TIDMPGY
RNS Number : 9364S
Progility PLC
30 September 2014
Progility plc
(hereafter 'Progility', 'the Company' or 'the Group')
Final Results
Final results for the 12 months to 30 June 2014
Progility is an AIM quoted project management services group
providing a range of project management services including
innovative and market leading technology solutions. The group
specialises in technology solutions, project management consulting,
training and talent acquisition.
Key highlights
-- A period of significant change
-- Revenues more than doubled to GBP38.8 million driven by the
merger of ILX Group with Progility Pty Ltd, other acquisitions and
organic growth
-- At constant currency exchange rates revenues would be 4%
higher for the year end 30 June 2014 (Note 1)
-- Underlying Profit Before Tax of GBP1.7 million (2013: loss of GBP0.2 million) (Note 2)
-- Underlying EBITDA of GBP2.6 million (2013: GBP0.9 million) (Note 3)
-- Reported loss before tax for the period GBP0.3 million (2013: loss of GBP3 million)
-- Group rebranded as Progility (previously ILX Group)
-- Formulated new strategy to be a platform for building a
leading technology solutions and project management services
business
-- GBP26.23m aggregate value of transactions in 13 months (including Starkstrom in July 2014)
Note 1: Constant currency is translated at the 2013 Australian
dollar exchange rate $1.657
Note 2: Underlying profit before tax is after excluding
highlighted items from the reported loss before tax including
restructuring, acquisition and merger related costs of GBP1.08
million (2013: GBP1.33 million), non-cash impairment charge of
GBP0.56 million (2013: GBP1.30 million) and non-cash amortization
charges of GBP0.35 million (2013: GBP0.18 million).
Note 3: Underlying EBITDA is underlying profit before tax
excluding interest charges GBP0.98 million (2013: GBP1.08
million)
Wayne Bos, Chairman, commenting on the results, said: "These
results show a business which has more than doubled in size over
the results reported last year, following the completion of three
complementary transactions during the year.
The profile of the business has been completely transformed from
the project management training and consulting business that
started the financial year. In early July 2013 the Group completed
the acquisition of recruitment services business TFPL Limited. Then
on 7th October 2013 we completed the strategic merger of the
Company with technology solutions group Progility Pty Ltd
("Progility Technologies"). This was the largest and most
significant transaction during the period leading to the change of
the Group's name to Progility plc. In addition, in mid-November
2013, the Group acquired a further recruitment services business,
Sue Hill Recruitment and Services Limited.
This pattern of corporate activity is ongoing and in July 2014,
shortly after the period end, we acquired Starkstrom Group Limited,
a project services company in the healthcare sector. In total, the
aggregate value of the transactions we have undertaken over the
last 13 months is GBP26.23m (Progility Pty Ltd GBP15.97 million,
Sue Hill GBP0.18 million and TFPL GBP0.40 million and Starkstrom
GBP9.68 million).
Our strategic objective is to develop the Group's project
management services offering, particularly in technology and
consulting solutions, where the Board believes we can generate
above average returns. To that end, Progility now represents a
profitable and growing platform upon which we intend to establish a
portfolio of complementary project services businesses, with the
ability to service our international client base and provide an
increasingly integrated offering to address our clients' needs. We
intend to continue acquiring appropriate new businesses which will
complement our existing activities or provide an established
presence in new industry verticals where the Group's skills and
services can be profitably applied.
I am confident we are creating significant value for
shareholders and that we will increasingly demonstrate the strength
of our integrated technology solutions and project management
services business."
Enquiries:
Progility plc
Wayne Bos, Executive Chairman & Interim CEO 020 7371
4444
John McIntosh, Finance Director
SPARK Advisory Partners Limited (Nominated Advisor)
Mark Brady
Sean Wyndham-Quin 0203 368 3551
W H Ireland Limited (Broker)
Adrian Hadden 020 7220 1666
Novella
Tim Robertson 020 3151 7008
Ben Heath
Progility plc ("Progility") is the holding company of a project
management services group which has been created to provide a range
of project management services including innovative and market
leading technology solutions.
Chairman's Statement
I am pleased to present Progility's results for the twelve
months to 30 June 2014. These results show a business which has
more than doubled in size as a result of the completion of the
merger with Progility Pty Ltd and two other complementary
acquisitions during the year.
The profile of the business has been completely transformed from
the project management training and consulting business that
started the financial year. On 1(st) July 2013 the Group completed
the first of three transactions during the period, with the
addition of recruitment services business TFPL Limited. Then on
7(th) October 2013 we completed the strategic merger of our Company
with the technology solutions group Progility Pty Ltd ("Progility
Technologies"). This was the largest and most significant
transaction leading to the change of the Group's name to Progility
plc. In addition, on 19(th) November 2013, the Group acquired a
further recruitment services business, Sue Hill Recruitment and
Services Limited.
This pattern of corporate activity is ongoing and on 14(th) July
2014, shortly after the period end, we acquired Starkstrom Group
Limited, a project services company in the healthcare sector. In
total, over the last thirteen months, the aggregate value of these
transactions amounted to GBP26.23m (Progility Pty Ltd GBP15.97
million, Sue Hill GBP0.18 million and TFPL GBP0.40 million and
Starkstrom GBP9.68 million).
Our strategic objective is to develop the Group's project
management services, particularly in technology and consulting
solutions, where the Board believes we can generate above average
returns. The current Progility represents a platform upon which we
intend to establish a portfolio of complementary project services
businesses, with the ability to service our international client
base and provide an increasingly integrated offering to address
client's needs. We intend to continue acquiring appropriate new
businesses which will complement our existing activities or provide
an established presence in new industry verticals where the Group's
skills and services can be profitably applied.
Financial Performance
In common with many companies with substantial operations in
Australia and New Zealand, our reported earnings experienced
significant adverse translation impact during the second and third
quarters due to a decline in the value of the Australian dollar
versus Sterling. The Group now has revenues of GBP38.8 million in
the period of reporting (versus pro-rata twelve months to 30 June
2013: GBP40.9 million). At constant currency, using 2013 exchange
rates, current year revenue would have been reported as GBP42.3
million in the year to 30 June 2014. As our business reports its
results under merger accounting it reflects current and historic
revenue as if the merged companies had always been combined,
meaning prior period revenues of the two companies are
aggregated.
As part of the process of integrating our acquisitions and
establishing a platform on which to build an enlarged business, the
Group incurred costs during the period which we have highlighted as
non-operating costs. These include transaction costs, and other
strategic, non-cash items including amortization of intangibles,
impairment, or non-recurring acquisition expenses and non-trading
items. To provide clarity on the performance of our underlying
business we have provided adjusted results which highlight these
non-operational costs, which are set out in Note 10 within the
Financial Statements.
Excluding the highlighted costs identified in note 10 our
business generated an underlying profit before tax of GBP1.7
million (2013: Loss GBP0.2 million) and an underlying EBITDA of
GBP2.6 million (2013: GBP0.9 million). (Note: underlying profit and
EBITDA is stated before highlighted costs). The Group generated an
unadjusted statutory loss before tax of GBP0.3 million which
compares favourably with the prior period loss of GBP2.3
million.
The Board's objective remains to grow the Group's business. As a
result it remains the Board's current intention that income
generated by the Group will be re-invested to implement this growth
strategy. The Board will not propose the payment of a dividend for
the financial year under review.
Business operations
A key operational focus over the period has been to develop a
core platform from which the Group's businesses can provide support
and benefit from exposure to the Group's wider client base.
Specifically, we aim to assist our sales teams throughout our
international network to facilitate greater integration and
cross-referral from amongst the client base. To this end back
office, new businesses administration, sales and marketing
functions have been centralised where possible. Our business
processes and related staffing levels are reviewed periodically and
we have taken positive action to bring operating costs into line
with the businesses objectives where possible.
Acquisition post year end
On the 14(th) July 2014 Progility acquired the entire share
capital of Starkstrom Group Limited ("Starkstrom") for GBP9.68
million. The acquisition of Starkstrom, a UK based project
management services' company specialising in manufacturing and
supplying medical infrastructure equipment for operating theatres
and intensive care units, will provide a strong hub around which to
focus the Group's work in the healthcare sector. We aim to increase
the scope and scale of the Starkstrom business through capitalising
on the contacts and experience available to the Group.
Finance
On 30 June 2014 through a wholly owned special purpose vehicle,
Progility Finco Limited, the Group created up to GBP50 million of
redeemable loan stock ("Loan Stock") which the Group intends to
list on the Channel Islands Stock Exchange. The Loan Stock provides
the Group with a flexible mechanism to raise funds to support its
growth strategy which we will employ as the occasion demands
alongside equity and bank debt.
I am also pleased that on 7(th) July the Company's largest
shareholder, Praxis Trustees Limited, as trustee of the DNY Trust,
a family trust of which I am a discretionary beneficiary, announced
its intention to support Progility by making up to GBP30m available
on commercial terms to help fund the acquisition of appropriate new
businesses.
Management
The Board has been strengthened during the period by the
addition of two new non-executive directors. I am pleased to have
welcomed both John Caterer and Michael Higgins onto the Board. John
joined the business as a non-executive Director on 17(th) October
2013 and was joined by Michael on 31(st) March 2014.
Alongside these new Directors the business has a team of highly
capable change managers experienced in the integration of new
businesses and sourcing business development opportunities.
Prospects
We believe there is a significant opportunity to deliver value
arising from leveraging our strong international customer base. The
re-organisation of the marketing functions across the business are
now very focussed on ensuring that our clients, in particularly the
top 100, are aware of the full extent of the Group's capabilities
in the field of project management services and the depth of
experience contained across the Group. Our latest acquisition,
Starkstrom, is a strong example with over forty years of experience
in supplying medical infrastructure equipment.
We continue to work on operational improvements and the
development of a broader consulting and technical solutions
offering, building on the Group's presence in the area of project
management and services.
Alongside this we will continue to seek to acquire further
suitable businesses which we believe will deliver profitable growth
to our existing project management services platform. We look
forward to the current financial year being a further period of
positive transformation.
Wayne Bos
30 September 2014
Strategic Report
Progility plc - Overview
This financial year to 30(th) June 2014 has seen the Group
transform from an Anglo-Australian project management training
business to a broad based project management services group. Our
expertise includes technology solutions, consulting, training and
recruitment services. Progility plc is becoming a leading provider
of technology solutions and project management services. Our goal
is to become a first choice global project management service group
for our clients. To achieve this we plan to grow our international
business in two ways. Firstly, by building on the operations of the
existing Group to increase our corporate profile and our brand
awareness, while developing the capabilities of our staff and our
technology solutions. Secondly, through the acquisition of other
established and complementary businesses. This approach will enable
us to broaden our reach beyond the existing sectors within which we
work.
Key strategic objectives and measures of performance:
The Group's key performance indicator is EBITDA growth which is
measured by operating segment. The Group's underlying EBITDA
improved to GBP2.6 million (2013: GBP0.9 million). Identifiable key
objectives include the following financial and non-financial
indicators.
Growth within the existing group: Progress was noted in the
revenue growth of 4%, arising from our broader product portfolio.
To do this we need to further understand our client's product needs
and ensure our product development is appropriately focused and
balanced, so as not to dilute our offering. Where the market is
very competitive for certain products we aim to add a number of new
product lines to diversify our portfolio. To mitigate price risk we
aim to differentiate ourselves from other project services
providers to ensure we minimise potential margin erosion. However,
our investment may not yield the anticipated returns, given the
competitive price pressure we have experienced.
Brand recognition and corporate profile: Progress has been
demonstrated with our investment in our online platform to
integrate the Group's brands and reflect our broader service led
portfolio. The Group aims to track its brand awareness and measure
this going forward. Investing in online marketing is only one of a
number of routes to market. We will look to continue to strengthen
our approach and focus on key opportunities within our top client
targets. Our specialist capability will help mitigate the possible
risk of losing market share to competitors.
Increased transaction activity: Progress is evident through the
number of transactions already undertaken. We aim to expand our
presence in the markets we already service, but we will also look
for value elsewhere, if there is a complementary client base. The
current period of reporting has seen three corporate transactions,
with a fourth occurring just after the period end. We continue to
look for good value businesses to which we can apply our skills. As
the economy improves we will see vendors price expectations
increase, however, we will only pursue opportunities where we
perceive the Group can achieve an acceptable return.
Developing capability: Further progress is required. We have
created a structure which promotes talent, and allows rapid
communication within our business. We aim to strengthen the
capability further to ensure we have sufficient capacity to develop
the business. The regional structure which we currently operate is
a platform for our experienced executives to take the business
forward. We aim to continue to provide a rewarding and stimulating
environment to make Progility a truly competitive force in the
market place. Obtaining the best talent to strengthen capability
will form one of the future challenges as the wider economy
improves intensifying competition for good people.
Our largest business service is the technology solutions
expertise which sits within Progility Pty Ltd. This business
delivers consulting led technology solutions across Australia and
internationally. Our training expertise is primarily conducted
under our historic ILX brand. ILX delivers technology-led learning
solutions including best practice training for PRINCE2 project
management. ILX has offices in the UK, Dubai, Australia and New
Zealand. Recruitment services are delivered by TFPL Limited
("TFPL") and Sue Hill Recruitment and Services Limited ("Sue Hill")
in the UK, which also promotes our Progility Recruitment brand. Our
consulting expertise is primarily delivered by Obrar Limited
("Obrar") in the UK and Progility (formerly ILX) Consulting Pty Ltd
("Progility Consulting") in Australia, both of which are also able
to service the needs of international clients.
Our teams are focused upon the delivery of profitable
project-related services that can be applied across different
sectors enabling the training, preparation and recruitment of
project managers and the planning and implementation of
projects
supported by technology solutions for clients. By strengthening
our project management services capabilities and with a widened
product technology portfolio, the Group will continue to:
-- Aggressively expand our consultancy and technology solutions
services in the UK and Europe, the Middle East and Africa, and
Australasia applying our core skills to underpin this activity;
-- Promote our skills in industries where we already provide
products and services, particularly to the mining and
communications sectors;
-- Exploit our market leading position in the provision of
project management training to build complementary offerings;
and
-- Provide recruitment services that complement our project
management activities and help foster deeper relationships with our
clients in other functions.
The Board believes that there is a significant opportunity to
create value through building on its customer contacts,
intellectual property and the further development of those assets.
We believe that we have the capability to provide a wider range of
project related services to our clients and that we can cross-sell
opportunities in different areas to clients who have hitherto
engaged with the Group in only a limited way. Additionally, as we
have stated before, we will continue our search for new
opportunities to develop the business and add companies which
complement our skills and broaden our sector reach to our portfolio
of brands, skills and geographies.
Principal risks and uncertainties
The principal risks and uncertainties facing the group are as
follows:
-- Technological development - the risk of potential advances in
technology making current products obsolete. This risk is mitigated
by the Group's continued investment in new technologies and the
development of existing product portfolio.
-- Operational risk - the risk of recruiting an inappropriate
individual for a role or providing inappropriate delivery of our
products, services or consultancy to customers. This risk is
mitigated by the Group's recruitment processes and annual
performance reviews, its development reviews prior to delivery of
products and services and the extensive experience of its
consultants.
-- Personnel risks - losing the services of key managers and
employees or delays in finding suitable replacements. This risk is
mitigated by the Group's bonus policies and other incentivisation
initiatives.
-- Additional funding - the existing resources of the Group may
not be sufficient to allow it to expand or exploit new business
development opportunities. This risk is mitigated by the expression
of substantial financial support which the Group has received from
its largest shareholder.
-- Foreign exchange - the risk of adverse currency movements
against the Group. This risk is mitigated by the Group's wide range
of operations globally and the holding of appropriate funds in
local currencies where the Group's operations are based.
The preparation of the Group accounts in conformity with IFRS
requires management to make accounting estimates and assumptions
that affect the reported amounts of revenues, expenses, assets and
liabilities, and the disclosure of contingent liabilities at the
date of the financial statements. The key accounting estimates and
assumptions are set out in the notes to the accounts. Such
accounting estimates and assumptions are based on historical
experience and various other factors that are believed to be
reasonable in the circumstances and constitute management's best
judgment of conditions at the date of the financial statements.
In the future, actual experience may deviate from these
estimates and assumptions, which could affect the financial
statements, as the original estimates and assumptions are modified,
as appropriate, in the year in which the circumstances change.
Principal activity and business review
The principal activity of the Group during the period has been
broadened, following the merger with Progility Pty Ltd in October
2013, to include the development of a professional services
business enabling clients to integrate their communications and
information systems by supplying innovative technology solutions
and consulting services. This activity complements the areas of
expertise which the group has at its disposal: technology
solutions, consulting, training and recruitment services.
Our business is managed through two geographical divisions to
maximize our ability to communicate and deliver our full range of
products and expertise to our client's budget decision makers
across the diverse territories and time zones in which we
operate.
Corporate Management
During the period the Group moved its headquarters to 15 Fetter
Lane, London. This central London location was chosen from a number
of potential sites as it best suits the diverse needs of the
various businesses within the Group. The Fetter Lane offices can
accommodate sales presentations and client demonstrations for all
of our businesses, as well as serving as a facility for training
courses. The Group's lease over its office on the Strand ended
during the period.
Our executive management team is made up of highly capable
managers within sales, finance, legal and operations. The team has
evolved out of the acquired/merged businesses, taking on additional
responsibilities, within their sphere of expertise, to become an
effective regional operation, able to deliver across their
respective geographical client base. Their combined experience
covers both large and medium sized entities and includes: systems
integration, consulting, business development, sales, e-learning,
digital transformation, cost control and operating in a public
company environment. Our executive directors are experienced in
mergers and acquisitions and business integration.
Overview of our Brands
Northern hemisphere operation
The founding unit of the Group, the Training business, operates
under the ILX brand. ILX delivers technology-led training in the UK
Cabinet Office's best management practice products, primarily in
PRINCE2, MSP and ITIL and is a leading provider of training in best
practice for programme, project and IT service management,
including strategic programme and project management consulting
solutions. ILX also develops bespoke training courses for
large-scale IT migration and transformation projects. We operate
this service from offices in the UK and Dubai, with partnerships
extending into Europe and the US.
Obrar is a consulting led project management services company.
It has over 30 years' experience delivering technology and people
solutions in the UK and internationally. Obrar, focuses on
multimedia-driven contact centres, corporate technology
infrastructure and associated operational change management. TFPL,
Sue Hill and Progility Recruitment are our UK based recruitment
services brands. TFPL became part of the Group in July 2013 with
Sue Hill joining in November 2013. Together they form a recruitment
division which boasts a pool of quality assured candidates trained
in project management services, including digital information
management candidates. Progility Recruitment was established in
January 2014 to offer specific project management recruitment
services.
Southern hemisphere operation:
Progility Technologies in Australia operates a communication
systems integration business that designs, implements, trains and
maintains technology solutions for medium and large enterprises.
Its focus is on the transport, utilities and healthcare industries
in Australia and on the mining industry globally. It also services
the New Zealand market. Progility Consulting and ILX training
provide their services through this region. The business is
headquartered in Melbourne, Australia, with five regional sales
offices.
The client facing brands include:
-- Communications Australia, focused on communication systems integration;
-- CA Bearcom, Australia's largest distributor of two-way radio communications products;
-- Minerals & Energy Technologies, which designs, implements
and manages an array of integrated communications solutions for
specific mining, energy and transport projects.
-- Progility Consulting, an organisational improvement and
project management consulting company, specialising in information
technology, service and supply chain improvement and overall
project and programme management; and
-- ILX Training which provides ILX branded training and
consulting primarily in Australia and New Zealand.
-- TFPL, Sue Hill and most recently Progility Recruitment, a
newly created brand representing our resourcing service.
Performance Management
Highlights
-- Revenue growth of 4% (after comparing on a constant currency basis, note 1)
-- Underlying profit before tax of GBP1.7 million (2013: Loss
GBP0.2 million) (after adjusting for highlighted costs, note 2)
-- Underlying earnings before interest, tax, depreciation and
amortisation of GBP2.6 million (2013: GBP0.9 million)
-- Unadjusted loss before tax reduced to GBP0.3 million (2013: GBP3.0 million)
Note 1: Group Revenue reported as GBP38.8 million (which at
constant currency is GBP42.6 million, 4% growth versus pro-rated
twelve months 2013: GBP40.9 million)
Note 2: Loss before tax, GBP0.3 million plus highlighted costs
of GBP2.0 million per Note 10 to the Financial Statements
Note 3: Constant currency is translated at the 2013 Australian
dollar exchange rate $1.657
Revenue
The transaction with Progility Pty Limited in October 2013, has
been reflected under merger accounting, meaning the current and
comparative figures reflect the Group position as if the two merged
businesses had always been combined for the current and comparative
period. The performance management of the Group has evolved as we
have begun to understand how the business can best service our
clients. Prior to the merger transaction in October 2013 the
business operated largely from the UK, and was reported as such.
Since the merger the diversity of the Group and the services and
products has multiplied. This resulted in a refocus on how the
business could most effectively sell its wider portfolio to its
clients. The business now reports operationally via its two
regional areas - each representing a significant regional customer
facing segment. All the Australian related businesses, whether
training, consulting or technology services now report and are
managed under one unified team. Similarly the UK located operation
reports its consulting, training and recruitment operation under
one unified team. The accountability for cross selling our products
and services is now region wide, which will enable faster response
to client needs.
These two segments are reported because they reflect the
management accounting key indicators which are used to manage the
performance of the business. The Group's chief operating decision
maker is the chief executive officerwho reviews and considers these
reports at the formal board meeting.
In common with many Anglo Australian businesses during the past
year, the Group's results have been impacted after translating
Australian Dollar earnings into Sterling on consolidation of the
merged company results. The impact of the translated currency is
compared with a constant currency translation shown below.
As reported Constant currency Pro-rata As reported
Year ended Year ended 12 months ended 15months ended
30.6.14 30.6.14 30.6.13 30.6.13
GBP000 GBP000 GBP000 GBP000
Group Revenue 38,786 42,555 40,929 51,861
Underlying profit before tax 1,664 2,346 (965) (225)
Underlying operating profit 2,648 2,743 120 853
Note 1: Loss before tax, GBP0.3 million plus highlighted costs
of GBP2.0 million (per Note 10 to the Financial Statements)
Note 2: Constant currency is translated at the 2013 Australian
Dollar rate $1.657
At a constant currency level the restated revenue reflects the
higher commercial activity in the business during the twelve months
to 30 June 2014 compared with the pro-rata prior year. This
demonstrates a real increase of activity during the period on a
like for like basis.
Segment performance
During the period the Group traded principally through its
subsidiaries in Australia, New Zealand, the UK and in the United
Arab Emirates.
Northern Operation - The Group's northern hemisphere operations
comprise operations in the UK and Ireland, the United States,
Europe and the Middle East, which are managed and directed from the
London office.
The northern hemisphere located division includes the UK
domiciled businesses, ILX Group (the UK and United Arab Emirates
Training businesses), Obrar consulting, TFPL recruitment, Sue Hill
Recruitment and Progility
recruitment. Its segmental performance was as shown below:
As reported As reported
Year ended 15 months ended
30.6.14 30.6.13
GBP000 GBP000 GBP000 GBP000
Revenue Segment Profit Revenue Segment Profit
Northern hemisphere revenue 13,400 2,732 12,784 2,285
As indicated in the half year results performance is second half
weighted. Segment profit was driven by training and consulting
services, with contribution from the recruitment service adding to
the result towards the end of the period.
Southern Operation - The Group's southern hemisphere operations
comprise operations in Australia and New Zealand and the far east,
which are managed and directed by the Melbourne office. The
divisions co-operate on large, sometimes global, accounts with key
talent in the relevant field of expertise taking the lead role.
The southern hemisphere group includes Progility Pty Ltd, ILX
Group Pty Ltd, Progility Consulting Pty Ltd, all Australia
domiciled, as well as ILX Group Limited in New Zealand.
As reported As reported
Year ended 15 months ended
30.6.14 30.6.13
GBP000 GBP000 GBP000 GBP000
Revenue Segment Profit Revenue Segment Profit
Southern hemisphere revenue 25,386 3,154 39,077 3,502
Performance in this division was also second half weighted.
Period on period performance reflects an increase segment profit
(at a like for like constant currency level) driven by the
Progility Technology brands, with a slowdown occurring in the
Training business brand due to a reorganisation.
Segment profit was driven by the Bearcom and Communications
Australia brands, while set up costs within the Progility
Consulting team and the Minerals & Energy business impacted the
overall momentum of the division.
Central corporate costs
As reported As reported
Year ended 15 months ended
30.6.14 30.6.13
GBP000 GBP000
Central costs (3,593) (5,186)
Our central costs include back office operations including
property, legal, finance, IT, communications, HR and board costs.
During the year both north and south divisions moved their
management offices from older premises to more efficient office
space which will better serve the needs of our staff and clients
alike. Other costs which have changed in the year include
governance costs relating to the board, with two new board members
having been appointed.
Financial Review
Result before tax
Underlying profit before tax for the period was GBP1.7 million
(2013: loss GBP0.2 million). The reported loss before tax, after
taking account of restructuring, amortization, share option and
impairment charges was GBP0.3 million (2013: GBP3.0 million).
As reported Constant currency Unaudited As reported
Year ended Year ended 12 months ended 15 months ended
30.6.14 30.6.14 30.6.13 30.6.13
GBP000 GBP000 GBP000 GBP000
Reported loss before tax (325) (357) (2,954) (3,037)
Highlighted costs (Note 10) 1,989 2,703 1,989 2,812
Underlying profit (loss) before tax 1,664 2,346 (965) (225)
Reported operating profit 659 754 (2,109) (1,959)
Interest (984) (1,111) (845) (1,078)
Loss before tax (325) (357) (2,954) (3,037)
The impact of the decline in the Australian Dollar and
comparatively weaker Australian economy has been felt both in the
Progility Pty Ltd Australian business and our Training/Consulting
businesses located in Australia/New Zealand. While revenue has been
maintained in our consulting business within the UK, the challenge
has been to ensure we continue to develop new business
relationships in the trainingand technology solutionsbrands while
ensuring margin is maintained.
The underlying operating profit before highlighted costs and
interest (underlying EBITDA) was GBP2.6 million (2013: GBP0.9
million). The majority of the restructuring costs related to the
northern hemisphere operation and were incurred in relation to the
merged or acquired businesses andcosts related to a
reorganisation.
Highlighted items include acquisition and merger related costs
of GBP1.08 million and an impairment charge of GBP0.56 million
(2013: GBP2.62 million). Additionally, amortization charges in the
period were GBP0.35 million (2013: GBP0.19 million). Apart from the
recurring amortization costs these highlighted costs were largely
non-recurring expenses in the holding company function, within the
northern hemisphere operation.
Cost reductions
Steps have been taken to maintain control over our cost base to
prevent gradual increases across the enlarged business. In the
twelve months to 30 June 2014, after accounting for highlighted
(cash) costs of GBP1.6 million, administration costs were GBP0.8
million lower than in the previous twelve months reporting period
(on a like for like basis at constant currency).
Understanding the detailed drivers of the margins of the
business is part of the ongoing review to strengthen the
performance of the core business and further effort will be
directed towards this objective during the coming year.
Finance costs
The Group incurred finance costs of GBP1.0 million (2013: GBP1.1
million) during the reporting period. On a like for like basis in
the twelve months to 30 June 2013 the Group incurred GBP0.8 million
of interest. The year on year increase reflects the higher costs
associated with our increased working capital facilities.
Taxation
The tax benefit for the period was GBP11,000 (2013: benefit
GBP0.7 million).
Profit for the period and earnings per share
Loss for the period attributable to equity shareholders was
GBP0.3 million (2013: GBP2.3 million loss). Loss per share was
0.16p basic and diluted (2013: 1.19p loss).
Going Concern
The Group has prepared its accounts on a going concern basis
based on current forecasts for the period through to November 2015.
While the Group currently has negative net current assets the Board
believes that it can meet its day-to-day working capital
requirements from operating cash flows and its existing facilities.
The Company's largest shareholder, Praxis Trustees Limited, as
trustee of the DNY Trust, announced its intention, on 7(th) July
2014, to support Progility by making up to GBP30 million available
on commercial terms.
Cash flow, net debt and facilities
Cash flow
Cash generated from operating activities was GBP0.5 million
(2013: GBP0.8 million). The Group generates operating cash flow
from its product sales, maintenance contracts, e-commerce and cash
sales and from advance payments from customers. During the period
to 30 June 2014 restructuring costs have represented a significant
proportion of the Group's operating cash outflow. is the Board
believes that the investment in ongoing restructuring will have a
positive effect on future cash flow. The effectiveness of this
investment will be reflected in its impact on the Group's northern
division.
The Group paid out GBP9,000 in corporation tax during the period
of reporting (2013: GBP0.9 million received).
The Group continues to invest in its staff development, its
product range and also incurred capital expenditure in the period
relating to updates of intellectual property assets, product
development and its internal systems and equipment to improve
operating efficiency and remove labour intensive
administration.
Net debt and facilities
At the balance sheet date the Group's debt comprised loans and
overdrafts due within one year of GBP3.7 million (2013: GBP3.1
million) and GBP4.6 million (2013: GBP4.6 million) falling due in
over one year. Of these amounts a total of GBP5.0 million
represents shareholder loans made up of GBP0.4 million of
convertible loan note and GBP4.6 million of other notes.
Of the bank facilities drawn at the balance sheet date, the
fixed term loan of GBP1.3 million is expected to be repaid in full
within the next eighteen months with GBP0.3 million having already
been paid since the balance sheet date. At the balance sheet date
GBP0.2 million of the overdraft facility remained undrawn.
Net debt at the period end, defined as all bank and third party
debt, less cash at bank, excluding shareholder loans was GBP1.5
million (2013: GBP0.9 million). This comprised: GBP1.5 million in
bank facilities drawn plus invoice discounting facilities of GBP1.8
million less GBP1.8 million in cash balances. The Group remains
within the terms of all its loan covenants.
After the year end the Group's available financing was raised to
GBP30.0 million following the statement on the 7(th) July 2014 from
the Group's largest shareholder announcing its intention to support
Progility's strategic objectives.
Dividend
As noted above, in order to pursue the Board's objective to grow
the Group's business the Board does not recommend the payment of a
dividend for the period ended 30 June 2014. As the Board intends
that income generated by the Group will be re-invested to implement
the Group's growth strategy this is likely to remain the position
for the foreseeable future.
Post balance sheet events
Acquisition of Starkstrom Group Limited
Starkstrom is a UK based project management services company
specialising in manufacturing and supplying medical infrastructure
equipment for operating theatres and intensive care units. The
entire share capital was acquired on the 14(th) July 2014 for an
aggregate consideration, payable in cash and loan notes, of GBP9.68
million. For further details refer to Note 28 within the Financial
Statements.
On behalf of the Board
Wayne Bos John McIntosh
30 September 2014
Governance
Board of Directors
1. Wayne Bos
Executive Chairman and Interim Chief Executive Officer
Wayne joined the Board on 21 August 2012. Wayne has over 20
years' experience managing and investing in business over a wide
range of sectors, with particular expertise in the software and
technology sector. Forthree years Wayne was Chief Executive of
Sausage Software, an Australian public company. Under his
leadership, Sausage grew from a single product company with 35
people and revenues of $5 million, to an eBusiness solutions house
with over 1500 people and revenues of more than $150 million.
Sausage Software, with subsidiaries in the UK, USA and Asia, became
Australia's fastest growing company as itgrew to a market
capitalizationof more than $2billion during the late 1990s and
early 2000s. In 2000 Wayne worked closely with the management team
of Uniqema, a division of Imperial Chemical Industries, to complete
the acquisition of one of its business units which was subsequently
successfully listed on the Australian Stock Exchange. In early 2006
Wayne became President and CEO of Natrol, a Nasdaq listed
Nutraceutical company, (then traded at around US$2.28 per share)
which was sold in late 2007 to Plethico, an Indian public company,
for US$4.40 per share. In the private company market, Wayne was
appointed Chairman of Ansett Aviation Training in 2004 as part of
its rescue from the bankrupt Ansett Australia. After growing the
business into the largest independent aviation training facility in
the southern hemisphere, Ansett Aviation Training was successfully
sold to a consortium led by an Australian private equity house for
an undisclosed amount in June 2012.
2. John McIntosh
Chief Financial Officer
John joined the board on 6 June 2013. John qualified as a
Chartered Accountant with Deloitte & Touche in 1994. He held
Controller roles within corporations including Sony and D'Arcy,
Masius Benton & Bowles and the BBC's corporate finance team
before joining an internet start-up team. He has significant
experience of managing growth businesses particularly within the
online, multi-media and the communications services sector. John
has worked extensively with private equity owned and quoted
businesses. He was instrumental in the development and growth of
the multi-media group DCD Media plc holding the positions of Chief
Financial and Chief Operating Officer. Mr McIntosh has held Main
Board Director roles in AIM listed companies since 2003 and joined
ILX Group (now Progility) in November 2012. John is also Company
Secretary.
3. Donald Stewart
General Counsel
Donald joined the board as a non-executive director on 18 April
2013 and subsequently joined the Company full time as General
Counsel on 3 June 2013. With over 25 years experience practising
corporate and commercial law as a qualified solicitor in England
and Wales and Scotland, Donald's expertise is focused on corporate
finance, takeovers, mergers and acquisitions, and UK publicly
listed companies. He has extensive experience working with
companies in the technology and communications sectors. Donald is
also a director (and past Chairman) of the Quoted Companies
Alliance, is the UK's representative on the Policy Committee of
European Issuers based in Brussels and sits on the Council of the
City of London's International Regulatory Strategy Group.
4. Paul Lever
Independent Non-executive
Paul joined the board as non-executive Chairman on 6 January
2003 and remained an independent non-executive director following
the appointment of Wayne Bos as Executive Chairman in August 2012.
Paul is currently senior partner of Marylebone Associates LLP, and
was Chairman of Datong Plc until June 2013. Paul was formerly the
chairman of the National Criminal Intelligence Service (NCIS) and
the National Crime Squad (NCS), non-executive chairman of BSM Group
plc and Oxford Aviation Holdings Ltd and chief executive of
Lionheart plc. Previously at Tube Investments he was chief
executive of the Steel Stockholding Division and, subsequently, of
the Small Appliance Division which included Russell Hobbs. Paul was
appointed chief executive of Crown Paints by Reed International
and, following the acquisition of Berger Paints for GBP135 million,
he merged the
two operations with considerable savings and combined annual
sales of GBP400 million. Paul is a member of the Audit Committee
and chairman of the Remuneration Committee.
5. John Caterer
Independent Non-executive
John was Managing Director, UK & Ireland, with Qualcomm, the
Fortune 500 and Nasdaq listed wireless/mobile technology product
developer, from 2005 until the summer of 2013. John joined
Motorola's infrastructure division in 1990 when GSM was first being
introduced in Europe. During 11 years at Motorola, John spent five
years heading operations and new business activities in
France/Benelux and then across Northern Europe latterly becoming
business development director for Europe, Middle East and Africa.
After leaving Motorola he held senior management roles with Juniper
Networks and Kodiak Networks. Earlier in his career, John spent 15
years working in industrial plant engineering and contracting in
Russia, Africa and the Far East. John is also a member, and
immediate past Chairman, of the Prince's Trust Technology
Leadership Group. John is a member of both the Audit Committee and
the Remuneration Committee.
6. Michael Higgins
Independent Non-executive
Michael Higgins has over 25 years' experience of advising and
working with public companies. Currently Michael is non-executive
Chairman of Ebiquity plc, independent marketing performance
specialists, senior independent director of Plant Health Care plc,
a patented biological products provider and a non-executive
director of Arria NLG plc, a software business. Michael is also
Chairman of the Quoted Companies Alliance. After reading economics
and politics at Cambridge, Michael qualified as an accountant at
Price Waterhouse. Following international banking experience with
Saudi International Bank he joined Charterhouse, the merchant bank,
in 1984. Michael became a KPMG Partner from 1996 to 2006, remaining
a senior adviser for a further five years. Michael is chairman of
the Audit Committee and a member of the Remuneration Committee.
Directors' Report for the year ended 30 June 2014
The Directors present their report and the financial statements
for the year ended 30 June 2014. On 4 October 2013 the company
changed its name from ILX Group Plc to Progility plc to better
reflect the nature of the Group's business following its merger
with Progility Pty Ltd.
As announced on 10(th) September 2013 a share for share exchange
agreement was entered into between the Company and the shareholders
of Progility Pty Ltd. The agreement was completed on 7 October 2013
and, following completion, the Company is the sole shareholder of
Progility Pty Ltd.
In determining the appropriate accounting treatment for this
transaction the directors considered IFRS 3 'Business Combinations'
(revised 2008). However, they concluded that this transaction fell
outside the scope of IFRS 3 since the transaction represents a
combination of entities under common control.
Accordingly, following the guidance regarding the selection of
an appropriate accounting policy provided in IFRS 10 Consolidated
Financial Statements (in relation to the evidence regarding what
constitutes control) and IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors', the transaction between the
Company and Progility Pty Ltd has been accounted for in these
accounts using the principles of merger accounting with reference
to UK Generally Accepted Accounting Practice (UK GAAP) which does
not conflict with IFRS and reflects the economic substance of the
transaction.
Under UK GAAP, the assets and liabilities of both entities are
combined at book value, not fair value (although adjustments are
made to achieve uniform accounting policies) and the comparative
amounts are restated as if the combination had taken place at the
beginning of the earliest accounting period presented.
Therefore, although the combination did not become unconditional
until 7 October 2013, the prior period has been restated as if the
Group structure had always been in place.
Post Balance Sheet Event
On the 14 July 2014 the Group acquired the entire share capital
of Starkstrom Group Limited ("Starkstrom") for an aggregate
consideration, payable in cash and loan notes, of GBP9.68 million
from its owner managers. Further details are provided in note
25.
Results and dividends
The results of the Group for the period are set out on page 26.
The Directors do not propose payment of a dividend for the
year.
Principal shareholders
At the date of this report the Company has been notified of the
following shareholdings in excess of 3% of the Company's issued
share capital:
Ordinary Shares
of 10 pence each Percentage
Praxis Trustees Limited* 129,294,195 64.75
Mmilt Pty Limited 35,863,179 17.96
Cameron Investment Trust 6,516,130 3.26
*As trustee of the DNY Trust, a family trust of which Wayne Bos
is a discretionary beneficiary, Praxis Trustees Limited holds
129,294,195 ordinary shares and, through DNY Investments Limited, a
company which is an asset of the DNY Trust, has the right to
subscribe for up to a further 8,000,000 ordinary shares by
exercising the conversion rights attached to a convertible loan
notes and warrants issued by the Company on 17 December 2012.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Business Review within the Strategic Report on
pages 6 to 7. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the
Financial Review on pages 10 to 11. In addition, the notes to the
financial statements include the Group's objectives, policies and
processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging
activities; and its exposures to credit risk and liquidity
risk.
The Group's banking facilities, which include an overdraft
facility and a loan, which replaced the previous revolving credit
facility, are repayable on demand. The Group's forecasts and
projections, taking account of reasonably foreseeable changes in
trading performance, show that the Group should be able to operate
within the level of its current facilities. Through discussions
with its loan note holders and principal bankers and lenders, the
Directors, after making enquiries, have concluded that they have a
reasonable expectation that the Company and the Group will have
adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going
concern basis in preparing the annual report and financial
statements. Further information on Going Concern is included in the
Notes to the Financial Statements on page 35.
The financial statements do not include the adjustments that
would result if the Group or Company was unable to continue as a
going concern.
Employment policies
It is the policy of the Group to consider all applicants for
employment on the basis of qualification for the specific job
without regard to race, colour, religion, age, sex, sexual
orientation, disability or national origin. This policy extends to
all aspects of employment including recruitment, training,
compensation, career development and promotion.
Corporate social responsibility
The Group is developing a corporate responsibility programme
that focuses on adding value to the communities and countries in
which we operate, looking after our environment, ensuring quality
and excellence for our customers and investing in our people.
Directors and their interests
The present Directors are listed on page 8. The interests of the
Directors in the share capital of the Company are as follows.
Ordinary shares of 10 pence
each
At 25.9.2014 At 30.6.2014 At 30.6.2013
W M Bos* 129,294,195 129,294,195 11,940,000
P R S Lever 210,000 173,024 148,021
D J Stewart 430,547 - -
J McIntosh 120,000 - -
J Caterer - - -
M Higgins - - -
*As trustee of the DNY Trust, a family trust of which Wayne Bos
is a discretionary beneficiary, Praxis Trustees Limited holds
129,294,195 ordinary shares and, through DNY Investments Limited, a
company which is an asset of the DNY Trust, has the right to
subscribe for up to a further 8,000,000 ordinary shares by
exercising the conversion rights attached to a convertible loan
notes and warrants issued by the Company on 17 December 2012.
In accordance with the articles of association John Caterer and
Michael Higgins, being eligible, offers themselves for re-election
at the forthcoming Annual General Meeting.
Directors' and officers' liability insurance
The Company has purchased insurance to cover its Directors and
Officers against the costs of their defending themselves in any
legal proceedings taken against them in that capacity and in
respect of charges resulting from the unsuccessful defence of any
proceedings.
Auditors
Grant Thornton have expressed their willingness to remain in
office as auditors of the Company. In accordance with S489 of the
Companies Act 2006 a resolution proposing that Grant Thornton be
reappointed as auditors to the Company will be put to the Annual
General Meeting.
Annual general meeting
The resolutions to be proposed at the Annual General Meeting
will be communicated in due course.
This report was approved by the board on 30 September 2014.
On behalf of the board
John McIntosh
Director
30 September 2014
Remuneration Report for the period ended 30 June 2014
Remuneration policy
The objective of the Group's remuneration policy is to attract,
motivate and retain high quality individuals who will contribute
significantly to shareholder value. The remuneration committee
decides on the remuneration of the Directors and other senior
executives, which comprises a basic salary, car allowance,
healthcare, bonus scheme, share options, and medium term incentive
plan. The Board as a whole decide the remuneration of the
non-executives.
Directors' remuneration
Details of the remuneration of the Directors for the year are
set out below (The executive Directors are regarded as the Key
Personnel for the purposes of the remuneration report):
TOTAL TOTAL
for year for period
Salary Other Pension ended ended
& fees benefits contri-butions 30.6.2014 30.6.2013
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Executive Directors
W M Bos 160 6 - 166 122
D J Stewart 178 - 7 185 18
J McIntosh 126 1 8 135 11
K P Scott+ - - - - 171
J A Pickles+ - - - - 86
E J Kilkelly+ - - - - 98
Non-executive
Directors
P R S Lever 25 - - 25 39
J Caterer* 14 - - 14 -
M Higgins* 6 - - 6 -
P Virik+ - - - - 15
DJP Lane+ - - - - -
509 7 15 531 560
======== ========== ================ =========== ============
* From date of appointment - J Caterer 17 October 2013, M
Higgins 31 March 2014
+ Until date of resignation - K Scott 27 November 2012 , J
Pickles 24 October 2012, E Kilkelly 24 October 2012, P Virik 24
October 2012, DJP Lane 24 October 2012
Share options
In November 2013 the Company adopted a bespoke Australian Share
Option Scheme, specifically for employees of the Group resident in
Australia, and the Progility plc 2013 Unapproved Share Option
Scheme for employees in the UK and elsewhere. The share options
granted to the Directors during the year and in previous years are
as follows:
Number of Number of
shares under Granted Lapsed shares under
option at during the during option at Exercise Date of
30.6.2013 year the year 30.6.2014 price grant
K P Scott 340,936 - (340,936) - 0p 20-Apr-11
E J Kilkelly 240,000 - (240,000) - 0p 31-Oct-09
E J Kilkelly 80,000 - (80,000) - 0p 01-Jun-10
J McIntosh - 500,000 - 500,000 10p 06-Nov-13
D J Stewart - 500,000 - 500,000 10p 06-Nov-13
-------------- ------------ ---------- --------------
660,936 1,000,000 (660,936) 1,000,000
============== ============ ========== ==============
Bonus scheme for executive Directors
The Company will consider creating a bonus scheme for executive
Directors and management which is based on meeting market
expectations and operating profit margin targets. No bonus was paid
for the period under review while the business is undergoing
integration and reorganisation.
Shareholder approval
In accordance with best practice in corporate governance, the
Company will put a resolution to shareholders to approve the
remuneration report at the forthcoming Annual General Meeting.
Corporate Governance
Statement of compliance
As a Company quoted on the Alternative Investment Market (AIM)
of the London Stock Exchange, the Company is not required to comply
with the UK Corporate Governance Code. However, the Directors have
adopted the Quoted Companies Alliance Corporate Governance Code for
Small and Mid-Size Quoted Companies (the QCA Code). The QCA Code
adopts key elements of the UK Corporate Governance Code, current
policy initiatives and other relevant guidance and applies these to
the needs and particular circumstances of small and mid-size quoted
companies on a public market. The QCA Code meets the different
needs of developing and growing companies.
The Directors are committed to ensuring appropriate standards of
Corporate Governance are maintained by the Group and this statement
sets out how the Board has applied the QCA Code in its management
of the business during the year ended 30 June 2014.
The Board recognises its collective responsibility for the long
term success of the Group. It assesses business opportunities and
seeks to ensure that appropriate controls are in place to assess
and manage risk. During a normal year there is a minimum of ten
scheduled Board meetings with other meetings being arranged at
shorter notice as necessary. During the period, there were eleven
scheduled meetings. Meetings of the Board were attended by all
Directors who were appointed at the time of the meeting. The Board
agenda is set by the Chairman in consultation with the other
Directors and the Company Secretary.
The Board has a formal schedule of matters reserved to it for
decision which is reviewed on an annual basis. Under the provisions
of the Company's Articles of Association all Directors are required
to offer themselves for re-election at least once every three
years. In addition, under the Articles, any Director appointed
during the year will stand for election at the next following
annual general meeting, ensuring that each Board member faces
re-election at regular intervals. The Directors are entitled to
take independent professional advice at the expense of the Company
and have access to the advice and services of the Group's General
Counsel and Company Secretary.
The Board
The Board is ultimately responsible and accountable for the
Group's operations. During the period the Board consisted of:
Executive Directors
Wayne Bos, Executive Chairman
John McIntosh, Chief Financial Officer
Donald Stewart, General Counsel
Non-executive Directors
Paul Lever
John Caterer (appointed 17 October 2013)
Michael Higgins (appointed 31 March 2014)
All of the Directors have access to the advice and services of
the Company's legal counsel. The Board meets regularly and agrees
and monitors the progress of a variety of Group activities. These
include strategy, business plan and budgets, acquisitions, major
capital expenditure and consideration of significant financial and
operational matters. The Board also monitors the exposure to key
business risks and considers legislative, environmental,
employment, quality and health and safety issues. There is a
written statement of matters reserved for consideration by the
Board.
During the 12 months to 30 June 2014 the Board has been
significantly strengthened by the addition of two independent
non-executive directors who have widened the fields of expertise
available to the Company and who bring extra dimensions of
experience to facilitate strong governance within the management of
the Group.
TheChairman, who is responsible for running the Board, continues
to assume the role of acting Chief Executive. The Board continues
to believethat the circumstances in which this situation has arisen
are both exceptional and appropriate given the transformational
growth of the business during the period and Board's need to
strengthen the drivers of the core business and successfully
integrate the additional businesses acquired during the period. The
Chairman has continued to display a clear vision and focus for the
Company's strategy and has drawn together the disparate
characteristics, skills, qualities and experience of the other
members of the Board and senior management. Highly visible in his
role, he continues to foster a positive corporate governance
culture, which has permeated through the Company.In his role as
acting Chief Executive he has been instrumental in facilitating the
executive management team in running the Group's expanded business
and implementing the Group's growth strategy.In addition to John
Caterer and Michael Higgins, throughout the period Paul Lever has
been an independent non-executive Director and has brought his
independent judgement to the governance of the Group. Although Mr
Lever has now served on the board for more than ten years since his
first appointment, in accordance with the QCA Code the Board
remains satisfied that he is free from any business or other
relationships which could interfere with the exercise of his
judgment. Mr Lever has sufficient time to carry out his duties for
the Group.
The Board considers its current structure is appropriate for the
scale of the business and to enable the Group to be managed
effectively.
The Group does not have an internal audit department, although
the need for one is reviewed from time to time within the Audit
Committee framework. Non-executive Directors are subject to
reappointment by the shareholders at the Annual General Meeting at
intervals of no more than three years.
Committees
The Board is supported by an audit committee and a remuneration
committee with formally delegated responsibilities ensuring that
appropriate governance procedures are followed. The audit committee
comprises Michael Higgins (chairman), Paul Lever and John Caterer
and the remuneration committee comprises Paul Lever (chairman),
Michael Higgins and John Caterer.
The Board has not established a nomination committee as it
regards the approval and appointment of Directors (whether
executive or non-executive) as a matter for consideration by the
whole board.
Audit committee
The audit committee meets at least twice a year. Typically the
auditors and the Finance Director are also invited to attend
meetings. It is responsible for ensuring that the financial
performance of the Group is properly monitored and reported on. It
also reviews the effectiveness of the Group's systems of internal
control on an ongoing basis. No significant weaknesses have been
identified. However, the committee recognises that as the Group
continues to grow, particularly internationally, internal controls
will have to be further reviewed and updated. It is also
responsible for appointing the auditors, ensuring the auditors'
independence is not compromised, and reviewing the reports on the
Group from the auditors in relation to the accounts and internal
control systems.
Remuneration committee
The remuneration committee is responsible for reviewing the
performance of the Executive Directors and other senior executives,
and for determining the scale and structure of their remuneration
packages and the basis of their service contracts bearing in mind
the interests of shareholders. The committee also monitors
performance and approves the payment of performance related bonuses
and the granting of share options.
Internal control
The QCA Code provides that the Board is responsible for putting
in place and communicating a sound system to manage risk and
implement internal control.
Although no system of internal control can provide absolute
assurance against material misstatement or loss, the Group's system
is designed to provide the Directors with reasonable assurance that
problems are identified on a timely basis and dealt with
appropriately. The key procedures that have been established and
which are designed to provide effective internal control are as
follows:
-- A formal management structure with a schedule of matters
specifically reserved for the Board's approval. The Executive
Directors and other members of senior management meet regularly to
control and monitor the Group's activities.
-- A strategic planning and budget setting process with both
annual and longer-term forecasts reviewed and approved by the
Board.
-- A comprehensive monthly financial reporting system which
compares results with budgets, together with a written report
detailing current trading conditions, variations from budget and
updated forecasts.
-- A report to the audit committee from the auditors stating any
material findings arising from the audit. This report is also
considered by the Board and action taken where appropriate.
-- A framework for capital expenditure and controls including
authorisation procedures and rules relating to the delegation of
authority.
-- Risk management policies to manage issues relating to health
and safety, disaster recovery, legal compliance, insurance and
security.
Relations with shareholders
The Group places a high level of importance on communicating
with its shareholders and welcomes and encourages such dialogue
within the constraints of the AIM Rules and other regulations
applicable to publicly quoted companies. The Group works closely
with its Nominated Adviser, brokers and financial PR advisors to
maintain an active dialogue with institutional and private
shareholders and analysts through a programme of investor relations
carried out during the year.
Information is made available on the Company's website in
accordance with the requirements of Rule 26 of the AIM Rules for
Companies. The Company has adopted electronic communication to the
fullest extent permissible and shareholders are notified when new
statutory information is available on the website. Hard copies of
reports are only sent where shareholders have specifically
requested their receipt.
Directors' Responsibilities
The Directors are responsible for preparing the strategic
report, the annual report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. The Directors have prepared the
Group and Company financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Company and Group for that period. In
preparing those financial statements, the Directors are required
to:
-- select suitable accounting policies and then apply them consistently;
-- make judgments and accounting estimates that are reasonable and prudent;
-- state whether applicable IFRSs have been followed, subject to
any material departures disclosed and explained in the financial
statements; and
-- prepare the financial statements on a going concern basis
unless it is inappropriate to assume that the Group will continue
in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them to
ensure that the financial statements comply with the Companies Act
2006. They are also responsible for safeguarding the assets of the
Company and the Group and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance of the Group
website, www.progility.com, together with the websites of all
subsidiary companies. Legislation in the United Kingdom governing
the preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
In our opinion:
-- The group financial statements, prepared in accordance with
IFRSs as adopted by the EU, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the Group taken as a whole; and
-- the annual report, including the strategic report, includes a
fair review of the development and performance of the business and
the position of the company and undertakings included in the
consolidation taken as a whole, together with a description of the
principal risks and uncertainties they face.
Disclosure of information to auditors
The Directors confirm that:
-- so far as each Director is aware, there is no relevant audit
information of which the Company's auditors are unaware; and
-- the Directors have taken all the steps that they ought to
have taken as Directors in order to make themselves aware of any
relevant audit information and to establish that the Company's
auditors are aware of that information
Resolutions at the Annual General Meeting
The Company's AGM will be held on [29] October 2014.
Accompanying this Report is the Notice of AGM which sets out the
resolutions to be considered and approved, if thought fit, at the
meeting together with some explanatory notes.
Supplier payment policy
The Company and Group's policy is to settle terms of payment
with suppliers when agreeing the terms of each transaction, to
ensure that suppliers are made aware of the terms of payment and to
abide by the terms of the payment.
Share capital
Details of the Company's share capital and changes to the share
capital are shown in note 19to the Consolidated Financial
Statements.
Website publication
The Directors are responsible for ensuring the annual report and
the financial statements are made available on a website. Financial
statements are published on the Company's website
(www.progility.com) in accordance with legislation and the AIM
Rules. The maintenance and integrity of the Company's website is
the responsibility of the Directors. The Directors' responsibility
also extends to the on-going integrity of the financial statements
contained therein.
Charitable and political donations
Group donations to charities worldwide during the period under
review were GBPnil (2013: GBPnil). No donations were made to any
political party.
This report was approved by the board on 30 September 2014.
On behalf of the board
John McIntosh
Director
30 September 2014
Independent auditor's report to the members of Progility plc
We have audited the financial statements of Progility plc for
the year ended 30 June 2014 which comprise the consolidated
statement of comprehensive income, the consolidated and parent
company statements of financial position, the consolidated and
parent company cash flow statements, the consolidated and parent
company statements of changes in equity and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards
the parent company financial statements, as applied in accordance
with the provisions of the Companies Act 2006.
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities
Statement set out on page 22, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in accordance
with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing
Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the APB's website at
www.frc.org.uk/apb/scope/private.cfm
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and of the parent company's affairs as at 30
June 2014 and of the group's loss for the year then ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company financial statements have been properly
prepared in accordance with IFRSs as adopted by the European Union
and as applied in accordance with the provisions of the Companies
Act 2006; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and
the Directors' Report for the financial year for which the
financial statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Mark Henshaw
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London
30 September 2014
Financial Statements
Consolidated Statement of Comprehensive Income for the Year
ended 30 June 2014
Before Highlighted Year Before Highlighted 15 months
highlighted costs ended highlighted cost ended
items items
30.6.2014 Note 10 30.6.2014 30.6.2013 Note 10 30.6.2013
Total Total Total Restated Total Restated
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 4 38,786 - 38,786 51,861 - 51,861
Cost of sales (27,354) - (27,354) (36,989) - (36,989)
------------- ------------ ---------- ------------- ------------ ----------
Gross profit 11,432 - 11,432 14,872 - 14,872
Administrative and
distribution expenses (8,784) (1,427) (10,211) (14,019) (1,515) (15,534)
Impairment charge 13 - (562) (562) - (1,297) (1,297)
------------- ------------ ---------- ------------- ------------ ----------
Operating profit/(loss) 5 2,648 (1,989) 659 853 (2,812) (1,959)
Finance costs 6 (984) (984) (1,078) - (1,078)
------------- ------------ ---------- ------------- ------------ ----------
Profit (loss) before
tax 1,664 (1,989) (325) (225) (2,812) (3,037)
Tax benefit 9 11 - 11 735 - 735
------------- ------------ ---------- ------------- ------------ ----------
Loss for the year
attributable to
equity shareholders 1,675 (1,989) (314) 510 (2,812) (2,302)
Other comprehensive
income
---------- ----------
Items that may be
subsequently reclassified
to profit or loss
Currency translation
differences on foreign
operations (44) (92)
---------- ----------
Other comprehensive
income, net of tax (44) (92)
Total comprehensive
income (358) (2,394)
========== ==========
Earnings per share 11
Basic (0.16)p (1.19)p
Diluted (0.16)p (1.19)p
The notes on pages 26 to 71 form part of the financial
statements.
Consolidated statement of Financial Position for the Year ended
30 June 2014
As at 30.6.2014 As at 30.6.2013
Restated
Assets Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment 12 861 986
Intangible assets 13 11,503 12,210
Deferred tax asset 15 1,154 1,251
---------------- ----------------
Total non-current assets 13,518 14,447
---------------- ----------------
Current assets
Inventories 16 3,251 2,068
Trade and other receivables 17 7,813 8,177
Other current assets 527 451
Tax receivable 82 82
Cash in hand and at bank 1,798 1,916
---------------- ----------------
Total current assets 13,471 12,694
----------------
Total assets 26,989 27,141
---------------- ----------------
Current liabilities
Trade and other payables 18 (10,802) (10,594)
Contingent consideration 19 (30) (307)
Provisions (1,028) (969)
Tax liabilities 18 (55) (69)
Bank and shareholder loans 18,20 (3,699) (3,127)
---------------- ----------------
Total current liabilities 18 (15,614) (15,066)
---------------- ----------------
Non-current liabilities
Contingent consideration 19 - (289)
Shareholder loans 20 (4,575) (4,611)
Provisions (128) (148)
---------------- ----------------
Total non-current liabilities (4,703) (5,048)
---------------- ----------------
Total liabilities (20,317) (20,114)
---------------- ----------------
Net assets 6,672 7,027
================ ================
Equity
Issued share capital 21 19,967 19,967
Share premium 114 114
Other reserve 75 75
Merger reserve (14,854) (14,854)
Own shares in trust 21 (50) (50)
Share option reserve 16 152
Retained earnings 1,534 1,709
Exchange differences arising
on consolidation (130) (86)
----------------
Total equity 21 6,672 7,027
================ ================
The notes on pages 26 to 71 form part of the financial
statements. The financial statements were approved by the Board of
Directors and authorised for issue on 30 September 2014. They were
signed on its behalf by:
Wayne Bos John McIntosh
Director Director 30 September 2014
Company Statement of Financial Position as at 30 June 2014
As at 30.6.2014 As at 30.6.2013
Assets Notes GBP'000 GBP'000
Non-current assets
Property, plant and equipment 12 155 154
Intangible assets 13 1,513 1,568
Investments 14 26,559 8,434
Deferred tax 182 209
Total non-current assets 28,409 10,365
---------------- ----------------
Current assets
Trade and other receivables 17 1,047 927
Tax receivable 82 79
Cash in hand and at bank 288 685
---------------- ----------------
Total current assets 1,417 1,691
Total assets 29,826 12,056
---------------- ----------------
Current liabilities
Trade and other payables (6,137) (3,724)
Contingent consideration 19 (30) (307)
Tax liabilities - -
Bank and shareholder loans 20 (1,925) (1,536)
---------------- ----------------
Total current liabilities 18 (8,092) (5,567)
---------------- ----------------
Non-current liabilities
Contingent consideration 19 - (289)
---------------- ----------------
Total non-current liabilities - (289)
---------------- ----------------
Total liabilities (8,092) (5,856)
---------------- ----------------
Net assets 21,734 6,200
================ ================
Equity
Issued share capital 20 19,967 3,993
Share premium 114 114
Other reserve 75 75
Own shares in trust 20 (50) (50)
Share option reserve 16 152
Retained earnings 1,612 1,916
Total equity 20 21,734 6,200
================ ================
The notes on pages 26 to 71 form part of the financial
statements. The financial statements were approved by the Board of
Directors and authorised for issue on 30 September 2014. They were
signed on its behalf by:
Wayne Bos John McIntosh
Director Director 30 September 2014
Consolidated Cash Flow Statement
15 months
Year ended ended
30.6.2014 30.6.2013
Restated
Notes GBP'000 GBP'000
Operating profit/(loss) 659 (1,959)
Adjustments for:
Depreciation and amortisation 720 673
Loss on fixed asset disposal 52 392
Impairment 562 1,297
Share option charge 3 67
Movement in inventories (1,359) (1,502)
Movement in trade and other receivables 322 (1,605)
Movement in trade and other payables (555) 3,551
Exchange difference on consolidation 46 (144)
------------- -----------
Cash generated from operations 450 770
Income taxes recovered/(paid) 9 (855)
------------- -----------
Net cash generated from operating
activities 459 (85)
------------- -----------
Investing activities
Purchases of property and equipment (331) (894)
Capitalised expenditure on product
development (126) (238)
Acquisition of subsidiaries, net
of cash acquired 3 (160) (687)
------------- -----------
Net cash used by investing activities (617) (1,819)
------------- -----------
Financing activities
Proceeds from borrowings 3,739 4,839
Repayment of borrowings (3,682) (3,386)
Proceeds of share issue - 1,234
Interest and refinancing costs paid (216) (285)
Net cash from financing activities (159) 2,402
------------- -----------
Net change in cash and cash equivalents (317) 498
Cash and cash equivalents at start
of year 1,916 1,524
Effect of foreign exchange rate
differences (66) (106)
------------- -----------
Cash and cash equivalents at end
of year 1,533 1,916
============= ===========
Cash and cash equivalents comprise
Cash in hand and at bank 1,798 1,916
Bank overdraft (265) -
1,533 1,916
============= ===========
The notes on pages 26 to 71 form part of the financial
statements.
Company Cash Flow Statement
15 months
Year ended ended
30.6.2014 30.6.2013
Notes GBP'000 GBP'000
Operating loss (248) (1,718)
Adjustments for:
Depreciation and amortisation 332 303
Loss on fixed asset disposal 27 6
Impairment - product development - 1,123
Investment impairment 562 26
Release of deferred consideration (562) -
Share option charge 3 67
Movement in trade and other receivables (124) 1,807
Movement in trade and other payables 1,696 (213)
------------- -----------
Cash generated from operations 1,686 1,401
Income taxes paid - (6)
------------- -----------
Net cash generated from operating activities 1,686 1,395
------------- -----------
Investing activities
Purchases of property and equipment (74) (57)
Expenditure on product development (126) (241)
Acquisition of subsidiaries 3 (2,153) (768)
------------- -----------
Net cash used by investing activities (2,353) (1,066)
------------- -----------
Financing activities
Proceeds from borrowings 1,500 400
Repayment of borrowings (1,393) (1,677)
Proceeds of share issue - 1,234
Interest and refinancing costs paid (102) (159)
Net cash from financing activities 5 (202)
------------- -----------
Net change in cash and cash equivalents (662) 127
Cash and cash equivalents at start of year 685 558
Cash and cash equivalents at end of year 23 685
============= ===========
Cash and cash equivalents comprise
Cash in hand and at bank 288 685
Bank overdraft (265) -
------------- -----------
23 685
============= ===========
The notes on pages 26 to 71 form part of the financial
statements.
Statement of Changes in Equity for the year ended 30 June
2014
Exchange
Own differences
Called Share shares Share arising
up share premium Other Merger in option on Retained
capital account reserve reserve trust reserve consolidation earnings Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
31.3.2012
as previously
reported 2,759 114 - - (1,881) 427 6 5,254 6,679
Adjustment to
reflect
merger 15,974 - - (14,854) - - - 247 1,367
--------- --------- --------- --------- -------- --------- -------------- ---------- --------
Revised
balance
at 31.3.2012 18,733 114 - (14,854) (1,881) 427 6 5,501 8,046
Equity
component
of
convertible
debt - - 75 - - - - - 75
Options
granted - - - - - 67 - - 67
Options
exercised - - - - 1,831 (315) - (1,516) -
Options lapsed
and waived - - - - - (27) - 27 -
Share issue 1,234 - - - - - - - 1,234
Transactions
with owners 1,234 - 75 - 1,831 (275) - (1,489) 1,376
--------- --------- --------- --------- -------- --------- -------------- ---------- --------
Loss for the
year - - - - - - - (2,303) (2,303)
Other
comprehensive
income:
Foreign
currency
translation
adjustment - - - - - - (92) - (92)
Total
comprehensive
income for
the
period - - - - - - (92) (2,303) (2,395)
--------- --------- --------- --------- -------- --------- -------------- ---------- --------
Balance at
30.6.2013 19,967 114 75 (14,854) (50) 152 (86) 1,709 7,027
Options
granted - - - - - 3 - - 3
Options lapsed
and waived - - - - - (139) - 139 -
Transactions
with owners - - - - - (136) - 139 3
--------- --------- --------- --------- -------- --------- -------------- ---------- --------
Loss for the
year - - - - - - - (314) (314)
Other
comprehensive
income:
Foreign
currency
translation
adjustment - - - - - - (44) - (44)
Total
comprehensive
income for
the
year - - - - - - (44) (314) (358)
--------- --------- --------- --------- -------- --------- -------------- ---------- --------
Balance at
30.6.2014 19,967 114 75 (14,854) (50) 16 (130) 1,534 6,672
========= ========= ========= ========= ======== ========= ============== ========== ========
The notes on pages 26 to 71 form part of the financial
statements.
Statement of Changes in Equity for the year ended 30 June
2014
Called Share Own Share
up share premium Other shares option Retained
capital account reserve in trust reserve earnings Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31.3.2012 2,759 114 - (1,881) 427 4,930 6,349
Equity component
of convertible debt - - 75 - - - 75
Options granted - - - - 67 - 67
Options exercised - - - 1,831 (315) (1,516) -
Options lapsed and
waived - - - - (27) 27 -
Share issue 1,234 - - - - - 1,234
Transactions with
owners 1,234 - 75 1,831 (275) (1,489) 1,376
---------- --------- --------- ---------- --------- ---------- --------
Loss for the period - - - - - (1,525) (1,525)
Total comprehensive
income for the period - - - - - (1,525) (1,525)
---------- --------- --------- ---------- --------- ---------- --------
Balance at 30.6.2013 3,993 114 75 (50) 152 1,916 6,200
Options granted - - - - 3 - 3
Options lapsed and
waived - - - - (139) 139 -
Share issue 15,974 - - - - - 15,974
Transactions with
owners 15,974 - - - (136) 139 15,977
---------- --------- --------- ---------- --------- ---------- --------
Loss for the year - - - - - (443) (443)
Total comprehensive
income for the year - - - - - (443) (443)
---------- --------- --------- ---------- --------- ---------- --------
Balance at 30.6.2014 19,967 114 75 (50) 16 1,612 21,734
========== ========= ========= ========== ========= ========== ========
The notes on pages 26 to 71 form part of the financial
statements.
Notes to the Financial Statements
Progility Plc (the "Company") is a public limited company
incorporated in England and Wales and, together with its
subsidiaries listed in note 14, forms the Progility group (the
"Group"). The financial statements are presented in pounds sterling
and were authorised for issue by the Directors on 30 September
2014. On the 21 March 2013 the statutory year end was changed to 30
June to better reflect the cycle of revenue and reporting within
the ILX training business. This has resulted in a fifteen month
comparative set of results. As such the information in the
financial statements is not entirely comparable.
Following the guidance regarding the selection of an appropriate
accounting policy provided in IFRS 10 Consolidated Financial
Statements (in relation to the evidence regarding what constitutes
control) and IAS 8 'Accounting Policies, Changes in Accounting
Estimates and Errors', the transaction between the Company and
Progility Pty Ltd in October 2013 has been accounted for in these
accounts using the principles of merger accounting. Therefore,
although the combination did not become unconditional until 7
October 2013, the prior period has been restated as if the Group
structure had always been in place. It follows that the comparative
period includes fifteen months results of Progility Pty Ltd.
The Group financial statements consolidate those of the Company
and its subsidiaries (together referred to as the "Group"). The
Company financial statements present information about the Company
as a separate entity and not about its Group.
Both the Group financial statements and the Company financial
statements have been prepared and approved by the Directors in
accordance with International Financial Reporting Standards
("IFRS") as adopted by the European Union ("EU"). In publishing the
Company financial statements here together with the Group financial
statements, the Company has taken advantage of the exemption in
Section 408 of the Companies Act 2006 not to present its individual
statement of comprehensive income and related notes that form a
part of these approved financial statements.
1 Basis of preparation and significant accounting policies
Basis of preparation
The preparation of the Group accounts in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities
and the disclosure of contingent liabilities at the date of the
financial statements. The key accounting estimates and assumptions
are set out below. Such estimates and assumptions are based on
historical experience and various other factors that are believed
to be reasonable in the circumstances and constitute management's
best judgment of conditions at the date of the financial
statements.
In the future, actual experience may deviate from these
estimates and assumptions, which could affect the financial
statements as the original estimates and assumptions are modified,
as appropriate, in the year in which the circumstances change.
The financial statements have been prepared on the historical
cost basis as modified by financial assets and financial
liabilities (including derivative financial instruments) at fair
value through the statement of comprehensive income.
Critical accounting estimates and Judgements
The preparation of the Group accounts in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of revenues, expenses, assets and liabilities,
and the disclosure of contingent liabilities at the date of the
financial statements. The judgements, estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities (refer to the
respective notes) within the next financial year are discussed
below. Key estimates and judgements relate to:
Accounting for acquisitions
Business combinations are initially accounted for on a
provisional basis. The fair value of assets acquired, liabilities
and contingent liabilities assumed are initially estimated by the
entity taking into consideration all available information at the
reporting date. Fair value adjustments on the finalisation of the
business combination accounting is retrospective, where applicable,
to the period the combination occurred and may have an impact on
the assets and liabilities, depreciation and amortisation
reported.
Recognition of exam vouchers
Actual experience may deviate from the assumptions used which
could be materially different from the actual usage rate. This
could impact the financial statements in the year in which
circumstances change.
Provisions for impairment of receivables (see note 2 on
Financial Instruments - credit risk)
The provision for impairment of receivables assessment requires
a degree of estimation and management judgement. The level of
provision is assessed by taking into account the recent sales
experience, the ageing of receivables, historical collection rates
and specific knowledge of the individual debtors' financial
position.
Provisions for impairment of inventories (see note 1 on
Inventories)
The provision for impairment of inventories assessment requires
a degree of estimation and management judgement. The level of the
provision is assessed by taking into account the recent sales
experience, the ageing of inventories and other factors that affect
inventory obsolescence.
Impairment of tangible/intangible and financial assets (see note
1 on Depreciation and Impairment)
The entity assesses impairment of non-financial assets other
than goodwill and other indefinite life intangible assets at each
reporting date by evaluating conditions specific to the entity and
to the particular asset that may lead to impairment. If an
impairment trigger exists, the recoverable amount of the asset is
determined. This involves fair value less costs to sell or
value-in-use calculations, which incorporate a number of key
estimates and assumptions.
Long service provision (see note 1 on Provisions) the liability
for long service leave is recognised and measured at the present
value of the estimated future cash flows to be made in respect of
all employees at the reporting date. In determining the present
value of the liability, estimates of attrition rates and pay
increases through promotion and inflation have been taken into
account.
Deferred tax assets
Deferred tax assets are recognised for deductible temporary
differences only if the entity
considers it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
Measurement of financial instruments (see note 2 on Financial
Instruments)
The entity is required to classify financial instruments,
measured at fair value, using a three level hierarchy, being: Level
1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities; Level 2: Inputs other than quoted prices
included within level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from
prices); and Level 3: Inputs for the asset or liability that are
not based on observable market data (unobservable inputs). An
instrument is required to be classified in its entirety on the
basis of the lowest level of valuation inputs that is significant
to fair value. Considerable judgement is required to determine what
is significant to fair value and therefore which category the
financial instrument is placed in can be subjective.
Such estimates and assumptions are based on historical
experience and various other factors that are believed to be
reasonable in the circumstances and constitute management's best
judgment of conditions at the date of the financial statements.
In the future, actual experience may deviate from these
estimates and assumptions, which could affect the financial
statements, as the original estimates and assumptions are modified,
as appropriate, in the year in which the circumstances change.
Key judgement - Merger Accounting
Following the completion of an agreement on 7 October 2013 the
Company became the sole shareholder of Progility Pty Ltd. The
resulting combination of businesses was renamed Progility plc. The
consideration for 100% of the equity of Progility Pty Ltd was
satisfied by the issue of the fully paid shares in the Company,
which based on the issue price, valued the Progility Pty Ltd's
equity at GBP15.97 million. In forming its judgement as to the
appropriateness of the use of merger accounting following the
transaction with Progility Pty Ltd ("the Transaction") the Board
considered whether common control was in place for each of the
merging entities (ILX Group plc and Progility Pty Ltd) both prior
to and after the completion of the transaction on 3 October 2013.
Following the preparation of the Group's financial statements for
the fifteen months to 30 June 2013 the Board adopted the wider
definition of control under IFRS10 which takes into account other
material influencing factors in addition to the consideration of an
investor/shareholder's equity holding. Prior to the Transaction the
significant shareholder in Progility Pty Ltd was Praxis Trustees
with a holding of 73.47%, and therefore control existed. Prior to
the Transaction Praxis Trustees also held 29.9% of ILX Group plc in
addition to holding convertible debt of GBP0.4 million. The
importance of Praxis Trustees investment into
the Group in August 2012 and its subsequent issue of convertible
debt provided material additional influence over ILX Group plc to
ensure its management's objective of restructuring and
repositioning the Group was given a strong platform for
success.
In arriving at the appropriate accounting treatment for this
Transaction the directors considered IFRS 3 'Business Combinations'
(revised 2008). However, they concluded that this Transaction fell
outside the scope of IFRS 3 since the Transaction represents a
combination of entities under common control.
Accordingly, following the guidance regarding the selection of
an appropriate accounting policy provided in IFRS 10 Consolidated
Financial Statements (in relation to the evidence regarding what
constitutes control) and IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors', the transaction has been
accounted for in these accounts using the principles of merger
accounting with reference to UK Generally Accepted Accounting
Practice (UK GAAP).
Restatement of prior period
As announced on 10 September 2013 a share for share exchange
agreement was entered into between the Company and the shareholders
of Progility Pty Ltd. The agreement was completed on 7 October 2013
and, following completion, the Company is now the sole shareholder
of Progility Pty Ltd.
In determining the appropriate accounting treatment for this
transaction the directors considered IFRS 3 'Business Combinations'
(revised 2008). However, they concluded that this transaction fell
outside the scope of IFRS 3 since the transaction represents a
combination of entities under common control.
Accordingly, following the guidance regarding the selection of
an appropriate accounting policy provided in IFRS 10 Consolidated
Financial Statements (in relation to the evidence regarding what
constitutes control) and IAS 8 'Accounting Policies, Changes in
Accounting Estimates and Errors', the transaction has been
accounted for in these accounts using the principles of merger
accounting with reference to UK Generally Accepted Accounting
Practice (UK GAAP) which does not conflict with IFRS and reflects
the economic substance of the transaction.
Under UK GAAP, the assets and liabilities of both entities are
combined at book value, not fair value (although adjustments are
made to achieve uniform accounting policies) and the comparative
amounts are restated as if the combination had taken place at the
beginning of the earliest accounting period presented.
Therefore, although the combination did not become unconditional
until 7 October 2013, the prior period has been restated as if the
Group structure had always been in place.
Going concern
The Group meets its day-to-day working capital requirements from
its operating cash flows and from its banking facilities, of which
GBP0.25 million was undrawn at the balance sheet date. The Group
has an outstanding term loan which is repayable on demand from HSBC
bank (GBP1.3 million at the balance sheet date), which is due to be
repaid during the next fifteen months. The Group's banking
facilities are repayable on demand.
The Directors, after making enquiries of its loan note holders,
its principal bankers and other lenders, have a reasonable
expectation that the Company and the Group will have adequate
resources to continue in operational existence for the foreseeable
future. Accordingly, they continue to adopt the going concern basis
in preparing the annual report and financial statements.
It is the Board's view that, based on cash flow projections, the
Group considers the existing financing facilities to be adequate to
meet operating requirements through December 2015.
Basis of consolidation
The consolidated financial statements include the financial
statements of Progility Plc and its subsidiaries. There are no
associates or joint ventures to be considered.
Consolidated financial statements (in relation to the merger of
ILX Group plc with Progility Technologies Pty Ltd) have been
accounted for in these accounts using the principles of merger
accounting with reference to UK Generally Accepted Accounting
Practice (UK GAAP) which does not conflict with IFRS and reflects
the economic substance of the transaction.
Intra-group balances, and any unrealised gains and losses or
income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements. The
Group uses the acquisition method of accounting to account for the
acquisition of subsidiaries with the exception of the merger with
Progility Pty Limited as explained above.
Revenue
Sales of Goods are recognised when the significant risks and
rewards of ownership are transferred to the buyer. Revenue from the
sales of goods with no significant service obligation is recognised
on delivery. Where significant tailoring or integration is required
revenue is recognised in the same way as construction contracts, in
line with IAS 11 (noted below).
Revenue for licenses to generic software products is recognised
at the start of the license term, provided that delivery has
occurred.
Revenue from software that is sold together with a workshop or
exam voucher is split into separate components based on the fair
value of the individual deliverables. The software will be
recognised upon delivery. The workshop or course deliverable will
be recognised upon delivery of the service. The allocation of the
fair value is based on stand-alone selling prices with the
exception of the exam vouchers which are determined after taking
into account the expected redemptions that have been reliably
estimated based on significant historical experience. This amount
is deferred until the exam has been taken or the voucher has
expired.
Revenue from fixed price consultancy, training, customisation
and software development projects or events is recognised in
accordance with the delivery for each project or event. Revenue
from such projects chargeable on a time and materials basis is
recognised when the work is performed by reference to the
percentage stage of completion.
Revenue is generated for after-sales service, maintenance and
consulting and telecommunication solutions. Consideration received
for those services is initially deferred and included in other
liabilities and recognised as revenue in the period when the
service is performed.
In recognising after sales service and maintenance revenues the
Group considers the nature of the services and the customer's use
of related products based on historical experience.
Revenue from rental and support services is recognised evenly
over the period for which the service is to be provided.
Construction contracts for telecommunication systems specify a
fixed price for the development and installation of IT and
telecommunication systems. When the outcome can be assessed
reliably, contract revenue and associated costs are recognised by
reference to the stage of completion of the contract activity at
the reporting date. Revenue is measured at the fair value of
consideration received or receivable in relation to that activity.
When the Group cannot measure the outcome of a contract reliably,
revenue is recognised only to the extent of contract costs that
have been incurred and are recoverable. Contract costs are
recognised in the period in which they are incurred. In either
situation, when it is probable that total contract costs will
exceed total contract revenue, the expected loss is recognised
immediately in profit or loss.
A construction contract's stage of completion is assessed by
management based on milestones (usually defined in the contract)
for the activities to be carried out under the contract and other
available relevant information at the reporting date. The maximum
amount of revenue to be recognised for each milestone is determined
by estimating relative contract fair values of each project phase,
i.e. by comparing the Group's overall contract revenue with the
expected profit for each corresponding milestone. Progress and
related contract revenue in-between milestones is determined by
comparing costs incurred to date with the total estimated costs for
that particular milestone (a procedure sometimes referred to as the
cost-to-cost method).
The gross amount due from customers for contract work is
presented within trade and other receivables for all contracts in
progress for which costs incurred plus recognised profits (less
recognised losses) exceed progress billings. The gross amount due
to customers for contract work is presented within other
liabilities for all contracts in progress for which progress
billings exceed costs incurred plus recognised profits (less
recognised losses).
Deferred revenue represents amounts invoiced for revenue which
is expected to be recognised in a future period. Accrued revenue
represents amounts recognised as revenue which are to be invoiced
in a future period.
Foreign currency
Transactions in foreign currencies are translated at the
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currency are
translated at the rates of exchange ruling at the balance sheet
date. Exchange differences are taken to the statement of profit or
loss.
In the consolidated accounts, the assets and liabilities of
foreign subsidiaries are translated at the rates of exchange ruling
at the balance sheet date. The trading results of foreign
subsidiaries are translated using the exchange rate ruling at the
date of the transactions. Exchange differences arising are
classified as other comprehensive income and accumulated in foreign
exchange reserve in equity.
Share based payments
The Company operates a share option scheme. The fair value of
the options granted under the scheme is recognised as an employee
expense with a corresponding increase in equity. The fair value is
measured at grant date and spread over the vesting period, based on
the number of options expected to vest.
The fair value of the options granted is measured using the
Black-Scholes model.
Business combinations
When applying the acquisition method the assets, liabilities and
contingent liabilities of a subsidiary are measured at their fair
values at the date of acquisition. Any excess of the fair value of
the consideration transferred over the fair values of the
identifiable net assets acquired is recognized as goodwill. Any
deficiency of the fair value of the consideration transferred below
fair values of the identified net asset acquired is credited to the
income statements in the period of acquisition.
Contingent and deferred consideration arising as a result of
acquisitions is stated at fair value. Contingent and deferred
consideration is based on management's best estimate of the likely
outcome and best estimate of fair value, which is usually a
contracted formula based on multiples of revenue and / or
EBITDA.
All transaction costs incurred in relation to the business
combination are expensed to the statement of profit or loss
The Group has elected not to apply IFRS 3 Business Combinations
retrospectively to combinations prior to the date of transition of
1 April 2004.
Goodwill
Goodwill is determined by comparing the amount paid, including
the fair value of any deferred and contingent consideration, on the
acquisition of a subsidiary or associated undertaking and the
Group's share of the aggregate fair value of its separable net
assets. It is considered to have an indefinite useful economic life
as there are no legal, regulatory, contractual, or other
limitations on its life. Goodwill is therefore capitalised and is
subject to annual impairment reviews in accordance with applicable
accounting standards. Contingent consideration classified as a
financial liability is subject to annual fair value re-measurement
and any movement recorded through the profit or loss.
Impairment
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets that
are subject to amortisation are reviewed for impairment. The
process of review starts with the intangible product and then
acquired goodwill, whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable, for
example if the product become obsolete, or a technology change
occurs in the case of capitalized intangible product. The
recoverable amount is the higher of an asset's fair value less
costs to sell and value in use. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash flows using a discount rate that
approximates the Group's cash generating units cost of capital to
calculate the net present discounted cash
flow. An impairment loss is
recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. Non-financial assets other than
goodwill that suffered an impairment are reviewed for possible
reversal of the impairment at each reporting date.
Where an impairment loss subsequently reverses, the carrying
amount of the asset or cash generating unit is increased to the
revised estimate of its recoverable amount, not to exceed the
carrying amount that would have been determined had no impairment
loss been recognised for the asset in prior years. A reversal of an
impairment loss is recognised immediately in the profit or
loss.
Intangible assets - Brands
The value of acquired brands is determined by estimating the net
present value of the future profits expected from the brands.
Brands are considered to have an indefinite useful life and are
subject to annual impairment reviews.
Acquired customer relationships
The value of acquired customer relationships is determined by
estimating the net present value of the future profits expected
from the customer relationships. Where customer relationships
relate to contracts covering a pre-determined period, the value is
amortised over that period.
Research and development
Research expenditure is written off to the statement of
comprehensive income in the year in which it is incurred. Costs
incurred on product development relating to the design and
development of new or enhanced products are capitalised as
intangible assets when it is probable that the development will
provide economic benefits, considering its commercial and
technological feasibility and the resources available for the
completion and marketing of the development, and where the costs
can be measured reliably. The expenditures capitalised are the
direct labour costs, which are managed and controlled centrally.
Other development costs are recognised as an expense as incurred.
Product development costs previously recognised as an expense are
not recognised as an asset in a subsequent period. Capitalised
costs are amortised on a straight line basis over their estimated
useful lives of ten years.
Depreciation
Property, plant, and machinery are stated at cost less
accumulated depreciation. Depreciation on these assets is provided
at rates estimated to write off the cost, less estimated residual
value, of each asset over its expected useful life as follows:
Fixtures, fittings and equipment - 2 to 4 years
Computer, rental equipment and vehicles - 3 years
Building & properties - 10 years
Investments
The Company carries the value of investments in subsidiaries at
cost, after adjusting for any impairment.
Inventories
Inventories are measured at the lower of cost and net realisable
value. The provision for impairment of inventories assessment
requires a degree of estimation and judgement. The level of the
provision is assessed by taking into account the recent sales
experience, the ageing of inventories and other factors that affect
inventory obsolescence.
Deferred taxation
Deferred income taxes are calculated using the liability method
on temporary differences between the carrying amounts of assets and
liabilities and their tax bases. However, deferred tax is not
provided on the initial recognition of goodwill, or on the initial
recognition of an asset or liability unless the related transaction
is a business combination or affects tax or accounting profit.
Deferred tax on temporary differences associated with investments
in subsidiaries and joint ventures is not provided if
reversal of these temporary differences can be controlled by the
Group and it is probable that reversal will not occur in the
foreseeable future.
Deferred tax assets and liabilities are calculated, without
discounting, at tax rates that are expected to apply to their
respective period of realisation, provided those rates are enacted
or substantively enacted by the end of the reporting period.
Deferred tax assets are recognised to the extent that it is
probable that the underlying tax loss or deductible temporary
difference will be able to be utilised against future taxable
income. This is assessed based on the Group's forecast of future
operating results, adjusted for significant non-taxable income and
expenses and specific limits on the use of any unused tax loss or
credit. Deferred tax liabilities are always provided for in
full.
Defined contribution pension scheme
The pension costs charged in the financial statements represent
the contributions payable by the Company during the year.
Leases and hire purchase contracts
The Company has no assets financed through finance leases.
Other leases are treated as operating leases. Annual rentals are
charged to the statement of profit or loss on a straight line basis
over the term of the lease.
Convertible debt
Convertible loan notes are regarded as compound instruments,
consisting of a liability instrument and an equity instrument. At
the date of issue the fair value of the liability component is
estimated using the prevailing market interest rate for similar
non-convertible debt. The difference between the proceeds of issue
of the convertible loan note and the fair value assigned to the
liability component, representing the embedded option to convert
the liability into equity of the Group, is included in equity
within the 'other' reserve. The interest expense of the liability
component is calculated by applying the effective interest rate to
the liability component of the instrument. The difference between
this amount and the interest paid is added to the carrying amount
of the convertible loan note.
Deferred and contingent consideration
Deferred and contingent consideration payable is shown as a
liability on the balance sheet to the extent that a contractual
obligation exists, or may exist, to make payment in cash.
Provisions
Provisions are recognised where a legal or constructive
obligation to employees has arisen in relation to long service
benefits and accrued leave entitlements and is measured at the best
estimate of the expenditure required to settle the obligations.
Company profit
The Company profit for the financial year includes a loss after
tax of GBP443,000 relating to the Company after taking account of
acquisition and merger costs of GBP876,000. No separate Company
statement of comprehensive income has been presented, in accordance
with Section 408 of the Companies Act 2006.
Highlighted items
Exceptional items represent material items of income and
expenses relating primarily to restructuring of the group, costs
associated with the merger with Progility and impairments of
intangible assets.
Interest
Interest on loans is expensed as it is incurred. Transaction
costs of borrowings are expensed as interest over the term
of the loans. Interest income is reported on an accruals basis
using the effective interest method.
Financial instruments
The Directors consider the Company to have financial
instruments, as defined under IFRS 7, in the following
categories:
Loans and receivables
The Group's loans and receivables comprise cash and cash
equivalents and trade receivables.
Cash and cash equivalents include cash in hand, deposits held at
call with banks, bank overdrafts and other short-term highly liquid
investments with original maturities of three months or less that
are readily convertible to known amounts of cash and are subject to
an insignificant risk of change in value.
Trade receivables are recognised and carried at original invoice
amount less an adjustment for doubtful debts. Bad debts are written
off to the statement of comprehensive income when identified. An
estimate of the adjustment for doubtful debts is made when
collection of the full amount is no longer probable.
Contingent consideration measured at fair value through profit
or loss
The Group measures its contingent liabilities arising upon
acquisition on an annual basis. Changes in the fair value of any
such contingent liabilities, such as earn out or other contingent
consideration are recognised immediately through the profit and
loss account.
Other financial liabilities measured at amortised cost
These include accruals, trade payables, revolving credit
facilities and term debt.
Trade payables are recognised and carried at original invoice
amount. Accruals are recognised and carried at the amounts expected
to be paid for the goods or services received but not invoiced at
the balance sheet date.
Bank borrowings, overdrafts, and revolving credit facilities are
classified as current liabilities to the extent that capital
repayments are due within 12 months of the balance sheet date, and
long term liabilities where they fall due more than 12 months after
the balance sheet date.
Future changes to accounting policies
Certain new standards, amendments and interpretations to
existing standards have been issued by the IASB or IFRSIC with an
effective date after the date of these financial statements which
include:
Standard Description Effective (periods beginning
on or after)
IFRS 9 Financial Instruments 1 January 2018
IFRS 10 Consolidated Financial Statements 1 January 2014
IFRS 11 Joint Arrangements 1 January 2014
IFRS 12 Disclosure of Interests in Other 1 January 2014
Entities
IFRS 15 Revenue from Contracts with Customers 1 January 2017
The impact on the Group's financial statements of the future
adoption of these standards is still under review. Other than IFRS
9 and IFRS 15, where the Group is continuing to assess the
materiality of the impact of these new standards, the Group does
not expect any of the changes to have a material effect on the
result or net assets of the Group.
2 Financial instruments - risk management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Liquidity risk
-- Interest rate risk
-- Exchange rate risk
-- Capital risk
The Group's financial instruments comprise cash and short term
deposits, and various items such as trade receivables and trade
payables that arise directly from its operations. The main purpose
of these instruments is to fund the Group's operations, manage
working capital and invest surplus funds.
The principal financial instruments used by the Group from which
financial instrument risk arises are as follows:
Financial Assets At 30.6.2014 At 30.6.2013 At 30.6.2014 At 30.6.2013
GBP'000 GBP'000 GBP'000 GBP'000
Group Company
Loans and receivables 7,813 8,177 868 651
Cash on hand 1,798 1,916 288 685
----------------------- ------------- ------------- ------------- -------------
Financial Liabilities At 30.6.2014 At 30.6.2013 At 30.6.2014 At 30.6.2013
GBP'000 GBP'000 GBP'000 GBP'000
Group Company
Fair value through
profit or loss:
Contingent consideration 30 596 30 396
Other amortised
cost:
Bank loans and
overdrafts 1,583 1,211 1,583 1,211
Shareholder loans 6,349 6,202 - -
Convertible loan 342 325 342 325
Trade payables 5,310 5,226 731 699
Accruals 1,372 1,219 539 725
------------------------------ ------------- ------------- ------------- -------------
It is, and has been throughout the year under review, the
Group's policy that no trading in financial instruments shall be
undertaken. The Group does, however, manage interest rate risk as
detailed below. For loans and receivables, and items carried at
amortised cost, the carrying value approximates the fair value.
Fair value hierarchy
The following table presents financial assets and liabilities
measured at fair value in the balance sheet in accordance with the
fair value hierarchy. This hierarchy groups financial assets and
liabilities into three levels based on the significance of inputs
used in measuring the fair value of the financial assets and
liabilities. The fair value hierarchy has the following levels:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets and liabilities;
-- Level 2: inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (ie. as prices) or indirectly (ie. derived from prices);
and
-- Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level within which the financial asset or liability is
classified is determined based on the lowest level of significant
input to the fair value measurement.
The following tables present the Group's assets and liabilities
that are measured at fair value:
At 30 June 2014 Level 1 Level 2 Level 3 Total
Group and company Note GBP'000 GBP'000 GBP'000 GBP'000
Liabilities
Contingent consideration - - 30 -
-------- -------- -------- --------
Net fair value - - 30 -
======== ======== ======== ========
At 30 June 2013 Level 1 Level 2 Level 3 Total
Group and company Note GBP'000 GBP'000 GBP'000 GBP'000
Liabilities
Contingent consideration - - 596 -
-------- -------- -------- --------
Net fair value - - 596 -
======== ======== ======== ========
Fair value measurements in Level 3
The Group's and company's financial assets classified in Level 3
uses valuation techniques based on significant inputs that are not
based on observable market data.
The following table presents the changes in Level 3
instruments.
GBP'000
At April 1, 2012 56
Contingent consideration from acquisition of Obrar 562
Payments made (22)
At June 30, 2013 596
--------
Contingent consideration from acquisition of Sue Hill 30
Payments made (34)
Adjustment to fair value of contingent consideration (562)
At June 30, 2014 30
========
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer fails to meet its contractual obligations. The Group is
exposed to credit risk from credit sales.
The amount of receivables past due but not impaired at the
balance sheet date was GBP425,000 (2013: GBP378,000). The
receivables are aged as follows: Debt Aged 60 days and over 25%, up
to 59 days 24%, and current up to 29 days, 51%.
The total exposure to credit risk lies within trade receivables
and accrued revenue and cash. The majority of these balances are
with blue-chip companies. The risk is spread over a wide range of
approximately 450 customers with an average balance of just under
GBP6,500. The largest balance at year end comprised 3% of the total
trade receivable balance.
At the reporting date the Directors do not expect any losses
from bad debts other than where specific provision has been
made.
Liquidity risk
Liquidity risk arises from the Group's management of its working
capital facilities. It is the risk that the Group may encounter
difficulty in meeting its financial obligations as they fall
due.
The Group's banking facilities include an overdraft and a term
loan facility which are repayable on demand and shareholder loans
which are due to be repaid as disclosed below. The Group also
utilises invoice finance facilities. The Directors, after making
enquiries, of its loan note holders, its principal bankers and
other lenders have a reasonable expectation that the Company and
the Group will have adequate resources to continue in operational
existence for the foreseeable future.
At 30.6.2014 At 30.6.2013 At 30.6.2014 At 30.6.2013
GBP'000 GBP'000 GBP'000 GBP'000
Group Company
Cash on
hand 1,798 1,916 288 685
--------- ------------- ------------- ------------- -------------
As at 30 June 2014, the Group's non-derivative financial
liabilities have contractual maturities as summarized below:
Group Company
Repayable Repayable Repayable Repayable Repayable Repayable
demand <12 over 6 over 1 on demand over 6 over 1
months to 12 Months to 5 years < 12 month to 12 Months to 5 years
As of 30 June
2013 GBP' 000 GBP' 000 GBP' 000 GBP' 000 GBP' 000 GBP' 000
Trade Payables 5,226 - - 699 - -
Borrowings 2,802 325 4,611 1,211 325 -
Contingent consideration - 307 289 - 307 289
As of 30 June
2014 GBP' 000 GBP' 000 GBP' 000 GBP' 000 GBP' 000 GBP' 000
Trade Payables 5,310 - - 731 - -
Borrowings 3,357 342 4,575 1,583 342
Contingent consideration - 30 - - 30 -
------------ -------------- ------------ ------------ -------------- ------------
To ensure that this is achieved, rolling 12-month cash flow
projections are reviewed on a monthly basis within a model that can
be readily flexed to show the effect of changes to key variables on
cash balances and cash flow. These projections are reviewed by the
Board and made available to the Group's bankers.
At the balance sheet date these projections indicated that the
Group expected to have sufficient cash and facilities to meet its
obligations for the next 12 months.
Interest rate risk
Interest risk arises from potential changes to interest rates.
It is the risk that the Group's financial position may be adversely
affected by future changes to interest rates.
It is the Group's policy to reduce its exposure to movements in
interest rates in instances where a significant change in rates
could have a material adverse impact on the Group's position. This
risk is minimised by regular review of the facilities available to
the Group.
The Group's exposure to interest rate risk arises principally
from its bank borrowing and other secured borrowing, which carry an
interest rate margin over Base Rate. Future changes in these rates
will affect the interest cost to the group. These rates would need
to rise significantly to have a material effect on the interest
cost. A one percentage point movement in the Bank of England Base
Rate would have approximately GBP7,000 (2013: GBP6,000) impact on
the monthly interest rate charge.
Exchange rate risk
All assets and liabilities are presented in Sterling.
Transactions in Euros, Danish Kroner, American Dollars, Australian
Dollars, New Zealand Dollars, Omani Riyals, Emirati Dirhams and
South African Rand are translated at the exchange rate ruling at
the date of the transaction. The Group did not carry out a
significant level of transactions in any other currency during the
year, however, this may increase in the future in line with the
Group's strategy. A five percentage point adverse movement in the
Australian dollar exchange rate could potentially be reflected as a
GBP1,082,000 (2013: GBP1,727,000) reduction on the monthly sales
recorded in pound sterling in the Group's accounts, an increase of
GBP7,000 (2013: GBP48,000) in profit after tax and a reduction of
GBP108,000 (2013: increase of GBP27,000) in total comprehensive
income.
Any gain or loss resulting from the final realisation of these
transactions in sterling is taken to the statement of comprehensive
income as an exchange gain or loss. Monetary assets and liabilities
remaining in foreign currencies are re-translated at the rates of
exchange ruling at the balance sheet date, with any gain or loss
taken to the statement of profit or loss as an exchange gain or
loss.
No hedging of this risk is undertaken as the non-sterling assets
and liabilities are relatively liquid and the Group considers that
its exposure is adequately managed, for the time being, through
matching of currency income and expenditure.
Capital risk
The Group's capital management objectives are:
-- To ensure the Group's ability to continue as a going concern;
-- To fund projects from raising capital from equity placements
rather than long term borrowings;
-- To increase the value of the assets of the business; and to
provide an adequate return to shareholders in the future when new
assets are taken on board.
These objectives will be achieved by maintaining and adding
value to existing projects and ultimately taking them through to
delivery and cash flow either with partners or by the Group's
means.
The Group monitors capital on the basis of the carrying amount
of share capital and other reserves as presented on the face of the
financial position. Capital for the reporting periods under review
is defined as total equity summarised in the consolidated statement
of changes in equity and was GBP6,672,000 at the end of the year
(2013: GBP7,027,000).
The Group obtains the amount of capital in proportion to its
overall financing structure. The Group manages the capital
structure and makes adjustments to it in the light of changes in
economic conditions and the risk characteristics of the underlying
assets. In order to maintain or adjust the capital structure the
Group may adjust the amount of dividends paid in the future or
issue new shares.
3 Acquisitions and Disposals
TFPL Ltd
On 1 July 2013 the company acquired 100% of the ordinary share
capital of TFPL Ltd ("TFPL") to bring recruitment consulting skills
in to the group product portfolio. This was acquired for a maximum
GBP0.6 million in cash. TFPL provides executive search, managed
services and the placement of permanent, interim and contract
personnel into the public and private sectors. Since its
establishment in 1985, the company has developed a strong brand and
reputation in its marketplace.
The fair values of the identifiable assets and liabilities of
the new subsidiary at the date of acquisition were calculated below
as follows:
Fair value of consideration GBP'000
Cash paid 400
Contingent consideration -
Total 400
Book value Fair value
Recognised amounts of identifiable
net assets GBP'000 GBP'000
Intangible assets - 137
Trade and other receivables 346 346
Cash at bank and in hand 204 204
Trade and other payables (456) (456)
Deferred Tax 6 6
----------- -----------
Identifiable Net Assets 100 237
===========
Goodwill on acquisition 163
===========
Consideration paid in cash 400
Cash and cash equivalents
acquired (204)
Net cash paid relating to
the acquisition 196
===========
Note: The fair value was calculated in line with the Group's
acquisition policy in note 1. Goodwill has arisen from the
acquisition due to synergies of management and the opportunity for
the Group to further expand the recruitment operations of the
group. Goodwill arising from the acquisition is not tax deductible.
The fair value of the trade receivables and payables is based on
gross contractual amounts as these are expected to be settled in
full within the year.
The summarised income statement of the acquired entity for the
period from the beginning of its financial year on 1 November 2012
to the effective date of acquisition, and for its previous
financial year, is set out below:
Period ended Year ended
1.7.2013 31.10.2012
TFPL Ltd GBP'000 GBP'000
Revenue 1,317 2,521
Net profit 376 (35)
Sue Hill Recruitment & Services Limited
On 19 November 2013 the company acquired 100% of the ordinary
share capital of Sue Hill Recruitment & Services Limited ("Sue
Hill") to augment the recruitment consulting skills within the
Group. This was acquired for a maximum GBP0.2 million in cash. Sue
Hill, which was founded in 1997, is a specialist employment agency
to the UK information, market research, insight and analysis
sectors. Since the business was established within the Group in
November 2013, demand for its recruitment services has been strong
reflecting the economic upturn.
The fair values of the identifiable assets and liabilities of
the new subsidiary at the date of acquisition were calculated below
as follows:
Fair value of consideration GBP'000
Cash paid 150
Fair value of contingent
consideration 30
Total 180
Book value Fair value
Recognised amounts of identifiable
net assets GBP'000 GBP'000
Tangible assets 32 32
Trade and other receivables 240 240
Cash at bank and in hand 186 186
Trade and other payables (269) (269)
Tax liabilities (9) (9)
Identifiable Net Assets 180 180
===========
Goodwill on acquisition -
===========
Consideration paid in cash 150
Cash and cash equivalents
acquired (186)
Net cash paid relating to
the acquisition (36)
===========
Note: The fair value was calculated in line with the Group's
acquisition policy in note 1. The fair value of the trade
receivables and payables is based on gross contractual amounts as
these are expected to be settled in full within the year.
The summarised income statement of the acquired entity for the
period from the beginning of its financial year on 1 January 2013
to the effective date of acquisition, and for its previous
financial year, is set out below:
Period Year ended
ended 31.12.2012
15.11.2013
Sue Hill GBP'000 GBP'000
Revenue 1,998 2,131
Net profit 30 39
Amounts paid for acquisition of subsidiaries in the Consolidated
Cash Flow Statement is made up as follows:
GBP'000
Cash consideration paid 550
less cash balances acquired (390)
160
==================
The amount of net profit since the acquisition date of acquired
companies included in the consolidated income statement for the
year ended 30 June 2014, excluding apportioned central costs, is as
follows:
TFPL Sue Hill
GBP'000 GBP'000
Revenue 1,797 1,390
Net profit 134 145
======== =========
The revenues and profits of the group for the year, had the
acquisitions made during the year been made at the beginning of the
year, would have been as follows:
Consolidated Pre-acquisition Total for
Statement trading of the year ended
of Comprehensive Sue Hill for 30.6.2014
Income for the period as though
the year ended 1.7.2013 to the acquisition
30.6.2014 19.11.2013 date was 1.7.2013
GBP'000 GBP'000 GBP'000
Revenue 38,786 868 39,654
Operating profit 659 15 674
================== ================ ===================
4 Segment reporting
The Group focuses its internal management reporting on the
following segments:
Northern Operation - The Group's northern hemisphere operations
comprise operations in the UK and Ireland, the United States,
Europe and the Middle East, which are managed and directed from the
London office.
Southern Operation - The Group's southern hemisphere operations
comprise operations in Australia and New Zealand, which are managed
and directed by the Melbourne office.
The Group measures the operating performance of the business
through monthly financial reports on the Northern and Southern
hemisphere segments. These segments are reported because they
reflect the management accounting key indicators which is used to
manage the performance of the business. The Group's chief operating
decision maker is the chief executive officer.
Following the merger with Progility Pty the group has
restructured its internal reporting and now reports based on a
northern hemisphere and southern hemisphere split of operations.
Accordingly the segmental analysis presented for the prior year has
been restated to align with the revised structure.
The Northern hemisphere provides training, recruitment and
consulting services and the Southern hemisphere segment provides
training, consulting services and technology solutions goods and
services.
Segment profit or loss consists of earnings before interest,
tax, and restructuring costs. This is the detail used by the chief
operating decision maker in determining how to allocate
resources.
Year ended 15 months ended
30.6.2014 30.6.2013
Segment
Segment Profit
Revenue by segment Revenue Profit Revenue / (Loss)
GBP'000 GBP'000 GBP'000 GBP'000
Northern hemisphere
operation 13,400 2,732 12,784 2,285
Southern hemisphere
operation 25,386 3,154 39,077 3,502
Central costs (3,593) (5,186)
-------- -------- -------- ----------
Total segment result 38,786 2,293 51,861 601
Highlighted items (1664) (225)
Operating (loss) profit 659 (1,959)
Interest (984) (1,078)
-------- ----------
Loss before tax (325) (3,037)
Adjusting for highlighted
items (Note10)
Non-cash Share option
charges Recurring 3 67
Restructuring items Nonrecurring 1,072 1,263
Impairment charges Recurring 562 1,297
Amortisation charges Recurring 352 185
-------- -------- -------- ----------
1,989 2812
Underlying profit before
tax 1,664 (225)
======== ==========
Underlying operating
profit 2,648 853
======== ==========
Year ended 15 months ended
30.6.2014 30.6.2013
Segment Segment Segment Segment
assets liabilities assets liabilities
GBP'000 GBP'000 GBP'000 GBP'000
Northern Hemisphere 12,376 8,041 12,266 5,836
Southern Hemisphere 14,634 12,221 14,875 14,278
Total assets/(liabilities) 27,010 20,262 27,141 20,114
======== ============= ======== =============
Revenues for the year and prior year split by geographical area
were as follows:
Year ended 15 months ended
30.6.2014 30.6.2013
GBP'000 % GBP'000 %
UK & Ireland 12,627 32.6 9,073 17.5
Australasia 25,033 64.5 39,055 75.4
Europe, Middle East
and Africa 772 2.0 3,233 6.2
Americas - - 400 0.7
Asia 354 0.9 100 0.2
-------- ------ ---------- ------
38,786 100.0 51,861 100.0
======== ====== ========== ======
Note: No individual customer represents more than 10% of the
revenue.
5 Operating (loss)/profit
Operating (loss)/profit is stated after charging:
Year ended 15 months
30.6.2014 ended 30.6.2013
GBP'000 GBP'000
Raw materials and consumables 10,123 10,810
Depreciation 368 488
Amortisation 352 185
Exchange losses / (gains) (163) 256
Operating lease rentals - land
and buildings 619 656
Operating lease rentals - other 112 143
Research and development 85 115
=========== =================
Fees receivable by the Group's auditors were as follows:
Year ended 15 months
30.6.2014 ended 30.6.2013
GBP'000 GBP'000
Audit of financial statements 80 64
Other services relating to taxation 4 37
Corporate finance and other advisory
services 181 35
260 136
=========== =================
6 Finance costs
Year ended 15 months
30.6.2014 ended 30.6.2013
GBP'000 GBP'000
On bank loans and overdrafts 265 213
On shareholder loans 683 819
Amortisation of fair value of
convertible loan 17 -
Arrangement fees and refinancing
costs 19 46
984 1,078
=========== =================
7 Employees' and Directors' remuneration
The average monthly number of employees (including the
Directors) during the year were:
Year ended 15 months
Employed by the Group 30.6.2014 ended 30.6.2013
Number Number
Development and delivery 98 101
Administration and management 46 38
Sales and marketing 69 59
----------- -----------------
213 198
=========== =================
Their total remuneration was as follows:
Year ended 15 months
Group 30.6.2014 ended 30.6.2013
GBP'000 GBP'000
Wages and salaries 11,802 17,306
Social security costs 876 1,155
Pension costs 853 1,040
Share based payments 3 67
----------- -----------------
13,534 19,568
=========== =================
The employees' and Directors' remuneration is reflected in the
financial statements as follows:
Year ended 15 months
Group 30.6.2014 ended 30.6.2013
Restated
GBP'000 GBP'000
Cost of sales 6,560 8,583
Administrative expenses 6,515 9,438
Exceptional items 438 -
Product development capital expenditure 21 147
----------- -----------------
13,534 18,168
=========== =================
Directors' Remuneration
Year ended 15 months
Company 30.6.2014 ended 30.6.2013
GBP'000 GBP'000
Remuneration and other emoluments 516 508
Severance pay - 239
Pension contributions 15 52
----------- -----------------
531 799
=========== =================
GBP'000 GBP'000
Highest paid Director 185 171
----------- -----------------
Two (2013: three) directors are accruing benefits under the
pension scheme. A detailed analysis of Directors' remuneration is
provided on page 13.
Year ended 15 months
Key management personnel emoluments 30.6.2014 ended 30.6.2013
GBP'000 GBP'000
Short term employment benefits 509 479
Other compensation including pension contributions 22 91
Post-employment benefits 3 67
----------- -----------------
534 637
----------- -----------------
8 Pension costs
The Company operates a defined contribution pension scheme in
respect of the Directors and employees. The scheme and its assets
are held by independent managers. The pension charge represents
contributions due from the Company which amounted to GBP838,000
(2013: GBP988,000) plus contributions payable directly to
Directors' and employees' personal pension schemes which amounted
to GBP15,000 (2013: GBP52,000).
9 Tax expense
Year ended 15 months
30.6.2014 ended 30.6.2013
GBP'000 GBP'000
Current tax (benefit)/expense 27 (47)
Adjustment in respect of prior periods (32) (22)
Tax benefit for the period (5) (69)
Deferred tax credit (6) (666)
----------- -----------------
Tax income (11) (735)
=========== =================
Factors affecting the tax charge for the
year
Loss before tax (325) (3,037)
====== ========
Loss before tax multiplied by standard
rate of UK corporation tax of 22.5% (2013:
23.8%) (73) (723)
Effects of:
Non-deductible expenses 131 86
Share option adjustment 1 16
Provisions adjustment 11 (32)
Recognition of tax losses (6) 0
Adjustment in respect of prior periods (33) (22)
Overseas tax differences (44) (60)
------ --------
Tax (income)/charge for period (11) (735)
====== ========
10 Highlighted costs
The Group incurred costs during the period which we have
highlighted as non-operating costs. These costs include transaction
costs, restructuring costs and other strategic, non-cash items
including amortization of intangibles, impairment, or non-recurring
acquisition expenses and non-trading items. Our ongoing review of
the business has identified opportunities to reduce costs that we
anticipate will translate into future profitability following the
acquisitions during the year. The management team has also
tightened up a number of business processes and eliminated certain
operating expenses and capital expenditure that have demonstrated
limited return. This has resulted in the following charges and
intangibles impairment as follows:
15 months
Year ended ended
30.6.2014 30.6.2013
GBP'000 GBP'000
Non-cash share option charge 3 67
Restructuring costs incurred - 1,263
Acquisition and merger costs 1,072 -
Impairment of intangibles 562 1,297
Amortisation charges 352 185
----------- -----------
Total highlighted costs 1,989 2,812
=========== ===========
11 Loss per share
Earnings per share is calculated by dividing loss attributable
to shareholders by the weighted average number of shares in issue
during the year.
Year ended 15 months ended
30.6.2014 30.6.2013
GBP'000 GBP'000
Loss for the period attributable to equity shareholders (315) (2,302)
============ ================
Weighted average shares 199,666,880 193,544,625
Weighted average shares for diluted earnings per share 199,666,880 193,544,625
============ ================
Basic loss per share (0.16)p (1.19)p
Diluted loss per share (0.16)p (1.19)p
Potential ordinary shares arising under potential conversion of
the convertible loan and share options outstanding are considered
anti-dilutive for the year ended 30 June 2014 and the period ended
30 June 2013.
12 Property, plant and equipment
Fixtures, fittings Computer equipment
Group and equipment & software Property Total
Cost GBP'000 GBP'000 GBP'000 GBP'000
At 31.3.2012 72 1,164 - 1,236
Additions 31 856 48 935
Disposals (45) (244) - (289)
Foreign exchange - (110) - (110)
------------------- ------------------- --------- --------
At 30.6.2013 58 1,666 48 1,772
Additions 4 333 - 337
Acquired with subsidiary 11 22 - 33
Disposals (45) (193) - (238)
Foreign exchange - (127) (2) (129)
------------------- ------------------- --------- --------
At 30.6.2014 28 1,701 46 1,775
------------------- ------------------- --------- --------
Depreciation
At 31.3.2012 39 550 - 589
Charge for the period 20 456 12 488
Disposals (38) (203) - (241)
Foreign exchange - (50) - (50)
------------------- ------------------- --------- --------
At 30.6.2013 21 753 12 786
Charge for the year 15 344 9 368
Disposals (26) (128) - (154)
Foreign exchange - (86) - (86)
------------------- ------------------- --------- --------
At 30.6.2014 10 883 21 914
------------------- ------------------- --------- --------
Net Book Value
At 30.6.2014 18 818 25 861
=================== =================== ========= ========
At 30.6.2013 37 913 36 986
=================== =================== ========= ========
At 31.3.2012 33 614 - 647
=================== =================== ========= ========
Fixtures, fittings Computer equipment
Company and equipment & software Total
Cost GBP'000 GBP'000 GBP'000
At 31.3.2012 71 222 293
Additions 29 29 58
Disposals (45) (59) (104)
------------------- ------------------- --------
At 30.6.2013 55 192 247
Additions 4 97 101
Disposals (44) (65) (109)
------------------- ------------------- --------
At 30.6.2014 15 224 239
------------------- ------------------- --------
Depreciation
At 31.3.2012 38 73 111
Charge for the period 20 59 79
Disposals (38) (59) (97)
------------------- ------------------- --------
At 30.6.2013 20 73 93
Charge for the year 13 61 74
Disposals (26) (57) (83)
------------------- ------------------- --------
At 30.6.2014 7 77 84
------------------- ------------------- --------
Net Book Value
At 30.6.2014 8 147 155
=================== =================== ========
At 30.6.2013 35 119 154
=================== =================== ========
At 31.3.2012 33 149 182
=================== =================== ========
13 Intangible assets
Acquired Product development
customer and intellectual
Group Goodwill Brand relationships property Total
Cost GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31.3.2012 11,526 1,330 - 4,594 17,450
Additions 559 - 381 241 1,181
Disposals (26) - - (362) (388)
Foreign exchange (76) (92) - (31) (199)
--------- -------- --------------- -------------------- --------
At 30.6.2013 11,983 1,238 381 4,442 18,044
Additions 163 - 137 127 427
Foreign exchange (90) (105) - (38) (233)
--------- -------- --------------- -------------------- --------
At 30.6.2014 12,056 1,133 518 4,531 18,238
Impairment and Amortisation
At 31.3.2012 3,278 - - 1,084 4,362
Impairment charge for
the period - - - 1,297 1,297
Amortisation charge
for the period - - - 185 185
Foreign exchange - - - (10) (10)
--------- -------- --------------- -------------------- --------
At 30.6.2013 3,278 - - 2,556 5,834
Impairment charge for
the year 562 - - - 562
Amortisation charge
for the year - - 76 276 352
Foreign exchange - - - (13) (13)
--------- -------- --------------- -------------------- --------
At 30.6.2014 3,840 - 76 2,819 6,735
--------- -------- --------------- -------------------- --------
Net Book Value
At 30.6.2014 8,216 1,133 442 1,712 11,503
========= ======== =============== ==================== ========
At 30.6.2013 8,705 1,238 381 1,886 12,210
========= ======== =============== ==================== ========
At 31.3.2012 8,248 1,330 - 3,510 13,088
========= ======== =============== ==================== ========
Goodwill by Cash Generating Units
Goodwill is made up of the historic acquired training businesses
of GBP7,097,000, goodwill within the Progility Pty Ltd business of
GBP958,000 and goodwill within the recruitment division of
GBP161,000.
Company Goodwill Product development and intellectual property Total
Cost GBP'000 GBP'000 GBP'000
At 31.3.2012 11 3,153 3,164
Additions - 241 241
Disposals - - -
--------- ---------------------------------------------- --------
At 30.6.2013 11 3,394 3,405
Additions - 127 127
--------- ---------------------------------------------- --------
At 30.6.2014 11 3,521 3,532
Impairment and Amortisation
At 31.3.2012 11 479 490
Impairment charge for the period 1,123 1,123
Amortisation charge for the period - 224 224
--------- ---------------------------------------------- --------
At 30.6.2014 11 1,826 1,837
Impairment charge for the period - - -
Amortisation charge for the period - 182 182
--------- ---------------------------------------------- --------
At 30.6.2014 11 2,008 2,019
Net Book Value
--------- ---------------------------------------------- --------
At 30.6.2014 - 1,513 1,513
--------- ---------------------------------------------- --------
At 30.6.2013 - 1,568 1,568
--------- ---------------------------------------------- --------
At 31.3.2012 - 2,674 2,674
--------- ---------------------------------------------- --------
Intangible capitalised product
The impairment charge of GBPnil (2013: GBP1.1 million) which was
based on value in use at a discount rate of 10% (2013:10%), arose
in the training division as a result of prior year under
performance of the division. Factors contributing to the prior
year's underperformance include: the macro environment, the further
investment required to address the digital assets and cost
reduction measures at all levels, including senior management.
Forecasts and assumptions which incorporate these factors have been
used in the calculation of this year's impairment review which
resulted in no further impairment.
Additions
The additions in respect of product development and intellectual
property relate to products and intellectual property developed
internally.
Impairment
An analysis of Goodwill by cash generating unit is given above
in note 13. Goodwill and brands are not amortised but tested
annually for impairment with the recoverable amount being
determined from value in use calculations of the relevant cash
generating units. The key assumptions for the value in use
calculations are those regarding the discount rate, growth rates
(in line with underlying growth of the industry) and forecasts of
income and costs.
Value in use is calculated on the basis of projected cash flows
derived from forecasts for the ensuing year based on past
experience, with subsequent years including nominal rates of sales
and cost growth. Management used modest nominal rates of sales
growth (between 2%-3%, appropriate to the market of the cash
generating unit) and cost inflation (2%) for the future
extrapolated period, as we believe the market is sufficiently
competitive to adopt this approach. These forecast cash flows are
adjusted to present day values at a discount rate based on a
weighted average cost of capital. Management believes 10% is the
appropriate discount rate. This rate is consistent for all cash
generating units on the basis that they all operate in similar
markets and are exposed to similar risks.
The Group assessed whether the carrying value of goodwill and
brands was supported by the discounted cash flow forecasts of the
cash generating unit based on financial forecasts approved by
management, taking in to account both past performance and
expectations for future market developments. In assessing the cash
generating units the Group reviewed the management forecasts.
Management believe the low growth rate used does not exceed the
growth rate of the industry and in the primary markets served by
the Group. The management forecasts include restructuring which has
been completed prior to 30 June 2014.
In relation to the Obrar acquisition in 2013, following aslower
than anticipated take up of new client contracts, management
concluded that performance target would not be met, and
consequently that the goodwill was impaired and recognised a charge
of GBP562,000 which fully impaired the goodwill arising on the
acquisition.
In evaluating the recoverable amount, using the discounted cash
flow methodology, which is based on making assumptions and
judgements on forecasts, margins, discount rates and working
capital needs. Management notes that a reasonable potential change
in any of these associated factors, say plus or minus 5%, would not
lead to any recognition of an impairment charge given the amount of
headroom available.
GBP'000
Goodwill arising on consolidation 8,214
Other intangibles
Brand 1,133
Acquired customer relationships 442
Product development and intellectual
property 1,712
--------
3,287
11,501
========
14 Investments
Shares in group
undertakings
(at cost)
Cost GBP'000
At 31.3.2012 7,131
Additions 1,330
(Disposals) / Adjustments (27)
----------------
At 30.6.2013 8,434
Additions 18,687
(Disposals) / Adjustments (562)
----------------
At 30.6.2014 26,559
================
Additions: On 1(st) July 2013 the Group completed the first of
three transactions during the period, with the addition of
recruitment services business TFPL Limited for a consideration of
GBP0.4 million. Then on 7(th) October 2013 we completed the
strategic merger of our Company with the technology solutions group
Progility Pty Ltd ("Progility Technologies") for a consideration of
GBP15.97 million. Further shares acquired totalled GBP2.13 million.
In addition, on 16(th) November 2013, the Group acquired a further
recruitment services business, Sue Hill Recruitment and Services
Limited for a total consideration of GBP0.18 million. The
aggregated of these additions totalled GBP18.69 million.
The Company has the following subsidiary undertakings:
Name Principal Activity Holding Registered
Progility Pty Ltd Trading 100% Australia
Comms Aust Pty Ltd Trading 100% Australia
Comms Aust No 1 Pty Ltd Trading 100% Australia
ILX Group Inc Trading 100% USA
ILX Group Pty Ltd Trading 100% Australia
ILX Consulting Pty Ltd Trading 100% Australia
ILX Group Ltd Trading 100% New Zealand
ILX Consulting JLT Trading 100% UAE (Free Zone)
Obrar Ltd Trading 100% England & Wales
TFPL Ltd Trading 100% England & Wales
Sue Hill Recruitment & Service
Ltd Trading 100% England & Wales
Progility Finco Ltd Trading 100% England & Wales
ILX Group plc Non-trading 100% England & Wales
Progility Health Ltd Non-trading 100% England & Wales
Computa-Friendly Ltd Non-trading 100% England & Wales
Corporate Training Solutions
Ltd Non-trading 100% England & Wales
CTG Exam Training Ltd Non-trading 100% England & Wales
Customer Projects Ltd Non-trading 100% England & Wales
Intellexis International Ltd Non-trading 100% England & Wales
Progility Consulting Ltd Non-trading 100% England & Wales
Progility Training Ltd Non-trading 100% England & Wales
Mindscope Ltd Non-trading 100% England & Wales
Mount Lane Training & Implementation
Solutions Ltd Non-trading 100% England & Wales
The Corporate Training Group
Ltd Non-trading 100% England & Wales
Note: Only the Trading entities above require to be audited. The
other entities are non-trading or soon to be dormant with no
activity in the period of the report.
15 Deferred Taxation
The following are the major deferred tax assets recognised by
the Group.
Trading Losses Other timing differences Total
GBP'000 GBP'000 GBP'000
At 31.3.2012 9 620 629
Credit to income 481 185 666
Exchange difference - (43) (43)
--------------- ------------------------- --------
At 30.6.2013 490 762 1,252
Credit to income 6 - 6
Exchange difference (24) (80) (104)
--------------- ------------------------- --------
At 30.6.2014 472 682 1,154
=============== ========================= ========
16 Inventories
Group At 30.6.2014 At 30.6.2013
GBP'000 GBP'000
Raw materials 808 354
Work in progress - -
Finished goods 2,443 1,714
3,251 2,068
============= =============
A total of GBP10.1 million of inventories was included as an
expense (2013: GBP10.8 million). All group inventories form part of
the assets pledged as security in respect of bank loans.
17 Trade and other receivables
Group At 30.6.2014 At 30.6.2013
GBP'000 GBP'000
Trade receivables 6,608 7,354
Other receivables 102 180
Prepayments 1,012 567
Accrued revenue 91 76
7,813 8,177
============= =============
At 30.6.2014 At 30.6.2013
Company GBP'000 GBP'000
Trade receivables 770 638
Other receivables 38 6
Prepayments 179 276
Accrued revenue 60 7
1,047 927
============= =============
The amount of receivables past due but not impaired at the
balance sheet date was GBP425,000 (2013: GBP378,000). The
receivables are aged as follows: Debt Aged 60 days and over 25%, up
to 59 days 24%, and current up to 29 days, 51%.
18 Trade and other payables
At 30.6.2014 At 30.6.2013
Group GBP'000 GBP'000
Trade payables 5,310 5,226
Other taxes and social security costs 920 696
Accruals 1,372 1,219
Deferred revenue 3,200 3,453
10,802 10,594
============= =============
HSBC 3-year term loan (see note 20) - 511
HSBC 2-year revolving credit facility
(see note 20) - 700
HSBC 2-year term loan (see note 20) 1,318 -
5-year convertible shareholder loan 342 325
Shareholder loans 1,774 1,591
Bank overdraft 265 -
3,699 3,127
============= =============
Corporation tax 55 69
Contingent consideration (see note 19) 30 307
Provisions for employee benefits 1,028 969
Company At 30.6.2014 At 30.6.2013
GBP'000 GBP'000
HSBC 3-year term loan (see note 20) - 511
HSBC 2-year revolving credit facility (see
note 20) - 700
HSBC 2-year term loan (see note 20) 1,318 -
Bank overdraft 265 -
5-year convertible shareholder loan 342 325
Trade payables 731 699
Amounts owed to group undertakings 3,389 642
Other taxes and social security costs 242 303
Contingent consideration (see note 19) 30 307
Accruals 539 725
Deferred revenue 1,236 1,355
8,092 5,567
============= =============
At 30.6.2014 At 30.6.2013
Group GBP'000 GBP'000
18% Redeemable loan note 2016 2,133 -
Shareholder loans 2,442 4,611
4,575 4,611
================ ==================
Contingent consideration (see note 19) - 289
Provisions for
Employee benefits 37 57
Deferred tax 91 91
128 148
================ ===============
19 Contingent consideration
Company and Group At 30.6.2014 At 30.6.2013
GBP'000 GBP'000
Current liabilities: Contingent
consideration
Acquisition of Obrar Ltd - 273
Acquisition of Sue Hill 30 -
Acquisition of rights to software
products - 34
30 307
================ ================
Non-current liabilities: Contingent
consideration
Acquisition of Obrar Ltd - 289
Acquisition of rights to software
products - -
- 289
================ ================
In January 2010 the Group purchased the full intellectual
property rights to certain software products. Under the purchase
agreement, a further payment equal to 20% of the gross profits on
sales of these products over a 4-year period ended January 2014 is
due. The payments are capped at GBP335,000, and no further payments
are required after the expiry of the 4-year period.
20 Bank loans and facilities
At 30.6.2014 At 30.6.2013
GBP'000 GBP'000
Total loans
Repayable in one year or less (note
16) 3,699 3,127
Repayable in more than one year 4,575 4,611
8,274 7,738
================ ================
Loans repayable within one year or less include HSBC GBP1.6
million and shareholder loans of GBP2.1 million. Loans repayable in
more than one year relate to shareholder loans.
The HSBC loan and additional facilities of GBP1.6m, which are
outstanding at the 30 June 2014 are secured by a Composite
Guarantee granted by the Group in favour of HSBC Bank Plc dated 29
August 2014, which includes a Fixed Charge over all present
freehold and leasehold property; a First Fixed Charge over book and
other debts, chattels, goodwill and uncalled capital, both present
and future; and a First Floating Charge over all assets and
undertakings both present and future.
The HSBC 2-year amortising GBP1.5m term loan which was issued in
January 2014, replaced the existing revolving facility. The Term
Loan carries an interest rate of 4.15% above Base Rate and has
eighteen months left to run as at the balance sheet date.
Repayments are due quarterly in arrears. The facility is repayable
on demand by its bankers.
On 17 December 2012 ILX Group plc entered into an agreement with
Praxis Trustees Limited ("Praxis Trustees"), a subsidiary of the
Praxis Group, to raise GBP0.4 million by way of a five year
convertible loan. The loan note will be convertible into Ordinary
Shares at a price of 10 pence per Ordinary Share and have a one for
one warrant attached, exercisable at 10 pence per Ordinary Share,
giving Praxis the potential to subscribe for a total of up to 8
million new Ordinary Shares.
The Loan Note conversion rights cannot be exercised until the
Company has all necessary authorities to enable conversion free
from pre-emption rights. Neither the Loan Note conversion rights
nor the warrants can be exercised unless either the exercising
party will not incur a City Code mandatory offer obligation or it
obtains a dispensation from such obligation.
Of the total GBP1.6 million in bank facilities, drawn at the
balance sheet date, including an overdraft of GBP0.25 million,
GBP0.8 million is expected to be repaid during the current
financial year, comprising quarterly term loan repayments.
21 Share capital and reserves
As at 30.6.2014 As at 30.6.2013
GBP'000 GBP'000
Allotted, called up and fully paid equity:
Ordinary shares of 10p each 19,967 3,993
=================== ===================
The movement on allotted called up and fully paid shares is
reflected below:
Issued and fully paid ordinary shares Number of ordinary GBP Amount
of 10 pence each shares
At 31.3.2012 27,593,376 2,759,338
Issue by placing 12,340,000 1,234,000
At 30.6.2013 39,933,376 3,993,338
------------------------------------------ ---------------------- --------------
Issued on merger 159,733,500 15,973,350
At 30.6.2014 199,666,886 19,966,688
------------------------------------------ ---------------------- --------------
Share premium account
This reserve records the consideration premium for shares issued
at a value that exceeds their nominal value, less any costs
incurred by the Company relating directly to the issue of these
shares.
Other reserve
This reserve records the difference between the proceeds of
issue of the convertible loan note and the fair value assigned to
the liability component, representing the embedded option to
convert the liability into equity of the Group, as outlined in note
19.
Merger reserve
This reserve records the difference between the nominal value of
the shares issued and fair value of other consideration given and
the nominal value of the share capital and other reserves received
in a business combination under common control.
Own shares in trust
This reserve records the purchase cost of shares by Investec
Trust held in the Group's medium term incentive plan trust. Further
details are contained in note 22.
Share option reserve
This reserve records the cumulative charges to profit with
respect to unexercised share options.
22 Share options and own shares in trust
Share options
As at 30 June 2014, 14 employees (including former Directors)
held options over a total of 6,450,000 (2013: 790,936) ordinary
shares at an average exercise price of 14.2p (2013: 9.5p), as
follows:
Number Number
of shares of shares
under Granted Forfeited under
Date of option during during option Exercise Expiry
grant at 30.6.2013 the year the year at 30.6.2014 Price Date
01-Feb-04 20,000 - (20,000) - 70p 01-Feb-14
24-Dec-04 15,000 - - 15,000 90p 24-Dec-14
15-Jul-05 5,000 - - 5,000 90p 15-Jul-15
12-Jun-06 10,000 - - 10,000 90p 12-Jun-16
22-May-07 50,000 - (10,000) 40,000 53p 22-May-17
31-Oct-09 240,000 - (240,000) - 0p 31-Oct-19
01-Jun-10 80,000 - (80,000) - 0p 01-Jun-20
24-Feb-11 30,000 - - 30,000 25p 24-Feb-21
20-Apr-11 340,936 - (340,936) - 0p 20-Apr-21
06-Nov-13 - 6,350,000 (1,050,000) 5,300,000 10p 05-Nov-18
790,936 6,350,000 (1,740,936) 5,400,000
============== ========== ============ ==============
The weighted average exercise price of these options, and the
number exercisable at the end of the year, were as follows:
Options
outstanding
Options Options Options (including
Options granted exercised forfeited Options those
outstanding during during during exercisable exercisable)
at 30.6.2013 the year the year the year at 30.6.2014 at 30.6.2014
Number of shares under
option 790,936 6,350,000 - (1,740,936) 100,000 5,300,000
Weighted average exercise
price 9.5p 10p - 2.8p 55.7p 10.7p
at 31.3.2012 at 30.6.2013 at 30.6.2013
Number of shares under
option 3,267,760 - (1,863,824) (613,000) 790,936 790,936
Weighted average exercise
price 7.4p - 0.0p 27.4p 9.5p 9.5p
The weighted average time to expiry of the share options
outstanding at 30 June 2014 was 3.8 years (2013: 4.3 years).
Details of individual expiry dates are shown above.
All options granted prior to 2013 are exercisable between 2 and
10 years from the date of grant. Options granted in 2013 are
exercisable in tranches beginning between 1 and 3 years from the
date of grant and expire after 5 years. Details of Directors' share
options can be found on page 13. No further options have been
granted during 2014. The Company's share price on 30 June 2014 was
5.63p (on 30 June 2013: 11.25p).
The fair value of all options granted is recognised as an
employee expense with a corresponding increase in equity. The
employee expense is recognised equally over time from grant until
vesting of the option. The employee expense for the year was
GBP3,000 (2013: GBP67,000). The fair value has been measured using
the Black-Scholes model. The expected volatility is based in the
historic volatility adjusted for any expected changes to future
volatility. The material inputs into the model have been:
Granted Granted Granted Granted Granted
in year in year in year in year in year
ended ended ended ended ended
31.3.2009 31.3.2010 31.3.2011 31.3.2012 30.6.2014
Average share price
at grant 22.5p 35.0p 20.1p 25.5p 8.4p
Average exercise
price 2.9p 1.4p 2.0p 10.2p 10.0p
Expected volatility 48% 62% 68% 55% 47%
Expected life 3.5 years 3.5 years 3.5 years 3.5 years 6 years
Expected dividend
yield 5.2% 5.4% 0.0% 6.0% 0.0%
Risk-free rate of
return 5.0% 1.0% 1.0% 1.0% 1.2%
Own shares in trust
At 30 June 2014, the Company held 49,231 (2013: 49,231) of its
own ordinary shares in a trust, administered by Investec Trust
Guernsey Ltd. The shares are held in trust and represented 0.001%
of the total called up share capital. These shares will be utilised
as required to satisfy share options granted to Directors and other
senior management on vesting and exercise.
23 Related party transactions
The Company has a related party relationship with its
subsidiaries, its Directors, and other employees of the Company
with management responsibility. There are no transactions with
related parties, that have not already been disclosed, which are
not members of the Group.
The Company made payments to Octopus Investments Ltd of GBPnil
(2013: GBP12,500) in respect of fees charged for the services of
Damien Lane as Non-Executive Director.
The parent company charged for sales of e-learning licences and
management charges to its subsidiaries in the amounts of GBP480,320
and GBP595,938, respectively. These amounts, along with any
intercompany payable and receivable balances, are eliminated upon
consolidation.
The issue of loans and warrants to Praxis Trustees and MMILT
(together the "Transactions") are classified as related party
transactions. The Group made repayments in the year to Praxis of
GBP2,133,000 (2013: GBP1,201,000) and issued new loans of
GBP2,133,000 (2013: GBP1,032,000). The Group made repayments in the
year to MMILT of GBP18,000 (2013: GBP244,000) and issued new loans
of GBPnil (2013: GBP521,000).
24 Ultimate parent undertaking and controlling interest
Praxis Trustees Limited, as trustee of the DNY Trust, which
holds the majority of shares of the company, is considered to be
the ultimate controlling party of the company.
25 Operating leases
At 30 June 2014 the Group had minimum commitments under
non-cancellable operating leases as set out below:
Land and Land and
buildings buildings
30.6.2014 30.6.2013
Group GBP'000 GBP'000
Due within one year 570 400
Due in second to fifth year 898 230
Total minimum lease payments 1,468 630
=========== ===========
Land and Land and
buildings buildings
30.6.2014 30.6.2013
Company GBP'000 GBP'000
Due within one year 231 160
Due in second to fifth year 179 94
Total minimum lease payments 410 254
=========== ===========
The Group leases office spaces under operating leases. The lease
terms typically range from one year to ten years. There are no
leases with more than five years to run from the balance sheet
date.
The amounts shown above assume all leases are broken at the
earliest opportunity and include any penalty payments that would
result from exercising the early break clauses.
26 Capital commitments
There were no material capital commitments at the end of the
year (2013: GBP0).
27 Contingent Liability
The Company has received a letter before action in respect of a
contractual dispute The Company's exposure is not expected to be
material and steps are being taken to mitigate any potential loss.
Management believes the claim has no merit whatsoever and has
indicated their intention to vigorously defend any such a
claim.
28 Post Balance Sheet Review
Acquisition of Starkstrom Group Limited ("Starkstrom")
Starkstrom operates a UK based project management services'
company specialising in manufacturing and supplying medical
infrastructure equipment for operating theatres and intensive care
units. The entire share capital was acquired on the 14 July 2014
for an aggregate consideration, payable in cash and loan notes, of
GBP9.68 million from its owner managers. This acquisition will
provide a strong hub around which to focus the Group's workin the
healthcare sector as a provider of project management services and
solutions to hospitals. Currently, Progility Technologies Pty Ltd.
is providing communications and systems integration products and
services to hospitals in Australia and the Directors believe that
there are opportunities to complement the technology being employed
by Starkstrom's complete solutions for operating theatres and
intensive care units. The transaction creates scope for
collaboration on product development and the opportunity to use
Progility's international reach to extend Starkstrom's business
beyond the UK into the Middle East and Australasia.
The consideration paid was GBP6.96m in cash on completion and
the issue of GBP2.72m of zero coupon loan notes repayable in four
half-yearly tranches over the two years following Completion. The
loan notes will be convertible into new ordinary Progility shares,
at the prevailing market price, in the event of non-payment.
The preliminary accounting for the Starkstrom acquisition is
still in progress and valuations of the assets acquired are being
prepared.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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