Notes to the Consolidated Financial Statements

1.   Summary of significant accounting policies

Corporate information

Beeks Financial Cloud Group PLC is a public limited company which is listed on the AIM Market of the London Stock Exchange and is incorporated in Scotland. The address of its registered office is Riverside Building, 2 Kings Inch Way, Renfrew, Renfrewshire, PA4 8YU. The principal activity of the Group is the provision of information technology services. The registered number of the Company is SC521839.  The financial statements are prepared in pounds sterling and rounded to the nearest thousand. In certain cases, amounts in the report have been rounded to the nearest pound.

The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Basis of preparation

These financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006.

The financial statements have been prepared on the historical cost basis except for the valuation of certain financial instruments that are measured at fair values at each reporting period, as explained in the accounting policies below.

The measurement bases and principal accounting policies of the group are set out below and are consistently applied to all years presented unless otherwise stated.

International Financial Reporting Standards and Interpretations issued but not yet effective

New and revised IFRSs in issue but not yet effective and have not been adopted by the Group.
At the date of authorisation of these financial statements, the following standards, interpretations, and amendments have been issued but are not yet effective and have no material impact on the Group's financial statements:

·      IFRS 17 (including the June 2020 Amendments to IFRS 17) - Insurance Contracts

·      Amendments to IAS 1 - Classification of Liabilities as Current or Non-current

·      Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies

·      Amendments to IAS 8 - Definition of Accounting Estimates

·      IFRS16 - Lease Liability in a Sale and Leaseback transaction

·      IFRS 4 - Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9

·      Amendments to IAS 12 - Deferred Tax related to Assets and Liabilities arising from a single transaction

None of these have been adopted early and the Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods.

Adoption of new and revised Standards - amendments to IFRS that are mandatorily effective for the current year
There are no new accounting policies applied in the year ended 30 June 2023 which have had a material effect on these accounts. In addition, the Directors do not consider that the adoption of new and revised standards and interpretations issued by the IASB in 2021 has had any material impact on the financial statements of the Group.

Going concern

The Directors have assessed the current financial position of Beeks Financial Cloud Group PLC, taking account of its business activities, together with the factors likely to affect its future development, performance and position as set out in the Strategic Report on pages 7 to 22.

The key factors considered by the Directors were:

·      Historic and current trading and profitability of the Group

·      The rate of growth in sales both historically and forecast

·      The competitive environment in which the group operates

·      The current level of cash reserves

·      Current level of debt obligations

·      Ability to comply with existing covenants

·      The finance facilities available to the Group, including the availability of any short term funding required through the use of the Revolving Credit Facility

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Financial Officer's Report on pages 13 to 16.

We take great comfort from the resilience of our business model. The level of customer churn across our business has remained low and cash collection has been in line with our typical profile. We do however remain vigilant to the economic impact the ongoing macro-economic environment may create, particularly on the SME segment of the market. Note 16 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The directors are of the opinion that the Group can operate within their current debt facilities and comply with its banking covenants. At the end of the financial year, the Group had net cash of £4.41m (2022: Net cash £7.86m) a level which the Board is comfortable with given the strong cash generation of the Group and low level of debt to EBITDA ratio. The Group has a diverse portfolio of customers with relatively low customer concentration which are split across different geographic areas. As a consequence, the directors believe that the Group is well placed to manage its business risks.

The directors have considered the Group budgets and the cash flow forecasts to December 2024, and associated risks, including the potential impact of the current economic climate. We have run appropriate scenarios applying reasonable downside sensitivities and are confident we have the resources to meet our liabilities as they fall due including the base case assumption of our existing loan facilities not being made available at the end of current terms (December 2024). The budgets and cash flow forecasts have assumed all loan facilities being repaid in full. We have also run reverse stress test scenarios in order to identify circumstances where cash reserves would be depleted. The circumstances that would lead into such scenarios (such as moving from revenue growth to revenue attrition) are not considered plausible given the historic track record and trading prospects of the group.

After making enquiries, the directors have a reasonable expectation that the Group will be able to meet its financial obligations and has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

Accordingly, the Directors have adopted the going concern basis in preparing the Report for the year ending 30th June 2023.

Principles of consolidation

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the subsidiary and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary or a business is the fair values of the assets transferred, the liabilities incurred to former owners of the acquiree and the equity interests issued to the Group.

The consideration transferred includes the fair values of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values on the acquisition date.

Acquisition related costs are expensed as incurred. As each of the subsidiaries are 100% wholly owned the Group has full control over each of its investees. Intercompany transactions, unrealised gains and losses on intragroup transactions and balances between group companies are eliminated on consolidation.

Foreign currency transactions

Foreign currency transactions are translated into pound sterling using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses resulting from the retranslation of inter-company balances are recognised in profit or loss. Non-monetary assets are translated at the historical rate.

Foreign operations

The assets and liabilities of foreign operations are translated into pound sterling using the exchange rates at the reporting date. The revenues and expenses of foreign operations are translated into Pound sterling using the average exchange rates, which approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through the foreign currency reserve in equity.

Business Combinations

Acquisitions of subsidiaries are accounted for using the acquisition method. The acquisition method involves the recognition at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the statement of financial position at their fair values, which are also used as the bases for subsequent measurement in accordance with the Group accounting policies.

Where the Group's assessment of the net fair value of a subsidiary's identifiable assets acquired and liabilities assumed is less than the fair value of the consideration including contingent consideration of the business combination then the excess is treated as goodwill. Where the Group's assessment of the net fair value of a subsidiary's net assets and liabilities exceeds the fair value of the consideration including contingent consideration of the business combination then the excess is recognised through profit or loss immediately.

Where an acquisition involves a potential payment of contingent consideration the estimate of any such payment is based on its fair value. To estimate the fair value an assessment is made as to the amount of contingent consideration which is likely to be paid having regard to the criteria on which any sum due will be calculated and is probability based to reflect the likelihood of different amounts being paid. Where a change is made to the fair value of contingent consideration within the initial measurement period as a result of additional information obtained on facts and circumstances that existed at the acquisition date then this is accounted for as a change in goodwill. Where changes are made to the fair value of contingent consideration as a result of events that occurred after the acquisition date then the adjustment is accounted for as a charge or credit to profit or loss.

Revenue recognition

Revenue arises from the provision of Cloud-based localisation. To determine whether to recognise revenue, the group follows a 5-step process as follows:

o  Identifying the contract with a customer

o  Identifying the performance conditions

o  Determining the transaction price

o  Allocating the transaction price to the performance conditions

o  Recognising revenue when/as performance obligation(s) are satisfied.

Revenue is measured at transaction price, stated net of VAT and other sales related taxes, if applicable.

Infrastructure services

The group's core business provides managed Cloud computing infrastructure and connectivity. The Group considers the performance obligation to be the provision of access and use of servers to our clients. As the client receives and consumes the benefit of this use and access over time, the related revenue is recognised evenly over the life of the contract.

Monitoring software and maintenance services

The group also provides software products that analyse and monitor IT infrastructure. Revenue from the provision of software licences is split between the delivery of the software licence and the ongoing services associated with the support and maintenance. The supply of the software licence is recognised on a point in time basis when control of the goods has transferred, being the delivery of the item to the customer, whilst the ongoing support and maintenance service is recognised evenly over the period of the service being rendered on an over time basis. The group applies judgement to determine the percentage of split between the licence and maintenance portions, which includes an assessment of the pricing model and comparison to industry standards.

Where an agreement includes a royalty fee as a result of future sales by a customer to third parties and there is a minimum amount guaranteed, this is recognised at point in time when the delivery of the item is complete. Where such contracts include a financing component, the group also adjusts the transaction price to reflect the time value of money. Finance income is recognised as other income in the statement of the comprehensive income

Set up fees

Set up fees charged on contracts are reviewed to consider the material rights of the set-up fee. When a set-up fee is arranged, Beeks will consider the material rights of the set-up fee, if in substance it constitutes a payment in advance, the set-up fee will be deemed to be a material right. The accounting treatment for both material rights and non-material rights set-up fees is as follows:

·      Any set up fees that are material rights are spread over the group's average contract term

·      Set up fees that are not material rights are recognised over the enforceable right period, i.e. 1 to 3 months depending on the termination period

Revenue in respect of installation or training, as part of the set-up, is recognised when delivery and installation of the equipment is completed on a point in time basis.

Hardware and software sales

Revenue from the supply of hardware is recognised when control of the goods has transferred. For hardware, this occurs upon delivery of the item to the customer. For software, control is deemed to pass on provision of the licence key to the customer being the point in time the customer has the right to use the software.

The Group has concluded it acts as a principal in each sales transaction vs an agent. This has been determined by giving consideration to whether the Group holds inventory risk, has control over the pricing over a particular service, takes the credit risk, and whether responsibility ultimately sits within the Group to service the promise of the agreements. Refer to note 2 for more detail on these considerations.

Professional and consultancy services

Revenue from professional and consultancy services are recognised as these services are rendered and the performance obligation satisfied. Any unearned portion of revenue (i.e. amounts invoiced in advance of the service being provided) is included in payables as a contract liability.

Proximity and Exchange Cloud Services

Proximity and Exchange Cloud are a fully-managed and configurable compute, storage and analytics racks built with industry-leading low latency hardware that allow capital markets and financial services customers to run compute, storage and analytics on-premise.

Revenue from the sale of proximity and exchange cloud contracts has been assessed under IFRS 15 and using the five step process, the following performance obligations have been identified:

·      Delivery and installation of the hardware, and provision of the software licence

·      Delivery of maintenance and technical support over the contract

·      Delivery of unspecified upgrades and future software releases

The delivery and installation of the hardware, and provision of the software licence are highly interrelated and considered to be one performance obligation. This is recognised on a point in time basis when the control of the goods have been transferred, being when delivery of the item is completed and the right to use the software is granted.

The maintenance and technical support over the contract, as well as the delivery of the unspecified upgrades and future software releases are recognised evenly on an over time basis over the period of the contract. The performance obligation for both is considered to be that of standing ready to provide technical product support and unspecified updates, optional upgrades and enhancements on a when-and-if-available basis over the period of service being rendered.

These contracts include multiple deliverables. The group applies judgement to determine the transaction price to be allocated between a) the delivery and installation of the hardware and provision of the software licence, recognised on a point in time basis and b) the stand ready services (support, maintenance, unspecified upgrades) recognised over time. The Group applies the expected cost plus margin approach to the stand ready services and the delivery and installation of the hardware and provision of software licence is estimated using the residual approach, given this is a new product to market and standalone selling prices are not directly observable.  Further detail is provided within key judgement and estimations on page 84.

Where such contracts include a financing component, the group also adjusts the transaction price to reflect the time value of money. Finance income is recognised as other income in the statement of the comprehensive income.

Revenue recognised over time and at a point in time is disclosed at note 3 of the notes to the financial statements.

Government grant income

Grants from Government agencies are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is deducted from carrying amount of the intangible asset over the expected useful life of the related asset. Note 3 Revenue provides further information on Government grants.

Rental Income

Rental income from the head office property leased out under operating leases is recognised in the statement of the comprehensive income as other income as these services are rendered, as the tenant occupies the space.

Cost of sales

Costs considered to be directly related to revenue are accounted for as cost of sales. All direct production costs and overheads, including indirect overheads that can reasonably be allocated, have been classified as cost of sales.

Interest

Interest revenue is recognised as part of the financing component within some Proximity Cloud and Software Licencing contracts. Interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash flows through the expected life of the financial asset to the net carrying amount of the financial asset.

Other non-recurring costs

The Group defines other non-recurring costs as costs incurred by the Group which relate to material non-recurring costs. These are disclosed separately where it is considered it provides additional useful information to the users of the financial statements.

Taxation and deferred taxation

The income tax expense or income for the period is the tax payable on the current period's taxable income. This is based on the national income tax rate enacted or substantively enacted for each jurisdiction with any adjustment relating to tax payable in previous years and changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in financial statements.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applicable when the asset or liability crystallises based on current tax rates and laws that have been enacted or substantively enacted by the reporting date. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability.

A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits against which to recover carried forward tax losses and from which the future reversal of temporary differences can be deducted. The carrying amount of deferred tax assets are reviewed at each reporting date.

Current and non-current classification

Assets and liabilities are presented in the statement of financial position based on current and non-current classification.

An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current.

A liability is classified as current when: it is either expected to be settled in the Group's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current.

Deferred tax assets and liabilities are always classified as non-current.

Cash and cash equivalents

Cash at bank, overnight and longer term deposits which are held for the purpose of meeting short term cash commitments are disclosed within cash and cash equivalents.

Financial instruments

A financial instrument is any contract that gives rise to a financial asset in one entity and a financial liability or equity instrument in another and is recognised when the Group becomes party to the contractual provisions of the instrument.

Financial assets and liabilities are recognised initially at fair value, and subsequently measured at amortised cost, with any directly attributable transaction costs adjusted against fair value at initial recognition and recognised immediately in the Consolidated income statement as a profit or loss.

Financial assets

Trade and other receivables

Trade and other receivables are initially recognised at transaction price, less allowances for impairment. These are subsequently measured at amortised costs using the effective interest method. An allowance for impairment of trade and other receivables is established when there is evidence that Beeks Financial Cloud Group PLC will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade and other receivables may be impaired. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within 'administrative expenses'. When a trade or other receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against 'administrative expenses' in the Consolidated statement of comprehensive income.

IFRS 9 requires an expected credit loss ("ECL") model which requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets.  The main financial asset that is subject to the expected credit loss model is trade receivables, which consist of billed receivables arising from contracts.

The Group has applied the simplified approach to providing for expected credit losses ("ECL")  prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables.

The ECL model reflects a probability weighted amount derived from a range of possible outcomes. To measure the ECL, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The Group has established a provision matrix based on the payment profiles of historic and current sales and the corresponding credit losses experienced. The historical loss rates are adjusted to reflect current and forward-looking information that might affect the ability of customers to settle the receivables, including macroeconomic factors as relevant.

Provision against trade and other receivables is made when there is evidence that the Group will not be able to collect all amounts due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the asset's carrying amount and the present value of estimated future cash flows. An assessment for impairment is undertaken at least at each reporting date.

Where a financing component is applicable, the Group has chosen to measure any loss allowance at an amount equal to lifetime expected credit losses.

Financial liabilities

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. These amounts represent liabilities for goods and services provided to Beeks Financial Cloud Group plc prior to the end of the financial period which are unpaid as well as any outstanding tax liabilities.

Borrowings

Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method.

Defined contribution schemes

The defined contribution scheme provides benefits based on the value of contributions made. Contributions to the defined contribution superannuation plans are expensed in the period in which they are incurred.

 

Fair value measurement

When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market.

Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs, and minimising the use of unobservable inputs.

Share based payments

The Group operates equity-settled share based remuneration plans for its employees. Options are measured at fair value at grant date using the Black Scholes model. Where options are redistributed, options are measured at fair value at the redistribution date using the Black Scholes Model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.

Under the Group's share option scheme, share options are granted to directors and selected employees. The options are expensed in the period over which the share based payment vests. A corresponding increase to the share based payment reserve in equity is recognised.

When share options are exercised, the company issues new shares. The nominal share value from the proceeds received are credited to share capital and proceeds received above nominal value, net of attributable transaction costs, are credited to the share premium when the options are exercised. When share options are forfeited, cancelled, or expire, the corresponding fair value is transferred to the retained earnings reserve. Amounts held in the share based payments reserve are transferred to Retained Earnings on exercise of the related options.

The Group has no legal or constructive obligation to repurchase or settle the options in cash.

Where the Group entity incurs a share based payment charge relating to subsidiary employees, the charge is treated as a capital contribution in the subsidiary and an increase in investment in the Group entity.

Property, plant and equipment (PPE)

PPE is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.  Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to Beeks Financial Cloud Group PLC and the cost of the item can be measured reliably. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.

Depreciation on IT infrastructure and fixtures and fittings is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

·      Leasehold property and improvements over the lease period

·      Freehold property over 50 years

·      Computer Equipment over 5 years and over the length of lease

·      Office equipment and fixtures and fittings over 5-20 years

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the lease or the estimated useful life of the assets, whichever is shorter.

An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the Group. Gains and losses between the carrying amount and the disposal proceeds are taken to profit or loss. Any revaluation surplus reserve relating to the item disposed of is transferred directly to retained profits.

Inventories

Inventories are stated at the lower of cost and net realisable value. Cost includes all expenses directly attributable to bringing the asset to its current condition. Costs of ordinarily interchangeable items are assigned using the first in, first out cost formula. Net realisable value is the estimated selling price in the ordinary course of business less any directly attributable selling expenses.

At each reporting date, an assessment is made for impairment.  Any excess of the carrying amount of inventories over its estimated selling prices less costs to complete and sell is recognised as an impairment loss in the income statement.  Reversals of impairment losses are also recognised in profit or loss.

Leases

A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration. To apply this definition the Group assesses whether the contract meets three key evaluations which are whether the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Group; the Group has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and the Group has the right to direct the use of the identified asset throughout the period of use.

At the lease commencement date, the Group recognises a right-of-use asset and a corresponding lease liability on the Consolidated statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability measured at the present value of future lease payments, any initial direct costs incurred by the Group. The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group assesses the right-of-use asset for impairment under IAS 36 'Impairment of Assets' where such indicators exist.

Lease liabilities are presented on two separate lines in the Consolidated statement of financial position for amounts due within one year and amounts due after more than one year. The lease liability is initially measured at the present value of lease payments that are not paid at the commencement date, discounted using the rate implicit in the lease. If this rate cannot readily be determined, the Group applies an incremental borrowing rate. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability and by reducing the liability by payments made. The Group re-measures the lease liability (and adjusts the related right-of-use asset) whenever the lease term has changed, or a lease contract is modified, and the modification is not accounted for as a separate lease.

Lease payments included in the measurement of the lease liability can be made up of fixed payments and an element of variable charges depending on the estimated future price increases, whether these are contractual or based on management's estimate of potential increases. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is re-measured to reflect any reassessment or modification, or if there are changes in fixed payments. When the lease liability is re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to

zero.  Where non-contractual payment discounts are subsequently received from suppliers, these are treated as a discharge of the lease liability with a credit recognised in the profit or loss statement.

The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients available under IFRS 16. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in profit or loss on a straight line basis over the lease term.

Under IFRS 16, the Group recognises depreciation of the right-of-use asset and interest on lease liabilities in the Consolidated statement of comprehensive income over the period of the lease. On the Consolidated statement of financial position, right-of-use assets have been included in right of use assets and lease liabilities have been included in lease liabilities due within one year and after more than one year.

Intangible assets and amortisation

Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the assets and liabilities assumed at the date of acquisition. Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Intangible assets carried forward from prior years are re-valued at the exchange rate in the current financial year. Impairment testing is carried out by assessing the recoverable amount of the cash generating unit to which the goodwill relates. A bargain purchase is immediately released to the Consolidated statement of comprehensive income in the year of acquisition.

Customer relationships

Included within the value of intangible assets are customer relationships. These represent the purchase price of customer lists and contractual relationships purchased on the acquisition of the business and assets of Gallant VPS Inc. and Commercial Network Services as well as the purchase of Velocimetrics Ltd. These relationships are carried at cost less accumulated amortisation or impairment losses where applicable. Amortisation is calculated using the straight line method over periods of between five and ten years and is charged to cost of sales.

Development costs

Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.

Development costs incurred are capitalised when all the following conditions are satisfied:

·      Completion of the intangible asset is technically feasible so that it will be available for use or sale;

·      The Group intends to complete the intangible asset and use or sell it;

·      The Group has the ability to use or sell the intangible asset;

·      The intangible asset will generate probable future economic benefits;

·      There are adequate technical, financial, and other resources to complete the development and to use or sell the intangible asset, and

·      The expenditure attributable to the intangible asset during its development can be measured reliably.

Development costs not meeting the criteria for capitalisation are expensed as incurred. The costs which do meet the criteria range from new product development to the enhancement of existing services. The scope of the development team's work continues to evolve as the Group continues to deliver business critical solutions to a growing customer base. Development costs capitalised are amortised on a straight-line basis over the estimated useful life of the asset. The estimated useful life is deemed to be five years for all developments capitalised. Amortisation is charged at the point of a major product release or upgrade in which that asset is made available for sale or release to the customer. Charges are recognised through cost of sales in the Consolidated statement of comprehensive income in the period in which they are incurred.

Impairment

Goodwill and assets with an indefinite useful life are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable or where the asset is still in development and is not yet being amortised as it is not available for use. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount.

Recoverable amount is the higher of an asset's fair value less costs of disposal and value-in-use. The value-in-use is the present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are grouped together to form a cash-generating unit.

A previously recognised impairment loss is reversed only if there is an indication that an impairment loss recognised in prior periods for an asset or cash-generating unit may no longer exist or may have decreased.  If that is the case, the carrying amount of the asset is increased to its recoverable amount.  That increased amount cannot exceed the carrying amount that would be determined, net of depreciation, had no impairment loss been recognised for the asset or cost-generating unit in prior years.  Such a reversal is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

Equity

Ordinary shares are classified as equity.  An equity instrument is any contract that evidences a residual interest in the assets of Beeks Financial Cloud Group plc after deducting all of its liabilities. Equity instruments issued by Beeks Financial Cloud Group plc are recorded at the proceeds received net of direct issue costs.

The share capital account represents the amount subscribed for shares at nominal value. Details on this can be found at note 22.

Earnings per share

Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to the owners of Beeks Financial Cloud Group PLC, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

 

 

Value-added tax ('VAT') and other similar taxes

Revenues, expenses, and assets are recognised net of the amount of associated VAT, unless the VAT incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.

Trade receivables and trade payables are stated inclusive of the amount of VAT receivable or payable. The net amount of VAT recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of financial position.

Cash flows are presented on a net basis. The VAT components of cash flows arising from investing or financing activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.

Commitments and contingencies are disclosed net of the amount of VAT recoverable from, or payable to, the tax authority.

Alternative performance measures

In addition to measuring financial performance of the Group based on statutory profit measures, the Group also measures performance based on underlying EBITDA, underlying profit before tax and underlying diluted earnings per share.

The alternative performance measures provide management's view of the Group's financial performance and are not necessarily comparable with other entities.  These alternative measures exclude significant costs (such as Share Based Payments) and as such, should not be regarded as a complete picture of the Group's financial performance.  These measures should not be viewed in isolation, but as supplementary information to the rest of the financial statements.

Underlying EBITDA

Underlying EBITDA is defined as earnings before amortisation, depreciation, finance costs, taxation, acquisition costs, share based payments and exceptional non-recurring costs.

Underlying EBITDA is a common measure used by investors and analysts to evaluate the operating financial performance of companies, particularly in the sector that the Group operates.

The Group considers underlying EBITDA to be a useful measure of operating performance because it approximates the underlying operating cash flow by eliminating the charges mentioned above. It is not a direct measure of liquidity, which is shown in the Consolidated statement of cash flows, and needs to be considered in the context of the Group's financial commitments. Reference is also made to the right of use asset implication on depreciation in the year as a result of the Group taking additional space in data centres.

Underlying profit before tax

Underlying profit before tax is defined as profit before tax adjusted for the following:

·      Amortisation charges on acquired intangible assets;

·      Exchange variances on statement of final position gains and losses;

·      Share-based payment charges;

·      M&A activity including:

o  Professional fees;

o  Any non-recurring integration costs; Any gain or loss on the revaluation of contingent consideration where it is material; and

o  Any material non-recurring costs where their removal is necessary for the proper understanding of the underlying profit for the period.

The Group considers underlying profit before tax to be a useful measure of performance because it eliminates the impact of certain non-recurring items including those associated with acquisitions and other charges commonly excluded from profit before tax by investors and analysts for valuation purposes.

Underlying diluted earnings per share

Underlying diluted earnings per share is calculated by taking the adjusted profit before tax as described after deducting an appropriate taxation charge and dividing by the total weighted average number of ordinary shares in issue during the year and adjusting for the dilutive potential ordinary shares relating to share options.

The Group considers adjusted diluted earnings per share to be a useful measure of performance for the same reasons as underlying profit before tax. In addition, it is used as the basis for consideration to the level of dividend payments.

Net cash/Net Debt

Net cash/net debt is a financial liquidity metric that measures the ability of a business to pay all its debts if they were to be called immediately. This is defined as current and non-current borrowing liabilities (debt and asset finance but excluding lease liabilities)- cash and cash equivalents.

Operational costs

Operational costs are defined as operating expenses less exceptional costs, share based payments and non-recurring costs. These costs are adjusted to reflect the true business operational trading costs.

Profit after Tax

Management believes that profitability measures after tax are not measures that would specifically require alternative performance measures as they do not constitute trading results. Tax legislation is out with the control of the Group. Whilst the group currently benefits from some tax relief such as R&D tax credits, the group does not rely on these in terms of trading results or provide consideration of the tax impact of adjusted items for alternative performance measures. Further information on tax impact on profitability can be found on Note 9.  

Annualised Committed Monthly Recurring Revenue

Annualised Committed Monthly Recurring Revenue (ACMRR) is committed recurring revenue. Management believes that ACMRR is a key measure as it provides investors with the total contracted committed revenue of the Group.   

2. Segment Information

Operating segments are reporting in a manner consistent with the internal reporting provided to the chief operating decision makers.

The chief operating decision makers, who are responsible for allocating resources and assessing performance of operating segments, have been identified as the executive directors. 

In the current year there is one customer that account for more than 10% of Group revenue. The total revenue for this customer amounts to £7.10m (2022 - £4.58m). £0.3m of this revenue has occurred within the Proximity Cloud operating segment, with the other £6.80m of revenue included within public/private cloud revenue.

Performance is assessed by a focus on the change in revenue across public/private cloud and new sales relating to Proximity Cloud/Exchange Cloud. Cost is reviewed at a cost category level but not split by segment. Assets are used across all segments and are therefore not split between segments so management review profitability at a group level.  

Revenues by Operating segment, further disaggregated are as follows:

	Year ended 30/06/23 (£'000)			Year ended 30/06/22 (£'000)
	Public/Private Cloud	Proximity/Exchange  Cloud	Total	Public/Private Cloud	Proximity /Exchange Cloud	Total
Over time
Infrastructure/software as a service	19,162	-	19,162	13,057	-	13,057
Maintenance	537	-	537	518		518
Proximity/Exchange Cloud	-	454	454		57	57
Professional services	273	-	273	234	-	234
Over time total	19,972	454	20,426	13,809	57	13,866
Point in time
Proximity/Exchange Cloud	-	-	-	-	2,222	2,222
Hardware/Software resale	529	-	529	1,601	-	1,601
Software licences	1,267	-	1,267	520	-	520
Set up fees	135	-	135	80	-	80
Point in time total	1,931	-	1,931	2,201	2,222	4,423
Total revenue	21,903	454	22,357	16,010	2,279	18,289

 

Revenues by operating segment, further disaggregated are as follows:

	2023	2022
	£'000	£'000
Revenues by geographic location are as follows:
United Kingdom	5,660	5,849
Europe	3,119	2,508
US	9,193	5,556
Rest of World	4,385	4,376
Total	22,357	18,289

 

During the year £267k (2022: £419k) was recognised in other income for grant income received from Scottish Enterprise and £94k (2022: £93k) was recognised as rental income.

	2023	2022
	£'000	£'000
Non-Current Assets by geographic location are as follows:
United Kingdom - Property, plant and equipment	9,235	8,132
Europe - Property, plant and equipment	1,610	1,717
Rest of World - Intangible assets	6,738	5,330
Rest of World - Goodwill	1,368	1,368
Rest of World - Property, plant and equipment	2,750	2,509
US - Property, plant and equipment	4,357	3,912
Total Non-Current Assets	26,058	22,968

 

Intangible assets have been classified as "Rest of World" due to the fact they represent products that are available to customers throughout the World as well as the US intangible assets referred to in note 10.

The Group has taken advantage of the practical expedient permitted by IFRS 15 and has therefore not disclosed the amount of the transaction price allocated to unsatisfied performance obligations or when it expects to recognise that revenue. Longer term contracts continue to be paid on a monthly basis.

3. Operating (Loss)/Profit

Operating (Loss)/Profit is stated after charging:

	2023	2022
	£000	£000
Staff costs (note 7)	6,909	5,637
Depreciation on owned assets (note 11)	3,140	2,189
Depreciation right-of-use assets (note 11)	1,410	1,024
Amortisation of acquired intangibles (note 10)	489	802
Amortisation of other intangibles (note 10)	1,227	726
Other cost of sales and admin*	7,191	6,452
Foreign exchange losses / (gains)	256	(98)
Share based payments (note 21)	2,291	1,661
Other non-recurring costs	136	24

 

*Included within other cost of sales and admin are the remainder of direct costs associated with the business including data centre connectivity, software licences, security, and other direct support costs.

 

 

 

Auditor's remuneration

	2023	2022
	£000	£000
Audit
Fees payable for the audit of the consolidation and the parent company accounts	83	63
Fees payable for the audit of the subsidiaries	75	59
Non Audit
Fees payable for the interim review of the group	5	4
Assurance related services	20	-
	183	126

4. Finance Costs

	2023	2022
	£000	£000
Bank charges	115	95
Interest on loan liabilities	140	129
Interest on lease liabilities	165	115
Total finance costs	420	340

5. Finance Income

	2023	2022
	£000	£000
Financing charge on Proximity Cloud contracts	101	21
Total finance income	101	21

 

 

 

 6. Average number of employees and employee benefits expense

Including directors, the average number of employees (at their full time equivalent) during the year was as follows:

	2023	2022
	£000	£000
Management and administration	22	21
Support and development staff	81	68
Average numbers of employees	103	89

 

The employee benefits expense during the year was as follows:

	2023	2022
	£000	£000
Wages and salaries	5,969	4,925
Social security costs	669	591
Other pension costs	271	121
Total employee benefits expense	6,909	5,637
Share based payments (note 21)	2,291	1,661

 

Wages and salary costs directly attributable to the development of products are capitalised in intangible assets (note 10). The total additions capitalised in intangible assets relates to payroll costs and external third party costs.

7. Directors' emoluments

	2023	2022
	£000	£000
Aggregate remuneration in respect of qualifying services	292	239
Aggregate amounts of contributions to pension schemes in respect of qualifying services	14	4
Other benefits in kind	2	2
Gain on exercise of options	-	133
Total Directors' emoluments	308	378
Highest paid director - aggregate remuneration (excluding share based payments)	126	109

 

 

 

 

 

 

 

 

 

 

 

There are two directors (2022: two) who are accruing retirement benefits in respect of qualifying services.

8. Taxation expense

	2023	2022
	£000	£000
Current
Foreign tax on overseas companies	65	33
R&D tax credit received	(95)	-
Total current tax	(30)	33
Origination and reversal of temporary differences	(531)	(435)
Prior year deferred tax adjustments	-	(358)
Total deferred tax	(531)	(793)
Tax on (loss)/profit on ordinary activities	(561)	(760)

 

The differences between the total tax credit above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax, together with the impact of the effective tax rate, are as follows:

	2023	% ETR	2022	% ETR
	£000	movement	£000	movement
(Loss)/profit before tax	(650)		66
(Loss)/profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 19% (2022: 19%)	(124)	21%	13	19%
Effects of:
Impact of super deduction	(215)	33.18%	(170)	(257.81%)
Expenses not deductible for tax purposes	481	(74.23%)	243	368.13%
R&D tax credits relief	(89)	13.73%	(140)	(212.12%)
Share option deduction	(404)	62.35%	(173)	(262.12%)
Prior year deferred tax adjustments	(88)	13.58%	(358)	(542.42%)
Adjustment for tax rate differences	(37)	4.01%	(175)	(265.15%)
Foreign tax suffered	40	0.32%	-	-
R&D tax credit received	(125)	-	-	-
Total tax charge	(561)	86.31%	(760)	(1,151.51%)

 

The effective tax rate (ETR) for the year was 86.31% (2022: -1,151.51%).

9. Intangible assets

	Acquired customer relationships	Development costs	Trade name	Goodwill	Total
	£000	£000	£000	£000	£000
Cost
As at 30 June 2021	2,383	3,990	137	2,336	8,846
Charge for year
Additions	-	2,590	-	-	2,590
Grant funding received	-	(432)	-	-	(432)
Foreign exchange movements	147	-	-	-	147
As at 1 July 2022	2,530	6,148	137	2,336	11,151
Additions	-	2,868	-	-	2,868
Grant Funding received	-	(147)	-	-	(147)
Foreign exchange movements	(29)	-	-	-	(29)
As at 30 June 2023	2,501	8,869	137	2,336	13,843
Accumulated Amortisation
As at 30 June 2021	(773)	(1,064)	(34)	(968)	(2,839)
Charge for the year	(287)	(1,214)	(27)	-	(1,528)
Foreign exchange movements	(86)	-	-	-	(86)
As at 1 July 2022	(1,146)	(2,278)	(61)	(968)	(4,453)
Charge for the year	(345)	(1,343)	(27)	-	(1,715)
Foreign exchange movements	17	-	-	-	17
Grant income release	-	414	-	-	414
As at 30 June 2023	(1,474)	(3,207)	(88)	(968)	(5,737)
NBV as at 1st July 2022	1,384	3,870	76	1,368	6,698
NBV as at 30th June 2023	1,027	5,662	49	1,368	8,106

 

Development costs have been recognised in accordance with IAS 38 in relation to the network automation project and development of the Proximity and Exchange Cloud products, including analytics and its integration into this product. Development costs in relation to Proximity and Exchange Cloud have a useful life of 5 years.

Brought forward development costs consist of £2.5m which was originally capitalised in July 2021. These assets now have a carrying value of £1.5m and a remaining useful life of 3 years.

During the year, a total of £2.9m of development costs relating to the development of Proximity Cloud/Exchange Cloud were capitalised. Included within this was the release of Exchange Cloud which launched in July 2022. £1.7m was capitalised in relation to this which now has a carrying value of £1.4m at June 2023. The remaining amortisation period on this asset is 4 years. In addition, £1.7m was capitalised in relation to further releases of the product. This has also been amortised over a useful life of 5 years. All costs incurred during the preliminary stages of development projects are charged to profit or loss.

Impairment test for goodwill

For this review, goodwill was allocated to individual cash generating units (CGU) on the basis of the Group's operations as disclosed in the segmental analysis. As the Board reviews results on a segmental level, the Group monitors goodwill and annually assesses it on the same basis for impairment.

The carrying value of goodwill by each CGU is as follows:

	2023
	£'000
Private/public cloud	1,368
Proximity/Exchange Cloud	-
Total goodwill	1,368

Goodwill has been allocated to the public/private segment and management have reviewed and confirmed that there is no indication of impairment. Within the Proximity/Exchange Cloud segment in the current year, an impairment review was carried out solely on the projects within development costs for which amortisation is yet to begin.

The recoverable amount of all CGUs has been determined by using value-in-use calculations, estimating future cash inflows and outflows from the use of the assets and applying an appropriate discount rates to those cash flows to ensure that the carrying value of each individual asset is still appropriate. 

In performing these reviews, under the requirements of IAS 36 "Impairment of Assets" management prepare forecasts for future trading over a useful life period of up to five years. 

These cash flow projections are based on financial budgets and market forecasts approved by management using a number of assumptions including;

·      Historic and current trading

·      Weighted sales pipeline

·      Potential changes to cost base (including staff to support the CGU)

·      External factors including competitive landscape and market growth potential

·      Forecasts that go beyond the approved budgets are based on long term growth rates on a macro-economic level. 

Management performed a full impairment assessment on the goodwill allocated to Public/Private Cloud. This included including modelling projected cash flows based on the current weighted sales pipeline, a discount rate based on the calculated pre-tax weighted average cost of capital (15%) and cost base assumptions that included contingency and investment to deliver against the weighted sales pipeline. Conservative mid-term rates of 20% and terminal growth rates of 2% were estimated, which were significantly less than both the Group's internal business plan and external market mid-term forecasts.   

 

 

 

An impairment review was carried out on the two development projects, for which amortisation is yet to begin, in line with the testing on impairment of intangible assets as referenced within the Group's accounting policies in note 1. For Exchange Cloud, the existing weighted sales pipeline was used as a typical pipeline profile for current and future years. Discount rates and cost base assumptions were consistent to what has been detailed above in regards to the impairment testing on goodwill. For Open Integration, cost comparisons of the two platform were compared based on current pricing with discount rates again consistent with the impairment testing on goodwill.

Based on an analysis of the impairment calculation's sensitivities to changes in key parameters (growth rate, discount rate and pre-tax cash flow projections) there was no reasonably possible scenario where these recoverable amounts would fall below their carrying amounts therefore as at 30 June 2023, no change to the impairment provision against the carrying value of intangibles was required. The revaluation of these from prior year represents exchange adjustment only.

10. Non-current assets - Property, plant and equipment

	Computer Equipment	Office equipment and fixtures and fittings	Right of Use	Freehold property	Total
Cost	£'000	£'000	£'000	£'000	£'000
As at 30 June 2021	12,311	71	3,908	-	16,290
Additions	5,055	163	1,997	3,034	10,249
Stock transfers	(830)	-	-	-	(830)
Disposals	-	(54)	(485)	-	(539)
Exchange adjustments	7	-	-	-	7
As at 1 July 2022	16,543	180	5,420	3,034	25,177
Additions	3,950	146	2,149	5	6,250
Exchange adjustments	(3)	-	172	-	169
As at 30 June 2023	20,490	326	7,741	3,039	31,596
Depreciation
As at 30 June 2021	(4,647)	(38)	(1,215)	-	(5,900)
Charge for the year	(2,134)	(28)	(1,024)	(27)	(3,213)
Exchange adjustments	3	-	-	-	3
Depreciation on disposals	-	18	185	-	203
As at 1 July 2022	(6,778)	(48)	(2,054)	(27)	(8,907)
Charge for the year	(3,020)	(49)	(1,410)	(71)	(4,550)
Exchange adjustments	(30)	-	(157)	-	(187)
As at 30 June 2023	(9,828)	(97)	(3,621)	(98)	(13,644)
NBV as at 30 June 2022	9,765	132	3,366	3,007	16,270
NBV as at 30 June 2023	10,662	229	4,120	2,941	17,952

 

Of the total additions in the year of £6.2m, £2.1m relates to right-of-use assets held under IFRS16 (2022 - £2.0m).

 

All revenue generating depreciation charges are included within cost of sales. Non-revenue generating depreciation charges are included with administrative expenses.

 

The Group recognises rental income for the rental of units at their Head Office property in Renfrew. This asset is disclosed as Freehold Property. Units are leased to tenants under operating leases with rentals payable quarterly. Full details on operating leases as a lessor can be found on note 19.

11. Non-current assets - Deferred tax

Deferred tax is recognised at the standard UK corporation tax of 25% for fixed assets in the UK (2022: 25%). Deferred tax in the US is recognised at an average rate of 21% for 2022 (2022: 21%).  The deferred tax asset relates to the difference between the amortisation period of the US acquisitions for tax and reporting purposes as well as the impact of the share options exercised during the year and tax losses carried forward in both UK and overseas companies. Deferred tax assets and liabilities on statement of financial position prepared after the substantive enactment of the new tax rate are calculated using a tax rate of 25% to the extent that the temporary differences will reverse after 2023.

	2023	2022
	£000	£000
The split of the deferred tax asset and liabilities are summarised as follows:
Deferred tax (liabilities)	(3,884)	(2,968)
Deferred tax asset	5,398	4,201
Total deferred tax	1,514	1,233
Movements
Opening balance	1,232	279
Charge to profit or loss (note 9)	531	793
Charged to goodwill / equity	(252)	167
Other movement	3	(6)
Closing balance	1,514	1,233

 

The movement in deferred tax assets and liabilities during the year is as follows:

	Share options	Tax losses c/fwd	Accelerated tax depreciation and other movement	Total deferred tax asset carried forward	Total deferred tax (liability) carried forward
	£000	£000	£000	£000	£000
At 1 July 2021	223	630	43	896	(617)
Charge to income	281	2,747	110	3,138	(2,351)
Charge to equity	167	-	-	167	-
As at 30 June 2022	671	3,377	153	4,201	(2,968)
Charge to income	387	1,036	24	1,447	(916)
Charge to equity	(251)	-	-	(251)	-
As at 30 June 2023	807	4,413	177	5,397	(3,884)

 

 

12. Current assets - Inventories

	2023	2022
	£000	£000
Materials	1,315	1,566
Consumables	452	252
	1,767	1,818

 

With the launch of Proximity Cloud in the previous year, the Group holds hardware which can be used in the sale of Proximity or Exchange Cloud contracts.  Subsequent to the year end, if they are not used as part of a Proximity or Exchange Cloud sale, they will be reclassified as PPE at the point in which they are delivered into one of the Group's data centres.

During the period, £nil (2022 - £0.99m) of inventories were recognised as an expense in the period.

13. Current assets - Trade and other receivables

	2023	2022
	£000	£000
Trade receivables	2,186	1,036
Less: allowance for impairment of receivables	(47)	(80)
	2,139	956
Prepayments	1,040	2,083
Contract asset	2,717	2,329
Other taxation	111	107
Other receivables	384	125
	6,391	5,600

 

The contract assets primarily relate to our rights to a consideration for goods or services delivered but not invoiced at the reporting date. The contract assets are transferred to receivables when invoiced. Contract liabilities relate to deferred revenue. At the end of each reporting period, these positions are netted on a contract basis and presented as either an asset or a liability in the Consolidated Statement of Financial Position. Consequently, a contract balance can change between periods from a net contract asset balance to a net contract liability balance in the statement of financial position.

Significant changes in the contract assets and the contract liability balances during the period are as follows:

	Contract assets	Contract liabilities
	£000	£000
Balance at 1 July 2022	2,329	961
Transferred to receivables from contract assets from the beginning of the period	(901)	-
Revenues recognised during the period to be invoiced	1,289	-
Revenue recognition that was included in the contract liability balance at the beginning of the period	-	(817)
Remaining performance obligations for which considerations have been received	-	1,009
Balance at 30 June 2023	2,717	1,153

 

The credit risk relating to trade receivables is analysed as follows:

 

	2023	2022
	£000	£000
Trade receivables	2,186	1,036
Less: allowance for impairment of receivables	(47)	(80)
	2,139	956

 

Movements in the allowance for expected credit losses are as follows:

	2023	2022
	£000	£000
Opening balance	80	19
Movement in allowances	(24)	91
Receivables written off during the year as uncollectable	(9)	(30)
Closing balance	47	80

 

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. The group has applied the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit loss allowance under IFRS 9 as at 30 June 2023 is £25k (2022 - £74k). The decrease in expected credit loss allowance is in line with the change in the lower risk profile of trade receivables during the year.

The following table details the risk profile of trade receivables based on the Group's provision matrix. As the Group's historical credit loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance based on past due status is not further distinguished between the Group's different customer segments.

	2023	ECL rate	2023 ECL allowance	2022	ECL rate	2022 ECL allowance
Risk profiling category (ageing)	£'000	%	£'000	£'000	%	£'000
Current	959	-0.10%	-1	923	-1.5%	-14
0-30 days	988	-1.00%	-10	20	-2%	-0
30-60 days	94	-2.00%	-2	8	-15%	-1
60-90 days	12	-5.00%	-1	40	-45%	-18
Over 90 days	88	-15.00%	-11	45	-90%	-41
Total			-25			-74

 

The ECL rate in the current year has been reduced in line with the risk profile of trade receivables, historic trade losses and continued tight credit control procedures.

Trade receivables consist of a large number of customers across various geographical areas. The aging below shows that almost all are less than three months old and historic performance indicates a high probability of payment for debts in this aging. Those over three months relate to customers without history of default for which there is a reasonable expectation of recovery.

Past due but not impaired

The Group did not consider a credit risk on the aggregate balances after reviewing the credit terms of the customers based on recent collection practices.

The aging of trade receivables at the reporting date is as follows:

	2023	2022
	£000	£000
Not yet due	965	923
Due 1 to 3 months	1,115	68
Due 3 to 6 months	30	45
More than 6 months due	76	-
	2,186	1,036

14. Current assets - Cash and cash equivalents

	2023	2022
	£000	£000
Cash and bank balances	7,829	10,160
	7,829	10,160

 

The credit risk on cash and cash equivalents is considered to be negligible because over 99% of the balance is with counter parties that are UK and US banking institutions.

15. Current assets - Financial instruments and risk management

Financial risk management objectives and policies

The Group's principal financial instruments comprise cash and cash equivalents, short term deposits and bank and other borrowings.

The carrying amount of all financial assets presented in the statement of financial position are measured at amortised cost.

The carrying amount of all financial liabilities presented in the statement of financial position are measured at amortised cost.

There have been no changes to valuation techniques, or any amounts recognised through 'Other Comprehensive Income'.

The main purpose of these financial instruments is to finance the Group's operations. The Group has other financial instruments which mainly comprise trade receivables and trade payables which arise directly from its operations.

Risk management is carried out by the finance department under policies approved by the Board of Directors. The Group finance department identifies, evaluates, and manages financial risks. The Board provides guidance on overall risk management including foreign exchange risk, interest rate risk, credit risk, and investment of excess liquidity.

The impact of the risks required to be discussed under IFRS 7 are detailed below:

Market risk

Foreign exchange risk

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the functional currency of the operations. The Group had potential exchange rate exposure within USD trade payable balances of £1,255,542 at 30 June 2023 (£1,512,444 at 30 June 2022) and potential exchange rate exposure within EUR trade payables balances of £59,768 (£26,500 at 30 June 2022).  The Group had potential exchange rate exposure within USD trade receivables of £1,179,455 (£403,700 at 30 June 2022) and potential exchange rate exposure within EUR trade receivables of £37,262 (£9,300 at 30 June 2022). The Group had potential exchange rate exposure within USD intercompany balances of £5,807,729 (£1,157,893 as at 30 June 2022) and within JPY intercompany balances of £189,028 (£236,780 as at 30 June 2022).  The Group also has potential exchange rate exposure within USD bank balances of £3,644,955 (£159,534 as at 30 June 2022) and £607,023 within EUR bank balances (£164,421 as at 30 June 2022).

 

Cash flow and interest rate risk

The Group has relatively limited exposure to interest rate risk in respect of cash balances and long-term borrowings held with banks and other highly rated counterparties. Loans are at variable rates of interest based on the Bank of England's base rate therefore the Group is subject to changes in interest rates. Given the relatively low level of debt the Board do not consider this to be a significant risk. At a total debt level of £3.4m, with £1.8m contracted on a variable rate and is the remainder under a fixed interest rate,  1% increase in interest rates would give rise to an additional annual interest rate charge of £18,140.

Credit risk

The Group's maximum exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, as summarised below:

	2023	2022
	£000	£000
Cash and cash equivalents	7,829	10,160
Trade receivables	2,186	1,036
Contract asset	2,717	2,329
Other receivables	384	125
	13,116	13,650

 

Credit risk is managed on a Group basis. Credit risks arise from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial losses to the Group. The Group provides standard credit terms (normally 30 days) to all of its customers which has resulted in trade receivables of £2,139,000 (2022: £956,000) which are stated net of applicable allowances, and which represent the total amount exposed to credit risk.

The Group's credit risk is primarily attributable to its trade receivables and contract assets. The Group present the amounts in the statement of financial position net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and the current economic environment. The Group reviews the reliability of its customers on a regular basis, such a review takes into account the nature of the Group's trading history with the customer, along with management's view of expected future events and market conditions.

The credit risk on liquid funds is limited because the majority of funds are held with two banks with high credit-ratings assigned by international credit-rating agencies. Management does not expect any losses from non-performance of these counterparties.

None of the Group's financial assets are secured by collateral or other credit enhancements.

Liquidity risk

The Group closely monitors its access to bank and other credit facilities in comparison to its outstanding commitments on a regular basis to ensure that it has sufficient funds to meet obligations of the Group as they fall due. The Group monitors its current debt facilities and complies both with its gross borrowings to adjusted EBITDA,  minimum adjusted cash banking and LTV covenants. Judgement is required in assessing what items are allowable for the adjusted components.

The Board receives regular debt management forecasts which estimate the cash inflows and outflows over the next twelve months, so that management can ensure that sufficient financing is in place as it is required.

As at 30 June 2023, the Group's financial liabilities (excluding leases disclosed in Note 17) have contractual maturities (including interest payments where applicable) as summarised below:

	Current                                             Non-current
	Within	1-3	3-12	1-5	After
	1 month	months	months	years	5 years
	£'000	£'000	£'000	£'000	£'000
Trade and other payables	3,483	1,052	417	-	-
Borrowings	-	1,445	369	-	-

 

The above amounts reflect the contractual undiscounted cash flows, which may differ from the carrying values of the liabilities at the reporting date.

Trade and other payables includes trade payables, accruals, contract liabilities, other taxation and social security and other payables.

Capital risk management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debts.

	2023	2022
	£000	£000
Total equity	32,786	30,759
Cash and cash equivalents	7,829	10,160
Capital	40,615	40,919
Total equity	32,786	30,759
Other loans	1,814	2,297
Lease liabilities	4,006	3,583
Overall financing	38,606	36,639
Capital-to-overall financing ratio	1.05	1.12

 

Other risks

Rental income from the head office property leased out under operating leases is recognised in the statement of the comprehensive income as other income as these services are rendered, as the tenant occupies the space. Any associated risk of the underlying asset used to generate this rental income is believed to be minimal given the building is utilised as the head office and the majority of staff are based there. 

 

16. Non-current liabilities - Borrowings and other financial liabilities

	2023	2022
	£000	£000
Other loans	-	1,320
Lease liabilities	2,047	2,303
	2,047	3,623
Other loans
Under one year	1,814	978
Between one to five years	-	1,320
	1,814	2,298

 

The bank loan derives from a £1.8m term loan facility taken out from Barclays Bank in December 2020 and a £1.47m property loan facility taken out from Barclays Bank in December 2021. The term loan was renewed during the financial year leaving 6 quarterly instalments of £0.125m due from March 2023. The property loan is repayable in 8 quarterly instalments of £0.03m which commenced in December 2021 along with a bullet balance which was repaid at Maturity in September 2023. This, along with the Group's revolving credit facility available of £3.5m, is used to fund the Group's working capital requirements when required. The available revolving credit facility balance of £3.5m was unutilised as at 30 June 2023.

Barclays have been given security for the facility of the UK assets of the Group and an unlimited guarantee is afforded to Barclays.

Costs of £21,500 have been amortised over the life of the term loan and aged in line with the capital repayments.

During the year, the Group entered into two new asset financing arrangements. These asset financing agreements have been disclosed under lease liabilities (note 19).

Changes in liabilities arising from financing activities:

	Lease liabilities	Loans	Total
	£000	£000	£000
Balance at 1 July 2022	3,327	2,297	5,624
Lease liabilities additions IFRS 16	149	-	149
Proceeds from new leases under asset financing	1,963	-	1,963
Loan repayments	-	(483)	(483)
Lease repayments	(1,432)	-	(1,432)
Balance at 30 June 2023	4,007	1,814	5,821

 

Included within the lease liabilities balance of £4.01m is £1.61m of asset finance lease liabilities.

17. Current liabilities - Trade and other payables

	2023	2022
	£000	£000
Trade payables	2,937	3,378
Other loans	1,814	978
Lease liability	1,960	1,280
Accruals	375	575
Contract liabilities	1,153	961
Other taxation and social security	373	192
Other payables	114	33
	8,726	7,397

18. Leases

The Group leases assets including the space in data centres in order to provide infrastructure services to its customers and also hardware for data centres. Information about leases for which the Group is a lessee is presented below:

Right-of-use assets

	Leasehold Property and improvement
	£000
Balance at 1 July 2022	3,366
Additions	2,101
Depreciation	(1,410)
Foreign exchange	16
Balance at 30 June 2023	4,073

 

The right-of-use assets are disclosed as non-current assets and are disclosed as property, plant and equipment (note 11).

Right-of-use lease liabilities

	2023	2022
	£000	£000
Maturity analysis:
Within one year	(2,068)	(1,407)
Within two years	(1,574)	(1,639)
Within three years	(461)	(769)
Within four years	(12)	-
Add: unearned interest	108	232
Total lease liabilities	(4,007)	(3,583)
Analysed as:
Non-current (Note 18)	(2,047)	(2,303)
Current (Note 19)	(1,960)	(1,280)
	(4,007)	(3,583)

 

The Group does not face a significant liquidity risk with regard to its lease liabilities. The interest expense on lease liabilities amounted to £165k for the year ended 30 June 2023 (2022: £131k). Lease liabilities are calculated at the present value of the lease payments that are not paid at the commencement date.

The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight line basis. During the year ended 30 June 2023, in relation to leases under IFRS 16, the Group recognised the following amounts in the Consolidated statement of comprehensive income:

	2023	2022
	£000	£000
Depreciation charge	1,410	1,024
Interest expense	165	131

 

Payments for short-term lease expenses in relation to data centre space have not been disclosed below and are instead reflected within other cost of sales under note 4.

Amounts recognised in the Consolidated statement of cash flows:

	2023	2022
	£000	£000
Amounts payable under leases:
Short-term and low value lease expense	10	25
Repayment of lease liabilities within cash flows from financing activities	1,432	1,067

 

The Group recognises rental income for the rental of units at their Head Office property in Renfrew. Units are leased to tenants under operating leases with rentals payable quarterly. Lease income from operating leases where the group is a lessor is recognised on a straight-line basis over the lease term. The total recognised in profit or loss during the period is as follows:

	2023	2022
	£000	£000
Rental income from operating leases	94	93

 

As part of this, The Group receives rental payments on a quarterly basis. The amounts due to be received over the next 5 years are as follows:

	2023	2022
	£000	£000
Within 1 year	96	94
Between 1 and 2 years	96	94
Between 2 and 3 years	96	94

 

19. Equity - issued capital

 

Ordinary shares

During the year, 164,670 share options were exercised.              

20. Share based payments

The movements in the share options during the year, were as follows:

	2023	2022
	Number of share options	Weighted Average Fair Value price per share (£)	Number of share options	Weighted Average Fair Value price per share (£)
Outstanding at the beginning of the year	4,925,668	1.20	2,916,973	0.89
Exercised during the year	(164,670)	1.24	(264,705)	1.02
Issued during the year	1,549,000	0.83	2,273,400	1.58
Forfeited during the year	(76,955)	1.43	-	-
Outstanding at the end of the year	6,233,043	1.35	4,925,668	1.20
Exercisable at the end of the year	1,410,180	0.83	-	-

The Group granted a total of 1,549,000 share options to members of its management team on 2^nd December 2022.

During the year 1,574,850 shares from Grant 2 vested, with 164,670 shares being exercised in the year. The remaining balance remain as exercisable at the end of the year.

Shares were forfeited during the year where employees left the business, with their share options not being fully redistributed within the Group.

These share options outstanding at the end of the year have the following expiry dates and exercise prices:

 

These share options vest under challenging performance conditions based on underlying profitability growth during the periods.

The Black Scholes model was used to calculate the fair value of these options, the resulting fair value is expensed over the vesting period. The following table lists the range of assumptions used in the model:

	Grant 1	Grant 2	Grant 3	Grant 4A	Grant 4B
Shares	264,706	1,574,850	1,042,063	1,022,500	597,150
Share price (£)	1.02	0.84	0.945	1.575	1.575
Volatility	5%	5%	5%	5%	5%
Annual risk free rate	4%	4%	4%	4%	4%
Exercise strike price (£)	0.00125	0.00125	0.00125	0.00125	0.00125
Time to maturity (yrs)	3	3	3	3	3

 

	Grant 4C	Grant 5A	Grant 5B	Grant 5C	Total
Shares	632,150	604,000	462,500	462,500	6,662,419
Share price (£)	1.575	1.43	1.43	1.43
Volatility	5%	5%	5%	5%
Annual risk free rate	4%	4%	4%	4%
Exercise strike price (£)	0.00125	0.00125	0.00125	0.00125
Time to maturity (yrs)	2	3	3	2

 

The total expense recognised from share based payments transactions on the Group's profit for the year was £2,291,120 (2022: £1,661,273).

Expected volatility was determined at the date of grant from historic volatility, adjusted for events that were not considered to be reflective of the volatility of the share price going forward.

These share options vest on the achievement of challenging growth targets. It is management's intention that the Group will meet these challenging growth targets therefore, based on management's expectations, the share options are included in the calculation of underlying diluted EPS in note 24.

21. Equity - Reserves

The foreign currency retranslation reserve represents exchange gains and losses on retranslation of foreign operations. Included in this is revaluation of opening balances from prior years. 

The merger reserve initially arose on the share for share exchange reflecting the difference between the nominal value of the share capital in Beeks Financial Cloud Group PLC and the value of the Group being acquired, Beeks Financial Cloud Limited. The merger reserve then increased upon acquisition of Velocimetrics Ltd in FY 2018, reflecting the difference between the nominal value of the share capital issued from Beeks Financial Cloud Group PLC and the value of the shares issued to the owners of Velocimetrics Ltd.

Share premium represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. Any transaction costs associated with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Retained earnings represents retained profits and losses.

The other reserve arose on the share for share exchange and reflects the difference between the value of Beeks Financial Cloud Group Limited and the share capital of the Group being acquired through the share for share exchange. Also included in the other reserve is the fair value of the warrants issued on the acquisition of VDIWare LLC. 

22. Related party transactions

Parent entity

Beeks Financial Cloud Group PLC is the parent entity.

Subsidiaries

Interests in subsidiaries are set out in note 25.

Transactions with related parties

The following transactions occurred with related parties:

	2023	2022
	£000	£000
Withdrawals from the director, Gordon McArthur	53	41

 

During the financial year, Beeks Financial Cloud Limited received services in the normal course of its business and at arm's length from A&B Property and Rental Services Scotland Limited, a company owned by Gordon McArthur. During the year, Beeks Financial Cloud Limited paid for services of £17,700 (2022: £nil) to A&B Property and Rental Services Scotland Limited and the amounts due at the year end was £nil (2022: £nil).

The Group recognise that the total withdrawals from the director exceeded the limit as defined in the Companies Act 2006 requiring shareholder approval. In order to rectify this, the amounts due by the director will be repaid subsequent to the financial year end.

 

 

 

Key management personnel

Compensation paid to key management (which comprises the executive and non-executive PLC Board members) during the year was as follows:

	2023	2022
	£000	£000
Wages and salaries	292	239
Social security costs	37	27
Other pension costs	14	4
Other benefits in kind	2	2
Share based payments	188	316

 

23. Earnings per share

	2023	Restated 2022
	£000	£000
(Loss)/Profit after income tax attributable to the owners of Beeks Financial Cloud Group PLC	(89)	826
	Pence	Pence
Basic (loss)/earnings per share	(0.14)	1.43
Diluted (loss)/earnings per share	(0.13)	1.42
	Number	Number
Weighted average number of ordinary shares used in calculating basic earnings per share	65,446,755	57,885,241
Adjustments for calculation of diluted earnings per share:
Dilutive impact of share options	4,736,830	3,325,122
Options over ordinary shares	125,611	96,454
Weighted average number of ordinary shares used in calculating diluted earnings per share	70,309,196	61,306,817

 

 

	2023	Restated 2022
	£000	£000
(Loss)/Profit before tax for the year	(650)	66
Share Based payments	2,291	1,661
Amortisation on acquired intangibles	489	802
Exceptional non-recurring costs	136	28
Exchange rate losses/(gains) on intercompany translation and unrealised currencies	325	(81)
Grant income	(267)	(419)
Tax effect	494	542
Underlying profit for the year	2,818	2,599
Weighted average number of shares in issue - basic	65,446,755	57,885,241
Weighted average number of shares in issue - diluted	71,143,541	61,985,547
Underlying earnings per share - basic	4.31	4.49
Underlying earnings per share - diluted	3.96	4.19

 

Included in the weighted average number of shares for the calculation of underlying diluted EPS are share options outstanding but not exercisable.  It is management's intention that the Group will meet the challenging growth targets therefore, based on management expectations, the share options are included in the calculation of underlying diluted EPS.

24. Subsidiaries

The Consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries held by the company in accordance with the accounting policy described in note 1.

The subsidiary undertakings are all 100% owned, with 100% voting rights.

Company name	Country of incorporation	Principal place of business/registered office	Activity
Beeks Financial Cloud Co Ltd	Japan	FARO 1F, 2-15-5, Minamiaoyama, Minato-Ku, Tokyo, Japan.	Non-trading
Beeks FX VPS USA Inc.	Delaware, USA	874 Walker Road, Suite C, Dover, Kent, Delaware, 19904, USA.	Non-trading Year end 31st December
Beeks Financial Cloud Limited	Scotland	Riverside Building, 2 Kings Inch Way, Renfrew, Renfrewshire, PA4 8YU	Cloud Computing Services
Velocimetrics Limited	England	Birchin Court, 230 Park Avenue 20 Birchin Lane, Suite 300 West, London, England, EC3V 9DU	Software Services
Velocimetrics Inc.	New York, USA	230 Park Avenue, 10th Floor, New York 10169, USA.	Software Services

 

In accordance with S479A of the Companies Act 2006, Velocimetrics Limited (06943398) have not prepared audited accounts. Beeks Financial Cloud Group plc guarantees all outstanding liabilities in this company at the year ended 30 June 2023, until they are satisfied in full.

 

25. Prior Period Adjustment

 

During the year, it was identified that share options which contained conditions relating to future years' performance targets were not included in the diluted EPS figure, despite the options having already achieved their performance conditions related to EBITDA in the current period.

IAS 33 'Earnings per share' considers the conditions at the period end as if these were the conditions at the end of the contingent period (i.e the future performance period) and as such, these options should then be included in the diluted EPS figure even though the vesting date and associated future profit metric has not yet been achieved.

The error has been corrected. The number of shares included in the diluted earnings per share calculation has increased to include options of 3.33m that meet the above conditions taking the total number of shares within the diluted earnings per share calculation from 57.98m to 61.31m.  As a result, the diluted earnings per share has been restated from 1.42p to 1.35p as disclosed in note 24.

 

26. Ultimate controlling party

The Directors have assessed that there is no ultimate controlling party.