TIDMIDE
RNS Number : 8822S
IDE Group Holdings PLC
14 July 2020
IDE Group Holdings Plc
("IDE", the "Group" or the "Company")
Audited Results for the Year Ended 31 December 2019
IDE, the mid-market network, cloud and IT Managed Services
provider, announces its audited results for the year ended 31
December 2019.
The Annual Report and Accounts for the year ended 31 December
2019 will shortly be available on the Company's website at
www.idegroup.com.
Copies of the Annual Report and Accounts are being posted to
shareholders today.
Summary
-- Revenue of GBP28.2 million (2018: GBP41.1 million).
-- Gross profit margins increased to 22.8% (2018: 16.1%). Gross
profit margins before the impact of IFRS 16 are 22.1%.
-- Adjusted EBITDA** profit GBP1.1 million (2018: loss of GBP3.9
million). The adjusted EBITDA of GBP1.1 million has benefited by
GBP0.9 million due to the adoption of IFRS 16 with costs now taken
in depreciation and finance costs.
-- Additional funding raised of GBP11.5 million in the form of
six-year secured loan notes from existing shareholders.
-- No external debt other than with key shareholders.
-- Stable leadership and consistent senior management team in place.
-- Partnership channel delivering revenues from public sector.
-- Strong partnership and direct customer pipeline of opportunities.
** Adjusted EBITDA is defined as earnings before interest, tax,
depreciation, amortisation, impairment charges, exceptional items,
loss on disposal of fixed assets and share-based payments
IDE Group Holdings Plc Tel: +44 (0)344 874 1000
Andy Parker, Non-Executive Chairman
finnCap Limited Tel: +44 (0)20 7220 0500
Nominated Adviser and Broker
Corporate finance: Jonny Franklin-Adams/ Hannah Boros
ECM: Tim Redfern/ Richard Chambers
Chairman's Statement
2019: A year of strategic realignment
This year has been pivotal for the Group, and whilst we saw a
significant drop in revenues, we saw an increase in adjusted
EBITDA. This confirms that the cost reductions and rationalisation
of loss-making business has moved the Group to a better trading
position from which to now grow.
After a period of consolidation and reflection we have embarked
on a course for long term growth that will capitalise on our
strengths and develop propositions that meet client needs. We have
a strong story to tell about how outsourced managed and lifecycle
services can bring value to organisations. We are also seeing
increasing success when introducing clients to the breadth of our
services including datacentre, cloud, and connectivity.
The Board decided that it is time for a more clearly articulated
services offer and simplified business structure.
Our challenges in 2019
We had some major challenges to address during the year:
-- Securing renewals of key customers
-- Consolidating our data centre estate
-- Developing a new strategy for Connect
-- Rebuilding our partner and channel relationships
-- Exploiting new sales opportunities
What has gone well?
Against a backdrop of economic and political uncertainty, we
have secured some key customer renewals and won new clients
particularly in managed services.
We retained our profitable key direct customers to whom we
provide user support desk, managed services, on-site and field
engineering.
On-going projects delivered by our lifecycle fulfilment centre
were particularly strong and we have seen strong and consistent
improvements in that area, with our major customer for that service
renewing mid-year.
We began a comprehensive review of the Connect business during
the year to develop a new strategy for this division after recent
declines in revenue and complexities in its operations. I am
pleased to provide an update that a major consolidation of the
network and datacentres in which we operate is underway. This is a
significant project which will take time to conclude, but we are
confident that it will provide the foundations for profitable
growth of our datacentre, cloud, and connectivity business.
Our relationship with third party system integrators has both
been refreshed and reinvigorated, and we have seen an increase in
opportunities both in service provision and project work through
this channel particularly into the public sector; we are delivering
IT services into both a number of Central Government departments
and Blue Light clients.
We have ended the year with several long-term partnerships which
are providing us with new sales opportunities.
What has changed?
During 2018 a key focus was on reducing the Group's overheads,
headcount, and infrastructure footprint in order to provide a more
sustainable cost base, and stabilising the business following a
period of upheaval and uncertainty.
We did, unfortunately, see some customer losses during the year;
lifecycle services are bolstered by project work which was lower in
2019 than the prior year, and subsequent projects were delayed into
2020. In our Connect business the customer churn was at an
unacceptable level with some larger account losses in cloud
services; this in part resulted in the programme to consolidate the
datacentre estate and review our pricing strategy for Connect
services.
In 2019, whilst managing costs has remained a key driver, we
have focussed attention onto customers. We gave focus to individual
customer and project profitability, continued to provide excellent
service to existing customers as well as clearly articulating our
value propositions to win new business.
Securing and developing our partnership channels has proven to
be successful with several new customer wins in the public sector;
and we have seen a positive affirmation in direct business with key
account renewals.
COVID-19
The unprecedented and rapidly changing circumstances surrounding
the COVID-19 outbreak provide an uncertain economic landscape and
increased risk aversion in the financial markets. Whilst it is
difficult to predict accurately the potential long-term
consequences, we remain vigilant and, in common with all
businesses, are closely monitoring the situation, the wellbeing of
staff and the customers with whom they interact is our overriding
priority. We have instituted measures to ensure that our people can
work safely and, in most cases, remotely, ensuring the continuity
of the business. We have rigorously stress tested our financial
forecasts for a range of potential outcomes associated with
COVID-19 and we are confident that the Group is well positioned to
withstand any negative impact. To date there has been no material
effect on the business.
Results
Revenue fell by 32% across the Group to GBP28.2 million for the
full year (2018: GBP41.1 million), but significantly we have
improved gross profit margins to 23%, which before the impact of
IFRS 16 are 22% (2018: 16%), and the resulting gross profit has
remained flat year-on-year at GBP6.4 million (2018: GBP6.6
million).
The significant work undertaken to reduce the Group costs
underpins the improvement in gross margins, and allied to a
reduction in overheads (excluding non-underlying costs, impairment,
amortisation and depreciation) by some 50% to GBP5.3 million (2018:
GBP10.0 million) has resulted in the adjusted EBITDA moving from
loss to profit of GBP1.1 million (2018: loss of GBP3.9
million).
The net loss for the year from continuing operations is GBP8.5
million (2018: loss GBP29.5 million), a GBP3 million impairment
charge against goodwill and acquired intangible assets (2018:
GBP17.5 million).
The Group continues to improve its cash generation and has
maintained strong working capital management, this along with the
additional loan notes resulted in Group paying off its third-party
bank debt and finance lease commitments.
Profitability of divisions
Manage
Manage encompasses our service lines broadly covering field and
site engineering, projects and lifecycle, network monitoring and
service desk support.
2019 saw revenues fall to GBP14.7 million (2018: GBP27.2
million), this was mostly down to novation of some GBP3.4 million
of contracts over to Connect, GBP4.9 million of lower project and
lifecycle services, and a further GBP3.7 million reduction in
engineering and managed services; however, we have seen an
improvement in gross profit margins to 31% (2018: 21%) and a
reduction in overheads by over 50%. The sum of these moved adjusted
EBITDA from a loss in the prior year to a profit in 2019 of GBP1.1
million (2018: loss of GBP3.1 million). The adjusted EBITDA of
GBP1.1 million has benefited by GBP0.6 million due to the adoption
of IFRS 16 with costs now taken in depreciation and finance costs.
This encouraging improvement underpins that this division is
approaching the right-size, further consolidation of field
engineering is underway, and that profitable growth can be achieved
in 2020.
Connect
Connect business services are broadly networking and
connectivity, cloud and hosting, and voice/telephony.
Revenues in Connect were flat year-on-year at GBP14.6 million
(2018: GBP14.6 million); whilst we were disappointed to lose some
of our larger cloud customers but benefited from contracts novated
from Manage, and the net result was an improvement in gross margins
to 13% (2018: 5%). There has been an increase in overheads to
GBP4.5 million (2018: GBP3.3 million), including a GBP0.3 million
benefit of adopting IFRS 16 in 2019. An impairment charge against
intangible assets of GBP3.0 million (2018: GBP6.9 million) was
incurred following an annual impairment review which indicates that
Connect is still underperforming. The resulting adjusted EBITDA
improved to GBP0.7 million (2018: loss GBP0.4 million). The
adjusted EBITDA of GBP0.7 million has benefited by GBP0.3 million
due to the adoption of IFRS 16 with costs now taken in depreciation
and finance costs.
Our objectives in 2020 are to further reduce costs through the
datacentre and network consolidation and leverage these commercial
improvements into more competitive pricing to win new and extend
existing business opportunities.
People
The management team had made consistent progress in simplifying
the structure of the business and aligning services better to
support our clients.
The Group executed on further headcount reductions during the
year ending the period with 262 FTE (2018: 303 FTE).
The board would like to recognise and thank its employees who
have worked hard to deliver excellent client service and retain
existing key clients.
What will we keep doing?
We are improving our customer and partner relationships and that
has shown in our longer-term contracts and customer renewals in
2019. Our focus is on developing those relationships and the skills
and processes needed to manage accounts in a consistent and
productive way by placing account management and service delivery
at the heart of the business.
We will continue to generate revenue and cash but will also
ensure that our business quality improves in terms of client fit,
margin and sustainability.
What will we do better?
We have several priorities for the future, highlighted ones
being:
-- Improvements to our Governance in line with the Quoted
Companies Alliance Corporate Governance Code.
-- Complete our network and datacentre consolidation.
-- Land and expand contracts through our partnership channel.
-- Win more direct customers >GBP1m per annum contract value.
-- Develop and deliver our datacentre, cloud and connectivity offering.
-- Remove business and operational complexities thereby reducing overheads.
We are currently assessing the technology and market landscape
and will evaluate our options in 2020. However, at our heart, we
are a business that depends on our own talented people delivering
best-of-class technology solutions. We need to build a strong sales
force to support our group of knowledgeable experts.
Our strategy of a more integrated offering across service lines
requires some investment in training and skills to ensure that we
can deliver for our clients and our investors.
Strategy
Having been greatly encouraged by the opportunities identified
in the partnership channel & lifecycle businesses, and strong
direct customers the Board has outlined a strategy to provide
better alignment between our operating businesses, customer needs
and driving competitive advantage as we widen the client base to
which we offer the full portfolio of our services.
Additionally, changes to our internal operating model will
assure consistent quality in our relationship and account
management whilst maintaining our strength in financial
management.
Our aim is to drive further operating margin improvement and
deliver consistent growth in earnings in the medium and long-term.
This will be supported by forthcoming developments in marketing and
lead generation activities we plan to implement in 2020.
Financing and dividend
During the year, the Company issued GBP11.5 million of secured
loan notes the proceeds of which were used to repay the Group's
debt facilities with National Westminster Bank, meet its finance
lease obligations, and provide additional working capital.
Given the continued losses the Board is not proposing to declare
a dividend at this time but will keep this policy under review.
Current trading and outlook
Trading in the current financial year remains broadly in line
with management expectations, although the mix has changed due to
the current COVID-19 crisis. We have won and implemented additional
projects in the Managed division supporting mobile working across a
number of our clients, offset by the expected pipeline of projects
being deferred into the second half. The Board is confident in its
strategy and continues to enhance operational efficiency in our
core services and strengthen the senior management team in order to
deliver an improved trajectory through 2020 and beyond.
Financial Review
The Group reported total revenues for the year to 31 December
2019 of GBP28.2 million, down from GBP41.1 million in 2018 and
gross profit of GBP6.4 million (2018: GBP6.6 million). The gross
profit of GBP6.4 million has benefited by GBP0.2 million due to the
adoption of IFRS 16 with costs now taken in depreciation and
finance costs.
The Group uses Adjusted EBITDA which is a non-GAAP measure of
performance as it believes this more accurately reflects the
underlying performance of the business. This is one of the key
operational performance measures monitored by the Board. Adjusted
EBITDA is defined as earnings before interest, tax, depreciation,
amortisation, impairment charges, exceptional items, loss on
disposal of fixed assets and share-based payments.
The adjusted EBITDA for the year to 31 December 2019 was a
profit of GBP1.1 million (2018: loss GBP3.9 million). The adjusted
EBITDA of GBP1.1 million has benefited by GBP0.9 million due to the
adoption of IFRS 16.
A detailed review of the business is set out in the Chairman's
Statement and this Financial Review. Included in these reviews are
comments on the key performance indicators that are used by the
Board monthly to monitor and assess the performance of the
business. These indicators include the level of revenue, gross
profit, and Adjusted EBITDA together with net debt
Manage
There was a decrease in revenues to GBP14.7 million (2018:
GBP26.7 million), which is attributable to GBP3.4 million value of
contracts novated to Connect, GBP4.9 million of lower project and
lifecycle services, and a further GBP3.7 million reduction in
engineering and managed services suffered from the loss of customer
contracts or reduction in scope of services.
For the year we have seen an improvement in gross profit margins
to 31%, which before the benefit of IFRS 16 is 28% (2018: 21%) as a
result of the services mix and operational efficiencies, and a
reduction in overheads by over 50% to GBP7.1 million (2018: GBP15.5
million), which is the result of reduced headcount, costs moving to
Connect alongside novated contracts, and stringent cost saving
initiatives.
Adjusted EBITDA attributable to Manage has moved from a loss in
the prior year to a profit in 2019 of GBP1.1 million (2018: loss of
GBP3.1 million). The adjusted EBITDA of GBP1.1 million has
benefited by GBP0.6 million due to the adoption of IFRS 16.
Connect
Revenues in Connect are flat year-on-year at GBP14.6 million
(2018: GBP14.6 million). This net neutral position reflects
additional revenues from Manage contracts novated of GBP3.4 million
against customer losses of a similar value.
However, there was an improvement in gross margins to 13% (2018:
5%), owing to savings in infrastructure costs, and changes in the
customer and services mix.
There has been an increase in overheads to GBP4.5 million (2018:
GBP3.3 million), and an impairment charge against intangible assets
of GBP3.0 million (2018: GBP6.9 million) was incurred following an
annual impairment review. The overheads of GBP4.5 million have
benefited by GBP0.3 million due to the adoption of IFRS 16.
Adjusted EBITDA attributable to Connect has improved to GBP0.7
million (2018: loss GBP0.4 million). The adjusted EBITDA of GBP0.7
million has benefited by GBP0.34 million due to the adoption of
IFRS 16.
Non-underlying items amount to GBP0.6 million in the year (2018:
GBP2.4 million), these are predominantly redundancy costs.
After incurring net finance costs of GBP1.8 million (2018:
GBP0.4 million), the loss before tax is GBP10.9 million (2018: loss
of GBP30.5 million).
The utilisation of tax losses and a deferred tax credit arising
on the amortisation of intangible assets has resulted in a tax
credit for the year of GBP2.4 million (2018: GBP1.1 million)
The Group therefore reported a loss after tax from continuing
operations of GBP8.5 million (2018: loss of GBP29.5 million), which
equates to a basic loss per share of 2.12 pence (2018: loss per
share of 11.97 pence).
Statement of Financial Position
The Group has property, plant, and equipment of GBP9.7 million
(2018: GBP9.8 million) all of which are subject to depreciation as
per the policies set out in the accompanying financial statements.
During the year there were additions of GBP3.1million, GBP2.9m of
this is in relation to the IFRS16 transition (2018: additions
GBP0.6 million).
Further, intangible assets are GBP21.1 million (2018: GBP27.4
million) and are subject to amortisation as per the policies set
out in the financial statements.
Further, intangible assets of goodwill, trademarks, capitalised
technology and customer contracts are GBP21.1 million (2018:
GBP27.4 million) and are subject to amortisation as per the
policies set out in the accompanying financial statements. There
was a goodwill impairment charge of GBP3m in 2019 relating to the
recoverability against future cashflows from IDE Group Connect
(2018: GBP17.5 million).
Trade and other receivables reflect revenue reductions in
comparison to the previous year at GBP7.6 million (2018: GBP8.9
million) including trade receivables of GBP5.4 million (2018:
GBP6.4 million) after a credit loss provision of GBP0.6 million
(2018: GBP0.7 million). Whilst the overall improvement in trade
debtors can be attributed to the fall in year-on-year revenues,
there have been reductions resulting from improved customer
payments and an improvement in the aged profile resulting in lower
credit loss provisions.
Contract liabilities arising from customers invoiced in advance
of services delivered amounted to GBP1.9 million (2018: GBP3.0
million), which reflects the contract position at the year end.
Cashflow and net debt
Cash generated from operating activities during the year was
GBP0.4 million (2018 cash used GBP5.8 million). Losses for the year
saw a material improvement to GBP8.7 million loss (2018: loss of
GBP32.6 million ), and working capital reduced to GBP0.3 million
(2018: GBP3.2 million).The Group invested GBP0.2 million (2018:
GBP0.3 million) in fixed assets and net new financing amounted to
GBP3.47 million (2018: GBP4.2 million). The net result is that as
at 31 December 2019 there were no bank borrowings or overdraft debt
and the cash balance was GBP0.7 million (2018: overdraft of GBP2.9
million).
During the year the Company raised GBP11.45 million by way of an
issue of secured loan notes ("Loan Notes") in three tranches: one
in January 2019, the second in March 2019 and the third in December
2019. The Loan Notes have a term of 6 years and an annual coupon of
12% which is compounded and payable at the end of the term. The
proceeds of the issue of the Loan Notes were used to fully repay
the revolving credit facility of GBP4.75 million and overdraft of
GBP3.5 million provided by Natwest and provide additional working
capital for the Group.
With the issue of the Loan Notes, the Group now has no external
debt other than with its major shareholders and has longer-term
funding, thereby affording security for all the Group's
stakeholders.
Dividend
The Directors do not propose a dividend in respect of the
current financial year (2018: GBPnil).
Update and outlook for 2020
Following the cost reduction programme started in 2018, and a
renewed focus on customer retention and service delivery, in order
to drive increased profitability and cash generation; the Group
ended the year in a much stronger position than it started it, with
a strong and consistent leadership team, an appropriate cost base
and clear focus on operational execution and customer service.
The additional refinancing has provided long term funding and
means that the Company has no external debt, as the Loan Notes are
held solely by shareholders, and predominantly by the largest
shareholders.
Since the year end there has been an improvement in the pipeline
of opportunities across the business both with existing and new
customers and the Group has been trading at acceptable levels of
profitably in the year to date.
The COVID-19 outbreak has presented the Group with an unexpected
new set of challenges. On a macroeconomic level, it is too early to
predict the medium-term impact on global and regional economies.
The UK government has announced an unprecedented GBP100 billion+
fiscal benefits package to help cushion the impact on jobs and
public and private sector industries. Although, as yet, the
consequences of COVID-19 on the Group have been limited, it does
have the potential to impact the UK economy, although with the
easing of the COVID-19 lock down seen in early July the impact on
the Group has been temporary and limited; to date IT managed
services have remained buoyant during the UK-wide lock down, with
increased reliance on mobile working and the need to facilitate
customers' staff working remotely.
The Board remains confident of the Group's future prospects.
Going Concern
The Directors have taken advantage of the Government's Job
Retention Scheme to furlough some staff members during the COVID-19
lockdown period, as well as senior staff taking a short-term 20%
salary reduction, and also deferment of PAYE and VAT liabilities.
There has been increased demand for lifecycle services which
necessitated an increase in shifts and production, and this has
offset minor reductions in user support desk activities.
The Directors have prepared detailed cash flow projections;
these projections, considering reasonably possible changes in
trading performance and the timing of key strategic events,
including COVID-19, show the Group expects to operate within the
level and conditions of available funding. The directors note,
however, that although the cash flow projections show that the
group expects to have sufficient cash resources throughout the
forecast period, the levels of cash fluctuate and at times in the
forecast period are relatively low. The continuing Covid-19
pandemic creates added uncertainties for the Group. Any reasonably
possible deviation from the forecast cash inflows could result in
the Group requiring additional funding.
The directors have discussed the future cashflows with two of
the Group's major shareholders who are represented on the Board
and, furthermore, note the continued support of these shareholders,
as demonstrated by the refinancing during the year. In reaching
their conclusion on the going concern assumption, the directors
note and rely on the letter of support provided by MXC Capital
Limited, in which they undertake to continue to provide such
financial support needed for continued operations for a period not
less than one year from the date of approval of these financial
statements. The directors having made the necessary inquiries, have
satisfied themselves of MXC Capital's ability to provide such
finance if necessary.
After making enquiries and having regard to the FRC's Guidance
to Companies on COVID-19 issued in March 2020, the Directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, the Group continues to adopt the going concern basis
in preparing its consolidated financial statements.
Consolidated Income Statement
for the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP000 GBP000
Continuing operations
Revenue 28,161 41,137
Cost of sales (21,742) (34,521)
__________ __________
Gross profit 6,419 6,616
Administrative expenses
excluding impairment (12,450) (18,522)
Impairment gain/(loss) on
trade receivables (30) (725)
Impairment charge on goodwill
and intangibles (3,000) (17,528)
__________ __________
Total administrative expenses (15,480) (36,775)
Adjusted EBITDA* 1,143 (3,886)
Exceptional items (588) (2,368)
Depreciation (3,241) (2,848)
Amortisation (3,289) (3,290)
Impairment charge on goodwill
and intangibles (3,000) (17,528)
Loss on disposal of fixed
assets - (441)
Charges for share-based
payments (86) 202
------------------------------- -------------------------------------- --------------------------------------
Operating loss (9,061) (30,159)
Finance costs (1,827) (389)
__________ __________
Loss on ordinary activities
before taxation (10,888) (30,548)
Income tax 2,411 1,089
__________ __________
Loss for the year from
continuing
operations (8,477) (29,459)
Discontinued operations
(Loss) after tax for the
year from discontinued
operations (179) (3,165)
__________ __________
Loss for the year attributable
to owners of the parent
company (8,656) (32,624)
From continuing operations
Basic and diluted loss per
share (2.12)p (11.97)p
From discontinued operations
Basic and diluted loss per
share (0.04)p (1.29)p
_________ _________
Total basic and diluted
loss per share (2.16)p (13.29)p
_________ _________
* Adjusted EBITDA is defined as earnings before interest, tax,
depreciation, amortisation, impairment charge, exceptional items,
loss on disposal of fixed assets and share-based payments
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2019
Year ended Year ended
31 December 31 December
2019 2018
GBP000 GBP000
Loss for the year attributable
to the owners of the parent company (8,656) (32,624)
Items that are or may be reclassified
subsequently to the income statement
Foreign exchange translation
differences - (23)
______ ______
Total other comprehensive (loss)/
income - (23)
_________ _________
Total comprehensive loss for
the year attributable to the
owners of the parent company (8,656) (32,647)
Statements of Financial Position
As at 31 December 2019
Group Company
(Restated)**
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
Non-current assets
Property, plant and equipment 9,706 9,836 - -
Intangible assets 21,106 27,395 - -
Investments - - 7,877 7,877
Deferred tax asset 1,821 - - -
Trade and other receivables - - 18,940 26,782
32,633 37,231 26,817 34,659
Current assets
Trade and other receivables 7,621 8,893 29 46
Cash and cash equivalents 679 - 103 5,488
8,300 8,893 132 5,534
Total assets 40,933 46,124 26,949 40,193
Current liabilities
Trade and other payables 7,562 7,670 2,075 1,651
Contract liabilities 1,926 2,962 - -
Borrowings 1,766 7,800 - 4,681
Provisions 192 1,514 50 50
11,446 19,946 2,125 6,382
Non-current liabilities
Contract liabilities 6 13 - -
Borrowings 14,333 494 12,474 -
Convertible loan notes 1,803 1,654 1,803 1,654
Provisions 230 1,705 - -
Deferred tax liabilities 3,272 3,899 - -
19,644 7,765 14,277 1,654
Total liabilities 31,090 27,711 16,402 8,036
Net assets 9,843 18,413 10,547 32,157
Equity attributable to
equity holders of the parent
Share capital 10,020 10,020 10,020 10,020
Share premium 35,439 35,439 35,439 35,439
Equity reserve 967 967 967 967
Retained earnings (36,433) (27,863) (35,879) (14,269)
Foreign currency translation
reserve (150) (150) - -
Total equity 9,843 18,413 10,547 32,157
** Following the introduction of IFRS 9 with effect from 1
January 2018, the company was required to assess the expected
credit losses on intercompany receivables. Management has
discovered an error in the application of the standard in the year
ended 31 December 2018 which resulted in an overstatement of the
impairment provision made at 31 December 2018, and an
understatement of the impairment provision in the opening position
at 1 January 2018.
The error has been corrected by restating each of the affected
financial statement line items for the prior periods; details are
shown in note 2 below.
Statements of Changes in Equity
for the year ended 31 December 2019
Group Share Share Equity Retained Foreign currency Total
Capital Premium reserve Earnings translation equity
(a) (b) (c) (d) reserve (e)
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January
2018 5,018 35,439 - 4,963 (127) 45,293
Total comprehensive
loss for the year
Loss for the financial
year - - - (32,624) - (32,624)
Movement in foreign
currency translation - - - - (23) (23)
Transactions with owners
recorded
directly in equity
Share issues 5,002 - - - - 5,002
Share based payments - - - (202) - (202)
Convertible loan notes - - 967 - - 967
Balance at 31 December (27,863
2018 10,020 35,439 967 ) (150) 18,413
Total comprehensive
loss for the year
Loss for the financial
year - - - (8,656) - (8,656)
Movement in foreign - - - -
currency translation
Transactions with owners
recorded
directly in equity
Share based payments - - - 86 - 86
Balance at 31 December
2019 10,020 35,439 967 (36,433) (150) 9,843
(a) Share capital represents the nominal value of equity shares
(b) Share premium represents the excess over nominal value of
the fair value of consideration received for equity shares; net of
expenses of the share issue.
(c) The equity reserve consists of the equity component of
convertible loan notes that were issued as part of the fundraising
in August 2018 less the equity component of instruments converted
or settled.
The fair value of the equity component of convertible loan notes
issued is the residual value after deduction of the fair value of
the debt component of the instrument from the face value of the
loan note.
(d) Retained earnings represents retained profits and accumulated losses
(e) On consolidation, the balance sheets of the Group's foreign
subsidiaries are translated into sterling at the rates of exchange
ruling at the balance sheet date. Exchange gains or losses arising
from the consolidation of these foreign subsidiaries are recognised
in the foreign currency translation reserve.
Statements of Cash Flows
for the year ended 31 December 2019
Group
Restated***
2019 2018
GBP000 GBP000
Cash flows from operating activities
Loss before tax for the year:
Continuing operations (10,888) (30,548)
Discontinued operations (216) (3,292)
Total loss before tax (11,104) (33,840)
Adjustments for:
Depreciation 3,241 3,033
Amortisation 3,289 3,549
Impairment charge 3,000 21,505
Net finance expenses 1,827 390
Share based payments 86 (202)
Loss on disposal of fixed assets - 425
Loss/(profit) on disposal of subsidiary - (680)
339 (5,820)
Decrease in trade and other receivables 1,271 6,284
Decrease in inventory - 366
Decrease in trade and other payables
and contract liabilities (1,355) (11,320)
(Decrease)/increase in provisions (208) 1,485
Net cash generated from/(used in) operating
activities 47 (9,005)
Cash flows from investing activities
Proceeds from sale of subsidiary and
PACT business, net of overdraft repaid - 3,611
Acquisition of property, plant and equipment (177) (272)
Realisation/ (acquisition) of non-current
financial assets - 89
Proceeds from sale of fixed assets - 23
Net cash (used in)/generated from investing
activities (177) 3,451
Cash flows from financing activities
Interest paid (451) (320)
Share issue, net of expenses - 3,752
New loans and borrowings, net of expenses 11,520 3,800
Repayment of loans and borrowings (4,750) (2,750)
Repayment of lease liabilities (2,605) (335)
Net cash generated from financing activities 3,714 4,147
Net increase/(decrease) in cash and
cash equivalents 3,584 (1,407)
Cash and cash equivalents at 1 January (2,905) (1,498)
Cash and cash equivalents at 31 December 679 (2,905)
Cash and cash equivalents comprise
Cash at bank 679 -
Overdrafts - (2,905)
679 (2,905)
*** Restatement of 2018 Group cash flow statement. The
comparative figures for the Group cash flow statement have been
restated to start from the Group's loss before tax and show
discontinued activities separately, with the corresponding removal
of the tax charge from adjustments in arriving at cash from
operating activities, as follows:
2018
GBP000
Cash flows from operating activities as originally stated (32,624)
Add tax (1,216)
T otal loss before tax (33,840)
Notes to the Consolidated Financial Statements
1 Accounting policies
IDE Group Holdings plc ("IDE Group") is a company incorporated
in Scotland, domiciled in the United Kingdom and limited by shares
which are publicly traded on AIM, the market of that name operated
by the London Stock Exchange. The registered office is 24 Dublin
Street, Edinburgh EH1 3PP and the principal place of business is in
the United Kingdom.
The principal activity of the Group is the provision of network,
cloud and IT managed services.
1.1 Basis of preparation
The consolidated financial statements of IDE Group have been
prepared on the going concern basis and in accordance with EU
adopted International Financial Reporting Standards (IFRS), IFRS
Interpretations Committee (IFRS IC) and the Companies Act 2006
applicable to companies reporting under IFRS. The consolidated
financial statements have been prepared under the historical cost
convention.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of
applying the Group's accounting policies.
The financial information set out in this preliminary
announcement does not constitute the company's statutory financial
statements for the years ended 31 December 2019 or 2018.
The Directors have taken advantage of the Government's Job
Retention Scheme to furlough some staff members during the COVID-19
lockdown period, as well as senior staff taking a short-term 20%
salary reduction, and also deferment of PAYE and VAT liabilities.
There has been increased demand for lifecycle services which
necessitated an increase in shifts and production, and this has
offset minor reductions in user support desk activities.
The Directors have prepared detailed cash flow projections;
these projections, considering reasonably possible changes in
trading performance and the timing of key strategic events,
including COVID-19, show the Group expects to operate within the
level and conditions of available funding. The directors note,
however, that although the cash flow projections show that the
group expects to have sufficient cash resources throughout the
forecast period, the levels of cash fluctuate and at times in the
forecast period are relatively low. The continuing Covid-19
pandemic creates added uncertainties for the Group. Any reasonably
possible deviation from the forecast cash inflows could result in
the Group requiring additional funding.
The directors have discussed the future cashflows with two of
the Group's major shareholders who are represented on the Board
and, furthermore, note the continued support of these shareholders,
as demonstrated by the refinancing during the year. In reaching
their conclusion on the going concern assumption, the directors
note and rely on the letter of support provided by MXC Capital
Limited, in which they undertake to continue to provide such
financial support needed for continued operations for a period not
less than one year from the date of approval of these financial
statements. The directors having made the necessary inquiries, have
satisfied themselves of MXC Capital's ability to provide such
finance if necessary. After making enquiries and having regard to
the FRC's Guidance to Companies on COVID-19 issued in March 2020,
the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Group continues to adopt the
going concern basis in preparing its consolidated financial
statements. In the year ended 31 December 2019, the Group fully
repaid its banking facilities with National Westminster Bank plc
which consisted of a GBP4.75 million Revolving Credit Facility (the
total facility was GBP7.5 million; GBP2.75 million was repaid in
October 2018 with the proceeds of the disposal of 365 ITMS Limited)
and a GBP3.5 million overdraft facility. The facilities were repaid
with the proceeds of the issue of 6-year secured loan notes to
certain of the Company's shareholders.
Based on the above the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future.
1.2 Basis of consolidation
Subsidiaries are all entities (including structured entities)
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are fully
consolidated from the date on which control is transferred to the
Group. They are deconsolidated from the date that control
ceases.
The Group applies the acquisition method to account for business
combinations. The consideration transferred for the acquisition of
a subsidiary is the total of the fair values of the assets
transferred, the liabilities incurred to the former owners of the
acquiree and the equity interests issued by the Group. The
consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. The Group
recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised
amounts of the acquiree's identifiable net assets.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated on
consolidation. Accounting policies of subsidiaries have been
changed where necessary to ensure consistency with policies adopted
by the Group.
1.3 Revenue
Revenue is measured at the fair value of the consideration
received or receivable for the sale of goods and services in the
ordinary course of the Group's activities. Revenue is shown net of
Valued Added Tax, returns, rebates and discounts and after the
elimination of sales within the Group.
The Group recognises revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits
will flow to the entity and when specific criteria have been met
for each of the Group's activities as described below.
Recurring revenue
The largest portion of the Group's revenues relates to a number
of network, cloud and IT managed services, which the Group offers
to its customers. All of the revenue in this category is contracted
and includes a full range of support, maintenance, subscription and
service agreements. Revenue for these types of services is
recognised as the services are provided on the basis that the
customer simultaneously receives and consumes the benefits provided
by the Group's performance of the services over the contract term.
In terms of performance obligations, the customer can benefit from
each service on its own and the Group's promise to transfer the
service to the customer is separately identifiable from other
promises in the contract. The transaction price for each service is
allocated to each performance obligation. The costs incurred for
these revenue streams typically match the revenue pattern. A
contract liability is recognised when billing occurs ahead of
revenue recognition. A contract asset is recognised when the
revenue recognition criteria were met but in accordance with the
underlying contract, the sales invoice has not been issued yet.
Project revenue
These project services include mainly installation and
consultancy services. Performance obligations are met once the
hours or days have been worked. Revenue is therefore recognised
over time based on the hours or days worked at the agreed price per
hour or day. The costs incurred for this revenue stream generally
match the revenue pattern, as a significant portion of consultancy
costs relate to staff costs, which are recognised as incurred.
Consultancy services are generally provided on a time and material
basis.
1.4 Application of new IFRSs and interpretations
International Financial Reporting Standard (IFRS) 16
"Leases"
The Group implemented IFRS 16 Leases as of 1 January 2019,
adopting the modified retrospective approach. The new standard is
effective for periods beginning on or after 1 January 2019. IFRS 16
removes the operating and finance lease classification for lessees
in IAS 17 Leases and replaces them with the concept of right-of-use
assets and associated financial liabilities. This change results in
the recognition of a liability on the balance sheet for all leases
which convey a right to use the asset for the period of the
contract. The lease liability reflects the present value of the
future rental payments, discounted using either the effective
interest rate or the incremental borrowing rate of the Group. The
operating lease charges previously reflected within administrative
expenses (and EBITDA) have been eliminated and instead depreciation
and finance charges have been recognised in respect of the lease
assets and liabilities.
The effect of IFRS 16 for the current reporting period, based on
the operating leases in place and qualifying for recognition under
IFRS 16 has resulted in the recognition of additional lease assets
within property, plant and equipment at 31 December 2019 of GBP5.5
million and additional lease liabilities of GBP5.5 million in total
for the Group. Additional lease liabilities include GBP2.6m in
respect of contracts which were determined to be onerous in prior
periods. The related right of use assets were recognised at GBP2.6m
and the onerous leases provision brought forward was transferred to
the right of use asset impairment provision The depreciation charge
against the right of use asset in 2019 has been calculated to be
GBP0.7 million, with an interest charge of GBP0.3 million, which
compares to the previous IAS 17 treatment which would have been an
operating lease charge within operating expenses of GBP0.9 million,
resulting in an increase in Adjusted EBITDA reported in 2019 of
GBP0.9 million compared to the IAS 17 treatment.
The weighted average incremental borrowing rate applied to lease
liabilities recognised by the group at 1 January 2019 is 7.97%.
When adopting IFRS 16 from 1 January 2019, the consolidated
entity has applied the following practical expedients:
-- applying a single discount rate to the portfolio of leases
with reasonably similar characteristics;
-- excluding any initial direct costs from the measurement of right-of-use assets; and
-- using hindsight in determining the lease term when the
contract contains options to extend or terminate the lease.
-- The right-of-use-assets have not been assessed for impairment
at 1 January 2019 but have been reduced by the amount of any
onerous lease provisions at that date.
Impact of adoption
IFRS 16 was adopted using the modified retrospective approach
and as such the comparatives have not been restated. The impact of
adoption on opening retained profits as at 1 January 2019 was as
follows:
1 January
2019
GBP000
Operating lease commitments as at 1 January 2019 (IAS
17) 2,476
Adjustment to opening lease commitments in respect of
lease extension 1,345
Operating lease commitments discount based on the weighted
average incremental borrowing rate of 7.97% (IFRS 16) (887)
Onerous contract provision leases for network infrastructure
and properties now recognised as lease liabilities at
1 January 2019 2,590
---------
Right of use assets recognised on transition to IFRS 16
on 1 January 2019 5,524
Lease liabilities - current (IFRS 16) 2,924
Lease liabilities - non-current (IFRS 16) 2,600
---------
5,524
---------
There was no impact on retained earnings on transition.
The Company has no leases.
2 Restatement of Company results for the year ended 31 December 2018
Correction of error in assessing expected credit losses
Following the introduction of IFRS 9 with effect from 1 January
2018, the company was required to assess the expected credit losses
on intercompany receivables. Management has discovered an error in
the application of the standard in the year ended 31 December 2018
which resulted in an overstatement of the impairment provision made
at 31 December 2018, and an understatement of the impairment
provision in the opening position at 1 January 2018.
The error has been corrected by restating each of the affected
financial statement line items for the prior periods as
follows:
Balance sheet: 31 December 2018 2018 (increase)/ Transition to IFRS 9 31 December 2018
as originally stated decrease increase/(decrease) (restated)
GBP'000 GBP'000 GBP'000 GBP'000
Amounts due from
subsidiary
undertakings 56,338 - - 56,338
Provision against
amounts due from
subsidiary
undertakings (56,338) 2,470 24,312 (29,556)
Total amounts due from
subsidiary
undertakings - 2,470 24,312 26,782
====================== ================= ======================= ========================
Net assets 5,375 2,470 24,312 32,157
====================== ================= ======================= ========================
Retained earnings (41,051) 51,094 (24,312) (14,269)
---------------------- ----------------- ----------------------- ------------------------
Total equity 5,375 51,094 (24,312) 32,157
====================== ================= ======================= ========================
Loss for the year (57,390) 51,094 - (6,296)
====================== ================= ======================= ========================
Changes to cash flow statement:
31 December 31 December
2018 (Increase)/decrease 2018 (restated)
as originally GBP000 GBP'000
stated
GBP'000
Loss for year (57,390) 51,094 (6,296)
Adjustment for impairment
of intercompany loans - 5,245 5,245
Decrease/(increase) in trade
and other receivables 58,811 (57,460) 1,351
Amounts (advanced to)/repaid
by subsidiaries - 1,123 1,123
3 Exceptional costs
In accordance with the Group's policy in respect of exceptional
items, the following charges were incurred for the year in relation
to continuing operations:
2019 2018
GBP000 GBP000
Restructuring and reorganisation
costs 466 2,105
Trademark dispute - 263
Other exceptional costs 122 -
588 2,368
Restructuring and reorganisation costs in the year ended 31
December 2019 and the year ended 31 December 2018 relate to costs
incurred on the restructure of the Group, predominantly redundancy
costs. Trademark dispute costs in the year ended 31 December 2018
relate to the settlement and associated legal costs in relation to
the trademark dispute with Coreix Limited.
Other exceptional costs in the year ended 31 December 2019
relate mainly to costs associated with a break in at the Dartford
facility.
4 Discontinued operations
On 12 October 2018, the Company sold the entire issued share
capital of 365 ITMS Limited ("365 ITMS") and its subsidiaries to
PTCA Newco Limited ("PTCA"), a newly incorporated company owned by
certain members of the management team within 365 ITMS, on a cash
free, debt free basis with a normalised level of working capital
(the "Sale"). The consideration for the Sale was GBP2.8 million,
payable in cash. The proceeds of the Sale were used to reduce the
Group's net debt.
In addition, as part of the Sale, certain assets relating to
PACT, the Group's business unit focused on cyber security,
including contracts and staff, were transferred to 365 ITMS for
cash consideration of GBP0.2 million which was paid to the Group by
365 ITMS upon completion of the Sale.
The results for 2018 showed a loss on discontinued operations of
GBP3.2m and a profit on disposal of subsidiary of GBP0.7m. Further
losses of GBP0.2m were identified in the current year on contracts
novated as part of the disposal.
5 Intangible assets
Group
Customer
contracts and related Technology
Goodwill Trademarks relationships development Total
GBP000 GBP000 GBP000 GBP000 GBP000
Cost:
At 1 January 2018 38,381 1,707 30,187 1,095 71,370
Disposal of discontinued operations (6,125) - (1,111) (160) (7,396)
At 31 December 2018 32,256 1,707 29,076 935 63,974
Additions - - - - -
At 31 December 2019 32,256 1,707 29,076 935 63,974
_______ _______ _______ _______ _______
Impairment and amortisation:
At 1 January 2018 9,339 640 5,841 200 16,020
Amortisation for the year - continuing operations - 341 2,865 84 3,290
Impairment charge - continuing operations 16,986 - 13,655 542 31,183
Reversal of impairment charge - - (13,655) - (13,655)
Impairment charge - discontinued operations 3,977 - - - 3,977
Amortisation for the year - discontinued operations - - 259 - 259
Disposal of discontinued operations (3,977) - (518) - (4,495)
At 31 December 2018 26,325 981 8,447 826 36,579
Amortisation for the year - continuing operations - 341 2,865 83 3,289
Impairment charge - continuing operations 3,000 - - - 3,000
At 31 December 2019 29,325 1,322 11,312 909 42,868
_______ _______ _______ _______ _______
Net carrying amount:
31 December 2019 2,931 385 17,764 26 21,106
___ __ _ __ ___ __ ____
31 December 2018 5,931 726 20,629 109 27,395
_______ ___ __ _______ ______ ___ ___
The amortisation charge of GBP3.3 million relates to continuing
operations and is included in the loss for the year from continued
operations in the Income Statement within administrative
expenses.
Goodwill is reviewed for impairment annually or more frequently
if events or changes in circumstances indicate that the carrying
value may be impaired. Goodwill is supported by calculating the
discounted cash flows arising from the businesses acquired which
represent the cash generating unit ("CGU") to which goodwill is
allocated.
The Group's CGUs are considered to be the two trading
subsidiaries, IDE Group Manage and IDE Group Connect. The goodwill
held is attributable to the IDE Group Connect CGU.
Other intangible assets are reviewed for impairment indicators
in line with the Group's accounting policy.
As a result of this review, there is an impairment charge of
GBP3.0 million in the year (2018: GBP17.5 million).
The recoverable amount of all cash generating units has been
determined based on value-in-use calculations. These calculations
use pre-tax cash flow projections based on financial budgets for
the year ending 31 December 2020 and extrapolated forecasts for a
further four years by prudent growth rates applicable to the CGU,
which are below bench-marked median revenue growth rates and EBITDA
profitability levels for relevant sectors. The financial budgets
were approved by the Board of Directors as part of our annual
forecasting and budgeting process. A terminal value has been
calculated based on a long-term growth rate of 2%. The recoverable
amount in relation to IDE Group Manage was calculated to be GBP19.7
million and the recoverable amount in relation to IDE Group Connect
was calculated to be GBP10.7 million.
The calculations used to compute cash flows at CGU level are
based on the Group's budget, growth rates, WACC and other known
variables. The calculations are sensitive to movements in both WACC
and EBITDA. The pre-tax WACC has been estimated at 11% per annum
(2018: 15%) for both CGUs with reference to comparable companies
operating within the sector. Sensitivities have been run on cash
flow forecasts for all CGUs. The Board is satisfied that the key
assumptions, summarised below, of revenue, gross profit, and
overhead growth rates are achievable.
Manage Connect
Carrying amount GBP000 12,007 13,781
Value in use GBP000
Key assumptions 19,768 10,743
2020 forecast Revenue GBP000 16,694 14.054
2020 forecast Gross Profit GBP000 4,463 1,897
2020 forecast Overheads GBP000 3,8 42 1,091
Gross Profit growth rate 2021-2024 +10% +5%
Overhead growth rate 2021-2024 +2% +2%
Discount rate 11% 11%
The Board reviewed the Manage CGU for impairment in view of
pre-tax losses incurred in the CGU, and based on the review do not
consider there to be any impairment of the Manage CGU intangible
assets. Given the Group's current pipeline and ability to undertake
large projects which could result in higher gross margin, as well
as the fact that further direct cost savings are in the process of
being identified, the Board is satisfied with the rates of growth
in the base case and believe there could be significant upside and
is therefore satisfied that there are no reasonably plausible
scenarios which may result in an impairment of the Manage CGU's
intangible assets. Accordingly, no sensitivity analysis is
presented.
For the Connect CGU, the impairment review indicated a
requirement for a further GBP3 million impairment against goodwill
for the year (2018: GBP17.0 million) based on a shortfall of the
estimated value in use compared to the carrying value CGU. The
CGU's performance has improved compared to prior years, but the
recovery has been slower than forecast.
The remaining unamortised life of the intangible assets at 31
December 2019 is as follows:
-- IDE Group Connect Trademarks - 1 year, net carrying value GBP0.4 million
-- IDE Group Connect Technology - 1 year, net carrying value GBP0.03 million
-- IDE Group Connect novated customer contracts and related
relationships- 5 years, net carrying value GBP6.8 million
-- IDE Group Connect legacy customer contracts and related
relationships- 1 year, net carrying value GBP0.4 million
-- IDE Group Manage customer contracts and related relationships
- 9 years, net carrying value GBP10.6 million
Company
The company had no intangible assets at 1 January 2018, 31
December 2018 or 31 December 2019.
6 Borrowings
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
Non-current
Lease liabilities 1,859 494 - -
Loan Notes 12,474 - 12,474 -
14,333 494 12,474 -
Group Company
2019 2018 2019 2018
GBP000 GBP000 GBP000 GBP000
Current
Bank loan - 4,750 - 4,750
Unamortised loan arrangement
fee - (69) - (69)
Bank overdraft - 2,905 - -
Lease liabilities 1,766 214 - -
1,766 7,800 - 4,681
The carrying value is not materially different to the fair value
of these liabilities.
Bank facilities
During the year ended 31 December 2018 the Group's borrowings
were with National Westminster Bank plc ("Natwest") and comprised a
five-year, fully drawn GBP4.75 million Revolving Credit Facility
("RCF") and a GBP3.5 million overdraft facility (the "Facilities").
Interest was payable on the utilised RCF at 2% above LIBOR.
In January 2019 the Company issued GBP5.3 million of secured
loan notes with a six-year term and a 12% coupon which is
compounded, rolled up and payable at the end of the term ("Loan
Notes"). The proceeds of the Loan Notes were used to repay GBP4.125
million to Natwest and the RCF was reduced to GBP625,000. In
February and March 2019, a further GBP4.7 million in total of Loan
Notes were issued to repay the remaining Facilities, which were
then cancelled, and provide additional working capital. The Loan
Notes carry an arrangement fee of 2.5 per cent., payable at the end
of the term, and an exit fee of 2.5 per cent., also payable at the
end of the term.
In December 2019 the Company issued an additional GBP1.5 million
of Loan Notes (with the same terms as those issued in the first
quarter of the year). The proceeds of the issue of the Loan Notes
were used to fully repay all outstanding leases to which the Group
was party and to provide additional working capital for the
Company.
The Loan Notes are held at amortised cost using the effective
interest rate method. The effective interest rate for the Loan
Notes has been calculated to be 18%.
Lease liabilities
The present value of lease liabilities is as follows:
Group Gross contractual
amounts
payable Carrying
2019 Interest amount
2019 2019
GBP000 GBP000 GBP000
Less than one year 1,945 179 1,766
Between one and five years 1,686 407 1,279
Greater than five years 644 64 580
4,275 650 3,625
Finance lease obligations at 31 December 2018 were:
Group Minimum
lease
payments Interest Principal
2018 2018 2018
GBP000 GBP000 GBP000
Less than one year 254 40 214
Between one and five years 558 64 494
812 104 708
The Company has no lease liabilities at 31 December 2019 (31
December 2018: nil)
Reconciliation of borrowings:
Group Non-current Current Non-current Current Total
Lease liabilities Lease liabilities Borrowings Borrowings Borrowings
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2019 494 214 - 7,586 8,294
Non-cash changes
Transfer from current to non-current 1,239 (1,239) - - -
Lease liabilities recognised on
transition 126 5,398 - - 5,524
Loan note interest - - 1,089 - 1,089
Lease interest - 318 - - 318
Amortisation of loan fee - - - 138 138
Loan fees accrued - - - (69) (69)
Fees in respect of loan notes - - (135) - (135)
Interest and other charges - 104 - 29 133
Cash flows
Issue of loan notes - - 11,520 - 11,520
Repayment of loan - - - (4,750) (4,750)
Repayment of lease liabilities - (2,605) - - (2,605)
Overdraft repaid - - - (2,905) (2,905)
Interest paid (422) (29) (451)
Balance at 31 December 2019 1,859 1,766 12,474 - 16,099
Company Non-current Current Non-current Current Total
Lease liabilities Lease liabilities Borrowings Borrowings Borrowings
GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 January 2019 - 4,681 4,681
Non-cash changes
Loan note interest - - 1,089 - 1,089
Amortisation of loan fee - - - 69 69
Fees in respect of loan notes - - (135) - (135)
Interest and other charges - - - 44 44
Cash flows
Issue of loan notes - - 11,520 - 11,520
Repayment of bank loan - - - (4,750) (4,750)
Interest paid - - - (44) (44)
Balance at 31 December 2019 - - 12,474 - 12,474
7 Convertible loan notes
Group and Company
GBP000
Balance at 1 January
2019 1,654
Interest unwound 149
Balance at 31 December
2019 1,803
On 21 August 2018, as part of a wider fundraising, the Company
issued GBP2.55 million of unsecured loan notes, which have a term
of 5 years and a zero per cent coupon ("CLNs"). The CLNs can be
converted into new ordinary shares in the capital of IDE at a price
of 2.5 pence per share. Conversion is at the option of the holder
at any time during the 5-year term. At the end of the term, if the
holder has not chosen to convert the CLNs, the CLNs will be settled
with a cash repayment. At issue, the CLNs have a fair value of
GBP2.54 million, split into an equity component (GBP0.96 million)
and a debt component (GBP1.58 million).
8 Post balance sheet events
Covid-19
The unprecedented and continually changing circumstances
surrounding the COVID-19 outbreak provide an uncertain economic
landscape.
Whilst it is difficult to predict accurately the potential
long-term consequences, we remain vigilant and, in common with all
businesses, are closely monitoring the situation and to date there
has been no material adverse effect on the business as IT managed
services have remained buoyant during the UK-wide lock down; with
increased reliance on mobile working and the need to facilitate
customers' staff working remotely, in addition there has been
increased demand for lifecycle services which necessitated an
increase in shifts and production, and this has offset modest
reductions in user support desk activities.
The Directors have taken advantage of the Governments Job
Retention Scheme to furlough some staff members during the lock
down period, as well as senior staff taking a short-term 20% salary
reduction, and also deferment of PAYE and VAT cash payments to
maximise cash flows.
We have continued to see new opportunities during lock-down, and
believe that the demand for centralised managed services, cloud,
user support desk, mobile working & collaboration, and
over-arching business continuity solutions will provide good
opportunities during the remainder of 2020.
We therefore do not expect an adverse effect on asset values,
with the exception of some receivable balances, which we do not
foresee being material due to the sectors in which our largest
clients operate and the critical nature of the services we
provide.
Nimoveri Acquisition
On 1 June 2020, the Group completed the acquisition of Nimoveri
Holdings Limited, a small cloud and IT services business, for a
total consideration of GBP200,000; GBP100,000 paid in cash on
completion, and GBP100,000 of secured 0% loan notes redeemable 31
December 2021. The initial accounting for this is still
incomplete.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UOORRROUBAUR
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July 14, 2020 02:00 ET (06:00 GMT)
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