RNS Number : 3478L
Arcontech Group PLC
05 September 2023
 

 

 

ARCONTECH GROUP PLC

 

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

 

Final Results for the year ended 30 June 2023

 

Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, is pleased to announce its final audited results for the year ended 30 June 2023.

 

Financial Highlights:

 

·         Turnover was £2,730,172 (2022: £2,757,795)

·         Profit before taxation was £985,696 (2022: £758,573) up by £227,123

·         Recurring revenues represented 100% of total revenues for the period (2022: 99%)

·         Net cash of £6,411,241 (2022: £6,026,468), an increase of 6.4%

·         Final dividend increased 7.7% to 3.5 pence per share (2022: 3.25 pence per share)

 

 

Operational Highlights:

 

·         Sales team improved and building a strong pipeline of near and mid-term prospects

·         Singapore-based consultant engaged to extend sales reach

·         Continued exploration of potential complementary acquisitions

·         Planned developments delivered to clients for testing

·         Investment in technical operations e.g., Python API's developed

·         PoC cloud installation tested and proven

 

 

Commenting on the results, Geoff Wicks, Chairman and Non-Executive Director of Arcontech said:

 

"We remain optimistic that we will return to revenue growth in the near term even though our markets remain challenging. Interest in our products is higher than we have seen for some time, and we have demonstrated we can compete in a price sensitive market with products that are market leading".  

 

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.

 

Enquiries:

 

Arcontech Group plc

020 7256 2300

Geoff Wicks, Chairman and Non-Executive Director


Matthew Jeffs, Chief Executive




finnCap Ltd (Nomad & Broker)

020 7220 0500

Carl Holmes/George Dollemore - Corporate Finance

Harriet Ward - ECM




To access more information on the Group please visit: www.arcontech.com

 


 

Chairman's Statement

 

Arcontech retains a significant customer base and has worked hard to ensure that products are resilient and competitive. We have also successfully renewed contracts for longer periods of time in order to increase the stability of our revenue base which also provides good forward visibility. There is now revenue growth at our existing customers and a number of potential new customers at an advanced stage of negotiation. We are of course cognisant that the market for our products remains challenging as turbulence in financial markets generally has slowed down decision making and increased competitive pressure. However, the year has started positively, and the Company remains confident about the outcome for the current year.

 

The year to 30 June 2023 had a better level of new orders although, as reported earlier, cancellations late in the previous year and during the course of the year had a negative impact on revenue for FY23. We go into the new financial year with a growing and more positive list of potential new customers that will drive better results in future years but with our starting revenue base for the current year lower than last year.

 

Turnover was £2,730,172 (2022: £2,757,795) down by £27,623 on last year as a result of a net customer loss. Profit before taxation was £985,696 (2022: £758,573) up by £227,123. This increase in profit before tax is, as previously reported, due to a combination of lower than anticipated staff related costs arising from lower variable costs and delayed hires, and a release of accruals to the Consolidated Statement of Income totalling £110,000. These are expected to be once off savings in the year to 30 June 2023. 100% of our revenue was recurring and average contract periods have increased over the last year so while revenue has reduced, it has increased in resilience and quality. Statutory earnings per share for the year to 30 June 2023 were 7.33p (2022: 4.57p).

 

Investment in growing technical and sales and marketing operations was held back in the early part of the year as costs were kept under review. However, towards the end of the year the Company was back up to the expected staffing levels in order to support our existing base and the increasing number of customer trials and product developments.

 

The strong revenue base of recurring revenue gives us confidence to continue with our strategy to grow our core business and to expand into new market areas. We have started to extend our reach geographically and continue to build our sales and marketing capability.

 

Financing

Cash balances were £6,411,241 (2022: £6,026,468) at the year end, an increase of 6.4%. This strong balance sheet allows the Company to invest in both organic growth and to and to be alert for opportunities to make complementary acquisitions.

 

Dividend

I am pleased to announce that subject to approval at the Annual General Meeting we intend to pay a dividend of 3.5p per share for the year ended 30 June 2023 (2022: 3.25 pence) an increase of 7.7%, to those shareholders on the register as at the close of business on 6 October 2023 with a dividend payment date of 3 November 2023.

 

Outlook

We remain optimistic that we will return to revenue growth in the near term even though our markets remain challenging. Interest in our products is higher than we have seen for some time, and we have demonstrated we can compete in a price sensitive market with products that are market leading.

 

 

 

 

 

Geoff Wicks

Chairman and Non-Executive Director



Chief Executive's Review

 

The 2022/23 financial year evidenced greater engagement with both our existing and prospective clients when compared with last year. Our continued focus on positioning ourselves as an independent provider of market-data platform components allows us to add value to the data vendors solutions and meet the varied requirements of the data consumer. 

 

The year has seen the addition of one new client and a 9% increase in the number of end users of our products. Whilst end user growth generally has less revenue impact than the higher margin side of the business, it is encouraging, nonetheless. We are also working on several active opportunities with both existing and prospective Tier 1 clients where our software has been installed for testing. These opportunities encompass both server-side (high margin) and our user-based solutions and have involved a good degree of work to both facilitate integration and accommodate in-house client development. This work adds optionality to our product range to create additional opportunities for deployment in the wider marketplace.

 

During the year we have continued to work on extending the terms of our contracts with our larger clients to multiple years so that we now have just under 50% of our recurring revenues subject to multi-year agreements and further discussions are underway.

 

With regard to sales resources, we have two seasoned and highly experienced professionals based in London. As a result, the current pipeline is looking increasingly optimistic whilst being added to with new opportunities. Further and in recognising the value of local sales and support, we have engaged a consultants based in Asia. The consultant has several decades of experience and has been a client of Arcontech in the past. Having started working with us at the end of the reporting year we look forward to seeing the benefit of this association in terms of reassurance, continuity and new business with both clients and prospective clients, over the coming year.

 

During the year we have looked at and entered discussions with prospective acquisitions, however, the fit has to be right, and our search continues.

 

Our staff are a key asset to the Company and have continued to provide exemplary service and support to our clients. I would like to express my thanks for their continued commitment.

 

With our increased sales footprint and the encouraging signs from existing clients and prospects alike, we feel optimistic for the year ahead and beyond.

 

 

 

 

 

Matthew Jeffs

Chief Executive

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Strategic Report

 

The Directors present the group strategic report for Arcontech Group plc and its subsidiaries for the year ended 30 June 2023.

 

Principal activities

 

The principal activities of the Company and its subsidiaries during the year were the development and sale of proprietary software and provision of computer consultancy services.

 

Review of the business and prospects

 

A full review of the operations, financial position and prospects of the Group is given in the Chairman's Statement and Chief Executive's Review on pages 2 to 3.

 

Key performance indicators (KPIs)

 

The Directors monitor the business using management reports and information, reviewed and discussed at monthly Board meetings. Financial and non-financial KPIs used in this report include:

 

Financial KPIs:

                                                                                                                                                                               

Revenue £2,730,172 (2022: £2,757,795; 2021: £2,988,842)                    Measurement:

Revenue from sales made to all customers (excluding intra-group sales which eliminate on consolidation)         

Performance:

Loss of two customers during the year impacted sales in the second half of the year

                                                                                                                               

Adjusted profit £861,716 (2022: £601,566; 2021: £959,110)                  Measurement:

Profit after tax and before release of accruals for administrative costs in respect of prior years . This is an alternative, non-IFRS performance measure, that is considered relevant as it provides a more accurate reflection of trading performance than net profit after tax. The adjusted profit is Net profit after tax less the amount of accruals for administrative costs released as disclosed in the footnote to the Income Statement. The accruals release for 2023 includes a release of £110,000 which is disclosed separately in the Group Statement of Income.

Performance:

Revenue is constant with the previous year and staff costs were below the previous year due to a temporary reduced headcount.

 

Cash £6,411,241 (2022: £6,026,468; 2021: £5,395,457)                          Measurement:

Cash and cash equivalents held at the end of the year

                                                                                                                  Performance:

                                                                                                                  The Group continues to maintain healthy cash balances

subject to any exceptional circumstances or                 acquisition

opportunities

 

Earnings per share (basic) 7.33p (2022: 4.57; 2021: 7.88p)                       Measurement:

Earnings after tax divided by the weighted average number of shares

                                                                                                                  Performance:

                                                                                                                  Decrease due to the loss of two customers during the year

 

Earnings per share (diluted) 7.32p (2022: 4.56p; 2021: 7.79p)                  Measurement:

Earnings after tax divided by the fully diluted number of shares

Performance:

                                                                                                                  Decrease due to the loss of two customers during the year

 

 

 

 

Strategic Report (continued)

 

Non-financial KPIs:

 

Staff retention rate (net) 94% (2022: 87%; 2021: 93%)                             Measurement:

Net retention after adjusting for joiners and leavers during  the year

Performance:

Staff morale from our dedicated employees remains strong, reflected in the stable retention rate

Principal risks and uncertainties

 

The Group's performance is affected by a number of risks and uncertainties, which the Board monitor on an ongoing basis in order to identify, manage and minimise their possible impact. General risks and uncertainties include changes in economic conditions, interest rate fluctuations and the impact of competition. The Group's principal risk areas and the action taken to mitigate their outcome are shown below:

 

Risk area

Nature

Mitigation




Competition

Loss of business due to existing competition or new entrants into the market

Ongoing investment in research and development

responding to the changing needs of clients to remain competitive




Loss of key personnel

Inability to execute business plan due to the risk of losing key personnel

Employee share option scheme in place




Brexit

Business made difficult due to increased regulations between the UK and Europe caused by Brexit

Arcontech is a global company and as such seeks growth across a geographically diverse customer base

 

Relations with shareholders

 

Section 172(1) Statement - Promotion of the Company for the benefit of the members as a whole

The Directors believe they have acted in the way most likely to promote the success of the Group for the benefit of its members as a whole, as required by s172 of the Companies Act 2006.

The requirements of s172 are for the Directors to:

·       Consider the likely consequences of any decision in the long term;

·       Act fairly between the members of the Company;

·       Maintain a reputation for high standards of business conduct;

·       Consider the interests of the Company's employees;

·       Foster the Company's relationships with suppliers, customers and others;

·       The desirability of the Company maintaining a reputation for high standards of business conduct; and

·       Consider the impact of the Company's operations on the community and the environment.

Section 172(1) Companies Act 2006

The Board takes decisions with the long term in mind, and collectively and individually aims to uphold the highest standards of conduct. Similarly, the Board understands that the Company can only prosper over the long term if it understands and respects the views and needs of its customers, distributors, employees, suppliers and the wider community in which it operates.

 

A firm understanding of investor needs is also vital to the Company's success. The Directors are fully aware of their responsibilities to promote the success of the Company in accordance with Section 172(1) of the Companies Act 2006. The text of Section 172(1) of the Companies Act 2006 has been sent out to each main Board Director.

 

 

 

Strategic Report (continued)

 

The Board ensures that the requirements are met, and the interests of stakeholders are considered as referred to elsewhere in this report and through a combination of the following:

 

·      A rolling agenda of matters to be considered by the Board through the year, which includes an annual strategy review meeting, where the strategic options for the following year are developed;

·      At each board meeting, to receive and discuss a will report on customers, employees and other colleagues, and investors;

·      Standing agenda points and papers;

·      A review of certain of these topics through the Audit Committee and the Remuneration Committee agenda items referred to in this report; and

·       Detailed consideration is given to of any of these factors where they are relevant to any major decisions taken by the Board during the year.

 

The Group's operation is the development and sale of proprietary software and provision of computer consultancy services. The Board has identified its key stakeholders as its customers, shareholders, employees and suppliers. The Board keeps itself appraised of its key stakeholders' interests through a combination of both direct and indirect engagement, and the Board has regard to these interests when discharging its duties.

The application of the s172 requirements can be demonstrated in relation to some of the key decisions made during the year to 30 June 2023:

·       Allocation of the Group's capital in a way which offers significant returns to shareholders in line with the Company's dividend policy, while also ensuring that the Group retains flexibility to continue to deploy capital towards profitable growth;

·       Continuation of a hybrid location working format for staff as working environments continue to evolve post Covid-19, while ensuring that the Group continued to deliver both the high level of service and security that our customers depend on without compromising the health and safety of employees.

During the year to 30 June 2023, the Board assessed its current activities between the Board and its stakeholders, which demonstrated that the Board actively engages with its stakeholders and takes their various objectives into consideration when making decisions. Specifically, actions the Board has taken to engage with its stakeholders over the last twelve months include:

 

·      All Directors attended the 2022 AGM to answer questions and receive additional feedback from investors;

·      The outcome of the AGM is published on the Company's corporate website;

·      The Board receives regular updates on the views of shareholders through briefings and reports from the executive directors, and the Company's brokers;

·      Arranged meetings with certain stakeholders to provide them with updates on the Company's operational activities and other general corporate updates;

·      We discussed feedback from investors' and analysts' meetings following the release of our annual and half-year announcements. We have an investor relations programme of meetings with existing and potential shareholders;

·      Monitored company culture and engaged with employees on efforts to continuously improve company culture and morale; and

·      A range of corporate information (including all Company announcements) is also available to shareholders, investors and the public on the Company's corporate website: www.arcontech.com.

 

The Board believes that appropriate steps and considerations have been taken during the year so that each Director has an understanding of the various key stakeholders of the Company. The Board recognises its responsibility to contemplate all such stakeholder needs and concerns as part of its discussions, decision-making, and in the course of taking actions, and will continue to make stakeholder engagement a top priority in the coming years.

 

 

 

Approved on behalf of the board on 4 September 2023 by:

 

 

 

Matthew Jeffs


Chief Executive


 

 

 

Group Income Statement and Statement of Comprehensive Income

 

For the year ended 30 June 2023

 

 


Note

 

 

 

 


2023

 


 

2022

 





£


£








Revenue

3



2,730,172


2,757,795








Administrative costs




(1,924,962)


(1,999,523)








 

Operating profit

4



805,210


758,272

 

Net finance income

5



70,486


301








Changes in estimated variable remuneration liability

2



110,000


-

 

Profit before taxation




985,696


758,573








 

Taxation

9



(5,587)


(148,007)

 

Profit for the year after tax




980,109


610,566

 

Total comprehensive income for the year




980,109


610,566

 

 

Earnings per share (basic)

10


 

 

7.33p


4.57p

 

Adjusted* Earnings per share (basic)

10



6.44p


4.50p

 

Earnings per share (diluted)

10


 

 

7.32p


4.56p

 

Adjusted* Earnings per share (diluted)

10



6.43p


4.49p

 

 

*Adjusted to exclude the release of accruals for administrative costs of £118,393 (2022: £9,000), which includes the £110,000 (2022: nil) shown above in respect of estimated variable remuneration liability releases in respect of prior years. This is a non-IFRS alternative performance measure that the Board considers to be a more accurate indicator of underlying trading performance. This measure has been adopted as a KPI and is disclosed in the Strategic Report on page 4.

 

All of the results relate to continuing operations.

 

There was no Other Comprehensive Income other than Profit for the year after tax for the year under review.

 

 

 

 

 

 

 

 

 

 

 

 

The notes on pages 33 to 59 form part of these financial statements

Statement of Changes in Equity



For the year ended 30 June 2023

 

Group:


Share

capital

Share

premium

Share option reserve

Retained

earnings

Total

equity


£

£

£

£

£

Balance at 30 June 2021

1,665,977

92,360

271,207

4,553,329

6,582,873

 

Profit for the year

-

-

-

610,566

610,566

Total comprehensive income for the year

-

-

-

610,566

610,566







Dividend paid

-

-

-

(367,752)

(367,752)







Exercise of options

5,624

23,401

-

-

29,025

 

Share-based payments

-

-

116,612

-

116,612







Transfer between reserves

-

-

(116,994)

116,994

-

Balance at 30 June 2022

1,671,601

115,761

270,825

4,913,137

6,971,324







Profit for the year

-

-

-

980,109

980,109

Total comprehensive income for the year

-

-

-

980,109

980,109







Dividend paid

-

-

-

(434,616)

(434,616)







Share-based payments

-

-

97,328

-

97,328







Transfer between reserves

-

-

(88,698)

88,698

-

Balance at 30 June 2023

1,671,601

115,761

279,455

5,547,328

7,614,145


Company:


Share

capital

Share

premium

Share option reserve

Retained

earnings

Total

equity


£

£

£

£

£

Balance at 30 June 2021

1,665,977

92,360

271,207

4,331,751

6,361,295







Profit for the year

-

-

-

273,286

273,286

Total comprehensive expense for the year

-

-

-

273,286

273,286







Dividend paid

-

-

-

(367,752)

(367,752)







Exercise of options

5,624

23,401

-

-

29,025

 

Share-based payments

-

-

116,612

-

116,612

 

Transfer between reserves

-

-

(116,994)

116,994

-

Balance at 30 June 2022

1,671,601

115,761

270,825

4,354,279

6,412,466







Profit for the year

-

-

-

304,044

304,044

Total comprehensive income for the year

-

-

-

304,044

304,044







Dividend paid

-

-

-

(434,616)

(434,616)







Share-based payments

-

-

97,328

-

97,328







Transfer between reserves

-

-

(88,698)

88,698

-

Balance as at 30 June 2023

1,671,601

115,761

279,455

4,312,406

6,379,222

 

 

 

 

 

 

 

 

The notes on pages 33 to 59 form part of these financial statements.



Statements of Financial Position

 

Registered number: 04062416

 

As at 30 June 2023



Group
2023
£


Group
2022

£


Company
2023
£


Company
2022

£


Note








Non-current assets


















Goodwill

11

1,715,153


1,715,153


-


-

Property, plant and equipment

12

5,950


6,545


-


-

Right of use asset

17

73,152


219,455


-


-

Investments in subsidiaries

13

-


-


2,017,471


2,017,471

Deferred tax asset

19

328,000


318,000


68,000


56,000

Trade and other receivables

14

-


141,750


-


-










Total non-current assets


2,122,255


2,400,903


2,085,471


2,073,471










Current assets


















Trade and other receivables

14

499,861


348,686


3,842,300


3,322,737

Cash and cash equivalents

15

6,411,241


6,026,468


518,678


1,074,294










Total current assets


6,911,102


6,375,154


4,360,978


4,397,031










Current liabilities


















Trade and other payables

16

(1,308,888)


(1,558,880)


(67,227)


(58,036)

Lease liabilities

17

(40,324)


(148,450)


-


-

Provisions

18

(50,000)


-


-


-










Total current liabilities


(1,399,212)


(1,707,330)


(67,227)


(58,036)










Non-current liabilities


















Lease liabilities

17

-


(47,403)


-


-

Provisions

18

(20,000)


(50,000)


-


-










Total non-current liabilities


(20,000)


(97,403)


-


-










Net current assets


5,511,890


4,667,824


4,293,751


4,338,995

Net assets


7,614,146


6,971,324


6,383,222


6,412,466










Equity


















Called up share capital

20

1,671,601


1,671,601


1,671,601


1,671,601

Share premium account

21

     115,761


     115,761


     115,760


     115,760

Share option reserve

21

    279,455


    270,825


    279,455


    270,825

Retained earnings

21

5,547,328


4,913,137


4,312,406


4,354,279



7,614,145


   6,971,324


6,379,222


6,412,466

 

As permitted by s408 of the Companies Act 2006, the Company has not presented its own income statement. The parent Company profit for the year was £304,044 (2022: £273,286).

 

The notes on pages 33 to 59 form part of these financial statements.

 

Approved on behalf of the board on 4 September by:

Matthew Jeffs, Chief Executive

 

Group Statement of Cash Flows

 

For the year ended 30 June 2023

 


Note

2023


2022




£


£








Cash generated from operations

22

901,422


1,109,608








Tax paid


-


(2,642)








Net cash generated from operating activities


901,420


1,106,966


 

Investing activities












Interest received


76,977


13,911








Purchases of plant and equipment


(3,480)


(2,688)








 

Net cash generated from investing activities


73,497


11,223








Financing activities












Proceeds from the issue of shares


-


29,025








Dividend paid


(434,616)


(367,752)








Payment of lease liabilities

17

(155,529)


(148,450)








Net cash used in financing activities


(590,145)


(487,177)


 

Net increase in cash and cash equivalents


384,772


631,012








Cash and cash equivalents at beginning of year


6,026,469


5,395,457


 

Cash and cash equivalents at end of year

15

6,411,241


6,026,469


 

 

 

For the year to 30 June 2023, the Group had no debt, and there were no material non-cash transactions.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The notes on pages 33 to 59 form part of these financial statements.

 

Company Statement of Cash Flows

 

For the year ended 30 June 2023

 


Note

2023


2022




£


£


 

Net cash (used in) / generated by operating activities

22

(129,978)


330,075








Tax paid


-


(1,221)








Net cash (used in) / generated from operating activities


(129,978)


328,854


 

Investing activities












Interest received


8,978


6,426








Net cash generated from investing activities


8,978


6,426








Financing activities

 













Proceeds from the issue of shares


-


29,025


 

Dividend paid


(434,616)


(367,752)








 

Net cash used in financing activities


(434,616)


(338,727)


 

Net decrease in cash and cash equivalents


(555,616)


(3,447)








Cash and cash equivalents at beginning of year


1,074,294


1,077,741


 

Cash and cash equivalents at end of year

15

518,678


1,074,294


 

 

 

For the year to 30 June 2023, the Company had no debt, and there were no material non-cash transactions.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The notes on pages 33 to 59 form part of these financial statements.

 

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023

 

1.     Accounting policies

 

The principal accounting policies are summarised below. They have all been applied consistently throughout the period covered by these financial statements except where changes have been noted below.

 

Reporting entity

 

Arcontech Group plc ("the Company") is a company incorporated in England and Wales with a registered address at 1st floor, 11-21 Paul Street, London, EC2A 4JU.  The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries (together referred to as "the Group").

 

Principal Activity

 

The principal activities of the Company and its subsidiaries during the year were the development and sale of proprietary software and provision of computer consultancy services.

 

Basis of preparation

 

These financial statements have been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006.

 

On the basis of current projections, confidence of future profitability and cash balances held, the Directors have adopted the going concern basis in the preparation of the financial statements.

 

The financial statements have been prepared under the historical cost convention. As at 30 June 2023 all assets and liabilities are recorded at amortised cost, and there were no assets or liabilities recorded at fair value.

 

Going Concern

 

On the basis of current projections and having regard to the Group's existing cash reserves, the Directors consider that the Group has adequate resources to continue in operational existence for the foreseeable future. In reaching this conclusion the Directors have projected cash flow out twelve months from the date of signing this report. Revenue projection has been based on recurring revenue streams from existing customers and a forecast for new revenue from additional sales that the Directors feel is achievable. The Group has a highly stable cost base which has been reviewed to incorporate the impact of additional costs for revenue generation activities such as industry trade shows. The Directors have stress tested the cash flow projections assuming no new revenue generation and an increase in costs of up to 8.5%, given the current inflationary environment. Under this scenario given expected cash generation from operations and existing cash balances, the Group will have sufficient resources to continue trading for well in excess of the next twelve months. Accordingly, the Directors have adopted the going concern basis in the preparation of the financial statements.

 

Changes in accounting policies and disclosures

 

a)    New and amended Standards and Interpretations adopted by the Group and Company

 

The International Accounting Standards Board (IASB) issued various amendments and revisions to International Financial Reporting Standards and IFRIC interpretations per the table below. The amendments and revisions were applicable for the period year 30 June 2023 but did not result in any material changes to the financial statements of the Group.

 

Standard

Impact on initial application

Effective date

IAS 16 (Amendments)

Property, Plant and Equipment

1 January 2022

IAS 37 (Amendments)

Provisions, Contingent Liabilities and Contingent Assets

1 January 2022

Annual Improvements to IFRS Standards

2018 - 2020 Cycle

 

1 January 2022

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

1.     Accounting policies (continued)

 

 

b)    New and amended Standards and Interpretations issued but not effective for the financial year beginning 1 July 2022

 

Standard

Impact on initial application

Effective date

IAS 1 (Amendments)

Presentation of Financial Statements and IFRS

Practice Statement 2: Disclosure of Accounting Policies

1 January 2023

IAS 12 (Amendments)

ncome Taxes - Deferred Tax related to Assets

and Liabilities arising from a Single Transaction

1 January 2023

IAS 8 (Amendments)

Accounting policies, Changes in Accounting

Estimates and Errors - Definition of Accounting Estimates

 

1 January 2023

IFRS 16 (Amendments)

Leases: Lase Liability in a Sale and Leaseback

1 January 2024

IAS 1 (Amendments)

Presentation of Financial Statements: Classification of Liabilities as Current or Non-Current

1 January 2024

The new and amended Standards and Interpretations which are in issue but not yet mandatorily effective is not expected to be material.

Basis of consolidation

 

The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) prepared to 30 June 2023. Subsidiaries are entities controlled by the Group. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

 

·       Power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee).

·       Exposure, or rights, to variable returns from its involvement with the investee

·       The ability to use its power over the investee to affect its returns.

 

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

 

·       The contractual arrangement with the other vote holders of the investee.

·       Rights arising from other contractual arrangements.

·       The Group's voting rights and potential voting rights.

 

Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control   of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary. The acquisition method is used to account for the acquisition of subsidiaries.

 

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

 

Business combinations and goodwill

 

On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair value at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.

 

 

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

1.     Accounting policies (continued)

 

Revenue recognition

 

Revenue is recognised in accordance with the transfer of promised services to customers (i.e. when the customer gains control of the service) and is measured as the consideration which the group expects to be entitled to in exchange for those services. Consideration is typically fixed on the agreement of a contract except for quarterly flexible license contracts. Payment terms are agreed on a contract by contract basis.

 

A service is distinct if the customer can benefit from the service on its own or together with other resources that are readily available to the customer and the entity's promise to transfer the service to the customer is separately identifiable from other promises in the contract.

 

Contracts with customers do not contain a financing component.

 

Under IFRS 15, revenue earned from contracts with customers is recognised based on a five-step model which requires the transaction price for each identified contract to be apportioned to separate performance obligations arising under the contract and recognised either when the performance obligation in the contract has been performed (point in time recognition) or over time as control of the performance obligation is transferred to the customer.

 

The group recognises revenue when it satisfies a performance obligation by transferring a promised service to the customer as follows:

 

• Revenue from recurring license fees and other license fees is recognised on an over time basis via a straight line across the period the services are provided. In reaching this conclusion the group has assessed that ongoing contractual obligations are not separately identifiable from other promises in the contract and are not distinct from the licence, and hence are accounted for as a single performance obligation. As the license is not distinct the combined performance obligation is recognised over time.

 

In assessing whether a licence is distinct the Group considered the continuing requirement to:-

-  optimise functionality;

-  optimise performance; and

-  provide enhancements to ensure user regulatory compliance.

 

• Revenue from flexible license contracts that include variable consideration are quarterly contracts assessed at the end of each calendar quarter and revenue is recognised based on actual usage confirmed for that quarter at the point of customer acceptance;   

• Revenue from project work is recognised on satisfactory completion of each project, as this is considered to be the point in time the customer gains control over the results of the project work.

 

Taxation

 

The tax charge/(credit) represents the sum of the tax payable/(receivable) and any deferred tax.

 

Research and development tax credits are recognised when received.

 

The tax payable/(receivable) is based on the taxable result for the year. The taxable result differs from the net result as reported in the income statement 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 Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

1.      Accounting policies (continued)

 

Taxation (continued)

 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

 

The carrying amount of deferred tax assets is reviewed at each balance sheet date.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled, or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.

 

Share-based payments

 

The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of shares or share options, is recognised as an employee benefit expense in the income statement.

 

The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non market-based vesting conditions) at the date of grant. Fair value is measured by the use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of the non-transferability, exercise restrictions and behavioural considerations. A cancellation of a share award by the Group or an employee is treated consistently, resulting in an acceleration of the remaining charge within the consolidated income statement in the year of cancellation.

 

Impairment of tangible and intangible assets

 

The carrying amounts of the Group's and Company's tangible and intangible assets are reviewed at each year end date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.

 

Expenses incurred on Research & Development are currently expensed through the income statement as the expenditure is incurred on the maintenance and enhancement of existing products. The applicability of this treatment is reviewed regularly by the Company.

 

For goodwill, the recoverable amount is estimated at each year end date, based on value in use. The recoverable amount of other assets is the greater of their net selling price 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 an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.

 

An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis.

 

A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

1.      Accounting policies (continued)

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

 

Depreciation is charged so as to write off the cost of assets, over their estimated useful lives, on the following bases:

Leasehold property

- over the period of the lease

Computer equipment

- 33% - 40% on cost

Office furniture and equipment

- 20% - 25% on cost or reducing balance

 

 

Investments in subsidiaries

 

Investments in subsidiaries are stated at cost less any provision for impairment.

 

Financial instruments

 

Financial assets and financial liabilities are recognised in the statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets

The Group does not hold any investments other than investments in subsidiaries.

Trade receivables are held in order to collect the contractual cash flows and are initially measured at the transaction price as defined in IFRS 15, as the contracts of the Group do not contain significant financing components. Impairment losses are recognised based on lifetime expected credit losses in profit or loss.

Other receivables are held in order to collect the contractual cash flows and accordingly are measured at initial recognition at fair value, which ordinarily equates to cost and are subsequently measured at cost less impairment due to their short-term nature. A provision for impairment is established based on 12-month expected credit losses unless there has been a significant increase in credit risk when lifetime expected credit losses are recognised. The amount of any provision is recognised in the income statement.

Cash and cash equivalents

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less.

Financial liabilities and equity

Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the company are recorded at the proceeds received, net of direct issue costs.

Effective interest rate method

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

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

1.      Accounting policies (continued)

Financial instruments (continued)

(a)  Classification

The Group classifies its financial assets in the following measurement categories:

·       those to be measured subsequently at fair value (either through OCI or through profit or loss); and

·       those to be measured at amortised cost.

 

The classification depends on the Group's business model for managing the financial assets and the contractual terms of the cash flows.

For assets measured at fair value, gains and losses will be recorded either in profit or loss or in OCI. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). See Note 16 for further details.

(b) Recognition

Purchases and sales of financial assets are recognised on trade date (that is, the date on which the Group commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership. 

(c) Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. 

Debt instruments 

Amortised cost; Assets that are held for collection of contractual cash flows, where those cash flows represent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method.

Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the statement of profit or loss.

(d) Impairment

The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

Leases

Leases are recognised as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is available for use by the Group.

 

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

1.      Accounting policies (continued)

Leases (continued)

 

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:

 

·       Fixed payments (including in-substance fixed payments), less any lease incentives receivable;

·       Variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the commencement date;

·       Amounts expected to be payable by the Group under residual value guarantees;

·       The exercise price of a purchase option if the Group is reasonably certain to exercise that option; and

·       Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option.

 

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

 

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee's incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions.

 

Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss over the lease period.

 

Right-of-use assets are measured at cost which comprises the following:

·       The amount of the initial measurement of the lease liability;

·       Any lease payments made at or before the commencement date less any lease incentives received;

·       Any initial direct costs; and

·       Restoration costs.

 

Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset's useful life.

 

Payments associated with short-term leases (term less than 12 months) and all leases of low-value assets (generally less than £4k) are recognised on a straight-line basis as an expense in profit or loss.

 

Provisions

Provisions are recognised when the Group has a present obligation, legal or constructive, resulting from past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the obligation.

 

Research and development

Research costs are charged to the income statement in the year incurred. Development expenditure is capitalised to the extent that it meets all of the criteria required by IAS 38, otherwise it is charged to the income statement in the year incurred. In order for development expenditure to meet the capitalisation criteria of IAS 38, it must be both technically feasible to complete the work, and there must be the intention to either use or sell the asset created.

 

Pension costs and other post-retirement benefits

 

The Group makes payments to occupational and employees' personal pension schemes. Contributions payable for the year are charged in the income statement.

 

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

1.      Accounting policies (continued)

 

Foreign currencies

 

Transactions denominated in foreign currencies are translated into sterling at the exchange rate ruling when the transaction was entered into. Where consideration is received in advance of revenue being recognised the date of the transaction reflects the date the consideration is received. Foreign currency monetary assets and liabilities are translated into sterling at the exchange rate ruling at the balance sheet date. Exchange gains or losses are included in operating profit.

 

Segment reporting

 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker as required by IFRS 8 "Operating Segments". The chief operating decision-maker responsible for allocating resources and assessing performance of the operating segments has been identified as the Board of Directors. The accounting policies of the reportable segments are consistent with the accounting policies of the group as a whole. Segment profit/(loss) represents the profit/(loss) earned by each segment without allocation of foreign exchange gains or losses, investment income, interest payable and tax. This is the measure of profit that is reported to the Board of Directors for the purpose of resource allocation and the assessment of segment performance. When assessing segment performance and considering the allocation of resources, the Board of Directors review information about segment assets and liabilities. For this purpose, all assets and liabilities are allocated to reportable segments with the exception of cash and cash equivalents and current and deferred tax assets and liabilities.

 

 

2.     Critical accounting judgments and key sources of estimation uncertainty

 

The preparation of financial statements in conformity with generally accepted accounting practice requires management to make estimates and judgements that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.

 

Estimates and judgements are continually evaluated and are based on historic experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

 

Judgements

 

Determination of performance obligations and satisfaction thereof

For the purposes of recognising revenue, the Directors are required to identify distinct services in contracts and allocate the transaction price to the performance obligations. Details of determining performance obligations, passing of control and amounts recognised as costs incurred to obtain or fulfil a contract are given in Note 1 - Revenue recognition. There has been no change in the Group's business model from the previous year and the Directors are satisfied that the revenue recognition policy remains correct for the year under review.

Changes in estimated variable remuneration liability

 

The Group Income Statement includes the release of £110,000 in accrued bonuses which has been disclosed separately in the current year. The Board's best estimate of the liability to pay bonuses as at 30 June 2022 was £170,000 and this was recorded with the prior year accruals balance. In the current year, £110,000 of this liability was released to the Group Income Statement following annual reappraisal of the estimated liability at 30 June 2023. The balance being carried forward to the future periods, is the Board's estimation of a constructive obligation with regards to bonuses in respect of work undertaken to date in progressing new business development and sales opportunities.

Capitalisation of development costs

 

As described in Note 1, the Group capitalises development costs when certain criteria are met including the probability of relevant future economic benefits. The key variable in making judgement of the correct treatment of development costs is new product development versus modification and maintenance of existing products. The development work undertaken has been to existing products, and having assessed the likelihood of future economic benefit, the Directors have judged it appropriate to not capitalise any development costs (2022 - £Nil).

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

2.      Critical accounting judgments and key sources of estimation uncertainty (continued)

 

 

Estimates

 

Impairment of intangible assets

 

Determining whether non-current assets are impaired requires an estimation of the value in use of the cash generating units to which non-current assets have been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate the present value. The key variables used in cash flow projections are: a timeline of fourteen years (the "time period"); the forecast for the next year which is used as the base for future years; revenue and cost projections for the time period using the average rate of increase / (decrease) achieved over the preceding ten years. No provision for impairment was made in the year to the carrying value of goodwill (see note 11) or investments in subsidiaries (see note 13).

 

Recognition of deferred tax assets

 

As described in Note 1, the Group recognises deferred tax assets arising from unused tax losses when certain criteria are met including the probability that future relevant taxable profits will be available. The directors have assessed the likelihood of future taxable profits being available and have judged it appropriate to recognise deferred tax assets for unused losses. The key variables used in the calculation of deferred tax assets are: a timeline of three years out from reporting date; revenue and cost projections on the same basis as used in the assessment of impairment of goodwill; a cost of capital of 8.44%. At the year-end a deferred tax asset of £328,000 (2022 - £318,000) was recognised.

 

Share based payment transactions

 

The Company has made awards of options and over its unissued share capital to certain Directors and employees as part of their remuneration package.

 

The valuation of these options involves making a number of critical estimates relating to price volatility, future dividend yields, expected life of the options and forfeiture rates.  These assumptions have been described in more detail in Note 20.

 

 

 

 

3.      Revenue

 

An analysis of the Group's revenue is as follows:



2023
£


2022
£








Software development, licence fees and project work


2,730,172


2,757,795


 

All of the Group's revenue relates to continuing activities.

 

 



 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

 

 

4.      Operating profit for the year is stated after charging/(crediting):



2023
£


2022
£

 

Depreciation of plant and equipment (see note 12)


4,074


7,291

Depreciation of leased assets (see note 17)


146,303


146,303

Interest on leased assets (see note 17)


6,471


13,550

Staff costs (see note 8)


1,374,676


1,491,348

Research and development


476,491


409,618

Release of accruals for administrative costs in respect of prior years


(8,393)


(9,000)

                               

 

 

 

 

5.      Finance income and Finance costs:

 


2023
£

2022
£

Finance income



Income on cash and cash equivalents

76,977

13,911




Finance costs



Lease interest expense

(6,471)

(13,550)

Other interest expense

(20)

(60)

Net finance income

70,486

301

 

 

 

 

 

6.      Auditor's remuneration:

 



2023
£


2022
£


Fees payable to the Group's auditor for the audit of the Group's annual accounts


37,750


31,500


Fees payable to the Group's auditor for other services:






- audit of the Company's subsidiaries


7,000


7,000




44,750


38,500


 



 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

7.      Operating segments:

 

The Group reports internally to the Chief Operating Decision Maker (CODM), who is considered to be the Board. Intersegment license fees and management charges are not included in the reports reviewed by the CODM during the year but are calculated for statutory reporting purposes and therefore are excluded from the following revenue and operating profit disclosures.

 



2023


2022




£


£


Revenue by segment












Software development and licence fees


2,730,172


2,757,795


External segment revenue


2,730,172


2,757,795








Operating profit by segment












Software development and licence fees


1,366,930


1,193,637








Unallocated overheads


(458,211)


(448,975)


Total operating profit


   908,719


   744,662








Finance income


        76,977


        13,911


Total profit before tax as reported in the Group income statement


    985,696


    758,573


 

 



2023


2022




£


£


Segment total of assets

 






Software development and licence fees


8,295,757


7,541,527








Unallocated assets


4,559,078


4,545,031





12,086,558








Less intercompany debtors


 (3,821,478)


 (3,310,501)


Total assets


9,033,357


8,776,057


 



2023


2022




£


£


Segment total of liabilities












Software development and licence fees


5,172,801


5,056,787








Unallocated liabilities


67,889


58,447




5,240,690


5,115,234








Less intercompany creditors


(3,821,478)


(3,310,501)


Total liabilities


1,419,212


1,804,733




Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

7.      Operating segments (continued):

 



2023


2022




£


£


Additions of property, plant and equipment assets by segment












Software development and licence fees


3,480


2,688


Total additions


3,480


2,688










2023


2022




£


£


Depreciation of property, plant and equipment assets recognised in the period by segment

 






Software development and licence fees


4,074


7,291


Total depreciation


4,074


7,291


 

 

Non-current assets by country


2023


2022




£


£


UK


2,122,255


2,400,903


Total non-current assets


2,122,255


2,400,903


 

 

 

 

Geographical information - External revenue


2023


2022




£


£


UK


1,979,802


2,013,140


Europe (excluding UK)


584,987


581,981


Africa


42,500


40,000


North America


89,656


89,447


Australia


12,603


12,603


Asia Pacific


20,624


20,624




2,730,172


2,757,795


 

 

During the year there were 4 customers (2022: 4) who accounted for more than 10% of the Group's revenues as follows:

 

 


2023


2022


 


Value of
sales
£

% of Total

 

 


Value of
sales

£


% of Total

 

 










Customer 1

685,720

25%


672,091


24%


Customer 2

520,990

19%


523,138


19%


Customer 3

361,152

13%


360,661


13%


Customer 4

342,588

13%


285,051


10%



1,910,451

70%


1,840,942


66%


 

These revenues are attributable to the software development and licence fees segment.



Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

8.      Staff costs:



2023

£


2022

£


a)      Aggregate staff costs, including Directors' remuneration






Wages and salaries


1,114,182


1,197,220


Social security costs


136,786


153,261


Pension contributions


26,380


24,255


Share-based payments


97,328


116,612




1,374,676


1,491,348


 

b)      The average number of employees (including Directors) was:






Sales and administration


7


7


Development and support


9


7




16


14


 



£


£


c)      Directors' emoluments






Short-term employee benefits


252,883


231,714


Pension contributions


5,513


5,250


Share-based payments


45,673


57,200




304,069


294,164


Social security costs


31,260


30,843


Total Director compensation


335,329


325,007


 

Directors' emoluments represent the staff costs of the parent company.

 

The average number of employees of the parent company is 3 (2022: 3)

 

The highest paid Director received remuneration of £192,114 (2022: £183,464).

 

 

The number of Directors that are members of a defined contribution pension scheme is 1 (2022: 1). Pension contributions paid to a defined contribution scheme in respect of the highest paid Director amounted to £5,513 (2022: £5,250).

 

 

 



Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

9.      Taxation

 



 2023


2022




£


£


Current tax


(15,587)


4,993


Deferred tax


10,000


(153,000)


Total tax charge for the year


5,587


148,007


 

The difference between the total tax credit shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax is as follows:

 



2023

£


2022

£


Profit on ordinary activities before tax


985,696


758,573








Profit on ordinary activities multiplied by the effective rate of corporation tax in the UK of 20.49 % (2022: 19.00%)


201,969


144,128








Effects of:












Disallowed expenses


52


288








Temporary differences on deferred tax


494


796














Research and development tax credits


-


(4,993)








Deferred tax asset movement


(10,000)


153,000








Brought forward losses utilised


(186,928)


(145,212)


 

Total tax charge for the year


5,587


148,007


 

From 1 April 2023 the UK Government increased the corporation tax rates 25% on profits above £250,000. Companies with profits of £50,000 or less will be taxed at 19% and companies with profits between £50,000 and £250,000 will pay tax at 25% that is reduced by marginal relief on a sliding scale. The effect of this change to tax rates resulted in an additional £960 tax payable for the year to 30 June 2023, with the Group having an effective tax rate of 20.49%.

 

Factors which may affect future tax charges

 

At 30 June 2023 the Group has tax losses of approximately £8,000,000 (2022: £8,300,000) to offset against future trading profits.

 

 

 

 

 

 

 

 

 

 



Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

10.    Earnings per share

 



2023


2022




£


£


Earnings






Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity shareholders


980,109


610,566




980,109


610,566


 



No.


No.


Number of shares






Weighted average number of ordinary shares for the purpose of basic earnings per share


13,372,811


13,364,195








Number of dilutive shares under option


14,805


25,145


Weighted average number of ordinary shares for the purposes of dilutive earnings per share


13,387,616


13,389,340


 

The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options.

 

 

11.    Goodwill



2023


2022




£


£


Cost and net book amount












At 1 July 2022 and at 30 June 2023


1,715,153


1,715,153


 

Goodwill acquired in a business combination is allocated at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The carrying amount of goodwill has been allocated as follows:

 



2023


2022




£


£


Arcontech Limited


1,715,153


1,715,153




1,715,153


1,715,153


 

The CGU used in these calculations is Arcontech Limited. The group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The recoverable amounts of the CGUs are determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the discount rates, growth rates and expected changes to selling prices and direct costs during the period. The discount rate is estimated using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. Long-term growth rates are based on industry growth forecasts. Changes in selling prices are based on past practices and expectations of future changes in the market. Changes in direct costs are based on expected cost of inflation of 6.0% and 1.8% after year 5.

 

Cashflow forecasts are based on the latest financial budgets and extrapolate the cashflows for the next five years based on an estimated growth in revenue representing an average rate of 3.4% (2022: 4.0%) per annum, after which the UK long-term growth rate of 1.8% is applied. The Directors consider that this rate is appropriate, given the current sales pipeline. Fluctuation in revenue is the most sensitive of assumptions. Should revenue fall by more than an average of 5% per annum then this could result in the value of goodwill being impaired.

 

As the Group does not have any borrowings, the rate used to discount all the forecast cash flows is 8.8% (2022: 8.8%), which represents the Group's cost of capital.

 

Goodwill on the purchase of Arcontech Limited is attributable to the operating synergies that have arisen as a result of the combination.

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

12.    Property, plant and equipment - Group



Leasehold
Property


Office
furniture &
equipment


Total


Cost


£


£


£










At 1 July 2021


26,199


143,700


169,899










Additions


-


2,688


2,688










Disposals


-


(40,447)


(40,447)










At 1 July 2022


26,199


105,941


132,140










Additions


-


3,480


3,480










Disposals


-


(6,056)


(6,056)










At 30 June 2023


26,199


103,365


129,564


Depreciation
















At 1 July 2021


22,058


136,694


158,752










Charge for the year


1,462


5,829


7,291










Disposals


-


(40,447)


(40,447)










At 1 July 2022


23,520


102,076


125,596










Charge for the year


1,461


2,613


4,074










Disposals


-


(6,056)


(6,056)










At 30 June 2023


24,981


98,633


123,614


 

Net book amount at 30 June 2023


1,218


4,732


5,950


 

Net book amount at 30 June 2022


2,679


3,865


6,545


 

 

 

13.    Investment in subsidiaries



2023


2022


Carrying amount


£


£








At 1 July 2022


2,017,471


2,017,471














At 30 June 2023


2,017,471


2,017,471


 

 

Details of the investments in which the Group and the Company holds 20% or more of the nominal value of any class of share capital are listed below. The Goodwill recognised in Note 11 is in connection with investments made in subsidiaries:

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

13.    Investment in subsidiaries (continued)

 

 

 

 


Country of
Incorporation

 

Address

Nature of business

Ordinary

shares

held

Arcontech Solutions Limited

England

 

11-21 Paul Street, London EC2A 4JU

Dormant

100%

 

Cognita Technologies Limited

England

11-21 Paul Street, London EC2A 4JU

Software development

100%

Arcontech Limited

 

England

 

11-21 Paul Street, London EC2A 4JU

Software development and consultancy

100%

 

 

14.    Trade and other receivables

 


Group
2023
£


Group
2022

£


Company
2023
£


Company
2022
£


Due within one year:


















Trade and other receivables

136,250


196,541


-


-











Amounts owed by group undertakings

-


-


3,821,378


3,310,401











Prepayments and accrued income

221,861


152,145


20,922


12,336











Other receivables

141,750


-


-


-



499,861


348,686


3,842,300


3,322,737

 











Group
2023
£


Group
2022

£


Company
2023
£


Company
2022
£


Due after more than one year:


















Other receivables

-


141,750


-


-



-


141,750


-


-


 

Trade receivables, which are the only financial assets at amortised cost, are non-interest bearing and generally have a 30-90 day term. Due to their short maturities, the carrying amount of trade and other receivables is a reasonable approximation of their fair value. A provision for impairment of trade receivables is established using an expected loss model. Expected loss is calculated from a provision based on the expected lifetime default rates and estimates of loss on default. 

 

As at 30 June 2023, trade receivables of £Nil were impaired (2022: £Nil) and during the year an impairment charge relating to trade receivables of £Nil (2022: £Nil) was recognised. As at 30 June 2023 trade receivables of £63,314 (2022: £nil) were past due but not impaired as fully recovery is expected. The ageing analysis of these trade receivables is as follows:

 


Group
2023
£


Group
2022

£


Company
2023
£


Company
2022
£











Up to 3 months past due

63,314


-


-


-











3 to 6 months past due

-


-


-


-



63,314


-


-


-


 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

 

15.    Cash and cash equivalents

 

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less. The Directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

 

 

 

16.    Trade and other payables


Group
2023
£


Group
2022
£


Company
2023
£


Company
2022
£











Trade payables

44,995


77,772


4,595


3,849











Amounts owed to group undertakings

-


-


100


100











Other tax and social security payable

58,185


62,148


12,740


7,843











Other payables and accruals*

323,850


440,724


49,792


46,244











Deferred income

881,858


978,236


-


-



1,308,888


1,558,880


67,227


58,036


 

The Directors consider that the carrying amount of trade and other payables approximates to their fair value.

 

Trade payables and other payables and accruals constitute the financial liabilities within the category "Financial liabilities at amortised cost." The total value of Financial liabilities at amortised cost is £438,845 (2022: £568,496) which includes provisions (Refer to note 18).

 

* Other payables and accrual includes accrued bonuses of £70,000. The material decrease in other payables and accrual is due to the release of £110,000 of accrued bonus provisions. (Refer to Note 2)

 

 

 

17.    Leases

 

Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for all leases on its balance sheet. The only lease applicable under IFRS 16 is the Group's office.

 

The key impacts on the Statement of Comprehensive Income and the Statement of Financial Position are as follows:

 

As at 30 June 2023

 

 


Lease liability

£


Right of use asset

£


Income statement

£

Carrying value at 30 June 2022



(195,853)


219,455


-









Depreciation



-


(146,303)


(146,303)

Interest



(6,471)


-


(6,471)

Lease payments



162,000


-


-

















Carrying value at 30 June 2023



(40,324)


73,152


(152,774)

 

 

 

 

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

17.    Leases (continued)

 

Reconciliation of lease liabilities

Operating cash flow

£

Financing cash flow

£

Non-cash

 

£

Total

 

£

As at 1 July 2022

-

-

-

195,853

Cash flows:





   Interest paid

(6,471)

-

-

(6,471)

   Liability reduction

-

(155,529)

-

(155,529)

Non-cash changes:





   Interest expense

-

-

6,471

6,471

As at 30 June 2023

(6,471)

(155,529)

6,471

40,324

 

 

 

 

As at 30 June 2022

 

 


Lease liability

£


Right of use asset

£


Income statement

£

Carrying value at 30 June 2021



(344,303)


365,758


-









Depreciation



-


(146,303)


(146,303)

Interest



(13,550)


-


(13,550)

Lease payments



162,000


-


-

















Carrying value at 30 June 2022



(195,853)


219,455


(159,853)

 

 

 

Reconciliation of lease liabilities

Operating cash flow

£

Financing cash flow

£

Non-cash

 

£

Total

 

£

As at 1 July 2021

-

-

-

344,303

Cash flows:





   Interest paid

(13,550)

-

-

(13,550)

   Liability reduction

-

(148,450)

-

(148,450)

Non-cash changes:





   Interest expense

-

-

13,550

13,550

As at 30 June 2022

(13,550)

(148,450)

13,550

195,853

 

 

 

Contractual maturity analysis of lease liabilities as at 30 June 2023


Less than

3 months

£

3 - 12

Months

£

1 - 5

Year

£

Longer than

5 years

£

 

Total

£

Lease liabilities

40,324

-

-

-

40,324



 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

 

 

18.    Provisions

 


Group
2023
£


Group
2022

£


Company
2023
£


Company
2022
£











As at 1 July

50,000


50,000


-


-











Increase in provision

20,000


-


-


-











As at 30 June

70,000


50,000


-


-











Disclosed as:









   Current liabilities

50,000


-


-


-


   Non-current liabilities

20,000


50,000


-


-

 

 

Provisions consists of dilapidations for the Office premises of £70,000 (2022: £50,000). Refer to note 1 for the Accounting Policy for Provisions. The increase during the year is management's estimate of an increase in cost of returning the office to it's original state upon termination of lease. The total estimate of dilapidation costs for the Paul Street office is £50,000 which is disclosed as a current liability as at 30 June 2023, the lease is due to end within twelve months. The £20,000 non-current dilapidations provision relates to a potential liability in connection with a previous office.

 

 

 

 

19.    Deferred tax

 

Deferred tax is calculated in full on temporary differences under the liability method using the tax rate of 20.4% which is the effective tax rate of the Group. The movement on the deferred tax account is as shown below:


Group
2023
£


Group
2022
£


Company
2023
£


Company
2022
£


At 1 July

318,000


471,000


56,000


55,000


 

Effect of change in tax rate

78,000


-


16,000


-


Effect of movement in temporary differences

(68,000)


(153,000)


(4,000)


1,000











At 30 June

328,000


318,000


68,000


56,000


 

The deferred tax asset has been recognised in relation to forecast taxable profits which are considered probable.

Losses to offset against future trading profits at 30 June 2023 amounted to approximately £8,000,000 (2022: £8,300,000).

 



 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

20.   Share capital

 

The Company has authorised share capital of 16,000,000 Ordinary shares of £0.125 each.

 

 

Company

Allotted and fully paid:


Shares

of 12.5p each


Share Capital
£


Share Premium

£

As at 1 July 2022


13,372,811


1,671,601


115,761

As at 30 June 2023

 

13,372,811

 

1,671,601

 

115,761

 

Share options

 

Under the Company's approved 2002 Share Option Scheme, certain Directors and employees held options at 30 June 2023 for unissued Ordinary Shares of 12.5 pence each as follows:

 

Share options

At 1 July
2022

Granted

Exercised

Lapsed

At 30 June
2023

Exercise price

Normal exercise period

















Employees:

100,000

-

-

-

100,000

64.50 pence

25 Apr 20 - 24 Apr 27


50,000

-

-

-

50,000

110.00 pence

30 Jun 21 - 29 Jun 28


32,000

-

-

(12,000)

20,000

196.00 pence

30- Jun 22 - 27 Sep 29


75,000

-

-

(32,000)

43,000

164.50 pence

30 Jun 23 - 2 Oct 30


73,500

-

-

(6,000)

67,500

130.50 pence

30 Jun 24 - 11 Oct 31


-

70,000

-

-

70,000

76.50 pence

30 Jun 25 - 21 Oct 32

Directors:
















Geoff Wicks

30,000

-

-

-

30,000

164.50 pence

30 Jun 23 - 2 Oct 30









Matthew Jeffs

100,000

-

-

-

100,000

110.00 pence

30 Jun 21 - 29 Jun 28


50,000

-

-

(50,000)

-

164.50 pence

30 Jun 23 - 2 Oct 30


50,000

-

-

-

50,000

130.50 pence

30 Jun 24 - 11 Oct 31


-

50,000

-

-

50,000

76.50 pence

30 Jun 25 - 21 Oct 32









Total

560,500

120,000

-

(100,000)

580,500











Weighted average exercise price

126.4 pence

76.5 pence

-

166.6 pence

109.2 pence



 

 

 

The number of options exercisable at 30 June 2023 was 343,000 (at 30 June 2022: 282,000), these had a weighted average exercise price of 113.3 pence (2022: 103.6 pence).

 

The weighted average share price as at the exercise date of the shares exercised in the year was nil pence (2022: 64.5 pence) and of the shares were forfeited in the year was 166.2 pence (2022: 122.3).

 

Options granted under the Company's approved 2002 Share Option Scheme are forfeited when the Optionholder ceases to be a Director or employee of a Participating Company. The Directors may before the expiry of 3 months following cessation of employment permit an Optionholder to exercise their Option within a period ending no later than 12 months from the cessation of employment.

 

The highest price of the Company's shares during the year was 85.5 pence, the lowest price was 63.5 pence and the price at the year-end was 64.5 pence.

 

The weighted average remaining contractual life of share options outstanding at 30 June 2023 was 7 years (2022: 7 years).



 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

20.          Share capital (continued)

 

Share-based payments

 

The Group operates an approved Share Option Scheme for the benefit of Directors and employees. Options are granted to acquire shares at a specified exercise price at any time following but no later than 10 years after the grant date. There are no performance conditions on the exercise of the options granted prior to 1 July 2018. The performance conditions of those granted after 1 July 2018 which apply to executive directors and certain key staff, are set out below.

 

The options issued to certain directors and members of staff in November 2018, September 20192, October 20203, October 2021 and in October 2022 will be exercisable from 30 June 2021, 30 June 2022, 30 June 2023, 30 June 2024 and 30 June 2025 respectively, dependent on the Company's compound annual rate of growth in fully diluted earnings* for the three financial years ending 30 June 2022, 2023, 2024 and 2025, respectively.

 

Options issued date

Exercisable from

Dependent on the Company's compound annual rate of growth in fully diluted earnings1 for the three financial years ending

November 2018

30 June 2021

30 June 2021

September 2019

30 June 2022

30 June 2022

October 2020

30 June 2023

30 June 2023

October 2021

30 June 2024

30 June 2024

October 2022

30 June 2025

30 June 2025

 

The Options will vest subject to performance criteria as follows:

 

- compound annual earnings growth of 10% or more - fully vested (100%);

- compound annual earnings growth between 5%-10% - partial vesting between 0% and 100% on a sliding scale; and

- compound annual earnings growth of 5% and below - nil.

 

   Any Ordinary Shares arising from the vesting of Options must be held for a period of two years after vesting.

 

   1 Fully diluted earnings will be based on: (a) the Company's pre-tax profit excluding exceptional items and the share option

   charge and (b) the current UK corporation tax rate of 19%, such that the fully diluted earnings calculation takes no account

   of R&D and deferred tax credits. For the purposes of the fully diluted earnings calculation, the applied rate of corporation tax

   will remain constant at 19% irrespective of any current or future changes to corporation tax.

 

2 70,000 options issued in September 2019 lapsed on 30 June 2022 as compound annual earnings growth targets for the financial years ended 30 June 2020, 2021 and 2022 were not achieved.

 

3 70,000 options issued in October 2020 lapsed on 30 June 2023 as compound annual earnings growth targets for the financial years ended 30 June 2021, 2022 and 2023 were not achieved.

 

The fair value of options is valued using the Black-Scholes pricing model. An expense of £97,328 (2022: £116,612) has been recognised in the year in respect of share options granted. The cumulative share option reserve at 30 June 2023 is £279,455         (2022: £270,805).



 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

20.          Share capital (continued)

 

The inputs into the Black-Scholes pricing model are as follows:

 

Directors & Employees


Grant date

25 Apr 2017

29 Nov 2018

27 Sep 2019

2 Oct 2020

11 Oct 2021

21 Oct 2022

Exercise price

   64.5 pence

110.0 pence

   196.0 pence

164.5 pence

130.5 pence

76.5 pence

Expected life

10 years

10 years

10 years

10 years

10 years

10 years

Expected volatility

50%

50%

50%

49%

45%

44%

Risk free rate of interest

0.5%

0.75%

0.75%

0.00%

0.60%

3.69%

Dividend yield

Nil

Nil

Nil

0.01%

0.01%

0.04%

Fair value of option

36.7 pence

57.0 pence

115.0 pence

91.92 pence

70.03 pence

45.47 pence

 

Volatility has been estimated based on the historic volatility over a period equal to the expected term from the grant date.

 

 

 

21.    Reserves

 

Details of the movements in reserves are set out in the Statement of Changes in Equity. A description of each reserve is set out below.

 

Share capital reserve

 

This is used to record the aggregate nominal amount of the Company's shares on issue.

 

Share premium account

 

This is used to record the aggregate amount or value of premiums paid when the Company's shares are issued at a premium, net of issue costs, less amounts cancelled by court order.

 

Share option reserve

 

This relates to the fair value of options granted which has been charged to the income statement over the vesting period of the options, less amounts transferred to retained earnings.

 

Retained earnings

 

This relates to accumulated profits and losses together with distributable reserves arising from capital reductions, less amounts distributed to shareholders.



Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

22.    Net cash generated from operations - Group

 


 

2023


 

2022


£


£





Operating profit and exceptional items before tax

                915,210


             758,272





Depreciation charge

150,377


153,594





Non cash share option charges

97,328


116,612





Lease interest paid

(6,471)


(13,550)





Other interest paid

(20)


(60)





(Increase) / decrease in trade and other receivables

(9,425)


126,624





Decrease in trade and other payables

(265,577)


(31,884)





(Increase) in provisions

20,000


-









Cash generated from operations

901,422


1,109,608





 

 

 

Net cash generated from operations - Company


2023


2022


£


£





Operating profit

284,772


265,860





Non cash share option charges

45,673


116,612





Increase in trade and other receivables

(469,614)


(59,270)





Increase in trade and other payables

9,191


6,873









Cash (used in) / generated from operations

(129,978)


330,075





 



Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

23.    Related party transactions

 

Group

 

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are disclosed in this part of the note.

 

Key management compensation

 

Key management are those persons having authority and responsibility for planning, controlling and directing the activities of the Group. In the opinion of the Board, the Group's key management are the Directors of Arcontech Group PLC. Information regarding their compensation is given in notes 8 and 20 for each of the categories specified in IAS 24 Related Party Disclosures. All emoluments given in notes 8 and 20 relate to short-term employee benefits and there are no post-employment or other long-term benefits.

 

The financial statements include the following amounts in respect of services provided to the Group:

 

 

Company

 

Transactions between the Parent Company and its subsidiaries during the year were as follows:

 

Management charges payable by subsidiaries £546,676 (2022: £536,216).

 

The amounts due from/to subsidiaries at the balance sheet date were as follows:

 



2023
£


2022
£








Amount due from subsidiaries


         7,415,999


7,098,581








Less: Provision for impairment


  (3,594,521)


(3,788,180)


Amount due from subsidiaries - net


3,821,478


3,310,401


 

During the year a provision of £193,659 was released (2022: £176,491) in respect of balances due from subsidiaries.

 



2023
£


2022
£








Amount due to subsidiaries


546,676


536,216




546,676


536,216


 

 

 

24.    Dividends

 

A final dividend of 3.5 pence will be proposed at the Annual General Meeting but has not been recognised as it requires approval (2022: 3.25 pence).

 



Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

25.    Financial instruments

 

The Group's financial instruments comprise cash and cash equivalents, and items such as trade payables and trade receivables, which arise directly from its operations. The main purpose of these financial instruments is to provide finance for the Group's operations.

 

The Group's operations expose it to a variety of financial risks including credit risk, liquidity risk and interest rate risk. Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the Board. The policies set by the Board of Directors are implemented by the Company's finance department.

 

Credit risk

 

The Group's credit risk is primarily attributable to its trade receivables. The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterparty is subject to a limit, which is reassessed annually by the Board. Trade receivables are considered in default and subject to additional credit control procedures when they are more than 30 days past due in line with industry practice. Trade receivables are only written off when there is no reasonable expectation of recovery due to insolvency of the debtor.

 

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

 

 


Group
2023
£


Group
2022
£


Company
2023
£


Company
2022

£


Trade receivables

136,250


196,541


-


-











Cash and cash equivalents

6,411,241


6,026,468


518,678


1,074,294











Amounts owed by group undertakings

-


-


3,821,378


3,310,401



6,547,491


6,223,009


4,340,056


4,384,695


 

Interest rate risk

 

The Group has interest bearing assets and no interest-bearing liabilities. Interest bearing assets comprise only cash and cash equivalents, which earn interest at a variable rate.

 

The Group has not entered into any derivative transactions during the period under review.

 

The Group does not have any borrowings.

 

The Group's cash and cash equivalents earned interest at variable rates, between 3.65% below bank base rate and 0.25% below bank base rate and at fixed/variable rates of between 2.53% below bank base rate and 1.15% below bank base rate (2022: 1.20% below bank base rate and 0.2% above bank base rate and at fixed/variable rates of below 0.06%).

 

Liquidity risk

 

The Group has no short-term debt finance. The Group monitors its levels of working capital to ensure that it can meet its liabilities as they fall due.

 

The Group's financial liabilities comprise trade payables and other payables, provisions and accruals, excluding deferred income, with a carrying value equal to the gross cash flows payable of £438,845 (2022: £568,496) all of which are payable within 6 months.

 

 

 

 

Notes to the Financial Statements

 

For the year ended 30 June 2023 (continued)

 

25.    Financial instruments (continued)

 

Market risk and sensitivity analysis

 

Equity price risk

 

The Directors do not consider themselves exposed to material equity price risk due to the nature of the Group's operations.

 

Foreign currency exchange risk

 

The Directors do not consider themselves exposed to material foreign currency risk due to the nature of the Group's operations. All invoices are raised in sterling.

 

Interest rate risk

 

The Group is exposed to interest rate risk as a result of positive cash balances, denominated in sterling, which earn interest at variable and fixed rates. As at 30 June 2023, if bank base rate had increased by 0.5% with all other variables held constant, post-tax profit would have been £32,056 (2022: £30,132) higher and equity would have been £32,056 (2022: £30,132) higher. Conversely, if bank base rate had fallen 0.5% with all other variables held constant, post-tax profit would have been £32,056 (2022: £30,132) lower and equity would have been £32,056 (2022: £30,132) lower.

 

 

26.    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 and maintain an optimal capital structure.

 

The Group defines capital as being share capital plus reserves. The Board of Directors continually monitors the level of capital.

 

The Group is not subject to any externally imposed capital requirements.

 

 

27.    Ultimate controlling party

 

There is no ultimate controlling party.

 

 

28.    Subsequent events

 

The Company has reached agreement on terms for a new lease agreement on the office at 11- 21 Paul Street, London, EC2A 4JU. The lease is for a five year term an on similar financial terms as the current lease which expires in December 2023. As at the date of signing this report the new lease agreement has not yet been signed as we wait for final documentation to be received from the Land Registry Office.

 

 

29.    Copies of these statements

 

Copies of this statement are available from the Company Secretary at the Company's registered office at 1st Floor, 11-21 Paul Street, London, EC2A 4JU or from the Company's website at www.arcontech.com.

 

 

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