TIDMDRUM
28 September 2021
Drumz plc
('Drumz' or the 'Company')
Interim Results to 30 June 2021
CHAIRMAN'S STATEMENT
I am pleased to present the Company's Interim Results for Drumz, which is
focused on investment in the technology sector, for the six months ended 30
June 2021.
Results and performance
The Group's results for the six months ended 30 June 2021 showed revenue of £
18,000 (2020: £Nil) and an operating loss of £115,000 (2020: loss of £36,000).
At 30 June 2021 the two principal assets of the Group were its holding in
Acuity Risk Management Limited ("Acuity"), an award winning business
specialising in risk management and cybersecurity and its legacy holding in KCR
Residential REIT plc ("KCR"), a company listed on AIM, which owns rented
property in the private rented residential sector, typically in blocks of
studio, one and two bedroomed apartments which are rented to private tenants in
the UK.
Acuity continues to perform well and in September 2021, Drumz exercised its
option to acquire a further 5% of Acuity for a cash consideration of £125,000.
As a result, Drumz now owns 25% of Acuity's share capital. Acuity's principal
product is STREAMT, which is used by private and public sector clients to
manage their cyber security and other enterprise risks. Acuity is in a sector
where customer demand is exceptionally strong, as more businesses seek to
protect their data for financial, reputational and regulatory reasons. Demand
for Acuity's proprietary software continues to grow and further details of the
progress achieved by the company are set out in the Chief Executive's Report.
The share price performance of KCR in the six months ended 30 June 2021
continued to be disappointing. The value of Drumz's holding in KCR at 30 June
2021 was £427,000 (31 December 2020: £767,000) representing a further book loss
on investments of £146,000 (2020: loss of £414,000). I am pleased to report
that in recent weeks the KCR share price has improved and at the date of this
announcement, the book loss suffered in the first half had been eliminated.
Principally as a result of the KCR book loss, the Group's loss before and after
taxation amounted to £261,000 (2020: £450,000). The basic and diluted loss per
share amounted to £0.08p (2020: loss £0.36p). No dividend has been declared.
At 30 June 2021 the Group had cash resources of £380,000 (2020: £25,000) and
shareholders' funds of £1,276,000 (2020: £754,000).
Macroeconomic factors
The effects of the global COVID-19 pandemic continue to be felt on the world's
economy and it remains extremely difficult to quantify what effect the broader
impact of this pandemic will have on business in the future.
Outlook
We continue to be extremely pleased with the progress at Acuity. The commercial
infrastructure of Acuity has been overhauled and a number of significant new
staff hires have been made. The improvement in the number and the quality of
the sales leads Acuity is now generating is testament to the progress that has
been made and bodes well for the future. We continue to look for new investment
opportunities and I would like to take this opportunity to thank my colleagues
for their continued support.
Simon Bennett
Chairman
27 September 2021
Chief Executive's Report
Existing portfolio
Acuity Risk Management
The focus has been on working with the Acuity management team to put in solid
foundations, which will enable Acuity to grow as quickly as possible in its
market, risk management for cybersecurity. The main drivers of value of such
companies which operate a Software as a Service (SaaS) business model, are
scale and revenue growth rates. It takes time and effort to get this right and
a lot of credit for the progress that has been made must go to the team at
Acuity.
In the period, Acuity completed its financial year end and the progress made in
commercialising its activities has begun to show through, with a 27% rise in
SaaS revenues to £1.2m, a 97% rise in contracted future revenues to £2.2m.
Recently, Acuity was identified by a Gartner survey, Hype Cycle for Cyber and
IT Risk Management, 2021. I am also delighted to be able to report that the
highly influential global research, Gartner's peer insightsT, https://
www.gartner.com/reviews/market/it-risk-management-solutions/vendor/
acuity-risk-management/product/stream-cyber-risk-platform recognises Acuity's
principal product STREAMT as being in the top three products in IT risk
management.
KCR
As referred to in the Chairman's statement, the share price of our legacy
investment in KCR has continued to be disappointing. However, it is an asset
backed company, and KCR's share price has been trading at a significant
discount to its stated net asset value per share. I also note that there has
been a significant improvement in the share price in recent weeks, as KCR moves
towards positive monthly cashflows.
New investment activity
In order to achieve good rates of return for shareholders, the focus is on
investing in and acquiring established software businesses with an enterprise
product sold into the business-to-business market, where Drumz can use its
expertise to transform the value. We continue to look actively for investment
opportunities.
Outlook
We continue to be pleased with the progress being made at Acuity, where Drumz's
strategy for delivering value enhancement is starting to bear fruit. Our
search for new investment opportunities continues and I look forward to being
able to report on the progress made in the coming months.
Angus Forrest
Chief Executive
For further information please
contact:
Drumz Plc www.drumzplc.com
Angus Forrest +44 (0) 20 3582 0566
WH Ireland (NOMAD & Broker) www.whirelandcb.com
Mike Coe / Sarah Mather 020 7220 1666
Peterhouse Capital Limited (Joint
broker)
Lucy Williams / Duncan Vasey 020 7469 0936
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
6 months 6 months year to
to 30 to 30 31
June 2021 June 2020 December
2020
Note £'000 £'000 £'000
Continuing operations
Revenue 18 - 12
Cost of sales - - -
Gross profit 18 - 12
Administrative expenses (133) (36) (161)
Operating loss 5 (115) (36) (149)
Loss on investments (146) (414) (608)
Loss before and after taxation 5 (261) (450) (757)
Loss for the period attributable to shareholders of the (261) (450) (757)
company
Total comprehensive income attributable to shareholders (261) (450) (757)
of the company
Earnings per share
Basic and diluted earnings per share from total and 4 (0.08)p (0.36)p (0.36)p
continuing operations
Diluted earnings per share is taken as equal to basic earnings per share as the
Company is loss making and the average share price during the period is lower
than the exercise price and therefore the effect of including share options is
anti-dilutive.
Condensed consolidated statement of financial position
Unaudited Unaudited Audited as
as at 30 as at 30 at 31
June 2021 June 2020 December
2020
Note £'000 £'000 £'000
ASSETS
Non-current assets
Investments at fair value through profit or loss 6 927 767 1,073
927 767 1,073
Current assets
Trade and other receivables 20 9 14
Cash and cash equivalents 380 25 491
400 34 505
Total assets 1,327 801 1,578
LIABILITIES
Current liabilities
Trade and other payables 51 47 60
Total liabilities 51 47 60
Net assets 1,276 754 1,518
EQUITY
Share capital 2,613 2,392 2,613
Share premium account 8,039 7,189 8,039
Share option reserve 19 - -
Convertible loan 88 88 88
Merger reserve 1,012 1,012 1,012
Retained earnings (10,495) (9,927) (10,234)
Total equity attributable to shareholders of the company 1,276 754 1,518
Condensed consolidated statement of changes in equity
Share Share
Share premium option Convertible Merger Retained Total
capital account Reserve loan reserve earnings equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 January 2020 2,392 7,189 __ 88 1,012 (9,477) 1,204
Total comprehensive profit - - __ - - (450) (450)
Balance at 30 June 2020 2,392 7,189 __ 88 1,012 (9,927) 754
Total comprehensive loss - - __ - - (307) (307)
Issue of shares net of costs 221 850 1,071
Balance at 31 December 2020 2,613 8,039 __ 88 1,012 (10,234) 1,518
Total comprehensive loss - - - - (261) (261)
Share option reserve __ __ 19 __ __ __ 19
Balance at 30 June 2021 2,613 8,039 19 88 1,012 (10,495) 1,276
Condensed consolidated statement of cash flows
Unaudited 6 Unaudited Audited
months to 30 6 months year to
June 2021 to 30 31
June 2020 December
2020
£'000 £'000 £'000
Cash flows from operating activities
(Loss)/profit before taxation (261) (450) (757)
Adjustments for:
Fair value adjustment for listed investments 146 414 608
Share option reserve
19
Changes in working capital:
- (Increase)/decrease in trade and other receivables (6) (4) (2)
- (Decrease)/increase in trade and other payables (9) (31) (25)
Net cash used in operating activities (111) (71) (176)
Cash flows from investing activities
Purchase of investments (500)
Cash flows from financing activities
Cash raised through issue of shares (net of transaction costs) 1,071
Net increase (decrease) in cash and cash equivalents (111) (71) 395
Cash and cash equivalents at beginning of period 491 96 96
Cash and cash equivalents at end of period 380 25 491
1. Nature of operations and general information
The principal activity of the Company is investing in technology companies,
which offer value creation opportunities over the short and medium term.
The Company is incorporated and domiciled in the United Kingdom. The address of
Drumz plc's registered office is Burnham Yard, London End, Beaconsfield,
Buckinghamshire, HP9 2JH.
Drumz plc's shares are listed on AIM, a market operated by the London Stock
Exchange. The condensed consolidated interim financial report was approved for
issue by the Board of Directors on 27 September 2021.
The financial information set out in this interim financial report does not
constitute statutory accounts as defined in Sections 434(3) and 435(3) of the
Companies Act 2006. The Company's statutory financial statements for the year
ended 31 December 2020 have been filed with the Registrar of Companies and are
available at www.drumzplc.com. The auditor's report on those financial
statements was unqualified and did not contain any statement under Section 498
(2) or Section 498(3) of the Companies Act 2006.
2. Basis of preparation
The condensed consolidated interim financial report has been prepared in
accordance with the requirements of the AIM Rules for Companies. As permitted,
the Company has chosen not to adopt IAS 34 "Interim Financial Statements" in
preparing this interim financial information. The condensed consolidated
interim financial statements should be read in conjunction with the annual
financial statements for the year ended 31 December 2020. The interim financial
statements have been prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the United Kingdom which have not
differed from the previously EU-endorsed IFRS, and hence the previously
reported accounting policies still apply.
The Directors believe that whilst the impact of COVID-19 appears to be reducing
there is still significant uncertainty as to what foreseen or unforeseen action
or actions the Company may be required to take in order to respond to any
circumstances that may arise in the future. They have considered the possible
impact of COVID-19 on Drumz and its business activities, which are now
increasingly focussed on software businesses, many businesses in the software
sector can be operated remotely in a virtual environment which should reduce
the impact of COVID-19 on their activities.
Going concern
The Directors, having made appropriate enquiries, consider that adequate
resources exist for the Company and Group to continue in operational existence
for the foreseeable future and that, therefore, it is appropriate to adopt the
going concern basis in preparing the condensed consolidated interim financial
statements for the period ended 30 June 2021.
Risks and uncertainties
The Board continuously assesses and monitors the key risks of the business. The
key risks that could affect the Group's medium term performance and the factors
that mitigate those risks have not substantially changed from those set out in
the Company's 2020 Annual Report and Financial Statements, a copy of which is
available on the Company's website: www.drumzplc.com.
Critical accounting estimates
The preparation of condensed consolidated interim financial report requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the end of the reporting period. Significant items
subject to such estimates are set out in the Company's 2020 Annual Report and
Financial Statements. The nature and amounts of such estimates have not changed
significantly during the interim period.
3. Accounting policies
Except as described below, the same accounting policies, presentation and
methods of computation have been followed in these condensed consolidated
interim financial statements as were applied in the preparation of the Group's
annual financial statements for the year ended 31 December 2020.
3.1 Changes in accounting policy and disclosures
(a) Accounting developments during 2021
The International Accounting Standards Board (IASB) issued various amendments
and revisions to International Financial Reporting Standards and IFRIC
interpretations. The amendments and revisions were applicable for the period
ended 30 June 2021 but did not result in any material changes to the financial
statements of the Group or Company.
(b) New standards, amendments and interpretations in issue but not yet
effective or not yet endorsed and not early adopted
Standard Impact on initial application Effective date
IFRS 3 Reference to Conceptual Framework 1 January 2022
IAS 37 Onerous contracts 1 January 2022
IAS 16 Proceeds before intended use 1 January 2022
Annual improvements 2018-2020 Cycle 1 January 2022
IAS 8 Accounting estimates 1 January 2023
IAS 1 Classification of Liabilities as 1 January 2023
Current or Non-Current.
The Group is evaluating the impact of the new and amended standards above which
are not expected to have a material impact on the Group's results or
shareholders' funds.
4. Loss per ordinary share
The loss per ordinary share is based on the weighted average number of ordinary
shares in issue during the period of 344,822,048 ordinary shares of 0.1p (2020:
210,083,568 ordinary shares of 0.1p) and the following figures:
Unaudited Unaudited Audited
6 months 6 months year to
to 30 to 30 31
June 2021 June 2020 December
2020
Loss attributable to equity shareholders £'000 (261) (450) (757)
Loss per ordinary share (0.08)p (0.36)p (0.36)p
Diluted loss per share is taken as equal to basic earnings per share as the
Company's average share price during the period is lower than the exercise
price and therefore the effect of including share options is anti-dilutive.
5. Income and segmental analysis
There is one operating segment.
The activity of both the investments is based mainly in the United Kingdom.
6. Investments
The Company made investments as follows during the years ended 31 December:
2018 It acquired 2,435,710 shares in KCR Residential REIT PLC, an AIM listed
real estate investment trust specialising in the acquisition and management of
rented residential portfolios in the UK.
2020 It invested £500,000 for a 20% holding in Acuity Risk Management Limited.
Subsequent to the period end, Drumz exercised its option and invested a further
£125,000 in Acuity Risk Management Limited, increasing the holding to 25% (see
Note 7 below).
Investments
£'000
Cost
At 1 January 2021 2,205
At 30 June 2021 2,205
Fair value losses
At 1 January 2021 (1,132)
Change in fair value recognised in profit and loss (146)
At 30 June 2021 (1,278)
Fair Value
At 30 June 2021 927
At 31 December 2020 1,073
Fair value hierarchy
In accordance with IFRS 7, financial instruments are measured by level of the
following fair value measurement hierarchy:
Level 1: quoted prices in an active market for identical assets or liabilities.
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. A market is regarded as active
if quoted prices are readily and regularly available and those prices represent
actual and regularly occurring market transactions on an arm's-length basis.
The quoted market price used for financial assets held by the Group is the
closing price on the last day of the financial year of the Group. These
instruments are included in level 1 and comprise FTSE and AIM-listed
investments classified as held at fair value through profit or loss.
Level 2: the fair value of financial instruments that are not traded in an
active market is determined by using valuation techniques. These valuation
techniques maximise the use of observable market data where it is available and
rely as little as possible on entity-specific estimates. If all significant
inputs required to fair value an instrument are observable, the instrument is
included in level 2.
Level 3: the fair value of financial instruments that are not traded in an
active market (for example, investments in unquoted companies) is determined by
using valuation techniques such as earnings multiples. If one or more of the
significant inputs is not based on observable market data, the instrument is
included in level 3.
There have been no transfers between these classifications in the period (2020:
none). The change in fair value for the current and previous years is
recognised through profit or loss.
All assets held at fair value through profit or loss were designated as such
upon initial recognition.
7. Post balance sheet events
Subsequent to the period end, Drumz exercised its option and invested a further
£125,000 in Acuity Risk Management Limited, taking its holding to 25%.
END
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