TIDMREAT
RNS Number : 8400M
React Group PLC
26 January 2021
26 January 2021
REACT Group plc
("REACT" or the "Company")
Final Results and notice of AGM
REACT (AIM: REAT.L), the leading specialist cleaning, hygiene,
and decontamination company, is pleased to announce its final
results for the year ended 30 September 2020.
Financial performance
Summary FY 2020 FY 2019
'000 '000 change
---------- ---------- ----------
Revenue GBP4,360 GBP3,103 +41%
Gross profit GBP1,449 GBP885 +64%
Gross profit margin 33.2% 28.5% +470-bps
EBITDA GBP261 (GBP131) +299%
Profit before tax GBP188 (GBP183) +203%
EPS 0.04p (0.04p) +200%
Net cash GBP1,783 GBP440 +305%
Highlights
-- Revenue up 41% at GBP4.36 million
-- Gross profit up 64% at GBP1.45 million
-- Gross profit margins up a further 470-basis points to 33.2%,
an increase of 1,220-basis points over two years
-- Maiden full year profit
-- EBITDA reversed from past losses to GBP261,000, representing a 6% operating margin
-- Profit before tax of GBP188,000
-- EPS of 0.04p
-- Net cash of GBP1.78m
-- Outlook is positive following a strong first 3-months of the new financial year (Q1, FY 2021)
Impact of COVID-19
COVID-19-specific business generated c.GBP444,000 of revenue in
the period and replaced some of the revenue and gross profit
contribution lost to the temporary decline in some of our
customer's requirements.
Excluding the increase in revenue from COVID-19 decontaminations
& despite the negative impact of lockdown in some key business
segments, the core business still grew revenues by +26% and gross
profit contribution by +41%.
Posting of Annual Report and Accounts & Notice of Annual
General Meeting
The annual report and accounts will be sent to shareholders
today, along with notice of the Company's annual general meeting
("AGM"). These documents will be made available on the Company's
website www.reactsc.co.uk/react-group-plc later on today.
The AGM will be held at 11am on 18 February 2021. Due to the
COVID-19 pandemic the AGM will be held virtually. Shareholders will
be able to participate in the virtual AGM via the Investor Meet
Company ("IMC") platform but will not be able to vote at the
meeting. Accordingly, shareholders are strongly urged to appoint
the Chairman of the AGM as their proxy in order for their votes to
be counted. Shareholders wishing to participate in the virtual AGM
should sign up to IMC for free ahead of the AGM via
https://www.investormeetcompany.com/react-group-plc/register-investor
and request to meet the Company. Once registered shareholders will
automatically be emailed an invitation which they should accept in
order to receive a unique link to access the AGM. Shareholders are
encouraged to register with IMC before the day of the AGM to avoid
entry to the meeting being delayed.
Commenting on the results Shaun Doak, Chief Executive, said:
"We are pleased to report a strong financial performance with
improvements across the board on all key metrics alongside a year
of substantial progress in developing our business through
accelerating organic growth.
"The new financial year has begun well and the outlook for the
Group remains positive. We believe REACT is well positioned to
continue to support its customers' critical requirements.
"On behalf of the Board I'd like to thank all of our colleagues
and business partners for their contribution, our results are a
measure of their commitment, hard work and dedication throughout
this challenging period - thank you!"
For more information:
REACT Group plc
Shaun Doak, Chief Executive Of cer via Allenby Capital
Andrea Pankhurst, Chief Financial Officer Tel: +44 (0) 203 328
5656
Allenby Capital Limited
(Nominated Adviser and Broker)
Nick Athanas / Liz Kirchner (Corporate Tel: +44 (0) 203 328
Finance) 5656
Amrit Nahal / Tony Quirke (Sales &
Corporate Broking)
Executive Chairman's Statement
For the year ended 30 September 2020
I am delighted to report strong progress in the year to 30(th)
September 2020, the second trading year reported by this management
team and the first full year since the business restructured.
The Board of REACT Group is pleased to report that the Company
has delivered significant organic growth in the period under review
and continued to deliver material improvements in operational
performance and profit contribution.
Details of business performance are set out in reviews by both
the Chief Executive and the Chief Financial Officer.
In summary, the business performance resulted in the Company's
maiden profit and an out-turn that was ahead of market
expectations.
For the year ended 30 September 2020 (FY 20), EBITDA(1) on a
consistent accounting basis was GBP261,000, (2019: loss of
GBP131,000), on sales revenue of GBP4.36 million, up +41% on the
prior year (2019: GBP3.10m).
Profit before tax (PBT) was GBP188,000 (2019: loss before tax of
GBP183,000), with basic earnings per share of 0.04 pence, (2019:
loss of 0.04 pence).
Gross profit margins continue to improve due to more disciplined
sales engagement alongside better operational processes to closely
monitor costs at a job and task level.
COVID-19 impacted the business from March 2020, roughly 6-months
into the financial year, providing both opportunities and
challenges for the management team. The Company delivered a high
quality, rapid response to customer demands, whilst at the same
time redeployed resources from sectors where work temporarily
declined due to the government restrictions put in place.
COVID-19-specific business generated c.GBP444,000 of revenue in
the period and replaced some of the revenue and gross profit
contribution lost to the temporary decline in some of our
customers' requirements.
The circumstances surrounding COVID-19 and REACT's response to
it, has helped accelerate the sales engagement process with new
customer prospects, and enhanced the Company's reputation with many
in the existing customer base. This resulted in incremental new
business opportunities for other of REACT's services, some of which
were delivered during the period with others flowing into the new
financial year.
A key focus has been to maintain the resilience of the Company's
service and to keep our workforce safe. We rapidly moved
operational and support staff to working from home and deployed
equipment, improved methods, and reinforced training for all our
specialist operators. Despite coming into close contact with
contaminated property, I am pleased to report that at the time of
writing we have not had any of our specialist operators or
operational and support colleagues at REACT test positive for
COVID-19.
Our strategy for growth is clear; we will continue to build a
leading position across our business through fast-paced organic
growth and if the right opportunities present themselves, via
strategic acquisitions, to support our goal of becoming the
country's most trusted name in the provision of specialist
cleaning, decontamination, and hygiene services.
(1) EBITDA represents the adjusted profit for the year (Note
8)
Mark Braund
Chairman
26 January 2021
Chief Executive Officer's Report and Strategic Review
I am pleased to report excellent progress in FY20, the second
year of turnaround for the business and the year during which I was
appointed CEO, (February 2020).
REACT Group delivered significant organic growth and continued
to deliver material improvements in operational performance, profit
contribution and cash generation.
At the beginning of the period, we set long-term priorities for
the business to focus on improving performance, customer
satisfaction, innovation, culture, and trust. COVID-19 could easily
have distracted our mission, instead we urgently focused to
galvanise the team into the appropriate action.
COVID-19 brought both opportunities and challenges. REACT was
well placed to advise and respond to customer requirements to
decontaminate their property from SARS-CoV-2, the virus that causes
COVID-19. We developed an unrivalled ability to deliver these
services across mainland Great Britain within less than 4-hours of
a call for help and focused on our most important customers and key
prospects to ensure they could rely on and be confident in the
efficacy of our solution.
Whilst at times during the year COVID-19 decontaminations
surged, some of our other call-out work temporarily shrank as
facilities in some sectors were much quieter than normal. Much of
the work we do with the judiciary and police cleaning cells and
transport vehicles, was suspended during specific periods over the
course of the year, as too was much of our work with housing
associations.
Although the Company responded well to the call for help in
dealing with COVID-19, we also worked hard to not allow it to
distract us from our strategic goals.
At the same time as developing and deploying a rapid response to
customer demand for COVID-19 decontaminations we also grew other
parts of our business. During the year, REACT won a small number of
material contracts, all of which were announced via RNS. We also
expanded our services with existing customers and won a number of
smaller projects, none of which alone were material enough to
formally announce, however all contributed to this period of
success. These included the award to carry out a deep cleaning
programme to twelve care home sites for one of our newly appointed
nationwide customers; deep cleaning programmes at a number of
prestigious manufacturing sites, distilleries, film studios and
offices throughout Great Britain.
Additionally, the Company successfully negotiated new specialist
reactive cleaning contracts for two large highway organisations.
Amongst other things this work will see our specialist operators
deal with cleaning and decontamination following road traffic
accidents, clearance of unauthorised camp sites and other
anti-social behaviour, such as graffiti removal and needle
picks.
To support our growth and develop the reach and range of our
capability, we have grown our team of specialist operators. We also
launched a partner programme aimed at developing a network of
trained and authorised subcontractors, to help us to more rapidly
scale to meet the often-demanding needs of nationwide coverage.
REACT continued to develop innovative offerings; we were amongst
the first nationwide service to provide ATP(2)-testing as part of
the pre- and post-cleaning process to verify the efficacy of our
work and we continue to develop the use of innovative chemicals and
UV-light as a means to provide greater efficiency and
environmentally friendly results.
We have established a number of delighted customer case studies
across our most important sectors, which continue to help verify
the quality of our work and provide reassurance to new customers
who place trust in our capability.
The speed and commitment with which the whole team has responded
to constantly changing parameters during this period has helped
build a continuous sense of urgency and resilience into our
customer-centric, can-do culture.
Financial Review
Turnover for year ended 30 September 2020 was GBP4.36m,
representing organic growth of +41% (2019: GBP3.1m). These revenues
generated a gross profit contribution of GBP1.45m, up +64% on the
prior year (2019: GBP0.89m) as margins were driven 474-basis points
higher to 33.2% (2019: 28.5%), by our continued focus on tasks with
greater value to our customers, alongside more disciplined sales
engagement, and improved operational processes closely monitoring
costs at a job and task level.
EBITDA on a consistent accounting basis was GBP261,000, a solid
turnaround from the prior year's losses (2019: loss of
GBP131,000).
Profit before tax was GBP188,000, (2019: loss of GBP183,000),
representing the Company's maiden profit, and basic earnings per
share of 0.04 pence (2019: loss of 0.04 pence).
Improved processes and disciplines have been applied to the
accounting and administration functions. We are invoicing customers
on a much more timely basis, daily (previously monthly), and any
queries are resolved promptly. This has resulted in improved cash
collections and aged debtor profile. No further provisions for bad
debt are required and GBP8,000 of the provision brought forward at
the start of the year has been released.
The Group's cash position at the year end was GBP1.78 million,
aside from the net placing proceeds of GBP1.13 million received in
June 2020, this represents a notable 40% improvement on the
previous year's balance of GBP0.44 million.
REACT reports three main areas of business; the first two are
Contract Maintenance, where the Company delivers regular deep
cleaning regimes, (such as in the healthcare and public transport
sectors) and; Contract Reactive, where REACT is the first responder
to an on-call emergency response service operating under a formal
contract or framework agreement, typically 24-hours a day, 7-days
per week, 365-days of the year. These two areas together are
recurring in nature and represent c.80% of our revenue and c.74% of
our gross profit contribution.
The third area is Ad Hoc, where REACT provides a solution to
typically one-off situations outside a framework agreement, such as
for fly tipping, void clearance, and COVID-19 decontaminations.
Because of the relatively short to mid-term nature of COVID-19, the
Company has recorded all COVID-19 decontamination work in the Ad
Hoc category of business.
COVID-19-specific decontamination business generated
c.GBP444,000 of revenue in the period and replaced some of the
revenue and gross profit contribution lost to the temporary decline
in some of our customers' Contract Reactive and other Ad Hoc
requirements.
The vast majority of our growth in performance came from other
areas of the business. A number of the material contracts announced
during the period were non-COVID-19 related, although as the
pandemic became more prevalent it placed operational challenges on
the team, which they successfully navigated.
In the second half of the year COVID-19 understandably had an
influence on how urgently customers wished to engage; the quality
and timeliness with which REACT answered their calls created
further opportunities and contributed to growth of business across
other areas of our service offering, which have continued into the
new financial year.
All three areas of the business grew in FY 20, albeit the
Contract Reactive business grew more slowly that the Contract
Maintenance and Ad Hoc areas. This was primarily driven by what we
consider to be a temporary reduction in demand due to restrictions
in relevant parts of the economy. Specifically, we saw temporary
reductions in activity in the judiciary and police sector, where we
carry out a significant amount of deep cleaning to cells, courts,
and transport vehicles, alongside a decline in the housing sector
where we typically carry out void cleans, deep cleans and needle
picks. We saw this business return in the late summer of 2020, only
to reduce again post-year end as lockdown restrictions began to
intensify. REACT operates on long-term framework agreements, which
we continue to add to. We therefore anticipate this business will
re-emerge and grow as the impact of restrictions eases in each of
these sectors.
Perhaps the most pleasing growth came in the Contract
Maintenance business. Revenue grew by +74% and gross profit
contribution by +94%, demonstrating the team's ability during this
challenging period to remain focused on our core objective of
improving the quality and recurring nature of our business. During
the period, the Contract Maintenance business grew to become 39% of
our overall sales revenues, with Contract Reactive and Ad Hoc being
41% and 20% respectively.
Strategy
Our strategy for growth is clear; we will continue to build a
leading position across our business through fast-paced organic
growth and if the right opportunities present themselves, via
strategic acquisitions, to support our goal of becoming the
country's most trusted name in the provision of specialist
cleaning, decontamination, and hygiene services.
We continue to invest in sales and marketing to engage with the
large addressable market for our services. This includes further
developing our use of the right sales and marketing tools,
especially during this period requiring a hybrid approach to
customer engagement, i.e. where both face to face and
virtual/electronic sales environments coexist.
In addition to scaling the business we continue to look at
operational efficiencies as a means to improve operating margins.
We see opportunities to add better technology and automation to
further simplify operational procedures at the same time as
improving scalability and resilience.
Key Performance Indicators (KPIs)
Financial : The key financial indicators are as follows:
2020 2019
Revenue GBP4.36m GBP3.10m
Gross margin 33.2% 28.5%
Profit/(Loss) from continuing operations GBP188,000 (GBP178,000)
before exceptional items
Exceptional items - (GBP5,000)
Profit/(Loss) from continuing operations GBP188,000 (GBP183,000)
after exceptional items
Cash and cash equivalents GBP1,783,000 GBP440,000
============== ==============
The Board recognises the importance of KPIs in driving
appropriate behaviours and enabling the monitoring of Group
performance.
Non-financial: The Board continues to monitor and improve
customer relationships, the motivation and retention of employees
as well as service quality and brand awareness.
Outlook
The new financial year has begun well, with profit and cash
generation stronger in the first quarter of FY 21 than the prior
year. Although the impact of the current COVID-19 crisis remains
unpredictable, we believe REACT is well positioned to continue to
support our customers' critical requirements.
We remain ambitious, aiming to drive a high-performance culture
placing our colleagues and customers at the heart of our business.
Through our focused efforts and competitive service proposition the
business remains committed to leveraging both existing
relationships and new ones to help underpin our ambitious growth
strategy and upward trend of sustainable profitability.
Finally, and on behalf of the Board, I wish to thank all of the
team here at REACT for their dedication, hard work and tenacity in
a year largely overshadowed by the pandemic, our performance is a
reflection of their commitment and talent. Additionally, I would
like to thank our partners and customers for their continued
support during my first year as CEO, I very much look forward to
working with them in 2021 and beyond.
(2) ATP testing is a process of rapidly measuring the actively
growing microorganisms through detection of adenosine triphosphate,
or ATP. This allows REACT to verify the presence and removal of
microorganisms before and after cleaning.
Shaun D Doak
Chief Executive Officer
26 January 2021
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2020
Notes 2020 2019
GBP'000 GBP'000
Continuing Operations
Revenue 4,360 3,103
Cost of sales (2,911) (2,218)
Gross profit 1,449 885
Other operating income 70 -
Administrative expenses 5 (1,308) (1,068)
Exceptional costs included in
administrative expenses 5 - (5)
------------------------------------------- ------- ---------- ----------------
Operating profit/(loss) 211 (183)
Finance cost 6 (23) -
Income tax credit 7 - -
Profit/(Loss) for the year 188 (183)
Other comprehensive Income - -
========== ================
Total comprehensive profit/(loss)
for the year attributable to the equity
holders of the company 188 (183)
========== ================
Basic and diluted profit/(loss) per
share - pence 8
Basic earnings/(loss) per share 0.04p (0.04)p
========== ================
Diluted earnings/(loss) per share 0.04p (0.04)p
========== ================
Adjusted basic earnings/(loss) per
share 0.06p (0.03)p
========== ================
Adjusted diluted earnings/(loss) per
share 0.05p (0.03)p
========== ================
Consolidated Statement of Financial Position
As at 30 September 2020
Notes 2020 2019
ASSETS GBP'000 GBP'000
Non-current assets
Intangible assets 10 174 174
Property, plant & equipment 11 85 81
Right-of-use assets 11 27 -
286 255
--------- ---------
Current assets
Trade and other receivables 13 1,089 718
Cash and cash equivalents 15 1,783 440
2,872 1,158
--------- ---------
TOTAL ASSETS 3,158 1,413
========= =========
EQUITY
Shareholders' Equity
Called-up equity share capital 16 1,246 1,039
Share premium account 5,852 4,926
Reverse acquisition reserve (5,726) (5,726)
Capital redemption reserve 3,337 3,337
Merger relief reserve 1,328 1,328
Share-based payments 15 12
Accumulated losses (3,861) (4,038)
Total Equity 2,191 878
--------- ---------
LIABILITIES
Current liabilities
Trade and other payables 17 924 535
Lease liabilities within one year 13 -
Non-current liabilities
Lease liabilities after one year 17 30 -
TOTAL LIABILITIES 967 535
--------- ---------
TOTAL EQUITY AND LIABILITIES 3,158 1,413
========= =========
Consolidated Statement of Changes in Equity
For the year ended 30 September 2020
Share Share Merger Capital Reverse Share-Based Accumulated Total
capital Premium Relief Redemption Acquisition Payments Deficit Equity
Reserve Reserve Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 October
2018 1,039 4,926 1,328 3,337 (5,726) 20 (3,863) 1,061
Issue of
options - - - - - 2 (2) -
On surrender
of
warrants - - - - - (10) 10 -
Loss for the
year - - - - - - (183) (183)
At 30
September
2019 1,039 4,926 1,328 3,337 (5,726) 12 (4,038) 878
========== ========== ========== ============= ============== ============== ============== =========
Issue of
shares 207 926 - - - - - 1,133
Share-based
payments - - - - - 3 - 3
Effect of
adoption
of IFRS16 - - - - - - (11) (11)
Profit for
the
year - - - - - - 188 188
At 30
September
2020 1,246 5,852 1,328 3,337 (5,726) 15 (3,861) 2,191
========== ========== ========== ============= ============== ============== ============== =========
Consolidated Statement of Cash Flows
For the year ended 30 September 2020
Notes 2020 2019
GBP'000 GBP'000
Cash flows from operating activities
Cash generated by operations 1 281 34
Net cash inflow from operating activities 281 34
--------- ---------
Cash flows from financing activities
Proceeds of share issue 1,246 -
Expenses of share issue (113) -
Lease liability payments (29) -
Net cash inflow from financing activities 1,104 -
--------- ---------
Cash flows from investing activities
Disposal of fixed assets 2 8
Capital expenditure (44) (25)
Net cash outflow from investing activities (42) (17)
--------- ---------
Increase in cash, cash equivalents
and overdrafts 1,343 17
Cash, cash equivalents and overdrafts at beginning
of year 440 423
Cash, cash equivalents and overdrafts
at end of year 2 1,783 440
========= =========
Notes to the Consolidated Statement of Cash Flows
For the year ended 30 September 2020
1. Reconciliation of profit for the year to cash outflow from operations
2020 2019
GBP'000 GBP'000
Profit/(Loss) before taxation 188 (183)
(Increase)/Decrease in trade
and other receivables (371) 441
Increase/(Decrease) in trade
and other payables 389 (275)
Depreciation and amortisation
charges 50 52
Finance costs 21 -
Loss/(Profit) on disposal of
fixed assets 1 (3)
Share-based payment 3 2
Net cash inflow from operations 281 34
========== ==========
2. Cash and cash equivalents
2020 2019
GBP'000 GBP'000
Cash at bank and in hand 1,783 440
=========== ===========
Notes to the Financial Statements
For the year ended 30 September 2020
1. General Information
Basis of preparation and consolidation
The Company is a public company, limited by shares, based in the
United Kingdom and incorporated in England and Wales. Details of
the registered office, the officers and advisors to the Company are
presented on the Company Information page at the start of this
report.
The consolidated financial statements present the results of the
company and its subsidiaries ('the Group') as if they formed a
single entity. Intercompany transactions and balances between Group
companies are therefore eliminated in full. Where the company has
control over an investee, it is classified as a subsidiary. The
company controls an investee if all three of the following elements
are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power
to affect those variable returns. Control is reassessed whenever
facts and circumstances indicate that there may be a change in any
of these elements of control.
The functional and presentational currency of the Group is
pounds sterling. The figures presented have been rounded to the
nearest one thousand pounds.
The equity structure appearing in the Group financial statements
reflects the equity structure of the legal parent, REACT Group PLC,
including the equity instruments issued in order to effect reverse
acquisition accounting. The merger relief reserve represents a
premium on the issue of the ordinary shares for the acquisition of
subsidiary undertakings. The relief is only available to the
issuing company securing at least a 90% equity holding in the
acquired undertaking in pursuance of an arrangement providing for
the allotment of equity shares in the issuing company on terms that
the consideration for the shares allotted is to be provided by the
issue of equity shares in the other company.
2. Accounting Policies
Statement of compliance
The consolidated financial statements of REACT Group PLC have
been prepared in accordance with International Financial Reporting
Standards (IFRSs), International Accounting Standards (IASs) and
International Financial Reporting Interpretations Committee (IFRIC)
interpretations (collectively 'IFRSs') as adopted for use in the
European Union and as issued by the International Accounting
Standards Board and with those parts of the Companies Act 2006
applicable to companies reporting under IFRS.
Basis of preparation
The financial statements have been prepared under the historical
cost convention. The principal accounting policies are summarised
below. They have all been applied consistently throughout the year
under review.
Going concern
Following its review of the Group's financial plans and forecast
growth, the cash balance held at the year end and the management
team currently in place, the Board has a good expectation that the
Group has adequate resources to continue in operational existence
for the foreseeable future. Therefore, the financial statements do
not include any adjustments that would result if the Group was
unable to continue as a going concern.
New , amended standards, interpretations not adopted by the
Group
Th e following Adopted IFRSs have been issued but have not been
applied by the Group in these Financial Statements. The full impact
of their adoption has not yet been fully assesse d; however,
management do not expect the changes to have a material effect on
the Financial Statements unless otherwise indicated:
-- Amendments to IAS 1 and IAS 8 - on definition of materiality (1 January 2020)
-- Amendments to IFRS 3 "Business combinations" on definition of a business (1 January 2020)
-- Amendments to IFRS 9, IFRS 7 and IAS 39 financial instruments (1 January 2020)
-- IFRS 17 Insurance contracts (1 January 2023)
Change s in Accounting Policies and Disclosures
Ne w and amended standards adopted by the Group
Th e Group has applied any applicable new standards, amendments
to standards and interpretations that are mandatory for the
financial year beginning on or after 1 January 2020. However, none
of them has a material impact on the Group's Consolidated Financial
Statements.
Impact of IFRS 16 - Leases
The Group has adopted IFRS 16 Leases using the modified
retrospective approach with recognition of transitional adjustments
on the date of initial application (1 October 2019), without
re-statement of comparative figures. As a lessee, the Group
previously classified leases as operating leases or finance leases.
Under IFRS 16, the Group recognises right-of-use assets and lease
liabilities for leases that meet the recognition criteria.
Revenue recognition
Revenue is recognised in accordance with the requirements of
IFRS 15 'Revenue from Contracts with Customers'. The Company
recognises revenue to depict the transfer of promised goods and
services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those
goods or services. This core principle is delivered in a five-step
model framework:
1. Identify the contract(s) with the customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations
in the contract; and
5. Recognise revenue when (or as) the entity satisfy a
performance obligation.
The Group recognises revenue in the accounting period in which
its services are rendered, by reference to stage of completion of
the specific transaction and assessed on the basis of the actual
service provided as a proportion of the total services to be
provided. Revenues exclude intra-group sales and value added taxes
and represent net invoice value less estimated rebates, returns and
settlement discounts. The net invoice value is measured by
reference to the fair value of consideration received or receivable
by the Group for goods supplied.
Taxation
Income tax expense represents the sum of the tax currently
payable and deferred tax.
(i) Current tax
Current taxes are based on the results shown in the financial
statements and are calculated according to local tax rules using
tax rates enacted or substantially enacted by the statement of
financial position date. Income tax is recognised in the income
statement or in equity if it relates to items that are recognised
in the same or a different period, directly in equity. Current tax
assets and liabilities for the current and prior periods are
measured at the amount expected to be recovered from or paid to the
taxation authorities.
(ii) Deferred tax
Deferred tax is provided, using the liability method, on
temporary differences at the statement of financial position date
between the tax base of assets and liabilities and their carrying
amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable
temporary differences.
Deferred tax assets are recognised for all deductible temporary
differences, carry forward of unused tax assets and unused tax
losses, to the extent that it is probable that taxable profit will
be available against which the deductible temporary difference, and
the carrying forward or unused tax assets and unused tax losses can
be utilised.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow
all or part of the deferred tax assets to be utilised. Conversely,
previously unrecognised deferred tax assets are recognised to the
extent that it is probable that sufficient taxable profit will be
available to allow all or part of the deferred tax asset to be
utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the asset is
realised or the liability is settled, based on the tax rates and
tax laws that have been enacted or substantively enacted at the
balance sheet date.
Investments
Investments in subsidiaries are held at cost less any
impairment.
Financial assets and liabilities
The Group classifies its financial assets at inception into
three measurement categories; 'amortised cost', 'fair value through
other comprehensive income' ('FVOCI') and 'fair value through
profit and loss' ('FVTPL'). The Group classifies its financial
liabilities, other than financial guarantees and loan commitments,
as measured at amortised cost. Management determines the
classification of its investments at initial recognition. A
financial asset or financial liability is measured initially at
fair value. At inception transaction cost that are directly
attributable to its acquisition or issue, for an item not at fair
value through profit or loss, is added to the fair value of the
financial asset and deducted from the fair value of the financial
liability.
Amortised cost measurement
The amortised cost of a financial asset or financial liability
is the amount at which the financial asset or liability is measured
at initial recognition, minus principal payments, plus or minus the
cumulative amortisation using the effective interest method of any
difference between the initial amount recognised and maturity
amount, minus any reduction for impairment.
Fair value measurement
Fair value is the amount for which an asset could be exchanged,
or a liability settled, between knowledgeable, willing parties in
an arm's length transaction on the measurement date. The fair value
of assets and liabilities in active markets are based on current
bid and offer prices respectively. If the market is not active the
group establishes fair value by using appropriate valuation
techniques. These include the use of recent arm's length
transactions, reference to other instruments that are substantially
the same for which market observable prices exist, net present
value and discounted cash flow analysis.
Derecognition
Financial assets are derecognised when the rights to receive
cash flows from the financial assets have expired or where the
group has transferred substantially all of the risks and rewards of
ownership. In transaction in which the group neither retains nor
transfers substantially all the risks and rewards of ownership of a
financial asset and it retains control over the asset, the group
continues to recognise the asset to the extent of its continuing
involvement, determined by the extent to which it is exposed to
changes in the value of the transferred asset. There have not been
any instances where assets have only been partly derecognised. The
group derecognises a financial liability when its contractual
obligation are discharged, cancelled or expired.
Impairment
The Group assesses at each financial position date whether there
is objective evidence that a financial asset or group of financial
assets is impaired. If there is objective experience (such as
significant financial difficulty of obligor, breach of contract, or
it becomes probable that debtor will enter bankruptcy), the asset
is tested for impairment. The amount of the loss is measured as the
difference between the asset's carrying amount and the present
value of the estimated future cash flows (excluding future expected
credit losses that have not been incurred) discounted at the
financial asset's original effective interest rate (that is, the
effective interest rate computed at initial recognition). The
carrying amount of the asset is reduced through use of an allowance
account. The amount of loss is recognised in the Statement of
Comprehensive Income.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand.
Leases
During the year the Group adopted IFRS 16 Leases for the first
time. IFRS 16 replaces IAS 17 Leases.
The Group previously split leases between 'finance leases' that
transferred substantially all the risks and rewards incidental to
ownership of the asset to the Group, and 'operating leases'. Under
IFRS 16, for all leases except for short-term leases and leases of
low-value assets, other than those which are subleased, previously
classified as operating leases:
As at 1 October 2019, the Group has recognised a lease liability
measured at the present value of the remaining lease payments,
discounted using the Group's incremental borrowing rate at 1
October 2019 and for all leases the Group has elected to recognise
a right-of-use asset at an amount equal to the lease liability,
adjusted by the amount of prepaid or accrued lease payments
relating to those leases recognised in the statement of financial
position immediately before the date of initial application.
The Group elected the following practical expedients:
-- it has applied a single discount rate to a portfolio of
leases with reasonably similar characteristics;
-- it has relied on its assessment of whether leases are onerous
applying IAS37 immediately before 1 October 2019 as an alternative
to performing an impairment analysis. The analysis of the onerous
contracts as at 30 September 2018 has not resulted in a need to
recognise an impairment allowance. The right-of-use assets as at 1
October 2019 were therefore not adjusted for any impairment;
-- it has opted not to apply the new lessee accounting model to
leases for which the lease term ends within 12 months after the
date of initial application. Instead, it has accounted for those
leases as short-term leases.
Impact of the transition to IFRS 16:
GBP'000
Operating lease commitments as at 30/9/2019
under IAS17 (57)
Leases previously not included (41)
Non-lease commitments
Excluded short-term leases
Excluded low value assets (other than those
which are subleased)
The effect of discounting using the incremental
borrowing rate at 1/10/2019 47
Lease liability as at 1/10/2019 (51)
Short-term portion (8)
Long-term portion (43)
Trade and other receivables
Trade and other receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted in an
active market. Subsequent to the initial recognition, trade and
other receivables are measured at amortised cost less impairment
losses for bad and doubtful debts, except where the receivables are
interest-free loans made to related parties without any fixed
repayment terms or the effect of discounting would be immaterial.
In such cases, the receivables are stated at cost less impairment
losses for bad and doubtful debts. Impairment losses for bad and
doubtful debts are measured as the difference between the carrying
amount of financial asset and the estimated future cash flows,
discounted where the effect of discounting is material.
Trade and other payables
Trade and other payables are initially recognised at fair value
and thereafter stated in amortised cost, except where the payables
are interest free loans made by related parties without any fixed
repayment terms or the effect of discounting would be immaterial,
in which case they are stated at cost.
Impairment of non-financial assets
At each statement of financial position date, the Group reviews
the carrying amounts of its investments to determine whether there
is any indication that those assets have suffered an impairment
loss. If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the
impairment loss (if any). Where the asset does not generate cash
flows that are independent from other assets, the Group estimates
the recoverable amount of the cash-generating unit to which the
asset belongs. An intangible asset with an indefinite useful life
is tested for impairment annually and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to
sell and value in use. In assessing value in use, the estimated
future cash flows are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset for
which the estimates of future cash flows have not been adjusted. If
the recoverable amount of an asset (or cash-generating unit) is
estimated to be less than its carrying amount, the carrying amount
of the asset (cash-generating unit) is reduced to its recoverable
amount. An impairment loss is recognised as an expense immediately,
unless the relevant asset is carried at a re-valued amount, in
which case the impairment loss is treated as a revaluation
decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but so that the
increased carrying amount does not exceed the carrying amount that
would have been determined had no impairment loss been recognised
for the asset (cash-generating unit) in prior periods. A reversal
of an impairment loss is recognised as income immediately, unless
the relevant asset is carried at a revalued amount, in which case
the reversal of the impairment loss is treated as a revaluation
increase.
Capital management
Capital is made up of stated capital, premium and retained
earnings. The objective of the Group's capital management is to
ensure that it maintains strong credit ratings and capital ratios.
This will ensure that the business is correctly supported and
shareholder value is maximised.
The Group manages its capital structure through adjustments that
are dependent on economic conditions. In order to maintain or
adjust the capital structure, the company may choose to change or
amend dividend payments to shareholders or issue new share capital
to shareholders. There were no changes to the objectives, policies
or processes during the year ended 30 September 2020.
Equity instruments
Equity instruments issued by the company are recorded at the
proceeds received. Incremental costs directly attributable to the
issuance of new ordinary shares are deducted against share
premium.
Share-based compensation
The fair value of the employee services received in exchange for
the grant of the options is recognised as an expense. The total
amount to be expensed over the vesting period is determined by
reference to the fair value of the options granted, excluding the
impact of any non-market vesting conditions (for example,
profitability and sales growth targets). Non-market vesting
conditions are included in assumptions about the number of options
that are expected to vest. At each statement of financial position
date, the entity revises its estimates of the number of options
that are expected to vest. It recognises the impact of the revision
to original estimates, if any, in the income statement, with a
corresponding adjustment to equity.
The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value) and
share premium when the options are exercised.
The fair value of share-based payments recognised in the income
statement is measured by use of the Black Scholes model, which
takes into account conditions attached to the vesting and exercise
of the equity instruments. The expected life used in the model is
adjusted; based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future
share price behaviour and is selected based on past experience,
future expectations and benchmarked against peer companies in the
industry.
Property, plant and equipment
Property, plant and equipment are stated at historical cost less
subsequent accumulated depreciation and accumulated impairment
losses, if any. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are charged to profit
or loss during the financial period in which they are incurred.
Depreciation on property, plant and equipment is calculated
using the straight-line method to write off their cost over their
estimated useful lives at the following annual rates:
Leasehold property 20%
Vehicles 25%
Fixtures, fittings & equipment 20% / 33%
Useful lives and depreciation methods are reviewed and adjusted
if appropriate, at the end of each reporting period.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to arise
from the continued use of the asset. Any gain or loss arising on
the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the relevant asset, and is
recognised in profit or loss in the period in which the asset is
derecognised.
A right-of-use asset is recognised at commencement of the lease
and initially measured at the amount of the lease liability, plus
any incremental costs of obtaining the lease and any lease payments
made at or before the leased asset is available for use by the
Group. They are subsequently measured at cost less accumulated
depreciation and any accumulated impairment losses.
Intangibles
Purchased goodwill represents the excess of the cost of
acquisition over the company's interest in the fair value of the
identifiable assets and liabilities of a business acquired at the
date of acquisition.
Purchased goodwill is recognized as an asset, reviewed for
impairment at least annually and carried at cost less accumulated
impairment losses. Any impairment is recognised immediately in
profit or loss and is not subsequently reversed. Purchased goodwill
is deemed to have an indefinite useful life due to the expectation
of the acquired business to operate in perpetuity, so is not
amortised.
Customer list represents the value placed on the retained
customer list at the acquisition date. The value recognises that
customers, although contracted to the company are not under an
obligation to use the company services.
The customer list will be amortised over a period of 5 years. An
impairment review will be conducted each year and will look at
significant changes in the turnover received from major
customers.
Employee benefit costs
The group operates a defined contribution pension scheme for
eligible employees. Contributions payable are charged to the income
statement in the period to which they relate.
Exceptional items
Exceptional items are material items of income or expenses which
have arisen in the normal course of business but are not expected
to re-occur on a regular basis.
Critical accounting judgments and key sources of estimation
uncertainty
The preparation of the financial statements requires management
to make estimates and assumptions concerning the future that affect
the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during
the reporting periods.
The resulting accounting estimates will, by definition, differ
from the related actual results.
-- Estimated impairment of goodwill
The Directors have carried out a detailed impairment review in
respect of goodwill. The Group assesses at each reporting date
whether there is an indication that an asset maybe impaired, by
considering the net present value of discounted cashflow forecasts
which have been discounted at 15%. The cashflow projections are
based on the assumption that the Group can realise projected
sales.
-- Share-based payments
The fair value of share-based payments recognised in the income
statement is measured by use of the Black Scholes model, which
takes into account conditions attached to the vesting and exercise
of the equity instruments. The expected life used in the model is
adjusted; based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations. The share price volatility percentage factor used
in the calculation is based on management's best estimate of future
share price behaviour and is selected based on past experience,
future expectations and benchmarked against peer companies in the
industry.
-- Goodwill and customer list valuation
Management originally estimated that the useful life of the fair
value of the customer lists acquired on the acquisition to be 5
years. As part of the annual impairment review on 30 September
2018, based on the medium-term trading outlook, the decision was
taken to write down the purchased goodwill and acquired customer
list to GBP174,000. As at 30 September 2020 a further review was
undertaken, and management judged that no additional impairment was
required.
-- Bad debt provision
We perform ongoing credit evaluations of our customers and grant
credit based on past payment history and industry conditions.
Customer payments are closely monitored and a provision for
doubtful debts is established based on management's assessment of
the expected collectability of all accounts receivable.
3. Segmental Reporting
In the opinion of the Directors, the Group has one class of
business, being that of specialist cleaning and decontamination
services. Although the Group operates in only one geographic
segment, which is the UK, it has also analysed the sources of its
business into the segments of Contract Maintenance, Contract
Reactive or Ad Hoc work.
2020 2019
Contract Contract Ad Hoc Total Contract Contract Ad Hoc Total
Maintenance Reactive Work Maintenance Reactive Work
Work Work Work Work
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue 1,694 1,775 891 4,360 974 1,751 378 3,103
Cost of Sales (1,178) (1,214) (519) (2,911) (708) (1,251) (259) (2,218)
Gross Profit 516 561 372 1,449 266 500 119 885
Administrative
Expenses (441) (479) (318) (1,238) (321) (603) (144) (1,068)
Operating
Profit/(Loss)
for the year 75 82 54 211 (55) (103) (25) (183)
============= ========== ========= ========= ============= =========== ========= =========
Total Assets 1,125 1,221 812 3,158 424 798 191 1,413
============= ========== ========= ========= ============= =========== ========= =========
Total
Liabilities (344) (374) (249) (967) (161) (302) (72) (535)
============= ========== ========= ========= ============= =========== ========= =========
The Directors have changed the segmental reporting this year to
give a more meaningful presentation of the figures. In the prior
year, the segmental reporting analysed the sources of the Group's
business into the segments of either public or private sector
customers.
4. Employees and Directors
2020 2019
GBP'000 GBP'000
Wages and salaries 2,258 1,932
Social security costs 203 174
Pension contributions 37 28
Share based payments 3 2
2,501 2,136
========= =========
The average monthly number of employees
:
No. No.
Directors 4 3
Operators and administration staff 83 79
87 82
========= =========
The number of directors to whom retirement
benefits were accruing under money
purchase schemes 2 1
The number of directors who exercised - -
share options during the year
The number of directors who received - -
share options during the year
Details of emoluments received by Directors of the Group for the
year ended 30 September 2020 were as follows:
Share based
Salaries Car benefit payment 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
G Leates 49 - 1 50 58
R Gilbert 24 - - 24 22
M Joyce 30 - - 30 17
L Innes - - - - 17
S Doak 119 - 1 120 -
A Pankhurst 75 - - 75 -
Total 297 - 2 299 114
-------------- ---------- ------------- ------------- --------- ---------
These amounts include the share-based payments referred to in
Note 2.
The key management personnel are the Directors and therefore
disclosure is the same as the above.
5. Administrative expenses
2020 2019
GBP'000 GBP'000
Auditor remuneration
- audit fees (Company GBP3,000; 2019 : GBP4,000) 16 25
- other services 2 3
Staff costs (note 4) 2,498 2,134
Less staff costs included in cost of sales (1,701) (1,623)
Recruitment 5 38
Legal and professional fees (incl AIM related costs) 161 155
Property costs 80 53
Travel expenses 36 42
Insurance 54 54
Marketing 99 61
Provision against bad debts and accrued income (8) (70)
Other expenses 44 180
Depreciation 50 52
Less depreciation included in cost of sales (28) (36)
1,308 1,068
================ =========
There were GBPNil non-recurring exceptional costs included in administrative expenses during
the year (2019: GBP5,000)
2020 2019
GBP'000 GBP'000
Recruitment fees & other employee related costs associated with the changes in the
management
of the business during the period under review - (61)
Legal fees relating to resolution of an historic debt - (10)
Release of historic VAT provision - 66
- (5)
=============== =========
6. Finance Costs
2020 2019
GBP'000 GBP'000
Lease liability interest on:
13 -
* Land and buildings
8 -
* Other
Other interest expense 2 -
At 30 September 2020 23 -
========== ==========
7. Income Tax
2020 2019
GBP'000 GBP'000
Current tax charge - -
Deferred tax credit - -
- -
========= =========
Analysis of tax expense:
2020 2019
GBP'000 GBP'000
Profit/(Loss) on ordinary activities before income tax 188 (183)
========== ==========
Profit/(Loss) on ordinary activities multiplied by the standard rate of corporation
tax in
UK of 19% (2019: 19%) 36 (35)
Effects of:
Fixed asset differences 4 -
Amortisation and depreciation not deductible for tax - 10
(Decrease)/Increase in net losses carried forward (40) 25
Corporation tax charge/(credit) - -
========== ==========
The Group has estimated excess management expenses carried forward of GBP1.3m (2019: GBP1.3m)
and trading losses of approximately GBP800,000 (2019: GBP1.0m) available to use against future
profits. The tax losses have resulted in a deferred tax asset of approximately GBP0.4m (2019:
GBP0.4m) which has not been recognised as it is uncertain when future taxable profits will
be sufficient to utilise the losses.
8. Earnings/(Loss) per Share (basic and adjusted)
The calculations of earnings/(loss) per share (basic and
adjusted) are based on the net profit/(loss) and adjusted
profit/(loss) respectively and the ordinary shares in issue during
the year. The adjusted profit/(loss) represents the EBITDA for the
year. For diluted earnings per share, the weighted average number
of shares is adjusted to assume conversion of all dilutive
potential ordinary shares.
2020 2019
GBP'000 GBP'000
Net profit/(loss) for year 188 (183)
============= =============
Adjustments:
Interest 23 -
Depreciation 50 52
Adjusted profit/(loss) for the
year 261 (131)
============= =============
Number Number
Weighted average shares in issue
for basic earnings/(loss) per share 441,291,857 415,407,753
Weighted average dilutive share
options and warrants 65,065,130 *
Average number of shares used for
dilutive earnings/(loss) per share 506,356,987 415,407,753
============= =============
pence pence
Basic earnings/(loss) per share 0.04p (0.04p)
============= =============
Diluted earnings/(loss) per share 0.04p (0.04p)
============= =============
Adjusted basic earnings/(loss)
per share 0.06p (0.03p)
============= =============
Adjusted diluted earnings/(loss)
per share 0.05p (0.03p)
============= =============
* Where a loss is incurred, the effect of outstanding share
options and warrants is considered anti-dilutive.
9. Company's result for the year
The company has elected to take the exemption under section 408
of the Companies Act 2006 not to present the parent company income
statement account. The result for the parent company for the year
was a profit of GBP30,000 (2019: profit of GBP74,000).
10. Intangible assets
Group Customer
List
Purchased Goodwill Acquired Total
GBP'000 GBP'000 GBP'000
Cost
At 1 October 2019 1,280 220 1,500
Disposals (220) (220)
At 30 September 2020 1,280 - 1,280
-------------------- ----------- ---------
Amortisation and impairment
As at 1 October 2019 1,106 220 1,326
Amortisation charge for the year - - -
Disposals - (220) (220)
As at 30 September 2020 1,106 - 1,106
-------------------- ----------- ---------
Carrying amount
As at 30 September 2020 174 - 174
==================== =========== =========
As at 30 September 2019 174 - 174
==================== =========== =========
The purchased goodwill relates to intangible assets that do not
qualify for separate recognition on the acquisition of the REACT
specialist cleaning services business, an unincorporated division
of Autoclenz Limited.
The Group assesses at each reporting date whether there is an
indication that an asset may be impaired, by considering the net
present value of discounted cash flow forecasts. Purchased goodwill
has been allocated for impairment testing purposes to the
individual businesses acquired which are also the cash--generating
units ("CGU") identified. The recoverable amount of a CGU is
determined based on value in use calculations using cash flow
projections based on financial budgets approved by the Directors.
The projections are based on the assumption that the company can
realise projected sales. A prudent approach has been applied with
no residual value being factored into these calculations. If the
projected sales do not materialise there is a risk that the total
value of the intangible assets shown above would be impaired. A
pre-tax discount rate of 15% per annum has been applied to the
cashflow projections, taking into consideration the expected rate
of return and various risks relating to the CGU.
As a result of this annual review, it was decided that given the
current trading performance of the business and the short/medium
term outlook, there was no need to further impair the carrying
value of the Purchased Goodwill.
The key assumptions used in the estimation of the revised value
of Purchased Goodwill are set out below. The values assigned to the
key assumptions represent management's assessment of future
revenues and cash flows of the CGU. The most recent financial
results and forecast approved by management for the next five years
were used and a terminal growth rate thereafter. The projected
results were discounted at a rate which is a prudent evaluation of
the time value of money and the risks specific to the CGU.
Key assumptions used:
%
Average revenue growth rate (of next five
years) 10
Terminal value growth rate 0
Discount rate 15
11. Property, Plant and equipment
Group Leasehold Fixtures, Right-of-Use
property fittings & Assets
Vehicles equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 October 2019 21 181 109 - 311
Additions - 28 16 44
IFRS16
implementation - - - 40 40
Disposals - (60) (10) - (70)
At 30 September
2020 21 149 115 40 325
=================== ========== =================== ==================== =========
Depreciation
At 1 October 2019 8 153 69 - 230
Depreciation charge
for the year 4 18 15 13 50
Disposals - (57) (10) - (67)
At 30 September
2020 12 114 74 13 213
=================== ========== =================== ==================== =========
Net book value
At 30 September
2020 9 35 41 27 112
=================== ========== =================== ==================== =========
At 30 September
2019 13 28 40 - 81
=================== ========== =================== ==================== =========
Company Fixtures, Right-of-Use
Leasehold fittings & Assets
property Vehicles equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost
At 1 October 2019 21 - - - 21
Additions - - - - -
IFRS16
implementation - - - 21 21
Disposals - - - - -
At 30 September
2020 21 - - 21 42
=================== ========== =================== ==================== =========
Depreciation
At 1 October 2019 8 - - - 8
Depreciation charge
for the year 4 - - 7 11
Disposals - - - - -
At 30 September
2020 12 - - 7 19
=================== ========== =================== ==================== =========
Net book value
At 30 September
2020 9 - - 14 23
=================== ========== =================== ==================== =========
At 30 September
2019 13 - - - 13
=================== ========== =================== ==================== =========
12. Investment in subsidiary undertakings
Company
GBP'000
Cost
At 1 October 2019 and 30 September 2020 1,560
===============
Impairment
At 1 October 2019 1,386
Impairment charge for the year -
At 30 September 2020 1,386
===============
Carrying amount
At 30 September 2020 174
===============
At 30 September 2019 174
===============
As at 30 September 2020, the company held the following
subsidiaries:
Name of company Principal Country of Proportion
activities incorporation of
and place equity
of business interest
of ordinary
shares
REACT SC Holdings Limited Holding company United Kingdom 100%
Specialist
REACT Specialist Cleaning cleaning &
Limited (held indirectly decontamination
by REACT SC Holdings Limited) services United Kingdom 100%
13. Trade and other receivables
Current Note Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 989 696 - -
Provision for impairment 14 (42) (83) - -
Net trade receivables 947 613 - -
Amounts owed by Group undertakings - - 1,151 1,242
Provision against amounts owed by Group undertakings - - (1,151) (1,226)
Prepayments and accrued income 142 105 4 22
Other debtors - - 42 -
1,089 718 46 38
========= ========= ========= =========
Trade receivables are amounts due from customers for services
performed in the ordinary course of business. The Group's
impairment and other accounting policies for trade and other
receivables are outlined in note 2.
14. Provision for impairment of receivables
A provision is established for irrecoverable amounts where there
is an indication that amounts due under the original payment terms
will not be collected.
Provision for impairment of receivables Group Group
Relating to debt over 3 months past due
2020 2019
GBP'000 GBP'000
Opening provision 83 339
Impairments in the year - 64
Amounts released in the year (8) (189)
Amounts utilised in the year (33) (131)
Closing provision 42 83
========= =========
There are no receivables in the Company, as all are held by the
trading subsidiary, REACT Specialist Cleaning Limited.
As at 30 September 2020, excluding balances provided for by the
impairment provision, GBP25,000 (2019: GBP157,000) of trade
receivables were past their due settlement date but not
impaired.
The ageing analysis of these trade receivables is as
follows:
2020 2019
GBP'000 GBP'000
Up to 3 months past due 18 119
3 to 6 months past due 7 37
Over 6 months past due - 1
25 157
=============== ===============
Trade receivables that are neither past due nor impaired are
considered to be fully recoverable.
15. Cash and cash equivalents
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Cash and bank balances 1,783 440 1,446 256
========= ========= ========= =========
16. Called Up Share Capital
2020 2019
GBP'000 GBP'000
Issued share capital comprises:
498,509,350 (2019 : 415,407,753) Ordinary shares of 0.25p each 1,246 1,039
=========== ==========
83,101,597 Ordinary shares of 0.25p were issued on 9 June 2020 at a price of 1.5p per share.
This transaction resulted in an increase of GBP207,000 to the Company's share capital and
an increase of GBP926,000 to its share premium, after deducting the cost of issue of GBP113,000.
17. Trade and other payables
Group Group Company Company
2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000
Current:
Trade payables 402 232 55 39
* Accrued expenses 192 128 3 -
Social security and
other taxes 330 175 4 (2)
Lease Liability <12
months 13 - 9 -
Non-current:
Lease Liability >12
months 30 - 15 -
967 535 86 37
========= ========= ========= =========
18. Deferred Tax
Deferred tax is provided, using the liability method, on
temporary differences at the statement of financial position date
between the tax base of assets and liabilities and their carrying
amounts for financial reporting purposes. Deferred tax is
calculated in full on temporary differences under the liability
method using a tax rate of 19%, the movement on the deferred tax
liability is as shown below:
Group 2020 2019
GBP'000 GBP'000
At 1 October 2019 - -
Income credit - -
At 30 September 2020 - -
========= =========
Deferred tax assets have not been recognised in respect of all
tax losses and other temporary differences giving rise to deferred
tax assets as the Directors believe it is uncertain when these
assets will be recovered.
19. Related Party Disclosures
Group and company
During the years ended 30 September 2019 and 30 September 2020,
there were no related party transactions.
20. Ultimate Controlling Party
No one shareholder has control of the company.
21. Warrants
There were no movements in the number of share warrants
outstanding and their related weighted average exercise prices
during the year.
Number of warrants Average exercise
price
2020 2019 2020 2019
No. No. GBP GBP
Outstanding at the beginning
of the year 19,939,537 2,380,000 0.0030 0.0168
Granted during the year - 19,939,537 - 0.0030
Lapsed during the year - (2,380,000) - (0.0168)
Outstanding at the end
of the year 19,939,537 19,939,537 0.0030 0.0030
------------ ------------- -------- ----------
The fair value of the share warrants issued on 17 May 2019 with
an exercise price of 0.30p is GBP5,834 and was derived using the
Black Scholes model. The following assumptions were used in the
calculations:
Share price at grant
date 0.30p
Risk-free rate 0.58%
Volatility 25%
Expected life 5 years
Expected volatility is based on a conservative estimate for the
company. The expected life used in the model has been adjusted,
based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations.
GBP1,167 (2019: GBP389) has been recognised during the year for
the share warrants over the vesting period.
22. Share options
The company has implemented a share option programme to grant
share options as an incentive for employees. Each share option
converts into one ordinary share of the company on exercise. No
amounts are paid or payable by the recipient on receipt of the
option and the company has no legal obligation to repurchase or
settle the options in cash. The options carry neither rights to
dividends nor voting rights prior to the date on which the options
are exercised. Options may be exercised at any time from the date
of vesting to the date of expiry.
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows:
Number of options Average exercise
price
2020 2019 2020 2019
No. No. GBP GBP
Outstanding at the
beginning of the year 45,125,593 2,754,077 0.0038 0.0168
Granted during the
year - 42,371,516 - 0.0030
Lapsed during the - - - -
year
Outstanding at the
end of the year 45,125,593 45,125,593 0.0038 0.0038
------------ ------------ --------- ---------
The Options shall vest and become capable of exercise in
specified quantities if the mid-market price (as derived from the
AIM Appendix of the Daily Official List and as certified in writing
by the Company's stockbrokers) equals or exceeds a series of
defined Share Hurdle Prices between GBP0.004 and GBP0.0280 for 5
consecutive business days at any time or times during the vesting
period. GBP3,646 (2019: GBP1,215) has been recognised during the
year for the share-based payments over the vesting period.
The prior year figures showing the number of options have been
restated as the warrants detailed in Note 21 were previously
incorrectly included in the total. However the share based charge
was correctly calculated, so there is no impact on the Consolidated
Statement of Comprehensive Income.
23. Financial risk management, objectives and policies
The Group's financial instruments comprise cash balances and
receivables and payables that arise directly from its operations.
The main risks the Group faces are liquidity risk and capital
risk.
The board regularly reviews and agrees policies for managing
each of these risks. The Group's policies for managing these risks
are summarised below and have been applied throughout the year. The
numerical disclosures exclude short-term debtors and their carrying
amount is considered to be a reasonable approximation of their fair
value.
Interest risk
The Group is not exposed to significant interest rate risk as it
has no interest-bearing liabilities at the year end.
Credit risk
The Group is exposed to credit risk as services are invoiced on
completion. This risk is mitigated as most large customers have
been customers for several years and have exemplary credit ratings.
The board also ensure robust procedures are in place to ensure all
services are invoiced promptly and all payments received in a
timely manner.
As at the year end, 13% of debtors included in trade receivables
are past their due dates. Included in trade receivables are
provisions of GBP42,000.
Liquidity risk
Liquidity risk is the risk that Group will encounter difficulty
in meeting the obligations associated with financial
liabilities.
The responsibility for liquidity risks management rest with the
Board of Directors, which has established appropriate liquidity
risk management framework for the management of the Group's short
term and long-term funding risks management requirements.
During the year under review, the Group has not utilised any
borrowing facilities. The Group manages liquidity risks by
maintaining adequate reserves and reserve borrowing facilities by
continuously monitoring forecast and actual cash flows, and by
matching the maturity profiles of financial assets and
liabilities.
Capital risk
The Group's objectives when managing capital are to safeguard
the ability to continue as a going concern in order to provide
returns for shareholders and benefits to other stakeholders and to
maintain an optimal capital structure to reduce the cost of
capital.
24. Lease liabilities
At 30 September 2020, the maturity of the Group's gross
contractual undiscounted cashflows due on the Group's lease
liabilities (excluding short-term and low-value leases) is set out
below:
Group Land and Other Total
Buildings
GBP000 GBP000 GBP000
Discounted future cash flows;
Not later than one year (9) (4) (13)
Later than one year and not later
than five years (15) (15) (30)
Later than five years - - -
Total discounted future cash flows
at 30 September 2020 (24) (19) (43)
============ ========= =========
Company Land and Other Total
Buildings
GBP000 GBP000 GBP000
Discounted future cash flows;
Not later than one year (9) - (9)
Later than one year and not later
than five years (15) - (15)
Later than five years - - -
Total discounted future cash flows
at 30 September 2020 (24) - (24)
============ ========= =========
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