ELIXIRR INTERNATIONAL PLC
("Elixirr", the "Company" or the "Group")
Final Results for the Year Ended 31 December 2023
Elixirr International plc (AIM:ELIX), an established, global award-winning challenger consultancy, is pleased to announce its final results for the year ended 31 December 2023.
Financial Highlights
· Revenue increased by 20% to £85.9m (FY 22: £71.7m)
· Adjusted EBITDA* increased by 24% to £25.4m (FY 22: £20.5m)
· Adjusted EBITDA* margin of 30% (FY 22: 29%)
· Profit before tax increased by 40% to £22.1m (FY 22: £15.7m)
· Adjusted diluted earnings per share* increased by 22% to 37.2p (FY 22: 30.5p)
· Year-end net cash of £18.1m (FY 22: £20.4m)
· Total dividend increased by 37% to 14.8p per Ordinary share (FY 22: 10.8p)
* Adjusted EBITDA excludes the following items from operating profit: non-cash depreciation and amortisation charges, share-based payments and non-recurring M&A-related items. Adjusted EPS excludes the following items from profit after tax: amortisation charges, share-based payments, non-recurring M&A-related items, M&A-related non-cash finance costs and their related tax impacts.
Current Trading & Outlook
· FY 23 momentum has continued into FY 24, with three record revenue months in Q1 2024 and a strong pipeline for the remainder of FY 24
· Momentum is expected to continue throughout the remainder of the year, with FY 24 revenue expected to be in the range of £104-110 million
· Adjusted EBITDA margin expected to be in the range of 27-29% after factoring in the impact of Insigniam's lower margins at acquisition
Operating Highlights
· Continued progress executing our four-pillar growth strategy, including:
1. Stretching Existing Partners - revenue per Partner increased by 7% during the year to £3.9m per Partner (FY 22: £3.6m). This continues the growth in this metric in each year since listing.
2. Hiring new Partners - we made three successful Partner hires in FY 23. These individuals have expanded the Group's presence in key markets and geographies and ensure that diversity of thought is maintained throughout the Partner grade.
3. Promoting Partners from Within - two experienced Principals were promoted to Partner in January 2023, with a further two Principals promoted to Partner in October 2023. January 2024 saw our first promotion to Partner in one of our acquired businesses, reflecting its successful integration within the Elixirr Group.
4. Inorganic Growth - the acquisition of the Artificial Intelligence firm, Responsum, in September 2023 has positioned the Group at the forefront of cutting-edge technology, whilst the acquisition of organisational change and transformation firm, Insigniam, in December 2023 enables us to support clients, innovate and drive large-scale change. Inorganic growth remains a key component of our strategy, and our internal M&A team continues to generate a pipeline of strong prospects that will help us further support clients with key boardroom issues and maximise the growth opportunity for the Group.
· Multiple accolades received including being named in the Financial Times' 2023 'UK Leading Management Consultants' list, earning a place on the Global Outsourcing 100® by the International Association of Outsourcing Professionals, being recognised as a Top Consulting Firm by Consultancy.UK and being shortlisted for the In-house Recruitment Awards 2023.
Commenting on the results, Founder & CEO, Stephen Newton said:
"2023 highlighted Elixirr's ability to thrive, outperforming both competitors and the global Consulting market. Our continued growth is a testament to the quality of our team, and the value we deliver to our clients. This year we continued to invest in our four-pillar growth strategy, further diversifying our offering and enabling us to solve new and interesting challenges for our clients. Our equity incentive model continues to disrupt the market, solidifying our reputation as the Challenger Consultancy and setting us up for continued success."
For further information please contact:
|
Elixirr International plc Stephen Newton, CEO Graham Busby, CFO |
| |
| Public and Investor Relations contacts: investor-relations@elixirr.com
Cavendish Capital Markets Ltd (Nominated Adviser & Joint Broker) Stephen Keys, Charlie Beeson (Corporate Finance), Sunila De Silva (ECM)
Investec Bank plc (Joint Broker) Carlton Nelson, Henry Reast (Corporate Broking)
|
+44 (0) 20 7220 0500
+44 (0) 20 7597 4000 | |
About Elixirr International plc
Elixirr is an established global award-winning management consultancy, challenging the larger consultancies by delivering innovative and bespoke solutions to a repeat, globally-recognised client base.
Elixirr was founded in 2009, by Stephen Newton, Graham Busby, Ian Ferguson, Andy Curtis and Mark Goodyear, experienced business advisors who identified a market opportunity to provide bespoke, personal services as a 'challenger' to the traditional consultancy businesses in the market. Elixirr guides its clients to overcome challenges such as: future-proofing against technological disruption; development and roll-out of innovative new propositions, products and services; incubating new businesses; navigating a more complex and multinational regulatory environment; and project management and implementation of major change programmes.
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the company's obligations under Article 17 of MAR.
Non-Executive Chairman's Report
OVERVIEW
I am pleased to introduce Elixirr's 2023 Annual Results, a year which highlighted the strength and resilience of the Group. Through its broad and diversified service offering, the Group has continued to deliver exceptional results.
Elixirr solved a variety of complex client challenges during 2023, facilitated by its broad service offering and foundation in data, technology, and innovation. The Group performed particularly well in scaling its existing client base, and its strong level of client retention demonstrates how in demand its expertise continues to be.
The Group grew both organically and inorganically in 2023, benefiting from its positioning in the market and increasing market awareness of the brand. The acquisition of the Artificial Intelligence firm, Responsum, in September 2023 has positioned the Group at the forefront of cutting-edge technology, whilst the acquisition of organisational change and transformation firm, Insigniam, in December 2023, enables us to support clients innovate and drive large-scale change. These acquisitions are highly complementary to the Group's existing offering, having driven further expansion into the US - a key growth market for the Group - and position the firm well to help clients address current and future disruptive market trends.
STRATEGY
The Board continues to have confidence in the Group's four-pillar growth strategy which has further demonstrated its value in FY 23. Through driving both organic and inorganic growth, the strategy has again proven highly successful despite challenging market conditions.
The Group's incentivisation model encourages the Partner team to act like entrepreneurs, with the team motivated to achieve growth for the Group, rather than solely at an individual level. As such, emphasis has been placed on selling services across the Elixirr Group, increasing client penetration, breadth of service and longevity of relationship as a result. Through future organic and inorganic growth, we expect to increase the breadth of services offered to clients even further.
We remain confident that the four-pillar growth strategy will drive future growth for the Group, as we have a team that is highly incentivised to achieve organic growth, together with a strong pipeline of new acquisition targets.
DIVIDEND
Given the continued growth of the business and in line with comparable companies, the Board has decided to declare two dividends per year, with an interim dividend payable shortly after the end of the financial year and a final dividend payable in August. As a result of the strong performance in FY 23 and the year-end cash position, the Company paid an interim Ordinary share dividend of 5.3p per share on 15 February 2024.
The Board is pleased to recommend a final Ordinary share dividend for FY 23 of 9.5p per share, making a total dividend of 14.8p for the FY 23 financial year, a 37% increase on the FY 22 dividend.
The final dividend will be recommended to shareholders at the AGM in June 2024. The FY 23 final dividend will have a total cash cost of £4.5 million, which will be funded from the Group's existing cash reserves.
GOVERNANCE
The Board operates within a robust governance framework and throughout FY 23, has ensured that the Group complies with the corporate governance code of the Quoted Companies Alliance (QCA). This includes ensuring that the Group has a balance of diverse skills and experience to deliver our strategy and growth objectives. The Board and its subcommittees include independent non-executive members with varying backgrounds and experience. The Board continues to monitor this on a regular basis.
OUTLOOK
The Board is optimistic about the outlook for FY 24, given the Group's track record of achieving its ambitions and its commitment to further growth. The growth of the business to date, underpinned by the support of our shareholders, clients and people, positions Elixirr well to continue its strong performance.
Gavin Patterson
Non-Executive Chairman
19 April 2024
Chief Executive Officer's Report
OVERVIEW
Elixirr's performance in FY 23 has again highlighted the firm's ability to grow profitably in both bull and bear markets. As always, our firm's key differentiator is the quality of our people, and I would like to thank our growing teams across the globe for their continued dedication and commitment.
Elixirr continued to perform well in FY 23, with revenue growing at a CAGR of 37% from 2019 to 2023. This sustained growth can be attributed to the increasing breadth of our services and a truly differentiated proposition, centred around the technology of tomorrow, which ensures that we continue to outperform the global consulting market (2019 to 2022 CAGR of 8.4%, source: Statista).
Our four-pillar growth strategy continues to provide the foundation for Elixirr's performance, ensuring a balance of both organic and inorganic growth. The acquisitions of Insigniam and Responsum brought new in-demand capabilities to the Group in FY 23, and enhanced Elixirr's presence in additive industries and geographies. Such acquisitions diversify our existing offering, increasing our resilience in all market conditions, and enable us to solve new and exciting challenges for our clients.
FY 23 PERFORMANCE
In FY 23, the business generated revenue of £85.9 million - a 20% increase from the prior year (£71.7 million). We focused on both winning new clients across the Group and deepening existing client relationships. This resulted in a 12% increase in the number of 'gold' client accounts - clients from which we receive annual revenue of over £1 million.
Throughout FY 23, Elixirr delivered a diverse range of solutions to our clients, across numerous industries and geographies. As a result of our continued growth, the firm now has a presence in six key geographies with eight offices across the globe, and diversification of revenue across nine core industries. Due to our broad service offering and deep knowledge of emerging technologies, we continue to be well placed to support clients with a wide range of business-critical challenges.
The revenue bridge above shows the elements of the growth in revenue from £71.7 million in FY 22 to £85.9 million in FY 23.
Underlying organic revenue growth was 15% year on year (net +£10.4 million revenue), with £11.5 million growth from existing clients and £10.4 million growth from new clients. This was partially offset by end-of-life projects which accounted for £11.5 million of lost revenue, including the impact of one very large, 5-year change programme successfully coming to an end.
The acquisition of Insigniam in December 2023 and iOLAP's revenue from the early part of the year (2.5 months in Q1) added £5.4 million to revenue overall in FY 23. In order to protect the overall profitability of the Group, management exited legacy lower margin revenue in acquired companies (-£1.6 million).
Elixirr achieved Adjusted EBITDA of £25.4 million in FY 23 - an increase in absolute terms of 24% from FY 22 (£20.5 million). This FY 23 Adjusted EBITDA represented 30% of revenue (FY 22: 29%), highlighting our ability to maintain market-leading levels of profitability and validating our position as a high value, high returns business.
We have been able to maintain this high level of profitability, despite acquiring businesses with historically lower margins, through increasing the value we deliver to our clients alongside removing inefficiencies. For the first time, both Elixirr Digital and iOLAP achieved margins similar to the core Consulting business in FY 23.
DELIVERING OUR FOUR-PILLAR GROWTH STRATEGY
Our aim is to become the best digital, data and AI consultancy in the world, and we have a clear and focussed four-pillar growth strategy that will enable us to achieve this goal. Progress has been made in each area of this strategy, including organic growth delivered by a collaborative Partner team that is heavily invested in Elixirr's growth journey, and inorganic growth resulting from the firm's mature acquisition strategy, process and pipeline.
In FY 23, revenue per Partner increased by 7% from £3.6 million in FY 22 to £3.9 million in FY 23, as set out in the Partner revenue bridge below. This continues the growth in this metric in each year since listing.
Stretching Existing Partners
A key component of our growth strategy is ensuring that established Partners maintain and improve their revenue contributions to the Elixirr Group. In FY 23, the established Partners in our firm generated average revenue of £4.8 million each - this was a 17% increase on the £4.1m achieved in FY 22.
Elixirr Partners are heavily incentivised to grow revenue and maintain margins and have been supported in doing so by an internal reorganisation into an industry vertical model. This makes us even more client-focussed. The senior members of the Partner team are accountable for growing specific industries, geographies, and capabilities, which will facilitate continued progress in this organic growth pillar.
We have also increased Partner revenue targets for FY 24, reflecting our expectations for further growth in this metric.
Hiring New Partners
Hiring external Partners with existing networks and consulting industry expertise is a key part of our growth strategy - bringing in individuals who expand the Group's presence in key markets and geographies. We successfully hired three new Partners in FY 23: a career consultant with experience founding a boutique consulting firm, a former managing director at Boston Consulting Group, and a former South African rugby captain turned entrepreneur. These candidates came through the network of the existing Partner team, and their respective backgrounds help to ensure that diversity of thought is maintained throughout the Partner grade.
In order to maintain the quality bar for which we are known, underperforming Partners were exited, with their equity positions forfeited. Management continues to take decisive action to protect the overall business and quality of our earnings.
In January 2024, we welcomed a new Partner to the team who brings award-winning expertise in growing and scaling companies and orchestrating successful exits. She will focus on driving growth for our clients, particularly in the technology and cybersecurity space, as well as generating new business development opportunities for the Group. We continually progress a warm pipeline of potential Partner candidates.
Promoting Partners from Within
Growing talent from within ensures that we retain our culture and quality as we scale, and we have embraced 'growing our own timber' since the day we were founded. Our strategy of giving promoted Partners a 'runway' to develop their Partner-level experience continued to pay off, with the promoted Partner team achieving £7.2 million revenue in FY 23.
In January 2023, Danielle Croucher and Ben Gower joined the Partner team, followed by Dan Coral and Rory Farquharson in October 2023. Each promoted Partner has been instrumental in our continued growth, both in the UK and US, and we have confidence that they will continue contributing to the Group's success worldwide as we scale.
In January 2024, Nick Larsen joined the Partner team. Nick is a longstanding member of the iOLAP team and is our first promotion to Partner in one of our acquired businesses. This is a significant milestone in our acquisition strategy, reflecting the successful integration of iOLAP within the Elixirr Group.
Acquiring New Businesses
Buying new businesses in key growth markets with additive capabilities to Elixirr's existing offering remains a key part of our growth strategy. In 2023, the acquisitions of Responsum and Insigniam opened doors to new clients, markets, and capabilities, and have generated significant growth potential.
In September 2023, Elixirr completed the acquisition of Responsum - a US-headquartered firm which has developed proprietary Artificial Intelligence ("AI") software. This acquisition brought specialist services in emerging technology, large language model and generative AI into the Group, complementing our existing service offering and iOLAP's data and analytics capabilities. This is a compelling opportunity for the Group, given that the global AI market is forecast to grow from US$208 billion in 2023 to US$1.8 trillion by 2030 (source: Statista). Consequently, we are well-positioned to capitalise upon the growing demand from clients for support in understanding how to implement and benefit from AI. Since the acquisition of Responsum was announced in September, several joint client engagements have been won and delivered, with most looking likely to extend, and multiple other active conversations are being closed out.
In December 2023, Elixirr completed the acquisition of Insigniam - a US and France headquartered consultancy firm, specialising in supporting clients and executives to define and navigate large scale change and transformation. This acquisition brought specialist services in transformation, leadership alignment, cultural change and executive coaching to Elixirr, complementing the Group's existing service offerings. Insigniam also has deep expertise in additive industries for Elixirr and has built a reputation as a market leader within the healthcare, biopharmaceuticals and life sciences industries. Insigniam's top clients include Fortune 500 companies and household brands, providing significant opportunities for the cross sell of services across the Elixirr Group.
We have a dedicated internal M&A team that continues to generate a pipeline of strong prospects, based on strict criteria, focused on bringing in additional capabilities that will help us to support clients with key boardroom issues. They remain focused on bringing in high-quality businesses that will maximise the growth opportunity for the Group.
OUR FIRM
I am truly proud of our team of bold entrepreneurs who have consistently delivered high-calibre work and value for our clients throughout the year.
The equity schemes offered by Elixirr instil a culture of entrepreneurship in our people, with everyone working together for, and able to benefit from, the growth of the Group. Our Employee Share Purchase Plan ("ESPP") had high levels of participation again for the new financial year - over 45% for the Group and over 75% for the consulting business for FY 24, highlighting the commitment that our teams have to the Elixirr growth story. We are particularly pleased that 70% of Insigniam employees elected to participate in the ESPP in the first year following the acquisition, indicating how strongly this proposition resonates for all employees across the Elixirr Group.
Our team continues to be diverse in skillset and experience, sourced from the world's best universities, industry roles and start-ups. We pride ourselves on the diversity of thought present within the Group, with more than 120 distinct University degrees studied within the Consulting team alone.
Elixirr's focus on cutting edge technologies differentiates us from traditional incumbents in the Consulting industry. Our broad range of capabilities and platform model offers our talent the opportunity to develop different expertise across multiple industries, geographies and service lines. In FY 23, we received over 10,000 job applications across the Elixirr Group, evidencing the strength of our employee proposition.
In 2023 we were pleased to receive multiple accolades including being named in the Financial Times' 2023 'UK Leading Management Consultants' list, earning a place on the Global Outsourcing 100® by the International Association of Outsourcing Professionals, being recognised as a Top Consulting Firm by Consultancy.UK and being shortlisted for the In-house Recruitment Awards 2023. These awards highlight our unwavering commitment to delivering value for our clients in addition to the quality of our internal functions.
OUTLOOK
Elixirr's continued growth in FY 23, despite challenging market conditions, once again highlights the resilience of our firm, talent of our people, and strength of our model.
As we look to the future, it is clear that emerging technology will have a significant impact on the Consulting industry and the evolution of services that clients will demand in the future. Given our focus on the technology of tomorrow, this provides a huge growth opportunity for Elixirr's core service offering, and our investments in this space to date position us well for future success.
Momentum has continued into FY 24, with three record revenue months in Q1 2024. We expect this momentum to continue over the rest of the year and, therefore, are targeting FY 24 revenue in the range of £104-110 million. After factoring in the impact of Insigniam's lower margins at acquisition, we expect our Adjusted EBITDA margin to be in the range of 27-29%.
Stephen Newton
Founder & Chief Executive Officer
19 April 2024
Financial Review
|
| FY 23 | FY 22 | % change |
| Revenue | £85.9m | £71.7m | +20% |
| Gross profit | £29.3m | £23.2m | +26% |
| Adjusted EBITDA* | £25.4m | £20.5m | +24% |
| Adjusted EBITDA margin* | 30% | 29% | +1PP |
| Profit before tax | £22.1m | £15.7m | +40% |
| Adjusted diluted earnings per share* | 37.2p | 30.5p | +22% |
| Dividend per share | 14.8p | 10.8p | +37% |
| Free cash flow | £16.1m | £14.6m | +11% |
| Net cash | £18.1m | £20.4m | -11% |
* In order to provide better clarity to the underlying performance of the Group, Elixirr uses adjusted EBITDA and adjusted earnings per share ('EPS') as alternative performance measures ('APMs'). Please refer to note 3 of the Group and Company Financial Statements for further details.
GROUP RESULTS
The Board is pleased to report another strong year of growth for the Group, both organically and as a result of the FY 23 acquisitions of Responsum and Insigniam and the FY22 acquisition of iOLAP. The Group achieved double-digit growth in both revenue and profits and this is testament to the continued effectiveness of our four-pillar growth strategy.
Our broad service offering and deep knowledge of emerging technologies meant we continued to be well placed to support an expanding client base with a wide range of business-critical challenges. During FY 23 we delivered a diverse range of solutions to our clients, across numerous industries and geographies, and successfully acquired Responsum and Insigniam, integrating their service offerings and teams into the Group. The acquisitions opened doors to new clients, markets, and capabilities, and have generated significant growth potential for future years.
The Group delivered healthy, industry-leading margins and strong cash generation, closing out the year in a financially sound position. In FY 23 the Group delivered revenue of £85.9 million (FY 22: £71.7 million), with profitability continuing to be strong. Adjusted EBITDA was £25.4 million, reflecting a 30% margin (FY 22: £20.5 million at a 29% margin).
REVENUE
Revenue increased by 20% to £85.9 million in FY 23 compared with £71.7 million in FY 22, with five record months of revenue achieved during the year. Revenue growth was driven by both underlying organic revenue growth of 15% and the impact of the acquisitions.
Double-digit revenue growth was achieved across all geographic regions (UK, USA and Rest of World) in which the Group operates, having increased our US footprint further following the acquisitions of Responsum and Insigniam. US revenue continues to account for 44% of Group revenue (FY 22: 44%). We are also pleased to report that revenue per client-facing Partner grew by 7% during the year, with established Partners having increased by 17%. This reflects the quality and resilience of our Partner team and how the growing suite of capabilities provided by our acquisitions have expanded the range of services that our Partners can sell to their clients.
The sustained increase in the Group's revenue highlights persistent high demand for its current service portfolio, coupled with the strategic integration of new service capabilities acquired through acquisitions. The Responsum and Insigniam businesses have complemented Elixirr's core consulting services, offering a range of additional solutions that meet client needs.
GROUP PROFITABILITY
The Group's revenue growth was accompanied by robust profit expansion. Group gross profit reached £29.3 million in the year, marking a notable £6.1 million increase or 26% growth compared to the previous year's £23.2 million. The gross profit margin increased to 34% from 32% in FY 22. These enhanced margins were evident in the growth in revenue per client-facing Partner and underscore our efficacy in increasing the profitability of acquired businesses.
Administrative expenses increased by 26% to £8.6 million, principally reflecting the inclusion of iOLAP for a full year and the non-cash acquired intangible asset amortisation from iOLAP and Insigniam.
Group Adjusted EBITDA grew 24% and was delivered at a 30% margin (FY 22: 29%). The enhanced Adjusted EBITDA margin reflects the improvement in gross profit margin, partially offset by the increase in administrative expenses referred to above.
Group profit before tax grew by 40% to £22.1 million (FY 22: £15.7 million) and was driven by the increase in Adjusted EBITDA and the £2.0 million M&A-related net credit for adjustments to contingent consideration associated with the acquisition of iOLAP.
NET FINANCE EXPENSE
Net finance expense of £0.5 million for FY 23 includes the finance cost of contingent consideration (£0.6 million) and the Group office leases liability (£0.3 million). The decrease in net finance expense was principally driven by finance income on short-term deposits given the rising interest rate environment experienced during FY 23. As at 31 December 2023, the Group has no interest rate risk exposure.
TAXATION
The Group's tax charge for FY 23 was £4.7 million, reflecting a higher effective tax rate of 22% compared with 18% in FY 22. The increase was largely driven by an increase in the UK corporate tax rate from 19% to 25% (effective April 2023 onwards). For further detail on taxation see notes 7 and 8 of the Group and Company Financial Statements. Adjusted profit after tax, used in calculating adjusted EPS, is shown after adjustments for the applicable tax on adjusting items as set out in note 3.
EARNINGS PER SHARE
Adjusted diluted EPS increased by 22% to 37.2p. This was the result of the 18% increase in Adjusted profit after tax, plus a reduction in the weighted average number of shares used as the denominator (due to the settlement of the FY 22 iOLAP earn-out without any dilution of shareholders and FY 23 share price performance). Adjusting items and their tax impacts are set out in note 3 of the Group and Company Financial Statements.
CASH FLOW
The Group's net cash position decreased to £18.1 million (FY 22: £20.4 million), as a result of the Responsum and Insigniam acquisitions, and earn-out payments for iOLAP and Coast Digital.
The Group continued to benefit from strong cash generation with increased net cash flow generated from operations of £16.8 million in FY 23 (FY 22: £15.7 million). The increase in operating cash flow compared to FY 22 was less than the increase in EBITDA due to the increase in tax paid (as explained above) and working capital timing differences (which reversed in January 2024).
Net cash utilised for acquisitions reflects a total of £15.1 million, which is comprised of £7.3 million initial cash consideration for the acquisition of Insigniam (net of cash of £1.1 million acquired on acquisition), £1.3 million initial cash consideration for the acquisition of Responsum, £6.4 million iOLAP earn-out satisfied through shares sold from the EBT in order to minimise dilution plus the final contingent consideration payment of £0.2 million for Coast Digital.
Net cash utilised in financing activities of £4.1 million represents a dividend payment of £4.9 million, net Partner loans (including associated section 455 tax) of £2.0 million, repayment of Responsum debt on acquisition of £0.7 million, office lease payments of £1.0 million, partially offset by net sales of shares from the EBT of £4.6 million.
STATEMENT OF FINANCIAL POSITION
Net assets as at 31 December 2023 totalled £119.6 million (FY 22: £95.9 million). The increase in net assets is as a result of a £4.3 million increase in share premium for share issues for Responsum, Insigniam and the sale of shares at market price to promoted Partners, net of loss on sale of shares by EBT, retained profit for the year of £15.4 million, net EBT share sales of £5.4 million and foreign currency translation losses of £1.5 million.
DIVIDENDS
The Company paid a final Ordinary share dividend in respect of FY 22 of 10.8 pence per share on 18 August 2023.
An interim Ordinary share dividend in respect of FY 23 of 5.3 pence per share was paid on 15 February 2024. The Board is pleased to recommend a final dividend for FY 23 of 9.5 pence per Ordinary share, making a total dividend of 14.8p for the FY 23 financial year, a 37% increase on the FY 22 dividend.
The final dividend will be recommended to shareholders at the AGM in June 2024. The FY 23 final dividend will have a total cash cost of £4.5 million, which will be funded from the Group's existing cash reserves.
Group Statement of Comprehensive Income
For the year ended 31 December 2023
| | | Year ended | Year ended |
| | Note | £'000s | £'000s |
| Revenue | 4 | 85,885 | 71,745 |
| Cost of sales | 4 | (56,621) | (48,589) |
| Gross profit |
| 29,264 | 23,156 |
| Administrative expenses | | (8,607) | (6,852) |
| Operating profit before M&A-related items | 5 | 20,657 | 16,304 |
| | | | |
| Depreciation | | 1,140 | 1,061 |
| Amortisation of intangible assets | | 1,652 | 2,004 |
| Share-based payments | | 1,967 | 1,159 |
| Adjusted EBITDA | 3 | 25,416 | 20,528 |
| | | | |
| M&A-related items | 5 | 1,966 | 600 |
| Operating profit | 5 | 22,623 | 16,904 |
| Finance income | | 365 | 54 |
| Finance costs | | (889) | (1,213) |
| Net finance expense | 6 | (524) | (1,159) |
| Profit before taxation | 5 | 22,099 | 15,745 |
| Taxation | 7 | (4,861) | (2,876) |
| Profit for the year | | 17,238 | 12,869 |
|
Other comprehensive income | | | |
| Items that may be subsequently reclassified to profit and loss: | | | |
| Currency translation on foreign currency net investments | (1,500) | 1,827 | |
| Other comprehensive income, net of tax | (1,500) | 1,827 | |
| | | |
|
| Total comprehensive income | 15,738 | 14,696 | |
| | | | |
| Basic earnings per Ordinary share (p) | 10 | 37.53 | 27.86 |
| Diluted earnings per Ordinary share (p) | 10 | 34.16 | 24.78 |
All results relate to continuing operations.
The notes form part of these accounts.
Group And Company Statements of Financial Position
As at 31 December 2023
| | | Group | Company | ||
| | |
|
|
|
|
| | Note | £'000s | £'000s | £'000s | £'000s |
| Assets | | | | | |
| Non-current assets |
| | | | |
| Intangible assets | 12 | 100,905 | 83,581 | - | - |
| Property, plant and equipment | 14 | 5,612 | 5,662 | - | - |
| Investments | 15 | - | - | 95,287 | 85,426 |
| Other receivables | 16 | 1,985 | 1,293 | 1,520 | 876 |
| Loans to shareholders | 16 | 7,604 | 4,734 | 7,604 | 4,723 |
| Deferred tax asset | 8 | 3,477 | 1,719 | - | - |
| Total non-current assets | | 119,583 | 96,989 | 104,411 | 91,025 |
| | | | | | |
| Current assets | | | | | |
| Trade and other receivables | 16 | 16,686 | 11,234 | 261 | 403 |
| Cash and cash equivalents | 17 | 18,130 | 20,433 | 6,659 | 6,340 |
| Total current assets | | 34,816 | 31,667 | 6,920 | 6,743 |
| | | | | | |
| Total assets | | 154,399 | 128,656 | 111,331 | 97,768 |
| | | | | | |
| Liabilities | | | | | |
| Current liabilities | | | | | |
| Trade and other payables | 18 | 19,056 | 13,304 | 6,909 | 7,215 |
| Lease liabilities | 19 | 1,150 | 750 | - | - |
| Corporation tax | | 268 | 381 | 3 | - |
| Other creditors | 20 | 1,144 | 6,765 | - | 203 |
| Total current liabilities | | 21,618 | 21,200 | 6,912 | 7,418 |
| | | |
| |
|
| Net current assets | | 13,198 | 10,467 | 8 | (675) |
| | | | | | |
| Non-current liabilities | | |
| |
|
| Lease liabilities | 19 | 4,214 | 4,393 | - | - |
| Deferred tax liability | 8 | 2,000 | 1,435 | - | - |
| Other non-current liabilities | 20 | 7,005 | 5,713 | - | - |
| Total non-current liabilities | | 13,219 | 11,541 | - | - |
| | | |
| |
|
| Total liabilities |
| 34,837 | 32,741 | 6,912 | 7,418 |
|
|
|
|
|
|
|
| Net assets |
| 119,562 | 95,915 | 104,419 | 90,350 |
| |
| |
| |
|
| Equity | | | | | |
| Share capital | 21 | 52 | 52 | 52 | 52 |
| Share premium | 21 | 29,922 | 25,599 | 29,922 | 25,599 |
| Capital redemption reserve | | 2 | 2 | 2 | 2 |
| EBT share reserve | 22 | (1,745) | (7,147) | (1,745) | (7,147) |
| Merger relief reserve | 21 | 46,870 | 46,870 | 46,870 | 46,870 |
| Foreign currency translation reserve | | 378 | 1,878 | - | - |
| Retained earnings | | 44,083 | 28,661 | 29,318 | 24,974 |
| Total shareholders' equity | | 119,562 | 95,915 | 104,419 | 90,350 |
As permitted by section 408 of the Companies Act 2006, a separate statement of comprehensive income of the parent Company has not been presented. The Company's profit for the year was £7.6 million (FY 22: £13.1 million).
The notes form part of these accounts.
The Financial Statements were approved by the Board of Directors on 19 April 2024 and were signed on its behalf by:
Stephen Newton
Director
Group Statement of Changes in Equity
For the year ended 31 December 2023
| | Share capital | Share premium | Capital redemption reserve | EBT share reserve | Merger relief reserve | Foreign currency translation reserve | Retained earnings | Total |
| Group | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s |
| | | | | | | | | |
| As at 31 December 2021 and 01 January 2022 | 52 | 24,952 | 2 | (2,193) | 46,870 | 51 | 16,307 | 86,041 |
| | | | | | | | | |
| Comprehensive income | | | | | | | | |
| Profit for the period | - | - | - | - | - | - | 12,869 | 12,869 |
| Other comprehensive income | - | - | - | - | - | 1,827 | - | 1,827 |
| Transactions with owners | | | | | | | | |
| Dividends | - | - | - | - | - | - | (1,855) | (1,855) |
| Share-based payments | - | - | - | - | - | - | 975 | 975 |
| Deferred tax recognised in equity | - | - | - | - | - | - | 365 | 365 |
| Sale of Ordinary shares | - | 647 | - | 9,743 | - | - | - | 10,390 |
| Acquisition of Ordinary shares | - | - | - | (14,697) | - | - | - | (14,697) |
| As at 31 December 2022 and 01 January 2023 | 52 | 25,599 | 2 | (7,147) | 46,870 | 1,878 | 28,661 | 95,915 |
| | | | | | | | | |
| Comprehensive income | | | | | | | | |
| Profit for the period | - | - | - | - | - | - | 17,238 | 17,238 |
| Other comprehensive income | - | - | - | - | - | (1,500) | - | (1,500) |
| Transactions with owners | | | | | | | | |
| Ordinary share issues | - | 5,417 | - | - | - | - | - | 5,417 |
| Dividends | - | - | - | - | - | - | (4,940) | (4,940) |
| Share-based payments | - | - | - | - | - | - | 1,694 | 1,694 |
| Deferred tax recognised in equity | - | - | - | - | - | - | 1,430 | 1,430 |
| Sale of Ordinary shares | - | (1,094) | - | 9,322 | - | - | - | 8,228 |
| Acquisition of Ordinary shares | - | - | - | (3,920) | - | - | - | (3,920) |
| As at 31 December 2023 | 52 | 29,922 | 2 | (1,745) | 46,870 | 378 | 44,083 | 119,562 |
The notes form part of these accounts. Please refer to note 28 for explanations of reserve accounts.
Company Statement of Changes in Equity
For the year ended 31 December 2023
| | Share capital | Share premium | Capital redemption reserve | EBT share reserve | Merger relief reserve | Retained earnings | Total |
| Company | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s |
| | | | | | | | |
| As at 31 December 2021 and 01 January 2022 | 52 | 24,952 | 2 | (2,193) | 46,870 | 12,772 | 82,455 |
| | | | | | | | |
| Comprehensive income | | | | | | | |
| Profit for the period | - | - | - | - | - | 13,082 | 13,082 |
| Transactions with owners | | | | | | | |
| Dividends | - | - | - | - | - | (1,855) | (1,855) |
| Share-based payments | - | - | - | - | - | 975 | 975 |
| Sale of Ordinary shares | - | 647 | - | 9,743 | - | - | 10,390 |
| Acquisition of Ordinary shares | - | - | - | (14,697) | - | - | (14,697) |
| As at 31 December 2022 and 01 January 2023 | 52 | 25,599 | 2 | (7,147) | 46,870 | 24,974 | 90,350 |
| | | | | | | | |
| Comprehensive income | | | | | | | |
| Profit for the period | - | - | - | - | - | 7,590 | 7,590 |
| Transactions with owners | | | | | | | |
| Ordinary share issues | - | 5,417 | - | - | - | - | 5,417 |
| Dividends | - | - | - | - | - | (4,940) | (4,940) |
| Share-based payments | - | - | - | - | - | 1,694 | 1,694 |
| Sale of Ordinary shares | - | (1,094) | - | 9,322 | - | - | 8,228 |
| Acquisition of Ordinary shares | - | - | - | (3,920) | - | - | (3,920) |
| As at 31 December 2023 | 52 | 29,922 | 2 | (1,745) | 46,870 | 29,318 | 104,419 |
The notes form part of these accounts. Please refer to note 28 for explanations of reserve accounts.
Group and Company Cash Flow Statements
For the year ended 31 December 2023
| | | Group | Company | ||
| | |
|
|
|
|
| | Note | £'000s | £'000s | £'000s | £'000s |
| | | | | | |
| Cash flows from operating activities: | | | | | |
| Cash generated from operations | 24 | 21,988 | 19,583 | 7,080 | 20,364 |
| Taxation paid | | (5,195) | (3,855) | (22) | (18) |
| Net cash generated from operating activities
| 16,793 | 15,728 | 7,058 | 20,346 | |
| | | | | | |
| Cash flows from investing activities: | | | | | |
| Purchase of property, plant and equipment | (62) | (329) | - | - | |
| Software development costs | | (65) | - | - | - |
| Payment for acquisition of subsidiary, net of cash acquired |
| (15,063) | (18,276) | - | (203) |
| Investment in subsidiary | | - | - | (4,621) | (20,643) |
| Interest received | | 365 | 71 | 253 | 59 |
| Net cash utilised in investing activities
| (14,825) | (18,534) | (4,368) | (20,787) | |
| | | | | | |
| Cash flows from financing activities: | | | | | |
| EBT Ordinary share purchases | | (3,773) | (14,697) | (3,773) | (14,697) |
| EBT Ordinary share sales | | 8,356 | 10,257 | 8,356 | 10,257 |
| Loans to shareholders | (2,500) | (3,011) | (2,500) | (3,000) | |
| Loans repaid by shareholders | | 1,130 | 2,268 | 1,130 | 2,268 |
| s455 tax refunded/(paid) re loans to shareholders | | (644) | 245 | (644) | 232 |
| Repayment of borrowings | | (687) | (1,143) | - | - |
| Lease liability payments | (770) | (651) | - | - | |
| Interest paid | | (236) | (262) | - | - |
| Ordinary share dividends paid to shareholders | | (4,940) | (1,855) | (4,940) | (1,855) |
| Net cash utilised in financing activities | (4,064) | (8,849) | (2,371) | (6,795) | |
| | | | | | |
| Net (decrease)/increase in cash and cash equivalents | (2,096) | (11,655) | 319 | (7,236) | |
| Cash and cash equivalents at beginning of the period | 20,433 | 31,795 | 6,340 | 13,576 | |
| Effects of exchange rate changes on cash and cash equivalents | (207) | 293 | - | - | |
| Cash and cash equivalents at the end of the period | 18,130 | 20,433 | 6,659 | 6,340 | |
The notes form part of these accounts.
Notes to the Financial Statements
1. BASIS OF PREPARATION
1.1. General information
Elixirr International plc (the "Company") and its subsidiaries' (together the "Group") principal activities are the provision of consultancy services.
The Company is a public company limited by shares incorporated in England and Wales and domiciled in the UK. The address of the registered office is 12 Helmet Row, London, EC1V 3QJ and the Company number is 11723404.
1.2. Basis of preparation
The financial statements have been prepared in accordance with UK adopted international accounting standards.
1.3. Basis of consolidation
These financial statements consolidate the financial statements of the Company and its subsidiary undertakings as at 31 December 2023.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. The acquisition method of accounting has been adopted. The financial statements of subsidiaries are prepared for the same reporting period as the parent Company, using consistent accounting policies.
All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.
1.4. Measurement convention
The financial statements have been prepared under the historical cost convention, except as otherwise described in the accounting policies.
The preparation of the consolidated financial information in compliance with UK adopted international accounting standards requires the use of certain critical accounting estimates and management judgements in applying the accounting policies. The significant estimates and judgements that have been made and their effect is disclosed in note 2.1.
1.5. Going concern
The Directors have, at the time of approving the financial statements, a reasonable expectation that the Company and the Group have adequate resources to continue in operation for the foreseeable future. The Group's forecasts and projections, taking into account reasonable possible changes in trading performance, show that the Group has sufficient financial resources, together with assets that are expected to generate cash flow in the normal course of business. Accordingly, the Directors have adopted the going concern basis in preparing these consolidated financial statements.
2. MATERIAL ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of the financial statements of the Group and Company, which have been applied consistently to the period presented, are set out below.
2.1. Judgements and key sources of estimation uncertainty
The preparation of the financial statements requires management to make estimates and judgements that affect the reported amounts of assets, liabilities, costs and revenue in the financial statements. Actual results could differ from these estimates. The judgements, estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
In the process of applying the Group's accounting policies, the Directors have made no judgements (excluding those involving estimations and recognition of intangibles on acquisitions), which are considered to have a significant effect on the amounts recognised in the financial statements for the year ending 31 December 2023.
The key sources of estimation uncertainty that could cause an adjustment to be required to the carrying amount of assets or liabilities within the next accounting period are:
• Revenue is recognised in line with time worked on a project unless the engagement is conditional or contingent. Management review accrued revenue to determine whether there is any likelihood of any amendments or provisions required based on project progress and relationship with the client.
• The Group's policy on recognising an impairment of the trade receivables balance is based on a review of individual receivable balances, their ageing and management's assessment of realisation. This review and assessment is conducted on a continuing basis and any material change in management's assessment of trade receivable impairment is reflected in the carrying value of the asset.
• Provisions for dilapidations are accrued based on estimation of the cost expected to crystallise on vacating leased premises.
• In determining the fair value of intangible assets arising on business combinations, management is required to estimate the timing and amount of future cash flows applicable to the intangible assets being acquired.
• Management has estimated the share-based payments expense under IFRS 2. In determining the fair value of share-based payments, management has considered several internal and external factors in order to judge the probability that management and employee share incentives may vest and to assess the fair value of share options at the date of grant. Such assumptions involve estimating a number of future performance and other factors.
• The Responsum and Insigniam contingent consideration calculations under IFRS 3 contain estimation uncertainty, as the earn-out potentially payable in each case is linked to the future performance of the acquiree. In estimating the fair value of the contingent consideration, at both the acquisition date and financial year end, management has estimated the potential future cash flows of the acquirees and assessed the likelihood of an earn-out payment being made. These estimates could potentially change as a result of events over the coming years.
2.2. Revenue recognition
Revenue is measured as the fair value of consideration received or receivable for satisfying performance obligations contained in contracts with clients, excluding discounts and Value Added Tax. Variable consideration is included in revenue only to the extent that it is highly probable that a significant reversal will not be required when the uncertainties determining the level of variable consideration are resolved.
This occurs as follows for the Group's various contract types:
• Time-and-materials contracts are recognised over time as services are provided at the fee rate agreed with the client where there is an enforceable right to payment for performance or performance-related elements completed to date.
• Fixed-fee contracts are recognised over time, based on the actual service provided to the end of the reporting period as a proportion of the total services to be provided where there is an enforceable right to payment for performance completed to date. This is determined based on the actual inputs of time and expenses relative to total expected inputs.
Where contracts include multiple performance obligations, the transaction price is allocated to each performance obligation based on its stand-alone selling price. Where these are not directly observable, they are estimated based on expected cost-plus margin. Adjustments are made to allocate discounts proportionately relative to the stand-alone selling price of each performance obligation.
Estimates of revenues, costs or extent of progress toward completion are revised if circumstances change. Any resulting increase or decrease in estimated revenues or costs are reflected in the statement of comprehensive income in the period in which the circumstances that give rise to the revision became known.
Fees are normally billed on a monthly basis. If the revenue recognised by the Group exceeds the amounts billed, a contract asset is recognised. If the amounts billed exceed the revenue recognised, a contract liability is recognised. Unbilled revenue is recognised at the fair value of consultancy services provided at the reporting date reflecting the stage of completion (determined by costs incurred to date as a percentage of the total anticipated costs) of each assignment. Contract assets are reclassified as receivables when billed and the consideration has become unconditional because only the passage of time is required before payment is due.
The Group's standard payment terms require settlement of invoices within 30 days of receipt.
The Group does not adjust the transaction price for the time value of money as it does not expect to have any contracts where the period between the transfer of the promised services to the client and the payment by the client exceeds one year.
2.3. Business combinations, goodwill and consideration
Business combinations
The Group applies the acquisition method of accounting to account for business combinations in accordance with IFRS 3, 'Business Combinations'.
The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the consideration transferred over the fair value of the Group's share of the identifiable net assets acquired is recorded as goodwill. All transaction related costs are expensed in the period they are incurred as operating expenses. If the consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in the income statement.
Goodwill
Goodwill is initially measured at cost and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the income statement.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units expected to benefit from the synergies of the combination. Cash-generating units to which goodwill has been allocated are tested for impairment annually, or more frequently when there is an indication that the unit may be impaired.
The Group performs impairment reviews at the reporting period end to identify any goodwill or intangible assets that have a carrying value that is in excess of its recoverable amount. Determining the recoverability of goodwill and the intangible assets requires judgement in both the methodology applied and the key variables within that methodology. Where it is determined that an asset is impaired, the carrying value of the asset will be reduced to its recoverable amount with the difference recorded as an impairment charge in the income statement.
In accordance with IAS 36, the Group has tested goodwill for impairment at the reporting date. No goodwill impairment was deemed necessary as at 31 December 2023. For further details on the impairment review please refer to note 12.
Contingent and non-contingent deferred consideration on acquisition
Contingent and non-contingent deferred consideration may arise on acquisitions. Non-contingent deferred consideration may arise when settlement of all or part of the cost of the business combination falls due after the acquisition date. Contingent deferred consideration may arise when the consideration is dependent on future performance of the acquired company.
Deferred consideration associated with business combinations settled in cash is assessed in line with the agreed contractual terms. Consideration payable is recognised as capital investment cost when the deferred or contingent consideration is not employment-linked. Alternatively, consideration is recognised as remuneration expense over the deferral or contingent performance period, where the consideration is also contingent upon future employment. Where the contingent consideration is settled in a variable number of shares or cash, the consideration is classified as a liability and measured at fair value through profit and loss.
2.4. Taxation
Income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profits as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's and Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the reporting end date.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit; and at the time of the transaction, does not give rise to equal taxable and deductible temporary differences.
The carrying amount of deferred tax assets is reviewed at each reporting end date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
2.5. Foreign currency translation
The presentational currency of these financial statements and the functional currency of the Group is pounds sterling.
Functional and presentational currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The financial statements are presented in 'sterling', which is the Group's and Company's functional currency and presentation currency.
On consolidation, the results of overseas operations are translated into sterling at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening rate and the results of overseas operations at actual rate are recognised in other comprehensive income.
Transactions and balances
Foreign currency transactions are translated into the functional currency 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 year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
2.6. Intangible assets
Intangible assets are measured at cost less accumulated amortisation and any accumulated impairment losses. Intangible assets acquired in a business combination are initially measured at their fair value (which is regarded as their cost). Subsequent to initial recognition, intangible assets acquired in a business combination are reported at cost less accumulated amortisation and any accumulated impairment losses.
Intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset under IAS 38. Such assets are only recognised if either:
• They are capable of being separated or divided from the company and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, identifiable asset or liability, regardless of whether the company intends to do so; or
• They arise from contractual or other legal rights, regardless of whether those rights are transferable or separable from the entity or from other rights and obligations.
The cost of such intangible assets is the fair value at the acquisition date. All intangible assets acquired through business combinations are amortised over their estimated useful lives. The significant intangibles recognised by the Group, their useful economic lives and the methods used to determine the cost of the intangibles acquired in business combinations are as follows:
| Intangible Asset | Useful Economic Life | Valuation Method |
| Trademark | 33.33% reducing balance | Relief from Royalty method |
| Customer relationships | 10 - 25% reducing balance | Multi-Period Excess Earnings method |
| Order book | Over order term | Multi-Period Excess Earnings method |
2.7. Tangible assets
Tangible fixed assets are stated at cost net of accumulated depreciation and accumulated impairment losses.
Costs comprise purchase costs together with any incidental costs of acquisition.
Depreciation is provided to write down the cost less the estimated residual value of all tangible fixed assets by equal instalments over their estimated useful economic lives on a straight-line basis. The following rates are applied:
| Tangible fixed asset | Useful economic life |
| Leasehold improvements | Over the life of the lease |
| Computer equipment | 3 years |
| Fixtures and fittings | 3 years |
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, if there is an indication of a significant change since the last reporting date. Low value equipment including computers is expensed as incurred.
2.8. Impairments of tangible and intangible assets
At each reporting end date, the Group reviews the carrying amounts of its tangible and intangible assets (other than goodwill) to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit and loss.
Where an impairment subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit and loss.
2.9. Employee benefits
Post-retirement benefits
The Group pays into defined contribution pension schemes on behalf of employees that are operated by third parties. The assets of the schemes are held separately from those of the Group in independently administered funds.
The amount charged to the income statement represents the contributions payable to the scheme in respect of the accounting period.
Share-based payments
The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of share options, is recognised as an employee benefit expense in the statement of profit and loss.
The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non-market based vesting conditions) at the grant date. Fair value is measured by use of Black Scholes option valuation model.
At the end of each reporting period the assumptions underlying the number of awards expected to vest are adjusted for the effects of non-market based vesting conditions to reflect conditions prevailing at that date. The impact of any revisions to the original estimates is recognised in the statement of profit or loss, with a corresponding adjustment to equity.
The Group has the obligation to pay employers' national insurance on the exercise of certain UK employee options. The Group has opted to account for the tax obligation under IFRS 2 as a cash-settled share-based payment arrangement as the amount of employers' national insurance due at the time of exercise is based on the share price of the equity instruments of the Company. The cash-settled share-based payment liability is estimated at each period end using the closing share price of the Company and the prevailing employers' national insurance rate. The number of awards expected to vest are consistent with the treatment for equity-settled share-based payments. The cost of employers' national insurance is included within share-based payments expense in the statement of comprehensive income.
Please refer to note 23 for further details.
2.10. Earnings per share
The Group presents basic and diluted EPS.
Basic EPS is calculated by dividing the profit attributable to the Group's Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the period.
The calculation of diluted EPS assumes conversion of all potentially dilutive Ordinary shares, which arise from share options outstanding. A calculation is performed to determine the number of share options that are potentially dilutive based on the number of shares that could have been acquired at fair value from the future assumed proceeds of the outstanding share options.
2.11. Financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. Financial instruments are recognised on trade date when the Group becomes a party to the contractual provisions of the instrument. Financial instruments are recognised initially at fair value plus, in the case of a financial instrument not a fair value through profit and loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument. Financial instruments are de-recognised on the trade date when the Group is no longer a party to the contractual provisions of the instrument.
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings and trade and other payables.
Trade and other receivables and trade and other payables
Trade and other receivables are recognised initially at transaction price less attributable transaction costs. Trade and other payables are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they are measured at amortised cost using the effective interest method, less any expected credit losses in the case of trade receivables. If the arrangement constitutes a financing transaction, for example if payment is deferred beyond normal business terms, then it is measured at the present value of future payments discounted at a market rate of interest for a similar debt instrument.
Interest-bearing borrowings
Interest-bearing borrowings are recognised initially at the present value of future payments discounted at a market rate of interest. Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost using the effective interest method, less any impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with terms up to 90 days.
Contingent consideration
Contingent deferred consideration may arise on acquisitions where the consideration is dependent on the future performance of the acquired company. In circumstances where the acquiree will receive contingent consideration in a variable number of shares and is not employment-linked, the Group has recognised a financial liability at the fair value of the contingent consideration. Subsequent changes to the fair value of the contingent consideration are recognised in the statement of comprehensive income.
At the balance sheet date the contingent consideration liability represents the fair value of the remaining contingent consideration valued at acquisition. The contingent consideration liability for acquisitions under IFRS 3 contains estimation uncertainty as they relate to future expected performance of the acquired business. In estimating the fair value of the contingent consideration, management have assessed the potential future cash flows of the acquired business and the likelihood of an earn-out payment being made.
2.12. Provisions
A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.
2.13. Right-of-use assets: Leases
The Group leases two properties in the UK and five properties outside the UK.
All leases are accounted for by recognising a right-of-use asset and a lease liability, except for leases of low value assets.
Lease liabilities are measured at the present value of contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless (as is typically the case) this is not readily determinable, in which case the lessee's incremental borrowing rate on commencement of the lease is used.
Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for:
• Lease payments made at or before commencement of the lease;
• Initial direct costs incurred; and
• The amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset (typically leasehold dilapidations).
Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease (because, for example, it re-assesses the probability of a lessee extension or termination option being exercised), it adjusts the carrying amount of the lease liability to reflect the payments to be made over the revised term, which are discounted at the same discount rate that applied on lease commencement. An equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term.
2.14. Financing income and expenses
Financing expenses comprise interest payable, interest on lease liabilities using the effective interest method and the unwinding of the discount on contingent consideration.
Financing income includes interest receivable on funds invested.
Interest income and interest payable are recognised in the statement of comprehensive income as they accrue, using the effective interest method.
2.15. Standards issued but not yet effective
At the date of authorisation of these financial statements, there are no standards that are issued but not yet effective that would be expected to have a material impact on the Group or Company's financial statements in the current or future reporting periods and on foreseeable future transactions.
3. Alternative performance measures
In order to provide better clarity to the underlying performance of the Group, Elixirr uses adjusted EBITDA and adjusted EPS as alternative performance measures. These measures are not defined under IFRS. These non-GAAP measures are not intended to be a substitute for, or superior to, any IFRS measures of performance, but have been included as the Directors consider adjusted EBITDA and adjusted EPS to be key measures used within the business for assessing the underlying performance of the Group's ongoing business across periods.
Adjusted EBITDA excludes the following items from operating profit: non-cash depreciation and amortisation charges, share-based payments and non-recurring M&A-related items. Adjusted EPS excludes the following items from profit after tax: amortisation charges, share-based payments, non-recurring M&A-related items, M&A-related non-cash finance costs and their related tax impacts.
The table below sets out the reconciliation of the Group's adjusted EBITDA and adjusted profit before tax from profit before tax:
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Profit before tax | 22,099 | 15,745 |
| Adjusting items: | | |
| M&A-related items (note 5) | (1,966) | (600) |
| Amortisation of intangible assets | 1,652 | 2,004 |
| Share-based payments | 1,967 | 1,159 |
| Finance cost - contingent consideration | 636 | 951 |
| Adjusted profit before tax | 24,388 | 19,259 |
| Depreciation | 1,140 | 1,061 |
| Net finance (income)/cost (excluding contingent consideration) | (112) | 208 |
| Adjusted EBITDA | 25,416 | 20,528 |
The table below sets out the reconciliation of the Group's adjusted profit after tax to adjusted profit before tax:
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Adjusted profit before tax | 24,388 | 19,259 |
| Tax charge | (4,861) | (2,876) |
| Tax impact of adjusting items | (761) | (531) |
| Adjusted profit after tax | 18,766 | 15,852 |
Adjusted profit after tax is used in calculating adjusted basic and adjusted diluted EPS. Adjusted profit after tax is stated before adjusting items and their associated tax effects.
Adjusted EPS is calculated by dividing the adjusted profit after tax for the period attributable to Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the period. Adjusted diluted EPS is calculated by dividing adjusted profit after tax by the weighted average number of shares adjusted for the impact of potential Ordinary shares.
Potential Ordinary shares are treated as dilutive when their conversion to Ordinary shares would decrease EPS. Please refer to note 10 for further details.
| | FY 23 | FY 22 |
| Group | p | p |
| Adjusted EPS | 40.86 | 34.32 |
| Adjusted diluted EPS | 37.19 | 30.53 |
4. Segment reporting & RESTATEMENT
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Revenue from contracts with customers arises from: | | |
| United Kingdom | 28,520 | 23,837 |
| USA | 37,533 | 31,703 |
| Rest of World | 19,832 | 16,205 |
| Total Revenue | 85,885 | 71,745 |
IFRS 8 requires that operating segments be identified on the basis of internal reporting and decision-making. The Group is operated as one global business by its executive team, with key decisions being taken by the same leaders irrespective of the geography where work for clients is carried out. Management therefore consider that the Group has one operating segment. As such, no additional disclosure has been provided under IFRS 8.
The Company is a holding Company operating in the UK with its assets and liabilities given in the Company Statement of Financial Position. Other Company information is provided in the other notes to the accounts.
FY 23 revenue includes £0.8m of reimbursable expenses. FY 22 revenue and cost of sales have been restated to reclassify reimbursable expenses as revenue, which was previously reported in cost of sales. The reimbursable expenses revenue was reclassified by restating each of the affected financial statement line items for the prior period as follows:
| | FY 22 | Increase | FY 22 (Restated) |
| Group | £'000s | £'000s | £'000s |
| Statement of Comprehensive Income (extract): | | | |
| Revenue | 70,703 | 1,042 | 71,745 |
| Cost of sales | (47,547) | (1,042) | (48,589) |
5. Profit before taxation
The following items have been included in arriving at profit before taxation:
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Depreciation of property, plant and equipment: | | |
| - Owned assets | 233 | 213 |
| - Leased assets | 907 | 848 |
| Amortisation of intangible assets | 1,652 | 2,004 |
| Share-based payments | 1,967 | 1,159 |
| Foreign exchange losses/(gains) | 388 | (392) |
| M&A-related items | (1,966) | (600) |
| - Transaction costs | 956 | 486 |
| - Adjustment to contingent consideration | (2,922) | (1,086) |
The M&A-related net credit of £2.0 million in FY 23 includes adjustments to contingent consideration associated with the acquisition of iOLAP, less non-recurring costs associated with the acquisitions of Insigniam and Responsum as well as other M&A activity. The M&A-related net credit of £0.6 million in FY 22 includes adjustments to contingent consideration associated with the acquisitions of Retearn and iOLAP, less non-recurring costs associated with the acquisition of iOLAP.
During the year the Group obtained the following services from the Company's auditors as detailed below:
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Services provided by the Company's auditors: | | |
| Audit fees - parent Company and consolidated accounts | 43 | 40 |
| Audit fees - subsidiary companies | 107 | 89 |
6. Net finance expense
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Finance income: | | |
| On short term deposits and investments | 365 | 54 |
| | 365 | 54 |
| Finance costs: | | |
| Finance cost - contingent consideration
| (640) | (951) |
| On lease liability | (249) | (262) |
| | (889) | (1,213) |
| Net finance expense | (524) | (1,159) |
7. Taxation on profit on ordinary activities
Analysis of tax charge:
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Current tax | | |
| In respect of the current year | 5,035 | 3,466 |
| Adjustments in respect of prior periods | 47 | (334) |
| Total current tax | 5,082 | 3,132 |
| | | |
| Deferred tax |
|
|
| In respect of the current year | (221) | (324) |
| Change in tax rates | - | 68 |
| Total deferred tax | (221) | (256) |
| | | |
| Income tax expense | 4,861 | 2,876 |
Numerical reconciliation of income tax expense:
The tax assessed on the profit on ordinary activities for the year is lower than the standard rate of corporation tax in the UK of 25%.
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Profit before taxation | 22,099 | 15,745 |
| Profit on ordinary activities multiplied by the weighted average rate of corporation tax in UK of 23.5% (FY 22: 19%) | 5,193 | 2,992 |
| Effects of: | | |
| M&A-related items not taxable | (606) | - |
| Expenses not deductible | 324 | 193 |
| Difference in overseas tax rates | (97) | 201 |
| Change in deferred tax rate | - | 68 |
| Adjustments in respect of prior periods | 147 | (62) |
| R&D tax relief in respect of prior periods | (100) | (271) |
| Deferred tax release re trademarks | - | (245) |
| Total taxation | 4,861 | 2,876 |
8. Deferred tax
Net deferred tax asset/(liability):
The balances comprise temporary differences attributable to:
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Deferred tax liability | | | | |
| Property, plant and equipment | (78) | (105) | - | - |
| Intangible assets | (1,922) | (1,330) | - | - |
| Total deferred tax liability | (2,000) | (1,435) | - | - |
|
|
|
|
|
|
| Deferred tax asset | | | | |
| Share-based payments | 3,117 | 1,400 | - | - |
| Short-term timing differences | 360 | 319 | - | - |
| Total deferred tax asset | 3,477 | 1,719 | - | - |
|
|
|
|
|
|
| Net deferred tax asset | 1,477 | 284 | - | - |
The deferred tax liability on intangible assets relates to trademarks and customer relationships and those on property, plant and equipment relate to accelerated capital allowances.
The deferred tax asset recognised represents the future tax effect of share-based payment charges in respect of options that are yet to vest. Deductions in excess of the cumulative share-based payment charge recognised in the statement of comprehensive income are recognised in equity.
Movements in deferred tax:
| | Property, plant and equipment | Intangible assets | Share-based payments | Short-term timing differences | Total |
| | £'000s | £'000s | £'000s | £'000s | £'000s |
| At 31 December 2021 | (52) | (571) | 966 | 231 | 574 |
| Acquisition of business | - | (858) | - | - | (858) |
| Credited to equity | - | - | 365 | - | 365 |
| Credited/(charged) to profit and loss | (53) | 182 | 69 | 58 | 256 |
| Exchange rate difference | - | (83) | - | 30 | (53) |
| At 31 December 2022 | (105) | (1,330) | 1,400 | 319 | 284 |
| Acquisition of business | - | (493) | - | - | (493) |
| Credited to equity | - | - | 1,429 | - | 1,429 |
| Credited/(charged) to profit and loss | 27 | (152) | 288 | 58 | 221 |
| Exchange rate difference | - | 53 | - | (17) | 36 |
| At 31 December 2023 | (78) | (1,922) | 3,117 | 360 | 1,477 |
9. Ordinary dividends
The Company paid a final Ordinary share dividend in respect of FY 22 of 10.8 pence per Ordinary share on 18 August 2023. No interim Ordinary share dividends were paid during FY 22 or FY 23.
An interim Ordinary share dividend in respect of FY 23 of 5.3 pence per Ordinary share was paid on 15 February 2024.
The Board is pleased to recommend a final dividend for FY 23 of 9.5p per share, making a total dividend of 14.8p for FY 23.
The final dividend will be recommended to shareholders at the AGM in June 2024. The FY 23 final dividend will have a total cash cost of £4.5 million, which will be funded from the Group's existing cash reserves.
10. Earnings per share
The Group presents non-adjusted and adjusted basic and diluted EPS for its Ordinary shares. Basic EPS is calculated by dividing the profit for the period attributable to Ordinary shareholders by the weighted average number of Ordinary shares outstanding during the period.
Diluted EPS takes into consideration the Company's dilutive contingently issuable shares. The weighted average number of Ordinary shares used in the diluted EPS calculation is inclusive of the number of share options and ESPP matching awards that are expected to vest (subject to the relevant criteria being met) and the number of shares that may be issued to satisfy contingent M&A deferred consideration.
The profits and weighted average number of shares used in the calculations are set out below:
| | FY 23 | FY 22 |
| Basic and Diluted EPS | | |
| Profit attributable to the Ordinary equity holders of the Group used in calculating basic and diluted EPS (£'000s) | 17,238 | 12,869 |
| | | |
| Basic earnings per Ordinary share (p) | 37.53 | 27.86 |
| Diluted earnings per Ordinary share (p) | 34.16 | 24.78 |
|
| | |
| | FY 23 | FY 22 |
| Adjusted Basic and Diluted EPS | | |
| | | |
| Profit attributable to the Ordinary equity holders of the Group used in calculating adjusted basic and diluted EPS (note 3) (£'000s) | 18,766 | 15,852 |
| | | |
| Adjusted basic earnings per Ordinary share (p) | 40.86 | 34.32 |
| Adjusted diluted earnings per Ordinary share (p) | 37.19 | 30.53 |
|
| | |
| | FY 23 | FY 22 |
| | Number | Number |
| Weighted average number of shares | | |
| Weighted average number of Ordinary shares used as the denominator in calculating non-adjusted and adjusted basic EPS | 45,933,062 | 46,186,481 |
| Number of dilutive shares | 4,531,375 | 5,740,587 |
| Weighted average number of Ordinary shares used as the denominator in calculating non-adjusted and adjusted diluted EPS | 50,464,437 | 51,927,068 |
11. Employees and directors
The monthly average number of persons employed by the Group during the year, analysed by category, was as follows:
| | FY 23 | FY 22 |
| Group | Number | Number |
| Directors, management and Partners | 32 | 31 |
| Provision of services | 397 | 373 |
| Administration | 55 | 46 |
| | 484 | 450 |
The average number of persons employed and staff costs includes both executive and non-executive Directors.
The aggregate payroll costs of these persons were as follows:
| | FY 23 | FY 22 |
| Group | £'000s | £'000s |
| Wages and salaries | 37,830 | 32,702 |
| Social security costs | 4,334 | 3,910 |
| Pension costs | 862 | 755 |
| Share-based payment charge | 1,967 | 1,159 |
| | 44,993 | 38,526 |
Defined contribution pension schemes are operated by third parties on behalf of the employees of the Group. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension charge represents contributions payable by the Group to the funds and amount to £0.9 million for FY 23 (FY 22: £0.8 million). Contributions amounting to £0.1 million (FY 22: £0.1 million) were payable to the fund as at 31 December 2023 and are included in payables.
Key management personnel include the Directors and senior managers across the Group who together have authority and responsibility for planning, directing and controlling the activities of the Group. The total compensation (including employers' national insurance) paid in respect of key management personnel for services provided to the Group is as follows:
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Aggregate emoluments including short term employee benefits | 5,511 | 4,872 | 200 | 167 |
| | 5,511 | 4,872 | 200 | 167 |
The share-based payment charge in respect of key management personnel was £0.3 million (FY 22: £0.2 million).
Details of the Directors' remuneration, including salary, bonus, share option awards, pension and other benefits are included in the tables within the Directors' Report.
12. Goodwill and intangible fixed assets
| | Goodwill | Trademarks | Customer relationships | Order book | Software | Total |
| Group | £'000s | £'000s | £'000s | £ 000's | £ 000's | £'000s |
| Cost | | | | | | |
| At 31 December 2021 | 51,412 | 7,135 | 1,874 | - | - | 60,421 |
| Acquisition of business | 23,391 | - | 2,453 | 1,051 | - | 26,895 |
| Gains/(losses) from foreign exchange | 2,172 | - | 227 | 98 | - | 2,497 |
| At 31 December 2022 | 76,975 | 7,135 | 4,554 | 1,149 | - | 89,813 |
| Acquisition of business (note 13) | 18,312 | - | 1,546 | 466 | 364 | 20,688 |
| Additions | - | - | - | - | 65 | 65 |
| Gains/(losses) from foreign exchange | (1,626) | - | (161) | (67) | 4 | (1,850) |
| At 31 December 2023 | 93,661 | 7,135 | 5,939 | 1,548 | 433 | 108,716 |
| | | | | | | |
| Amortisation | | | | | | |
| At 31 December 2021 | - | (4,071) | (157) | - | - | (4,228) |
| Charge for the year | - | (879) | (620) | (505) | - | (2,004) |
| Gains/(losses) from foreign exchange | - | - | 1 | (1) | - | - |
| At 31 December 2022 | - | (4,950) | (776) | (506) | - | (6,232) |
| Charge for the year | - | (627) | (653) | (372) | - | (1,652) |
| Gains/(losses) from foreign exchange | - | - | 37 | 36 | - | 73 |
| At 31 December 2023 | - | (5,577) | (1,392) | (842) | - | (7,811) |
| | | | | | | |
| Net book value | | | | | | |
| At 31 December 2022 | 76,975 | 2,185 | 3,778 | 643 | - | 83,581 |
| At 31 December 2023 | 93,661 | 1,558 | 4,547 | 706 | 433 | 100,905 |
The Company has no intangible assets.
Goodwill
Goodwill arising on the acquisition of a business in FY 23 relates to the acquisitions of Responsum and Insigniam and was calculated as the fair value of initial consideration paid less the fair value of the net identifiable assets at the date of the acquisition (see note 13).
Goodwill arising on the acquisition of a business in FY 22 relates to the acquisition of iOLAP.
Goodwill impairment review
The breakdown of goodwill by cash-generating unit ('CGU') is listed below:
| | FY 23 | FY 22 |
| | £'000s | £'000s |
| Consulting | 61,700 | 48,556 |
| Elixirr Digital | 2,856 | 2,856 |
| iOLAP and Responsum | 29,105 | 25,563 |
| | 93,661 | 76,975 |
The Consulting CGU comprises goodwill and other assets of Elixirr Consulting Limited, The Retearn Group Limited and the acquisition of Insigniam in FY 23 (refer note 13). The Elixirr Digital CGU comprises goodwill and other assets of Elixirr Digital Limited. The iOLAP CGU comprises goodwill and other assets of iOLAP and the acquisition of Responsum in FY 23 (refer note 13).
Following initial recognition, goodwill is subject to impairment reviews, at least annually, and measured at fair value less accumulated impairment losses. Any impairment is recognised immediately in the consolidated statement of comprehensive income and is not subsequently reversed.
Key assumptions used in value in use calculation
The key assumptions for the value in use calculation are those regarding:
• number of years of cash flows used and budgeted EBITDA growth rate;
• discount rate; and
• terminal growth rate.
No impairment is indicated for any of the CGUs using the value in use calculation.
Number of years of cash flows used and budgeted growth rate
The recoverable amount of the CGU is based on a value in use calculation using specific cash flow projections over a five-year period and a terminal growth rate thereafter.
The budget for the following financial year forms the basis for the cash flow projections for a CGU. The cashflow projections for the four years subsequent to the budget year reflect the Directors' expectations based on market knowledge, numbers of new engagements and the pipeline of opportunities.
Discount rate
The Group's post-tax weighted average cost of capital has been used to calculate a discount rate of 12% for the Group and Consulting, 12% for iOLAP and Responsum, and 13% for Elixirr Digital. This reflects current market assessments of the time value of money for the period under review and the risks specific to the Group and company acquired.
Terminal growth rate
An appropriate terminal growth rate is selected, based on the Directors' expectations of growth beyond the five-year period. The terminal growth rate used is 2%.
Sensitivity to changes in assumptions
With regard to the value in use assumptions, the Directors believe that reasonably possible changes in any of the above key assumptions would not cause the carrying value of the unit to exceed its recoverable amount. In forming this view, the Directors have considered the following:
| | Consulting | Elixirr Digital | iOLAP |
| |||
| | FY 23 | FY 22 | FY 23 | FY 22 | FY 23 | FY 22 | |
| | £'000s | £'000s | £'000s | £'000s | £'000s | £'000s | |
| On current cash flow projections, the discount rate would need to exceed the % alongside for there to be any impairment; and | 28.1% | 30.5% | 71.4% | 50.0% | 21.9% | 23.7% | |
| In the case of no increase in future cash flows above those projected for the following year, the discount rate would have to exceed the % alongside for there to be any impairment. | 22.7% | 25.0% | 58.8% | 42.7% | 17.9% | 19.0% | |
Customer relationships
FY 23 additions represent the fair value of customer relationships from the acquisition of Insigniam. Refer to note 13 for further details.
The fair value has been determined by applying the Multi-Period Excess Earnings method to the cash flows expected to be earned from customer relationships. The key management assumptions are in relation to forecast revenues, margins and discount factors. The fair value represents the present value of the earnings the customer relationships generate.
A useful economic life of 10 years has been deemed appropriate based on the average realisation rate of cumulative cash flows. The projected cash flows have been discounted over this period. The amortisation charge since acquisition is recognised within administrative expenses.
FY 22 additions represent the fair value of customer relationships from the acquisition of iOLAP.
Order Book
FY 23 additions represent the fair value of the order book from the acquisition of Insigniam. Refer to note 13 for further details.
The fair value has been determined by applying the Multi-Period Excess Earnings method to the cash flows earned from the order book. The key management assumptions relate to forecast margins and discount factors.
A useful economic life of 1 year has been deemed appropriate based on the relevant contractual period. Projected cash flows have been discounted over this period. The amortisation charge is recognised within administrative expenses.
FY 22 additions represent the fair value of the order book from the acquisition of iOLAP.
13. Business combinations
On 15 September 2023, the Group, through its US subsidiary iOLAP, acquired 100% of the share capital and voting interests of Responsum, Inc. a US-headquartered firm which has developed proprietary artificial intelligence software. The acquisition brings specialist services in emerging technology, large language models ("LLM") and generative AI into the Group, complementing the Group's existing service offering and iOLAP Inc.'s ("iOLAP") data and analytics capabilities in particular.
The Group acquired Responsum for a maximum consideration payable of £5.1 million (US$6.4 million). The consideration consists of:
• An initial consideration of £1.6 million (US$2.0 million) in cash;
• An initial consideration of £2.7 million (US$3.4 million) settled through the issue of 505,196 Ordinary shares at a price of £5.40 per share;
• Potential earn-out payments of up to £0.8 million (US$1.0 million) in cash which are contingent on iOLAP and Responsum together achieving EBIT margin targets in periods up to 31 December 2026.
The Ordinary shares purchased pursuant to the acquisition are subject to restrictions on sale for a total period of up to four years. The sellers also agreed to three-year restrictive covenants.
The difference between the fair value of the purchase consideration of £4.6 million and the fair value of the identifiable assets acquired and liabilities assumed was recognised as goodwill of £5.0 million. The goodwill is attributable to the company's workforce and working methodologies.
The total fair value of the contingent consideration payable recognised on the date of acquisition was £0.4 million (US$0.5 million), of which £0.1 million (US$0.2 million) was the hold back for warranties and £0.3million (US$0.3 million) related to the present value of potential earn-out payments.
The contingent consideration for potential earn-out payments is discounted to fair value and has been estimated by management based on anticipated future revenue growth and EBIT. Discount unwinding is recognised in finance costs proportionately across the periods until final settlement. During the period, £9k of discount unwinding was expensed as finance costs in relation to the Responsum acquisition consideration.
As at 31 December 2023, a £0.4 million liability is recorded, of which £0.1 million is a current and £0.3 million is a non-current liability.
Included within M&A-related items is an amount of £0.1 million for legal and advisory fees in relation to the acquisition.
The table below sets out the amounts recognised as of the acquisition date for each major class of assets acquired and liabilities assumed, the consideration and goodwill on the acquisition of Responsum:
| | Fair value |
| | £'000s |
| Assets | |
| Non-current assets | |
| Intangible assets | 364 |
| Total non-current assets | 364 |
| | |
| Total assets | 364 |
|
| |
| Liabilities | |
| Current liabilities | |
| Trade and other payables | 80 |
| Total current liabilities | 80 |
| | |
| Non-current liabilities | |
| Loans and borrowings | 687 |
| Total non-current liabilities | 687 |
| | |
| Total liabilities | 767 |
|
| |
| Fair value of net assets acquired | (403) |
| Goodwill (note 12) | 5,044 |
| Fair value of purchase consideration | 4,641 |
| Cash and cash equivalents in subsidiary acquired | - |
On 8 December 2023, the Group's US subsidiary, Elixirr, Inc. acquired all of the issued and outstanding membership interests of Insigniam LLC, and Elixirr International plc acquired the entire issued and outstanding shares of Insigniam SAS (Insigniam SAS together with Insigniam LLC, "Insigniam"). Insigniam is a US-headquartered consultancy firm specialising in supporting clients and executives to define and navigate large scale change and transformation. The acquisition brings specialist services in transformation, leadership alignment, cultural change, and executive coaching, complementing the Group's existing service offerings.
The Group acquired Insigniam for a maximum consideration payable of £14.7 million (US$18.5 million). The consideration consists of:
• An initial consideration of £9.2 million (US$11.6 million) in cash;
• An initial consideration of £1.2 million (US$1.5 million) settled through the issue of 258,553 Ordinary shares at a price of £4.60 per share;
• Contingent consideration of up to £4.3 million (US$5.4 million) in either cash or Ordinary shares with, at a minimum, 33% of the contingent consideration being satisfied in cash. This is contingent on Insigniam achieving both revenue growth and EBITDA margin targets in financial periods up to 31 December 2026.
The difference between the fair value of the purchase consideration of £13.8 million and the fair value of the identifiable assets acquired and liabilities assumed of £0.5 million was recognised as goodwill of £13.3 million. The goodwill is attributable to the company's workforce and working methodologies and is deductible for tax purposes.
The total fair value of the contingent consideration payable recognised on the date of acquisition was £4.2 million (US$5.3 million), of which £0.8 million (US$1.0 million) was the hold back for warranties and £3.4million (US$4.3 million) related to the present value of the maximum potential earn-out payments.
The contingent consideration for potential earn-out payments is discounted to fair value and has been estimated by management based on anticipated future revenue growth and EBITDA. Discount unwinding is recognised in finance costs proportionately across the periods until final settlement. During the period, £24k of discount unwinding was expensed as finance costs in relation to the Insigniam acquisition consideration.
As at 31 December 2023, a £4.2 million liability is recorded, of which £0.8 million is a current and £3.4 million is a non-current liability.
Included within M&A-related items is an amount of £0.4 million for legal and advisory fees in relation to the acquisition.
Insigniam contributed £0.9 million to the Group's revenue and £0.1 million to the Group's profit before tax for the period from the date of acquisition to 31 December 2023.
If the acquisition of Insigniam had been completed on 1 January 2023, Group revenues for the year ended 31 December 2023 would have been £95.9 million and Group profit before tax would have been £23.8 million.
In calculating the goodwill arising, the fair value of the net assets of Insigniam have been assessed, and fair value adjustments were required for the recognition of customer relationship and order book intangibles and the related deferred tax.
Customer relationships and order book intangibles were assessed to be separately identifiable assets, recognised at fair value and are included within intangible assets below. Refer to note 12 for further details.
The fair value of trade and other receivables approximates carrying value and there is no material difference between fair value and the gross contractual amounts at the acquisition date.
The table below sets out the amounts recognised as of the acquisition date for each major class of assets acquired and liabilities assumed, the consideration and goodwill on the acquisition of Insigniam:
| | Fair value |
| | £'000s |
| Assets | |
| Non-current assets | |
| Intangible assets | 2,012 |
| Property, plant and equipment | 400 |
| Other receivables | 67 |
| Total non-current assets | 2,479 |
| | |
| Current assets | |
| Trade and other receivables | 1,914 |
| Cash and cash equivalents | 1,118 |
| Total current assets | 3,032 |
| | |
| Total assets | 5,511 |
|
| |
| Liabilities | |
| Current liabilities | |
| Trade and other payables | 4,102 |
| Total current liabilities | 4,102 |
| | |
| Non-current liabilities | |
| Loans and borrowings | 395 |
| Deferred tax liability | 493 |
| Total non-current liabilities | 888 |
| | |
| Total liabilities | 4,990 |
|
| |
| Fair value of net assets acquired | 521 |
| Goodwill (note 12) | 13,268 |
| Fair value of purchase consideration | 13,789 |
| Cash and cash equivalents in subsidiary acquired | 1,118 |
14. Property, plant and equipment
| | Right of use asset | Furniture and Fittings | Leasehold Improvements | Computer Equipment | Total |
| Group | £'000s | £'000s | £'000s | £'000s | £'000s |
| Cost | | | | | |
| At 31 December 2021 | 6,427 | 89 | 505 | 188 | 7,209 |
| Acquisition of business (note 13) | 655 | 56 | 26 | 90 | 827 |
| Additions | - | 131 | 134 | 64 | 329 |
| Gains from foreign exchange | 51 | 5 | 2 | 5 | 63 |
| At 31 December 2022 | 7,133 | 281 | 667 | 347 | 8,428 |
| Acquisition of business (note 13) | 400 | - | - | - | 400 |
| Additions | 639 | 3 | 4 | 55 | 701 |
| Losses from foreign exchange | (23) | (4) | - | (14) | (41) |
| At 31 December 2023 | 8,149 | 280 | 671 | 388 | 9,488 |
|
| | | | | |
| Depreciation | | | | | |
| At 31 December 2021 | (1,321) | (70) | (225) | (97) | (1,713) |
| Charge for the year | (848) | (29) | (86) | (98) | (1,061) |
| Gains from foreign exchange | 7 | - | - | 1 | 8 |
| At 31 December 2022 | (2,162) | (99) | (311) | (194) | (2,766) |
| Charge for the year | (907) | (42) | (98) | (93) | (1,140) |
| Gains from foreign exchange | 11 | 5 | - | 14 | 30 |
| At 31 December 2023 | (3,058) | (136) | (409) | (273) | (3,876) |
|
| | | | | |
| Net book value | | | | | |
| At 31 December 2022 | 4,971 | 182 | 356 | 153 | 5,662 |
| At 31 December 2023 | 5,091 | 144 | 262 | 115 | 5,612 |
The Company has no property, plant and equipment.
The lease liability in respect of the right-of-use asset was £5.4 million (FY 22: £5.1 million) and relates to property leases.
15. Investments
| | Group companies |
| Company | £'000s |
| Cost/carrying value | |
| At 31 December 2021 | 63,807 |
| Capitalisation of subsidiary | 20,643 |
| Group companies share-based payments | 975 |
| At 31 December 2022 | 85,426 |
| Acquisition of business | 1,070 |
| Capitalisation of subsidiary | 7,098 |
| Group companies share-based payments | 1,693 |
| At 31 December 2023 | 95,287 |
The Group has no investments.
The Company has the following subsidiary undertakings at the year-end:
| Subsidiary undertakings | Country of incorporation | Principal activity | Registered office | FY 23 | FY 22 |
| Elixirr Consulting Limited | England and Wales | Consultancy | 12 Helmet Row, London, EC1V 3QJ | 100% | 100% |
| Elix-IRR Consulting Services (South Africa) Limited (indirect) | England and Wales | Services to the Group | 12 Helmet Row, London, EC1V 3QJ | 100% | 100% |
| Elixirr LLC (indirect) | United States | Consultancy | 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808 | 100% | 100% |
| Den Creative Limited | England and Wales | Consultancy | 12 Helmet Row, London, EC1V 3QJ | 100% | 100% |
| Elixirr Services Limited (indirect) | England and Wales | Dormant | 12 Helmet Row, London, EC1V 3QJ | 100% | 100% |
| Coast Digital Limited* | England and Wales | Consultancy | 12 Helmet Row, London, EC1V 3QJ | 100% | 100% |
| The Retearn Group Limited | England and Wales | Consultancy | 12 Helmet Row, London, EC1V 3QJ | 100% | 100% |
| Elixirr Consulting (Jersey) Limited | Jersey | Consultancy | 3rd Floor, 44 Esplanade, St Helier, Jersey, JE4 9WG | 100% | 100% |
| Elixirr Inc. | United States | Holding Company | 2600 Network Blvd Suite 570 Frisco, TX 75034 | 100% | 100% |
| iOLAP Inc. (indirect) | United States | Consultancy | 2600 Network Blvd Suite 570 Frisco, TX 75034 | 100% | 100% |
| iOLAP d.o.o. (indirect) | Croatia | Consultancy | Prolaz Marije Krucifikse Kozulić 1, 51000, Rijeka | 100% | 100% |
| Elixirr GmbH | Germany | Dormant | Ronsbachweg 6, 36093, Kuenzell. Germany | 100% | - |
| Responsum, Inc. (indirect) | United States | Consultancy | 2600 Network Blvd Suite 570 Frisco, TX 75034 | 100% | - |
| Insigniam LLC (indirect) | United States | Consultancy | 301 Woodbine Ave, Narberth, PA 19072 | 100% | - |
| Insigniam SAS | France | Consultancy | 36 Rue De Ponthieu, 75008, Paris 8 | 100% | - |
* On 2 January 2024 the name of Coast Digital Limited was changed to Elixirr Digital Limited.
16. Receivables
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Non-current assets | | | | |
| Loans to shareholders | 7,604 | 4,734 | 7,604 | 4,723 |
| Other receivables | 1,985 | 1,293 | 1,520 | 876 |
| | 9,589 | 6,027 | 9,124 | 5,599 |
| Current assets | | | | |
| Trade receivables | 15,295 | 10,355 | - | - |
| Less: allowance for doubtful debts | - | (8) | - | - |
| Trade receivables - net | 15,295 | 10,347 | - | - |
| Prepayments and deposits | 840 | 653 | 63 | 62 |
| Contract assets | 288 | 26 | - | - |
| Amounts owed by group companies | - | - | - | 199 |
| Other receivables | 263 | 208 | 198 | 142 |
| | 16,686 | 11,234 | 261 | 403 |
The Company was due £0.2 million as at 31 December 2022 from Elixirr Inc. for costs relating to the acquisition of iOLAP.
Loans to shareholders in FY 23 represent amounts owed to the Company by shareholders, who are senior employees of the Group. The loans to shareholders are interest-free and expected to be repaid beyond one year. Non-current other receivables include property deposits and section 455 tax receivable.
Trade receivables are non-interest bearing and receivable under normal commercial terms. Management considers that the carrying value of trade and other receivables approximates to their fair value. The carrying value of non-current other receivables and loans to shareholders is considered to be a reasonable approximation of their fair value, but has not been discounted to present value.
The expected credit loss on trade and other receivables was not material at the current or prior year ends. For analysis of the maximum exposure to credit risk, please refer to note 25.
The ageing of trade receivables of the Group as at 31 December 2023:
| | Gross carrying amount | Loss allowance | Net carrying amount |
| Group | £'000s | £'000s | £'000s |
| < 31 days | 9,916 | - | 9,916 |
| 31-60 days | 3,451 | - | 3,451 |
| 61-90 days | 1,662 | - | 1,662 |
| 91-120 days | 36 | - | 36 |
| 121+ days | 230 | - | 230 |
| At 31 December 2023 | 15,295 | - | 15,295 |
The ageing of trade receivables of the Group as at 31 December 2022:
| | Gross carrying amount | Loss allowance | Net carrying amount |
| Group | £'000s | £'000s | £'000s |
| < 31 days | 6,171 | - | 6,171 |
| 31-60 days | 3,607 | - | 3,607 |
| 61-90 days | 450 | - | 450 |
| 91-120 days | 1 | - | 1 |
| 121+ days | 126 | (8) | 118 |
| At 31 December 2022 | 10,355 | (8) | 10,347 |
17. Cash and cash equivalents
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Cash at bank and in hand | 18,130 | 20,433 | 6,659 | 6,340 |
| | 18,130 | 20,433 | 6,659 | 6,340 |
Cash at bank includes £6.2 million on 32-day notice deposit which earned interest at an average rate of 4.2% during the year.
18. Trade and other payables
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Trade payables | 1,774 | 1,178 | 241 | 55 |
| Other taxes and social security costs | 1,899 | 1,540 | 8 | 7 |
| Accruals | 11,308 | 8,599 | 450 | 156 |
| Contract liabilities | 3,938 | 1,983 | - | - |
| Other payables | 137 | 4 | 116 | - |
| Amounts owed to group companies | - | - | 6,094 | 6,997 |
| | 19,056 | 13,304 | 6,909 | 7,215 |
As at 31 December 2023, the Company owed £6.1 million (FY 22: £7.0 million) to Elixirr Consulting Limited.
The fair value of trade and other payables approximates to book value at the period end. Trade payables are non-interest bearing and are normally settled monthly.
Trade payables comprise amounts outstanding for trade purchases and ongoing costs.
Contract liabilities arise from the Group's revenue generating activities relating to payments received in advance of performance delivered under a contract. These contract liabilities typically arise on short-term timing differences between performance obligations in some milestone or fixed fee contracts and their respective contracted payment schedules.
19. LEASE LIABILITIES
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Current liabilities | | | | |
| Right of use lease liability | 1,150 | 750 | - | - |
| | 1,150 | 750 | - | - |
| Non-current liabilities | | | | |
| Right of use lease liability | 4,214 | 4,393 | - | - |
| | 4,214 | 4,393 | - | - |
The movement in the right of use lease liability was as follows:
| | Right of use lease liability |
| Group | £'000s |
| At 31 December 2021 | 5,245 |
| Acquisition of business (note 13) | 555 |
| Interest payable | 262 |
| Repayment of lease liabilities | (913) |
| Losses from foreign exchange | (6) |
| At 31 December 2022 | 5,143 |
| Acquisition of business (note 13) | 395 |
| Additions | 639 |
| Interest payable | 249 |
| Repayment of lease liabilities | (1,006) |
| Losses from foreign exchange | (56) |
| At 31 December 2023 | 5,364 |
The acquisition of business in FY 23 relates to the acquisition of Insigniam. The additions in FY 23 relate to a new property lease signed by iOLAP d.o.o.
The acquisition of business in FY 22 relates to the acquisition of iOLAP.
Maturity analysis of contracted undiscounted cashflows of the right of use lease liability are as follows:
| | FY 23 | FY 22 |
| | £'000s | £'000s |
| Lease liability less than one year | 1,334 | 932 |
| Lease liability greater than one year and less than five years | 3,721 | 3,270 |
| Lease liability greater than five years | 1,092 | 1,871 |
| Total liability | 6,147 | 6,073 |
| Finance charges included above | (783) | (930) |
| | 5,364 | 5,143 |
20. Other creditors and other non-current liabilities
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Other creditors | | | | |
| Contingent consideration | 1,144 | 6,765 | - | 203 |
| | 1,144 | 6,765 | - | 203 |
| Other non-current liabilities | | | | |
| Dilapidations | 377 | 380 | - | - |
| Cash-settled share-based payments | 360 | 139 | - | - |
| Contingent consideration | 6,268 | 5,194 | - | - |
| | 7,005 | 5,713 | - | - |
Contingent consideration in FY 23 include earn-out payments which are contingent on performance and arose from the acquisition of iOLAP, Responsum and Insigniam.
Contingent consideration in FY 22 include earn-out payments which are contingent on performance and arose from the acquisition of Coast Digital and iOLAP.
Cash-settled share-based payments include obligations for the Group's employers' NI on options that are yet to vest. Refer to note 23 for further details.
Other non-current liability payments fall due beyond 12 months from the reporting date.
21. Share capital, share premium and merger relief reserve
| | FY 23 | |||
| | Issued shares | Par value | Merger relief reserve | Share premium |
| Group and Company | Number | £ | £'000s | £'000s |
| £0.00005 Ordinary shares | 47,272,811 | 2,364 | 46,870 | 29,922 |
| £1 Redeemable Preference shares | 50,001 | 50,001 | - | - |
| | 47,322,812 | 52,365 | 46,870 | 29,922 |
| | FY 22 | |||
| | Issued shares | Par value | Merger relief reserve | Share premium |
| Group and Company | Number | £ | £'000s | £'000s |
| £0.00005 Ordinary shares | 46,186,481 | 2,309 | 46,870 | 25,599 |
| £1 Redeemable Preference shares | 50,001 | 50,001 | - | - |
| | 46,236,482 | 52,310 | 46,870 | 25,599 |
The total number of voting rights in the Company at 31 December 2023 was 47,272,811 (FY 22: 46,186,481).
Ordinary shares
On a show of hands every holder of Ordinary shares present at a meeting, in person or by proxy, is entitled to one vote, and on a poll each share is entitled to one vote. The shares entitle the holder to participate in dividends, and to share in the proceeds of winding up the Company in proportion to the number of and amounts paid on the shares held. These rights are subject to the prior entitlements of the Redeemable Preference shareholders.
Movements in Ordinary shares:
| | Issued shares | Par value | Merger relief reserve | Share premium |
| Group and Company | Number | £ | £'000s | £'000s |
| At 31 December 2021 | 46,186,481 | 2,309 | 46,870 | 24,952 |
| Sale of Ordinary shares from the EBT | - | - | - | 647 |
| At 31 December 2022 | 46,186,481 | 2,309 | 46,870 | 25,599 |
| Share issues | 1,086,330 | 54 | - | 5,417 |
| Sale of Ordinary shares from the EBT | - | - | - | (1,094) |
| At 31 December 2023 | 47,272,811 | 2,364 | 46,870 | 29,922 |
Share issues in FY 23 represented consideration for the acquisitions of Responsum and Insigniam as well as the sale of shares at market price to promoted Partners.
Redeemable Preference shares
The Redeemable Preference shares are entitled to dividends at a rate of 1% per annum of paid up nominal value. The shares have preferential right, before any other class of share, to a return of capital on winding-up or reduction of capital or otherwise of the Company.
The Redeemable Preference shares are redeemable 100 years from the date of issue or at any time prior at the option of the Company.
22. EBT share reserve
The Employee Benefit Trust ('EBT') is accounted for under IFRS 10 and is consolidated on the basis that the parent has control, thus the assets and liabilities of the EBT are included on the Company and Group statement of financial position and shares held by the EBT in the Company are presented as a deduction from equity. The EBT share reserve comprises of Ordinary and Redeemable Preference shares bought and held in the Group's EBT.
The below table sets out the number of EBT shares held and their weighted average cost:
| | FY 23 | ||
| | Shares held in EBT | Weighted average cost | Total cost |
| Group and Company | Number | £ | £'000s |
| Ordinary shares | 397,667 | 4.26 | 1,695 |
| Redeemable Preference shares | 50,001 | 1.01 | 50 |
| | 447,668 |
| 1,745 |
| |
|
|
|
| |
|
|
|
| | FY 22 | ||
| | Shares held in EBT | Weighted average cost | Total cost |
| Group and Company | Number | £ | £'000s |
| Ordinary shares | 1,204,965 | 5.89 | 7,097 |
| Redeemable Preference shares | 50,001 | 1.01 | 50 |
| | 1,254,966 |
| 7,147 |
23. Share-based payments
The Group recognised a total share-based payment expense of £2.0 million (FY 22: £1.2 million) in the current year, comprising £1.7 million (FY 22: £1.0 million) in relation to equity settled share-based payments, and £0.3 million (FY 22: £0.2 million) relating to relevant social security taxes.
A cash-settled share-based payment liability is recognised relating to social security tax on share options (refer to note 20). The liability has been estimated using a closing share price of £6.20 and employers' national insurance at 13.8%. The carrying value of the liability as at 31 December 2023 is £0.4 million (FY 22: £0.1 million), with £0.3 million (FY 22: £0.2 million) recognised in the P&L and payments amounting to £0.1 million (FY 22: £0.1 million) made in the year.
Share Option Plans
The Group operates EMI, CSOP and unapproved share option plans with time-based and performance-based vesting conditions.
During FY 23, a total of 5,614,145 (FY 22: 3,687,080) share options were granted to employees and senior management. The weighted average fair value of the options awarded in the year is £1.17 per share (FY 22: £1.66).
During FY 23, options issued between April 2021 and April 2023 were repriced to an exercise price of £5.20. The weighted average incremental fair value granted as a result of this modification was £0.30. The incremental fair value was measured as the difference between the fair value of the repriced share option and that of the original share option, both estimated as at the date of the modification. The incremental fair value is recognised as an expense over the remaining vesting period from the modification date.
Details of share option awards made are as follows:
| | Number of share options (000's) | Weighted average exercise price |
| Outstanding at the beginning of the year | 10,886 | 3.47 |
| Granted during the year | 5,614 | 5.22 |
| Exercised during the year | (57) | 2.34 |
| Forfeited during the year | (2,875) | 4.28 |
| Outstanding at the year end | 13,568 | 3.76 |
| Exercisable at the year end | 293 | 5.54 |
For the options exercised during FY 23, the weighted average share price at the date of exercise was £5.05.
The options outstanding as at 31 December 2023 had a weighted average remaining contractual life of 2.6 years (FY 22: 3 years) and a weighted average exercise price of £3.76 (FY 22: £3.47) per share.
The options were fair valued at the grant date using the Black Scholes option valuation model.
The inputs into the model were as follows:
| | FY 23 | FY 22 |
| Weighted average share price at grant date (£) | 4.98 | 5.90 |
| Weighted average exercise price (£) | 5.22 | 6.32 |
| Volatility (%) | 27.00% | 26.54% |
| Weighted average vesting period (years) | 5 | 5 |
| Risk free rate (%) | 4.28% | 1.73% |
| Expected dividend yield (%) | 2.54% | 0.71% |
Expected volatility was determined by calculating the historic volatility of comparable companies in the market in which the Group operates. The expected expense calculated in the model has been adjusted, based on management's best estimate, for the effects of non-market-based performance conditions and employee attrition.
Reasonable changes in the above inputs do not have a material impact on the share-based payment charge in FY 23.
Fixed Consideration Options
In addition to the share options set out in the table above, share options with an exercise price of £0.00005 were issued in connection with the acquisition of Elixirr Digital. These share options are for a fixed monetary consideration where the number of share options is variable and determined with reference to the share price at the date of vesting.
The monetary value of such share options is as follows:
| | Value £'000s |
| Outstanding at the beginning of the period | 797 |
| Exercised during the year | (297) |
| Outstanding at the year end | 500 |
| Exercisable at the year end | - |
The share price at the date of exercise of the Coast Digital options was £4.74.
The weighted average remaining contractual life of such options at 31 December 2023 was 0.5 years (FY 22: 1.5 years).
Employee Share Purchase Plan ('ESPP')
The Group operates an employee share purchase plan where the employees of the Group (excluding Partners) are eligible to contribute a percentage of their gross salary to purchase shares in the Company. The Company makes a matching award of shares that will vest over time dependent on continued employment.
During FY 23, the Company awarded 184,546 (FY 22: 89,841) matching shares on the basis of one matching share for every one employee share purchased during FY 22. The matching shares vest equally over a 5-year period with the first tranche vesting on 31 January 2024.
Details of ESPP awards made are as follows:
| | Number of ESPP awards (000's) |
| Outstanding at the beginning of the period | 78 |
| Granted during the year | 185 |
| Vested and converted to shares during the year | (15) |
| Forfeited during the year | (44) |
| Outstanding at the year end | 204 |
| Exercisable at the year end | - |
24. Cash flow information
Cash generated from operations:
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Profit before taxation | 22,099 | 15,745 | 7,617 | 13,078 |
| Adjustments for: |
| | | |
| Depreciation and amortisation | 2,792 | 3,065 | - | - |
| Net finance expense/(income) | 524 | 1,159 | (253) | (55) |
| Share-based payments | 1,967 | 1,159 | - | - |
| Adjustment to contingent consideration | (2,922) | (1,086) | - | (1,400) |
| Foreign exchange | 388 | (392) | (4) | - |
| (Increase)/decrease in trade and other receivables | (3,812) | 975 | 186 | 1,660 |
| Increase/(decrease) in trade and other payables | 952 | (1,042) | (422) | 7,081 |
| | 21,988 | 19,583 | 7,124 | 20,364 |
Reconciliation of liabilities from financing activities:
| | Borrowings | Leases | Total |
| Group | £'000s | £'000s | £'000s |
| Balance 31 December 2021 | - | 5,245 | 5,245 |
| Cash flows | (1,143) | (913) | (2,056) |
| Other changes | 1,143 | 811 | 1,954 |
| Balance 31 December 2022 | - | 5,143 | 5,143 |
| Cash flows | (687) | (1,006) | (1,693) |
| Other changes | 687 | 1,227 | 1,914 |
| Balance 31 December 2023 | - | 5,364 | 5,364 |
Other changes in FY 23 include non-cash movements, additional property leases on acquisition of Insigniam and accrued interest expense on leases. Other changes in FY 22 include non-cash movements, including borrowings and additional property leases on acquisition of iOLAP and accrued interest expense on leases.
25. Financial instruments and financial risk management
Carrying amount of financial instruments
The Group's and Company's financial instruments may be analysed as follows:
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Financial assets | | | | |
| Financial assets that are debt instruments measured at amortised cost | 43,367 | 37,027 | 15,956 | 12,327 |
| Financial liabilities |
| | | |
| Financial liabilities measured at amortised cost | 11,213 | 16,907 | 6,451 | 7,208 |
| Financial liabilities at fair value through profit and loss | 8,149 | 11,959 | - | 203 |
Financial assets measured at amortised cost comprise cash, trade receivables and other receivables.
Financial liabilities measured at amortised cost comprise loans and borrowings, trade payables and other payables.
Financial liabilities at fair value through profit and loss comprise contingent consideration on the acquisitions of iOLAP, Responsum and Insigniam.
The Group is exposed to a variety of financial risks through its use of financial instruments which result from its operating activities. All of the Group's financial instruments are classified as loans and receivables.
The Group does not actively engage in the trading of financial assets for speculative purposes. The most significant financial risks to which the Group is exposed are described below.
Credit risk
Generally, the Group's and Company's maximum exposure to credit risk is limited to the carrying amount of the financial assets recognised at the reporting date, as summarised below:
| | Group | Company | ||
| | FY 23 | FY 22 | FY 23 | FY 22 |
| | £'000s | £'000s | £'000s | £'000s |
| Trade receivables | 15,295 | 10,347 | - | - |
| Contract assets | 288 | 26 | - | - |
| Other receivables | 9,654 | 6,221 | 9,283 | 5,784 |
| Cash and cash equivalents | 18,130 | 20,433 | 6,659 | 6,340 |
| | 43,367 | 37,027 | 15,942 | 12,124 |
Credit risk is the financial risk to the Group if a counter party to a financial instrument fails to meet its contractual obligation. The nature of the Group's debtor balances, the time taken for payment by clients and the associated credit risk are dependent on the type of engagement.
The Group's trade and other receivables are actively monitored. The ageing profit of trade receivables is monitored regularly by management. Any debtors over 30 days are reviewed by the management group every week and explanations sought for any balances that have not been recovered.
Unbilled revenue is recognised by the Group only when all conditions for revenue recognition have been met in line with the Group's accounting policy.
Other receivables include amounts owed by senior employees for the acquisition of shares in the Company. The EBT holds legal title to these shares which will not be released to the beneficial owner prior to the repayment of the loan.
Cash and cash equivalents is split across multiple counterparties and the Group actively monitors the exposure to different financial institutions.
The Directors are of the opinion that there is no material credit risk at Group level.
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting its obligations associated with its financial liabilities. The Group seeks to manage financial risks to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash assets safely and profitably.
The table below analyses the Group's financial liabilities into relevant maturity groupings based on their contractual maturities. The amounts disclosed in the tables are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances, because the impact of discounting is not significant.
Contractual maturities of financial liabilities of the Group as at 31 December 2023:
| | Less than 6 months | 6-12 months | 1 - 2 years | 2 - 5 years | Over 5 years | Total contractual cashflows | Carrying amount of liabilities |
| Trade payables | 1,774 | - | - | - | - | 1,774 | 1,774 |
| Lease liabilities | 676 | 658 | 1,040 | 2,681 | 1,092 | 6,147 | 5,364 |
| Financial liabilities at fair value through profit and loss | 1,144 | - | 4,680 | 3,597 | - | 9,421 | 8,149 |
| | 3,594 | 658 | 5,720 | 6,278 | 1,092 | 17,342 | 15,287 |
Contractual maturities of financial liabilities of the Group as at 31 December 2022:
| | Less than 6 months | 6-12 months | 1 - 2 years | 2 - 5 years | Over 5 years | Total contractual cashflows | Carrying amount of liabilities |
| Trade payables | 1,178 | - | - | - | - | 1,178 | 1,178 |
| Lease liabilities | 496 | 436 | 875 | 2,395 | 1,871 | 6,073 | 5,143 |
| Financial liabilities at fair value through profit and loss | 6,765 | - | 3,073 | 3,073 | - | 12,911 | 11,959 |
| | 8,439 | 436 | 3,948 | 5,468 | 1,871 | 20,162 | 18,280 |
Interest rate risk
As at 31 December 2023 the Group has no material interest rate risk exposure.
Foreign currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily US Dollars. The Group monitors exchange rate movements closely and ensures adequate funds are maintained in appropriate currencies to meet known liabilities.
The Group's exposure to foreign currency risk at the end of the reporting period, expressed in Currency Units, was as follows:
| | FY23 | FY22 | ||||||
| | USD '000s | EUR '000s | ZAR '000s | USD '000s | EUR '000s | ZAR '000s | CAD '000s | HRK '000s |
| Cash & cash equivalents | 5,025 | 1,031 | 9 | 6,906 | 1 | 1,257 | 313 | 270 |
| Trade receivables | 7,308 | 829 | - | 6,709 | 72 | - | 28 | 149 |
| Trade payables | (631) | (206) | (178) | (124) | (7) | (132) | 0 | (649) |
The Group is exposed to foreign currency risk on the relationship between the functional currencies of the Group companies and the other currencies in which the Group's material assets and liabilities are denominated. The table below summaries the effect on profit and loss had the functional currencies of the Group weakened or strengthened against these other currencies, with all other variables held constant.
| | FY 23 | FY 22 |
| | £'000s | £'000s |
| 10% weakening of functional currency | 230 | 219 |
| 10% strengthening of functional currency | (230) | (219) |
The impact of a change of 10% has been selected as this has been considered reasonable given the current level of exchange rates and the volatility observed both on a historical basis and market expectations for future movements.
Fair value of financial instruments
The fair values of all financial assets and liabilities approximates to their carrying value.
Capital risk management
The Group defines capital as being share capital plus all reserves, which amounted to £119.6 million as at 31 December 2023 (FY 22: £95.9 million).
The Group's objectives when managing capital are to:
• Safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders; and
• Maintain an optimal capital structure to provide a capital-efficient return to shareholders.
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 debt.
26. Related party disclosures
Related parties, following the definitions in IAS 24, are the Group's subsidiary companies, members of the Board, key management personnel and their families, and shareholders who have control or significant influence over the Group. Refer to note 11 for key management personnel compensation disclosures. The Directors' Report contains details of Board remuneration.
In FY 23, travel and marketing costs include £6,550 (FY 22: £43,956) for the hire of an aeroplane from Aviation E LLP. Stephen Newton, a member of the Board, is a member of Aviation E LLP.
Company related party transactions are disclosed in notes 16 and 18.
27. Events after the reporting date
An interim Ordinary share dividend in respect of FY 23 of 5.3 pence per Ordinary share was paid on 15 February 2024.
The Directors are proposing a final Ordinary share dividend in respect of FY 23 of 9.5 pence per share.
As at 19 April 2024, in accordance with the Financial Conduct Authority's Disclosure and Transparency Rules, the Company continues to have 47,272,811 Ordinary shares in issue, of which none are held in Treasury.
The total number of voting rights in the Company is 47,272,811. This figure of 47,272,811 may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.
28. Reserves
| Share capital |
| Share capital represents the nominal value of share capital subscribed. |
| |
| Share premium |
| The share premium account is used to record the aggregate amount or value of premiums paid when the Company's shares are issued at a premium, net of associated share issue costs. |
| |
| Capital redemption reserve |
| The capital redemption reserve is a non-distributable reserve into which amounts are transferred following the redemption or purchase of the Company's own shares. |
| |
| EBT share reserve |
| The EBT share reserve represents the cost of shares repurchased and held in the employee benefit trust ("EBT"). |
| |
| Merger relief reserve |
| This reserve records the amounts above the nominal value received for shares sold, less transaction costs in accordance with section 610 of the Companies Act 2006. |
| |
| Foreign currency translation reserve |
| The foreign currency translation reserve represents exchange differences that arise on consolidation from the translation of the financial statements of foreign subsidiaries. |
| |
| Retained earnings |
| The retained earnings reserve represents cumulative net gains and losses recognised in the statement of comprehensive income and equity-settled share-based payment reserves and related deferred tax on share-based payments. |
29. Ultimate controlling party
There is no ultimate controlling party as at 31 December 2023.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
