1 December 2022
Merit Group plc
("Merit", the "Company" or "the Group")
UNAUDITED INTERIM RESULTS TO 30 SEPTEMBER 2022
Merit Group plc (AIM: MRIT), the data and intelligence business, announces its unaudited interim results for the half year ended 30 September 2022. The Company is also pleased to announce completion of the disposal of the Dods MET Operations.
Financial Highlights
· Strong year on year growth in Revenue from Continuing Operations to £9.2m (H1 2021/22: Revenue £8.7m);
· Adjusted EBITDA of £1.1m (H1 2021/22: Adjusted EBITDA £1.6m), reflecting increased costs primarily driven by wage inflation and a £0.3m negative impact from GBP/INR exchange rates;
· Net cash generated from continuing operating activities of £0.4m (H1 2021/22: £0.4m);
· Disposal of the MET Operations completed for a cash consideration of £4.5m1;
· Cash balance of £1.8m and Net Debt 2 of £3.2m as at 30 September 2022, with total debt facilities of £5.0m; and
· Net Cash2 at 30 November 2022, after disposal proceeds1, of £0.3m. Reduction in debt facility post disposal to £3.0m (£1.0m Term Loan and £2.0m RCF) retaining financial flexibility.
| Continuing Operations |
| | |
| | H1 2022/23 | H1 2021/22 | |
| | 30 Sep 22 | 30 Sep 21 | Change6 |
| |
|
|
|
| Revenue | £9.2m | £8.7m | 6.1% |
| Gross profit | £4.6m | £4.6m | (1.1%) |
| Gross margin3 | 50% | 53% |
|
| Adjusted EBITDA4 | £1.1m | £1.6m | (31.0%) |
| Net margin5 | 11.7% | 18.0% |
|
| Loss after tax | (£0.4m) | (£0.1m) | |
| Basic Earnings per share | (1.8p) | (0.4p) | |
| Discontinued Operations |
| | |
| | H1 2022/23 | H1 2021/22 | |
| | 30 Sep 22 | 30 Sep 21 | Change6 |
| |
|
|
|
| Revenue | £4.8m | £3.6m | 31.0% |
| Adjusted EBITDA4 loss | (£0.3m) | (£0.3m) | (14.3%) |
| Loss after tax | (£0.6m) | (£0.6m) | (1.0%) |
1. £4.1m (90%) of net disposal proceeds received on completion, with the remaining 10% due on settlement of completion accounts, expected by 31 March 2023.
2. Net debt/net cash comprises the aggregate of gross debt, excluding IFRS16 lease liabilities, and cash and cash equivalents.
3. Gross margin is Gross profit as a percentage of Revenue.
4. Adjusted EBITDA is calculated as earnings before interest, tax, depreciation, amortisation of intangible assets, share based payments and non-recurring items.
5. Net margin is Adjusted EBITDA as a percentage of Revenue.
6. Year-on-year percentage change figures are calculated on unrounded numbers.
Operational Highlights
· New sales team for Merit Data & Technology brought on board;
· Further recovery in Merit Data & Technology as marketing events activity picked up following the pandemic; and
· New clients for Dods PI including Energy UK, Smart Energy, Council of Europe, IDF Europe.
David Beck, CEO of Merit Group plc, said;
"The restructuring of the Group, which is focused on improving the Group's prospects and shareholder value, continues at pace. In line with our strategy to focus on the data and technology segment of the business intelligence sector, we disposed of our media, events and training operations in the half year.
"The Group is not immune from the impacts of a global recession and remains cautious given the high inflation and interest rate environment in which it operates. However, the ongoing business benefits from high levels of subscription revenue in the Dods segment and long standing customer relationships in Merit D&T, contributing to around 85% of the Group's revenue now being recurring (derived from contracts of 12 or more months in duration). The sale of the MET Operations has significantly reduced the seasonality of the Group's EBITDA and strengthened the Company's financial position."
For further information, please contact:
Merit Group plc
David Beck - CEO 020 7593 5500
Philip Machray - CFO
Canaccord Genuity Limited (Nomad and Broker)
Bobbie Hilliam 020 7523 8150
This announcement is released by Merit Group plc and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"), and is disclosed in accordance with the Group's obligations under Article 17 of MAR. With the publication of this announcement, this information is now considered to be in the public domain.
For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Group by David Beck, Chief Executive Officer.
BUSINESS AND OPERATIONAL REVIEW
The interim results are in line with expectations, despite some residual impact from the COVID 19 Pandemic and challenging economic conditions arising from the war in Ukraine. Adjusted EBITDA from Continuing Operations of £1.1m in the first half compared to £1.6m in the prior year, with revenue improvements partially offset by increased cost pressures, the full year cost effect of management changes made in the prior year, and the deterioration in the GPB/INR exchange rate.
Merit Data & Technology
The Merit Data & Technology ('Merit D&T') business has long-standing customers that provide the business with high levels of recurring revenue. We provide a range of data and intelligence products and services to largely UK based customers, using our proprietary technology to enhance industry intelligence and marketing data.
Merit Data & Technology reported Adjusted EBITDA of £0.7m in the first half against £1.0m in the same period in the previous year. The significant weakening of Sterling against the Indian Rupee impacted margins in the first half; the exchange rate movement alone had an adverse impact of £323k, more than accounting for the year-on-year reduction of £287k in Adjusted EBITDA. The Sterling exchange rate's recent recovery and a close focus on costs, should allow for margin improvement in the second half.
Joanna Edwards joined the business in June 2022 as the new CRO of Merit D&T. Joanna comes with extensive sales management experience at Incisive Media and Infopro Digital and will drive a new and expanded sales team at Merit D&T.
Whilst onboarding the new sales team Merit D&T grew its revenue by 10% year-on-year. Both our core sectors are doing well in terms of revenue growth. Within the data segment, Marketing Data put in a particularly strong performance as it benefited from increased marketing events activity post the pandemic.
The business secured new clients in System1, Partnerize, Axco, EDI, Lowry Systems and Wired (Conde Nast), and has also secured additional work from existing clients Relx, CRU, PrisymID, BIP amongst others.
The Merit D&T business has faced increasing cost challenges post pandemic, high levels of wage inflation in India, especially in the technology teams, together with an increasing general inflation rate both in the UK and India. Other costs related to home working that were saved during the pandemic have returned.
Our new sales team will drive additional revenue and secure new clients in 2023 and the upgraded and expanded team also gives us an opportunity to push further into eCommerce data services, where our investment in the DataWorks Technology Platform will help us to secure new clients at much higher levels of annual revenue.
Dods
The Dods business now comprises a leading political intelligence offering that has over 800 subscribers and where we are the UK's industry leader with an enviable reputation for the comprehensiveness of our service and the quality of analysis that we provide customers. In the half year we continued the roll out of our new platform to UK customers, which helped reduce churn and improve the quality of customers' experience.
In the first half the Continuing Operations of Dods made Adjusted EBITDA of £0.9m against £1.0m in the same period last year. New customers in the period include Energy UK, Smart Energy, The Council of Europe and IDF Europe.
With the increased focus on this key service following the disposal of the MET Operations, we are targeting growth through the addition of new sector specialisms and a greater focus on European markets where we see opportunities to grow our market share.
Board Change
Following the disposal of the Dods MET Operations, Munira Ibrahim, the MD of the Dods business, has resigned and will be leaving the Board with immediate effect. Munira has been with the Company for three and a half years and helped to guide the business through a most difficult period. She oversaw many significant improvements, most notably in our media titles and events portfolio. The Board recorded its thanks to her for her contribution and dedication, especially through the pandemic, a uniquely challenging time.
Outlook
The Group is not immune from the impacts of a global recession and remains cautious given the high inflation and interest rate environment in which it operates. However, the ongoing business benefits from high levels of subscription revenue in the Dods segment and long standing customer relationships in Merit D&T, contributing to around 85% of the Group's revenue being recurring (derived from contracts of 12 or more months in duration). The sale of the MET Operations has also significantly reduced the seasonality of the Group's EBITDA and strengthened the Company's financial position.
David Beck
CEO
Merit Group plc
FINANCIAL REVIEW
On 27 October 2022, the Group announced that it had agreed to sell the Media, Events and Training operations of its Dods segment (together, the "MET Operations") for a cash consideration of £4.5 million. The Disposal completed on 30 November 2022.
As a consequence of the disposal, the assets of the MET Operations have been reclassified as assets held for resale within current assets; the transferring liabilities of the MET Operations have been reclassified as liabilities directly associated with assets classified as held for resale within current liabilities; and the activities of the MET Operations have been classified as Discontinued Operations within the Condensed Consolidated Income Statement.
Income Statement - Continuing Operations
The Group's revenue from Continuing Operations increased by 6.1% to £9.2m (H1 2021/22: £8.7m).
Revenues from Merit Data and Technology (MD&T) were £0.5m higher than the equivalent prior half year (H1 2022/23: £5.6m; H1 2021/22: £5.1m), representing an increase of 10%. Dods revenues for the period remained stable at £3.6m (H1 2021/22: £3.6m).
Gross profit for the period was stable at £4.6m by comparison to the prior period (H1 2021/22: £4.6m). Gross margin decreased from 53.3% to 49.7%, driven by the Group's investment in sales & marketing resource within MD&T.
Adjusted EBITDA decreased by £0.5m to £1.1m (H1 2021/22: £1.6m Adjusted EBITDA) due to inflationary pressure on the UK and Indian cost bases, the strengthening of the Executive management team and the impact of adverse foreign exchange rate movements on the Group's Indian cost base.
The increase in operating loss, from a profit of £0.1m to a loss of £0.6m, reflects the reduction in EBITDA. The Group's operating loss is stated after a right-of-use assets charge of £0.7m (H1 2021/22: £0.6m), an amortisation on acquired intangibles under business combinations of £0.3m (H1 2021/22: £0.3m), a charge for intangible assets amortisation of £0.2m (H1 2021/22: £0.1m), a charge for depreciation of tangible assets of £0.3m (H1 2021/22: £0.3m), and non-recurring costs of £0.2m (H1 2021/22: £0.2m).
The net finance credit for the year of £0.1m compared to a net finance expense of £0.2m in H1 2021/22, reflecting the favourable impact of foreign exchange hedging.
The loss for the year from Continuing Operations, after a tax charge of £0.2m (H1 2021/22: £nil), amounted to £0.4m (H1 2021/22: £0.1m loss).
Income Statement - Discontinued Operations
The results of the Group's MET Operations, which have been reclassified as Discontinued Operations, are disclosed within Note 5. These show revenue of £4.8m (H1 2021/22: £3.6m), an Adjusted EBITDA loss of £0.3m (H1 2021/22: £0.3m Adjusted EBITDA loss) and a loss for the period of £0.6m (H1 2021/22: £0.6m loss).
Earnings and Dividends
Adjusted earnings per share (basic and diluted) from Continuing Operations in the period were a loss of 0.68 pence (H1 2021/22: earnings of 1.15 pence, basic and diluted) and were based on the adjusted loss for the period of £0.2m (H1 2021/22: £0.2m profit) with a weighted average number of shares in issue during the period of 23,956,124.
Earnings per share, both basic and diluted, from Continuing Operations in the period were a loss of 1.85 pence (H1 2021/22: loss of 0.41 pence) and were based on the loss after tax for the period of £0.4m (H1 2021/22: loss of £0.1m).
Total Earnings per share, both basic and diluted, in the period were a loss of 4.17 pence (H1 2021/22: loss of 3.11 pence) and were based on the loss after tax for the period of £1.0m (H1 2021/22: £0.6m)
Whilst the Company's focus remains on maintaining financial flexibility and repositioning the business for future growth, the Board is not proposing a dividend (H1 2021/22: £nil).
Going Concern
The Directors have considered the implications for Going Concern and remain satisfied with the Company's funding and liquidity position. See further comments below, under 'Statement of Financial Position'.
Statement of Financial Position
Assets
Non-current assets of £43.9m (31 March 2022: £47.0m) comprise goodwill of £27.6m (31 March 2022: £28.9m), intangible assets of £8.7m (31 March 2022: £9.8m), property, plant and equipment of £1.7m (31 March 2022: £1.8m), IFRS 16 rights-of-use assets of £4.9m (31 March 2022: £5.7m) and investments of £1.0m (31 March 2022: £0.8m).
Investments include the Group 40% stake in the issued share capital of Sans Frontières Associates (SFA) with a carrying value of £0.5m (31 March 2022: £0.3m). The Group also loaned SFA £0.1m (31 March 2022: £0.2m) at the period end. The loan was unsecured, carried no interest charge, and was repaid in October 2022. Investments also include a 10.9% stake in DataWorks Ltd with a carrying value of £0.5m (31 March 2022: £0.5m).
During the period, the group completed the sale of its 30% stake in Social 360 Limited, previously carried as an asset held for resale, for cash consideration of £420,000.
The Group had a cash balance of 1.8m (31 March 2022: £2.3m) and gross bank borrowings of £5.0m at the period end (31 March 2022: £4.4m).
Total assets of the Group were £53.9m (31 March 2022: £55.5m), of which £3.6m are held for resale in respect of the MET operations which were disposed after the period end.
Equity and Liabilities
The Group has a bank term loan of £3.0m (31 March 2022: £2.4m). The current amount due is £0.2m (31 March 2022: £0.9m) and non-current is £2.8m (31 March 2022: £1.5m). The loan has a repayment schedule through to September 2027. £2.0 million of the term loan will be repaid following the disposal of the MET operations. The Group also has a RCF loan facility of £2.0m available through to September 2027. This RCF facility was fully drawn throughout the period and stood at £2.0m at the period end (31 March 2022: £2.0m). Due to its revolving nature, this loan is all shown as due within one year.
Current liabilities of £13.2m decreased by £1.1m during the period (31 March 2022: £14.3m) and include £3.1m of liabilities directly associated with the assets of the MET Operations, which have been classified as held for resale.
Also within current liabilities, trade and other payables decreased from £9.8m at 31 March 2022 to £6.2m at the period end, including a reduction of £0.3m in VAT liabilities which were deferred from FY21 under an arrangement made available as part of the UK Government's support for businesses impacted by Covid-19. Deferred VAT at the period end was £0.2m (31 March 2022: £0.5m).
Total equity reduced by £0.9m to £33.5m (31 March 2022: £34.4m), reflecting the loss for the period.
Liquidity and capital resources
Net cash generated by operations was neutral at £0.0m inflow in the period by comparison to an £0.3m outflow in H1 2021/22. Operating cashflow in respect of working capital movement were significantly reduced year-on-year at £0.9m outflow in the period compared to £1.4m in H1 2021/22 as the Group neared completion of the repayment of operating liabilities deferred from prior periods in response to Covid-19, with only £0.2m of deferred liabilities outstanding at the period end (31 March 2022: £0.5m). The movement in working capital of £0.9m also includes payment of the final £0.3m of deferred cash consideration on the Meritgroup Limited acquisition, and £0.3m of payments to HMRC as the Group fell within the VAT 'payment on account' regime.
After tax, net cash used in operating activities amounted to £0.2m (H1 2021/22: £0.4m) of which continuing operations generated £0.4m (H1 2021/22: £0.4m) and discontinued operations used £0.6m (H1 2021/22: £0.8m).
Investing activities produced a net cash inflow of £0.3m in the period, including the £0.4m receipt of proceeds from the sale of the Group's investment in Social 360 Limited in August 2022. This compares to a net cash outflow of £1.0m in the H1 2021/22, driven by the Group's investment in the Political Intelligence platform and DataWorks.
Total financing outflow used in the servicing of bank debt and interest and capital repayments on leases amounted to £1.1m in the period (H1 2021/22; £1.3m) and the Group received a net inflow on the bank refinancing in July 2022 of £0.6m.
The cash position at the period end was £1.8m (31 March 2022: £2.3m). As at 30 September 2022, the Group had a net debt position of £3.2m (31 March 2022: net debt of £2.1m).
Philip Machray
Chief Financial Officer
Condensed consolidated income statement
For the half year ended 30 September 2022
|
Continuing Operations
|
Note |
Unaudited Half year ended 30 Sept 2022 £'000 | Unaudited Half year ended 30 Sept 2021 (restated) £'000 | Audited Year ended 31 Mar 2022 (restated) £'000 | |
| |
|
| | | |
| Revenue
| 3
| 9,229 | 8,698
| 17,981
| |
| Cost of sales
| | (4,641) | (4,060) | (8,986) | |
|
Gross profit | |
4,588 |
4,638 |
8,995 | |
| | |
| | | |
| Administrative expenses | | (5,142) | (4,556) | (10,489) | |
|
Operating loss from Continuing Operations | | (554) | 82 | (1,494) | |
|
Memorandum: | |
| | | |
|
Adjusted EBITDA1 | | 1,080 | 1,566 | 2,302 | |
|
Depreciation of property, plant and equipment | | (301) | (296) | (596) | |
| Depreciation of right-of-use assets | | (661) | (641) | (1,277) | |
| Amortisation of intangible assets acquired through business combinations | | (255) | (255) | (511) | |
| Amortisation of software intangible assets | | (163) | (114) | (255) | |
| Share-based payments | | (31) | - | 48 | |
| Non-recurring items | 4 |
| | | |
| Impairments and asset write offs | | - | - | (843) | |
| People-related costs | | (150) | (158) | (316) | |
| Other non-recurring items
| | (73) | (20) | (46) | |
|
Operating loss from Continuing Operations | | (554) | 82 | (1,494) | |
|
| |
| | | |
| Net finance credit/(expense) | | 41 | (167) | (411) | |
| Share of profit of Associate
| | 252 | - | 144 | |
| Loss before tax from Continuing Operations | | (261) | (85) | (1,761) | |
|
Income tax (charge)/credit
| | (182) | - | 292 | |
|
Loss for the period from Continuing Operations
| | (443) | (85) | (1,469) | |
| Loss for the period from Discontinued Operations | | (556) | (561) | (103) | |
|
Loss for the period
| | (999) | (646) | (1,572) | |
(1) Adjusted EBITDA is defined as the operating loss after adding back depreciation, amortisation, share-based payments, and non-recurring items. 100% of the loss is attributable to owners of the parent.
Earnings per share (pence)
| | | p per share | p per share (restated*) | p per share (restated*) |
|
Basic from Continuing Operations | 6 | (1.85p) | (0.41p) | (6.57p) |
|
Basic from Discontinued Operations
| 6 | (2.32p) | (2.70p) | (0.46p) |
|
Basic total
| 6 | (4.17p) | (3.11p) | (7.03p) |
Prior period earnings per share have been restated in accordance with IAS33 to reflect the share consolidation and subdivision undertaken on 16 April 2021, as detailed in Note 12.
The notes on pages 13 to 25 form part of these unaudited interim results.
Condensed consolidated statement of comprehensive income
For the half year ended 30 September 2022
|
| Unaudited Half year ended 30 Sept 2022 £'000 | Unaudited Half year ended 30 Sept 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
|
Loss for the period |
(999) |
(646) |
(1,572) |
| |
| | |
| Items that may be subsequently reclassified to Profit and loss: |
| | |
| Exchange differences on translation of foreign operations
| 21 | 28 | 31 |
| Remeasurement of defined benefits obligation | 36 | 20 | 3 |
| Other comprehensive income for the period | 57 | 48 | 34 |
| Total comprehensive loss for the period | (942) | (598) | (1,538) |
The notes on pages 13 to 25 form part of these unaudited interim results.
Condensed consolidated statement of financial position
As at 30 September 2022
|
|
Note | Unaudited 30 Sept 2022 £'000 | Unaudited 30 Sept 2021 £'000 | Audited 31 Mar 2022 £'000 |
| |
|
| |
|
| Non-current assets
| |
| |
|
| Goodwill | 8 | 27,642 | 28,911 | 28,911 |
| Intangible assets | 9 | 8,679 | 10,358 | 9,826 |
| Property, plant and equipment | 10 | 1,673 | 2,082 | 1,807 |
| Right-of-use assets | | 4,869 | 6,541 | 5,660 |
| Investment in associates | | 997 | 1,167 | 777 |
| Total non-current assets | | 43,860 | 49,059 | 46,981 |
| Current assets | |
| | |
| Work in progress and inventories | | - | 119 | 14 |
| Trade and other receivables | | 4,448 | 5,786 | 5,569 |
| Loan receivable | | 140 | 420 | 210 |
| Cash and cash equivalents | | 1,834 | 2,804 | 2,321 |
|
| | 6,422 | 9,129 | 8,114 |
| Assets held for resale | | 3,591 | - | 410 |
| Total current assets | | 10,013 | 9,129 | 8,524 |
| Total assets | | 53,873 | 58,188 | 55,505 |
|
| |
| | |
| Current liabilities | |
| | |
| Trade and other payables | | 6,168 | 10,966 | 9,718 |
| Defined benefit pension obligation | | 84 | 78 | 85 |
| Deferred consideration | | - | 1,046 | - |
| Bank loan/RCF | 11 | 2,200 | 2,541 | 2,860 |
| Lease liability | 11 | 1,640 | 1,680 | 1,679 |
| Liabilities directly associated with assets classified as held for resale | | 3,101 | - | - |
| Total current liabilities | | 13,193 | 16,311 | 14,342 |
| Non-current liabilities | |
| | |
| Deferred tax liability | | - | 222 | - |
| Pension obligation | | 232 | 146 | 197 |
| Bank loan/RCF | 11 | 2,800 | 2,024 | 1,518 |
| Lease liability | 11 | 4,153 | 6,045 | 5,042 |
| Total non-current liabilities | | 7,185 | 8,437 | 6,757 |
| Capital and reserves | |
| | |
| Issued capital | 12 | 6,708 | 5,821 | 6,708 |
| Share premium | | 1,067 | - | 1,067 |
| Retained profit/(loss) | | 12,033 | 13,958 | 13,032 |
| Redemption reserve | | 13,680 | 13,680 | 13,680 |
| Translation reserve | | (28) | (52) | (49) |
| Other reserves | | (6) | (25) | (42) |
| Share option reserve | | 41 | 58 | 10 |
| Total equity | | 33,495 | 33,440 | 34,406 |
| Total equity and liabilities | | 53,873 | 58,188 | 55,505 |
The notes on pages 13 to 25 form part of these unaudited interim results.
Condensed consolidated statement of changes in equity
For the half year ended 30 September 2022
|
|
Share capital £'000 |
Share premium reserve1 £'000 |
Merger reserve2 £'000 |
Retained earnings £'000 |
Capital redemption reserve3 £'000 |
Translation reserve4 £'000 |
Other reserves £'000 |
Share option reserve5 £'000 |
Total shareholders' funds £'000 |
| |
|
|
| | | | | | |
| Unaudited | | | | | | | | | |
|
|
|
|
|
|
|
|
|
|
|
| At 1 April 2021 | 19,501 | 20,866 | 409 | (6,671) | - | (80) | (45) | 58 | 34,038 |
| Total comprehensive income: | | | | | | | | | |
| Loss for the period | - | - | - | (646) | - | - | | - | (646) |
| Currency translation differences | - | - | - | - | - | 28 | - | - | 28 |
| Remeasurement of defined benefits obligations | - | - | - | - | - | - | 20 | - | 20 |
|
|
|
|
|
|
|
|
|
|
|
| Transactions with owners: |
|
|
|
|
|
|
|
|
|
| Share consolidation | (13,680) | (20,866) | (409) | 21,275 | 13,680 | - | - | - | - |
|
|
|
|
|
|
|
|
|
|
|
| At 30 September 2021 | 5,821 | - | - | 13,958 | 13,680 | (52) | (25) | 58 | 33,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 April 2022 | 6,708 | 1,067 | - | 13,032 | 13,680 | (49) | (42) | 10 | 34,406 |
| Total comprehensive income: | | | | | | | | | |
| Loss for the period | - | - | - | (999) | - | - | | - | (999) |
| Currency translation differences | - | - | - | - | - | 21 | - | - | 21 |
| Remeasurement of defined benefits obligations | - | - | - | - | - | - | 36 | - | 36 |
|
|
|
|
|
|
|
|
|
|
|
| Share-based payments
| - | - | - | - | - | - | - | 31 | 31 |
| At 30 September 2022 | 6,708 | 1,067 | - | 12,033 | 13,680 | (28) | (6) | 41 | 33,495 |
1 The share premium reserve represents the amount paid to the Company by shareholders above the nominal value of shares issued.
2 The merger reserve represents the accounting treatment in relation to historical business combinations.
3 The capital redemption reserve is a non-distributable reserve created on cancellation of deferred shares.
4 The translation reserve comprises foreign currency translation differences arising from the translation of financial statements of the Group's foreign entities into Sterling.
5 The share option reserve represents the cumulative expense recognised in relation to equity-settled share-based payments.
The notes on pages 13 to 25 form part of these unaudited interim results.
Condensed consolidated statement of cash flows
For the half year ended 30 September 2022
|
|
Note | Unaudited Half year ended 30 Sept 2022 £'000 | Unaudited Half year ended 30 Sept 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
| |
|
| | |
| Cash generated by operations | 7 | 6 | (349) | 696 |
| Taxation paid | | (163) | (85) | (332) |
| Net cash (used in)/generated from operating activities | | (157) | (434) | 364 |
| Cash flows from investing activities | |
| | |
| Interest and similar income received | | 40 | 7 | 28 |
| Additions to property, plant and equipment | | (132) | (127) | (314) |
| Additions to intangible assets | | (108) | (568) | (1,240) |
| Acquisition of investment | |
| (450) | (450) |
| Proceeds from sale of Investment in Associates | | 410 | - | - |
| Repayment of long-term loan by Associate | | 70 | 140 | 350 |
| Net cash raised/(used) in investing activities | | 280 | (998) | (1,626) |
| | |
| | |
| Cash flows from financing activities | |
| | |
| Proceeds from issue of share capital | | - | - | 908 |
| Interest and similar expenses paid | | (153) | (87) | (213) |
| Payment of lease liabilities | | (806) | (913) | (2,055) |
| Payment of lease interest | | (161) | (280) | (369) |
| Net drawings from bank facility | | 774 | - | - |
| Repayment of bank loan | | (152) | (101) | (253) |
| Net cash used in financing activities | | (498) | (1,381) | (1,982) |
| Net decrease in cash and cash equivalents | | (375) | (2,813) | (3,244) |
| Opening cash and cash equivalents | | 2,321 | 5,565 | 5,565 |
| Effect of exchange rate fluctuations on cash held | | (112) | 52 | - |
| Closing cash at bank | | 1,834 | 2,804 | 2,321 |
|
Comprised of: | |
| | |
| Cash and cash equivalents | | 1,834 | 2,804 | 2,321 |
| Closing cash at bank | | 1,834 | 2,804 | 2,321 |
The notes on pages 13 to 25 form part of these unaudited interim results.
Notes to the condensed consolidated financial statements
For the half year ended 30 September 2022
1. Basis of preparation
Merit Group plc is a Company incorporated in England and Wales.
This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the UK. The annual financial statements of the Group are prepared in accordance with International Financial Reporting Standards (IFRSs) in conformity with the requirements of the Companies Act 2006. As required by AIM Rules, the condensed set of financial statements has been prepared applying accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 March 2022.
The condensed consolidated financial statements are neither audited in accordance with International Standards on Auditing (UK) nor subject to review as per International Standard on Review Engagements (ISRE) 2410. The comparative figures for the year ended 31 March 2022 have been extracted from the Group's statutory accounts for that financial period and, where applicable, have been restated to remove Discontinued Operations as outlined in note 5. Those accounts have been reported on by the Company's auditor and delivered to the registrar of companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498(2) or (3) of the Companies Act 2006.
Going concern
The Directors have considered the financial projections of the Group, including cash flow forecasts and the availability of committed bank facilities for the coming 12 months. They are satisfied that the Group has adequate resources for the foreseeable future and that it is appropriate to continue to adopt the going concern basis in preparing these interim financial statements.
2. Critical accounting estimates and judgements
Accounting estimates and judgements
The Group makes estimates and judgements concerning the future and the resulting estimates may, by definition, vary from the actual results. The Directors considered the critical accounting estimates and judgements used in the interim financial statements and concluded that the main areas of judgement and estimates are:
Significant Financial Judgements
§ Going concern
§ Recognition of deferred tax assets
§ Identification of cash generating units for goodwill impairment testing
§ Non-recurring administrative expenses
Significant Financial Estimates
§ Carrying value of goodwill
§ Bad debt allowance
§ Pensions
§ Share based payments
The condensed set of interim financial statements have been prepared on a going concern basis and were approved by the Board on 30 November 2022.
3. Segmental information
Business segments
The Group considers that it has two operating business segments, Merit Data & Technology (MD&T) and Dods, plus a (non-revenue generating) central corporate segment. In the half year ended 30 September 2021, the Group reported activity against the two operating business segments only, and therefore the prior period segmental analysis has been restated to reflect a like-for-like comparison with the 2022 disclosures.
The Merit Data & Technology business segment focuses on the provision of data, data engineering and machine learning, and on the provision of software and technology resourcing.
The Dods business segment concentrates on the provision of key information and insights into the political and public policy environments around the UK and the European Union.
The central corporate segment contains the activities and costs associated with the Group's head office business.
The following table provides an analysis of the Group's segment revenue by business segment.
|
Continuing Operations(1) |
Unaudited Half year ended 30 Sept 2022 £'000 | Unaudited Half year ended 30 Sept 2021 (restated*) £'000 | Audited Year ended 31 Mar 2022 (restated*) £'000 |
| |
| | |
| Merit Data & Technology
| 5,626 | 5,111 | 10,696 |
| Dods
| 3,603 | 3,587 | 7,285 |
|
| 9,229 | 8,698 | 17,981 |
No client accounted for more than 10 percent of total revenue.
|
Group Revenue by stream
Continuing Operations(1)
|
Unaudited Half year ended 30 Sep 2022 £'000 | Unaudited Half year ended 30 Sep 2021 (Restated) £'000 | Audited Year ended 31 Mar 2022 (Restated) £'000 |
| |
| | |
| Data | 2,981 | 2,649 | 5,567 |
| Software & Technology Resourcing | 2,645 | 2,462 | 5,129 |
| Political Intelligence | 3,414 | 3,431 | 6,866 |
| Political engagement
| 189 | 156 | 419 |
|
| 9,229 | 8,698 | 17,981 |
(1) Prior periods have been restated to remove Discontinued Operations as outlined in Note 5.
*Prior period segmental analysis has been restated to reflect a like-for-like comparison with the 2022 disclosures, as outlined above.
3. Segmental information (continued)
|
Unaudited half year ended 30 Sep 2022 Business segment profit before tax
Continuing Operations |
MD&T 30 Sep 2022 £'000
|
Dods 30 Sep 2022 £'000 |
Central 30 Sep 2022 £'000 |
Total 30 Sep 2022 £'000 |
| Adjusted EBITDA
| 733 | 889 | (542) | 1,080 |
| Depreciation of property, plant and equipment | (140) | (161) | - | (301) |
| Depreciation of right-of-use assets | (281) | (211) | (169) | (661) |
| Amortisation of intangible assets acquired through business combinations | (255) | - | - | (255) |
| Amortisation of software intangible assets | - | (163) | - | (163) |
| Share based payments | - | - | (31) | (31) |
| Non-recurring items | | | |
|
| People-related costs | (34) | (23) | (93) | (150) |
| Other non-recurring items
| - | (48) | (25) | (73) |
| Operating profit/(loss) | 23 | 283 | (860) | (554) |
| Net finance income/(expense) | 45 | (16) | 12 | 41 |
| Share of profit of Associate | - | - | 252 | 252 |
| Profit/(loss) before tax from Continuing Operations | 68 | 267 | (596) | (261) |
|
Unaudited half year ended 30 Sep 2021 Business segment profit before tax
Continuing Operations(1)
|
MD&T 30 Sep 2021 (restated*) £'000
|
Dods 30 Sep 2021 (restated*) £'000 |
Central 30 Sep 2021 (restated*) £'000 |
Total 30 Sep 2021 (restated*) £'000 |
| Adjusted EBITDA
| 1,020 | 995 | (449) | 1,566 |
| Depreciation of property, plant and equipment | (138) | (158) | - | (296) |
| Depreciation of right-of-use assets | (264) | (209) | (168) | (641) |
| Amortisation of intangible assets acquired through business combinations | (255) | - | - | (255) |
| Amortisation of software intangible assets | - | (114) | - | (114) |
| Non-recurring items | | | |
|
| People-related costs | - | - | (158) | (158) |
| Other non-recurring items
| - | 10 | (30) | (20) |
| Operating profit/(loss) | 363 | 524 | (805) | 82 |
| Net finance expense | (42) | (124) | (1) | (167) |
| Share of profit of Associate | - | - | - | - |
| Profit/(loss) before tax from Continuing Operations | 321 | 400 | (806) | (85) |
(1) Prior periods have been restated to remove Discontinued Operations as outlined in Note 5.
*Prior period segmental analysis has been restated to reflect a like-for-like comparison with the 2022 disclosures, as outlined above
3. Segmental information (continued)
|
Audited year ended 31 Mar 2022 Business segment profit before tax
Continuing Operations(1)
|
MD&T 31 Mar 2022 £'000
|
Dods 31 Mar 2022 £'000 |
Central 31 Mar 2022 £'000 |
Total 31 Mar 2022 £'000 |
| Adjusted EBITDA
| 1,898 | 1,395 | (991) | 2,302 |
| Depreciation of property, plant and equipment | (279) | (317) | - | (596) |
| Depreciation of right-of-use assets | (531) | (413) | (333) | (1,277) |
| Amortisation of intangible assets acquired through business combinations | (511) | - | - | (511) |
| Amortisation of software intangible assets | - | (255) | - | (255) |
| Share based payments | - | - | 48 | 48 |
| Non-recurring items | | | |
|
| Impairments and asset write offs | - | (746) | (97) | (843) |
| People-related costs | - | - | (316) | (316) |
| Other non-recurring items
| - | - | (46) | (46) |
| Operating profit/(loss) | 577 | (336) | (1,735) | (1,494) |
| Net finance expense | 74 | (375) | (110) | (411) |
| Share of profit of Associate | - | - | 144 | 144 |
| Profit/(loss) before tax from Continuing Operations | 651 | (711) | (1,701) | (1,761) |
(1) Prior periods have been restated to remove Discontinued Operations as outlined in Note 5.
4. Non-recurring items
|
Continuing Operations(1) |
Unaudited Half year ended 30 Sep 2022 £'000
| Unaudited Half year ended 30 Sep 2021 (restated) £'000
| Audited Year ended 31 Mar 2022 (restated) £'000 |
| |
| | |
| Impairments and asset write offs
| - | - | 843 |
| People-related costs
| 150 | 158 | 316 |
| Other: |
| | |
| - Professional services and consultancy
| 73 | 20 | 46 |
|
| 223 | 178 | 1,205 |
(1) Prior periods have been restated to remove Discontinued Operations as outlined in Note 5.
During the full year to 31 March 2022, the Group made an impairment charge of £97k against the carrying value of investments and wrote off £746k of intangible fixed assets under construction.
People-related costs include deferred cash consideration on the acquisition of Meritgroup Limited. Also included are redundancy costs reflecting the effect of Group initiatives to appropriately restructure the business.
Other non-recurring costs relate to one-off consultancy and professional fees associated with the rental review of the London premises.
5. Disposal
On 27 October 2022, the Group announced that it had agreed to sell the Media, Events and Training operations of its Dods segment (together, the "MET Operations") for a cash consideration of £4.5 million. The Disposal remains subject to the satisfaction of certain conditions, including satisfaction of financing by Political Holdings Limited (the Purchaser), but is expected to complete before the end of the 2022 calendar year.
As a consequence of the agreed disposal, the assets of the MET Operations have been reclassified as assets held for resale within current assets; the transferring liabilities of the MET Operations have been reclassified as liabilities directly associated with assets classified as held for resale within current liabilities; and the activities of the MET Operations have been classified as Discontinued Operations within the Condensed Consolidated Income Statement.
The results of the Discontinued MET Operations for the period are as follows.
|
Discontinued Operations
| Unaudited Half year ended 30 Sept 2022 £'000 | Unaudited Half year ended 30 Sept 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
| |
| | |
| Revenue
| 4,770 | 3,640
| 9,418
|
| Cost of sales
| (4,280) | (3,491) | (7,610) |
|
Gross profit |
490 |
149 |
1,808 |
| |
| | |
| Administrative expenses | (1,044) | (750) | (1,945) |
| Other operating income | - | 44 | 42 |
|
Operating loss | (554) | (557) | (95) |
|
Memorandum: |
| | |
|
Adjusted EBITDA | (269) | (314) | 519 |
|
Depreciation of property, plant and equipment | (45) | (48) | (93) |
| Depreciation of right-of-use assets | (19) | (19) | (38) |
| Amortisation of intangible assets acquired through business combinations | (176) | (176) | (351) |
| Non-recurring items |
| | |
| People-related costs | (45) | - | (132) |
|
Operating loss | (554) | (557) | (95) |
|
|
| | |
| Net finance expense | (2) | (4) | (8) |
| Loss before tax | (556) | (561) | (103) |
|
Income tax
| - | - | - |
|
Loss for the period
| (556) | (561) | (103) |
5. Disposal
Cashflows generated by the Discontinued Operation for the period were as follows:
|
Discontinued Operations
| Unaudited Half year ended 30 Sept 2022 £'000 | Unaudited Half year ended 30 Sept 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
| |
| | |
| Net cash outflow from operating activities
| (576) | (833) | (330) |
| Net cash outflow from financing activities
| (22) | (22) | (44) |
|
Net decrease in cash, cash equivalents and bank overdrafts from Discontinued Operations | (598) | (855) | (374) |
| |
| | |
6. Earnings per share
|
Continuing Operations(1) | Unaudited Half year ended 30 Sep 2022 £'000
| Unaudited Half year ended 30 Sep 2021 (restated) £'000 | Audited Year ended 31 Mar 2022 (restated) £'000 |
| |
| | |
| Loss attributable to shareholders
| (443) | (85) | (1,469) |
| Add: non-recurring items
| 223 | 178 | 1,205 |
| Add: amortisation of intangible assets acquired through business combinations
| 255 | 255 | 511 |
| Add: net exchange losses/(gains)
| (230) | (109) | (147) |
| Add: share-based payment (credit)/expense
| 31 | - | (48) |
| Adjusted post-tax (loss)/profit from Continuing Operations attributable to shareholders | (164) | 239 | 52 |
(1) Prior periods have been restated to remove Discontinued Operations as outlined in Note 5.
|
Discontinued Operations | Unaudited Half year ended 30 Sep 2022 £'000
| Unaudited Half year ended 30 Sep 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
| |
| | |
| Loss attributable to shareholders
| (556) | (561) | (103) |
| Add: non-recurring items
| 45 | - | 132 |
| Add: amortisation of intangible assets acquired through business combinations
| 176 | 176 | 351 |
| Adjusted post-tax (loss)/profit from Discontinued Operations attributable to shareholders | (335) | (385) | 380 |
6. Earnings per share (continued)
|
|
Unaudited Half year ended 30 Sept 2022 Ordinary shares
| Unaudited Half year ended 30 Sept 2021 Ordinary shares (restated*) |
Audited Year ended 31 Mar 2022 Ordinary shares |
| |
| | |
| Weighted average number of shares
|
| | |
| In issue during the period - basic
| 23,956,124 | 20,805,685 | 22,367,910 |
| Adjustment for share options
| - | 55,786 | - |
| In issue during the period - diluted
| 23,956,124 | 20,861,471 | 22,367,910 |
Performance Share Plan (PSP) options over 1,420,791 Ordinary shares have not been included in the calculation of diluted EPS for the period ended 30 September 2022, nor for the year ended 31 March 2022, because their exercise is contingent on the satisfaction of certain criteria that had not been met at those dates.
|
Continuing Operations(1) |
Unaudited Half year ended 30 Sep 2022 Pence per share
| Unaudited Half year ended 30 Sep 2021 Pence per share (restated*) | Audited Year ended 31 Mar 2022 Pence per share (restated*) | |
| |
|
| | |
| Earnings per share - Continuing Operations
|
|
| | |
| Basic | (1.85) | (0.41) | (6.57) | |
| Diluted | (1.85) | (0.41) | (6.57) | |
| Adjusted earnings per share - Continuing Operations
|
| | | |
| Basic | (0.68) | 1.15 | 0.23 | |
| Diluted | (0.68) | 1.15 | 0.23 | |
(1) Prior periods have been restated to remove Discontinued Operations as outlined in Note 5.
* Prior period figures for the number of shares and earnings per share have been restated in accordance with IAS33 to reflect the share consolidation and subdivision undertaken on 16 April 2021, as detailed in Note 12.
|
Discontinued Operations | Unaudited Half year ended 30 Sep 2022 Pence per share
| Unaudited Half year ended 30 Sep 2021 Pence per share | Audited Year ended 31 Mar 2022 Pence per share | ||
| |
|
| | ||
| Earnings per share - Discontinued Operations |
|
| | ||
| Basic | (2.32) | (2.70) | (0.46) | ||
| Diluted | (2.32) | (2.70) | (0.46) | ||
| Adjusted earnings per share - Discontinued Operations
|
| | | ||
| Basic | (1.40) | (1.85) | 1.70 | ||
| Diluted | (1.40) | (1.85) | 1.70 | ||
6. Earnings per share (continued)
|
Total |
Unaudited Half year ended 30 Sep 2022 Pence per share
| Unaudited Half year ended 30 Sep 2021 Pence per share (restated *) | Audited Year ended 31 Mar 2022 Pence per share (restated *) |
| |
|
| |
| Earnings per share |
|
| |
| Basic | (4.17) | (3.11) | (7.03) |
| Diluted | (4.17) | (3.11) | (7.03) |
| Adjusted earnings per share
|
| | |
| Basic | (2.08) | (0.70) | 1.93 |
| Diluted | (2.08) | (0.70) | 1.93 |
* Prior period figures for the number of shares and earnings per share have been restated in accordance with IAS33 to reflect the share consolidation and subdivision undertaken on 16 April 2021, as detailed in Note 12.
7. Cash generated by operations
|
|
| Unaudited Half year ended 30 Sept 2022 £'000 | Unaudited Half year ended 30 Sept 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
| |
|
| | |
| Cash flows from operating activities | |
| | |
| Loss for the period | | (999) | (646) | (1,572) |
| Depreciation of property, plant and equipment | | 346 | 273 | 689 |
| Depreciation of right-of-use assets | | 680 | 660 | 1,315 |
| Amortisation of intangible assets acquired through business combinations | | 431 | 431 | 862 |
| Amortisation of other intangible assets | | 163 | 184 | 255 |
| Share-based payments charge/(credit) | | 31 | - | (48) |
| Share of profit of Associate | | (252) | - | (144) |
| Lease interest expense | | 161 | 195 | 369 |
| Loss on disposal of fixed assets | | - | - | 2 |
| Write off of intangible assets | | - | - | 746 |
| Impairment of investments in associates | | - | - | 97 |
| Interest income | | (40) | (110) | (28) |
| Interest expense | | 153 | 86 | 213 |
| Foreign exchange on operating items | | 24 | - | - |
| Income tax charge/(credit) | | 182 | - | (292) |
| Operating cash flows before movement in working capital | | 880 | 1,073 | 2,464 |
| (Increase)/decrease in inventories | | 14 | (83) | 22 |
| (Increase)/decrease in trade and other receivables | | (422) | (202) | 430 |
| Decrease in trade and other payables | | (466) | (1,137) | (2,220) |
|
Cash generated by operations
| | 6 | (349) | 696 |
8. Goodwill
|
| Unaudited Half year ended 30 Sep 2022 £'000
| Unaudited Half year ended 30 Sep 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
| |
| | |
| Cost and net book value
|
| | |
| Opening balance | 28,911 | 28,911 | 28,911 |
| Reclassified as assets held for resale | (1,269) | - | - |
| Closing balance | 27,642 | 28,911 | 28,911 |
9. Intangible assets
|
| Assets acquired through business combinations |
Software | Under Construction Capitalised costs |
Total |
|
| £'000
| £'000 | £'000 | £'000 |
| |
| | | |
| Cost
| | | | |
| At 1 April 2021
| 28,042 | 4,834 | 746 | 33,622 |
| Additions - internally generated
| - | 1,240 | - | 1,240 |
| Asset write off | - | - | (746) | (746) |
|
At 31 March 2022
|
28,042 |
6,074 | - | 34,116 |
| Additions - internally generated | - | 108 | - | 108 |
| Reclassified as assets held for resale
| (1,294) | - | - | (1,294) |
| At 30 September 2022 | 26,748 | 6,182 | - | 32,930 |
| Accumulated amortisation
| | | | |
| At 1 April 2021
| 19,283 | 3,890 | - | 23,173 |
| Charge for the year
| 862 | 255 | - | 1,117 |
|
At 31 March 2022
| 20,145 | 4,145 | - | 24,290 |
| Charge for the period
| 431 | 163 | - | 594 |
| Reclassified as assets held for resale
| (633) | - | - | (633) |
| At 30 September 2022 | 19,943 | 4,308 | - | 24,251 |
| Net book value
| | | | |
| At 31 March 2021 - audited
| 8,759 | 944 | 746 | 10,449 |
| At 31 March 2022 - audited
| 7,897 | 1,929 | - | 9,826 |
| At 30 September 2022 - unaudited | 6,805 | 1,874 | - | 8,679 |
10. Property, plant and equipment
|
|
|
Leasehold Improvements | IT Equipment and Fixtures and Fittings
|
Total |
|
|
| £'000
| £'000 | £'000 |
| |
|
| | |
| Cost
|
| | | |
| At 1 April 2021
|
| 2,037 | 2,255 | 4,292 |
| Additions
|
| - | 314 | 314 |
| Disposals |
| - | (48) | (48) |
|
At 31 March 2022
|
|
2,037 |
2,521 |
4,558 |
| Additions
|
| - | 132 | 132 |
| Foreign exchange
|
| - | 88 | 88 |
| Reclassified as assets held for resale |
| (52) | (17) | (69) |
| At 30 September 2022 |
| 1,985 | 2,724 | 4,709 |
| Accumulated depreciation
|
| | | |
| At 1 April 2021
|
|
918 | 1,190 | 2,108 |
| Charge for the year
|
| 210 | 479 | 689 |
| Disposals |
| - | (46) | (46) |
|
At 31 March 2022
|
| 1,128 | 1,623 | 2,751 |
| Charge for the period |
| 105 | 241 | 346 |
| Reclassified as assets held for resale
|
| (44) | (17) | (61) |
| At 30 September 2022 |
| 1,189 | 1,847 | 3,036 |
| Net book value
|
| | | |
| At 31 March 2021 - audited
|
| 1,119 | 1,065 | 2,184 |
| At 31 March 2022 - audited
|
| 909 | 898 | 1,807 |
| At 30 September 2022 - unaudited |
| 796 | 877 | 1,673 |
11. Interest-bearing loans and borrowings
|
| Unaudited Half year ended 30 Sep 2022 £'000
| Unaudited Half year ended 30 Sep 2021 £'000 | Audited Year ended 31 Mar 2022 £'000 |
| |
| | |
| Current liabilities:
|
| | |
| Bank loan/RCF | 2,200 | 2,541 | 2,860 |
| Leases | 1,640 | 1,680 | 1,679 |
|
| 3,840 | 4,221 | 4,539 |
| Non-current liabilities:
|
| | |
| Bank loan/RCF | 2,800 | 2,024 | 1,518 |
| Leases | 4,153 | 6,045 | 5,042 |
|
| 6,953 | 8,069 | 6,560 |
| Total loans and borrowings |
| | |
| Bank loan/RCF | 5,000 | 4,565 | 4,378 |
| Leases | 5,793 | 7,725 | 6,721 |
|
| 10,793 | 12,290 | 11,099 |
On 22 July 2022, the Group agreed new secured loan facilities with Barclays which included:
§ Term Loan: a £3 million, five-year term loan, amortising on a straight-line basis at £150,000 per quarter;
§ RCF: a £2 million non-amortising, revolving credit facility for the five-year duration of the Term Loan;
§ Both the Term loan and RCF accruing interest at 4.75% above Bank of England base rate;
§ Covenants: leverage covenants measured quarterly from September 2022, Cash cover measured quarterly from June 2023, and Interest cover measured quarterly from December 2023, each for the duration of the facilities. Debt service covenants measured quarterly from June 2022 to March 2023.
Following disposal of the Dods MET Operations, the Group has agreed to a £2m repayment of the Term Loan, reducing overall post-disposal debt facilities to £3m (£1m Term Loan, amortising on a straight-line basis at £50,000 per quarter and a £2m RCF), retaining financial flexibility.
12. Issued Share Capital
|
| 9p deferred shares Number | 1p ordinary shares Number | 28p ordinary shares Number |
Total £'000 |
| |
| | |
|
| Issued share capital as at 1 April 2021
| 151,998,453 | 582,071,380 | - | 19,501 |
| Shares cancelled during the year | (151,998,453) | | 20,788,375 | (13,680) |
| Share consolidation during the year | - | (582,071,380) | 3,167,749 | - |
| Shares issued during the year | - | - | - | 887 |
| Issued share capital as at 31 March 2022
| - | - | 23,956,124 | 6,708 |
| Issued share capital as at 30 September 2022 | - | - | 23,956,124 | 6,708 |
On 16 April 2021, shareholders approved a reorganisation of the parent company's share capital. This reorganisation included cancellation of 151,998,453 Deferred Shares and the consolidation and sub-division of the parent company's Ordinary Shares (including the purchase of certain of the parent company's shares), having the impact of reducing the total number of Ordinary Shares by a factor of 28 and increasing the nominal value by a factor of 28 (from 1 pence to 28 pence nominal).
On 1 October 2021, the parent company issued 1,675,749 ordinary shares due as contingent consideration on the acquisition of Meritgroup Limited in 2019.
On 1 October 2021, the parent company issued 1,492,000 ordinary shares in a fundraising subscription at 62.4 pence per share, raising £908,000, net of costs.
13. Related party transactions
During the period, the Group received a repayment of £70,000 (H1 2021/22: £140,000) on its interest free loan to its Associate Sans Frontières Associates (SFA). At 30 September 2022, the balance outstanding was £140,000 (31 March 2022: £210,000).
During the period, an amount of £17,493 (2021: £55,166) was payable to an Associate, Social 360 Limited, in relation to profit-share for monitoring services provided. At 30 September 2022, £34,466 (31 March 2022: £16,973) of this balance was outstanding. On 8 August 2022, the Company completed the sale of its 30% stake in Social 360 Limited for cash consideration of £420,000.
On acquisition of Meritgroup Limited, an arm's length non-repairing 7-year lease was entered into between a Merit subsidiary (Letrim Intelligence Services Private Limited) and Merit Software Services Private Limited. Cornelius Conlon, a Director of the Group, is the beneficial owner of Merit Software Services Private Limited. The lease relates to the Chennai office of MD&T. During the period, payments of £400,900 (H1 2021/22: £416,900) were made to Merit Software Services Private Limited in relation to the lease and other property-related costs.
Cornelius Conlon, a Director of the Group, was entitled to shares and cash consideration on the first three anniversaries of the Meritgroup Limited acquisition in 2019. During the period, Cornelius Conlon was paid cash consideration of £220,000.
During the period, an amount of £nil (H1 2021/22: £nil) was recognised in the profit and loss account in relation to licence fees to software charged by Web Data Works Limited, a company in which the Group has a 9.2% investment, and of which Cornelius Conlon is a Director. At 30 September 2022, there was a balance of £105,000 (31 March 2022: £105,000) outstanding.
During the year, an amount of £18,000 (H1 2021/22: £28,000) was billed in relation to recruitment services charged by Acolyte Resource Group Limited, a company in which the Group had a 13.3% investment at the start of the period, and of which Cornelius Conlon is a Director and shareholder. At 30 September 2022, there was a balance of £nil (31 March 2022: £nil) outstanding.
Acolyte Resource Group Limited is also a customer of MD&T and was billed £131,033 (H1 2021/22: £155,908) for Software and Technology Resourcing services. At 30 September 2022, there was a balance of £61,125 (31 March 2022: £104,000) due.
On 23 September 2022, the Group paid £50,364 in consideration for further shares in Acolyte Resource Group Limited as part of a £336,000 funding round by the company. As a consequence of this share subscription, the Group's stake in Acolyte Resource Group Limited increased from 13.3% to 13.5%.
During the current and previous period, Deacon Street Partners Limited, a company related by virtue of Angela Entwistle, a Director of the Company also being a Director, invoiced £15,000 (2021: £12,500) to the Company for the services of Angela Entwistle as a Non-Executive Director. At 30 September 2022 the balance outstanding was £2,500 (31 March: £2,500).
System1 Group plc, a company related by virtue of Philip Machray, a Director of the Company also being a Director, is a customer of MD&T and was billed £55,857 (H1 2021/22: £nil) for Technology Resourcing Services. At 30 September 2022 the balance outstanding was £40,028 (31 March 2022: £nil).
14. Subsequent events
On 27 October 2022, the Group announced that it had agreed to sell the Media, Events and Training operations of its Dods segment (together, the "MET Operations") for a cash consideration of £4.5 million. This transaction completed on 30 November 2022.
Following the above disposal, the Group has agreed to a £2m reduction in debt facilities to £3m (£1m Term Loan, amortising on a straight-line basis at £50,000 per quarter and a £2m RCF). For more details on the disposal, see Note 5. For more details on the debt facilities see Note 11.
Further to the above disposal, the Group has concluded that a considerable proportion of the available floorspace within its leased London premises is surplus to its ongoing requirements. It is considering potential options of assigning or sub-letting the space and in the event it is unable to achieve this, management expect to impair the portion of the Right-of Use assets no longer utilised and make a provision for the running costs of the vacant space for the remainder of the lease which runs to July 2026.
Between the 3rd and 10th of October 2022 the Company received loan repayments totalling £140,000 from its Associate, Sans Frontières Associates (SFA).
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