financing | 81.9% | 63.7% | 81.9% | 63.7% |
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
Credit risk
The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date.
| Group | Company | |||
| 2022 | 2021 | 2022 | 2021 | |
| £’000 | £’000 | £’000 | £’000 | |
| Trade and other receivables | 122 | 23 | 122 | 23 |
| Cash and cash equivalents | 222 | 561 | 222 | 561 |
| 344 | 584 | 344 | 584 | |
The Directors consider that all the above financial assets are of reasonable quality. No amounts shown above are considered to be past their due date.
Summary of financial assets and liabilities by category
The carrying amount of financial assets and liabilities as recognised at the balance sheet date of the reporting periods under review may also be categorised as below:
| Group | Company | |||
| 2022 £’000 | 2021 £’000 | 2022 £’000 | 2021 £’000 | |
| Current assets | ||||
| Trade and other receivables | 122 | 23 | 122 | 23 |
| Cash and cash equivalents | 222 | 561 | 222 | 561 |
| Financial assets at amortised cost | 344 | 584 | 344 | 584 |
| Fair value though profit and loss assets | 930 | 1,015 | 930 | 1,015 |
| Current liabilities | ||||
| Financial liabilities carried at amortised cost | 47 | 52 | 47 | 52 |
| Non-current liabilities | ||||
| Financial liabilities carried at amortised cost | — | — | — | — |
The financial instruments held at fair value through profit or loss have been valued in accordance with the International Private Equity and Venture Capital Valuation guidelines. In the current year, these are determined by reference to quoted prices where there is an active market for identical assets or liabilities. Otherwise, the fair value is determined by using valuation techniques such as earnings multiples. There is no material difference between the carrying value and fair value of the Group’s aggregate financial assets and liabilities.
Interest rate risk profile of financial liabilities
| Group | Company | |||
| 2022 £’000 | 2021 £’000 | 2022 £’000 | 2021 £’000 | |
| Floating rate financial liabilities | — | — | — | — |
| Fixed rate financial liabilities | — | — | — | — |
| Financial liabilities on which no interest is paid | 47 | 52 | 47 | 52 |
| 47 | 52 | 47 | 52 | |
Sensitivity analysis
The following table illustrates the sensitivity of loss and equity to a reasonably possible change in interest rates of +/- 1%. These changes are considered to be reasonably possible, based on observation of current market conditions. The calculations are based on a change in the average market interest rate for each period, and the financial instruments held at each reporting date that are sensitive to changes in interest rates. All other variables are held constant.
Group
| Loss for the year £000 | Equity £000 | |||
| + 1% | - 1% | + 1% | - 1% | |
| 31 December 2022 | (344) | (338) | 1,239 | 1,215 |
| 31 December 2021 | (426) | (418) | 1,562 | 1,532 |
Company
| Loss for the year £000 | Equity £000 | |||
| + 1% | - 1% | + 1% | - 1% | |
| 31 December 2022 | (344) | (338) | 1,239 | 1,215 |
| 31 December 2021 | (426) | (418) | 1,562 | 1,532 |
12. Subsidiary undertakings
At 31 December 2022 the Group held 50% or more of the equity of the following:
| Company name | Country of registration | Principal activity | Holding | Class of shares |
| World Life Sciences Limited | England | Dormant | 100% | Ordinary |
The registered address of the subsidiary is the same as that of the parent company.
13. Company information
The Company is a Public Limited Company registered in England and Wales. The registered office is 2nd Floor, 80 Cheapside, London EC2V 6EE
14. Ultimate controlling party
The Directors believe that there is no overall controlling party of the Company.
15. Events after the balance sheet date
The Company announced on 5 April 2023 that it had conditionally agreed terms to acquire all the shares in Acuity Risk Management Limited (“Acuity”) it did not already own. Acuity is a supplier of governance, risk and compliance software and services. Drumz then owned 25% of the issued share capital of Acuity and proposed to acquire the balance of the issued and to be issued share capital. The acquisition of the outstanding c.75% of Acuity was for a total consideration of approximately £3.6 million. The consideration was to be satisfied by the payment of £0.5 million in cash and the issue of 45,709,570 New Ordinary Shares at 6.75p per share. In addition, in order to settle the cash consideration of the acquisition and pay for the transaction costs the Company’s Board organised a conditional placing and subscription to raise £1.45 million (before expenses) by the issue of 32,222,222 New Ordinary Shares at a price of 4.5 pence per New Ordinary Share. In addition certain advisers were issued with warrants over 2,159,999 New Ordinary Shares at 4.5p per share expiring on the third anniversary of Admission. This transaction was treated as a reverse takeover under the AIM Rules. The acquisition was approved by shareholders in a General Meeting on 24 April 2023 and Simon Marvell joined the Company’s Board.
In connection with the transaction to acquire Acuity £78,000 professional costs were incurred during the year which have been treated as prepayments and will be recognised in the year to 31 December 2023.
On 24 April 2023 a resolution was also approved by shareholders in general meeting whereby the Ordinary shares were subject to a consolidation and subdivision effectively reducing the number of shares and share options by a factor of 10.
At the date of this report it is impracticable to disclose the provisional fair values of the total consideration paid and the acquired assets, liabilities, contingent liabilities and goodwill.
The goodwill that will be recognised is expected to capture synergies that will be achieved as an enlarged business, as well as intangible assets which do not qualify for separate recognition such as workforce. It is impracticable to conclude at the date of this report the total amount of goodwill which is expected to be deductible for tax purposes.
As this acquisition took place on 24 April 2023, the statement of comprehensive income does not include any revenue, profit or loss relating to the acquired Acuity business for the year ended 31 December 2022.
16. Contingent Liabilities
In connection with the transaction to acquire Acuity, £78,000 of professional costs were incurred during the year which are included as an asset in the balance sheet at 31 December 2022, subject to the successful acquisition of Acuity in 2023. It is anticipated that further costs of £575,000 for this acquisition will be incurred in 2023, which have not been provided for in these financial statements.
Annual Report and AGM Notice
The Company confirms the Annual Report and AGM Notice will be available on the Company's website drumzplc.com in due course.
