TIDMREDT
RNS Number : 4079C
Red24 PLC
28 June 2016
red24 PLC
("Red24" or the "Company")
Final Results
red24 plc, the crisis assistance company, is pleased to announce
its audited final results for the year ended 31 March 2016.
Highlights:
-- Revenue increased by 11% to GBP6,614,524 (2015: GBP5,947,246)
-- Adjusted* profit before tax up 10% to GBP1,005,732 (2015: GBP915,170)
-- Completion of first acquisition - RISQ Worldwide
-- Cash balances down 17% to GBP2,830,585 (2015: GBP3,417,956)
-- Final dividend increased by 11% to 0.30p per share (2015: 0.27p).
-- Adjusted* basic EPS up 22% to 1.79p (2015: 1.50p)
-- Basic earnings per share down 45% to 1.00p (2015: 1.83p)
* Adjustments to profit before tax are detailed in note 5 and
include currency movements, the amortisation of acquired
intangibles and provision for acquisition earn out payments.
Adjusted earnings per share is based on the retained profit with
these adjustments added back.
Simon Richards, Chairman, commented:
"The business continues to develop successfully and for many of
our KPIs in a way that has exceeded our expectations. We have
worked hard to build up a reputation with well-established clients
for high quality work and we see future growth both from our
existing services and also from the addition of other services that
are likely to be of assistance to those clients.
Although there are risks to any business, the Board feel
encouraged by the way we have continued to progress over the last
year, and are excited by the growth prospects offered by our
European partners, Allianz, the US product safety team,
cross-selling RISQ services and potential further acquisition."
Enquiries
red24 PLC Tel : +44(0) 203 291 2424
Simon Richards, Chairman
Maldwyn Worsley-Tonks, CEO
finnCap Tel: +44(0) 20 7220 0500
Julian Blunt / James Thompson (Corporate Finance)
Alice Lane (Corporate Broking)
Yellow Jersey PR Ltd Tel: +44(0) 7768 534 641 / +44(0) 7584 085
670
Philip Ranger, Aidan Stanley
About red24
red24 is headquartered in the UK and is listed on the London
Stock Exchange (AIM: REDT). Further information is available at
www.red24plc.com
red24 is a crisis assistance company that provides a range of
security and business support services, offering preventative and
reactive advice to help organisations and individuals avoid or
manage security and business risks to themselves, their families
and their businesses. Its products and services are distributed
through leading international financial service companies.
STRATEGIC REPORT
Chairman's Statement
Introduction
I am pleased to present our report for the year ended 31 March
2016.
Financial overview
The business continues to develop successfully and for many of
our KPIs in a way that has exceeded our expectations. Revenue has
increased by 11% to GBP6,614,524 from GBP5,947,246 achieved last
year. Of course the acquisition of RISQ is responsible for this but
there is a strong organic growth underlying these numbers if one
take account of the loss of our largest customer from the previous
financial year, who contributed GBP850k to the 2015 numbers. So
taking RISQ out of the 2016 revenue brings our like for like sales
down to GBP5,704k, but adjusting for the loss of HSBC from travel
safety brings last year's "base" revenue to GBP5,097k. Thus the
underlying increase from organic growth is a very creditable
12%.
The Chief Executive reviews the income streams in more detail in
his report, but the growth in travel assistance and product safety
is most noticeable. This growth is reflected in the increase in
staff numbers and a large increase in amortisation charges
following our investment in new services, particularly travel
tracker. This has held back the growth in profitability as has a
rather different currency environment. In addition accounting
standards require the entire RISQ earn out payments to be treated
as remuneration rather than adding to the consideration paid. The
Board believe it is best to show the effects of these large
currency movements, the effect of the earn out and the amortisation
of the identified intangibles in RISQ as exceptional items, to
enable a better understanding of the underlying trend in
profitability. Taking these factors into account underlying profits
have increased by 10%.
The exceptional items and the tax charge reduce the retained
earnings but the dividend is covered 1.9 times. The net assets per
share continue to increase and are now 9.2p per share up from 8.7p
last year. The Board are recommending a final dividend of 0.30p be
paid in September, which is an increase of 11% on the 0.27p final
dividend paid last year, and brings the dividend return for the
year as a whole to 0.55p as compared to 0.50p last year.
Financial position
Our cash position remains strong with year end cash balances of
GBP2,830,585 (2015:GBP3,417,956) despite the acquisition and
reducing the local bank loan which part funded the purchase of the
building in Cape Town and which remains our only debt, though we do
have commitments to pay the deferred consideration on the purchase
of RISQ; the first tranche of which is due this summer and looks
likely to be at the top end of the range, reflecting the strong
performance of the business since acquisition.
Outlook
We have worked hard to build up a reputation with
well-established clients for high quality work and we see future
growth both from our existing services and also from the addition
of other services that are likely to be of assistance to those
clients.
Although there are risks to any business, the Board feel
encouraged by the way we have continued to progress over the last
year, and are excited by the growth prospects offered by our
European partners, Allianz, the US product safety team,
cross-selling RISQ services and potential further acquisition.
Staff
Our staff are absolutely crucial to the quality of service
provided and to creating an environment where we can attract good
quality people who want to come to work for us. The Board are most
grateful to all the staff for their hard work and are gratified
that so many of them are choosing to build their careers with the
group.
Simon Richards
Chairman
27 June 2016
Chief Executive's Report
red24 is a risk management group that provides a range of
security and business support services. The acquisition of RISQ
Worldwide, in Singapore, has added an investigations business
stream to our existing distinct streams of revenue: travel
assistance, including accident and healthcare, special risks,
consulting and product safety. We have developed an excellent
reputation for assisting clients in minimising risks to their
personnel, operations and profitability and this reputation is key
to our ability to grow the business into related areas and to
expanding our geographic coverage.
Business model
The heart of our business operation is our 24/7 Crisis Response
Management Centre (CRM) in Cape Town. This state of the art
response centre is staffed 24 hours a day, 365 days a year by a
dedicated team of multi-lingual customer service representatives,
regional analysts and experienced security professionals. The
centre enables our experts to give accurate impartial, up to the
minute information and advice to our clients. Across the group
clients are offered escalating levels of assistance that are
appropriate to the threat.
Travel assistance
Over the last two years we have made a significant investment in
our travel assistance services to enhance the technical platform
making it both easier to interface with new clients and with new
travel data bases. The service now offers travel tracking,
e-learning and mobile apps.
However we do not believe that technology alone will enable us
to provide the tailored and personalized approach that HR and
Security managers are looking for from a service provider. We keep
a close watch on competitor initiatives to ensure that we have the
balance right and believe the results for the year show that our
approach is meeting market needs.
In the year underlying revenues have grown by 28%, once one
strips out the revenue contribution, in the previous year, from the
HSBC Premier and Advance books in the UK, which we lost in November
2014. This has been achieved by recruiting direct sales staff to
focus efforts on building a broader customer base that is less
vulnerable to such shocks.
Special risks
Our special risks business had another active year and although
the number of incidents dropped there was a significant extortion
case in the Middle East that ran for three months. This business is
now more dependent on incident related revenue than in the past as
there has been a reduction in retainer income reflecting the number
of insurers underwriting. Our Munich office has made a significant
contribution to gaining European business and there have been
significant client wins for those insurers. We continue to publish
our respected "Threat forecast".
Consulting and response
The year lacked the large evacuation job in Libya, which
contributed 50% of this streams 2015 revenue. In the current year
the largest incident related to the Nepalese earthquake which
contributed 24% of revenue. Outside these two major incidents
revenue increased by 3%.
Investigations
We acquired RISQ Worldwide on 1 July 2015 and so these figures
include just 9 months of revenue. RISQ is a Singapore based
investigations business that specializes in employment screening
and business investigations - primarily for European businesses
with Asian investments. In the first 9 months the business was 11%
ahead of the budget set and has made a significant contribution to
the group. We believe that this will grow as the services offered
expand the range that can be put to the HR or security purchase
holder, both in Europe and in Asia. Some cross selling has already
occurred and this will develop in the coming year as we rebrand as
red24 Asia Pacific.
Product safety
Red24 Assist, our product safety brand, has shown a 35% increase
in revenue. This increase is largely attributable to adding a major
provider of this insurance in the United States and to the start of
a business to business product safety service there. This follows
the recruitment of a US based team early in October. Business to
business growth is behind our expectations but we are hopeful that
the original goals set will be achieved by the end of 2016. We have
aligned our training in this field with academic institutions so
that it becomes possible to achieve a Masters degree in this field
and we have entered into a revenue sharing deal with a University
which should benefit 2017, once the course is launched.
Principal risks and uncertainties
The principal risks and uncertainties which could have a
material effect on the group have been identified and set out in a
risk register which assesses each risk for the likelihood of its
occurrence and the potential impact on the group.
The Board regularly review the group's exposure to currency
risk, which is one of the key risks impacting the group. The longer
term currency presents an on-going challenge for the group; the
economic environment, which remains a challenging one as many
governments struggle with debt constraints, will determine the
relative value of currencies - not least sterling, which is our
functional and reporting currency. In the shorter term we monitor
the situation regularly and react to favourable spot opportunities,
utilising up to twelve month hedging instruments when appropriate,
though our hedging the risk against a change in government in the
UK in 2015 has been costly. A fuller discussion of the sensitivity
of our exposure to currency risk is contained in note 29 to the
financial statements.
Other risks and uncertainties that are largely within the
control of the group, have been categorised into strategic,
operational, financial and administrative risks. These include the
maintenance of the group's competitive position to ensure the
achievement and collection of sufficient revenue to meet the
group's objectives. The group maintains significant cash reserves
both to mitigate against the possibility of periods of reduced
working capital and to ensure adequate working capital is available
to meet any sudden increase in the level of response work clients
may require. Internally we have worked hard, and with some success,
to broaden the customer base and reduce dependence on key accounts.
Other normal business risks include dependence on the continued
availability of key personnel to ensure that our clients receive
the level of service they are entitled to expect, and the ability
of the group to continue to provide that level of service. The
reputation of the group is critical to its continued success and it
works hard to develop and protect that reputation by ensuring that
it only associates itself with activities that are appropriate for
a business in its sector.
Looking forward
I am delighted that our first acquisition has started so
strongly and brought significant strength to the group. Our task in
the coming year is to push ahead with integrating the marketing of
our broader service offering to ensure we gain access to
opportunities to cross sell services. It is a reflection of this
broader range that we have moved to describing ourselves as a risk
management company and not just a crisis assistance company.
We have also expanded organically by adding product safety
specialists in the United States and our opening of an office in
Germany has played a key part in winning business with Allianz. We
act as their responder on Special Risks and Product Safety and have
partnered with their Worldwide Care team to offer clients a
combined, comprehensive, one-stop medical and travel risk package,
which has exciting prospects.
Although the market for our services is becoming ever more
competitive we believe that we have a good track record of
innovation that should enable us to win more business and that
increased competition creates greater awareness of the need for
these services which leads to a larger market.
Expansion in areas outside our reporting currency is affected by
exchange rate movements. A substantial proportion of our revenue is
now denominated in US dollars and a growing proportion in euros,
whereas almost 50% of our costs are incurred in Rand. Exchange rate
movements are influenced by many complex factors. Last year, faced
with a very uncertain General Election in the UK, the Board decided
to buy forward 80% of our Rand requirements for the year to March
2016. The unexpected election outcome combined with the fall in
commodity prices were largely responsible for a large and
unfavourable move against that view and the year has suffered from
a significant currency loss as opposed to substantial gain in the
previous year. Currency fluctuations remain a significant risk and
the Board have shown the "before" and "after" effect to enable
readers to take an informed view.
Key performance indicators
The key performance indicators ("KPIs") for the group are those
that communicate the financial performance and strength of the
group, as a whole, to shareholders. A summary of the KPI's is as
follows (derived from continuing operations only):
2016 2015
GBP'000 GBP'000
Financial
Revenue 6,614 5,947
Gross profit 5,141 4,418
Adjusted* profit before tax 1,006 915
Adjusted* earnings per share 1.79p 1.50p
Available cash 2,831 3,418
* Adjustments to profit before tax are detailed in note 5 and
include currency movements, the amortisation of acquired
intangibles and provision for acquisition earn out payments.
Adjusted earnings per share is based on the retained profit with
these adjustments added back.
Maldwyn Worsley-Tonks
Chief Executive
27 June 2016
Corporate Social Responsibility Report
The red24 brand and our corporate values are the key to our
approach to Corporate Social Responsibility (CSR). Our CSR strategy
is focused on the following key issues:
Business Ethics
The Board is committed to maintaining high ethical standards
across the group and expect the same commitment from our staff,
customers and suppliers. Our reputation is vital to our continued
business success and we do not tolerate any form of bribery,
corruption or fraud. We have anti-bribery policies in place of
which all employees are made aware when they join as well as
through the group intranet and through training.
Employee engagement
The Board recognise that our employees are fundamental to our
success. As a professional services business we have a highly
skilled workforce who assist in delivering our strategic
objectives. The Board aim to ensure that there are equal
opportunities for all employees and that decisions affecting
employees are taken based on merit and not on such factors as race,
gender, nationality or religious beliefs. In South Africa there are
legislative requirements that expect the workforce to be reflective
of the mix of peoples in the Western Cape. The board regularly
monitor progress towards this.
Many of the group's employees have become shareholders through
the share loan scheme. In 2013 an employee benefit trust was
created. The Board have provided a loan of GBP150,000 to the
Trustees to acquire shares in the market and, at 31 March 2016 the
Trust held 1,100,000 shares in the Group. The Board intend that
these shares will be used to satisfy staff share awards made as
part of a longer term incentive scheme. The remaining step will be
to create a new, approved, Enterprise Management Incentive Scheme
open to all qualifying staff.
The optional defined contribution pension schemes, introduced in
2012, for all staff based in either South Africa or the United
Kingdom, have been taken up 80% of our staff.
Health and safety
The Board are committed to providing a safe workplace for all
our staff and to ensure that our services are provided in a way
that delivers our services safely for clients and staff, including
contractors. Responsibility for health and safety rests with the
Chief Executive.
Sustainability
The Board monitor staffing needs to ensure that it is regularly
reviewed and appropriate plans put in place to ensure we retain and
develop the necessary levels of skills and take action where
necessary.
We monitor and work to minimise our impact on the environment.
We measure our carbon footprint and work to reduce it. We provide
the green24 website as an open access one, allowing individuals and
corporates to live and work in a more sustainable way.
Community engagement
Red24 established a charity committee in 2007, "Project
Infundo", which means education. Through the work of this committee
we support educational initiatives. In Cape Town, we assist a
disadvantaged primary school in Constantia and a teacher
improvement programme in Khayelitsha; whilst in London we assist a
community voluntary charity.
On behalf of the Board
J E A Mocatta
Secretary
27 June 2016
DIRECTORS' REPORT
The directors present their report and the audited financial
statements of the company and of the group for the year ended 31
March 2016.
PRINCIPAL ACTIVITIES AND BUSINESS REVIEW
red24 plc is incorporated in Scotland and domiciled in England.
Its shares are listed on the AIM Market ("AIM") of the London Stock
Exchange. The company acts as a holding company. The principal
activities of its wholly-owned trading subsidiaries are the
provision of security risk management and other assistance
services. These activities are expected to continue for the
foreseeable future.
A fair review of the business, and its future prospects,
including consideration of the principal risks facing the group and
a review of our performance against financial key performance
indicators is contained in the Strategic Report above.
The Board exercises proper and appropriate corporate governance
for the group. It ensures that there are effective systems of
internal controls in place to manage the shareholders' interests
and the group's assets, including the assessment and management of
the risks to which the group's businesses are exposed. A discussion
of the principal risks is contained in the strategic review and in
note 29 to the financial statements.
RESULTS FOR THE YEAR
The financial result for the year ended 31 March 2016 and the
comparative result for the year ended 31 March 2015 are set out
later in this announcement. An interim dividend of 0.25p per share
(2015: 0.23p) was paid on 25 February 2016. A final dividend of
0.30p per share (2015: 0.27p) will be recommended to the AGM on 3
August 2016, to be paid on 16 September 2016.
DIRECTORS
S A Richards, L Adlam, J E A Mocatta and M S H Worsley-Tonks all
held office throughout the year. J M Brigg was appointed a director
on 2 May 2016.
S A Richards retires by rotation at the forthcoming annual
general meeting and, being eligible, offers himself for
re-election. J M Brigg having been appointed since the last Annual
General Meeting and, being eligible, offers himself for
re-appointment.
BIOGRAPHIES OF DIRECTORS
Simon Richards, who is a Chartered Accountant, is the company's
executive chairman. Simon has been a director since 1995 and
oversaw the company's first listing on AIM in 1999 and the
re-listing on the acquisition of the security business in 2002. He
also acts as the part time finance director as well as being the
chairman of Sidebell Limited.
Maldwyn Worsley-Tonks joined the Board in 2003 and has been the
group's chief executive since 2007. Maldwyn has overseen the
profitable development of the group. A former Lieutenant Colonel in
the British Army, having commanded a regular Parachute Battalion,
he has many years' experience in the security industry and is an
expert in crisis contingency planning for businesses.
John Mocatta, who is a Chartered Accountant, is the company's
senior non-executive director and joined the Board in 1999 to
assist in the AIM listing and to be the independent voice of
shareholders. He is a specialist in corporate finance and has
previously been both an executive and a non-executive director of a
number of public and private companies.
Lorraine Adlam joined the board in October 2014 as a
non-executive Director. She has over thirty years' experience in
the insurance sector in a variety of roles including CEO of a
Lloyd's Underwriting business and Chairman of a Lloyd's Broker. She
is also a non-executive director of Thompson, Heath and Bond
Limited.
Micky Brigg joined the Board in May 2016 and has extensive
knowledge and experience across the insurance industry with a
particular focus on Asia, India and the Middle East and is a former
head of RSA's operations for South-East Asia and India. He is an
Associate of the Chartered Insurance Institute.
DIRECTORS' INTERESTS
The interests of the directors in the company's share capital,
including shares held by companies controlled by the directors,
were as follows:
31 March 2016
Ordinary
Ordinary share
shares options
of 1p each (iv)
S A Richards (i) 630,000 -
J E A Mocatta (ii) 650,000 -
M S H Worsley-Tonks 963,500 750,000
L Adlam 50,000 -
1 April 2015
Ordinary Ordinary
Ordinary share share
shares options options
of 1p each (iii) (iv)
S A Richards (i) 630,000 - -
J E A Mocatta (ii) 650,000 - -
M S H Worsley-Tonks 963,500 500,000 750,000
L Adlam 50,000 - -
(i) S A Richards is interested in the shares of Sidebell
Limited, which held 13,889,250 ordinary shares of 1p each at 31
March 2016 (1 April 2015: 13,389,250 ordinary shares of 1p
each).
S A Richards was also interested in the shares of Financial
& General Securities Limited, which held no ordinary shares of
1p each at 31 March 2016 (1 April 2015: 440,000).
(ii) J E A Mocatta is also interested in 18,000 (1 April 2015:
12,000) ordinary shares held in trust for his granddaughter.
(iii) On 2 March 2010 options over ordinary shares of 1p each at
a price of 8p per share were granted to M S H Worsley-Tonks. These
options were exercised on 16 March 2016.
(iv) On 8 August 2012 options over ordinary shares of 1p each at
a price of 10.5p per share were granted to M S H Worsley-Tonks.
These options are exercisable between 8 August 2015 and 8 August
2018.
(v) J M Brigg held 3,475,000 shares at the date of his
appointment and is interested in a further 4,981,500 shares held by
EMIS.
SUBSTANTIAL SHAREHOLDINGS
The following shareholders had advised the company of holding an
interest of 3 per cent or more in the issued ordinary share capital
of the company at 9 May 2016:
Percentage
Number of of issued
ordinary ordinary
shares of share
1p each capital
Sidebell Limited 13,889,250 28.07
J M Brigg and EMIS 8,456,500 17.09
Hargreave Hale Nominees 2,615,000 5.28
PFS Downing Active Management
Fund 2,049,056 4.14
Barclays Wealth Management 1,963,181 3.97
Hargreaves Lansdown Nominees 1,855,268 3.75
Jarvis Investment Management 1,839,799 3.72
Pershing Nominees 1,670,100 3.38
DIRECTORS' AND OFFICERS LIABILITY INSURANCE
During the year the company has maintained insurance to
indemnify the directors against potential claims arising from the
performance of their duties.
RELATED PARTIES
The group considers that the Directors, their spouses and
children and other companies or businesses of which the Directors,
their spouses or children are either directors or principals, or
both, are related parties. Full details of transactions with
related parties are disclosed in note 28 to these accounts. The
interests of related parties in the shares of the company are set
out above.
CORPORATE SOCIAL RESPONSIBILITY
The group corporate social responsibility report is set earlier
in the announcement.
EQUAL OPPORTUNITIES
The group endorses and supports the principles of equal
employment opportunities. It is the policy of the group to provide
equal employment opportunities to all qualified individuals, which
ensures that all employment decisions are made, subject to legal
obligations, on a non-discriminatory basis.
Disabled employees
Applications for employment by disabled persons are always fully
considered, bearing in mind the aptitudes of the applicant
concerned. In the event of members of staff becoming disabled,
every effort is made to ensure that the training, career
development and promotion opportunities of disabled persons should,
as far as possible, be identical with those of other employees.
PRODUCT DEVELOPMENT
The group invests in its products and services on a continuous
basis to ensure that its offerings remain at the forefront of those
on offer in the market place.
Suppliers' payment terms
It is the policy of the group to agree terms of payment with its
suppliers when trading relationships are established, to ensure
that the terms of payment are clear and to abide by the agreed
terms, provided the suppliers meet their obligations. Payable days
at 31 March 2016 were 15 (2015: 26) for the group and 44 (2015: 32)
for the company.
FINANCIAL INSTRUMENTS
Details of the financial instruments of the company and its
subsidiary undertakings are contained in note 29.
Employee participation
The group values the involvement of its employees and keeps them
informed of matters affecting them and on the various factors
affecting the performance of the group. Employees are encouraged to
become shareholders in the company.
STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITOR
Each of the directors confirms that, so far as he is aware,
there is no relevant audit information of which the company's
auditor is unaware, and that he has taken all steps that he ought
to have taken as a director in order to make himself aware of any
relevant audit information and to establish that the company's
auditor is aware of that information.
Auditor
A resolution proposing that RSM UK Audit LLP (formerly Baker
Tilly UK Audit LLP), Chartered Accountants, be appointed as auditor
of the company will be put to the members at the Annual General
Meeting. RSM UK Audit LLP has indicated its willingness to continue
in office.
On behalf of the Board
J E A Mocatta
Secretary
27 June 2016
CORPORATE GOVERNANCE STATEMENT
The company is committed to high standards of corporate
governance. The board is accountable to the company's shareholders
for good corporate governance. The company has complied
substantially throughout the period with the corporate governance
guidelines for smaller quoted companies issued by the Quoted
Companies Alliance and details are provided below.
Application of the Principles of Good Governance
At the year end, the Board consisted of two executive directors
and two non-executive directors. Both non-executive directors are
regarded as independent. The full Board met 11 times during the
year (2015: 12) and receives appropriate information from
management in advance of its meetings. Certain functions are
delegated to Board Committees.
The Remuneration Committee is chaired by the senior independent
non-executive director and consists of that director, the other
non-executive director and the Chairman. Its key role is to make
recommendations to the Board, within agreed terms of reference, on
the Company's framework of executive remuneration and its cost and
to determine on behalf of the Board specific remuneration packages
for the Executive Directors.
The Audit Committee consists of the Chairman and the two
non-executive directors, two of whom are Chartered Accountants. The
Committee, which is chaired by the senior non-executive director,
meets with the independent auditor to consider the group's
financial reporting in advance of its publication.
The Board considers that its structure is appropriate to its
present stage of development and that both non-executive directors
are independent of the executives in both character and
judgement.
Internal control
The Board has overall responsibility for ensuring that the group
maintains a system of internal control to provide it with
reasonable assurance regarding the reliability of information used
within the business and for publication and that assets are
safeguarded. There are inherent limitations in any system of
internal control and, accordingly, even the most effective system
can provide only reasonable, and not absolute, assurance with
respect to the preparation of financial information and the
safeguarding of assets.
The key features of the internal control system that operated
during the year may be summarised as follows:
-- Board responsibility for overall strategy and for approving budgets, forecasts and plans;
-- Board and business heads participate in the annual strategic
planning process which sets the framework for the budgets of
individual business units;
-- clear lines of authority, responsibility and financial
accountability within each business unit, ensuring an appropriate
organisational structure for planning, executing, controlling and
monitoring its business operations;
-- consideration and review by the Board of monthly management
accounts which compare actual results with budgets and prior years'
results;
-- regular reporting of legal, accounting, human resources and
health and safety developments and issues to the Board; and
-- comprehensive accounting policies and regular reviews of compliance with those policies.
The Audit Committee reviews the operation and effectiveness of
this framework on a regular basis and, on behalf of the Board, has
reviewed the half yearly report and the annual financial statements
along with the nature and scope of the external audit.
The directors consider that there have been no weaknesses in
internal financial control that have resulted in any material
losses, contingencies or uncertainties requiring disclosure in the
group's financial statements.
RElations WItH SHAREHOLDERS
The Chairman and Chief Executive make themselves available to
major shareholders on request and periodically attend meetings with
and presentations to shareholders. The Annual General Meeting is
normally attended by all directors and shareholders are invited to
ask questions during the meeting and to meet with directors after
the formal proceedings have ended.
Going concern
Having made enquiries, the directors have a reasonable
expectation that the company and the group as a whole will have
adequate resources to continue in operational existence for the
foreseeable future. For this reason they continue to adopt the
going concern basis in preparing the accounts.
AUDITOR INDEPENCE
The Audit Committee undertakes a formal assessment of the
external auditor's independence each year which includes:
-- a review of non-audit services provided to the group and related fees;
-- receipt from the auditor of a written report detailing
relationships with the company and any other parties that could
affect independence or the perception of independence;
-- a review of the auditor's own procedures for ensuring
independence of the audit firm and partners and staff involved in
the audit, including the regular rotation of the audit partner;
and
-- obtaining written confirmation from the auditor that, in
their professional judgement, they are independent.
An analysis of the fees payable to the external audit firm in
respect of both audit and non-audit services during the year is set
out in note 4 to the financial statements.
On behalf of the board
J E A Mocatta
Audit Committee Chairman
27 June 2016
Remuneration Report
The Remuneration Committee comprises J E A Mocatta, as Chairman,
L Adlam and S A Richards.
Policy on remuneration of executive directors
The purpose of the Remuneration Committee is to consider all
aspects of executive directors' remuneration and determine the
specific remuneration packages of each of the executive directors
and, as appropriate, other senior executives, ensuring that the
remuneration packages are competitive within the service industry
and reflect both group and personal performance.
The current remuneration packages of the executive directors
consist of basic salary, share options and a discretionary
bonus.
M S H Worsley-Tonks has a letter of appointment dated 1 April
2008, which is capable of termination by twelve months notice by
either party.
S A Richards has a letter of appointment dated 23 September
2004, which is capable of termination by twelve months notice by
either party.
Non-Executive DirectorS
The remuneration of the Non-Executive Directors is set by the
Board as a whole.
J E A Mocatta, the senior non-executive director, has a letter
of appointment dated 1 July 2015, which is capable of termination
by the giving of six months notice on either side. These services
were previously provided by John Mocatta & Co.
L Adlam has a letter of appointment dated 1 October 2014, which
is capable of termination by six months notice by the company and
at no notice by the director.
J M Brigg has a letter of appointment dated 9 May 2016, which is
capable of termination by three months notice on either side.
Directors' remuneration
The emoluments of the individual directors, which comprise
salaries or fees and bonus were as follows:
2016
Salary Bonus
or fees GBP Total
GBP GBP
S A Richards 92,500 9,250 101,750
J E A Mocatta 42,600 - 42,600
M S H Worsley-Tonks 145,000 21,750 166,750
L Adlam 24,480 - 24,480
304,580 31,000 335,580
On 16 March 2016 M S H Worsley-Tonks exercised his option to
subscribe for 500,000 Ordinary Shares of 1p each at a price of 8p
per share, which were then placed at a price of 18p per share
thereby realising a gain of GBP50,000.
Directors' remuneration
2015
Salary
or fees Bonus Total
GBP GBP GBP
S A Richards 90,700 13,600 104,300
J E A Mocatta 42,036 - 42,036
M S H Worsley-Tonks 133,900 26,800 160,700
L Adlam 12,000 - 12,000
D J Gill 5,015 - 5,015
283,651 40,400 324,051
DIRECTORS' BENEFITS
None of the directors received any benefits in kind during the
year or during the previous year, nor were any pension
contributions made on behalf of any director in either year. On 1
August 2013 the group introduced a three times salary death in
service benefit scheme of which the executive directors are
members.
DIRECTORS' INTERESTS IN SHARES AND OPTIONS
The interests of the directors holding office at 31 March 2016
in the company's share capital, including share options and also
including shares held by companies controlled by the directors, are
shown in the directors' report on page 9 of the Annual Report and
Accounts.
The Board believe that the direct participation in the equity of
the company leads to a significant reduction in staff turnover and
is an effective method of ensuring that the longer term interests
of staff and shareholders coincide. In 2013 the Board set up an
Employee Benefit Trust with the intention of empowering the Trust
to acquire shares at appropriate opportunities to satisfy future
staff share awards. At 31 March 2016 1,100,000 shares (2015:
1,050,000) had been acquired by the trust. In the coming year a new
Enterprise Management Incentive Scheme is planned.
Executive directors, managers and staff will all be eligible to
participate in the scheme after a minimum length of service and the
Board envisage that the present system of discretionary cash
bonuses will move to one where there is a short and long term
element to the award, the former will continue to be paid in cash
and the later by way of share options, under the EMI Scheme for
those eligible.
The Board are pleased to note that at 31 March 2016 18 members
of staff (2015: 20) were shareholders in the company.
J E A Mocatta
Remuneration Committee Chairman
27 June 2016
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the Strategic Report
and the Directors' Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare group and company
financial statements for each financial year. The directors are
required by the AIM Rules of the London Stock Exchange to prepare
group financial statements in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the European
Union ("EU") and have elected under company law to prepare the
company financial statements in accordance with IFRS as adopted by
the EU.
The financial statements are required by law and IFRS adopted by
the EU to present fairly the financial position of the group and
the company and the financial performance of the group. The
Companies Act 2006 provides in relation to such financial
statements that references in the relevant part of that Act to
financial statements giving a true and fair view are references to
their achieving a fair presentation.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and the company and of
the profit or loss of the group for that period.
In preparing the group and company financial statements, the
directors are required to:
a. select suitable accounting policies and then apply them consistently;
b. make judgements and accounting estimates that are reasonable and prudent;
c. state whether they have been prepared in accordance with IFRSs adopted by the EU;
d. prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the group and the
company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the group's and the
company's transactions and disclose with reasonable accuracy at any
time the financial position of the group and the company and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the group and the company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the red24
plc website.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
CONSOLIDATED INCOME STATEMENT Notes 2016 2015
GBP GBP
REVENUE 3 6,614,524 5,947,246
Cost of sales (1,473,201) (1,587,478)
Gross profit 5,141,323 4,359,768
Administrative expenses 4 (4,135,591) (3,444,598)
OPERATING PROFIT before exceptional items 1,005,732 915,170
Exceptional items 5 (379,193) 162,034
OPERATING PROFIT 626,539 1,077,204
Finance income 7 15,497 13,211
Finance costs 8 (17,692) (24,017)
PROFIT before tax 3 624,344 1,066,398
Tax charge 12 (147,592) (178,240)
PROFIT FOR THE YEAR ATTRIBUTABLE TO THE
OWNERS OF THE PARENT 476,752 888,158
Earnings per share
Basic 14 1.00 p 1.83 p
Diluted 0.99 p 1.82 p
CONSOLIDATED STATEMENT OF coMPREHENSIVE INCOME
Notes 2016 2015
GBP GBP
Profit for the year 476,752 888,158
Other comprehensive income for the year net of
tax
Items that may be subsequently reclassified to
profit or loss
Revaluation of property 53,610 19,184
Currency translation differences 25 (58,529) (3,308)
Total comprehensive income for the year attributable
to owners of the parent 471,833 904,034
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Other Retained
Attributable to capital premium reserves earnings Total
owners of the parent GBP GBP GBP GBP GBP
Balance at 1 April
2014 489,834 223,652 57,397 2,936,454 3,707,337
Profit for the year - - - 888,158 888,158
Revaluation of property - - 19,184 - 19,184
Currency translation
differences - - (3,308) - (3,308)
Total comprehensive
income for the year - - 15,876 888,158 904,034
Transactions with
owners
Own shares acquired - - (121,586) - (121,586)
Share based payments - - (12,130) 21,170 9,040
Dividends paid - - - (222,218) (222,218)
Total transactions
with owners - - (133,716) (201,048) (334,764)
Balance at 31 March
2015 489,834 223,652 (60,443) 3,623,564 4,276,607
Profit for the year - - - 476,752 476,752
Revaluation of property - - 53,610 - 53,610
Currency translation
differences - - (58,529) - (58,529)
Total comprehensive
income for the year - - (4,919) 476,752 471,833
Transactions with
owners
Own shares acquired - - (9,257) - (9,257)
Shares options exercised 5,000 35,000 (14,850) 14,850 40,000
Dividends paid - - - (249,128) (249,128)
Total transactions
with owners 5,000 35,000 (24,107) (234,278) (218,835)
Balance at 31 March
2016 494,834 258,652 (89,469) 3,866,038 4,530,055
COMPANY STATEMENT OF CHANGES IN EQUITY
Share Share Other Retained
Attributable to capital premium reserves earnings Total
owners of the parent GBP GBP GBP GBP GBP
Balance at 1 April
2014 489,834 223,652 54,100 1,436,573 2,206,159
Total comprehensive
income for the year - - - 423,835 423,835
Transactions with
owners
Own shares acquired - - (121,586) - (121,586)
Share based payments - - (12,130) 21,170 9,040
Dividends paid - - - (222,218) (222,218)
Total transactions
with owners - - (133,716) (201,048) (334,764)
Balance at 31 March
2015 489,834 223,652 (79,616) 1,661,360 2,295,230
Total comprehensive
income for the year - - - 423,255 423,255
Transactions with
owners
Own shares acquired - - (9,257) - (9,257)
Shares options exercised 5,000 35,000 (14,850) 14,850 40,000
Dividends paid - - - (249,128) (249,128)
Total transactions
with owners 5,000 35,000 (24,107) (234,278) (218,835)
Balance at 31 March
2016 494,834 258,652 (103,723) 1,850,337 2,500,100
BALANCE SHEETS
Group Group Company Company
2016 2015 2016 2015
ASSETS Notes GBP GBP GBP GBP
NON-CURRENT ASSETS
Intangible assets 15 822,044 432,335 15,577 27,791
Property, plant
& equipment 16 770,087 756,170 - -
Investment in group
companies 17 - - 672,747 408,334
Deferred tax assets 19 51,806 51,315 41,500 38,100
Trade and other
receivables 20 - 6,490 868,386 537,414
1,643,937 1,246,310 1,598,210 1,011,639
Current assets
Trade and other
receivables 20 1,417,978 905,501 232,388 212,899
Cash and cash equivalents 21 2,830,585 3,417,956 1,086,458 1,359,576
4,248,563 4,323,457 1,318,846 1,572,475
Assets classified
as held for sale 18 125,000 250,000 125,000 250,000
TOTAL ASSETs 6,017,500 5,819,767 3,042,056 2,834,114
capital and reserves
Called up share
capital 24 494,834 489,834 494,834 489,834
Share premium account 25 258,652 223,652 258,652 223,652
Other reserves 25 (103,723) (79,616) (103,723) (79,616)
Revaluation reserves 25 14,254 19,173 - -
Retained earnings 25 3,866,038 3,623,564 1,850,337 1,661,360
EQUITY ATTRIBUTABLE
TO OWNERS OF THE
PARENT 25 4,530,055 4,276,607 2,500,100 2,295,230
NON-CURRENT LIABILITIES
Deferred tax liabilities 19 57,069 43,549 - -
Borrowings 23 122,552 215,370 - -
179,621 258,919 - -
CURRENT LIABILITIES
Trade and other
payables 22 1,169,155 1,180,485 541,956 538,884
Corporation tax 124,177 86,350 - -
Borrowings 23 14,492 17,406 - -
1,307,824 1,284,241 541,956 538,884
TOTAL EQUITY AND
LIABILITIES 6,017,500 5,819,767 3,042,056 2,834,114
The accompanying notes are an integral part of these financial
statements.
CASH FLOW STATEMENTS
Group Group Company Company
2016 2015 2016 2015
Notes GBP GBP GBP GBP
Cash generated
from operating
activities 26 59,093 1,642,496 (317,838) 441,640
Investing activities
Interest received 15,497 13,211 25,088 21,619
Dividend received - - 380,000 180,000
Investment in
subsidiary - - (264,413) -
Held for sale
investment 125,000 122,000 125,000 122,000
Purchase of intangibles (90,010) (217,020) (2,570) (19,305)
Purchase of property,
plant & equipment (106,439) (46,017) - -
Purchase of subsidiary
net of cash acquired (195,242) - - -
Net cash (used
in)/generated
from investing
activities (251,194) (127,826) 263,105 304,314
Financing activities
Shares issued 40,000 - 40,000 -
Dividends paid (249,128) (222,218) (249,128) (222,218)
Interest paid (17,692) (24,017) - -
Purchase of own
shares (9,257) (121,586) (9,257) (121,586)
Bank loans repaid (64,751) (19,651) - -
Net cash used
in financing activities (300,828) (387,472) (218,385) (343,804)
Net (decrease)/increase
in cash and cash
equivalents 26 (492,929) 1,127,198 (273,118) 402,150
Cash and cash
equivalents at
the beginning
of the year 3,417,956 2,302,577 1,359,576 957,426
Effect of foreign
exchange rate
changes (94,442) (11,819) - -
Cash and cash
equivalents at
the end of the
year 2,830,585 3,417,956 1,086,458 1,359,576
The accompanying notes are an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
(a) Basis of preparation
From 1 April 2007, the group and company have adopted
International Financial Reporting Standards ("IFRS") and the
International Financial Report Interpretations Committee ("IFRIC")
interpretations as adopted by the European Union ("EU") in the
preparation of its financial statements and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The financial statements have been prepared under the historical
cost basis, except for trade investments and land and buildings
which have been measured at fair value.
The accounts are prepared on a going concern basis. In assessing
whether the going concern assumption is appropriate, the directors
have taken into account relevant available information about the
future including profit and cash forecasts for the next two
financial years and the assumptions on which they are based. After
reviewing this information, the directors consider that it is
appropriate to prepare the financial statements on a going concern
basis.
(b) Basis of consolidation
The consolidated financial statements include the financial
statements of the company and all of the entities controlled by the
company (its subsidiaries) made up to 31 March each year. Control
is obtained when the company has exposure or rights to the variable
returns from the involvement in the investee entity and the ability
to affect those returns through its power over the investee. The
acquisition of subsidiaries is accounted for using the acquisition
method. The cost of an acquisition is measured as the cash paid and
the fair value of other assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange of
contracts. Costs directly attributable to the acquisition are
expensed as incurred.
The results of subsidiaries sold or acquired are included in the
consolidated income statement up to, or from, the date control
passes. Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies used
into line with those used by the group. All intra-group
transactions, balances, income and expenses are eliminated on
consolidation.
The company has not presented its own income statement as
permitted by Section 408 of the Companies Act 2006. The profit for
the year was GBP423,255 (2015: GBP423,835).
(c) Revenue recognition
Revenue represents the fair value of the consideration received
or receivable in respect of services provided in the normal course
of business, net of discounts, value added tax and other sales
related taxes. Sales of services are recognised when the services
have been provided, services invoiced in advance are treated as
deferred income and income is accrued where services have been
provided but not yet invoiced.
Interest income is accrued on a time-apportioned basis. Dividend
income is accounted for when received.
(d) Cost of sales, gross profit and operating profit
Cost of sales represent the fair value of costs directly
incurred in the supply of goods sold and services provided. Costs
are recognised at the time when the goods have been supplied or the
services have been provided. Costs relating to still to be provided
services are carried forward in other receivables to the extent it
is considered probable they will be recovered.
Gross profit is defined as revenue recognised less cost of
sales.
Operating profit is arrived at after deducting all
administrative expenses from gross profit, including restructuring
and impairment costs, but before finance income and finance
costs.
(e) Borrowing costs
All borrowing costs are recognised in the income statement in
the period in which they are incurred. Interest costs are accrued
on a time basis by reference to the principal outstanding at the
effective interest rate applicable.
(f) Taxation
The tax credit or expense represents the sum of the current tax
expense and deferred tax.
The tax currently payable is based on the taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statements because it excludes items of income and expense
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The group's
liability for current tax is calculated using the applicable rate
for the period the taxable profits are earned in.
Deferred tax is provided in full, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial
statements.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profits will be available against
which the temporary differences can be utilised.
Deferred tax is measured at the average tax rates that are
expected to apply in the periods in which timing differences are
expected to reverse, based on tax rates and laws that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax is measured on a non-discounted basis. Deferred tax is
charged or credited in the income statement, except where it
relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with in equity.
Deferred tax is provided on temporary timing differences arising
on investments in subsidiary companies, except where the timing of
the reversal of the temporary difference is controlled by the group
and it is probable that the temporary difference will not reverse
in the foreseeable future.
(g) Intangible assets
Goodwill, being the excess of the cost of acquisition over the
fair value of net assets, including any intangible assets
identified, acquired, is capitalised. Goodwill is not amortised but
is tested at least annually for impairment and carried at cost less
accumulated impairment provisions.
Goodwill is allocated to cash generating units for the purpose
of impairment testing. If the recoverable amount of the cash
generating unit is less than the carrying amount of the unit, then
any goodwill is considered to be impaired. Impairment losses
recognised for goodwill are not reversed in subsequent periods.
The recoverable amounts of cash generating units are determined
from value in use calculations. The group prepares cash flow
forecasts from the most recent financial budgets approved by
management. The cash flows are discounted at an appropriate
interest rate, based on the likely cost of loan capital, to
determine value in use.
Other intangible assets include intellectual properties and
those intangibles identified in assessing the fair value of assets
acquired in a business combination, including customer lists.
Intellectual properties, including computer software licences,
training courses, websites and trademarks are capitalised at cost
and are amortised on a straight-line basis over their estimated
useful economic lives of between two and four years.
Identified, acquired intangibles, other than customer
relationships, are amortised on a straight-line basis over their
estimated useful economic lives, not exceeding ten years. Customer
lists are amortised on a discounted cash flow basis over ten
years.
(h) Investment
A trade investment is an entity over which the group does not
have significant influence and that is neither a subsidiary, an
associate nor a joint venture. Such investments are initially
measured at fair value, to which transaction costs are added. Such
assets are financial assets and any gain or loss arising on
remeasurement is recognised in profit and loss.
(i) Property, plant & equipment and depreciation
Land and buildings held for use in the provision of services, or
for administrative purposes, are initially valued at cost,
including transaction costs. Subsequent to initial measurement land
and buildings are revalued regularly and held in the balance sheet
at the revalued amount, being the fair value at the date of
revaluation, less any subsequent accumulated depreciation. A gain
or loss arising from a change in fair value is included in taken to
a revaluation reserve in the period in which it arises.
Plant and equipment is valued at cost less accumulated
depreciation and less provisions for impairment. Depreciation is
provided at the following annual rates in order to write off each
asset, on a straight-line basis, over its estimated useful
life:
Buildings 3% per annum
Fixtures, fittings and equipment 16.67% to 50% per annum
Motor vehicles 20% per annum
The depreciation charge is time apportioned in the year of
acquisition and disposal of assets. Freehold land is not
depreciated.
(j) Product development
Product development is written off to the income statement as
incurred unless the directors are satisfied as to the technical,
commercial and financial viability of individual projects. In this
situation, the expenditure is deferred and amortised over the
period during which the company is expected to benefit.
(k) Foreign currency translation
The individual financial statements of each group company are
presented in the currency of the primary economic environment in
which it operates (its functional currency). For the purposes of
the consolidated financial statements, the results and financial
position of each group company are expressed in sterling, which is
the functional currency of the company, and the presentation
currency for the consolidated financial statements.
In preparing the financial statements of the individual
companies, transactions expressed in currencies other than the
entity's functional currency (foreign currencies) are translated at
rates of exchange approximating to those ruling at the date of the
transaction. At each balance sheet date, monetary assets and
liabilities that are denominated in foreign currencies are
retranslated at rates ruling at the balance sheet date. Non
monetary items that are measured in terms of historical cost in a
foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary
items, and on the retranslation of monetary items, are included in
the profit or loss before tax for the period.
In presenting the consolidated financial statements the assets
and liabilities of the overseas subsidiary are translated at the
rate ruling at the balance sheet date. The results of the overseas
subsidiary have been translated at the average exchange rate ruling
during the year. Differences arising on retranslation are added to
or deducted from the group's translation reserve
(I) Financial assets
Trade receivables, loans and other receivables that have fixed
or determinable payments that are not quoted in an active market
are classified as "Loans and receivables". These receivables are
initially recognised at fair value and subsequently measured at
their amortised cost using the effective interest rate method less
any provision for impairment.
Financial assets are assessed for indications of impairment at
each balance sheet date. Financial assets are impaired where there
is objective evidence that, as a result of one or more events that
occurred after the initial recognition of the financial asset, the
estimated future cash flows of the asset have been impacted. For
trade and other receivables the carrying amount is reduced by an
allowance reflecting the impairment. When a trade receivable is
uncollectible it is written off against the allowance, subsequent
recoveries of amounts previously written off are credited against
the allowance account. Changes in the carrying amount of the
allowance are reflected in the income statement.
Cash and cash equivalents comprise cash in hand and on demand
deposits, and other short-term highly liquid investments that are
readily convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
(m) Financial liabilities and equity
Financial liabilities and equity are classified according to the
substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in
the assets of the group after deducting all its liabilities. Equity
instruments are recorded at the proceeds received, net of direct
issue costs.
The component parts of compound instruments are classified
separately as financial liabilities and equity in accordance with
the substance of the transaction. At the date of issue the fair
value of the liability is estimated using the prevailing market
interest rate for a similar non-convertible instrument. This amount
is recorded as a liability on an amortised cost basis until
extinguished on conversion or upon the instrument reaching
maturity. The equity component is determined by deducting the
amount of the liability component from the fair value of the
compound instrument as a whole. This is recognised in equity
through other reserves and is not subsequently re-measured.
Other financial liabilities are initially measured at fair
value, net of transaction costs, and subsequently at amortised cost
using the effective interest method. Interest bearing bank loans
and overdrafts together with obligations under finance leases are
classified as "Borrowings".
(n) Net cash
Net cash is defined as the excess of cash and cash equivalents
over borrowings.
(o) Investments
Non-current investments representing investments in subsidiary
undertakings are valued at cost less any provision for impairment
in the value of the investment.
Held-for-sale investments that do not have a quoted market price
are held at fair value, where that can be reliably measured,
otherwise they are held at cost less any identified impairment
losses at the end of each reporting period.
(p) Dividends
Dividend payments are recognised as liabilities once they are
appropriately authorised and no longer at the discretion of the
company.
(q) Share based payments
The group issues equity-settled share based payments to certain
employees. Equity settled share based payments are measured at fair
value at the date of grant. The fair value determined at the grant
date is expensed on a straight line basis over the vesting period,
based on the group's estimate of options that will eventually vest.
Fair value is measured by use of the Black Scholes model. The
assumptions underlying the number of awards expected to vest are
subsequently adjusted to reflect conditions prevailing at the
balance sheet date. At the vesting date of an award, the cumulative
expense is adjusted to take account of the awards that actually
vest.
(r) Leased assets and obligations
An asset is acquired when substantially all the risks and
rewards are transferred and is capitalised as an asset under a
finance lease with the corresponding liability to the finance
company included in trade and other payables. Depreciation on
assets held under finance leases is provided in accordance with the
policy noted in (i) above. Finance lease payments are treated as
consisting of capital and interest elements and the interest is
charged to the income statement on a constant rate basis over the
period of the agreement. Finance charges are charged directly to
income. All other leases are operating leases.
Rentals receivable or payable under operating leases are
credited or charged to the income statement on a straight line
basis over the lease term.
(s) Adoption of new and revised standards
In the current financial year the group has adopted the
following improvements to IFRSs which were effective for this
financial period. These have had no material impact on the
financial statements of the Group:
-- IAS 19 'Employee benefits';
-- Annual improvements to IFRS 2011-2013 Cycle;
At the date of authorisation of these financial statements, the
following Standards and Interpretations, which have not yet been
applied in these financial statements, were in issue but not yet
effective:
-- IAS 1 'Disclosure initiative';
-- IAS 19 'Employee benefits';
-- IAS 16 and IAS 38 'Acceptable methods of depreciation and
amortisation'
-- Annual Improvements to IFRS 2010-2014.
The directors do not anticipate that they will have a material
impact on the financial statements.
2 Critical accounting judgements and key sources of estimation uncertainty
Estimates and judgements are evaluated on a continual basis and
are based on historical experience together with expectations of
future events believed to be reasonable at the time. In considering
the possible impairment of intangible assets and in recognising
deferred tax assets, estimates of future revenues are particularly
critical. The directors have prepared forecasts of revenues and
expenses covering the next two financial years to assist in the
making of estimates and judgements.
In the process of applying the group's accounting policies,
which are described in note 1, the directors have made the
following judgements that have the most significant effect on the
amounts recognised in the financial statements.
Estimation uncertainty - Intangible assets
The group depends on its intangible assets to generate revenue
and invests to develop and maintain those assets. New intangible
assets are recognised on the balance sheet and tested annually for
impairment, as described further in note 15. Estimates supporting
these impairment tests are based on future revenue projections and
discount rates and are inherently uncertain.
The group recognises acquired intangible assets acquired as part
of a business combination at fair value at the date of acquisition.
The determination of those fair values and the useful economic life
of those assets is based upon management's judgement and includes
assumptions on the timing of future cash flows to be generated by
those assets.
In addition management must assess the value of contingent
consideration that is due to the seller following the completion of
the initial purchase. The value of this is based upon the future
financial performance of the acquired business. Hence management
must assess the likely value of this performance to place a value
on this consideration. Actual post-completion performance may vary
from this estimate.
3 Revenue and segment analysis
The group recognises five streams of revenue (2015: four) each
of which is supported by the Crisis Response Management Centre
(CRM) in Cape Town. The Chief Operating Decision Maker which is
deemed to be the group board of directors, receives reports of
revenue and cost of sales by revenue stream but it is considered
neither desirable nor practical to allocate the administrative
overheads to those revenue streams.
The following tables provide details of revenue and gross profit
for each revenue stream:
Revenue Stream 31 March 2016
Travel Special Consultancy Investigations Product Consolidated
assistance Risks & response Safety
GBP GBP GBP GBP GBP GBP
Revenue 2,062,546 1,648,254 614,698 910,073 1,378,953 6,614,524
Gross profit 2,002,095 1,104,520 297,300 713,269 1,024,139 5,141,323
Administrative expenses (4,135,591)
Operating profit
before
exceptional items 1,005,732
Exceptional
items (379,193)
Operating profit 624,344
Finance income 15,497
Finance expense (17,692)
Profit before
tax 624,344
Tax charge (147,592)
Profit after
tax 476,752
Revenue Stream 31 March 2015
Travel Special Consultancy Product Consolidated
assistance Risks & response Safety
GBP GBP GBP GBP GBP
Revenue 2,192,504 1,595,008 1,143,468 1,016,266 5,947,246
Gross profit 2,116,679 1,197,888 363,008 682,193 4,359,768
Administrative costs (3,444,598)
Operating profit before
exceptional items 915,170
Exceptional items 162,304
Operating profit 1,077,204
Finance income 13,211
Finance expense (24,017)
Profit before tax 1,066,398
Tax charge (178,240)
Profit after tax 888,158
The group's operations are located in the United Kingdom, in
Singapore, South Africa and in the USA. The following tables
provide an analysis of the group's sales by location of customer,
irrespective of the origin of the services, and a geographical
analysis of the location of segment assets and additions to
property, plant and equipment and intangible assets.
Geographic segment Segment Segment Segment Segment
Revenue Revenue assets assets liabilities liabilities
2016 2015 2016 2015 2016 2015
GBP GBP GBP GBP GBP GBP
United Kingdom 2,325,249 2,832,560 3,643,269 4,172,484 982,952 1,056,372
Rest of Europe 990,386 471,844 - - - -
South Africa 24,433 37,447 1,490,124 1,628,882 290,052 465,296
United States of
America 2,250,188 1,821,225 14,787 18,401 97,754 21,492
Rest of the World 1,024,268 784,170 869,420 - 116,687 -
6,614,524 5,947,246 6,017,500 5,819,767 1,487,445 1,543,160
The following tables provide details of capital expenditure and
amortisation by geographic segment:
Intangible assets
Geographic segment Capital Capital
expenditure expenditure Amortisation Amortisation
2016 2015 2016 2015
GBP GBP GBP GBP
United Kingdom 81,867 217,020 92,033 55,878
South Africa 8,143 - 8,300 8,226
Singapore 414,955 - 51,097 -
504,965 217,020 151,430 64,104
Property, plant
& equipment
Geographic segment Capital Capital
expenditure expenditure Amortisation Amortisation
2016 2015 2016 2015
GBP GBP GBP GBP
United Kingdom 54,160 4,836 2,897 5,216
South Africa 35,605 41,181 46,553 27,994
Singapore 16,129 - 7,916 -
United States 545 - 87 1,545
106,439 46,017 57,453 34,755
No (2015: Two) customer accounted for more than 10% of group
revenue. In 2015 a distributor accounted for 14.0% and the client
for whom we carried out a major response also accounted for 14.0%
of group revenue.
4 Administrative expenses 2016 2015
GBP GBP
Staff costs 2,737,256 2,220,578
Other administrative costs 1,130,724 1,053,391
Amortisation of intangible assets 103,984 64,104
Depreciation of property, plant
and equipment 57,453 34,755
Operating lease rentals - land
and buildings 99,066 65,591
-
equipment 7,108 6,179
Total administrative expenses 4,135,591 3,444,598
Fees payable to the auditor for
the audit of the company and group
annual accounts 21,350 16,850
Audit of the company's subsidiaries
pursuant to legislation 16,650 18,150
Fees payable to the auditor and
their associates for other services:
Other services pursuant to legislation 2,300 1,800
Fees payable for the audit of
the South African subsidiaries 11,050 12,001
Fees payable to the auditor's
associates for other services 23,858 13,524
Fees payable to other auditors
of overseas subsidiaries 3,077 -
5 Exceptional items
Exceptional items are those which, in the management's
judgement, need to be disclosed separately by virtue of their size
or incidence in order for the reader to obtain a proper
understanding of the financial information.
Exceptional 2016 2015
charges/(credits) GBP GBP
Foreign currency movements 167,170 (103,482)
Prior year refund of sales taxes - (58,552)
Surplus of assets acquired over
consideration paid (note 6) (5,851) -
Provision for vendor earnout on
acquisition 170,428 -
Amortisation of acquired intangibles 47,446 -
379,193 (162,034)
The impact of foreign currency movements on our results between
2015 and 2016 are sufficiently material that, in the opinion of the
directors, it is necessary to separately analyse these to enable a
proper understanding of the financial information to be
obtained.
6 Acquisitions
On 1 July 2015 the Company acquired the entire share capital of
RISQ Worldwide Holdings Pte. Ltd an investigations business based
in Singapore. The initial cash consideration was GBP259,425 (SGD
550,000) with further contingent consideration of up to GBP826,320
(SGD 1,600,000) payable depending on the profit before tax for the
three years to 30 June 2018. One of the contingent events is the
continued involvement of the vendor, as such IFRS3 - Business
Combinations requires the entire consideration to be treated as
remuneration. The directors' best estimate of the amount of
consideration likely to be payable for the year to 31 March 2016 is
GBP170,428 and this has been provided for and is included in
exceptional charges.
The amounts recognised in respect of the identifiable assets
acquired and liabilities assumed are set out below:
Fair value
GBP
Intangible assets 414,955
Property, plant and equipment 13,048
Deferred tax liability (9,914)
Trade and other receivables 213,894
Cash and cash equivalents 64,184
Trade and other payables (430,891)
Fair value acquired 265,276
Cash consideration paid 259,425
Surplus of assets acquired
over
consideration paid 5,851
Acquisition related costs of GBP19,127 have been expensed in the
current year.
7 Finance income 2016 2015
GBP GBP
Bank and other interest receivable 15,497 13,211
8 Finance costs 2016 2015
GBP GBP
Interest on bank loans and overdrafts 17,692 24,017
9 Employees 2016 2015
Number Number
(a) Average monthly number of
employees of the group, including
executive directors, during the
year:
Consultants and sales 7 6
Office and management 84 78
91 84
2016 2015
GBP GBP
(b) Staff
costs
including
executive
directors:
Wages and
salaries 2,484,897 2,002,207
Social
security
costs 120,808 124,729
Pension and medical benefits 131,551 84,602
Share based
payments - 9,040
Employee costs in administrative
expenses 2,737,256 2,220,578
Provision for earn out - exceptional
item (note 5) 170,428 -
2,907,684 2,220,578
10 Share based payments
The company has issued share options, none of which are subject
to performance conditions, to certain directors and employees. The
options cannot be exercised in the first three years following
their grant and, under normal circumstances, the options lapse if
an employee leaves the group.
On 2 March 2010, the company granted 500,000 options to
subscribe for ordinary shares of 1p each under the company's
executive share option scheme, exercisable at 8p per share; these
were exercised on 16 March 2016.
On 8 August 2012 the company granted 750,000 options to
subscribe for ordinary shares of 1p each under the company's
executive share option scheme, exercisable at 10.5p per share at
any time between 8 August 2015 and 8 August 2018.
At 31 March 2016 750,000 outstanding options are exercisable
(2015: 1,250,000) at a weighted average exercise price of 10.5p
(2015: 9.5p).
The total charge recognised in administration expenses in the
income statement from share based transactions, all equity-settled,
amounted to GBPNil (2015: GBP9,040).
The following movement took place in the year:
2010 2012
Series Series Total
At 1 April 2015 500,000 750,000 1,250,000
Exercised during the
year (500,000) - (500,000)
At 31 March 2016 - 750,000 750,000
The following movements took place in the previous year:
2010 2012
Series Series Total
At 1 April 2014 500,000 750,000 1,250,000
Exercised during the
year - - -
At 31 March 2015 500,000 750,000 1,250,000
11 Directors' emoluments
The total emoluments of the directors, who are considered to be
the key management personnel, were as follows:
2016 2015
GBP GBP
Salaries, fees and bonuses 335,580 324,051
Social security costs 41,918 32,562
Share based payments - 9,040
377,498 365,653
Bonus payments were made to the executive directors during the
year, and for the previous year, based on a percentage of annual
salary, as shown in the remuneration report. The executive
directors are members of the group death in service scheme. Other
than that, the directors received no benefits in kind during the
year or during the previous year, nor were any pension
contributions made on behalf of any director in either year.
Details of the highest paid director are shown in the remuneration
report and details of the directors' interests in share options are
given in the directors' report.
12 Taxation
(a) Analysis of income tax charge for the year
2016 2015
GBP GBP
Current tax
United Kingdom 124,129 58,409
- adjustments to prior periods (29,036) (789)
95,093 57,620
Overseas 51,840 97,482
146,933 155,102
Deferred tax:
United Kingdom (9,400) 35,360
Overseas 10,059 (12,222)
147,592 178,240
(b) Factors affecting the income
tax charge for the year
The charge for the year can be
reconciled to the profit per the 2016 2015
income statement as follows: GBP GBP
Profit before taxation 624,344 1,066,398
Profit on ordinary activities multiplied
by the standard rate of corporation
tax in the UK of 20% (2015: 21%) 124,869 223,944
Effects of:
Permanent differences 42,768 (15,057)
Temporary differences 13,422 3,043
Utilisation of tax losses not
previously recognised in deferred
tax (46,381) (54,308)
Tax losses not recognised in deferred
tax 30,580 -
Adjustments to prior periods (29,036) (789)
Difference in overseas tax rates 11,370 21,407
Income tax charge 147,592 178,240
(c) Factors affecting tax charge for future years
The company has capital losses for tax purposes at 31 March 2016
of GBP605,994 (2015: GBP605,994) available to carry forward against
future capital gains and excess management expenses of GBP643,245
(2015: GBP882,917), subject to acceptance by H M Revenue &
Customs.
The group and the company have potential deferred tax assets not
included in the financial statements as recovery is not
sufficiently certain, calculated at a corporation tax rate of 18%
(2015: 20%), as follows:
Group Company
2016 2015 2016 2015
GBP GBP GBP GBP
Tax losses carried forward:
Capital losses 109,079 121,199 109,079 121,199
Management expenses 78,416 138,500 78,416 138,500
Trading losses 27,522 - - -
Non-current asset temporary
differences - 1,042 - -
215,017 260,741 187,495 259,699
The potential deferred tax asset in respect of trading losses is
recoverable against future profits from the same trade.
13 Dividends per share 2016 2015
The following dividends per share
were paid by the group:
Interim dividend 0.25p 0.23p
The following dividends per share
are proposed by the group:
Final dividend 0.30p 0.27p
The interim dividend for 2016 was paid on 25 February 2016 at a
total cost of GBP119,708 (2015: paid on 24 February 2015 at a total
cost of GBP110,247).
The payment of the final dividend remains discretionary until
paid. The final proposed dividend for 2016 of 0.30p per share
(2015: 0.27p) was not recognised at the year end and will be paid
on 16 September 2016 subject to authorisation by shareholders at
the Annual General Meeting. The final dividend for 2015 was paid on
18 September 2015 at a total cost of GBP129,420.
14 Earnings per share 2016 2015
Attributable profit for the year
(GBP) 476,752 888,158
Weighted average number of ordinary
shares in issue for the purposes
of basic earnings per share 47,939,844 48,477,670
Effect of dilutive potential ordinary
shares on exercise of options 397,650 434,410
Weighted average number of ordinary
shares in issue for the purposes
of diluted earnings per share 48,337,494 48,912,080
Earnings per share
Basic earnings per share (pence) 1.00p 1.83p
Diluted earnings per share (pence) 0.99p 1.82p
Adjusted earnings per share
Attributable profit for the year
(GBP) 476,752 888,158
Exceptional items, net of tax 379,193 (162,034)
Adjusted attributable profit for
the year
from continuing operations (GBP) 855,945 726,124
Adjusted earnings per share
Basic earnings per share (pence) 1.79p 1.50p
Diluted earnings per share (pence) 1.77p 1.49p
15 Intangible assets
Intangibles
identified Other intangible
Goodwill on acquisition assets Total
Group GBP GBP GBP GBP
Cost
At 1 April 2014 137,556 - 249,809 387,365
Foreign currency adjustment - - (1,053) (1,053)
Additions - - 217,020 217,020
At 1 April 2015 137,556 - 465,776 603,332
On acquisition (note
6) - 414,955 - 414,955
Foreign currency adjustment - 38,973 (6,007) 32,966
Additions - - 90,010 90,010
Disposals - - (1,946) (1,946)
At 31 March 2016 137,556 453,928 547,833 1,139,317
Amortisation and impairment
At 1 April 2014 - - 107,259 107,259
Foreign currency adjustment - - (366) (366)
Amortisation charge
for the year - - 64,104 64,104
At 1 April 2015 - - 170,997 170,997
Foreign currency adjustment - - (3,208) (3,208)
Amortisation charge
for the year - 47,446 103,984 151,430
Disposals - - (1,946) (1,946)
At 31 March 2016 - 47,446 269,827 317,273
Carrying amount
At 31 March 2016 137,556 406,482 278,006 822,044
At 31 March 2015 137,556 - 294,779 432,335
At 1 April 2014 137,556 - 142,550 280,106
The carrying amount of goodwill had been allocated as follows:
special risks GBP137,566. Other intangible assets
arising on acquisition represent customer relationships,
operating licences, supply networks and systems.
The group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. Charges for amortisation and impairment of goodwill and
other intangible assets are included within administrative
expenses, except for amortisation of intangibles recognised on
acquisition, which is shown as an exceptional item.
The recoverable amounts of the cash generating units are
determined from value in use calculations. The group prepares cash
flow forecasts from the most recent financial budgets approved by
management. The cash flows are then discounted at an appropriate
interest rate to determine value in use.
The forecast cash flows for the next two years, taking forecast
revenues, based upon historical experience, and anticipated
expenditure are then discounted at a rate of ten percent per annum
to arrive at a recoverable amount for each cash generating unit.
This shows that each cash generating unit has a recoverable amount
in excess of the carrying value of goodwill and that no charge for
impairment in necessary.
The key assumptions are those regarding discount rate, growth
rates, expected sales and direct costs during the period. Growth
forecasts are based on the experience of the past three years. The
discount rate applied is based on the cost of loan capital.
Intellectual
Property Total
Company GBP GBP
Cost
At 1 April 2014 48,356 48,356
Additions 19,305 19,305
At 31 March 2015 67,661 67,661
Additions 2,570 2,570
At 31 March 2016 70,231 70,231
Amortisation and impairment
At 1 April 2014 26,588 26,588
Amortisation charge for the year 13,282 13,282
At 31 March 2015 39,870 39,870
Amortisation charge for the year 14,784 14,784
At 31 March 2016 54,654 54,654
Carrying amount
At 31 March 2016 15,577 15,577
At 31 March 2015 27,791 27,791
At 1 April 2014 21,768 21,768
At 31 March 2016 the group had capital commitments of GBP69,125
(2015: GBP20,008).
16 Property, plant & equipment
Group Other Fixtures,
Land and fixed fittings
buildings assets and equipment Total
GBP GBP GBP GBP
Cost
At 1 April 2014 633,219 3,425 226,220 862,864
Foreign currency adjustment (15,009) (81) (4,014) (19,104)
Additions - - 46,017 46,017
Revaluation 19,184 - - 19,184
Disposals - - (3,737) (3,737)
At 1 April 2015 637,394 3,344 264,486 905,224
Foreign currency adjustment (87,605) (459) (23,831) (111,895)
On acquisition of subsidiary - - 56,002 56,002
Additions - - 106,439 106,439
Revaluation 38,893 - - 38,893
Disposals - - (40,750) (40,750)
At 31 March 2016 588,682 2,885 362,346 953,913
Depreciation
At 1 April 2014 - 2,713 116,782 119,495
Foreign currency adjustment - (64) (1,646) (1,710)
Charge for the year - 334 34,421 34,755
Disposals - - (3,486) (3,486)
At 1 April 2015 - 2,983 146,071 149,054
Foreign currency adjustment - (410) (9,758) (10,168)
On acquisition of subsidiary - - 42,954 42,954
Charge for the year 14,717 288 42,449 57,454
Revaluation (14,717) - - (14,717)
Disposals - - (40,750) (40,750)
At 31 March 2016 - 2,862 180,966 183,826
Carrying amount
At 31 March 2016 588,682 24 181,380 770,087
At 31 March 2015 637,394 361 118,415 756,170
At 1 April 2014 633,219 712 109,438 743,369
The depreciation has been charged to administrative
expenses.
The group's freehold property was valued on 21 January 2016 by
Pears Property Group, Cape Town, independent valuers, at Rand
11,436,000 compared to its historic cost of R 11,135,165.
17 Investment in group companies Company
Investments in subsidiary companies: GBP
Cost
At 1 April 2014 and 31 March 2015 1,927,338
Additions 264,413
At 31 March 2016 1,927,338
Impairment provisions
At 1 April 2014 and 31 March 2015 and
31 March 2016 1,519,004
Net book amount
At 31 March 2016 672,747
At 1 April 2014 and 31 March 2015 408,334
The subsidiary companies at 31 March 2016 and their activities
during the year were:
Country % of
Held directly: of incorporation ordinary Activity
share
capital
held
red24 Operations UK 100% Crisis management
Limited services
red24 CRM (Pty) South 100% Crisis management
Limited Africa services
red24 Sales Limited UK 100% Dormant
red24 Inc USA 100% Crisis management
services
Red24 Asia Pacific Singapore 100% Holding company
Pte. Ltd
RISQ Worldwide Singapore 100% Investigations
Pte. Ltd
RISQ Worldwide Hong Kong 100% Investigations
HK Limited
Green 24 Limited UK 100% Environmental
assistance
Silvermine Properties South 100% Property ownership
(Pty) Limited Africa
The red24 Employees' Jersey 100% Employee equity
Share Trust participation
The company's investment in red24 CRM (Pty) Limited includes
R1,300,000 5% convertible redeemable cumulative preference shares
of R1 each. The company has waived its right to the dividend due on
these shares up to 31 March 2016. For the year to 31 March 2016
this would have amounted to R65,000 (GBP3,175).
Each year the company reviews the carrying value of the
investment in each subsidiary against the amount estimated to be
recoverable from that subsidiary, if recovery is not reasonably
foreseeable then the investment is considered impaired and a charge
made.
18 Available-for-sale financial assets
Linx International Limited ("Linx"), a company incorporated in
England & Wales, was the company's sole trade investment. Linx
offers security consulting services and also acts as the holding
company of a group that provides security management training, both
in the United Kingdom and overseas. At 31 March 2014 the group held
a 25% stake in the equity of Linx and that stake was held directly
by the parent company. On 12 August 2014 the company agreed to sell
down its holding in Linx in three equal instalments at a fixed
price of GBP125,000 per instalment. At the 31 March 2016 the group
holds 8.33% of the equity in Linx but is contracted to sell it on
12 August 2016. The directors expects this to happen on or before
the due date and the investment is considered as held for sale.
The movements on the investment in the consolidated financial
statements is shown below:
GBP
Fair value at date of acquisition 372,000
At 31 March 2014 372,000
Sold during the year (122,000)
At 31 March 2015 250,000
Sold during the year (125,000)
At 31 March 2016 125,000
19 Deferred tax
The deferred tax assets and liabilities represent the
following:
Group Company
Tax losses Tax losses
carried Temporary carried
Total forward differences forward
GBP GBP GBP GBP
At 1 April 2014 30,898 35,800 (4,902) 35,800
Foreign currency
adjustment 6 - 6 -
Income statement
(charge)/credit (23,138) 2,300 (25,438) 2,300
At 1 April 2015 7,766 38,100 (30,334) 38,100
Liability acquired
(note 6) (9,914) 60,425 (70,339) -
Foreign currency
adjustment (2,456) 4,639 (7,095) -
Income statement
(charge)/credit (659) (10,019) 9,360 3,400
At 31 March 2016 (5,263) 93,145 (98,408) 41,500
Assets 51,806 41,500 10,306 41,500
Liabilities (57,069) 51,645 (108,714) -
(5,263) 93,145 (98,408) 41,500
The deferred tax assets recognised in respect of tax losses
carried forward represent GBP41,500
(2015: GBP38,100) relating to UK companies and GBP51,645
relating to overseas companies. Tax losses, which may be carried
forward indefinitely, are recoverable against future profits from
the
same trade and in the country in which they were incurred.
20 Trade and other receivables
Group Company
2016 2015 2016 2015
Current assets: GBP GBP GBP GBP
Trade receivables (i) 910,207 716,554 - -
Provisions for impairment
(ii) (8,262) (44,115) - -
901,945 672,439 - -
Due from subsidiary
undertakings (iii) - - 185,169 166,851
Other
receivables 111,050 36,738 9,949 10,010
Prepayments and accrued
income 404,983 196,324 37,270 36,038
1,417,978 905,501 232,388 212,899
Non-current assets:
Due from subsidiary
undertakings (iii) - - 868,386 557,414
Provisions for impairment
(ii) - - - (20,000)
Net amount due from
subsidiary undertakings
(iii) - - 868,386 537,414
Other receivables - 6,490 - -
- 6,490 868,386 537,414
(i) The average credit period on sales of services is 50 days
(2015: 43 days). Trade receivables over 60 days at the balance
sheet date are provided for on estimated irrecoverable amounts. The
carrying value of trade and other receivables is considered to be
the same as their fair value.
Included in trade receivables are receivables with a carrying
amount of GBP630,854 (2015: GBP339,560) that are designated in
foreign currencies, of which GBP347,633 (2015: GBP253,569) are
designated in US dollars and GBP283,221 (2015: GBP85,991) in other
currencies.
Included in the group's trade receivables are debtors with a
carrying amount of GBP169,207 (2015: GBP127,192) which are overdue
at the balance sheet date for which the group has not provided as
there has not been a significant change in credit quality and the
group believes that these amounts are still recoverable. The group
does not hold any collateral over these balances. The ageing of
amounts past due but not impaired is as follows:
2016 2015
GBP GBP
60-90 days 118,099 88,756
90-120 days - 6,337
120+ days 11,088 -
129,187 95,093
At the balance sheet date only one customer who owed GBP202,000
(2015: GBP112,000) accounted for more than 10% of the balance due
to the group in trade and other receivables.
(ii) Movement in the allowances against trade and other receivables:
Group Company
Trade receivables Due from subsidiary
undertakings
2016 2015 2016 2015
GBP GBP GBP GBP
Balance at 1 April 44,115 28,953 20,000 60,000
(Decrease)/increase
in provision (35,853) 15,162 - -
Release of provision
to income statement - - (20,000) (40,000)
Balance at 31 March 8,262 44,115 - 20,000
(iii) With the exception of the loan made to Silvermine
Properties (Pty) Ltd to purchase the property the amounts due from
subsidiary companies are unsecured and interest to 31 March 2016
has been waived. There are no fixed terms for repayment. GBP274,271
(2015: GBP236,914) was due to the company from Silvermine
Properties (Pty) Ltd and this loan is denominated in Rand and bears
interest at 10.5% per annum.
21 Cash and cash equivalents
Group Company
2016 2015 2016 2015
GBP GBP GBP GBP
Cash and cash equivalents 2,830,585 3,417,956 1,086,458 1,359,576
Cash and cash equivalents comprise cash held in short-term bank
deposits with a maturity of three months or less. The carrying
amount of these assets approximated to their fair value.
Repatriation of funds to the UK is subject to South African
exchange control legislation; at 31 March 2016 GBP612,872 (2015:
GBP686,209) was held with banks in South Africa.
22 Trade and other payables due within one year
Group Company
2016 2015 2016 2015
GBP GBP GBP GBP
Trade
payables 118,149 193,140 39,636 42,846
Due to subsidiary
companies - - 243,908 385,813
Other taxation and
social security 75,728 116,805 13,359 10,825
Accruals and deferred
income 975,278 870,540 245,053 99,400
1,169,155 1,180,485 541,956 538,884
The average credit period taken on purchases of services is 15
days (2015: 26 days). The carrying value of trade and other
payables is considered to be the same as their fair value.
Included in group trade payables are payables with a carrying
amount of GBP45,427 (2015: GBP80,826) that are designated in
foreign currencies, of which GBP30,944 (2015: GBP72,747) are
designated in US dollars and GBP31,310 (2015: GBP8,079) in other
currencies.
23 Borrowings
Due within one year Group Company
2016 2015 2016 2015
GBP GBP GBP GBP
Bank
loan 14,492 17,406 - -
14,492 17,406 - -
Due after more than Group Company
one year
2016 2015 2016 2015
GBP GBP GBP GBP
Bank
loan 122,552 215,370 - -
122,552 215,370 - -
The carrying value of borrowings is considered to be the same as
their fair value.
The loan is secured by a fixed charge over the land and
buildings of Silvermine Properties (Pty) Limited. The loan is being
repaid by fixed instalments of R62,650 (GBP3,005) (2015: R62,650 -
GBP3,491) per calendar month; the fixed instalments are inclusive
of interest. The interest charged on the loan is 2.75% per annum
over the prime rate of Standard Bank of South Africa.
24 Share capital
Authorised
Number of shares Number GBP
Ordinary shares of
1p each
At 1 April 2014 and 31 March
2015 and 2016 75,000,000 750,000
issued & Fully paid
Number of shares Number GBP
At 1 April 2014 and 31 March
2015 48,983,355 489,834
Issued during the year 500,000 5,000
At 31 March 2016 49,483,355 494,834
25 Other reserves
Group
Share
Revaluation Translation Own share option
reserve reserve reserve reserve Total
GBP GBP GBP GBP GBP
1 April 2014 - 3,297 - 54,100 57,397
Own shares purchased - - (121,586) - (121,586)
Share based payments - - - 9,040 9,040
Adjustments for
lapsed share
based payments - - - (21,170) (21,170)
Revaluation of property 19,184 - - - 19,184
Exchange difference
on translation of
overseas operations - (3,308) - - (3,308)
31 March 2015 19,184 (11) (121,586) 41,970 (60,443)
Own shares purchased - - (9,257) - (9,257)
Share options exercised - - - (14,850) (14,850)
Revaluation of property 53,610 - - - 53,610
Exchange difference
on translation of
overseas operations (2,742) (55,797) - - (58,529)
31 March 2016 70,052 (55,798) (130,843) 27,120 (89,469)
Company
Own share Share
reserve option
GBP reserve Total
GBP GBP
1 April 2014 - 54,100 54,100
Own shares purchased (121,586) - (121,586)
Share based payments - 9,040 9,040
Adjustments for lapsed based
payments - (21,170) (21,170)
1 April 2015 (121,586) 41,970 (79,616)
Own shares purchased (9,257) - (9,257)
Share options exercised - (14,850) (14,850)
31 March 2016 (130,843) 27,120 (103,723)
The revaluation reserves comprise the translation reserve and
the reserve arising from the adjustment to fair value of group
property. The translation reserve arises from currency differences
arising on the retranslation of foreign currency balances as
explained in accounting policy 1(k); there is no tax effect.
The share option reserve represents the cumulative amount
charged to the income statement in respect of the company's share
options as set out in note 8 and the own share reserve represents
the cost of shares acquired by the Employee Benefit Trust which
held 1,100,000 shares at 31 March 2016 (2015: 1,050,000).
The share premium reserve records the premium above the par
value of the shares paid on the issue of shares by the company,
less the costs of the issue of shares.
Retained earnings is the balance of profit retained by the group
and company and is the company's distributable reserve.
26 Notes to the cash flow statement
Cash generated from operating activities
Group Group Company Company
2016 2015 2016 2015
Operating activities GBP GBP GBP GBP
Profit before tax 624,344 1,066,398 423,255 423,835
Adjustments for:
Finance income (15,497) (13,211) (405,088) (201,619)
Finance costs 17,692 24,017 - -
Depreciation and amortisation 208,883 98,859 14,784 13,282
Share based payments - 9,040 - 9,040
Exchange losses/(gains) 19,241 14,160 - -
Income tax paid (115,089) (222,967) - -
(Increase)/decrease in receivables (319,885) 355,547 (353,861) (78,656)
(Decrease)/increase in payables (360,596) 310,653 3,072 275,758
Cash generated from/(consumed
by) operating activities 59,093 1,642,496 (317,838) 441,640
27 Operating lease commitments
At 31 March 2016 the group was committed to making minimum lease
payments under non-cancellable operating leases as follows:
Group
Office equipment Land and buildings
2016 2015 2016 2015
GBP GBP GBP GBP
Within one year 1,580 1,148 168,698 34,918
Between one and two
years - 1,148 180,685 -
Between two and five
years - - 338,100 -
1,580 2,296 687,483 34,918
Operating leases represent rental payments payable by the group
for its UK office property and items of office equipment. The
average contractual life of these leases is three years. One
property lease extends to March 2026, with a rent review in March
2021, otherwise the rents are fixed.
28 Related party transactions
Since 1 January 2005, the company has paid Sidebell Limited
amounts for the use of Sidebell's offices and the use of
accountancy services. S A Richards, a director of the company, has
a minority interest in the share capital of Sidebell Limited. In
the year to 31 March 2016, these amounts were GBP2,000 per month,
totalling GBP24,000 (2015: GBP24,000). The balance due to Sidebell
Limited at 31 March 2016 was GBPNil (2015: GBPNil).
The directors' report sets out the interests of the directors in
the share capital of the company; the director's received the same
dividends per share as other shareholders. In addition all the
directors hold share options under the group's share option scheme
and these are also disclosed in that report.
Refer to the remuneration report, and note 9, for further
details of the remuneration of key management who are also the
directors of the company.
During the year the company entered into the following
transactions with its subsidiaries:
2016 2015
GBP GBP
Management charges receivable 780,000 852,000
Dividends receivable 380,000 180,000
Licence fee receivable 120,000 120,000
Amounts owed by subsidiaries at
year end 868,386 557,414
Amounts owed to subsidiaries at
year end 243,908 385,813
The management charges reflect a charge to partly recover the
time of the group directors and the cost of central services such
as administrative offices, the conduct of the audit and the
maintenance of professional insurances.
As shown in note 20, impairment provisions totalling GBPNil
(2015: GBP20,000) have been made against the amounts shown as due
from subsidiaries in the table above.
29 Financial instruments and risk summary
(a) Financial risk policies and objectives
The group's financial instruments comprise cash and cash
equivalents, trade and other receivables, trade and other payables,
and loans. Details of the significant accounting policies in
relation to these financial assets and liabilities are disclosed in
note 1 to the financial statements.
All financial assets are categorised as loans and receivables as
follows:
Group Company
Non-current financial 2016 2015 2016 2015
assets: GBP GBP GBP GBP
Trade and other receivables - 6,490 868,386 537,414
- 6,490 868,386 537,414
Current financial
assets:
Trade and other receivables 1,012,995 709,177 195,118 176,861
Cash and cash equivalents 2,830,585 3,417,956 1,086,458 1,359,576
3,843,580 4,127,133 1,281,576 1,536,437
Total 3,843,580 4,133,623 2,149,962 2,073,851
All financial liabilities are categorised at amortised cost as
follows:
Group Company
Current financial 2016 2015 2016 2015
liabilities: GBP GBP GBP GBP
Trade and other
payables 118,149 193,140 496,903 428,659
Accruals 465,324 350,948 - -
Bank loan 14,492 17,406 - -
597,965 561,494 496,903 428,659
Non-current financial
liabilities:
Bank loan 122,552 215,370 - -
Total 720,517 776,864 496,903 428,659
The Board's principal objective in managing its financial assets
and liabilities is to ensure that the operating units have
sufficient working capital for their day-to-day needs. Surplus cash
is maintained on call deposits with the clearing bankers to the
operating units, as the group is not yet sufficiently cash
generative to warrant a separate treasury function or take
advantage of greater returns that may be available from other
sources or maturities. The group does derive income in overseas
currencies, principally the US dollar, and does incur expenses in
overseas currencies, principally the staff costs of its overseas in
South Africa, Singapore and the United States.
At 31 March 2016 the group had no forward currency commitments.
At the previous year end the group had purchased R5 million forward
for sterling at a rate of R17.90:GBP1 and R5 million forward for
dollars at a rate of R11.36: $1 exercisable at any time between 1
April 2015 and 30 September 2015; the fair value of the financial
liability is immaterial to the financial statements.
(b) Capital risk management
The directors consider the company's capital comprises its share
capital and reserves and bank and other loans. In general the group
finances its operations from equity share issues and from the
retention of profits. To ensure that equity markets remain open to
the group as a source of capital, the market price of the group's
shares is regularly reviewed by the Board, to check it remains
above par value. The group's investment in South Africa includes
the property there; this purchase was financed through a
combination of retained earnings and locally sourced bank finance
to act as a hedge against country and currency risk. The
acquisition of RISQ is dependent on an earn out denominated in
Singapore dollars and this represents a currency risk.
(c) Foreign currency risk and sensitivity
The group has six overseas subsidiaries whose functional
currencies are not sterling and which do not generate sufficient
local currency revenue to cover their operating costs, which are
predominantly in their functional currency. In addition the group
undertakes sale and purchase transactions denominated in foreign
currencies, principally US dollars and euros, hence exposures to
exchange rate fluctuations arise. The carrying amount of the
group's foreign currency denominated financial assets and financial
liabilities at the reporting date is as follows:
Assets Liabilities
2016 2015 2016 2015
GBP GBP GBP GBP
Rand 433,768 545,554 233,167 236,644
Dollar 922,817 881,291 30,944 72,747
Other currencies 487,203 91,004 30,919 6,621
1,843,788 1,517,849 295,030 316,012
The company's only exposure to foreign currencies is the
intercompany loan to Silvermine Properties of GBP274,271 (2015:
GBP236,914) which is denominated in Rand. All other transactions
are in sterling; though the earn-out consideration on the
acquisition of RISQ, which is a contingent liability is denominated
in Singapore dollars.
The group's exposure to the Rand is such that were the Rand to
appreciate by 10% against sterling the cost of its operations in
South Africa would rise by GBP149,566 (2015: GBP147,905), this
would be mitigated by a rise in the value in the group's Rand
assets, principally the office building, of GBP99,385 (2015:
GBP115,613).
The Singapore dollar is RISQ's functional currency and the
majority of its revenues are denominated in US dollars; were the
Singapore dollar to appreciate by 10% against the US dollar then
the cost of the operation there would rise by GBP106,957.
The group's exposure to the euro arises from sales to and
purchases from Eurozone countries and is such that were the euro to
depreciate by 10% against sterling profit would be reduced by
GBP65,234 (2015: GBP70,308).
The group's exposure to the US dollar arises both from dollar
denominated sales and purchases and from the operating expenses of
the US subsidiary. Such that were the dollar to depreciate by 10%
against sterling gross profit would be reduced by GBP178,183 (2015:
GBP80,314) but this would be mitigated by a reduction in operating
costs of GBP49,969 (2015: GBP24,681).
The Board are aware that these are significant risks and the
impact of currency movements on earnings cannot be reliably
forecast and remains an area of uncertainty.
(d) Market risk
The group's activities expose it to the financial risks of
changes in foreign currency exchange rates (see section (c)) and
interest rates (see section (g)). As explained above, the group
has, for the present, accepted exposure to these risks.
(e) Liquidity risk
Ultimate responsibility for liquidity risk management rests with
the board of directors, which regularly reviews the short, medium
and long term funding and liquidity requirements. As a general
principle the board consider that equity remains the most
appropriate source of funds for the business and endeavours to
maintain access to equity capital markets to fund medium and long
term liquidity requirements. However, where significant overseas
investments are contemplated an evaluation of currency, country and
other risk factors are taken into account and opportunities to
finance a proportion of that investment locally will be considered.
Financial assets are maintained on short term deposit to assist
with the management of day-to-day working capital requirements.
(f) Fair value of financial instruments
There is no material difference between the fair value and
carrying value of financial assets and liabilities.
(g) Interest rate risk
The group has financial assets of GBP3,843,580 at 31 March 2016
(2015: GBP4,113,623) comprising cash deposits and trade and other
receivables. Trade and other non-interest bearing receivables have
been excluded from the following tables as they are non-interest
bearing.
The interest rate profile of the group's financial assets,
excluding trade and other receivables was:
Floating Floating
rate deposits Average rate deposits Average
2016 rate 2015 rate
Group GBP 2016 GBP 2015
Currency
Sterling 1,792,134 0.1% 2,294,485 0.1%
Rand 307,880 6% 491,826 6%
United States Dollar 539,912 0% 614,145 0%
Euro 119,391 0% 17,500 0%
Singapore Dollar 71,268 0% - -
2,830,585 3,417,956
Company
Sterling 1,086,458 0.1% 1,359,576 0.1%
Rand 274,271 10.5% 236,914 9%
1,360,729 1,596,490
The group has financial liabilities of GBP720,517 (2015:
GBP776,864).
The interest rate profile of the group's financial liabilities,
excluding trade and other payables, at 31 March 2016 was:
Average
Floating Fixed rate Total financial rate of
rate liabilities liabilities liabilities floating
Group GBP GBP GBP rate liabilities
Currency
Rand bank loan 137,044 - 137,044 10.5%
The interest rate profile of the group's financial liabilities,
excluding trade and other payables, at 31 March 2015 was:
Average
Floating Fixed rate Total financial rate of
rate liabilities liabilities liabilities floating
Group GBP GBP GBP rate liabilities
Currency
Rand bank loan 232,776 - 232,776 9.0%
The following table details the remaining contractual maturity
for the group's financial liabilities. The table is based on the
earliest date on which the group can be required to pay. The table
includes both principal cash flows and interest, or an estimate of
interest for floating rate instruments and excludes trade and other
payables as the contractual maturities are all due within one year
of the balance sheet date.
Due in Due in Due in
Due within one to two to over five
Group one year two years five years years Total
2016 GBP GBP GBP GBP GBP
Floating rate
bank loan 28,197 28,197 84,593 51,696 192,683
- Average
rate 10.5%
28,197 28,197 84,593 51,696 192,683
2015 GBP GBP GBP GBP GBP
Floating rate
bank loan 41,902 41,902 125,706 118,723 328,233
- Average
rate 9.0%
41,902 41,902 125,706 23,266 328,233
(h) Credit risk
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
group. The group has a credit policy of only dealing with
creditworthy counterparties as a means of mitigating this risk. The
group's exposure to credit risk is monitored on a monthly basis and
remedial action taken where appropriate.
The group endeavour to ensure a spread of customers to avoid the
risks associated with concentration of credit. At the balance sheet
date one customer accounted for 22.2 % (2015: 15.6%) of the group's
trade and other receivables, no other customer accounted for more
than 10%. These receivables are within their trading terms but
nonetheless present an ongoing risk. The group is endeavouring to
mitigate this risk by gaining new customers at a faster rate than
business with these two counterparties develops.
The group's maximum exposure to credit risk on its financial
assets is GBP3,843,580, (2015: GBP4,133,623). For the company its
maximum exposure, excluding amounts due from subsidiaries, is
GBP1,096,407 (2015: GBP1,369,586). The group does not hold any
collateral against these financial assets.
30 Contingent liabilities
As explained more fully in note 6, the group and the company has
a contingent liability in respect of the deferred consideration
payable following the acquisition of RISQ Worldwide Holdings Pte.
Ltd. The amount payable is dependent on performance of that
business but could amount to a maximum of SGD1,600,000 (GBP826,300)
and relates to the three years to 30 June 2018.
The company has a contingent liability in respect of the value
added tax of certain subsidiary companies under a group
registration and is therefore jointly and severally liable for all
the other group companies' debt in this respect. At 31 March 2016
the maximum potential liability was GBP29,515 (2015:
GBP90,871).
DIRECTORS
S A Richards, MA MSc FCA (Executive Chairman)
M S H Worsley-Tonks MBE (Chief Executive Officer)
L Adlam (Non-Executive Director)
J M Brigg (Non-Executive Director)
J E A Mocatta, MA FCA (Non-Executive Director)
SECRETARY
J E A Mocatta, MA FCA
REGISTERED OFFICE: ADMINISTRATIVE OFFICE:
Third Floor The Coach House
Centenary House Bill Hill Park
69 Wellington Street Wokingham
Glasgow G2 6HG Berkshire RG40 5QT
NOMINATED ADVISER AND BANKERS:
BROKER:
finnCap Limited HSBC Bank plc
60 New Broad Street 26-28 Broad Street
London EC2M 1JJ Reading
Berkshire RG1 2BU
REGISTRARS: SOLICITORS:
Capita Registrars PXS Field Seymour Parkes LLP
34 The Registry 1 London St
Beckenham Reading RG1 4QW
Kent BR3 4TU
INDEPENDENT AUDITOR:
RSM UK Audit LLP
Chartered Accountants
25 Farringdon Street
London EC4A 4AB
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR AKODDABKDNAB
(END) Dow Jones Newswires
June 28, 2016 02:00 ET (06:00 GMT)
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