This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014 (as amended), which forms
part of domestic UK law pursuant to the European Union (Withdrawal)
Act 2018. Upon publication of this announcement via a Regulatory
Information Service, this inside information is now considered to
be in the public domain.
24 July 2024
Shearwater Group
plc
("Shearwater", or the "Group")
Results
for the year ended 31 March 2024
Resilient performance in a
challenging environment, with confidence in a return to growth
during FY25
Shearwater Group plc, the
cybersecurity, advisory and managed security services
group, announces its final results for
the year ended 31 March 2024.
Financial Highlights
· Group
revenue of £22.6m (FY23: £26.7m), impacted
by a period of cautious customer spending.
· Adjusted EBITDA1 of £0.9m (FY23:
£(0.2)m).
· Adjusted loss before tax2 of £(0.6)m (FY23: loss
before tax of £(1.3)m).
· Strong
financial position with net cash as at 31 March 2024 of £5.0m
(FY23: £4.0m), £3m higher than the cash position at the half
year.
· Recovering margins delivered in FY24 through an improved
profile of business and cost control following the restructuring
early in the year.
Operational Highlights
· Streamlined operations and enhanced synergies following the
successful integration of Xcina into Brookcourt Solutions and
GeoLang into SecurEnvoy.
· Notable contract wins and renewals in Services across the
banking, telecoms and retail sectors, alongside the strategically
significant new focus on central government departments.
· Three
consecutive half years of stable Software sales with progress in
the expansion of the Group's offering, positioning the division for
growth and success.
· Despite FY24 performance being impacted by customer caution
surrounding budget allocations, customer engagement levels remained
high and the Group continues to benefit from a customer base of
blue-chip organisations spanning a breadth of sectors.
· Five prestigious awards during the year,
serving as a testament to the value of the Group's
offering.
Outlook
· Post
period end, clear signs that customer budget allocation is starting
to be released at a modest pace.
· FY25
has started well with increasing momentum, including notable
contracts secured and a strong pipeline of opportunities across
both divisions.
· Expansion into Government departments remains a key strategic
priority and a focus.
· Confidence in returning to growth in FY25, delivering solid,
sustainable revenue and profit growth in the years
ahead.
1 Adjusted EBITDA is
defined as profit before tax, before one off exceptional items,
share based payment charges, finance charges, impairment of
intangible assets, depreciation and amortisation.
2 Adjusted Loss Before Tax
defined as net profit before tax, exceptional items, share based
payments and amortisation of acquired goodwill.
Phil Higgins, CEO of Shearwater
Group, commented: "I am encouraged by how
resiliently the Group navigated challenging market conditions in
the year. Although FY24 performance was impacted by some customers
deferring budget allocations, we emerged having secured notable
contract wins and having maintained a strong level of customer
engagement.
"We are encouraged that FY25 has
started well, with a number of significant contracts already
secured and clear signs that customer budget allocation is starting
to be released at a modest pace.
"The team remains focused on
converting the significant pipeline of opportunities across both
divisions, with deepened expansion into Government departments
remaining a key strategic priority and a major growth avenue for
the business. We are confident in returning to growth in FY25 and
in delivering solid, sustainable revenue and profit growth in the
years ahead."
Investor Presentation
Shearwater Group's CEO, Phil Higgins
and Interim CFO, Adam Hurst, will provide a live investor
presentation relating to the results via the Investor Meet Company
platform on Wednesday 24 July 2024 at 10.00am.
Investors can sign up to Investor
Meet Company for free and add to meet Shearwater Group
via:
https://www.investormeetcompany.com/shearwater-group-plc/register-investor
Enquiries:
|
Shearwater Group plc
David Williams, Chairman
Phil Higgins, CEO
Adam Hurst, Interim CFO
|
www.shearwatergroup.com
c/o Alma
|
|
Cavendish Securities plc
Adrian Hadden / Ben Jeynes / Fergus
Sullivan - Corporate Finance
Henry Nicol / Dale Bellis / Michael
Johnson - Sales
|
+44 (0) 20 7397 8900
|
|
Alma
Justine James / Joe Pederzolli /
Emma Thompson
|
shearwater@almastrategic.com
+44 (0) 20 3405 0205
|
About Shearwater Group plc
Shearwater Group plc is an
award-winning group providing cyber security, managed security and
professional advisory solutions to create a safer online
environment for organisations and their end users.
The Group's differentiated full
service offering spans identity and access management and data
security, cybersecurity solutions and managed security services,
and security governance, risk and compliance. Its growth strategy
is focused on building a scalable group that caters to the entire
spectrum of cyber security and managed security needs, through a
focused buy and build approach.
The Group is headquartered in
the UK, serving customers globally across a broad spectrum of
industries.
Shearwater shares are listed on
the London Stock Exchange's AIM under the ticker
"SWG". For more information, please
visit www.shearwatergroup.com.
Chairman's statement
Phil's CEO report sets out the
Group's performance for the year ended 31 March 2024, together with
details of the work being undertaken by our management team in
laying the groundwork for better results in the new financial
year. Our Board has been encouraged to note the improved
pipeline as it shows greater levels of activity than in previous
years which gives us all confidence in the potential moving
forward.
We are a fundamentally sound
business, delivering robust and award winning solutions for our
clients, but we are at the mercy of timing in winning large
contracts and, after three years of profit growth and strong
revenue performance, the last two years have been impacted by
delays. Despite this we have maintained a healthy cash
balance such that, as can be seen in the accounts, this represents
roughly half our market capitalisation.
In common with many small companies
our shares are languishing. This is in part due to those
contract delays in the last two years impacting profits but also
reflects the malaise in the market for micro cap companies where
poor liquidity deters investors and exacerbates share price
movements.
Your board is very mindful of this
and, together with our Advisory Panel members, has been supportive
of management's drive to win new business and improve the
results. We can see a distinct improvement in the market for
our products and services, which gives us optimism for the current
year, but we also review other avenues to improve shareholder
returns.
Our non executive directors and
Advisory Panel members have done a great job in supporting and
assisting management and I want to thank them for their
contribution as well as thank our customers and shareholders for
their support. We are all working hard to return your company
to much improved profitability in the current year and
beyond.
David Williams
Chairman
23 July 2024
Chief Executive's review
The year ending 31 March 2024 was
one of consolidation which demonstrated Shearwater Group's
resilience and potential. While headline revenue performance
remained impacted by some customers continuing to defer budget
allocations for larger contracts to future periods, we remain
upbeat due to the promising pipeline of opportunities across both
our Services and Software divisions and confident in the strong
foundation we've built to enable us to capitalise on these
opportunities moving forward.
While Group revenue for the year was
£22.6m (FY23: £26.7m), Adjusted EBITDA1 returned to
profit at £0.9m compared to a £0.2m loss in FY23 and the Group
delivered improved margins from a combination of an improved
profile of business and cost control following the restructuring
early in the year.
1See
notes 2 and 3
within the Group financial statements that present a reconciliation
of Adjusted EBITDA to statutory measures including profit/(loss)
before tax.
The Group continues to be
strengthened by a robust balance sheet, with year-end cash of £5.0m
(FY23: £4.0m), in line with market expectations, £1m ahead of the
prior year and £3m higher than the cash position at the half year.
The improved cash position reflects strong cash generation in the
second half, bolstering our financial position and positioning us
well for future growth.
We move into FY25 with key wins
already secured and are encouraged by the increasing levels of
customer engagement, which provides more confidence in our return
to growth. Whilst some larger contracts are still under
negotiation, they continue to progress and remain in our pipeline.
Consequently, we are well-positioned to deliver solid and
sustainable revenue and profit growth in the years
ahead.
Group operational review
The Group comprises two divisions:
Services, which accounts for 89% of our revenue, and Software,
contributing the remaining 11%. Despite encountering a period of
cautious customer spending in FY24, resulting in a slight softening
in the number of new client acquisitions, our commitment to
excellence has led to notable contract wins, in particular in the
banking, telecommunications and retail sectors, alongside our new
focus of central government departments. These achievements
underscore the value of our established relationships with
prestigious blue-chip organisations spanning a breadth of
sectors.
In FY24 we completed a strategic
initiative to integrate our Group businesses, resulting in
streamlined operations and enhanced synergy. The successful
integration of Xcina into Brookcourt Solutions and GeoLang into
SecurEnvoy yielded tangible benefits in the year. These
include the realisation of internal efficiencies, empowering us to
channel resources into further product development initiatives
across both divisions. We have emerged as a more unified business,
ensuring we are poised to capitalise on Shearwater's long-term
growth opportunities.
At Shearwater we take immense pride
in delivering our top-tier cyber security, managed security and
professional advisory solutions and services. We were delighted to
have received further accolades, which serve as a testament to the
exceptional value we provide. In total, five prestigious awards
were secured across both divisions. Noteworthy mentions include
SecurEnvoy's recognition as the Identity & Access Management
Solution of the Year at the Computing Security Magazine Awards
2023, along with commendation in the Security Software Solution of
the Year category for Data Discovery. Additionally, Brookcourt
received the Customer Service Award at the same event and earlier
in the year Brookcourt won the Logo Acquisition Award 2023 at the
Proofpoint channel event for the most successful acquisition of an
Enterprise bank over a three-year sales cycle. Furthermore, Pentest
emerged as a triumphant winner at Pwn2Own Toronto for successfully
compromising the Samsung Galaxy S23, underscoring our commitment to
innovation and excellence in the field.
Services
Despite continued challenging market
conditions in FY24 the Services division secured £20m in revenue,
primarily through contract wins and renewals, notably in the
banking, telecommunications and government sectors.
Noteworthy wins included: a managed cyber security service,
utilising AI-driven endpoint protection, for a leading finance
investment house; tailored technical consulting projects for a new
customer, an international financial technology company; and
retention of our services for existing telecommunication customers.
These examples illustrate our ability to navigate the current
climate and capitalise on emerging opportunities.
The first half of FY24 saw pivotal
wins, including partnerships with a prominent European Cyber
Managed Security Services Provider (MSSP), an international retail
chemist and cosmetics company, and a crucial security services
contract with a UK government department. While financial
performance was, as expected, weighted to the second half of the
year, the pace of renewals and wins, particularly in Brookcourt
Solutions was affected by customer hesitancy surrounding budget
allocations and not secured at the pace we had
anticipated.
Securing the £1.3m Government agency
contract in October 2023 was an important milestone, as our
first major Government contract, with a second three-year agreement
worth c.£0.8m secured with another Government department following
a successful one-year trial. This not only diversifies our client
portfolio but also positions us for growth within the central
government sector. Deepening our engagement with Government
entities remains a strategic focus where we see an exciting
opportunity for business expansion. Alongside this, Brookcourt
secured a lucrative three-year contract with a leading global bank,
valued at US$3.2m, further solidifying our position as a trusted
provider of comprehensive security and cyber security services and
solutions.
Our penetration testing business,
Pentest, completed a record number of tests (3,174 days in total),
adding 34 new clients and expanding the list of territories in
which it operates to 22 countries. Revenues in the year were
enhanced by a significant engagement from an existing US-based
client and a number of key account wins with global enterprises.
Due to our focus on delivering world-class service, Pentest
maintained a strong pipeline throughout the year with repeat
revenues from a high percentage of returning clients and a
year-on-year increase in their day rate.
|
|
2024
|
2023
|
|
|
|
£m
|
£m
|
%
|
|
Revenue
|
20.2
|
23.8
|
(15.1)
|
|
Gross profit
|
5.4
|
4.3
|
25.5
|
|
Gross margin %
|
27%
|
18%
|
+9%
|
|
Overheads
|
3.9
|
4.2
|
16.7
|
|
Adjusted
EBITDA1
|
1.5
|
0.1
|
n/a
|
|
Adjusted EBITDA margin %
|
7%
|
1%
|
+6%
|
1Note that to provide useful
analysis the above table is adjusted to net off FX movements on
forward contracts (FY24: £0.2m credit; FY23: £0.4m cost) against
the FX movement on the underlying balance which are accounted for
within Gross profit. FX movements on forward contracts are
included in Administrative costs in the financial statements.
Adjusted EBITDA above is prior to Group costs as set out in Note
3.
Amidst an ever-changing
cybersecurity landscape, we continue to tailor our offering to
cater to the needs of our customers. Throughout the year, we
expanded our AI-based solutions by collaborating with partners who
are integrating advanced machine learning algorithms enhancing
threat detection capabilities and delivering automated response
systems. These efforts provide us with an additional competitive
advantage over the general IT marketplace and ensure that our
clients receive cutting-edge protection against evolving
threats.
Software
While Software performance in the
year experienced some challenges compared to the prior period, we
have made significant strides in other key areas. The integration
of GeoLang into SecurEnvoy has generated efficiencies that allowed
for increased investment in product development in FY24. As a
result, we successfully introduced a comprehensive product set
across the Group's global distribution network. Our development
team is now fully integrated and operating as a unified resource,
leading to increased opportunities for Geolang, now renamed as
SecurEnvoy Data Discovery, through SecurEnvoy's global network of
resellers. These advances position us well for future growth and
success.
Our ongoing R&D focus has
significantly expanded our Software product
portfolio, strengthening our market positioning and setting us
apart from our peers. Key achievements during the year
include:
· Enhanced
Security: The V3.R3 update
meets heightened government and critical network security
requirements.
· Deployment
Flexibility: We now offer
On-Premise (Windows & Linux) and Private Cloud (Azure &
AWS) options, catering to diverse customer needs.
· Managed Service Integration
(MSP): A new MSP edition
addresses the growing demand for managed security services and
simplifies billing.
· Enhancing SecurEnvoy with
AI: SecurEnvoy will leverage AI to
reduce training needs, enhance security response and proactive
threat prevention. SecurEnvoy's AI strategy aims to streamline user
support, strengthen security posture through advanced threat
detection, and empower proactive response to
cyberattacks.
With an expanded product portfolio
across the Software vision, we are well-placed to serve a
broader customer base and cater to evolving market demands across
both On-Premise and Private Cloud solutions.
Software's financial performance in
FY24 was behind the prior year but has seen stable revenues for the
last three half years and we are confident that traction and
engagement will increase. We have a renewed confidence in the
division, with marketing and activities increased as the year
progressed, which will be key in positioning the division for
growth in FY25. The second half of the year saw an encouraging
increase in new customer acquisitions.
Further progress was made in the
year with the expansion of channel partnerships through new
agreements. In North America, we refocused our efforts and signed
our first Managed Service Provider (MSP), BlueZone Cyber Inc.,
based in Texas. Additionally, we are advancing plans to offer our
solution on the AWS Marketplace in North America by the second half
of the FY25, making SecurEnvoy available to over 180,000 active
customers on the platform. We have also made progress in the Middle
East. This region continues to thrive, benefiting from in-person
channel and customer meetings, resulting in a 20% year-on-year
increase in deal registrations. In FY25, we will maintain a strong
focus on this territory, with plans to deliver a Cloud Hosted Stack
in the UAE to address regional data sovereignty and residency
requirements.
|
|
2024
|
2023
|
|
|
|
£m
|
£m
|
%
|
|
Revenue
|
2.4
|
2.9
|
(17.2)
|
|
Gross profit
|
1.7
|
1.8
|
(5.6)
|
|
Gross margin %
|
71%
|
63%
|
+8%
|
|
Overheads
|
0.8
|
0.8
|
-
|
|
Adjusted
EBITDA1
|
0.9
|
1.0
|
-
|
|
Adjusted EBITDA margin %
|
38%
|
34%
|
+4%
|
1 Adjusted EBITDA above is
prior to Group costs as set out in Note 3.
Growth strategy
Becoming a Cybersecurity
Leader
Our vision is clear: to become a
leader in next-generation cybersecurity solutions. We deliver a
comprehensive suite of services, from cutting-edge technology to
expert consulting, empowering businesses to navigate the evolving
threat landscape.
Strengthening Organic Growth:
Fuelling Our Momentum
While current market conditions have
necessitated a focus on strengthening organic growth, M&A
remains a strategic pillar. In the near term, we're capitalising on
the increasing number of opportunities within our chosen sectors,
driving robust organic revenue expansion.
A differentiated
offering
Our Services division carries
preferred partner status for a client base comprising blue chip
organisations, for all things security, offering comprehensive
managed solutions, penetration testing, and insightful advisory
services. We provide a seamless, end-to-end experience that
empowers our clients.
Our Software division is developing
a revolutionary next-generation platform that converges access
management and data discovery. Leveraging our zero-trust access
solution, our platform safeguards users, devices, and data -
anywhere, anytime.
Delivering Sustainable
Growth
Our medium-term strategy prioritises
achieving consistent, sustainable revenue and profit growth. With a
deep commitment to innovation and an unwavering focus on customer
success, we are confident in delivering value for our stakeholders
in the years to come.
Adding Shareholder Value Through AI
Integration
Artificial intelligence (AI) is
rapidly transforming industries, and our company is poised to
leverage this powerful technology to create additional value for
our shareholders. We are already providing AI based cyber
security solutions to our customer base and also recognise the
opportunity to drive AI within our business to enhance efficiencies
through automating and streamlining processes and utilise the
powerful analytical capabilities to enhance data-driven decisions
to optimise our resource allocation and maximise return on
investment. We believe that we can achieve competitive
advantage through utilising AI-powered solutions to personalise
customer experiences, improve product development and strengthen
our overall market position, driving long-term growth and
shareholder value.
We are committed to implementing AI
responsibly and ethically keeping within our established AI code of
conduct and we look forward to updating you on our
developments.
Market Opportunity
Businesses globally are facing a
growing number of cybersecurity challenges, requiring the
implementation of controls to build and embed resilience, meet
regulatory mandates and reduce overall risk. 50% of businesses
report having experienced some form of cyber security breach or
attack in the past 12 months, with a 72% increase in the number of
data compromises in 2023 over the 2022 previous high
1.
The rise of cloud-based technology
has driven a rise in cyber attacks, with cloud environment
intrusions increasing by 75% from 2022 to 2023 2. The
more recent exponential increase in the adoption of AI is proving
to revolutionise not only the way in which businesses work, but
also lower the barriers of entry for low-skilled adversaries,
making it easier to launch sophisticated attacks.
1Cyber security breaches
survey 2024 - GOV.UK (www.gov.uk)
2The
rise of AI threats and cybersecurity: predictions for 2024 | World
Economic Forum (weforum.org)
There is a growing need for the
services which Shearwater Group offers, driving significant
opportunities for the business. Shearwater's offering is
well-placed to cater to the need for businesses' proactive approach
to cybersecurity measures, offering access to a differentiated
full-service cyber security in a rapidly expanding market. Further
to supportive market trends, our growth strategy, stronger
financial position, prestigious customer base, industry recognition
and talented team, we are poised to capitalise on opportunities and
deliver substantial returns on investment.
Board Update
Adam Hurst, Interim Chief Financial
Officer, will shortly be completing his contract with the Company
and a process has commenced to find a permanent replacement.
Adam has agreed to remain with the business until his successor has
been appointed and assist with handover.
Current Trading and Outlook
We are encouraged that FY25 has
started well with the increasing momentum reported in April
building in Q1, with notable contracts secured, including a £1.4m
contract renewal and a $4.8m new deal with a British media and
telecommunications company as well as one of the delayed projects
from a leading international bank. There are clear signs that
customer budget allocations, which had been squeezed in recent
years due to the challenging external environment, are starting to
be released at a modest pace. We are benefitting from increased
customer engagement, with a stronger pipeline of opportunities
across both divisions.
We remain focused on converting the
significant pipeline of opportunities across the Group, with
deepened expansion into Government departments remaining a key
strategic priority and a major growth avenue for the business. We
are confident in returning to growth in FY25 and in delivering
solid, sustainable revenue and profit growth in the years
ahead.
Philip Higgins
CEO
23 July 2024
Financial review
Overview
While the Group's financial
performance in the year to 31 March 2024 was again impacted by
market factors and delayed contracts in the Group's Services
division, resulting in revenue down 15% to £22.6 million, gross
margins improved from 24% of revenue to 31% and administrative
expenses for the Group were lower by 9%.
The Group continues to retain a
healthy balance sheet with a cash position of £5.0 million at 31
March 2024 (2023: £4.0 million) and no debt. During the year
the Group again generated positive operating cash flows and
continued to invest in the development of new software offerings
which it expects to successfully monetise in future
years.
A summary of the Group's financial
performance for the year is set out below:
|
|
2024
|
2023
|
|
|
£m
|
£m
|
|
Revenue
|
22.6
|
26.7
|
|
Gross profit
|
6.9
|
6.4
|
|
Administrative expenses
(underlying)1
|
(6.0)
|
(6.6)
|
|
Adjusted EBITDA
|
0.9
|
(0.2)
|
|
Adjusted EBITDA margin
|
4%
|
-%
|
|
Net finance charges
|
(0.1)
|
(0.1)
|
|
Depreciation
|
(0.2)
|
(0.2)
|
|
Amortisation of intangible assets -
computer software
|
(1.2)
|
(0.8)
|
|
Adjusted loss before tax
|
(0.6)
|
(1.3)
|
|
Amortisation of acquired intangible
assets
|
(2.1)
|
(2.1)
|
|
Impairment of intangible
assets
|
-
|
(6.0)
|
|
Exceptional items and share-based
payments
|
(0.6)
|
(0.2)
|
|
Loss
before tax
|
(3.3)
|
(9.6)
|
|
Taxation credit
|
1.1
|
1.5
|
|
Loss
after tax
|
(2.2)
|
(8.2)
|
1 Administrative expenses
(underlying) excludes items that are not included within Adjusted
EBITDA such as finance charges, depreciation, amortisation,
impairment, share-based payment charges and exceptional
items.
Revenue
Revenue for the year ended 31 March
2024 of £22.6 million was 15% down on the prior year (2023: £26.7
million).
The table below provides a breakdown
of revenues for the current year:
|
|
2024
|
2023
|
|
|
£m
|
£m
|
|
Services
|
|
|
|
Managed services and
warranties
|
9.8
|
11.2
|
|
Security solutions
|
5.1
|
6.1
|
|
Advisory and engineering
|
5.3
|
6.5
|
|
Software
|
|
|
|
Software licences
|
2.4
|
2.9
|
|
Total revenue
|
22.6
|
26.7
|
The Services division was impacted
by the continued effect of market conditions on its customer
base. While some contracts that had been delayed from the
previous financial year were completed, there continued to be
delays in some customers releasing budgets, resulting in lower
revenue year on year. Advisory revenues included particularly
strong demand for Pentest's consulting services in the
year.
Software licences revenue fell in
the year as falling sales of the legacy 'On Premise' multi-factor
authentication software have not yet been replaced by sales of the
new platform and cloud-based products which were released during
the year and continue to be developed. Renewal rates with
existing customers increased to over 80% demonstrating the value
many long-standing clients place on this product and its future
roadmap and resulting in stable revenue in the Software business
for the third half year in a row. Continued investment into
developing this software both as a cloud-based platform as well as
a next generation on prem solution provides opportunities to drive
additional incremental revenues in the future.
Adjusted EBITDA
The Group delivered a return to
positive adjusted EBITDA of £0.9 million in the year (2023: Loss of
(£0.2) million). The prior year was impacted by a £0.8m loss
on foreign exchange which did not recur following implementation of
a hedging policy. The increase in adjusted EBITDA, excluding
the impact of foreign exchange in the prior year, was £0.3m and
achieved despite the lower revenue due to higher gross margin
percentages in both the Services and Software divisions, from
improved profile of revenues and lower costs following the
restructuring activity earlier in the year.
The table below provides a breakdown
of the Group's adjusted EBITDA:
|
|
2024
|
2023
|
|
|
|
£m
|
£m
|
|
|
Services and Software
|
2.3
|
1.1
|
|
|
Central administrative
expenses
|
(1.4)
|
(1.3)
|
|
|
Adjusted EBITDA
|
0.9
|
(0.2)
|
|
|
Adjusted EBITDA margin %
|
4%
|
-
|
|
Central administrative expenses
increased by £0.1 million in the year to £1.4
million.
Finance charges
Net finance charges of £0.1 million
were in line with prior year (2023: £0.1 million). In the second
half of the year the Group began to utilise short term deposits to
earn interest on excess cash balances.
Depreciation
Depreciation of £0.2 million (2023:
£0.2 million) was similar to the prior year and mainly comprises
depreciation of right of use assets.
Amortisation of intangible assets
- computer software
Amortisation of computer software
increased by £0.4 million to £1.2 million (2023: £0.8 million),
reflecting the profile of expenditure in recent years.
Adjusted loss before tax
The Group's adjusted loss before tax
for the year was £0.6 million (2023: £1.3 million loss). The
improvement compared to the prior year was largely due to the
increased EBITDA, which was partly offset by the increase in
amortisation of computer software.
Amortisation of acquired intangible assets
Amortisation of acquired intangible
assets of £2.1 million (2023: £2.1 million) was in line with the
previous year.
Share-based payments
Share-based payment charges were
less than £0.1 million in the year (2023: £0.1 million) mainly
reflecting lapsed options and expiry of the SAYE plan.
Exceptional items
Exceptional items of £0.5 million
(2023: £0.1 million) included one-off expenses relating to
completion of the restructuring which followed a review of the
Group in early 2023 and the cost of a one-off strategic project in
the second half of the current year.
Reported loss before tax
Reported loss before tax for the
year of £3.3 million (2023: £9.6 million loss) reflected
the absence of the £6.0 million impairment charge incurred in the
prior year.
Taxation
A taxation credit in the period of
£1.1 million primarily comprises movements in deferred
taxation.
Earnings/(loss) per share
Adjusted basic and diluted earnings
per share of 0.3 pence (2023: loss of 0.4 pence) was similar
to the prior year. Reported basic and diluted loss per share
of 9.1 pence (2023: loss 34.3 pence) improved due to the absence of
the impairment charge incurred in the prior year.
Statement of financial position
Intangible assets
Intangible assets decreased in the
year by £2.2 million to £42.7 million at 31 March 2024 (2023:
£44.9 million). This movement incorporates £1.0 million of
investment into continued development of the Group's software
assets (2023: £1.3 million), less £3.3 million amortisation, of
which £2.1 million relates to acquired intangibles and £1.2 million
to internally developed computer software. The prior year included
a £6.0 million impairment charge relating to the write down of
goodwill.
Property, plant and equipment
Property, plant and equipment
increased slightly in the year by £0.1 million to
£0.5 million at 31 March 2024 (2023: £0.4 million).
Additions of £0.3 million include £0.2 million for the
extension of an existing office lease which has been recognised as
a right of use asset. Other movements in the period include
depreciation in the year of £0.2 million.
Trade and other receivables
Trade and other receivables,
including both non-current and current balances, decreased by £6.5
million in the year from £19.6 million to £13.1 million at 31
March 2024. The reduction was mainly due to receipts relating to
large long-term customer contracts that were delivered and
recognised in the income statement in previous financial
years. By March 2024 none of the remaining balances were due
after more than one year.
Trade and other payables (falling due within one
year)
Trade and other payables increased
by £0.3 million in the year from £12.3 million to £12.6 million at
31 March 2024. The balance includes a £4.1 million increase in
trade payables and £4.5 million reduction in accruals and other
payables as invoices were received in the year relating to long
term supplier contracts where the costs were recognised in previous
financial years in line with the long-term customer contracts noted
above.
Creditors: amounts falling due after more
than one year
Creditor amounts falling due after
more than one year reduced by £5.6 million from £9.2 million
to £3.6 million at 31 March 2024, due mainly to a reduction in
accruals and other payables relating to long-term contracts.
At 31 March 2024 none of the remaining balances were due after more
than one year. Deferred tax was £3.0 million (2023: £3.6
million) and mainly comprised amounts held for acquired intangible
assets.
Statement of cash flows
The Group generated cash inflows in
the year of £1.0 million (2023: outflow of £1.6 million), driven
largely by the return to positive adjusted EBITDA and positive
working capital generation, particularly in the second half of the
year. Working capital benefited in the year from the profile
of long term deals concluded in previous years. The Group
continued to invest in the Software division, with £1.0 million
invested into internally developed software, the latest of which,
SecurEnvoy's Access Management v.4.0 R2, went live in May 2024. The
Group continued to collect cash effectively, with minimal bad
debt.
The table below provides a summary
of cash flows in the year:
|
|
2024
|
2023
|
|
|
£m
|
£m
|
|
Adjusted EBITDA
|
0.9
|
(0.2)
|
|
Movements in working
capital
|
1.1
|
0.5
|
|
Cash
generated from operations
|
2.0
|
0.3
|
|
Adjusted cash generated from operations
|
2.4
|
0.4
|
|
Exceptional items
|
(0.4)
|
(0.1)
|
|
Net
cash generated from operating activities
|
2.0
|
0.3
|
|
Capital expenditure (net of disposal
proceeds)
|
(1.1)
|
(1.3)
|
|
Tax received/(paid)
|
0.3
|
(0.3)
|
|
Finance costs paid
|
(0.1)
|
(0.1)
|
|
Payments of lease
liabilities
|
(0.2)
|
(0.2)
|
|
Movement in cash
|
1.0
|
(1.6)
|
|
Opening cash and cash
equivalents
|
4.0
|
5.6
|
|
Closing cash and cash equivalents
|
5.0
|
4.0
|
|
|
|
|
The above cash flow is extracted
from the statutory presentation and adjusted to show exceptional
items on a like for like basis as this is the basis reviewed by the
Directors.
Capital expenditure
Capital expenditure of £1.1 million
(2023: £1.3 million) in the year primarily includes
capitalisation of external and internal software costs for
developing our software business's product sets. Expenditure of
property, plant and machinery remains minimal.
Financing activities
Expenditure on financing activities
of £0.3 million (2023: £0.3 million) including repayment of lease
liabilities, was in line with the prior year.
Key
performance indicators
The Board believes that revenue,
adjusted EBITDA and adjusted profit before tax are key metrics
to monitor the performance of the Group, as they provide a good
basis to judge underlying performance and are recognised by the
Group's shareholders.
Alternative performance measures
The Group uses alternative
performance measures alongside statutory measures to manage the
performance of the business. In the opinion of the Directors,
alternative performance measures can provide additional relevant
information on past and future performance to the reader
in assessing the underlying performance of the
business.
The table within note 2 of the
consolidated financial statements details definitions of adjusted
EBITDA and adjusted (loss)/profit before tax measures. Note 8
details the definition of adjusted EPS.
Consolidated statement of
comprehensive income
for the year ended 31 March
2024
|
|
Note
|
2024
£000
|
2023
£000
|
|
Revenue
|
3
|
22,643
|
26,686
|
|
Cost of sales
|
|
(15,790)
|
(20,236)
|
|
Gross profit
|
|
6,853
|
6,450
|
|
Administrative expenses
|
|
(6,548)
|
(12,875)
|
|
Depreciation and
amortisation
|
|
(3,531)
|
(3,131)
|
|
Total operating costs
|
|
(10,079)
|
(16,006)
|
|
Operating loss
|
|
(3,226)
|
(9,556)
|
|
Adjusted EBITDA
|
|
864
|
(201)
|
|
Depreciation and
amortisation
|
|
(3,531)
|
(3,131)
|
|
Impairment of intangible
assets
|
|
-
|
(6,014)
|
|
Exceptional items
|
4
|
(533)
|
(125)
|
|
Share-based payments
|
|
(26)
|
(85)
|
|
Operating loss
|
|
(3,226)
|
(9,556)
|
|
|
|
|
|
|
Net finance cost
|
6
|
(67)
|
(77)
|
|
Loss
before taxation
|
|
(3,293)
|
(9,633)
|
|
Income tax credit
|
7
|
1,123
|
1,458
|
|
Loss
for the year and attributable to equity holders of the
Company
|
|
(2,170)
|
(8,175)
|
|
|
|
|
|
|
Other comprehensive (loss)/income
|
|
|
|
|
Exchange differences on translation
of foreign operations
|
|
(3)
|
7
|
|
Total comprehensive loss for the year
|
|
(2,173)
|
(8,168)
|
|
Earnings/(loss) per ordinary share attributable to the owners
of the parent
|
|
|
|
|
Basic and diluted (Pence per
share)
|
8
|
(9.1)
|
(34.3)
|
|
Adjusted basic and diluted (Pence per
share)
|
8
|
0.3
|
(0.4)
|
Adjusted EBITDA and Adjusted basic
and diluted earnings/(loss) per share are non-GAAP Group-specific
measures which are considered to be key performance indicators of
the Group's financial performance. See note 2 for definition of
Adjusted EBITDA and note 8 for definition of Adjusted based and
diluted earnings/(loss) per share.
The results above are derived from
continuing operations.
Consolidated statement of financial
position
As at 31 March 2024
|
|
|
2024
|
2023
|
|
|
Note
|
£000
|
£000
|
|
Assets
|
|
|
|
|
Non-current assets
|
|
|
|
|
Intangible assets
|
9
|
42,684
|
44,939
|
|
Property, plant and
equipment
|
10
|
481
|
433
|
|
Deferred tax asset
|
14
|
1,016
|
742
|
|
Trade and other
receivables
|
11
|
679
|
7,280
|
|
Total non-current assets
|
|
44,860
|
53,394
|
|
Current assets
|
|
|
|
|
Trade and other
receivables
|
11
|
12,392
|
12,346
|
|
Cash and cash equivalents
|
|
4,974
|
3,964
|
|
Total current assets
|
|
17,366
|
16,310
|
|
Total assets
|
|
62,226
|
69,704
|
|
Liabilities
|
|
|
|
|
Current liabilities
|
|
|
|
|
Trade and other payables
|
12
|
12,604
|
12,348
|
|
Total current liabilities
|
|
12,604
|
12,348
|
|
Non-current liabilities
|
|
|
|
|
Creditors: amounts falling due after
more than one year
|
13
|
3,646
|
9,233
|
|
Total non-current liabilities
|
|
3,646
|
9,233
|
|
Total liabilities
|
|
16,250
|
21,581
|
|
|
|
|
|
|
Net
assets
|
|
45,976
|
48,123
|
|
Capital and reserves
|
|
|
|
|
Share capital
|
16
|
22,278
|
22,278
|
|
Share premium
|
|
34,581
|
34,581
|
|
Other reserves
|
|
23,086
|
23,442
|
|
Translation reserve
|
|
27
|
30
|
|
Accumulated losses
|
|
(33,996)
|
(32,208)
|
|
Equity attributable to owners of the Company
|
|
45,976
|
48,123
|
|
|
|
|
|
|
Total equity and liabilities
|
|
62,226
|
69,704
|
The financial statements were
approved and authorised for issue by the Board and signed on their
behalf on 23 July 2024.
Philip Higgins
Chief Executive Officer
Registered number:
05059457
Consolidated statement of changes in
equity
for the year ended 31 March
2024
|
|
Share
capital
£000
|
Share
premium
£000
|
Other
reserves
£000
|
Translation
reserve
£000
|
Accumulated
losses
£000
|
Total
equity
£000
|
|
At 1
April 2022
|
22,278
|
34,581
|
24,386
|
23
|
(25,062)
|
56,206
|
|
Loss for the year
|
-
|
-
|
-
|
-
|
(8,175)
|
(8,175)
|
|
Other comprehensive income for the
year
|
-
|
-
|
-
|
7
|
-
|
7
|
|
Total comprehensive loss for the year
|
-
|
-
|
-
|
7
|
(8,175)
|
(8,168)
|
|
Contributions by and distributions to owners
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expiry of share options
|
-
|
-
|
(1,029)
|
-
|
1,029
|
-
|
|
Share-based payments
|
-
|
-
|
85
|
-
|
-
|
85
|
|
At
31 March 2023
|
22,278
|
34,581
|
23,442
|
30
|
(32,208)
|
48,123
|
|
|
|
|
|
|
|
|
|
Loss for the year
|
-
|
-
|
-
|
-
|
(2,170)
|
(2,170)
|
|
Other comprehensive loss for the
year
|
-
|
-
|
-
|
(3)
|
-
|
(3)
|
|
Expiry of share options
|
-
|
-
|
-
|
-
|
-
|
-
|
|
Total comprehensive loss for the year
|
-
|
-
|
-
|
(3)
|
(2,170)
|
(2,173)
|
|
Contributions by and
distributions to owners
|
|
|
|
|
|
|
|
Expiry of share options
|
-
|
-
|
(382)
|
-
|
382
|
-
|
|
Share-based payments
|
-
|
-
|
26
|
-
|
-
|
26
|
|
At
31 March 2024
|
22,278
|
34,581
|
23,086
|
27
|
(33,996)
|
45,976
|
Consolidated cash flow
statement
for the year ended 31 March
2024
|
|
Note
|
2024
£000
|
2023
£000
|
|
Cash
flows from operating activities
|
|
|
|
|
Loss for the year
|
|
(2,170)
|
(8,175)
|
|
Adjustments for:
|
|
|
|
|
Amortisation of intangible
assets
|
4
|
3,287
|
2,891
|
|
Depreciation of right of use
assets
|
4
|
197
|
184
|
|
Depreciation of property, plant and
equipment
|
4
|
47
|
56
|
|
Share-based payment charge
|
4
|
26
|
85
|
|
Impairment of intangible
assets
|
4
|
-
|
6,014
|
|
Exceptional items
|
|
-
|
125
|
|
Net finance cost
|
|
67
|
77
|
|
Income tax
|
|
(1,123)
|
(1,458)
|
|
Cash
flow from operating activities before changes in working
capital
|
|
331
|
(201)
|
|
Decrease in trade and other
receivables
|
|
6,509
|
813
|
|
Decrease in trade and other
payables
|
|
(4,796)
|
(248)
|
|
Cash
generated from operations
|
|
2,044
|
364
|
|
Net foreign exchange
movements
|
|
3
|
10
|
|
Net finance cost paid
|
|
(47)
|
(83)
|
|
Tax received / (paid)
|
|
301
|
(285)
|
|
Net
cash generated from operating activities before exceptional
items
|
|
2,301
|
6
|
|
Net cash flows on exceptional
items
|
|
-
|
(80)
|
|
Net
cash generated from / (used in) operating
activities
|
|
2,301
|
(74)
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
Purchase of property, plant and
machinery
|
10
|
(42)
|
(57)
|
|
Purchase of intangibles
|
9
|
(1,032)
|
(1,280)
|
|
Net
cash used in investing activities
|
|
(1,074)
|
(1,337)
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
Repayment of lease
liabilities
|
15
|
(216)
|
(200)
|
|
Net
cash used in financing activities
|
|
(216)
|
(200)
|
|
|
|
|
|
|
Net
increase / (decrease) in cash and cash
equivalents
|
|
1,011
|
(1,611)
|
|
Foreign exchange movement on cash and
cash equivalents
|
|
(1)
|
-
|
|
Cash and cash equivalents at the
beginning of the period
|
|
3,964
|
5,575
|
|
Cash
and cash equivalents at the end of the period
|
|
4,974
|
3,964
|
Notes to the consolidated financial
statements
for the year ended 31 March
2024
1.
Basis of Preparation and Accounting Policies
These Consolidated
Financial Statements have been prepared in accordance
with UK adopted International Accounting Standards and
are in conformity with the requirements of the Companies Act 2006.
They do not include all of the information required for full annual
statements and should be read in conjunction with the 2024 Annual
Report.
The comparative figures for the
financial year 31 March 2023 have been extracted from the Group's
statutory accounts for that financial year. The statutory accounts
for the year ended 31 March 2023 have been filed with the registrar
of Companies. The auditor reported on those accounts: their report
was (i) unqualified, (ii) did not include references to any matters
to which the auditor drew attention by way of emphasis without
qualifying the reports and (iii) did not contain statements under
section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year
ended 31 March 2024 were approved by the Board of Directors on 23
July 2024 and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting on 24 September
2024.
The financial information contained
in this announcement does not constitute statutory accounts for the
year ended 31 March 2024 or 2023 as defined by Section 434 of the
Companies Act 2006.
Going
concern
Having made enquiries, the Directors
have a reasonable expectation that the Group has adequate resources
to continue in operational existence for at least twelve months
from the date of signing these financial statements. Accordingly,
they continue to adopt the going concern basis in preparing these
consolidated financial statements.
The Directors continue to regularly
review the Group's going concern position, considering the impact
of potential future trading downturns should there be another
global event or further economic challenges. Over the past two
years some of the Group's customers have experienced challenging
trading conditions which has resulted in delays to projects, which
impacted the business's performance.
At 31 March 2024 the Group has been
able to report a robust financial position and is well capitalised
with a net cash position of £5.0 million (2022: £4.0
million).
The Directors have reviewed detailed
budget cash flow forecasts for the period to 30 September 2025 and
have challenged the assumptions used to create these budgets. The
budget figures are carefully monitored against actual outcomes each
month and variances are highlighted and discussed at Board level on
a quarterly basis as a minimum.
The Board is pleased to report that
trading in the current year has started solidly and for the first
quarter ended 30 June 2024 is broadly in line with management's
expectations.
The Directors have reviewed and
challenged a reverse stress test scenario on the Group up to
September 2025. The purpose of the reverse stress test for the
Group is to test the impact on the Group's cash if the assumptions
in the budget are altered.
The reverse stress test assumes
significant adjustments to the Group's budget which include
the scaling back of revenues across all business lines, for the
year ended 31 March 2025 and onwards, by around 50%. Services
revenues have been reduced to exclude significant opportunities in
discussion with existing customers, delay some material renewals
and exclude 50% of identified new business deals. Software
revenues have been reduced with renewal rates lowered and all new
business lines removed with the exception of the Access Management
product new business revenues which have been reduced by 75%.
Costs have been scaled back in line with the reduction
in revenues. The resulting outcome of the stress-test
forecasts that the Group would have sufficient cash resources to
service its liabilities during the periods reviewed.
In the event that the performance of
the Group is not in line with the projections, action will be taken
by management to address any potential cash shortfall for the
foreseeable future. The actions that could be taken by the
Directors include both a review and restructuring of
employment‑related costs. Additionally, the Directors would seek to
negotiate access to other sources of finance from the Company's
relationship banks.
Overall, the sensitised cash flow
forecast demonstrates that the Group will be able to pay its debts
as they fall due for the period to at least 30 September 2025 and
therefore the Directors are satisfied there are no material
uncertainties to disclose regarding going concern. The Directors
are therefore satisfied that the financial statements should
be prepared on the going concern basis.
Material accounting
judgements, estimates and assumptions
The preparation of financial
statements requires management to make judgements, estimates and
assumptions that affect the amounts reported for income and
expenses during the year and that affect the amounts reported for
assets and liabilities at the reporting date.
Revenue recognition of material contracts
Management make judgements,
estimates and assumptions in determining the revenue recognition of
material contracts sold by the Group's Services division. The Group
works with large enterprise clients, providing services and
solutions to support the clients' needs. In many cases a
third-party's products or services will be provided as part of a
solution. Management consider the implications around timing of
recognition, with factors such as determining the point control
passes to the client and the subsequent fulfilment of the
Group's performance obligations. In addition to this, management
consider if it is acting as agent or principal. Further
details of how the Group determines revenue recognition and if it
is acting as agent or principal can be found within the relevant
notes within this section.
Impairment of goodwill, intangible assets and investment
in subsidiaries
Management make judgements,
estimates and assumptions in supporting the fair value of goodwill,
intangible assets and investments in subsidiaries. The Group
carries out annual impairment reviews to support the fair value of
these assets. In doing so, management estimate future growth rates,
weighted average cost of capital and terminal values. Further
information can be found in note 9.
Basis of
consolidation
The Group's consolidated financial
statements incorporate the results and net assets of Shearwater
Group plc and all its subsidiary undertakings made up to 31 March
each year. Subsidiaries are all entities over which the Group has
control (see note 2 of the Company financial statements). 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. 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
inter-group transactions, balances, income and expenses are
eliminated on consolidation.
Business combinations and
goodwill
Business combinations are accounted
for using the acquisition accounting method. This involves
recognising identifiable assets (including previously unrecognised
intangible assets) and liabilities of the acquired business
at fair value. Any excess of the cost of the business
combination over the Group's interest in the net fair value of the
identifiable assets and liabilities is recognised in the
consolidated statement of financial position as goodwill and is not
amortised. To the extent that the net fair value of the acquired
entity's identifiable assets and liabilities is greater than the
cost of the investment, a gain is recognised immediately in the
consolidated statement of comprehensive income.
After initial recognition, goodwill
is stated at cost less any accumulated impairment losses, with the
carrying value being reviewed for impairment at least annually and
whenever events or changes in circumstances indicate that the
carrying value may be impaired. Goodwill assets considered
significant in comparison to the Group's total carrying amount of
such assets have been allocated to cash-generating units or groups
of cash-generating units. Where the recoverable amount of the
cash-generating unit is less than its carrying amount
including goodwill, an impairment loss is recognised in the
consolidated statement of comprehensive income.
Acquisition costs are recognised in
the consolidated statement of comprehensive income as
incurred.
Revenue
The Group recognises revenue in
accordance with IFRS 15: Revenue from Contracts with Customers.
Revenue with customers is evaluated based on the five-step model
under IFRS 15: Revenue from Contracts with Customers:
(1) identify the contract with the customer; (2) identify
the performance obligations in the contract; (3) determine
the transaction price; (4) allocate the transaction price
to separate performance obligations; and (5) recognise
revenues when (or as) each performance obligation
is satisfied.
Revenue recognised in the statement
of comprehensive income but not yet invoiced is held on the
statement of financial position within accrued income. Revenue
invoiced but not yet recognised in the statement of comprehensive
income is held on the statement of financial position within
deferred revenue.
The Group's revenues are comprised
of a number of different products and services across our two
divisions, details of which are provided below:
Services
·
Sale of third-party hardware, software, warranties
and internal support:
a) where the
contract entails only one performance obligation to provide
software or hardware, revenue is recognised in full at a point in
time upon delivery of the product to the end client.
This delivery will either be in the form of the physical
delivery of a product or the emailing of access codes to the client
for them to access third‑party software or warranties;
and
b) where a
contract to supply external hardware, software and/or warranties
also includes an element of ongoing internal support, multiple
performance obligations are identified and an allocation of the
total contract value is allocated to each performance
obligation based on the standalone costs of each performance
obligation. The respective costs of each performance obligation are
traceable to supplier invoice and applying the fixed margins,
standalone selling prices are determined. Internal support is
recognised equally over the period of time detailed in the
contract.
·
Sales of consultancy services are usually based
on a number of consultancy days that make up the
contracted consideration. Consultancy days generally comprise field
work and (where required) report writing and delivery which are
considered to be of equal value to the client. Revenue is
recognised over time based on the number of consultancy days
provided within the period compared to the total in
the contract.
Software
·
Software licences whereby the customer buys
software that it sets up and maintains on its premises is
recognised fully at the point the licence key/access has been
granted to the client. The Group sells the majority of its services
through channels and distributors who are responsible for providing
first and second line support to the client.
·
Software licences for the new 'Authentication as a
Service' product whereby the customer accesses the product via
a cloud environment maintained by the Company is recognised in two
parts, whereby part of the subscription is recognised at the point
that the licence key is provided to the customer, with the
remaining part recognised evenly over the length of
the contract. This deferred proportion represents
the obligation to maintain and support the platform that
the software runs on.
Principal versus agent
considerations
In instances where the Group is
involving another party in providing goods or services to a
customer the Group considers whether the nature of its promise is a
performance obligation to provide the specified goods or services
itself or to arrange for those goods or services to be provided by
the other party to determine whether it is a principal or an agent.
The business will firstly identify the specific goods and/or
services to be supplied to the customer.
In determining whether the business
is acting as agent or principal the business assesses whether it
controls each specified good or service before that good is
transferred to the customer. It will consider:
·
Who is responsible for fulfilling the promise to
provide the specific product or service.
·
If the business is carrying a liability risk for
the specific good or service prior to it being supplied
to the customer.
·
If the business has discretion over
pricing.
In addition to the points noted
above, the business also considers the following unique selling
points:
·
Pre-sales process:
In some cases, the business invests
heavily in working with the customer to understand their
requirements, before designing/recommending a solution that
integrates various third-party products or services
to meet the customers' requirements.
·
Levels of ongoing services:
In some cases, whilst not always
contracted, the business will continue to support the customer
as needed to ensure that their solution is working.
This may include co-ordination of the maintenance
and support with third parties and provision of engineers to
remove and send back faulty product.
Where the Group is a principal,
revenues are recognised on a gross basis in the statement of
comprehensive income while when an agent revenues are recognised on
a net basis in the statement of comprehensive income.
Segmental
reporting
For internal reporting and
management purposes, the Group is organised into two
reportable segments based on the types of products and services
from which each segment derives its revenue - Services and
Software. The Group's operating segments are identified on the
basis of internal reports that are regularly reviewed by the chief
operating decision maker in order to allocate resources to the
segment and to assess its performance.
Current and deferred income
tax
The charge for taxation is based on
the profit or loss for the year and takes into account deferred
tax. Deferred tax is the tax expected to be payable or
recoverable on temporary differences between the carrying amounts
of assets and liabilities in the financial statements and the
corresponding tax based in the computation of taxable profit or
loss and is accounted for using the balance sheet
method.
The current income tax charge is
calculated on the basis of the tax laws enacted or
substantively enacted at the balance sheet date in the countries
where the Group's subsidiaries operate and generate taxable income.
Management periodically evaluate positions taken in tax returns
with respect to situations where applicable tax regulation is
subject to interpretation. It establishes provisions where
appropriate on the basis of amounts expected to be paid to the tax
authorities.
Deferred tax assets are only
recognised to the extent that it is probable that future taxable
profit will be available in the foreseeable future against which
the temporary differences can be utilised.
Deferred income tax assets and
liabilities are measured at the rates that are expected to apply
when the related asset is realised, or liability settled, based on
tax rates and laws enacted or substantively enacted at the
reporting date.
Intangible
assets
Intangible assets are carried at
cost less accumulated amortisation and accumulated impairment
losses. Intangible assets acquired as part of a business
combination are recognised outside goodwill if the assets are
separable or arise from contractual or other legal rights and their
fair value can be measured reliably. Material expenditure on
internally developed intangible assets is taken to the consolidated
statement of financial position if it satisfies the
six‑step criteria
required under IAS 38.
Intangible assets with a finite life
have no residual value and are amortised over their expected useful
lives as follows:
|
Computer software (including
in-house developed software)
|
2-5 years straight-line
basis
|
|
Customer relationships
|
1-15 years straight-line
basis
|
|
Software
|
10 years straight-line
basis
|
|
Trade names
|
10 years straight-line
basis
|
The amortisation expense on
intangible assets with finite lives is recognised in the statement
of comprehensive income within administrative expenses. The
amortisation period and the amortisation method for intangible
assets with finite useful lives are reviewed at least
annually.
The carrying value of intangible
assets is reviewed for impairment whenever events or changes in
circumstances indicate the carrying value may not be
recoverable.
Property, plant and
equipment
Property, plant and equipment is
stated at historical cost less accumulated depreciation. Cost
includes the original purchase price of the asset plus any costs of
bringing the asset to its working condition for its intended use.
Depreciation is provided at the annual rates set out below, on a
straight-line basis, in order to write down each asset to its
residual value over its estimated useful life. The assets'
residual values and useful lives are reviewed, and adjusted if
appropriate, at the end of each reporting period.
|
Office equipment
|
25% - 33% per annum
|
|
Right of use assets
|
Shorter of useful life of the asset
or lease term
|
Gains and losses on disposals are
determined by comparing the proceeds with the carrying amount
and are recognised, as adjusted items if significant,
within the statement of comprehensive income.
Financial
instruments
Shearwater's financial assets and
financial liabilities are recognised in the Group's balance sheet
when the Group becomes a party to the contractual provisions of the
instrument.
Financial
assets
Trade and other receivables are
measured at amortised cost less a provision for doubtful debts,
determined as set out below in 'impairment of financial
assets'. Any write‑down of these assets is expensed to the statement of
comprehensive income.
The Group uses derivatives where
there is a material surplus or deficit of non-sterling receipts and
payments. Forward contracts are measured at each balance sheet
based on the prevailing closing exchange rates with exchange
gains/(losses) recognised in the statement of comprehensive
income.
Impairment of financial assets
The impairment model under IFRS 9
reflects expected credit losses, as opposed to only incurred credit
losses under IAS 39. Under the impairment approach in IFRS 9,
it is not necessary for a credit event to have occurred
before credit losses are recognised. Instead, the Group always
accounts for expected credit losses and changes in those
expected credit losses. The amount of expected credit losses are
updated at each reporting date.
The impairment model only applies to
the Group's financial assets that are debt instruments measured at
amortised cost or FVTOCI as well as the Group's contract assets
and issued financial guarantee contracts. The Group
has applied the simplified approach to recognise lifetime
expected credit losses for its trade receivables and contracts
assets as required or permitted by IFRS 9.
Expected credit losses are
calculated with reference to average loss rates incurred in
the three most recent reporting periods then adjusted taking into
account forward-looking information that may either increase or
decrease the current rate. The Group's average combined loss rate
is 0.27% (2023: 0.24%). This percentage rate is then applied to
current receivable balances using a probability risk spread as
follows:
·
80% of debt not yet due (i.e. the Group's average
combined loss rate of 0.27% is discounted by 20%, meaning a 0.22%
provision would be made to debt not yet due);
·
85% of debt that is <30 days
overdue;
·
90% of debt that is 30-60 days overdue;
·
95% of debt that is 60-90 days overdue;
and
·
100% of debt that is >90 days
overdue.
Management have performed the
calculation to ascertain the expected credit loss provision, which
works out to £18,935 (2023: £29,864). The movement has been
recognised in the statement of comprehensive income. To date, the
Group has a record of minimal bad debts, with less than £25,000
being written off in the past three years.
The Group derecognises a financial
asset only when the contractual rights to the cash flows from the
asset expire, or when it transfers the financial asset and
substantially all the risks and rewards of ownership of the asset
to another entity. On derecognition of a financial asset measured
at amortised cost, the difference between the asset's carrying
amount and the sum of the consideration received and receivable is
recognised in the statement of comprehensive
income.
Financial
liabilities
Trade and other payables
Financial liabilities within trade
and other payables are initially recognised at fair value,
which is usually the invoiced amount. They are subsequently
carried at amortised cost using the effective interest method
(if the time value of money is significant).
Loans are initially recognised at
fair value, which is the amount stated in the loan agreement.
Subsequently, loan balances are restated to include any
interest that has become payable.
Lease liabilities have been
recognised at fair value in line with the requirements of IFRS 16.
Details of lease disclosures are included in note 15.
The Group derecognises financial
liabilities when, and only when, the Group's obligations are
discharged, cancelled or they expire. The difference between the
carrying amount of the financial liability derecognised and the
consideration paid and payable, including any non-cash assets
transferred or liabilities assumed, is recognised
in the statement of comprehensive income.
Forward
contracts
Foreign exchange risk arises when
individual group operations enter into transactions denominated in
a currency other than their functional currency. Where the risk to
the Group is considered to be significant, the Group has a policy
to enter into forward foreign exchange contracts. Further details
can be found in note 18.
Leases
Leases are accounted for under IFRS
16 which sets out the principles for recognition, measurement,
presentation and disclosures of leases and requires lessees to
account for most leases under a single on‑balance sheet model.
Right of use assets
In determining if a lease exists,
management considers if a contract conveys the right to
control the use of an identified asset for a period of time in
return for a consideration. When assessing whether a contract
states a right to control the use of an identified asset,
management considers:
·
if a contract involves the use of an identified
asset, this could be specified explicitly or implicitly and should
be physically distinct;
·
if the Group has obtained the right to gain
substantially all of the economic benefit from the use of the
asset throughout the period of use; and
·
if the Group has the right to direct the use of
the asset.
Identified 'right of use assets'
since 1 April 2019 are valued at the commencement date of the lease
(this is usually the date the underlying asset is available for
use). For leases that began prior to 1 April 2019, a right of use
asset was created at 1 April 2019 when the Group adopted
IFRS 16.
Right of use assets are depreciated
on a straight-line basis from the commencement date (this is
usually the date the underlying asset is available for use, or
1 April 2019 if the lease commenced before this date) to
the earlier of the end of useful life of the right of use asset or
the end of the lease term. The right of use asset may be subject to
impairment following certain remeasurement of lease
liabilities. Details of the Group's right of use assets are
contained in note 10 of the consolidated financial
statements.
Lease liability
At the commencement date of a lease
(or 1 April 2019 for leases which commenced before this date)
the Group recognises lease liabilities, measuring them at the
present value of lease payments at commencement of the lease (or 1
April 2019 for leases which commenced before this date) discounted
at the determined incremental borrowing rate.
The lease liability is measured at
the amortised cost using the effective interest method. Should
there be a change in expected future lease payments arising from a
lease modification or if the Group changes its assessment of
whether it will exercise an extension or termination option, the
lease liability would be remeasured.
Remeasurement of a lease liability
will give rise to a corresponding adjustment being made to the
carrying value of the right of use asset.
Lease liabilities are detailed in
notes 12, 13 and 15 of the consolidated financial
statements.
Practical expedients
IFRS 16 provides for certain
optional practical expedients, including those related to the
initial adoption of the standard. The Group applies the following
practical expedients when applying IFRS 16 to leases previously
classified as operating leasing under IAS 17:
• applied a single discount rate to
all leases with similar characteristics;
• applied the exemption not to
recognise right of use assets and liabilities for leases with less
than twelve
months of the lease term remaining
as at the date of initial application; and
• applied the exemption for
low-value assets whereby leases with a value under £5,000 (usually
IT equipment) have been classed as short-term leases and not
recognised on the statement of financial position even if the
initial term of the lease from the lease commencement date may be
more than twelve months.
Incremental borrowing rate
IFRS 16 states that all components
of a lease liability are required to be discounted to reflect the
present value of the payments. Where a lease (or group of leases)
does not state an implicit rate, an incremental borrowing rate
should be used.
The incremental borrowing rate
should represent what the lessee would have to pay to borrow over a
similar term and with similar security, the funds necessary to
obtain an asset of similar value to the right of use asset
in a similar economic environment.
The Group has applied an incremental
borrowing rate which it uses to discount all identified leases
across the Group. The Group has one type of right of use assets,
all of which are located in the United Kingdom.
Share-based
payments
In order to calculate the charge for
share-based payments as required by IFRS 2, the Group makes
estimates principally relating to assumptions used in
its option-pricing model as set out in note 17.
The cost of equity-settled
transactions with employees, and transactions with suppliers where
fair value cannot be estimated reliably, is measured with reference
to the fair value of the equity instrument. The fair value of
equity‑settled
instruments is determined at the date of grant, taking into
account market-based vesting conditions. The fair value is
determined using an option pricing model.
No expense is recognised for awards
that do not ultimately vest, except for awards where vesting is
conditional upon a market condition, which are treated as vesting
irrespective of whether or not the market condition is satisfied,
provided that all other performance conditions are
satisfied.
At each reporting date before
vesting, the cumulative expense is calculated, representing the
extent to which the vesting period has expired and management's
best estimate of the achievement or otherwise of non-market
conditions, the number of equity instruments that will likely vest,
or in the case of an instrument subject to market condition, be
treated as vesting as described above. The movement in cumulative
expense since the previous reporting date is recognised in the
statement of comprehensive income, with the corresponding
entry in equity.
Pensions
The Group operates a defined
contribution personal pension scheme. The assets of this
scheme are held separately from those of the Company in an
independently administered fund. The pension charge represents
contributions payable by the Company to the fund.
Uncertainty over income tax
treatments
The Group applies the guidance in
IFRIC 23 on the accounting for current and deferred tax liabilities
and assets in circumstances in which there is uncertainty over
income tax treatments. The interpretation requires:
·
the Group to determine whether uncertain
tax treatments should be considered separately,
or together as a Group, based on which approach
provides better predictions of the resolution;
·
the Group to determine if it is probable that the
tax authorities will accept the uncertain tax treatment;
and
·
if it is not probable that the uncertain tax
treatment will be accepted, measure the tax uncertainty based on
the most likely amount or expected value, depending on whichever
method better predicts the resolution of the uncertainty. This
measurement is required to be based on the assumption that each of
the tax authorities will examine amounts they have a right to
examine and have full knowledge of all related information when
making those examinations.
New
standards
and interpretations
applied
There were no new standards or
amendments or interpretations to existing standards that became
effective during the year that were material to the Group.
These include an amendment to IAS 12- Deferred Tax related to
Assets and Liabilities arising from a Single
Transaction).
No new standards, amendments or
interpretations to existing standards having an impact on the
financial statements that have been published and that are
mandatory for the Group's accounting periods beginning on or before
1 April 2023, or later periods, have been adopted early.
New standards and
interpretations not applied
The following new standards,
amendments and interpretations have not been adopted in the
current year:
|
International Financial Reporting Standard
(IFRS/IAS)
|
Effective
date
|
Adopted by the
Group
|
|
Liability in a Sale and Leaseback
(Amendments to IFRS 16 Leases)
|
1 January
2024
|
1 April
2024
|
|
Classification of Liabilities as
Current or Non-Current (Amendments to IAS 1 Presentation of
Financial Statements)
|
1 January
2024
|
1 April
2024
|
|
Non-current Liabilities with
Covenants (Amendments to IAS 1 Presentation of Financial
Statements)
|
1 January
2024
|
1 April
2024
|
|
Supplier Finance Arrangements
(Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial
Instruments: Disclosures)
|
1 January
2024
|
1 April
2024
|
|
Lack of Exchangeability (Amendments
to IAS 21 The Effects of Changes in Foreign Exchange
Rates)
|
1 January
2025
|
1 April
2025
|
2.
Measure of profit/loss
To provide shareholders with a
better understanding of the trading performance of the Group,
additional alternative performance measures ('APMs') are included;
Adjusted EBITDA and Adjusted loss before tax have been calculated
as profit/loss before tax after adding back the following items,
which can distort the underlying performance of the
Group:
Adjusted loss before
tax
·
Amortisation of acquired intangibles.
·
Share-based payments.
·
Impairment of intangible assets.
·
Exceptional items
Adjusted
EBITDA
In addition to the adjusting items
highlighted above in the adjusted loss before tax:
·
Finance costs.
·
Finance income.
·
Depreciation (including amortisation of right of
use assets).
·
Amortisation of intangible assets - computer
software (including in-house software development).
Adjusted EBITDA and adjusted loss
before tax reconciles to loss before tax as follows:
|
|
2024
£000
|
2023
£000
|
|
Loss
before tax
|
(3,293)
|
(9,633)
|
|
Amortisation of acquired
intangibles
|
2,099
|
2,099
|
|
Impairment of intangible
assets
|
-
|
6,014
|
|
Exceptional items
|
533
|
125
|
|
Share-based payments
|
26
|
85
|
|
Adjusted loss before tax
|
(635)
|
(1,310)
|
|
Net finance costs
|
67
|
77
|
|
Depreciation
|
244
|
240
|
|
Amortisation of intangible assets -
computer software (including in-house software
development)
|
1,188
|
792
|
|
Adjusted EBITDA
|
864
|
(201)
|
3.
Segmental information
In accordance with IFRS 8, the
Group's operating segments are based on the operating results
reviewed by the Board, which represents the chief operating
decision maker.
The Group is organised into two
reportable segments based on the types of products and services
from which each segment derives its revenue - Services and
Software.
Segment information for the twelve
months ended 31 March 2024 is presented below. The Group's assets
and liabilities are not presented by segment as the Directors do
not review assets and liabilities on a segmental basis.
|
|
Revenue
Year ended
31 March 2024
£000
|
Profit/(Loss)
Year ended
31 March 2024
£000
|
Revenue
Year ended
31 March 2023
£000
|
Profit/(Loss)
Year ended
31 March 2023
£000
|
|
Services1
|
20,270
|
1,467
|
23,830
|
149
|
|
Software1
|
2,373
|
869
|
2,856
|
977
|
|
Group Revenue / Group trading
EBITDA1
|
22,643
|
2,336
|
26,686
|
1,126
|
|
Group costs1
|
|
(1,472)
|
|
(1,327)
|
|
Adjusted EBITDA
|
|
864
|
|
(201)
|
|
Amortisation of
intangibles
|
|
(3,287)
|
|
(2,891)
|
|
Impairment of intangible
assets
|
|
-
|
|
(6,014)
|
|
Depreciation
|
|
(244)
|
|
(240)
|
|
Exceptional items
|
|
(533)
|
|
(125)
|
|
Share-based payments
|
|
(26)
|
|
(85)
|
|
Net finance costs
|
|
(67)
|
|
(77)
|
|
Loss
before tax
|
|
(3,293)
|
|
(9,633)
|
1 Figures disclosed in the
profit column for Services and Software profitability is adjusted
EBITDA.
Segmental information by
geography
The Group is domiciled in the United
Kingdom and currently the majority of its revenues come from
external customers that are transacted in the United Kingdom. A
number of transactions which are transacted from the United Kingdom
represent global framework agreements, meaning our services, whilst
transacted in the United Kingdom, are delivered globally. The
geographical analysis of revenue detailed below is on the basis of
country of origin in which the master agreement is held with the
customer (where the sale is transacted).
|
|
2024
£000
|
2023
£000
|
|
United Kingdom
|
17,867
|
18,585
|
|
Europe (excluding the UK)
|
3,428
|
6,043
|
|
North America
|
1,050
|
1,620
|
|
Rest of the world
|
298
|
438
|
|
|
22,643
|
26,686
|
All of the Group's non-current
assets are held within the United Kingdom.
In the year to 31 March 2024 one
customer within the Group made up more than 10% of the Group's
revenue. This customer contributed £4.3 million to the Group's
Services division. In the prior year, one customer made up more
than 10% of the Group's revenue, contributing £8.0 million to the
Group's Services division.
4.
Expenses and auditor's remuneration
Operating loss is stated after
charging/(crediting):
|
|
2024
£000
|
2023
£000
|
|
Depreciation of fixed
assets
|
244
|
240
|
|
Amortisation of
intangibles
|
3,287
|
2,891
|
|
External auditor's
remuneration:
|
|
|
|
- Audit fee for annual audit of the
Group and Company financial statements
|
132
|
103
|
|
- Audit fee for annual audit of the
subsidiary financial statements
|
231
|
179
|
|
Share-based payments
|
26
|
85
|
|
Impairment of intangible
assets
|
-
|
6,014
|
|
Exceptional items
|
533
|
125
|
|
Unrealised (profit)/loss on forward
contracts
|
(194)
|
407
|
Exceptional items include one off
expenses relating to completion of the restructuring which
commenced at the end of the previous financial year and the cost of
a one-off strategic project in the second half of the year to 31
March 2024.
5.
Staff costs
Total staff costs within the Group
comprise of all Directors' and employee costs for the financial
year.
|
|
2024
£000
|
2023
£000
|
|
Wages and salaries
|
6,769
|
6,864
|
|
Social security costs
|
802
|
835
|
|
Pension costs
|
200
|
207
|
|
Share-based payments
|
26
|
85
|
|
|
7,797
|
7,991
|
The weighted average monthly number
of employees, including Directors, employed by the Group and
Company during the year was:
|
|
2024
No.
|
2023
No.
|
|
Administration
|
21
|
20
|
|
Production
|
45
|
53
|
|
Sales and marketing
|
28
|
26
|
|
|
94
|
99
|
6.
Interest costs
|
|
2024
£000
|
2023
£000
|
|
Interest payable on revolving credit
facility
|
61
|
56
|
|
Interest payable on lease
liabilities
|
20
|
15
|
|
Other interest payments
|
1
|
6
|
|
|
82
|
77
|
|
Interest receivable
|
(15)
|
-
|
|
|
67
|
77
|
7.
Taxation
|
|
2024
£000
|
2023
£000
|
|
Current tax:
|
|
|
|
UK corporation tax at current rates
on UK loss for the year
|
-
|
-
|
|
Under/(over) provision in respect of
prior year
|
109
|
(442)
|
|
|
109
|
(442)
|
|
Foreign tax
|
(20)
|
2
|
|
Total current tax charge / (credit)
|
89
|
(440)
|
|
Deferred tax movement in the
period
|
(1,212)
|
(1,018)
|
|
Income tax credit
|
(1,123)
|
(1,458)
|
|
Reconciliation of taxation:
|
|
|
|
Loss
before tax
|
(3,293)
|
(9,633)
|
|
|
|
|
|
Loss multiplied by the average rate
of corporation tax in the year of 25% (2023: 19%)
|
(823)
|
(1,830)
|
|
Tax
effects of:
|
|
|
|
Expenses not deductible for tax
purposes
|
333
|
1,532
|
|
Adjustments for previous
periods
|
109
|
(442)
|
|
Foreign tax rate
differences
|
(12)
|
(1)
|
|
Increase to deferred tax asset owing
to changing tax rate from 1 April 2023
|
-
|
(136)
|
|
R&D relief
|
(423)
|
(130)
|
|
Other items
|
(307)
|
(277)
|
|
Brought forward losses
|
-
|
(174)
|
|
Income tax credit
|
(1,123)
|
(1,458)
|
8.
Earnings per share
Basic loss per share is calculated
by dividing the loss attributable to the ordinary shareholders by
the weighted average number of ordinary shares outstanding during
the period.
Diluted loss per share is the same
as Basic loss per share as the potential dilutive shares are
anti-dilutive for the twelve months ended 31 March 2024 and for the
twelve months ended 31 March 2023. Please see notes 16 and 17
of the consolidated financial statements for more
details.
Adjusted earnings per share has been
calculated using adjusted earnings calculated as loss after
taxation but before:
·
Amortisation of acquired intangibles after
tax.
·
Impairment of intangible assets.
·
Exceptional items after tax.
·
Share-based payments.
The calculation of the basic and
diluted profit/loss per ordinary share from total operations
attributable to shareholders is based on the following
data:
|
|
2024
£000
|
2023
£000
|
|
Net
loss from total
operations
|
|
|
|
Loss for the purposes of basic and
diluted earnings/(loss) per share being net profit attributable to
shareholders
|
(2,170)
|
(8,175)
|
|
Add/(remove):
|
|
|
|
Amortisation of acquired intangibles
(net of tax)
|
1,808
|
1,878
|
|
Impairment of intangible
assets
|
-
|
6,014
|
|
Exceptional items (net of
tax)
|
400
|
101
|
|
Share-based payments
|
26
|
85
|
|
Adjusted profit/(loss) for the purposes of adjusted earnings
per share
|
64
|
(97)
|
|
|
Number
|
Number
|
|
Number of shares
|
|
|
|
Weighted average number of ordinary
shares for the purpose of basic and adjusted loss per
share
|
23,826,379
|
23,818,674
|
|
|
Pence
|
Pence
|
|
Basic and diluted loss per
share
|
(9.1)
|
(34.3)
|
|
Adjusted basic and Adjusted diluted
profit/(loss) per share
|
0.3
|
(0.4)
|
9.
Intangible assets
|
|
Goodwill
£000
|
Customer
relationships
£000
|
Software
£000
|
Tradenames
£000
|
Gold
exploration
£000
|
Total
£000
|
|
Cost
|
|
|
|
|
|
|
|
At 1 April 2022
|
36,660
|
10,838
|
8,640
|
6,826
|
1,005
|
63,969
|
|
Additions
|
-
|
-
|
1,280
|
-
|
-
|
1,280
|
|
At
31 March 2023
|
36,660
|
10,838
|
9,920
|
6,826
|
1,005
|
65,249
|
|
Additions
|
-
|
-
|
1,032
|
-
|
-
|
1,032
|
|
At
31 March 2024
|
36,660
|
10,838
|
10,952
|
6,826
|
1,005
|
66,281
|
|
Accumulated amortisation
|
|
|
|
|
|
|
|
At 1 April 2022
|
-
|
3,623
|
4,417
|
2,360
|
1,005
|
11,405
|
|
Amortisation for the year
|
-
|
934
|
1,274
|
683
|
-
|
2,891
|
|
Impairment
|
6,014
|
-
|
-
|
-
|
-
|
6,014
|
|
At
31 March 2023
|
6,014
|
4,557
|
5,691
|
3,043
|
1,005
|
20,310
|
|
Amortisation for the year
|
-
|
934
|
1,670
|
683
|
-
|
3,287
|
|
At
31 March 2024
|
6,014
|
5,491
|
7,361
|
3,726
|
1,005
|
23,597
|
|
Net
book amount
|
|
|
|
|
|
|
|
At
31 March 2024
|
30,646
|
5,347
|
3,591
|
3,100
|
-
|
42,684
|
|
At 31 March 2023
|
30,646
|
6,281
|
4,229
|
3,783
|
-
|
44,939
|
|
At 31 March 2022
|
36,660
|
7,215
|
4,223
|
4,466
|
-
|
52,564
|
Software intangible assets comprise
acquired software assets plus software assets developed both
in-house and externally. The amortisation charge for the year
includes £2.1 million amortisation on acquired intangible assets
and £1.2 million amortisation of internally developed software
assets.
The Group tests goodwill annually
for impairment. The recoverable amount of goodwill is determined as
the higher of the value-in-use calculation or fair value less cost
of disposal for each cash‑generating unit (CGU). The
value-in-use calculations use pre-tax cash flow projections based
on financial budgets and forecasts approved by the Board covering a
five-year period. These pre-tax cash flows beyond the five -year
period are extrapolated using estimated long-term growth rates.
Following a restructuring of the Group during FY24, including the
commercial integration of Xcina Consulting into Brookcourt
Solutions and Geolang into SecurEnvoy, the Group now has three
separate CGUs (FY23: five CGUs). For all three CGUs a weighted
average cost of capital of 13.0% (FY23: 12.6%) and a terminal
value, based on a long-term growth rate of 2% (FY23: 2%) calculated
on year five cash flow has been used when testing
goodwill.
The following key assumptions around
revenue growth are summarised in the table below.
|
|
|
|
|
Software
|
Brookcourt
Solutions
|
Pentest
|
|
Year 1
|
28%
|
47%
|
0%
|
|
Year 2
|
20%
|
15%
|
10%
|
|
Year 3
|
20%
|
10%
|
8%
|
|
Year 4
|
15%
|
8%
|
6%
|
|
Year 5
|
15%
|
6%
|
6%
|
|
4
year CAGR1
|
17.5%
|
9.7%
|
7.5%
|
4 year CAGR represents the average
growth rate per year between FY25 and FY29.
No impairment charge has been
recorded in the year (In the prior year an impairment charge of
£6.0 million was recorded, writing down the goodwill balance held
for the Group's SecurEnvoy and Xcina businesses).
Sensitivity analysis has been
performed on each of the Group's CGUs which incorporates changes in
assumed revenue growth rates and profit margin growth in addition
to terminal value revenue growth rate and weighted cost of capital
(WACC). Outcomes of the following sensitivities, before tax, are
detailed below:
·
Reducing the terminal value by 1% from 2% to 1%
would flag insufficient headroom in one of the Group's CGUs
(Software) resulting in an impairment of £0.3m
·
Increasing the weighted average cost of capital by
1.0% from 13.0% to 14.0% would flag insufficient headroom in one of
the Group's CGUs (Software) resulting in an impairment of £0.7
million.
·
A 10% reduction in the assumed annual revenue
growth rates for each CGU from FY25 (maintaining forecast gross
profit margin % and adjusting administrative expenses in line with
the % revenue reduction) would, subject to no other changes, flag
insufficient headroom in each of the Group's CGUs resulting in a
potential impairment of £14.0 million.
·
A 15% reduction in the assumed annual revenue
growth rates for each CGU from FY25 (maintaining forecast gross
profit margin % and adjusting administrative expenses in line with
the % revenue reduction) would, subject to no other changes, flag
insufficient headroom in each of the Group's CGUs resulting in a
total potential impairment of £21.7 million.
Gold exploration assets date back to
before 2017 when the Group was known as Aurum Mining plc whose
principal activity was mining and exploration.
10.
Property, plant and equipment
|
|
Right of
use
assets
£000
|
Office
equipment
£000
|
Total
£000
|
|
Cost
|
|
|
|
|
At 1 April 2022
|
576
|
414
|
990
|
|
Additions
|
301
|
57
|
358
|
|
Disposals
|
-
|
(43)
|
(43)
|
|
At
31 March 2023
|
877
|
428
|
1,305
|
|
Additions
|
250
|
42
|
292
|
|
Disposals
|
(436)
|
-
|
(436)
|
|
At
31 March 2024
|
691
|
470
|
1,161
|
|
Accumulated depreciation
|
|
|
|
|
At 1 April 2022
|
375
|
300
|
675
|
|
Charge for the year
|
185
|
55
|
240
|
|
Disposals
|
-
|
(43)
|
(43)
|
|
At
31 March 2023
|
560
|
312
|
872
|
|
Charge for the year
|
197
|
47
|
244
|
|
Disposals
|
(436)
|
-
|
(436)
|
|
At
31 March 2024
|
321
|
359
|
680
|
|
Net
book amount
|
|
|
|
|
At
31 March 2024
|
370
|
111
|
481
|
|
At 31 March 2023
|
317
|
116
|
433
|
|
At 31 March 2022
|
201
|
114
|
315
|
Depreciation of property, plant and
equipment is charged to depreciation and amortisation expenses
within the statement of comprehensive income.
11.
Trade and other receivables
|
Non-current
|
2024
£000
|
2023
£000
|
|
Trade receivables
|
-
|
5,226
|
|
Accrued income
|
679
|
2,054
|
|
|
679
|
7,280
|
|
Current
|
2024
£000
|
2023
£000
|
|
Trade receivables
|
8,948
|
7,475
|
|
Accrued income
|
2,889
|
4,081
|
|
Prepayments and other
receivables
|
310
|
499
|
|
Corporation tax asset
|
245
|
291
|
|
|
12,392
|
12,346
|
The movement for the provision in
expected credit losses is stated below:
|
|
2024
£'000
|
2023
£'000
|
|
At 1 April
|
30
|
41
|
|
Movement in expected credit loss
provision
|
(10)
|
(11)
|
|
At
31 March
|
20
|
30
|
12.
Trade and other payables
|
|
2024
£000
|
2023
£000
|
|
Trade payables
|
7,320
|
3,265
|
|
Accruals and other
payables
|
3,529
|
8,031
|
|
Other taxation and social
security
|
1,275
|
518
|
|
Forward contract
|
213
|
275
|
|
Deferred income
|
137
|
147
|
|
Corporation tax
|
3
|
7
|
|
Lease liabilities
|
127
|
105
|
|
|
12,604
|
12,348
|
13.
Creditors: amounts falling due after more than one
year
|
|
2024
£000
|
2023
£000
|
|
Accruals and other
payables
|
385
|
5,284
|
|
Deferred tax
|
3,010
|
3,602
|
|
Lease liabilities
|
251
|
216
|
|
Forward contract
|
-
|
131
|
|
|
3,646
|
9,233
|
14.
Deferred tax
|
|
2024
£000
|
2023
£000
|
|
Non-current liabilities
|
|
|
|
Liability at 1 April
|
3,602
|
3,878
|
|
Deferred tax credit in the statement
of comprehensive income
|
(592)
|
(276)
|
|
Total deferred tax
|
3,010
|
3,602
|
Deferred tax balance at 31 March
2024 includes a £2.5 million (2023: £3.0 million) deferred tax
liability for acquired intangible assets including software and
trademarks. The remainder represents timing differences arising on
the difference between the net book value and tax written down
value of internally generated software and office
equipment.
|
|
2024
£000
|
2023
£000
|
|
Non-current assets
|
|
|
|
At 1 April
|
742
|
-
|
|
Credit to statement of comprehensive
income
|
274
|
742
|
|
Total deferred tax asset
|
1,016
|
742
|
The Group has tax losses of £4.1
million (2023: £3.0 million) across its Parent Company Shearwater
Group plc and four subsidiaries that are available for offset
against future taxable profits of the entity. A deferred tax asset
has been recognised in respect of tax losses brought forward and in
the current year which will be used to offset future taxable
profits.
15.
Lease liabilities
Lease liabilities at 31 March 2024,
which include the extension of some existing office leases, are
detailed below:
|
Lease liabilities
|
Property
£000
|
|
At 1 April 2022
|
206
|
|
Additions
|
301
|
|
Interest expense
|
15
|
|
Payments to lease
creditors
|
(200)
|
|
At
31 March 2023
|
321
|
|
Additions
|
253
|
|
Interest expense
|
20
|
|
Payments to lease
creditors
|
(216)
|
|
At
31 March 2024
|
378
|
The maturity analysis of lease
liabilities is detailed below:
|
Lease liabilities - (contractual undiscounted cash
flows)
|
2024
£000
|
2023
£000
|
|
Less than one year
|
140
|
118
|
|
One to five years
|
265
|
233
|
|
Total undiscounted lease liabilities at 31
March
|
405
|
351
|
There are no leases with a term of
more than five years.
|
Lease liabilities included in the statement of financial
position at 31 March
|
2024
£000
|
2023
£000
|
|
Current
|
127
|
105
|
|
Non-current
|
251
|
216
|
|
Amounts recognised in the statement of comprehensive
income
|
2024
£000
|
2023
£000
|
|
Interest on lease
liabilities
|
20
|
15
|
|
Expenses related to
short‑term
leases
|
6
|
-
|
|
Depreciation of right of use assets
(note 10)
|
197
|
185
|
|
Amounts recognised in the statement of cash
flows
|
2024
£000
|
2023
£000
|
|
Payment of principal
|
216
|
200
|
|
Payment of interest
|
20
|
15
|
|
Total cash outflows
|
236
|
215
|
16.
Share capital
The table below details movements
within the year:
|
|
Ordinary
shares
|
|
In
thousands of shares
|
2024
|
2023
|
|
In issue at 1 April
|
23,826
|
23,818
|
|
Options exercised during the
year
|
-
|
8
|
|
Number of shares
|
23,826
|
23,826
|
|
|
|
| |
|
Allotted, called up and fully paid
|
2024
£000
|
2023
£000
|
|
Ordinary shares of £0.10 each (2023:
£0.10 each)
|
2,382
|
2,382
|
|
Deferred shares of £0.90 each (2023:
£0.90 each)
|
19,896
|
19,896
|
|
Total
|
22,278
|
22,278
|
Deferred shares for all practical
purposes are valueless and it is the Board's intention to
repurchase, cancel or seek to surrender these deferred shares
using lawful means as the Board may at such time in the future
decide.
No shares were issued or options
granted in the twelve-month period ended 31 March 2024. In the
prior year 8,320 options were exercised by a professional adviser
to the Group.
Other reserves included:
Share
premium
This comprises of the amount
subscribed for share capital in excess of the nominal value less
any transaction costs incurred in raising equity.
Other
reserves
These comprise of amounts expensed
in relation to the share options, share incentive scheme (see note
17) and merger relief from shares issued as consideration to
acquisitions and equity placings (net of costs).
Movements in the year ended 31 March
2024 include the following transactions which have been recognised
in the other reserve:
A reallocation to retained earnings
from capital and share-based payments reserves of £382,000 relating
to the share incentive scheme and other of lapsed share options was
made in the year.
Accumulated loss
reserve
Accumulated loss reserves for the
Group are made up of cumulative profits and losses net of dividends
and other adjustments.
17.
Share-based payments
|
|
2024
£000
|
2023
£000
|
|
Subsidiary incentive
scheme
|
-
|
36
|
|
Share options - (CSOP)
|
22
|
38
|
|
Share options - (ESOP)
|
4
|
(1)
|
|
Save As You Earn (SAYE)
|
-
|
12
|
|
|
26
|
85
|
Share options -
(CSOP)
The following options over ordinary
shares remained outstanding at 31 March 2024:
|
|
Options at
1 April
2023
|
Options
issued
during
the year
|
Options
lapsed
during
the year
|
Options
exercised
during
the year
|
Options at
31 March
2024
|
Exercise
price
|
Date of
grant
|
First date
of exercise
|
Final date
of exercise
|
|
Directors 1:
|
|
|
|
|
|
|
|
|
|
|
P McFadden
|
25,000
|
-
|
25,000
|
-
|
-
|
£0.95
|
10/02/2022
|
10/02/2025
|
10/02/2027
|
|
Employees:
|
|
|
|
|
|
|
|
|
|
|
Employees
|
87,220
|
-
|
6,944
|
-
|
80,276
|
£0.95
|
10/02/2022
|
10/02/2023
|
10/02/2027
|
|
Employees
|
11,112
|
-
|
4,863
|
-
|
6,249
|
£0.95
|
10/02/2022
|
30/09/2023
|
10/02/2027
|
|
Employees
|
432,064
|
-
|
191,000
|
-
|
241,064
|
£0.95
|
10/02/2022
|
10/02/2025
|
10/02/2027
|
|
Total
|
555,396
|
-
|
227,807
|
-
|
327,589
|
|
|
|
|
1. P McFadden resigned
on 20 November 2023
The following options over ordinary
shares remained outstanding at 31 March 2023:
|
|
Options at
1 April
2022
|
Options
issued
during
the year
|
Options
lapsed
during
the year
|
Options
exercised
during
the year
|
Options at
31 March
2023
|
Exercise
price
|
Date of
grant
|
First date
of exercise
|
Final date
of exercise
|
|
Directors:
|
|
|
|
|
|
|
|
|
|
|
P McFadden
|
25,000
|
-
|
-
|
-
|
25,000
|
£0.95
|
10/02/2022
|
10/02/2025
|
10/02/2027
|
|
Employees:
|
|
|
|
|
|
|
|
|
|
|
Employees
|
89,998
|
-
|
2,778
|
-
|
87,220
|
£0.95
|
10/02/2022
|
10/02/2023
|
10/02/2027
|
|
Employees
|
11,112
|
-
|
-
|
-
|
11,112
|
£0.95
|
10/02/2022
|
30/09/2023
|
10/02/2027
|
|
Employees
|
514,064
|
-
|
82,000
|
-
|
432,064
|
£0.95
|
10/02/2022
|
10/02/2025
|
10/02/2027
|
|
Total
|
640,174
|
-
|
84,778
|
-
|
555,396
|
|
|
|
|
The following illustrates the number
and weighted average exercise price (WAEP) of, and movements in,
share options during the year.
|
|
2024
|
|
2023
|
|
|
|
Number
|
WAEP
£
|
Number
|
WAEP
£
|
|
Outstanding at the beginning of the
year
|
555,396
|
0.95
|
640,174
|
0.95
|
|
Issued
|
-
|
-
|
-
|
-
|
|
Lapsed during the year
|
227,807
|
0.95
|
84,778
|
0.95
|
|
Exercised during the year ended 31
March
|
-
|
-
|
-
|
-
|
|
Outstanding at 31 March
|
327,589
|
0.95
|
555,396
|
0.95
|
|
Exercisable at 31 March
|
86,525
|
0.95
|
87,220
|
0.95
|
The share-based payment charge for
options granted to employees and Directors has been calculated
using the Black‑Scholes model and using the following parameters:
|
|
|
|
Share price at grant date
|
£0.95
|
|
Exercise price
|
£0.95
|
|
Expected option life
(year)
|
5 years
|
|
Expected volatility (%)
|
43.4%
|
|
Expected dividends
|
0%
|
|
Risk-free interest rate
(%)
|
1.54%
|
|
Option fair value
|
£0.38
|
The calculation includes an
estimated leaver provision of 55% (2023: 55%).
The weighted average remaining
contractual life of options outstanding at the end of the year was
two years and ten months (Prior year: three years and eleven
months).
Share options -
(ESOP)
The following options over ordinary
shares remained outstanding at 31 March 2024:
|
|
Options at
1 April
2023
|
Options
issued
during
the year
|
Options
lapsed
during
the year
|
Options
exercised
during
the year
|
Options at
31 March
2024
|
Exercise
price
|
Date of
grant
|
First date
of exercise
|
Final date
of exercise
|
|
Directors 1:
|
|
P McFadden
|
7,875
|
-
|
7,875
|
-
|
-
|
£4.00
|
07/05/2018
|
07/05/2019
|
30/09/2023
|
|
Employees:
|
|
Employees
|
5,250
|
-
|
5,250
|
-
|
-
|
£4.00
|
13/11/2017
|
13/11/2018
|
30/09/2023
|
|
Employees
|
454
|
-
|
454
|
-
|
-
|
£4.00
|
01/03/2018
|
01/03/2019
|
28/02/2023
|
|
Employees
|
5,313
|
-
|
5,313
|
-
|
-
|
£4.00
|
04/04/2018
|
04/04/2019
|
03/04/2023
|
|
Employees
|
524
|
-
|
291
|
-
|
233
|
£1.60
|
01/03/2019
|
01/03/2020
|
01/07/2024
|
|
Employees
|
3,000
|
-
|
3,000
|
-
|
-
|
£4.00
|
01/06/2019
|
01/06/2020
|
30/09/2023
|
|
Employees
|
7,500
|
-
|
2,500
|
-
|
5,000
|
£2.00
|
01/10/2019
|
01/10/2020
|
30/09/2023
|
|
Employees
|
27,936
|
-
|
-
|
-
|
27,936
|
£0.95
|
10/02/2022
|
10/02/2025
|
10/02/2027
|
|
Total
|
57,852
|
-
|
24,683
|
-
|
33,169
|
|
|
|
|
1. P McFadden
resigned on 20 November 2023
The following options over ordinary
shares remained outstanding at 31 March 2023:
|
|
Options at
1 April
2022
|
Options
issued
during
the year
|
Options
lapsed
during
the year
|
Options
exercised
during
the year
|
Options at
31 March
2023
|
Exercise
price
|
Date of
grant
|
First date
of exercise
|
Final date
of exercise
|
|
Directors:
|
|
P McFadden
|
7,875
|
-
|
-
|
-
|
7,875
|
£4.00
|
07/05/2018
|
07/05/2019
|
30/09/2023
|
|
Employees:
|
|
Employees
|
39,500
|
-
|
39,500
|
-
|
-
|
£4.00
|
09/05/2017
|
09/05/2018
|
08/05/2022
|
|
Employees
|
9,390
|
-
|
4,140
|
-
|
5,250
|
£4.00
|
13/11/2017
|
13/11/2018
|
30/09/2023
|
|
Employees
|
1,023
|
-
|
569
|
-
|
454
|
£4.00
|
01/03/2018
|
01/03/2019
|
28/02/2023
|
|
Employees
|
5,625
|
-
|
312
|
-
|
5,313
|
£4.00
|
04/04/2018
|
04/04/2019
|
03/04/2023
|
|
Employees
|
911
|
-
|
387
|
-
|
524
|
£1.60
|
01/03/2019
|
01/03/2020
|
01/07/2024
|
|
Employees
|
3,000
|
-
|
-
|
-
|
3,000
|
£4.00
|
01/06/2019
|
01/06/2020
|
30/09/2023
|
|
Employees
|
10,000
|
-
|
2,500
|
-
|
7,500
|
£2.00
|
01/10/2019
|
01/10/2020
|
30/09/2023
|
|
Employees
|
27,936
|
-
|
-
|
-
|
27,936
|
£0.95
|
10/02/2022
|
10/02/2025
|
10/02/2027
|
|
Non-employees:
|
|
Other
|
8,320
|
-
|
-
|
8,320
|
-
|
£0.10
|
27/02/2020
|
27/02/2021
|
31/03/2023
|
|
Total
|
113,580
|
-
|
47,408
|
8,320
|
57,852
|
|
|
|
|
The following illustrates the number
and weighted average exercise price (WAEP) of, and movements in,
share options during the year.
|
|
2024
|
2023
|
|
|
Number
|
WAEP
£
|
Number
|
WAEP
£
|
|
Outstanding at the beginning of the
year
|
57,852
|
3.7
|
113,580
|
2.8
|
|
Issued
|
-
|
-
|
-
|
-
|
|
Lapsed during the year
|
24,683
|
3.8
|
47,408
|
3.9
|
|
Exercised during the year ended 31
March
|
-
|
-
|
8,320
|
0.1
|
|
Outstanding at 31 March
|
33,169
|
1.1
|
57,852
|
2.2
|
|
Exercisable at 31 March
|
2,500
|
2.0
|
21,229
|
3.7
|
No options were exercised in the
year. The weighted average share price of options exercised in the
prior year was £0.89.
The share-based payment charge for
options granted to employees and Directors has been calculated
using the Black‑Scholes model and using the following parameters:
|
|
|
|
|
Share price at grant date
|
|
£0.95 to
£4.30
|
|
Exercise price
|
|
£0.10 to
£4.00
|
|
Expected option life
(year)
|
|
1 year to
6 years
|
|
Expected volatility (%)
|
|
10.6% to
80.0%
|
|
Expected dividends
|
|
0%
|
|
Risk-free interest rate
(%)
|
|
0.60% to
1.54%
|
|
Option fair value
|
|
£0.04 to
£2.87
|
The calculation includes an
estimated leaver provision of 31% (2023: 31%).
The weighted average remaining
contractual life of options outstanding at the end of the year was
11 months (2023: two years and two months).
Share options -
(SAYE)
The following options over ordinary
shares remained outstanding at 31 March 2024:
|
|
Options at
1 April
2023
|
Options
issued
during
the year
|
Options
lapsed
during
the year
|
Options
exercised
during
the year
|
Options at
31 March
2024
|
Exercise
price
|
Date of
grant
|
First date
of exercise
|
Final date
of exercise
|
|
Employees:
|
|
Employees
|
117,614
|
-
|
(84,350)
|
-
|
33,264
|
£1.515
|
25/01/2021
|
01/03/2024
|
30/09/2024
|
|
Total
|
117,614
|
-
|
(84,350)
|
-
|
33,264
|
|
|
|
|
The following options over ordinary
shares remained outstanding at 31 March 2023:
|
|
Options at
1 April
2022
|
Options
issued
during
the year
|
Options
lapsed
during
the year
|
Options
exercised
during
the year
|
Options at
31 March
2023
|
Exercise
price
|
Date of
grant
|
First date
of exercise
|
Final date
of exercise
|
|
Employees:
|
|
Employees
|
132,465
|
-
|
14,581
|
-
|
117,614
|
£1.515
|
25/01/2021
|
01/03/2024
|
30/09/2024
|
|
Total
|
132,465
|
-
|
14,581
|
-
|
117,614
|
|
|
|
|
The following illustrates the number
and weighted average exercise price (WAEP) of, and movements in,
share options during the year.
|
|
2024
|
2023
|
|
|
Number
|
WAEP
£
|
Number
|
WAEP
£
|
|
Outstanding at the beginning of the
year
|
117,614
|
1.515
|
132,465
|
1.515
|
|
Issued
|
-
|
-
|
-
|
-
|
|
Lapsed during the year
|
84,350
|
1.515
|
14,851
|
1.515
|
|
Exercised during the year ended 31
March
|
-
|
-
|
-
|
-
|
|
Outstanding at 31 March
|
33,264
|
1.515
|
117,614
|
1.515
|
|
Exercisable at 31 March
|
33,264
|
1.515
|
-
|
-
|
The share-based payment charge for
options granted to employees and Directors has been calculated
using the Black‑Scholes model and using the following parameters:
|
|
|
|
|
Share price at grant date
|
|
1.420
|
|
Exercise price
|
|
1.515
|
|
Expected option life
(year)
|
|
3 years 7
months
|
|
Expected volatility (%)
|
|
40.0%
|
|
Expected dividends
|
|
0%
|
|
Risk-free interest rate
(%)
|
|
0.13%
|
|
Option fair value
|
|
£0.394
|
The calculation includes an
estimated leaver provision of 33% (2023: 33%).
At the 31 March 2024 there were no
options held by Directors.
The market price of shares as at 31
March 2024 was £0.49 (31 March 2023: £0.50). The range during the
financial year was £0.35 to £0.625. At the date of signing the
financial statements the share price was £0.41.
The weighted average remaining
contractual life of options outstanding at the end of the year was
6 months (2023: one year and six months).
Subsidiary incentive
scheme
On 29 September 2016, the Group
established a share incentive scheme for certain Directors and
consultants to the Group, via the Group's subsidiary,
Shearwater Subco Limited (the 'subsidiary'), in order to align the
interests of the scheme participants directly with those of
shareholders.
Pursuant to the subsidiary incentive
scheme, the subsidiary issued 160,000 'B' ordinary shares of
£0.000001 in the capital of the subsidiary ('incentive
shares') on 18 January 2017 at a price of £0.032 per share. Subject
to the growth and vesting conditions both being satisfied,
participants may elect to sell their respective B shares to the
parent company and the parent company shall acquire those B shares
in consideration for cash or by the issue of new ordinary shares at
the Group's discretion. The Group's intention was to settle these
through the issue of new ordinary shares in the Group.
The subsidiary incentive scheme
vesting period expired on 29 September 2022. Whilst the vesting
condition of being employed were satisfied, the growth conditions
were not met and subsequently no exercises were made. In the year
ended 31 March 2024 the Company exercised a call option to reclaim
the B shares from the current holders.
Directors' incentive
shares
The incentive shares issued to
Directors are shown in the table below:
|
|
Participation
in
increase
in
shareholder
value
|
Issue
price
|
Nominal
value
of
incentive
shares
|
Number
of
incentive
shares
1
April
2023
|
Number of
incentive
shares
31 March
2024
|
Number
of
Shearwater
Group
plc
shares
issued
|
Share-based
payment
charge
|
|
D Williams
|
6.5%
|
£0.032
|
£0.000001
|
65,000
|
-
|
-
|
-
|
|
P Higgins
|
7.5%
|
£0.032
|
£0.000001
|
75,000
|
-
|
-
|
-
|
Valuation of incentive
shares
The share-based payment charge for
the incentive shares in the prior year was calculated using a
binomial valuation model at the grant date. The fair value
amounted to £937,623 based on an initial expiry date of 29
September 2019. An option to amend the expiry date was
exercised on 17 April 2020 to extend this expiry date to 29
September 2022, which increased the fair value by £18,349.
Following this extension, £955,972 was to be recognised over the
life of the scheme which expired on 29 September 2022. In
the current year £nil (2023:£35,773) has been recognised as an
expense in the statement of comprehensive income in respect of
incentive shares. All 160,000 incentive scheme shares were
subscribed for by participants at unrestricted market
value.
18.
Financial instruments
The Group uses financial
instruments, other than derivatives, comprising cash at bank and
various items such as trade and other receivables and trade and
other payables that arise directly from its operations. The main
purpose of these financial instruments is to raise finance for the
Group's operations.
The Group's financial assets and
liabilities at 31 March 2024, as defined under IFRS 9, are as
follows. The fair values of financial assets and liabilities
recorded at amortised cost are considered to approximate their book
value.
|
|
|
Amortised
cost
(loans
and receivables)
|
|
|
|
|
2024
£'000
|
2023
£'000
|
|
|
Financial assets
|
|
|
|
|
|
Cash and cash equivalents
|
|
4,974
|
3,964
|
|
|
Trade and other
receivables
|
|
12,516
|
18,836
|
|
|
Total financial assets
|
|
17,490
|
22,800
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
|
|
|
|
Trade receivables
|
|
8,948
|
12,701
|
|
|
|
Accrued income
|
|
3,568
|
6,135
|
|
|
|
|
|
12,516
|
18,836
|
|
|
|
|
|
Amortised
cost
(payables)
|
Fair
value through profit or loss (FVPL)
|
|
|
|
2024
£'000
|
2023
£'000
|
2024
£'000
|
2023
£'000
|
|
Financial liabilities
|
|
|
|
|
|
|
Trade and other payables
|
|
11,234
|
16,580
|
-
|
-
|
|
Lease liabilities
|
|
378
|
320
|
-
|
-
|
|
Forward contracts
|
|
-
|
-
|
213
|
407
|
|
Total financial liabilities
|
|
11,612
|
16,900
|
213
|
407
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
|
|
|
Trade payables
|
|
7,320
|
3,265
|
|
|
|
Accruals
|
|
3,914
|
13,302
|
|
|
|
Other creditors
|
|
-
|
13
|
|
|
|
|
|
11,234
|
16,580
|
|
|
General objectives, policies
and processes
The Board has overall responsibility
for the determination of the Group's risk management objectives and
policies and, whilst retaining ultimate responsibility for them, it
has delegated the authority for designing and operating processes
that ensure the effective implementation of the objectives and
policies to the Group's Finance function. The overall objective of
the Board is to set policies that seek to reduce risk as far as
possible without unduly affecting the Group's competitiveness and
flexibility.
The Group is exposed to financial
risks in respect of:
·
capital risk;
·
foreign currency;
·
interest rates;
·
credit risk; and
·
liquidity risk.
A description of each risk, together
with the policy for managing risk, is given below.
Capital
risk
The Group manages its capital to
ensure that the Group and its subsidiaries will be able to continue
as going concerns while maximising the return to stakeholders
through the optimisation of equity and debt balances.
The capital structure of the Group
consists of cash and cash equivalents, borrowings and equity.
Equity comprises issued capital, reserves and accumulated losses as
disclosed in the Consolidated Statement of Changes in
Equity.
The Board of Directors reviews the
capital structure on a regular basis. As part of this review, the
Board considers the cost of capital and the risks associated
with each class of capital, against the purpose for which it is
intended.
The Group's three-year £4.0 million
revolving credit facility, to fund further growth and
short‑term working
capital requirements, was not utilised during the current year and
expired on 23 March 2024. The Group is currently considering
whether to renew the facility and is in ongoing discussions with
Barclays Bank plc.
Market risk
Market risk arises from the Group's
use of interest‑bearing, tradable and foreign currency financial instruments.
It is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in foreign
exchange rates (currency risk), interest rates (interest rate
risk), or other market factors (other price risk).
Foreign currency
risk
The Group is exposed to foreign
currency risk on sales and purchases which are denominated in a
currency other than sterling. Exposures to exchange rates are
predominantly denominated in US dollars and euros. The Group seeks
to reduce foreign exchange exposures arising from transactions in
various currencies through a policy of matching, as far as
possible, receipts and payments across the Group in each individual
currency. The Group has introduced a policy to use derivatives
where there is a material surplus or deficit of non-sterling
receipts and payments.
The following forward contracts were
entered into in order to mitigate the risk of further weakening of
sterling against US dollar.
|
Currency
|
Amount
(000)
|
Maturity
date
|
Foreign exchange
rate
|
|
US dollar
|
4,100
|
10
November 2023
|
1.138
|
|
US dollar
|
2,000
|
10 May
2024
|
1.140
|
|
US dollar
|
2,000
|
02 October 2024
|
1.216
|
The above derivatives are remeasured
at fair value at each reporting date. This gives rise to a gain or
loss, the entire amount of which is recognised in the statement of
comprehensive income within administrative expenses.
As of 31 March the Group's net
exposure to foreign exchange risk was as follows:
|
|
USD
|
EUR
|
|
Net
foreign currency financial assets/(liabilities)
|
2024
£000
|
2023
£000
|
2024
£000
|
2023
£000
|
|
Trade receivables
|
369
|
228
|
160
|
148
|
|
Other receivables
|
85
|
1,390
|
0
|
4
|
|
Trade payables
|
(7,747)
|
(2,537)
|
(27)
|
(43)
|
|
Other payables
|
(67)
|
(9,605)
|
0
|
(192)
|
|
Cash and cash equivalents
|
2,572
|
1,929
|
176
|
551
|
|
Total net exposure before excluding
forward contracts
|
(4,788)
|
(8,595)
|
309
|
468
|
|
Forward contracts
|
4,000
|
6,100
|
0
|
-
|
|
Total net exposure
|
(788)
|
(2,495)
|
309
|
468
|
The effect of a 10% strengthening of
the US dollar against sterling at the reporting date on the US
dollar-denominated trade and other receivables, trade and other
payables, forward contracts and cash and cash equivalents carried
at that date would, all other variables held constant, have
resulted in an increase of the pre-tax loss in the year and a
decrease in net assets of £0.2 million. A 10% weakening in the
exchange rate would, on the same basis, have decreased the pre-tax
loss in the year and increased net assets by
£0.2 million.
The effect of a 10% strengthening of
the euro against sterling at the reporting date on the
euro-denominated trade receivables, payables and cash and cash
equivalents carried at that date would, all other variables held
constant, have resulted in a decrease of the pre-tax loss in the
year and an increase in net assets of £0.05 million. A 10%
weakening in the exchange rate would, on the same basis, have
increased the pre-tax loss in the year and decreased net assets by
£0.04 million.
Interest rate
risk
The Group has minimal cash flow
interest rate risk as it has no external borrowings at variable
interest rates.
Liquidity
risk
The Group manages liquidity risk by
maintaining adequate cash reserves and credit facilities, by
continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and liabilities
wherever possible. In addition to this, the Group had a £4.0
million revolving credit facility (RCF) to provide further
contingency against short-term working capital movements. The
facility expired on 23 March 2024 and up to that point had not been
utilised. The Group is currently considering whether to renew the
facility and is in ongoing discussions with Barclays Bank plc.
There has been no change to the Group's exposure to
liquidity risks or the manner in which these risks are managed and
measured during the year. Further details are provided in the
strategic report.
The liquidity risk of each Group
entity is managed centrally by the Group's Finance function. Each
entity has a predefined facility based on the budget which is set
and approved by the Board in advance, which provides detail of each
entity's cash requirements. Any material additional expenditure
over budget requires sign off by the Board. A quarterly reforecast
which includes a cash flow forecast is reviewed by management and
approved by the Board.
The Group has just over £0.1 million
of credit available on corporate credit cards which are settled in
full on a monthly basis.
The maturity profile of the
financial assets and liabilities is summarised below. The table has
been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group can be
required to pay.
|
|
|
Up
to
3
months
£'000
|
Between
3 and 12
months
£'000
|
Between
1 and 2
years
£'000
|
Between
2 and 5
years
£'000
|
Over 5
years
£'000
|
|
Financial assets
|
|
|
|
|
|
|
|
As
at 31 March 2024
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
4,367
|
8,086
|
635
|
43
|
0
|
|
As
at 31 March 2023
|
|
|
|
|
|
|
|
Trade and other
receivables
|
|
6,515
|
5,041
|
7,280
|
-
|
-
|
|
Financial liabilities
|
|
|
|
|
|
|
As
at 31 March 2024
|
|
|
|
|
|
|
Trade and other payables
|
8,541
|
3,728
|
3,462
|
-
|
-
|
|
Forward contracts
|
161
|
52
|
|
|
|
|
Lease liabilities
|
32
|
95
|
131
|
120
|
-
|
|
Total
|
8,734
|
3,875
|
3,593
|
120
|
-
|
|
|
|
|
|
|
|
|
Financial liabilities
|
Up
to
3
months
£'000
|
Between
3 and 12
months
£'000
|
Between
1 and 2
years
£'000
|
Between
2 and 5
years
£'000
|
Over 5
years
£'000
|
|
As
at 31 March 2023
|
|
|
|
|
|
|
Trade and other payables
|
4,953
|
6,342
|
5,284
|
-
|
-
|
|
Forward contracts
|
-
|
275
|
131
|
-
|
-
|
|
Lease liabilities
|
30
|
75
|
59
|
157
|
-
|
|
Total
|
4,983
|
6,692
|
5,474
|
157
|
-
|
Credit risk
The Group's principal financial
assets are trade receivables and bank balances. The Group is
consequently exposed to the risk that its customers cannot meet
their obligations as they fall due. The Group's policy is that the
lines of business assess the creditworthiness and financial
strength of customers at inception and on an ongoing basis. The
Group also reviews the credit rating of its banks and financial
institutions.
Ongoing review of the financial
condition of trade and other receivables is performed. Further
details are in note 11. The carrying amount of financial assets
recorded in the financial statements represents the Group's maximum
exposure to credit risk. Whilst the Group's exposure to credit risk
fluctuates depending on its revenue performance, to date this has
not materially impacted the Group's actual bad debt, which is
partially due to the type of clients it contracts with as well as
effective due diligence when issuing credit to its
clients.
19.
Related party transactions
The Directors of the Group and their
immediate relatives have an interest of 19% (2023: 19%) of the
voting shares of the Group. The shareholdings of Directors and
changes during the year are shown in the Directors'
report.
No dividends were made to the
Company in either years by subsidiary undertakings.
There were no other related party
transactions for the Group during the period.
20.
Bank loans
The Group's £4.0 million credit
facility with Barclays Bank plc expired on 23 March 2024 and no
facility was in place on 31 March 2024. The Group is
currently considering whether to renew the facility and is in
ongoing discussions with Barclays. A charge remains
registered on Shearwater Group plc and a number of its subsidiaries
as security for the facility.
21.
Notes to support cash flow
Cash and cash equivalents, which are
available on demand, comprise:
|
|
2024
£'000
|
2023
£'000
|
|
Net increase/(decrease) in cash and
cash equivalents
|
1,010
|
(1,611)
|
|
Cash and cash equivalents at the
beginning of the year
|
3,964
|
5,575
|
|
Cash
and cash equivalents at the end of the year
|
4,974
|
3,964
|
Cash and cash equivalents are held
in the following currencies:
|
|
2024
£'000
|
2023
£'000
|
|
Sterling
|
2,774
|
1,914
|
|
US dollar
|
2,049
|
1,566
|
|
Euro
|
151
|
484
|
|
|
4,974
|
3,964
|
Reconciliation of liabilities from
financing activities:
|
|
|
|
Non-cash
changes
|
|
|
2023
£'000
|
Cash
outflows
£'000
|
Loan
interest
£'000
|
Right of
use
asset
additions
£'000
|
2024
£'000
|
|
Revolving credit facility interest
payable
|
-
|
(47)
|
47
|
-
|
-
|
|
Payment of principal on lease
liabilities
|
321
|
(216)
|
20
|
253
|
378
|
|
Total
|
321
|
(263)
|
67
|
253
|
378
|
|
|
|
|
|
Non-cash
changes
|
|
|
|
2022
£'000
|
Cash
outflows
£'000
|
Interest
savings
on
early
repayment
of
loans
£'000
|
Loan
interest
£'000
|
Right of
use
asset
additions
£'000
|
Early
repayment
discount
on
loan
liabilities
£'000
|
2023
£'000
|
|
Revolving credit facility interest
payable
|
20
|
(76)
|
-
|
56
|
-
|
-
|
-
|
|
Other interest - paid
|
-
|
(7)
|
-
|
6
|
-
|
-
|
-
|
|
Payment of principal on lease
liabilities
|
206
|
(200)
|
-
|
15
|
301
|
-
|
321
|
|
Total
|
226
|
(283)
|
-
|
77
|
301
|
-
|
321
|
22.
Events after the reporting period
There are no material events after
the reporting period to disclose.
