Preliminary Results for year ended 31 July 2020

About this update from Gattaca Plc

[{"type":"text","content":"\n \n \n \n RNS Number : 1651E \n Gattaca PLC \n 04 November 2020 \n   \n \n \n \n  4 November 2020 \n \n \n   \n \n \n Gattaca plc \n \n \n   \n \n \n Preliminary Results for the year ended 31 July 2020 \n \n \n   \n \n \n Strategic progress and a resilient trading performance against a challenging backdrop \n \n \n   \n \n \n Gattaca plc (\"Gattaca\" or the \"Group\"), the specialist Engineering and Technology (IT & Telecoms) recruitment solutions business, today announces its Preliminary Results for the year ended 31 July 2020. \n \n \n   \n \n \n Financial Highlights \n \n \n \n \n \n \n \n \n \n \n \n \n 2020 \n \n \n \n \n Restated 2019 \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n Continuing \n \n \n Reported \n \n \n \n \n Continuing underlying 2 \n \n \n \n \n Continuing \n \n \n Reported \n \n \n \n \n Continuing underlying 2 \n \n \n \n \n Continuing \n \n \n Reported \n \n \n \n \n Continuing underlying 2 \n \n \n \n \n \n \n \n \n \n \n \n \n \n £m \n \n \n \n \n £m \n \n \n \n \n £m \n \n \n \n \n £m \n \n \n \n \n % \n \n \n \n \n  % \n \n \n \n \n \n \n Revenue \n \n \n \n \n 538.7 \n \n \n \n \n 538.7 \n \n \n \n \n 634.3 \n \n \n \n \n 634.3 \n \n \n \n \n -15% \n \n \n \n \n -15% \n \n \n \n \n \n \n Net Fee Income (NFI) 1 \n \n \n \n \n 54.3 \n \n \n \n \n 54.3 \n \n \n \n \n 69.1 \n \n \n \n \n 69.1 \n \n \n \n \n -21% \n \n \n \n \n -21% \n \n \n \n \n \n \n Profit from operations \n \n \n \n \n 3.4 \n \n \n \n \n 6.0 \n \n \n \n \n 5.1 \n \n \n \n \n 13.7 \n \n \n \n \n -34% \n \n \n \n \n -56% \n \n \n \n \n \n \n Profit before taxation \n \n \n \n \n 1.4 \n \n \n \n \n 4.6 \n \n \n \n \n 3.4 \n \n \n \n \n 11.7 \n \n \n \n \n -57% \n \n \n \n \n -61% \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Basic earnings per share \n \n \n \n \n 1.8 \n \n \n \n \n 10.3 \n \n \n \n \n 5.8 \n \n \n \n \n 28.4 \n \n \n \n \n -70% \n \n \n \n \n -64% \n \n \n \n \n \n \n Diluted earnings per share \n \n \n \n \n 1.8 \n \n \n \n \n 10.3 \n \n \n \n \n 5.7 \n \n \n \n \n 27.6 \n \n \n \n \n -69% \n \n \n \n \n -63% \n \n \n \n \n \n \n Dividend per share \n \n \n \n \n \n \n \n \n \n \n \n 0 \n \n \n \n \n \n \n \n \n \n \n \n 0 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Adjusted Net cash / (debt) at end of period (excluding IFRS 16 lease liabilities) \n \n \n \n \n \n \n \n \n \n \n \n 27.3 \n \n \n \n \n \n \n \n \n \n \n \n (24.8) \n \n \n \n \n \n \n \n \n \n \n \n 52.1 \n \n \n \n \n \n   \n \n \n   \n \n \n Financial Performance \n \n \n   \n \n \n \n \n \n ● \n \n \n \n \n Continuing underlying PBT of £4.6m (2019 restated: £11.7m), 61% lower year-on-year \n \n \n \n \n \n \n ● \n \n \n \n \n Basic continuing underlying EPS of 10.3p (2019 restated: 28.4p), 64% lower year-on-year \n \n \n \n \n \n \n ● \n \n \n \n \n Robust balance sheet with Group having adjusted net cash position of £27.3m at 31 July 2020 (2019: £(24.8)m net debt). Reduction of net debt a key focus over last three years, net debt having been £(40.3)m at July 2017 \n \n \n \n \n \n \n ● \n \n \n \n \n Revolving Credit Facility repaid early in October 2020; Group now covenant free \n \n \n \n \n \n   \n \n \n COVID-19 response \n \n \n   \n \n \n \n \n \n ● \n \n \n \n \n Business was fully operational through remote working within first week of UK-wide lock-down, now remote working on a hybrid basis \n \n \n \n \n \n \n ● \n \n \n \n \n Immediate actions taken on costs and liquidity improvement, including no bonuses and 20% temporary pay cuts for all directors and staff \n \n \n \n \n \n \n ● \n \n \n \n \n Gattaca's weighing towards Contract (73%, 27% Perm), combined with resilience of core markets, including Infrastructure and Defence, provided comparatively stable platform for Group performance \n \n \n \n \n \n   \n \n \n \n Operational Performance \n \n \n 3 \n \n \n \n   \n \n \n \n \n \n ● \n \n \n \n \n Group continuing underlying NFI of £54.3m, 21% lower year-on-year, reflecting impact of COVID-19 pandemic \n \n \n \n \n \n \n ● \n \n \n \n \n UK Engineering NFI on a continuing basis declined 19% year-on-year, a relatively resilient performance reflecting longer investment horizons in the sector and strong mix of defence, infrastructure and public sector work \n \n \n \n \n \n \n ● \n \n \n \n \n UK Technology NFI on a continuing basis was 31% lower than the prior year. NFI stabilised in Q2 and Q3, prior to the onset of the pandemic, demonstrating the underlying recovery of the business unit \n \n \n \n \n \n \n ● \n \n \n \n \n International NFI on a continuing basis declined 19% against 2019 (as restated), reflecting the global nature of the pandemic. China operations are now closed and treated as discontinued \n \n \n \n \n \n \n ● \n \n \n \n \n Contract NFI now represents 73% of Group NFI (2019 restated: 71%) on a continuing basis \n \n \n \n \n \n \n ● \n \n \n \n \n Significant cost actions taken across all areas of the business, whilst ensuring focused investment in technology to enhance remote working productivity. £1.5m of ongoing administrative costs saved in the year, with a further £4.0m of annualised savings from November 2020 \n \n \n \n \n \n \n ● \n \n \n \n \n Cooperation with the US Department of Justice continues with respect to historical transactions in our discontinued telecommunication infrastructure business \n \n \n \n \n \n   \n \n \n Strategic Update \n \n \n Implementation of the Group-wide Improvement Plan accelerated during the year, with changes focused on improving sales impact and cost reduction. Key milestones included: \n \n \n \n \n \n ● \n \n \n \n \n Introduced a new, targeted approach to client acquisition, delineated by industry sector \n \n \n \n \n \n \n ● \n \n \n \n \n Completed restructuring of our Technology business unit \n \n \n \n \n \n \n ● \n \n \n \n \n Scaled-up our fulfilment operation, with the business reorganised to form a core dedicated delivery capability across all of our locations, enabling a more agile response to client and market needs \n \n \n \n \n \n \n ● \n \n \n \n \n Investment in major technology platform maintained, first subsidiary was 'live' in October \n \n \n \n \n \n   \n \n \n Alongside the Improvement Plan, a restructuring was carried out which is expected to deliver £4m in annualised cost reductions from November 2020. \n \n \n   \n \n \n Outlook \n \n \n In the first few months of the current financial year there have been some encouraging indications of increased activity within the Group's core markets, however, as the economy remains fragile, including the potential impact of an extended second lockdown in England, we remain cautious as to the timeframe for its eventual recovery. We remain confident that the work done to refocus the business, including the acceleration of the Group-wide Improvement Plan, combined with our robust balance sheet and expertise in STEM skills, leaves us well-placed to benefit from the inevitable recovery in our core markets. \n \n \n   \n \n \n Kevin Freeguard, CEO commented: \n \n \n   \n \n \n \"Whilst the past 12 months have been overshadowed by the onset of the COVID-19 pandemic, I am pleased with the resilience that the business has demonstrated during this time and the strategic progress we have made. Our staff have been our number one priority during this time, and I would like to thank them for their hard work and the commitment they have shown throughout this challenging period. \n \n \n   \n \n \n \"During the year, we accelerated the implementation of our Group-wide Improvement Plan and the changes made throughout the business have improved both our agility and ability to react quickly and cost-effectively to changes in demand. Prior to the pandemic the demand for STEM skills, our core focus, was growing significantly and, whilst we remain cautious as to the timeframe for economic recovery and the potential impact of an extended second lockdown in England, we have been encouraged by the signs of increased activity in our core markets in the first few months of the new financial year. With further benefits from our Improvement Plan to come, and our robust and covenant-free balance sheet, we are confident that Gattaca is well-placed for the future.\"   \n \n \n   \n \n \n   \n \n \n The following footnotes apply, unless where otherwise indicated, throughout these Preliminary Results: \n \n \n   \n \n \n \n \n 1   \n \n \n \n NFI is calculated as revenue less contractor payroll costs \n \n \n \n \n \n 2 \n \n \n \n Continuing underlying results exclude non-underlying items within continuing administrative expenses (2020: £(1.2)m, 2019 £(1.4)m), the losses of discontinued operations before taxation (2020: £(2.6)m, 2019 restated: £(7.9)m), amortisation of acquired intangibles (2020: £(0.6)m, 2019 £(1.3)m), impairment of goodwill and acquired intangibles (2020: £(0.3)m, 2019 £(5.9)m), impairment of plant, property and equipment and right-of-use assets (2020: £(0.4)m, 2019:£(0.0)m) and P&L exchange (losses) / gains from revaluation of monetary foreign assets and liabilities (2020: £(0.5)m, 2019 £0.3m) \n \n \n \n \n \n 3 \n \n \n \n NFI commentary is on an underlying like for like constant currency basis \n \n \n \n   \n \n \n   \n \n \n For further information please contact: \n \n \n \n \n \n Gattaca plc \n \n \n \n \n +44 (0) 1489 898989 \n \n \n \n \n \n \n Kevin Freeguard, Chief Executive Officer \n \n \n Salar Farzad, Chief Financial Officer  \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n Liberum Capital Limited (Nomad and Broker) \n \n \n \n \n +44 (0) 20 3100 2000 \n \n \n \n \n \n \n Lauren Kettle \n \n \n Robert Morton \n \n \n Euan Brown \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Citigate Dewe Rogerson \n \n \n \n \n +44 (0) 20 7638 9571 \n \n \n \n \n \n \n Nick Hayns \n \n \n Louise Mason-Rutherford \n \n \n Elizabeth Kittle \n \n \n Claire Dansie  \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain. \n \n \n   \n \n \n CHAIRMAN'S STATEMENT \n \n \n   \n \n \n Maintaining focus whilst demonstrating resilience in unprecedented times \n \n \n This year has been very challenging, not just for Gattaca but for the UK in general. In early 2020 we saw some early softening in demand but the scale of the COVID-19 pandemic and subsequent lockdown in March was unprecedented. As with all great shocks to the system there are many true unsung heroes who keep the wheels turning. For us it was the numerous colleagues in our back office functions who enabled the entire business to work from home with only 48 hours' notice and still ensure our contractors were paid on time. Meanwhile our sales teams were supporting clients and contractors whilst our marketing team focused on internal communications to the dispersed group. In addition, in solidarity with our furloughed colleagues, everyone, at all levels of the business, took a 20% reduction in salary up until July. We truly have a strong family culture and the Board wish to express our gratitude to all the family at Gattaca. \n \n \n Overview \n \n \n We have maintained focus on the continuation of the Group-wide Improvement Plan that we discussed last year, and indeed have accelerated its implementation over the past 12 months. We are determined to make sure the business has the foundations to operate well in the coming years, with improved sales management and the reinforcement of a performance culture. Whilst to some extent the progress we have made in the business has been masked by the impact of the pandemic, the improvements we have implemented leave us well placed to exploit the upside when the economy improves. \n \n \n A consequence of both the acceleration of the Improvement Plan and the impact of the pandemic on many of our clients has regrettably been the loss of a number of jobs across the Group. At this stage, we are clear that, so long as the pandemic is around, we will need to keep a clear focus on costs and to that end we have reduced annualised costs by a further £4m going forward. In addition, we took the decision during the year to exit our operations in China. We had been very explicit when we decided to retain the overseas operations that they needed to continue to create value - our Chinese business could not reach the levels of profitability which we demanded. \n \n \n Our focus to reduce net debt has been hugely successful. We ended the year with adjusted net cash (excluding lease liabilities) of £27.3m, an improvement of £52.1m over the previous year. Part of that improvement is the result of our ability to access £13.8m of non-recourse debt financing and a further £10.3m in deferred payments to the UK Government in the form of delayed VAT payments, which become repayable at the end of March 2021. Irrespective of these one-offs we have been able to reduce debt by £11.1m through improved control of working capital including the move of some contractors to four-weekly payment terms. We have significant liquidity of £58.5m at the year-end, being our cash resources and our undrawn invoice financing facility, and since year-end have repaid and cancelled our Revolving Credit Facility thereby removing all covenants going forward. Whilst recruitment businesses typically require increased working capital in times of growth, the change in contractor terms will offset some of this as trading improves with the recovery from the pandemic and we expect to maintain a strong net cash position. \n \n \n Dividend \n \n \n We are conscious that this will be the second year where the Board have not recommended a dividend. We feel that given the economic headwinds the UK is facing over the next six months it would not be prudent to do so at this time. We are however committed as a Board to restoring the dividend at the earliest opportunity. \n \n \n Board \n \n \n We would like to thank Richard Bradford who is stepping down as a Non-Executive Director at this year's AGM after nine years' service for his contribution to the Group. His wise counsel and knowledge of our industry will be sorely missed. We are proactively seeking his replacement which we are hopeful will start to address the diversity imbalance on the Board. \n \n \n Outlook \n \n \n Gattaca's focus on in-demand STEM skills, in addition to the measures we have taken to strengthen the business, positions us well for the eventual, and inevitable, recovery in our core markets. Whilst we remain cautious as to the timeframe for the recovery, and the nascent second wave of the COVID-19 pandemic and the potential for an extended second lockdown in England adds further uncertainty to the near-term outlook, we are encouraged by the initial signs of improvement we have seen in the first few months of the new financial year, with \n increased numbers of contractors, from the low period of \n May, and \n some of our major clients seeking more permanent roles. \n \n \n   \n \n \n We have brought more staff back from furlough in anticipation of economic recovery and we will cautiously monitor activity over the coming months particularly given the recently announced second national lockdown. Whilst we expect the first six months to remain challenging, we are hopeful that the second half will see further improvement. We are confident that the changes we have made in the business leave us better placed to deal with whatever economic conditions we may face in the short term and to better benefit from the upside of the eventual recovery. \n \n \n   \n \n \n Patrick Shanley \n \n \n Non-Executive Chairman \n \n \n   \n \n \n CHIEF EXECUTIVE OFFICER'S REVIEW \n \n \n Continued progress throughout the year; we are positioned well to support our clients with the critical STEM skills needed for recovery. \n \n \n Introduction \n \n \n Gattaca continues to play a key role partnering with our clients across multiple sectors and geographies to deliver the engineering and technology talent they need as they work through the economic and business recovery. I am proud of the way our staff have responded to support clients, contractors and candidates without any interruption to operations. Our business is resilient and we continue to make good progress with the Improvement Plan. \n \n \n As with most businesses across the globe our results for the year have been impacted by the COVID-19 pandemic, Net Fee Income at £54.3m was 21% lower than prior year. Notwithstanding this, the Group delivered £4.6m of continuing underlying profit before tax, eliminated debt and is now in a strong net cash position. Whilst some of the improvement in our cash position was the result of an unwinding of working capital due to lower trading levels, a material element was driven by specific actions which have strengthened our balance sheet. We expect much of the improved position to be permanent, and as our business recovers we expect a lower rate of working capital requirement given the changes to our operating model. \n \n \n Overall market \n \n \n During the first half of FY20, UK market conditions were particularly challenging, driven by political uncertainty before the General Election, ongoing Brexit uncertainty and the proposed IR35 regulatory change. These external factors combined to slow investment decisions and client recruitment in both temporary and permanent markets. \n \n \n As one would expect, the outbreak of COVID-19 resulted in an immediate and major decline in client requirements in the second half of the year. Whilst companies continued to recruit during this period, volumes were significantly reduced in a relatively short time frame. Towards the end of the financial year we saw numbers stabilise and subsequently there have been early indications that activity and client confidence levels are increasing, prompting us to take the decision to bring staff back from furlough. \n \n \n Many of the market sectors we support remained active during the initial lockdown period, in particular Infrastructure, Defence, Energy and Technology. Whilst we were impacted with reduced activity, our core focus on STEM skills and the contract market helped us deliver a resilient performance. \n \n \n Operational response to the COVID-19 situation \n \n \n As the potential impact of the pandemic became apparent, our immediate priorities were to ensure our staff were able to work in a safe and stable environment; and to support our clients, contractors and candidates. \n \n \n We commenced detailed planning and volume testing of our systems and processes in February and the entire Group was fully operational on a remote working basis by the end of the first week of the UK lockdown in March. We had fully remote working for several months and have since moved to a hybrid approach. \n \n \n The lockdown necessitated the acceleration of many of our digitisation plans, achieving in weeks what may have otherwise taken months and we will retain the benefits of this in the years to come. \n \n \n With no service interruptions, we ensured operational capability, and were able to fully deliver our part of the supply chain. We maintained existing contractor support where clients required this; delivered new skills to existing clients and began servicing new clients. We were able to tailor our business model to support our individual clients. \n \n \n We took a number of actions to ensure the ongoing financial stability of the business, both in terms of cost mitigation and liquidity maximisation. The furlough scheme introduced by the UK Government was welcome and enabled us to support employees and some contractors whose roles would otherwise have been at immediate risk. We moved early to work proactively with clients to offer furlough support to contractors where this was possible. \n \n \n Accelerating the Improvement Plan and cost reduction \n \n \n Following my appointment we launched the Group-wide Improvement Plan in order to build on the fundamental strengths of the business to deliver long term sustainable growth. \n \n \n The business was organised and united around delivering the Plan, focusing on our four strategic priorities: \n \n \n \n \n \n ● \n \n \n \n \n Customer Focus - growing our customer base and deepening relationships \n \n \n \n \n \n \n ● \n \n \n \n \n Product and Innovation - innovating and developing products to meet customer needs \n \n \n \n \n \n \n ● \n \n \n \n \n Service Delivery - enriching the customer experience and enhancing our service delivery capability \n \n \n \n \n \n \n ● \n \n \n \n \n Operational Excellence - improving organisational alignment and performance \n \n \n \n \n \n   \n \n \n I am pleased to report good progress this year. Not only did we maintain the pace of change during the pandemic, we accelerated certain elements including client service and efficiency, leading to cost reduction and focused sales improvement. This was recognised externally after the year end as our Gattaca Solutions business was included in HRO Today's 'Bakers Dozen' for being one of the top RPO (Recruitment Process Outsourcing) providers, for the first time. This is significant to us as companies are placed on the list based solely on customer feedback, making it a highly credible accolade. \n \n \n We have implemented a focused approach to how we target industry sectors and are aligning our talent more closely to our operating model across the Group which will enable us to improve our sales effectiveness. This has seen the Group working more closely with existing clients and accelerating new client relationships to better support them with solutions for their talent needs as well as achieving cost efficiencies across the Group. \n \n \n Internally the restructuring of the Technology business unit was completed during the year, and it has now started rebuilding for a recovery. Prior to COVID-19, the first green shoots of recovery were emerging in the business unit, with NFI run rates flattening out after the decline of the last three years, providing evidence that the strategy is working. \n \n \n Our centralised Fulfilment operation was scaled during the year, and the business was reorganised to form a core dedicated fulfilment capability across all our locations. This is enabling a more agile response to client and market needs. \n \n \n The Gattaca Solutions business, which is fully aligned with our fulfilment operation under the same senior management, continued to perform strongly, out-performing our traditional staffing business in difficult markets. \n \n \n Internationally, our size relative to the overall market for engineering and technology skills highlights the importance of defining and focusing on our specific niches. During the year, we worked to closer align our International operations with the rest of the business. This has enabled increased collaborative business development activities, resulting in quicker client acquisition as well as greater niche skill delivery capability across borders. As the business matures and it continues to leverage the experience we have within the Group, we have started to develop more meaningful long-term relationships with some of our international customers by moving to delivering RPO solutions and exclusive recruitment projects, where we have considerable experience to draw upon from our UK operations. We see these more sustainable relationships as key to the long-term success of our International business. During the year, as previously announced, we ceased operational activity in China as we prioritised other markets. \n \n \n Notwithstanding the challenging economic environment, we maintained our planned systems investment. Our Primary Business System project maintained pace during the lockdown period and we have our first UK subsidiary live on the system, with the rest of the Group coming online before the end of the 2021 financial year. This investment will be transformational for ways of working and the level of business insight and understanding across the Group. \n \n \n We also implemented a number of other technology applications during the year to improve our client, candidate and staff experience. We integrated a new digital platform for our Gattaca Solutions accounts that brings greater automation, increased flexibility and enables us to implement new solutions quicker. We continue to invest in tools to support our operations introducing new applications to support real time communication, collaboration, digital coaching and training and development to create an efficient and engaging digital workplace. \n \n \n In combination with the above actions aimed at driving agility and promoting growth throughout the Group, we also undertook measures to reduce costs in the business. Post period end we completed a restructuring which will achieve £4m in annualised cost reductions from November 2020. \n \n \n People \n \n \n During the year I was delighted to appoint Claire Cross as our new HR Director. Claire brings with her extensive industry experience and knowledge of our Group. Beyond her HR expertise, her background includes operational sales experience and she will be instrumental to our plans as we continue to grow and develop the organisation. \n \n \n The pandemic has been unparalleled in terms of its impact on people both in their business and personal lives. I have been truly humbled by the way our Gattaca team has and continues to rise to the challenges we and our clients are navigating and I want to take this opportunity to thank them for their dedication, resilience and hard work. \n \n \n Looking forward \n \n \n Notwithstanding the obvious uncertainty in global markets, in the longer term there are significant opportunities in our chosen sectors. Prior to the COVID-19 pandemic the demand for STEM skills, our core focus, was growing significantly and, whilst we remain cautious as to the timeframe for economic recovery and the potential impact of an extended second lockdown in England, we have been encouraged by the signs of increased activity in our core markets in the first few months of the new financial year. With further benefits from our Improvement Plan to come, and our robust and covenant-free balance sheet, we are confident that Gattaca is well-placed for the future. \n \n \n   \n \n \n Kevin Freeguard \n \n \n   \n \n \n Chief Executive Officer \n \n \n   \n \n \n   \n \n \n CHIEF FINANCIAL OFFICER'S REVIEW \n \n \n 2020 has been another year of intense activity. We continued our work on repositioning the business, including a much strengthened balance sheet, and of course managing the impact of the global pandemic. We delivered £4.6m of underlying profit before tax, eliminated debt and are now in a strong net cash position. \n \n \n Financial performance \n \n \n On a continuing basis, revenue of £538.7m (2019 restated: £634.3m) generated NFI of £54.3m (2019 restated: £69.1m). We achieved contract NFI of £39.7m (2019 restated: £49.3m) at a margin of 7.6% (2019 restated: 8.0%), and permanent recruitment fees of £14.5m (2019 restated: £19.7m). \n \n \n Profit before tax from continuing operations was £1.4m (2019 restated: £3.4m). \n \n \n Statutory loss after tax was £1.8m (2019: £5.9m loss). \n \n \n Net cash at 31 July 2020 (excluding lease liabilities) improved considerably to £27.3m (2019: net debt of £24.8m), a £52.1m improvement including the benefit of £10.3m of VAT deferrals and a change from recourse to non-recourse financing worth £13.8m at year end, in addition to l improvements in contractor terms, DSO \"Days Sales Outstanding\") and volume related movements as explained below. \n \n \n Underlying results \n \n \n Underlying results are shown beneath the Income Statement. Underlying continuing profit before tax at £4.6m (2019 restated: £11.7m) was £7.1m below last year with the most significant factor being the impact of the COVID-19 pandemic. Whilst we moved to full remote working within days of the various national restrictions without any interruption to our operational capability, we saw a significant and relatively sudden reduction in trading volumes, and having anticipated this, took early mitigating actions on our cost base, including acceleration of Improvement Plan efficiencies. We were also able to achieve significant positive changes in terms of digitisation and process optimisation. \n \n \n Discontinued operations and non-underlying costs \n \n \n The Group-wide Improvement Plan continued at pace during 2020 and drove some of the non-underlying costs below: \n \n \n \n \n \n £'000 \n \n \n \n \n Profit/(Loss) Before Tax \n \n \n \n \n \n \n Underlying continuing \n \n \n \n \n 4,588 \n \n \n \n \n \n \n Restructuring costs \n \n \n \n \n (1,552) \n \n \n \n \n \n \n Advisory fees primarily related to DoJ cooperation \n \n \n \n \n (1,395) \n \n \n \n \n \n \n Discontinued operations losses and related restructuring costs primarily with respect to China \n \n \n \n \n (1,225) \n \n \n \n \n \n \n Amortisation and impairment of acquired intangibles \n \n \n \n \n (950) \n \n \n \n \n \n \n Impairment of right-of-use leased assets (one building on our Whiteley campus) \n \n \n \n \n (432) \n \n \n \n \n \n \n Gain on sale of investment in Concilium Search Limited \n \n \n \n \n 304 \n \n \n \n \n \n \n Foreign exchange differences \n \n \n \n \n (521) \n \n \n \n \n \n \n Reported statutory for the total Group \n \n \n \n \n (1,183) \n \n \n \n \n \n   \n \n \n The acceleration of certain elements of the Improvement Plan enabled restructuring both during FY20 and in the early part of FY21 and our financial statements include both the actual costs incurred in FY20 and a provision for known redundancy costs for the initiatives that have been implemented in early FY21. \n \n \n Despite changes in local staffing and strategy, our China business was not generating appropriate returns and this business was closed during the year, allowing us to devote resources to markets with greater potential. \n \n \n We continue to cooperate with the US Department of Justice (\"DoJ\") and there have been no significant new matters in this regard during the year. Legal fees on this matter were £1.4m in the year (2019: £3.4m), the vast majority of which were incurred in the first half of the year. As shown in Note 28 to the Financial Statements, the Group is not currently in a position to know what the outcome of these enquiries may be, therefore we are unable to make any type of quantification of the potential financial impact, if any. \n \n \n During the year, we took an additional impairment charge of £0.3m (2019 £5.9m) writing off all remaining intangible asset values relating to the UK Technology business of Networkers, acquired in 2015. All International intangible asset values relating to Networkers were written off in prior periods. \n \n \n Following the closure of our Bromley office last year, we have also made the decision to close one of the buildings on our Whiteley campus. This was primarily enabled by the restructurings noted above. We fully intend to build on the positive lessons learnt during the UK lockdown, including the benefits of flexible working. In the long run this is likely to mean a hybrid approach and using our offices in different ways to before. We expect the remaining office space in London Bridge, Whiteley and Winnersh to be sufficient for the business as we grow through the recovery and beyond. \n \n \n Cost actions and UK Government Coronavirus \n \n \n Job Retention Scheme \n \n \n We took significant cost actions during the year to mitigate as much of the impact of reduced NFI as possible, and welcomed the UK Government Job Retention Scheme which enabled us to support staff and contractors. \n \n \n The UK Government Job Retention Scheme enabled us to take a more considered view of the resourcing level adjustments necessitated by the abrupt and significant changes in the economic landscape. Without the scheme we would have been compelled to make significant reductions to our workforce at the start of the lockdown, and inevitably this would have been more severe when uncertainty was at its highest. \n \n \n During the year we claimed £2.4m with respect to our contractors and £1.5m with respect to our staff, enabling us to provide continued financial support to individuals whilst we and our clients took the appropriate time to assess our needs with much greater knowledge around the short and likely medium- terms impacts to our businesses and the necessary cost actions. \n \n \n All staff and Directors who remained working in the business during this time also made a sacrifice through a 20% reduction in salary for a period of time, reducing 2020 costs by £0.7m. In addition we reassessed structures in the UK and internationally, with some de-layering, which benefited results in 2020 by £1.7m. Commissions were lower by £3.6m due to lower trading volumes and there were no Board and central staff bonuses, saving £1.8m compared to prior year. In September 2020 we concluded a staff consultation process, the impact of which will be a further reduction of £4m in staff costs on an annualised basis. We will review our staffing needs as the recovery takes shape. At this time, we believe we have significant capacity to absorb increased trading without the need to increase significantly overall headcount. \n \n \n Taxation \n \n \n The Group's reported effective tax rate of 50.5% (2019: 31.6%) was driven up by the impact of overseas losses not recognised as deferred tax assets. The continuing underlying effective tax rate was 27.7% (2019 restated: 21.3%), similarly impacted by the same overseas losses. \n \n \n Earnings per share \n \n \n Basic earnings per share was negative 5.5 pence (2019: negative 18.3 pence), and on a fully diluted basis was negative 5.5 pence (2019: negative 17.8 pence). \n \n \n Continuing underlying basic earnings per share was 10.3 pence (2019 restated: 28.4 pence). \n \n \n Dividends \n \n \n We are very much cognisant that our shareholders have shown great patience as we have worked to strengthen our balance sheet and reposition the business. Given the economic headwinds the UK faces over the next six months the Board is not recommending a final dividend for 2020. We are however committed as a Board to restoring the dividend at the earliest opportunity. \n \n \n Capital expenditure \n \n \n Capital expenditure in the year was £2.6m (2019: £3.5m) of which £2.3m related to software. Having a single set of integrated and effective systems across the Group is critical to our long-term success and during the lockdown we maintained the pace of our Primary Business Systems project. One of our subsidiaries is already live on the system and we expect all of our businesses to be operating on the new systems by the end of FY21. \n \n \n Sale of holding in Concilium \n \n \n On 27 November 2019 we sold our 10% holding in Concilium Search Limited realising a gain of £0.3m which has been included in non-underlying items. \n \n \n Net assets and shares in issue \n \n \n At 31 July 2020 the Group had net assets of £39.8m (2019: £41.9m) and had 32.3m (2019: 32.3m) fully paid ordinary shares in issue. \n \n \n Cash flow and net debt \n \n \n Net cash at 31 July 2020 was £19.6m (2019: net debt £(24.8)m). Adjusted net cash (net cash excluding IFRS 16 lease liabilities) was £27.3m (2019: net debt £(24.8)m). Reducing our financial leverage has been a key objective for the last three years and we are pleased with this progress, having had net debt of £(40.3)m at 31 July 2017. As the UK was heading towards lockdown, we took immediate measures to ensure our balance sheet could weather whatever storms might lie ahead and prior to the announcement by the Chancellor on the UK-wide Government support schemes, we were able to secure agreement from HMRC to defer our VAT payments until the end of March 2021, and other tax payments for a shorter period. At 31 July 2020, our cash position included the benefit of £10.3m from these deferrals. \n \n \n A further element of the improvement is driven by reduced trading activity which enabled an unwinding of working capital. We expect a very substantial element of the overall working capital improvement to be permanent as described below. \n \n \n We have changed the payment terms for contractors earning above a certain level from seven to 28 days which is in alignment with normal payment cycles for businesses and most company employees. This change reduces significantly the gap between payments to contractors and payments from our customers. As well as the immediate benefit at the point of change, the new terms should mean a lower requirement for additional working capital as our business grows through the inevitable economic recovery and thereafter. We have so far effectively reduced the period of funding business from 20 days to 16 days and as this change initiative was still in the process of implementation at year end, we expect further improvement as this initiative is further embedded. \n \n \n We have also continued to improve further our cash collections capability with DSO (days sales outstanding, based on a three-month average and including sales taxes) of 41 (2019: 45) representing a further four day advancement on the substantial improvement achieved last year. Our DSO calculation includes trade receivables transferred to HSBC but on whose behalf we perform collection services. \n \n \n As a result of the current economic climate we have noticed increased pressure from customers for longer payment terms, and any increased mix of trading with infrastructure clients may also lead to longer average terms, as this sector tends to pay less promptly than other sectors. However, we remain resolute in maintaining our strong working capital performance and this will continue to be a key focus for the Group. \n \n \n Following our refinancing in October 2019, in January 2020 we transferred a portion of our recourse working capital facility to a non-recourse working capital facility whereby the trade receivables assigned to the facility are owned by HSBC, thereby reducing receivables and our indebtedness. \n \n \n Our liquidity, being our cash resources and the unused headroom in our invoice financing facilities which could be drawn against existing invoices at 31 July 2020 was very strong at £58.5m. \n \n \n Cash generated from operations at £59.1m (2019: £24.1m) was £35.0m higher than prior year driven by the factors summarised above. \n \n \n Banking facilities and interest rate risk \n \n \n As of 31 July 2020 the Group had a working capital facility of £75m. \n \n \n Given our strong liquidity position, the Board decided to repay the remaining £7.5m of our Revolving Credit Facility in October 2020 and cancel the facility. All previous covenants were attached to this facility and as a result of the repayment and cancellation of the facility, the Group no longer has any covenant obligations. \n \n \n Brexit \n \n \n The Board continues to follow Brexit developments closely. The economic effect of these developments on business confidence is an important factor for us to the extent it affects the UK economic environment, as noted in the Principal Risks and Uncertainties report on page 48. \n \n \n Critical accounting policies \n \n \n The statement of significant accounting policies is set out in Note 1 to the Financial Statements. \n \n \n IFRS 16 \n \n \n IFRS 16 was adopted by the Group from 1 August 2019, choosing to adopt the transition approach which did not require comparatives to be restated. At 31 July 2020, the Group held Right-of-Use lease assets of £6.5m and lease liabilities of £7.7m on the balance sheet. In 2020, depreciation and impairment expense of £2.3m was charged in respect of Right-of-Use lease assets and interest expense on lease liabilities was £0.2m. Operating lease expense of £0.2m (2019: £2.3m) was also recorded in the income statement in 2020 for leases where exemptions were taken from IFRS 16, for those with assets of low value or short-term leases of less than 12 months; the expense in 2019 was for all the Group's leases prior to adoption of IFRS 16. \n \n \n There was no impact of adopting IFRS 16 in 2020 on continuing underlying PBT. \n \n \n Group financial risk management \n \n \n The Board reviews and agrees policies for managing financial risks. The Group's finance function is responsible for managing investment and funding requirements including banking and cash flow monitoring. It seeks to ensure that adequate liquidity exists at all times, to meet its cash requirements. The Group's financial instruments comprise borrowings, cash and various items, such as trade receivables and trade payables that arise from its operations, and some matching forward foreign exchange contracts. The Group does not trade in financial instruments. The main risks arising from the Group's financial instruments are described below. \n \n \n Credit risk \n \n \n The Group trades only with recognised, creditworthy third parties. We monitor receivable balances on an ongoing basis and in 2020 have taken a prudent approach to receivables risk and have increased our loss allowance by £1.8m to £4.0m. Whilst our receivables write offs during the year at £0.5m are only slightly higher than the £0.4m in the prior year, we believe that given the uncertainty in the economic headwinds in the UK and abroad, a prudent approach is the right one. We shall be monitoring actual default rates closely over the next few months, especially as companies cease to benefit from the various support schemes such as the UK Job Retention Scheme and VAT deferrals. \n \n \n There are no significant concentrations of credit risk within the Group, with no single debtor accounting for more than 8% (2019: 4%) of total receivables balances at 31 July 2020. \n \n \n Foreign currency risk \n \n \n The Group generates 12% of its annualised NFI from continuing business in international markets. The Group does face risks to both its reported performance and cash position arising from the effects of exchange rate fluctuations. The Group manages these risks by matching sales and direct costs in the same currency and where appropriate entering into forward exchange contracts to minimise the gap in assets and liabilities denominated in foreign currencies. \n \n \n   \n \n \n Salar Farzad \n Chief Financial Officer \n \n \n   \n \n \n FINANCIAL STATEMENTS \n \n   \n \n Consolidated Income Statement \n \n \n For the year ended 31 July 2020 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n  Note \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n Restated 1 \n2019 \n£'000 \n \n \n \n \n \n \n Continuing Operations \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n Revenue \n \n \n \n 2 \n \n \n  538,651 \n \n \n  634,281 \n \n \n \n \n \n Cost of sales \n \n \n \n   \n \n \n  (484,375) \n \n \n  (565,226) \n \n \n \n \n \n Gross profit \n \n \n \n 2 \n \n \n  54,276 \n \n \n  69,055 \n \n \n \n \n \n Administrative expenses 2 \n \n \n \n   \n \n \n  (50,914) \n \n \n  (63,956) \n \n \n \n \n \n Profit from continuing operations \n \n \n \n 4 \n \n \n  3,362 \n \n \n  5,099 \n \n \n \n \n \n Finance income \n \n \n \n 6 \n \n \n  91 \n \n \n  364 \n \n \n \n \n \n Finance cost \n \n \n \n 7 \n \n \n  (2,016) \n \n \n  (2,095) \n \n \n \n \n \n Profit before taxation \n \n \n \n   \n \n \n  1,437 \n \n \n  3,368 \n \n \n \n \n \n Taxation \n \n \n \n 10 \n \n \n  (866) \n \n \n  (1,485) \n \n \n \n \n \n Profit for the year after taxation from continuing operations \n \n \n \n   \n \n \n  571 \n \n \n  1,883 \n \n \n \n \n \n Discontinued operations \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n Loss for the year from discontinued operations \n(attributable to equity holders of the Company) \n \n \n \n 11 \n \n \n  (2,352) \n \n \n  (7,784) \n \n \n \n \n \n Loss for the year \n \n \n \n   \n \n \n  (1,781) \n \n \n  (5,901) \n \n \n \n \n   \n \n \n Losses for the year for 2020 and 2019 are wholly attributable to equity holders of the Company. The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Parent Company Income Statement. \n \n \n \n \n \n Earnings per ordinary share \n \n \n \n \n Note \n \n \n \n \n 2020 \npence \n \n \n \n \n 2019 \npence \n \n \n \n \n \n \n Basic earnings per share \n \n \n \n \n 12 \n \n \n \n \n  (5.5) \n \n \n \n \n  (18.3) \n \n \n \n \n \n \n Diluted earnings per share \n \n \n \n \n 12 \n \n \n \n \n  (5.5) \n \n \n \n \n  (17.8) \n \n \n \n \n \n   \n \n \n Reconciliation to adjusted profit measure \n \n \n Underlying profit is the Group's key adjusted profit measure; profit from continuing operations is adjusted to exclude non-underlying income and expenditure as defined in the Group's accounting policy, amortisation and impairment of goodwill and acquired intangibles, impairment of leased right-of-use assets and net foreign exchange gains or losses.  \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n Note \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n Restated 1 \n2019 \n£'000 \n \n \n \n \n \n \n Profit from continuing operations \n \n \n \n \n \n \n \n \n \n \n  3,362 \n \n \n  5,099 \n \n \n \n \n \n Add \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n   \nDepreciation of property, plant and equipment, depreciation of leased right-of-use assets and amortisation of software and software licences \n \n \n \n 2 \n \n \n  3,245 \n \n \n  1,202 \n \n \n \n \n \n   Non-underlying items included within administrative expenses \n \n \n \n 2,4 \n \n \n  1,248 \n \n \n  1,441 \n \n \n \n \n \n   \nAmortisation and impairment of goodwill and acquired intangibles and impairment of leased right-of-use assets \n \n \n \n 2 \n \n \n  1,382 \n \n \n  7,146 \n \n \n \n \n \n Underlying EBITDA \n \n \n \n   \n \n \n  9,237 \n \n \n  14,888 \n \n \n \n \n \n Less \n \n \n \n   \n \n \n   \n \n \n   \n \n \n \n \n \n   \nDepreciation and impairment of property, plant and equipment, leased right-of-use assets and amortisation of software and software licences \n \n \n \n   \n \n \n  (3,245) \n \n \n  (1,202) \n \n \n \n \n \n   Net finance costs excluding foreign exchange gains and losses \n \n \n \n 6,7 \n \n \n  (1,404) \n \n \n  (2,032) \n \n \n \n \n \n Underlying profit before taxation \n \n \n \n   \n \n \n  4,558 \n \n \n  11,654 \n \n \n \n \n \n   Underlying taxation \n \n \n \n 10 \n \n \n  (1,271) \n \n \n  (2,501) \n \n \n \n \n \n Underlying profit after taxation from continuing operations \n \n \n \n   \n \n \n  3,317 \n \n \n  9,153 \n \n \n \n \n   \n \n \n \n \n \n 1 \n \n \n \n \n 2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. \n \n \n \n \n \n \n 2 \n \n \n \n \n Administrative expenses from continuing operations includes net impairment losses on trade receivables and accrued income of £2,716,000 (2019: £305,000). \n \n \n \n \n \n   \n \n \n Consolidated Statement of Comprehensive Income \n \n \n For the year ended 31 July 2020 \n \n   \n \n \n \n \n \n \n \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n 2019 \n£'000 \n \n \n \n \n \n \n Loss for the year \n \n \n \n  (1,781) \n \n \n  (5,901) \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n Other comprehensive (loss)/income \n \n \n \n   \n \n \n   \n \n \n \n \n \n Items that may be reclassified subsequently to profit or loss: \n \n \n \n   \n \n \n   \n \n \n \n \n \n Exchange differences on translation of foreign operations \n \n \n \n  (1,091) \n \n \n  645 \n \n \n \n \n \n Other comprehensive (loss)/income for the year \n \n \n \n  (1,091) \n \n \n  645 \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n   \n \n \n \n \n \n Total comprehensive loss for the year attributable to equity holders of the parent \n \n \n \n  (2,872) \n \n \n  (5,256) \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n Restated 1 \n2019 \n£'000 \n \n \n \n \n \n \n Attributable to: \n \n \n \n   \n \n \n   \n \n \n \n \n \n Continuing operations \n \n \n \n  (172) \n \n \n  1,531 \n \n \n \n \n \n Discontinued operations \n \n \n \n  (2,700) \n \n \n  (6,787) \n \n \n \n \n \n \n \n \n \n \n \n  (2,872) \n \n \n  (5,256) \n \n \n \n \n   \n \n \n \n \n \n 1 \n \n \n \n \n 2019 figures have been restated for the presentation of discontinued operations as explained in Note 11. \n \n \n \n \n \n   \n \n \n Consolidated and Company Statements of Changes in Equity \n \n \n For the year ended 31 July 2020 \n \n \n   \n \n \n A) Consolidated \n \n \n \n \n \n \n \n \n \n \n \n \n Share \ncapital \n£'000 \n \n \n \n \n Share premium \n£'000 \n \n \n \n \n Merger \nreserve \n£'000 \n \n \n \n \n Share-based \npayment \nreserve \n£'000 \n \n \n \n \n Translation reserve \n£'000 \n \n \n \n \n Treasury \nshares \nreserve \n£'000 \n \n \n \n \n Retained \nearnings \n£'000 \n \n \n \n \n Total \n \n \n \n \n \n \n At 1 August 2018 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,750 \n \n \n  1,074 \n \n \n  299 \n \n \n  - \n \n \n  7,867 \n \n \n  47,019 \n \n \n \n \n \n Loss for the year \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (5,901) \n \n \n  (5,901) \n \n \n \n \n \n Other comprehensive income \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  645 \n \n \n  - \n \n \n  - \n \n \n  645 \n \n \n \n \n \n Total comprehensive \nincome/(loss) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  645 \n \n \n  - \n \n \n  (5,901) \n \n \n  (5,256) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Deferred tax movement in respect of share options \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  15 \n \n \n  15 \n \n \n \n \n \n Share-based payments charge (Note 23) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  269 \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  269 \n \n \n \n \n \n Share-based payments reserves transfer \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (590) \n \n \n  - \n \n \n  - \n \n \n  590 \n \n \n  - \n \n \n \n \n \n Purchase of treasury shares \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (140) \n \n \n  - \n \n \n  (140) \n \n \n \n \n \n Transactions with owners \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (321) \n \n \n  - \n \n \n  (140) \n \n \n  605 \n \n \n  144 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n At 31 July 2019 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,750 \n \n \n  753 \n \n \n  944 \n \n \n  (140) \n \n \n  2,571 \n \n \n  41,907 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n At 1 August 2019 as per originally presented \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,750 \n \n \n  753 \n \n \n  944 \n \n \n  (140) \n \n \n  2,571 \n \n \n  41,907 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Adjustment on initial application \n of IFRS 16, net of tax \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  770 \n \n \n  770 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Restated total equity \nat 1 August 2019 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,750 \n \n \n  753 \n \n \n  944 \n \n \n  (140) \n \n \n  3,341 \n \n \n  42,677 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss for the year \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (1,781) \n \n \n  (1,781) \n \n \n \n \n \n Other comprehensive loss \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (1,091) \n \n \n  - \n \n \n  - \n \n \n  (1,091) \n \n \n \n \n \n Total comprehensive loss \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (1,091) \n \n \n  - \n \n \n  (1,781) \n \n \n  (2,872) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Deferred tax movement in respect of share options \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (16) \n \n \n  (16) \n \n \n \n \n \n Reversal of share-based payments charge (Note 23) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (60) \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (60) \n \n \n \n \n \n Share-based payments reserves transfer \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (167) \n \n \n  - \n \n \n  - \n \n \n  167 \n \n \n  - \n \n \n \n \n \n Issue of treasury shares to employees \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  43 \n \n \n  - \n \n \n  43 \n \n \n \n \n \n Transactions with owners \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (227) \n \n \n  - \n \n \n  43 \n \n \n  151 \n \n \n  (33) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n At 31 July 2020 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,750 \n \n \n  526 \n \n \n  (147) \n \n \n  (97) \n \n \n  1,711 \n \n \n  39,772 \n \n \n \n \n   \n \n \n B) Company \n \n \n \n \n \n \n \n \n \n \n \n \n  Share \n capital \n '000 \n \n \n \n \n  Share \npremium \n '000 \n \n \n \n \n  Merger \n reserve \n '000 \n \n \n \n \n Share- \nbased \npayment \nreserve \n£'000 \n \n \n \n \n Treasury \n shares \nreserve \n£'000 \n \n \n \n \n  Retained \nearnings \n '000 \n \n \n \n \n  Total \n '000 \n \n \n \n \n \n \n At 1 August 2018 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,526 \n \n \n  1,074 \n \n \n  - \n \n \n  2,031 \n \n \n  40,660 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss and total comprehensive expense \nfor the year (Note 9) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (231) \n \n \n  (231) \n \n \n \n \n \n Share-based payments charge (Note 23) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  269 \n \n \n  - \n \n \n  - \n \n \n  269 \n \n \n \n \n \n Share-based payments reserves transfer \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (590) \n \n \n  - \n \n \n  590 \n \n \n  - \n \n \n \n \n \n Transactions with owners \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (321) \n \n \n  - \n \n \n  590 \n \n \n  269 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n At 31 July 2019 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,526 \n \n \n  753 \n \n \n  - \n \n \n  2,390 \n \n \n  40,698 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n At 1 August 2019 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,526 \n \n \n  753 \n \n \n  - \n \n \n  2,390 \n \n \n  40,698 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss and total comprehensive expense \nfor the year (Note 9) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (1,111) \n \n \n  (1,111) \n \n \n \n \n \n Reversal of share-based payments charge \n(Note 23) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (60) \n \n \n  - \n \n \n  - \n \n \n  (60) \n \n \n \n \n \n Share-based payments reserves transfer \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (167) \n \n \n  - \n \n \n  167 \n \n \n  - \n \n \n \n \n \n Transactions with owners \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  (227) \n \n \n  - \n \n \n  167 \n \n \n  (60) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n At 31 July 2020 \n \n \n \n  323 \n \n \n  8,706 \n \n \n  28,526 \n \n \n  526 \n \n \n  - \n \n \n  1,446 \n \n \n  39,527 \n \n \n \n \n   \n \n \n Consolidated and Company Statements of Financial Position \n \n \n As at 31 July 2020 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Group \n \n \n \n \n Company \n \n \n \n \n \n \n \n \n \n \n \n \n \n Note \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n 2019 \n£'000 \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n 2019 \n£'000 \n \n \n \n \n \n \n Non-current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Goodwill and intangible assets \n \n \n \n 13 \n \n \n  12,877 \n \n \n  11,751 \n \n \n  16 \n \n \n  - \n \n \n \n \n \n Property, plant and equipment \n \n \n \n 14 \n \n \n 1,492 \n \n \n  3,292 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Right-of-use assets \n \n \n \n 22 \n \n \n 7,338 \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Investments \n \n \n \n 15 \n \n \n  19 \n \n \n  - \n \n \n  8,520 \n \n \n  8,580 \n \n \n \n \n \n Deferred tax assets \n \n \n \n 16 \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Total non-current assets \n \n \n \n \n \n \n \n \n \n \n  21,726 \n \n \n  15,043 \n \n \n  8,536 \n \n \n  8,580 \n \n \n \n \n \n Current assets \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Trade and other receivables \n \n \n \n 17 \n \n \n  48,888 \n \n \n  96,728 \n \n \n  101,885 \n \n \n  101,158 \n \n \n \n \n \n Cash and cash equivalents \n \n \n \n \n \n \n \n \n \n \n  34,796 \n \n \n  19,173 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Total current assets \n \n \n \n \n \n \n \n \n \n \n  83,684 \n \n \n  115,901 \n \n \n  101,885 \n \n \n  101,158 \n \n \n \n \n \n Total assets \n \n \n \n \n \n \n \n \n \n \n  105,410 \n \n \n  130,944 \n \n \n  110,421 \n \n \n  109,738 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Non-current liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Deferred tax liabilities \n \n \n \n 16 \n \n \n  (277) \n \n \n  (396) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Provisions \n \n \n \n 18 \n \n \n  (2,558) \n \n \n  (2,349) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Lease liabilities \n \n \n \n 22 \n \n \n  (5,746) \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Bank loans and borrowings \n \n \n \n 20 \n \n \n  (7,304) \n \n \n  (14,957) \n \n \n  (7,304) \n \n \n  (14,957) \n \n \n \n \n \n Total non-current liabilities \n \n \n \n \n \n \n \n \n \n \n  (15,885) \n \n \n  (17,702) \n \n \n  (7,304) \n \n \n  (14,957) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Current liabilities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Trade and other payables \n \n \n \n 19 \n \n \n  (46,129) \n \n \n  (40,676) \n \n \n  (63,590) \n \n \n  (54,083) \n \n \n \n \n \n Provisions \n \n \n \n 18 \n \n \n  (236) \n \n \n  (332) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Current tax liabilities \n \n \n \n \n \n \n \n \n \n \n  (1,247) \n \n \n  (1,289) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Lease liabilities \n \n \n \n 22 \n \n \n  (1,990) \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Bank loans and borrowings \n \n \n \n 20 \n \n \n  (151) \n \n \n  (29,038) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Total current liabilities \n \n \n \n \n \n \n \n \n \n \n  (49,753) \n \n \n  (71,335) \n \n \n  (63,590) \n \n \n  (54,083) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Total liabilities \n \n \n \n \n \n \n \n \n \n \n  (65,638) \n \n \n  (89,037) \n \n \n  (70,894) \n \n \n  (69,040) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Net assets \n \n \n \n \n \n \n \n \n \n \n  39,772 \n \n \n  41,907 \n \n \n  39,527 \n \n \n  40,698 \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Equity \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Share capital \n \n \n \n 23 \n \n \n  323 \n \n \n  323 \n \n \n  323 \n \n \n  323 \n \n \n \n \n \n Share premium \n \n \n \n \n \n \n \n \n \n \n  8,706 \n \n \n  8,706 \n \n \n  8,706 \n \n \n  8,706 \n \n \n \n \n \n Merger reserve \n \n \n \n \n \n \n \n \n \n \n  28,750 \n \n \n  28,750 \n \n \n  28,526 \n \n \n  28,526 \n \n \n \n \n \n Share-based payment reserve \n \n \n \n \n \n \n \n \n \n \n  526 \n \n \n  753 \n \n \n  526 \n \n \n  753 \n \n \n \n \n \n Translation reserve \n \n \n \n \n \n \n \n \n \n \n  (147) \n \n \n  944 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Treasury shares reserve \n \n \n \n \n \n \n \n \n \n \n  (97) \n \n \n  (140) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Retained earnings \n \n \n \n \n \n \n \n \n \n \n  1,711 \n \n \n  2,571 \n \n \n  1,446 \n \n \n  2,390 \n \n \n \n \n \n Total equity \n \n \n \n \n \n \n \n \n \n \n  39,772 \n \n \n  41,907 \n \n \n  39,527 \n \n \n  40,698 \n \n \n \n \n   \n \n \n The accompanying notes on pages 98 to 137 form part of these Financial Statements. \n \n \n The Financial Statements on pages 92 to 137 were approved by the Board of Directors on 3 November 2020 and signed on its behalf by \n \n \n Salar Farzad \n \n \n Chief Financial Officer \n \n \n   \n \n \n Consolidated and Company Cash Flow Statements \n \n \n For the year ended 31 July 2020 \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n Group \n \n \n \n \n Company \n \n \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n 2019 \n£'000 \n \n \n \n \n 2020 \n£'000 \n \n \n \n \n 2019 \n£'000 \n \n \n \n \n \n \n Cash flows from operating activities \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Loss after taxation \n \n \n \n  (1,781) \n \n \n  (5,901) \n \n \n  (1,111) \n \n \n  (231) \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Adjustments for: \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Depreciation of property, plant and equipment and amortisation \nof goodwill and intangible assets \n \n \n \n \n 1,831 \n \n \n \n  2,483 \n \n \n 4 \n \n \n  - \n \n \n \n \n \n Depreciation of leased right-of-use assets \n \n \n \n \n  2,041 \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Profits from sale of subsidiary, associate or investment \n \n \n \n \n  (304) \n \n \n \n  (135) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Loss on disposal of property, plant and equipment \n \n \n \n \n  52 \n \n \n \n  67 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Impairment of goodwill and acquired intangibles and right-of-use assets \n \n \n \n \n  766 \n \n \n \n  5,882 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Interest income \n \n \n \n \n  (91) \n \n \n \n  (437) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Interest costs \n \n \n \n \n 1,936 \n \n \n \n  2,096 \n \n \n  593 \n \n \n  637 \n \n \n \n \n \n Taxation expense recognised in Income Statement \n \n \n \n \n  598 \n \n \n \n  1,417 \n \n \n  (339) \n \n \n  (281) \n \n \n \n \n \n Decrease/(increase) in trade and other receivables \n \n \n \n \n  47,537 \n \n \n \n  17,225 \n \n \n  - \n \n \n  (5,950) \n \n \n \n \n \n Increase/(decrease) in trade and other payables \n \n \n \n \n  5,453 \n \n \n \n  (174) \n \n \n  9,120 \n \n \n  6,436 \n \n \n \n \n \n Increase in provisions \n \n \n \n \n  1,085 \n \n \n \n  1,291 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Share-based payment charge \n \n \n \n \n  77 \n \n \n \n  269 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Investment income \n \n \n \n \n  - \n \n \n \n  - \n \n \n  - \n \n \n  (968) \n \n \n \n \n \n Cash generated from/(used in) operations \n \n \n \n \n  59,200 \n \n \n \n  24,083 \n \n \n  8,267 \n \n \n  (357) \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Interest paid \n \n \n \n \n  (1,052) \n \n \n \n  (1,993) \n \n \n  (524) \n \n \n  (611) \n \n \n \n \n \n Interest on lease liabilities \n \n \n \n \n  (214) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Interest received \n \n \n \n \n  91 \n \n \n \n  86 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Income taxes paid \n \n \n \n \n  (387) \n \n \n \n  (2,523) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Cash generated from/(used in) operating activities \n \n \n \n \n  57,638 \n \n \n \n  19,653 \n \n \n  7,743 \n \n \n  (968) \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash flows from investing activities \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Purchase of plant and equipment \n \n \n \n \n  (191) \n \n \n \n  (673) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Purchase of intangible assets \n \n \n \n \n  (2,348) \n \n \n \n  (2,876) \n \n \n  (20) \n \n \n  - \n \n \n \n \n \n Purchase of investments \n \n \n \n \n  (19) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Proceeds from sale of subsidiary, associate or investment \n \n \n \n \n  304 \n \n \n \n  2 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Proceeds from sale of property, plant and equipment \n \n \n \n \n  - \n \n \n \n  26 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Dividend received \n \n \n \n \n  - \n \n \n \n  - \n \n \n  - \n \n \n  968 \n \n \n \n \n \n Cash (used in)/generated from investing activities \n \n \n \n \n  (2,254) \n \n \n \n  (3,521) \n \n \n  (20) \n \n \n  968 \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Cash flows from financing activities \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Lease liability principal repayment \n \n \n \n \n  (1,987) \n \n \n \n  - \n \n \n  - \n \n \n  - \n \n \n \n \n \n Purchase of treasury shares \n \n \n \n \n  (67) \n \n \n \n  (140) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Working capital facility (repaid) \n \n \n \n \n  (28,968) \n \n \n \n  (6,740) \n \n \n  - \n \n \n  - \n \n \n \n \n \n Finance costs paid \n \n \n \n \n  (223) \n \n \n \n  - \n \n \n  (223) \n \n \n  - \n \n \n \n \n \n Repayment of term loan \n \n \n \n \n  (7,500) \n \n \n \n  - \n \n \n  (7,500) \n \n \n  - \n \n \n \n \n \n Cash used in financing activities \n \n \n \n \n  (38,745) \n \n \n \n  (6,880) \n \n \n  (7,723) \n \n \n  - \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Effects of exchange rates on cash and cash equivalents \n \n \n \n \n  (1,016) \n \n \n \n  163 \n \n \n  - \n \n \n  - \n \n \n \n \n \n \n \n \n \n \n \n   \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n \n Increase in cash and cash equivalents \n \n \n \n \n  15,623 \n \n \n \n  9,415 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Cash and cash equivalents at the beginning of year \n \n \n \n \n  19,173 \n \n \n \n  9,758 \n \n \n  - \n \n \n  - \n \n \n \n \n \n Cash and cash equivalents at end of year 1 \n \n \n \n \n  34,796 \n \n \n \n  19,173 \n \n \n  - \n \n \n  - \n \n \n \n \n   \n \n \n Net decrease in cash and cash equivalents for discontinued operations was £1,164,000 (2019 restated: decrease of £2,046,000). \n \n \n \n \n \n 1 \n \n \n \n \n Included in cash and cash equivalents is £2,034,000 of restricted cash (2019: £nil) which meets the definition of cash and cash equivalents but is not available for use by the Group. This balance arises from the Group's non-recourse working capital arrangements, which were entered into in 2020 as explained in Note 20. \n \n \n \n \n \n   \n \n \n Notes Forming Part of the Financial Statements \n \n \n   \n \n \n \n \n \n 1 \n \n \n \n \n The Group and Company Significant Accounting Policies \n \n \n \n \n \n \n 1.1 \n \n \n \n \n The Business of the Group \n \n \n \n \n \n   \n \n \n Gattaca plc ('the Company') and its subsidiaries (together 'the Group') is a human capital resources business providing contract and permanent recruitment services in the private and public sectors. The Company is a public limited company, which is listed on the Alternative Investment Market (AIM) and is incorporated and domiciled in England, United Kingdom. The Company's address is: 1450 Parkway, Solent Business Park Whiteley, Fareham, Hampshire, PO15 7AF. The Company's registration number is 04426322. \n \n \n \n \n \n 1.2 \n \n \n \n \n Basis of preparation of the Financial Statements \n \n \n \n \n \n   \n \n \n The Financial Statements of Gattaca plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements comply with IFRS as issued by the International Accounting Standards Board (IASB). \n \n \n These Financial Statements have been prepared under the historical cost convention. The accounting policies have been applied consistently to all years throughout both the Group and the Company for the purposes of preparation of these Financial Statements, apart from the adoption of IFRS 16 from 1 August 2019 using the modified retrospective approach to transition, under which comparative information in 2019 has remained as presented under IAS 17. A summary of the principal accounting policies of the Group are set out below. \n \n \n The preparation of Financial Statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated Financial Statements, are disclosed in Note 1.23.  \n \n \n \n \n \n 1.3 \n \n \n \n \n Going concern \n \n \n \n \n \n   \n \n \n The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Report. The financial position of the Group, its cash flows and liquidity position are described in the Chief Financial Officer's Report. \n \n \n There continues to be significant uncertainty regarding the ongoing potential future impact of the COVID-19 outbreak on our clients and resultant trading activity. We continue to monitor any changes and have regular management and monthly Board meetings to assess the situation. We have a wide spread of customers across multiple sectors but recognise that COVID-19 continues to impact many of our customers and contractors across many industries. \n \n \n The majority of our staff have now been working remotely for over seven months and there has not been any significant impact to our ability to operate effectively. The initial reduction in contractor numbers in April 2020, whilst impacting profitability, has resulted in reduced working capital requirements and has created further liquidity. The Group has also undertaken other actions, including an increase to the payment terms of certain contractors and these actions have created a permanent working capital benefit, and will reduce our working capital requirements during growth. We have seen early signs of minor extensions in debtor days as a result of the pandemic impact on trading at our clients and we continue to be alert for any sudden changes. There is sufficient headroom on our working capital facilities to absorb a level of extensions but we would also manage supply to the customer if payment within an appropriate period was not being made. A significant deterioration in payment terms would significantly impact the Group's liquidity. Our future cost base has also been significantly reduced following both a number of redundancies in 2020 as well as a larger scale UK redundancy programme announced just before year end. \n \n \n Having repaid and cancelled the Revolving Credit Facility on 27 October 2020, the Group is now covenant free. \n \n \n The Directors have prepared detailed cash flow forecasts to July 2023, covering a period of 33 months from the date of approval of these financial statements. This base case is drawn up with appropriate regard for the current macroeconomic environment and the particular circumstances in which the Group operates. This conservative base case assumes a recovery of the UK business to 80% of pre-COVID-19 contract and permanent NFI by the second half of 2021, with further recovery over the 2022 and 2023 years. Trading has been in line with this forecast since the year end. \n \n \n The output of the base case forecasting process has been used to perform sensitivity analysis on the Group's cash flow to model the potential effects should principal risks actually occur either individually or in unison. The sensitivity analysis modelled scenarios in which the Group incurred a sustained loss of business arising from a prolonged global downturn as a result of the COVID-19 pandemic, with a range of slower recovery scenarios considered. The Group has modelled the impact of a number of severe but plausible scenarios including the sustained loss of over 55% of our permanent NFI until July 2022 compared to March 2020 pre-COVID run rates, and a 29% sustained reduction in contractor NFI over the same period, again compared to March 2020 pre-COVID run rates, and slow recovery after that point. This is in conjunction with the UK Government's Coronavirus Job Retention Scheme ending as currently planned and the repayment of our deferred HMRC payments in full in March 2021. These scenarios, whilst severe, still show the Group continuing as a going concern and actual current trading performance is trending above the modelled downside scenarios. We have also not quantified or included in the sensitivity analysis, further working capital benefits which are likely to occur as we fully embed new payment terms across a larger proportion of contractor base.  \n \n \n After making appropriate enquiries and considering the uncertainties described above, the Directors have a reasonable expectation at the time of approving these financial statements that the Group and the Company has adequate resources to continue in operational existence for the foreseeable future. Following careful consideration the Directors do not consider there to be a material uncertainty with regards to going concern and consider it is appropriate to adopt the going concern basis in preparing the financial statements. \n \n \n \n \n \n 1.4 \n \n \n \n \n New standards and interpretations \n \n \n \n \n \n   \n \n \n The following are new standards or improvements to existing standards that are mandatory for the first time in the Group's accounting period beginning on 1 August 2019 and no new standards have been early adopted. The Group's July 2020 consolidated financial statements have adopted these amendments to IFRS. Apart from IFRS 16 Leases, none of these have had any material impact on the Group's results or financial position: \n \n \n \n \n \n ● \n \n \n \n \n IFRS 9 (amendments) Financial Instruments (effective 1 January 2019) \n \n \n \n \n \n \n ● \n \n \n \n \n IFRS 16 Leases (effective 1 January 2019) \n \n \n \n \n \n \n ● \n \n \n \n \n IFRIC 23 Uncertainty over Income Tax Treatments (effective 1 January 2019) \n \n \n \n \n \n \n ● \n \n \n \n \n Annual Improvements to IFRSs 2017 (effective 1 January 2019) \n \n \n \n \n \n \n ● \n \n \n \n \n IFRS 16 (amendments) COVID-19 related rent concessions (effective 1 June 2020) \n \n \n \n \n \n   \n \n \n Under IFRS 16 Leases, for all applicable leases, the Group has recognised within the Consolidated Statement of Financial Position a right-of-use asset and a lease liability, and within the Consolidated Income Statement, operating lease rental charges have been replaced with depreciation and interest expense. The accounting policy under this standard is shown in Note 1.13 and the impact of this change has been disclosed in Note 22 to these financial statements. \n \n \n IFRIC 23 Uncertainty over Income Tax Treatments clarifies how to measure current and deferred tax assets and liabilities where there is uncertainty that affects the application of IAS 12 Income Taxes. The Group has undertaken a review of the current tax position and assessed that the adoption of IFRIC 23 does not have a material impact on the Group's results. \n \n \n Apart from IFRS 16 Leases there have been no alterations made to the accounting policies as a result of considering all of the other amendments above that became effective in the year, as these were either not material or were not relevant to the Group or Company. \n \n \n New standards in issue, not yet adopted \n \n \n The Group has not yet adopted certain new standards, amendments and interpretations to existing standards, which have been published but which are only effective for the Group accounting periods beginning on or after 1 August 2020. These new pronouncements are listed as follows: \n \n \n \n \n \n ● \n \n \n \n \n Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors - Definition of material (effective 1 January 2020) \n \n \n \n \n \n \n ● \n \n \n \n \n IFRS 3 (amendments) Business Combinations - Definition of a business (effective 1 January 2020) \n \n \n \n \n \n   \n \n \n The Directors are currently evaluating the impact of the adoption of all other standards, amendments and interpretations but do not expect them to have a material impact on the Group's or Company's operations \nor results. \n \n \n Forthcoming requirements \n \n \n The following amendments are required for application for the Group's year beginning after 1 August 2020 or later: \n \n \n \n \n \n Standard \n \n \n \n \n \n \n \n \n \n \n \n Effective date (annual periods beginning on or after) \n \n \n \n \n \n \n IAS 1 Amendments \n \n \n \n \n Classification of liabilities as current or non-current \n \n \n \n \n 1 January 2022 \n \n \n \n \n \n \n IAS 16 Amendments \n \n \n \n \n Property, plant and equipment: proceeds before intended use \n \n \n \n \n 1 January 2022 \n \n \n \n \n \n \n IAS 37 Amendments \n \n \n \n \n Onerous contracts-cost of fulfilling a contract \n \n \n \n \n 1 January 2022 \n \n \n \n \n \n \n IFRS 3 Amendments \n \n \n \n \n Reference to the conceptual framework \n \n \n \n \n 1 January 2022 \n \n \n \n \n \n   \n \n \n \n \n \n 1.5 \n \n \n \n \n Basis of consolidation \n \n \n \n \n \n   \n \n \n Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date on which that control ceases. \n \n \n The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree, and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangements. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of the acquiree's identifiable net assets. \n \n \n Acquisition-related costs are expensed as incurred. \n \n \n Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated. Where necessary, amounts reported by subsidiaries have been adjusted to conform to the Group's accounting policies. \n \n \n \n \n \n 1.6 \n \n \n \n \n Revenue \n \n \n \n \n \n   \n \n \n Revenue is measured by reference to the fair value of consideration received or receivable by the Group for services provided, excluding VAT and trade discounts. \n \n \n Temporary placements \n \n \n Revenue from temporary, or contract, placements is recognised at the point in time when the candidate provides services, upon receipt of a client-approved timesheet or equivalent proof of time worked. Timing differences between the receipt of a client-approved timesheet and the raising of an invoice are recognised as accrued income. The Group has assessed its use of third party providers to supply candidates for temporary placements under the agent or principal criteria and has determined that it is the principal on the grounds that it retains primary responsibility for provision of the services. \n \n \n A number of contractual rebate arrangements are in place in respect of volume and value of sales; these are accounted for as variable consideration reducing revenue and estimated in line with IFRS 15. \n \n \n Any consideration payable at the start of contracts to customers is recognised as a prepayment and released to profit or loss over the terms of the contract it relates to, as a reduction to revenue.  \n \n \n Permanent placements \n \n \n Revenue from permanent placements, which is based on a percentage of the candidate's remuneration package, is recognised when candidates commence employment which is the point at which the performance obligation of the contract is considered met. Some permanent placements are subject to a 'claw-back' period whereby if a candidate leaves within a set period of starting employment, the customer is entitled to a rebate subject to the Group's terms and conditions. Provisions as a reduction to revenue are recognised for such arrangements if material. In addition, a number of contractual rebate arrangements are in place in respect of volume and value of sales; these are accounted for as variable consideration reducing revenue and estimated in line with IFRS 15. \n \n \n Other \n \n \n Other revenue streams are generated from provision of engineering services and other fees. Revenue from the provision of engineering services is recognised either over a period of time when the performance obligations are satisfied over the course of project milestones or at a point in time upon receipt of client-approved timesheets. Other fees mainly relate to relate to account management fees for providing recruitment services. Revenue from other fees is recognised on confirmation from the client committing to the agreement and either at a point in time or over time in accordance with terms of each individual agreement as performance obligations are met. \n \n \n \n \n \n 1.7 \n \n \n \n \n Government grants \n \n \n \n \n \n   \n \n \n Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future compliance with certain conditions relating to operating activities. \n \n \n Government grants are recognised when there is a reasonable assurance that the Group will comply with the conditions attached to it and that the grant will be received. They are recognised in the Income Statement on a systematic basis over the periods in which the related costs that they compensate are recognised as expenses. \n \n \n Grants are either presented as grant income or deducted in reporting the related expense they compensate in the Income Statement. \n \n \n \n \n \n 1.8 \n \n \n \n \n Non-underlying items \n \n \n \n \n \n   \n \n \n Non-underlying items are income or expenditure that are considered unusual and separate to underlying trading results because of their size, nature or incidence and are presented within the consolidated income statement but highlighted through separate disclosure. The Group's Directors consider that these items should be separately identified within the income statement to enable a proper understanding of the Group's business performance. \n \n \n Items which are included within this category include but are not limited to: \n \n \n \n \n \n ● \n \n \n \n \n costs of acquisitions; \n \n \n \n \n \n \n ● \n \n \n \n \n integration costs following acquisitions; and \n \n \n \n \n \n \n ● \n \n \n \n \n material restructuring costs including related professional fees and staff costs \n \n \n \n \n \n   \n \n \n In addition, the Group also excludes from underlying results amortisation and impairment of goodwill and acquired intangibles, impairment of leased right-of-use assets and net foreign exchange gains or losses. \n \n \n Specific adjusting items are included as non-underlying based on the following rationale: \n \n \n \n \n \n Item \n \n \n \n \n Distorting due to irregular nature year on year \n \n \n \n \n Distorting due to fluctuating nature (size) \n \n \n \n \n Does not reflect in-year operational performance of continuing business \n \n \n \n \n \n \n Costs of acquisitions \n \n \n \n • \n \n \n • \n \n \n • \n \n \n \n \n \n Integration costs following acquisitions \n \n \n \n • \n \n \n   \n \n \n • \n \n \n \n \n \n Material restructuring costs \n \n \n \n   \n \n \n • \n \n \n • \n \n \n \n \n \n Amortisation and impairment of goodwill and acquired intangibles \n \n \n \n • \n \n \n • \n \n \n • \n \n \n \n \n \n Impairment of leased right-of-use assets \n \n \n \n • \n \n \n • \n \n \n • \n \n \n \n \n \n Net foreign exchange gains and losses \n \n \n \n   \n \n \n • \n \n \n • \n \n \n \n \n \n Tax impact of the above \n \n \n \n • \n \n \n • \n \n \n • \n \n \n \n \n   \n \n \n \n \n \n 1.9 \n \n \n \n \n Property, plant and equipment \n \n \n \n \n \n   \n \n \n Property, plant and equipment is stated at cost, net of depreciation and any provision for impairment. \n \n \n Depreciation is calculated so as to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset in terms of annual depreciation as follows: \n \n \n \n \n \n Motor vehicles \n \n \n \n \n 25.0% \n \n \n \n \n Reducing balance \n \n \n \n \n \n \n Fixtures, fittings and equipment \n \n \n \n \n 12.5% to 33.3% \n \n \n \n \n Straight line \n \n \n \n \n \n \n Leasehold improvements \n \n \n \n \n Over the period of the lease term \n \n \n \n \n Straight line \n \n \n \n \n \n   \n \n \n The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.   \n \n \n An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. \n \n \n When revalued assets are sold, the amounts included in other reserves in respect of those assets are transferred to retained earnings. \n \n \n 1.10 Goodwill \n \n \n Goodwill arises on the acquisition of subsidiaries and represents the excess of the fair value of the consideration given for a business over the Company's interest in the fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree. Goodwill is stated at cost less accumulated impairment. \n \n \n Goodwill impairment reviews are undertaken annually, or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill is allocated to cash-generating units, being the lowest level at which goodwill is monitored. The carrying value of the assets of the cash-generating unit, including goodwill, intangible and tangible assets and working capital balances, is compared to its recoverable amount, which is the higher of value in use and fair value less costs to sell. Any excess in carrying value over recoverable amount is recognised immediately as an impairment expense and is not subsequently reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. \n \n \n 1.11 Intangible assets \n \n \n Customer relationships \n \n \n Customer relationships comprise principally of existing customer relationships which may give rise to future orders (customer relationships), and existing order books. They are recognised at fair value at the acquisition date, and subsequently measured at cost less accumulated amortisation and impairment. Customer relationships are determined to have a useful life of ten years and are amortised on a straight-line basis. \n \n \n Trade names and trademarks \n \n \n Trade names and trademarks have either arisen on the consolidation of acquired businesses or have been separately purchased and are recognised at fair value at the acquisition date. They are subsequently measured at cost less accumulated amortisation and impairment. Trade names and trademarks are determined to have a useful life of ten years and are amortised on a straight-line basis. \n \n \n Software and software licences \n \n \n Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring into use the specific software. These costs are amortised using the straight line method to allocate the cost of the software licences over their useful lives of between two and five years. Subsequent licence renewals are expensed to profit or loss as incurred. Software licences are stated at cost less accumulated amortisation and impairment. \n \n \n Internally generated intangible assets \n \n \n Development costs that are directly attributable to the design and testing of identifiable and unique software products are capitalised as part of internally generated software and include employee costs and professional fees attributable to the development of the asset. Other expenditure that does not meet these criteria is recognised as an expense to profit or loss as incurred. Software development costs recognised as assets are amortised on a straight line basis over their estimated useful lives of between two and ten years. \n \n \n Expenditure on internally generated brands and other intangible assets is expensed to profit or loss as incurred. \n \n \n Other \n \n \n Other intangible assets acquired by the Group have a finite useful life between five and ten years and are measured at cost less accumulated amortisation and accumulated losses. \n \n \n Amortisation of intangible assets and impairment losses are recognised in profit or loss within administrative expenses. \n \n \n Intangible assets are tested for impairment either as part of a goodwill-carrying cash-generated unit, or when events arise that indicate an impairment may be triggered. Provision is made against the carrying value of an intangible asset where an impairment is deemed to have occurred. Impairment losses on intangible assets are recognised in the income statement under administrative expenses. \n \n \n 1.12 Disposal of assets \n \n \n The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of the asset and is recognised in the income statement at the time of disposal. \n \n \n 1.13 Leases \n \n \n The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS17 and IFRIC 14. \n \n \n The Group leases office property, motor vehicles and equipment. Rental contracts range from monthly to \neight years. \n \n \n At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Contracts may contain both lease and non-lease components, and consideration is allocated in the contract to the lease and non-lease components based on their relative stand-alone prices. \n \n \n Assets and liabilities arising from a lease are initially measured on a present value basis at the lease commencement date. Lease liabilities include the net present value of the fixed payments less any lease incentives receivable, variable lease payments that are based on an index or a rate, amounts expected to be payable by the group under residual value guarantees, the exercise price of any purchase option if the Group is reasonably certain to exercise that option, and payments of penalties for terminating the lease if that option is expected to be taken. \n \n \n Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. \n \n \n Lease payments are discounted at either the interest rate implicit in the lease or when this interest rate cannot be readily determined, the Group's incremental borrowing rate associated with a similar asset. When calculating lease liabilities, the Group uses its incremental borrowing rate, being the rate it would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic climate with similar terms, security and conditions. This is estimated using publicly available data adjusted for changes specific to the lease in financing conditions, lease term, country and currency. \n \n \n The Group does not have leases with variable lease payments based on an index or rate. \n \n \n Extension or termination options are included in a number of the Group's leases. In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise, or not to exercise, an option. Extension options are only included in the lease term if the ...

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