Final Results

The information communicated in this announcement includes inside information for the purposes of Article 7 of Regulation 596/2014

Ideagen PLC

("Ideagen" the "Company" or the "Group")

Audited Final Results

Ideagen PLC (AIM: IDEA), a leading supplier of Integrated Risk Management software to highly regulated industries, announces its audited final results for the year ended 30 April 2020.

Financial Highlights

· Revenue increased by 21% to £56.6 million (2019: £46.7 million)

· Recurring revenues of £43.1 million (2019: £31.2 million) representing 76% (2019: 67%) of total revenues

· Annual Recurring Revenue (ARR) book of £48.7 million at year end (2019: £36.4 million)

· SaaS revenues increased by 61% to £22.1 million and now represent the largest portion of Group revenue

· Adjusted EBITDA* on an IFRS16 basis increased by 30% to £18.5 million (2019: £14.3 million on an IAS 17 basis) - Adjusted EBITDA* on an IAS17 basis increased by 22% to £17.5 million

· Adjusted diluted EPS** increased by 12% to 5.36 pence (2019: 4.80 pence)

· Cash generated by operations of £18.1 million on an IFRS16 basis or £17.0 million on an IAS 17 basis (2019: £12.3 million) 

· Net bank debt (excluding lease liabilities) at year end of £16.8 million (2019: £1.3 million) following the funding of three acquisitions during the period

· Proposed final dividend of 0.216 pence per share making a total of 0.32 pence per share up 15% on the prior year (2019: 0.278 pence)

Operational Highlights

· Acquisition of Redland Business Solutions which delivered high quality recurring revenues growing 25% in the first six months

· Acquisition of Optima Diagnostics which provides health and safety solutions to BAE and Sellafield as part of a market consolidation strategy

· Acquisition of Workrite, a Software as a Service (SaaS) company that has developed a functionally rich, content enabled Health and Safety e-learning management platform

· 458 new logo customer wins including - Emirates Group, SSE, US Federal Reserve, Corbus Pharmaceuticals

· Continued high levels of customer retention with support and maintenance contract renewal rate of 95% (2019: 95%)

· Ongoing product innovation and investment across all products with strong emphasis on cloud

· COVID-19: early and decisive action - focused on protecting team members, supporting our customers and positioning for the future

* Before share-based payments, costs of acquiring businesses, restructuring costs and exceptional items.

** Before share-based payments, amortisation of acquisition intangibles, costs of acquiring businesses, restructuring costs and exceptional items

Ben Dorks, Chief Executive of Ideagen, commented:

"I am extremely proud of our performance in the last 12 months, which saw us reach the inflexion point in our transition to SaaS, continue to grow organically and by acquisitions, and delivering a robust financial performance. We have continued to focus on our international expansion and innovative product offerings. We are better positioned than ever to support our customers now and in the longer term.

None of this would be possible without the exceptional Ideagen team and the Board pays tribute to the dedication, resilience and talent of our colleagues. I am extremely confident Ideagen is approaching the future from a position of strength.

Trading since the year end has remained robust and we continue to see strong demand for our products from new potential customers. The acquisition of Qualsys post the period end has further enhanced the Group's portfolio of products and growing recurring revenues. Furthermore, the recurring business derived from more than 5,500 customers provides the Board with confidence in the prospects for the Group for the current year and beyond."

Enquiries: 

About Ideagen plc 

Ideagen is a UK-headquartered, global technology company quoted on the London Stock Exchange AIM market (Ticker: IDEA.L). The Group provides software and services to organisations operating within highly regulated industries such as healthcare, banking and finance and life science, with operational premises spread throughout the UK, EU, US, Middle East and SE Asia.

With an excellent portfolio of software products including Q-Pulse, Pentana and PleaseReview, Ideagen helps its clients reduce costs, improve operational efficiency, strengthen compliance and oversight and anticipate and manage every detail of risk. Currently, more than 5,700 organisations use Ideagen's products including seven of the top 10 UK accounting firms, all of the top aerospace and defence companies and 75% of the world's leading pharmaceutical firms.

Ideagen's diverse and varied customer base includes many well-known, global brands such as British Airways, Aggreko, BAE, Ryanair, US Navy, KLM, BBVA, Bank of New York, Commerzbank, Meggitt, Heineken, Johnson Matthey, Haeco Group and European Central Bank. As well as this, Ideagen counts 250 hospitals across the UK and US amongst its client base. Ideagen directly employs over 500 members of staff and is present in every continent globally.

Chairman's Statement

I am pleased to report on another strong performance for the year to 30 April 2020, representing Ideagen's 11th consecutive year of revenue and EBITDA growth. To achieve such a performance despite the significant obstacles resulting from COVID-19 in the last two months of the financial year, and to continue to build momentum into the current financial year, is an outstanding testament to the resilience of our business model, the strength of our products and the character of our people.

The Group met or exceeded all key financial and operational objectives for the year including targets for revenue, profitability, organic growth, cash generation and customer retention. These results are underpinned by Ideagen's world class customer base, strong global reach, outstanding product set and proven and effective management team.

Acquisition and Organic Growth Strategy

The Group has consistently delivered shareholder value through the successful execution of a dual growth strategy. We are operating in a growth market and have enjoyed considerable organic growth over recent years and we continue to source and execute quality acquisitions. Currently we have a pipeline of opportunities that would increase our product capability, global scale and recurring revenues, which the Board expect would further enhance shareholder value for the long term. Three targets, Redland, Workrite and Optima were acquired in the year and have been successfully integrated into the Group. In August 2020, after the year end in question, we acquired Qualsys and this is already delivering significant value and an excellent growth engine as our customers and prospects continue to embrace cloud based applications.

The Group has a clear vision for the future and the Board has a standing plan for the three years into the future. The Group targets both organic growth and selective acquisitions. The Group is progressing well towards its targets as previously set out and is now targeting £100 million in run rate revenue by 2023, with recurring revenues representing a minimum of 85% of revenue, EBITDA margin of 33% and operating cash collection in excess of 90% of EBITDA (as compared to targets of 75%, 30% and 90% respectively).

The Board believes that approximately £80 million in revenue will be achieved from our current business through organic growth with £20 million being generated through acquisitions.

'C Level' Management

Ben Dorks as Chief Executive provides strong operational leadership for the Group. Having moved from Chief Executive to Executive Chairman in 2018 my focus remains on M&A activities and the 3-year strategic plan.

During the year Geoff Neil was appointed as Chief Development Officer to work alongside Ian Hepworth, our Chief Technology Officer. Geoff has significant experience of delivering enterprise software through both on and offshore teams and has development responsibility for the Group's software products.

Post year end Emma Hayes joined the Group as Chief Financial Officer replacing Graeme Spenceley who retired from the Board but remains as Company Secretary. Emma joined from Severn Trent where she served as Group Finance Director - Capital Delivery & Commercial and previously worked in Corporate Finance for Deloitte UK LLP. Emma brings an excellent blend of operational and strategic finance capability and will provide effective leadership as the Group continues to grow quickly.

The Executive Team also comprises Arun Varma, Chief Marketing Officer; Paul Marshall, Chief Customer Officer; Alex Hewitt, Chief Legal Officer and Barnaby Kent, Chief Operating Officer.

Market Opportunity

The Board is confident in the long-term prospects of the Group. The Integrated Risk Management market was, according to Gartner, worth $6.1 billion globally in 2019 and is estimated to be growing at 13% per annum. We believe we have a compelling business platform that has been significantly enhanced over the past year through the Group's recent acquisitions. Highly regulated organisations require the tools we provide to help them identify, assess and manage corporate risk while complying with international industry standards. Many of these organisations are only in the early stages of adopting an enterprise-wide approach. The Board believes that the Group's cloud solutions will be a particular growth area for the Group which will increase the percentage of total revenues derived from recurring contracts providing further visibility of earnings.

Dividend

In line with our progressive dividend policy and reflecting our continued confidence in the prospects for the Group, the Board is pleased to propose a final dividend of 0.216 pence per share making a total dividend of 0.32 pence for the year (FY2019: 0.278 pence), an increase of 15%. Subject to approval at the forthcoming AGM, the final dividend will be payable on 25 November 2020 to shareholders on the register on 6 November 2020. The corresponding ex-dividend date is 5 November 2020.

The success of Ideagen is the result of the excellence and dedication of our employees and on behalf of the Board, I would like to thank all of them for their continued hard work especially during these difficult times. The new financial year has started well and I look forward to continuing our track record of growth and delivering on our strategic objectives.

David Hornsby

Executive Chairman

Chief Executive Officer's Review

Business Review

I am delighted to report that despite the impact of COVID-19, the Group has continued to perform well and delivered yet another year of quality earnings growth characterised by strong cash and EBITDA generation as well as a positive set of key performance indicators.

The Board considers Annual Recurring Revenue (ARR) as its primary growth metric and the key driver of long-term value for the Group. ARR has grown strongly due to the ongoing transition from a perpetual licence model to a SaaS model and through the acquisition of businesses with similar high proportions of recurring revenues.

The ARR book at 30 April 2020 was up 34% to approximately £48.7 million from £36.4 million at 30 April 2019. This comprises organic growth of £6.9 million, representing a 19% organic growth rate, combined with acquisition-led growth of £5.4 million from the three acquisitions made in the year.

The Group has now successfully transitioned to a primarily recurring revenue model and has quickly responded to the new and challenging business backdrop we all face. I am encouraged by our continued success across all our key verticals and the growth in our priority international markets which continue to form a significant expansion opportunity. I am pleased to see the importance of our software and customer relationships reflected in our customer retention continuing at 95% throughout the period.

The Group has made excellent strategic progress in implementing its strategy of organic and acquisitive growth and we are excited to see that continue. We have completed three acquisitions during the period that has strengthened our product portfolio and provides further consolidation opportunities and capability to support our customer base. We continue to be extremely encouraged by the success in our priority international markets of North America and Asia, that continues to form a significant expansion opportunity for the Group.

Total revenue of £56.6 million (FY2019: £46.7 million), represented overall growth of 21% and adjusted EBITDA reported on an IFRS16 basis increased by 30% to £18.5 million (2019: £14.3 million reported on an IAS17 basis). A key financial metric for the Group continues to be adjusted EPS and I am pleased to report an increase in adjusted diluted EPS of 12% to 5.36 pence for the year (FY2019: 4.80 pence).

Market drivers and growth opportunities

Ideagen operates in a global market with a number of drivers for structural growth. Businesses around the world need innovative solutions to help them meet increasingly stringent compliance, quality, safety, and regulatory risk requirements.

Ideagen's product-market strategy is focused in three areas:

QHSE - Quality, Health & Safety and Environmental Management - covering:

· Compliance with existing and new standards, laws and regulations

· Conformance with customer requirements, including, for example, new pressures for risk-based shop floor quality management in manufacturing supply chains

· Efficiency and productivity in quality, safety and environmental management; for example, being able to comply with new or more stringent requirements without increasing headcount in the compliance team

· Improving performance in these areas, for example by reducing the number of safety incidents in which employees are harmed, ensuring that important quality audits are passed successfully

ARC - Audit, Risk and Compliance Management - covering:

· Pursuit of sustainable competitive advantage through risk-based compliance and oversight

· Establishing a strong governance model to deliver resilience, compliance and strategic goals

· Productivity of internal audit teams through automation of their business processes

· Compliance with laws and regulations such as SOX, UK Companies Act, SM&CR or ASC 275

· Stewardship of brand and reputation

DCC - Document Collaboration and Compliance

· Real time content collaboration across all stakeholders, partners, suppliers and customers

· Manage FDA drug approvals, complex proposals and legal documents

· Audit ready for your compliance process with full report output

· Access from anyplace or device with paragraph-based permissions and controls

· Automatic capture of comments, suggested changes and discussion threads for document intelligence

These key market opportunities overlaid with vertical concentration in life sciences, healthcare, financial services and banking, aviation, aerospace, automotive and defence manufacturing; provides global opportunity for growth with the accelerating shift towards a cloud and subscription economy.

Overview

Following another strong financial performance in 2020, Ideagen has the capability and resources to continue to make important investments across the Group. These investments will support further growth in line with our People, Products and Customers. Organic investment will be directed at developing and launching additional world-class products, improving the value-based outcomes for our customer, and recruiting and developing the very best people. We intend to support this organic investment by considering acquisitions that broaden our geographic reach, consolidate our market opportunity and strengthen our product capabilities.

Strategic focus areas

In the past year we have increased our focus on our three core business areas that underpin our strategy: People, Products, Customers. This has not only contributed to the strong performance in the period but in the rapidly changing and complex environment of COVID-19. This approach allows us to prioritise and align our resource and developments with customer demand and capitalise on market trends.

We have strengthened the capabilities of all our teams, particularly in development, marketing and sales. In the last year our new 21,000 sq-foot development centre in Kuala Lumpur (Malaysia) was opened by the Minister for Communications and Multimedia, YB Gobind Singh Deo. This new centre already houses 90 technical specialists and has accelerated our cloud development capability. Our sales and marketing growth programs continue with additional investment throughout the year on the program started in 2018 in our digital marketing and sales teams. These teams provide the speed, transparency and expertise our customers desire through great digital interactions and the human touch. This enabled a smooth transition to home working through the COVID-19 lockdown period with no interruption to sales and marketing productivity. This investment will provide resource, technology and infrastructure to further support the Group's growth strategy.

Our customer strategy continues to mature with the introduction of new customer success profiling, people, and systems. We are now implementing the Freshdesk success software which helps prevent churn, increase expansion, and strengthen customer relationships. Our success teams and account managers can quickly see account health, support tickets, billing history, communications, and user engagement enabling us to proactively manage risks, relationships and identify upsell. We are pleased with the progress we have made during the period which is demonstrated by the industry high retention rate of 95%. 

With COVID-19 we did not hold our annual customer satisfaction survey which is traditionally run in March. We continue to measure our transactional net promoter score through our support, onboarding and customer success teams and we had a 30% increase in our transactional satisfaction levels. We continue to engage with our new acquisitions on customer success. As is standard we experience a reduction in customer satisfaction in the months following acquisition as we change the working process and direct communication customers had with individuals. We monitor how that performs over the following 18 months to ensure that it then aligns in to Ideagen's standard KPIs and that the customers are now benefitting from Ideagen's dedicated resource in this area.

This year we have significantly advanced the technology that underpins our customer propositions. The shift to a cloud operational model is a strategic priority, which will continue to evolve through our partnerships with Amazon Web Services and Azure. This innovation means the business is able to scale faster and can continue to support our evolving customer requirements in the UK and international markets.

Corporate Transactions

Ideagen has a strong track record of acquiring companies. During the year we completed three acquisitions to strengthen our product and technology capabilities, broaden our international reach and customer base, and take us closer to our strategic goal of being global leader in our chosen markets.

The first of these was Redland Business Solutions Ltd ("Redland") for net cash consideration at completion of £15.8 million. Redland is a fast growing, profitable RegTec SaaS company supplying software to the financial services industry. With solutions that underpin the Senior Manager & Certification Regime (SMCR) and individual employee competency. Customers include Nomura, Santander, Investec, Hargreaves Lansdown, and Rathbones. Current run rate revenues are approximately £4.2 million while ARR is approximately £3 million.

Redland is an extremely valuable addition to the Group and in line with our strategy of acquiring Integrated Risk Management businesses that have strong IP and growing recurring revenues. Financial Services is an important vertical market for Ideagen and the combination of Redland's Insight Platform with Ideagen's Pentana products provides a compelling proposition covering internal audit, risk management, certification and SMCR compliance.

Since its acquisition, Redland has performed strongly securing twelve new logo wins with a combined contract value of £1.6 million, including prestigious clients such as Natixis, Alexander Hall, TPICAP and IG Group in the first 6 months.

This was followed by the acquisition of Optima Diagnostics Limited ("Optima") for a net cash consideration of £1.8 million. Optima is a Software as a Service company that has developed OSHENS, a SaaS based Health and Safety compliance solution with approximately 80 customers across highly regulated markets including Airbus, Sellafield, BAE Systems and Edinburgh Airport. On a current run rate, Optima is generating approximately £1 million in revenues and £0.9 million ARR.

In March 2020 we acquired Workrite for a net cash consideration of £6.5m which includes £0.8m being held in escrow subject to the achievement of certain business objectives during the first 12 months. Workrite is a fast growing Software as a Service business that developed an e-learning platform for the Occupational Health and Safety market

Workrite, a UK company has approximately 500 customers including the London Stock Exchange, Panasonic, Kings College London, The Law Society and Credit Suisse generating approximately £1.7m in revenues of which £1.6m is recurring and in the first full year of ownership will contribute £0.7m additional EBITDA.

The Global Quality, Health, Safety and Environmental (QHSE) market is valuable yet fragmented and the acquisition will further enhance our market position as we aim to further consolidate this sector.

Together, these acquisitions mean that we now have businesses of genuine scale and ability to execute on the market opportunity.

The Board remains committed to our ongoing buy and build strategy and expect to complete further acquisitions in the future. Our acquisition strategy focusses on recurring revenues and compelling product offerings, and we apply strict criteria to ensure that acquisitions represent value for shareholders.

Operational

Cash generated by operations during the year was strong, amounting to £18.1 million on an IFRS16 basis or representing cash conversion of approximately 97%. The Group ended the year with net bank debt of £16.8 million (2019: £1.3 million) and it is significant that this represents less than 1x our adjusted EBITDA for the year. The increase in net bank debt over the year of £15.5 million is after taking into account net payments of £24.1 million for businesses acquired in the year and £2.0 million of deferred and contingent consideration in respect of acquisitions in the prior year.

The Group is committed to increasing the percentage of total revenue derived from recurring contracts through the transition from a traditional licence model to a SaaS subscription-based model. This transition is now at its inflexion point and recurring SaaS revenues increased by 61% to £22.1 million (2019: £13.7 million) which at 39% (2019: 29%) now represents the largest element of Group revenue. ARR recognised during the year increased by 38% to £43.1 million (2019: £31.2 million), representing an increase to 76% of total revenues from 67% the previous year. This proportion has improved consistently since 2016 when recurring revenues represented only 54% of total revenues.

The three acquisitions from FY2019 - InspectionXpert, Morgan Kai and Scannell Technologies - have been successfully integrated using our mature integration framework which provided the delivery of true synergies and enabled an acceleration of sales execution. All the acquisitions broadened Ideagen's relationships in our existing core sector and provided an additional source of recurring revenue and upsell opportunities to our existing customer base.

Growth: Sales and Marketing & Customer Success

We have seen good performance in terms of new business and customer retention. This includes key wins across all our core markets and geographies within each of our solution areas.

It is particularly pleasing to note that the ARR organic growth of 19% was driven by 458 new customer logo wins across verticals such as Healthcare, Life Sciences, Financial Services and US Government, with new customers including the US Federal Reserve, SSE, Emirates and Corbus Pharmaceuticals.

Investment appetite from new customers in sectors that have been more intensely impacted by the pandemic, including the Aviation and Manufacturing sectors, has as expected been slower.

We have invested into our marketing teams to generate qualified sales leads and to enhance the global recognition and reputation of our brand and solutions. This is achieved through content driven product and vertical marketing covering blogs, white papers, webinars, and a dedicated digital team. Our marketing qualified leads and pipeline have continued to grow in line with the business and our Sales Development team has continued to support lead generation and qualification.

We sell our products primarily through a direct sales force which generates 97 percent (FY2019 - 97%) of Group revenue. Our sales force operates globally with a focus on UK, Europe, North America, and Asia. The team is organized by both vertical market and product focus area and includes 61 'quota carrying' sales executives and account managers supported by technical sales and domain experts.

We generate revenues from sales to new customers and through repeat licence and services sales to our existing customers. Key highlights of the year have been the success of the Ideagen Sales Excellence Academy and the continued growth of our digital sales team.

In order to drive growth, we have successfully added new customers to the Group across all of our key verticals, with healthcare, financial services and life sciences providing particularly notable success in the year. We also continue to maintain a strong focus on customer success with continuous investment in customer teams, technology, and product enhancement. This has resulted in significant revenues from strong retention of recurring contracts and new projects from our extensive customer base. Reflecting the importance of the Group's software to our customers, there has been no material impact on the Group's existing customer relationships or the ARR book as a result of COVID-19.

People

At 30 April 2020 Ideagen had 527 (2019: 442) employees based across its UK and international office network, with the majority located at our Centres of Excellence: Nottingham HQ (UK), Kuala Lumpur (Malaysia) and Raleigh (US). A combined total of 127 (2018: 120) people are based internationally. In the UK 35% of all employees are now contracted homeworkers reflecting the change in working environment, our flexible policies and supporting systems.

The organisation is committed to significant investment within our development teams, with 32% of resource dedicated to this area, primarily based in Nottingham and Malaysia. Ideagen maintains its focus upon building domain expertise within core markets and delivering excellence across the customer base. As a result, the Group has 25% within Sales & Marketing, and 29% in Customer Delivery, Support and Success

Ideagen continues to believe a broad talent pool across the company is the best way to ensure sustainable growth, as such it is pleased to confirm 47% of employees have been with the Group for 3 or more years, and 32% have been with the group for 6 years or more. The Group is delighted that this traditionally male dominated sector continues to see strong growth in female applications, resulting in an improved ratio of 62% (2019: 64%) male to 38% (2019: 36%) female.

Ideagen is an environment which focuses delivering on diversity, in which people make their own careers, go beyond their own ambitions and achieve success in our unique collaborative environment. With investment in our people, facilities and communities we strive each and every day to make a difference and be a global leader.

I am immensely proud to work every day with such a committed and talented team and delighted to see it reflected in positive feedback from customers.

Risk Management

Effective risk management enables us to take advantage of business opportunities and deliver on our strategy while protecting our business.

We have established a risk management framework and structure across the group, driven by our risk and compliance team through to individual risk owners in each area of the business. We continue to make progress embedding our risk management framework into our new and existing operations and continue to work hard to improve risk awareness across the business. Utilising our own market leading risk and audit products, risks and the efficacy of internal and external risk control measures in each part of the business are continually audited and reassessed by each risk owner and reported to the board on a monthly basis.

Our risk profile continues to change as we adapt to market conditions and implement new and reassess existing control measures to mitigate our risks. We recognise that managing our principle key risks is fundamental to the company's prosperity and longevity and achieve this by making risk management an integral part of our business management and planning. We also take a proactive and forward-looking approach to new and emerging risks such as COVID-19 and Cyber Security. While we recognise that we have limited control over these macro-economic risks, by early identification and assessment of these risks the company is provided with sufficient time to implement adequate control measures to reduce these risks to as low as possible.

The Board regularly reviews those risks and in particular those which could have the greatest impact on the business and confirms that robust assessments have been performed on both the identified risks and the control measures the company has in place to mitigate those risks.

Current Trading & Outlook

Trading since the year end has remained robust and we continue to see strong demand for our products from new potential customers. With acquisitions made during the previous year performing well, and with a base of over 5,700 customers generating growing recurring revenues and repeat business the Board has every confidence in the continued prospects for the Group.

Ben Dorks

Chief Executive Officer 

Customer case studies

PleaseReview - World Health Organisation

"PleaseReview is working with the World Health Organisation in support of WHO's COVID-19 outbreak response by providing services to WHO on a pro bono basis to allow WHO to conduct its first-ever digital World Health Assembly" - WHO spokesperson

The World Health Organisation (WHO) was supposed to hold its 73rd World Health Assembly (WHA) in May 2020 - right in the middle of the global pandemic.

In normal times there would have been more than 60 items on the agenda for discussion, but this year there were only two, with the main one, unsurprisingly, being COVID-19 and the global response to it.

The Assembly was due be attended by delegations from the 194 Member States of the WHO, as well as NGOs, philanthropic organisations and other interested parties. This year many delegations were led by Heads of States and the number of people attending was expected to be around 4,000. Normally this meeting would involve face to face gatherings and discussions in the Palais de Nation in Geneva, but social distancing measures required meant that was impossible this year.

The WHO faced a huge problem. With the world waiting for guidance from the organisation on how to respond to the COVID-19 pandemic, this was potentially one of the most important Assemblies in its history. Faced with travel and meeting restrictions the like of which we have never experienced, the WHO had no option other than to try to hold the assembly virtually. Something they had never done before.

Ideagen's leading document collaboration and governance software, PleaseReview, provided the WHO with the solution.

PleaseReview allows for real-time collaboration on documents, offers a secure means of capturing comments and provides a full audit trail of responses, changes and agreements. When each word is poured over and debated by thousands of people and the outcome of those debates has such global significance, getting it right was of paramount importance to the WHO.

Adopting PleaseReview meant the WHO could invite member states to conduct a first review of policy documents, that would normally be conducted face to face, in a secure, online environment.

PleaseReview allowed the member states to engage in a proper review process and reach agreement on the wording of vital documents without having to leave their desks. Ideagen's security protocols meant there was a full audit trail of revisions and comments and the member states were confident that discussions were safe from interference by external forces. Social distancing was maintained, a huge amount of time was saved, and the WHO was extremely pleased with their first ever virtual World Health Assembly.

Pentana Risk - Admiral Insurance

"By giving each business unit the tools to control their own risk management, Admiral's executive oversight has dramatically improved." - Huw Thomas, Enterprise Risk Manager

Admiral launched in 1993 with one brand, zero customers and 57 members of staff. On 23rd September 2004, Admiral floated on the London Stock Exchange and became Wales' only FTSE 100 company. The Group now offers home, van and travel insurance as well as personal loans and car finance in the UK, has operations worldwide, and has over 6.5 million customers.

In maintaining a global presence and portfolio of financial products, as well as protecting their market-leading position, Admiral's risk management program is crucial. In order to improve oversight of the global risk profile and streamline reporting capabilities, Admiral needed new software to demonstrate effective risk management and a strong risk-aware culture throughout the Group. 

Admiral chose Pentana Risk to provide them with assurance that they're meeting the requirements of not only the regulators, but also their executive teams and boards. For Admiral, the management team need accurate, actionable data on their organisation's top risks to make informed decisions quickly.

Huw Thomas, Enterprise Risk Manager at Admiral, had a very clear vision for what the new system needed to deliver. 

"We used to struggle to create bespoke reports and needed a way to create tailored, drillable reports. Aggregation of risk was time-consuming and mainly done on spreadsheets; this quickly became unmanageable. And finally, end-user buy-in. The old system was not user friendly and was poorly adopted within the business." Since implementing Pentana Risk, Admiral have transformed risk management into a centralised system for creating a single source of truth.

"The benefits of Pentana Risk were apparent immediately. With Pentana Risk, we can create unique portals for stakeholders across the business to let them identify key risks quickly. We can compare risks globally and update instantly so we can get an accurate and up-to-date picture of risk.

"We can produce reports in a matter of minutes, keeping senior executives informed about Admiral's top risks. We can re-use them with a click of a button to produce different reports for different audiences and tailor it to their requirements. 

"Pentana Risk is intuitive and buy-in from the business has been successful. By giving each business unit the tools to control their own risk management, Admiral's oversight has improved - the Enterprise Risk team can take a step back and look at the holistic picture of risk, incorporating a more strategic view.

"Its ability to be specifically tailored to Admiral made Pentana Risk really stand out from the crowd. We spent time with Ideagen customising the system to make sure it met Admiral's needs, and that support continued to ensure the system was fully embedded. We get a great deal out of the relationship with Ideagen and feel that the direction of the product is extremely positive." 

Q-Pulse - Whyte and Mackay

"Q-Pulse means that everything we require is in one system - for document management that is excellent. We no longer need to check if the most up-to-date documentation and processes are being followed. The system does that for us automatically." - Norman Elliott, Compliance Manager

As a global drinks provider, Whyte and Mackay is required to meet multiple compliance requirements, including ISO 45001, sharper health and safety and BRC adherence.

But document control was becoming more and more of an issue ahead of each inspection. Siloed directories made document access time-consuming and stressful.

Norman Elliott, Compliance Manager at Whyte and Mackay, said: "The management of our documentation was a major driver in us looking at modernising our quality system. We were using a series of dated manual systems and processes.

We undergo lots of audits every year, including stringent checks from the likes of Tesco and Sainsbury's. We would be frantically preparing to ensure we had the correct documentation to prove we were meeting whatever standard we were being assessed against.

It was becoming more and more apparent that we required a modern software system."

Ideagen's Q-Pulse software was rolled out across the Grangemouth plant, replacing a series of paper-based processes and helping Whyte & Mackay improve all aspects of its operations.

Norman said "Our staff are taking more ownership of overall safety around the plant. By tackling safety in this proactive way, and because everything is recorded in the Q-Pulse system, we can show inspectors exactly how we have tried to prevent accidents."

Norman added "Q-Pulse encourages ownership of the quality system and makes it easier to comply with our standards. Now, when we're audited, it's a case of quickly and easily finding the information the auditor requires and presenting it. The auditor can see what we've done and why we've done it. Previously, we would have been under pressure preparing for those audits. But Q-Pulse is a one-stop shop for us to go and find any information that is required - whether that's for our own internal staff or external auditors."

Whyte and Mackay then extended the system to manage health and safety, near-miss reporting and safety improvement.

Norman added: "Q-Pulse has helped us improve our investigations into safety incidents. To get to the root cause of an incident, we can record corrective and preventive actions through Q-Pulse's incident management functionality, and this fits very nicely with our overall health and safety management. One of our major successes was encouraging staff to come forward with improvement suggestions using Q-Pulse."

Financial Review

We made significant strategic and financial progress during the year across all of our key measures -notably growing ARR, adjusted EBITDA and in cash generation. We closed the year during a period of unprecedented uncertainty from the economic disruption of the COVID-19 pandemic in a strong financial position, robustly financed, with globally diversified end markets and resilient infrastructure and processes in place.

The Group has adopted IFRS16 "Leases" with effect from 1 May 2019 using the modified retrospective approach to transition and has therefore not restated any prior period information in the financial statements. Accordingly, the results for the year ended 30 April 2020 are not directly comparable with those presented in the prior year under the previously applicable accounting standard IAS17 "Leases". In order to show the impact of IFRS16 and to facilitate a comparison of results with the prior year, a reconciliation of results for the year ended 30 April 2020 as reported on an IFRS16 basis with the former IAS17 basis has been presented in note 2.

The Board considers Annual Recurring Revenue (ARR) as its primary growth metric and the key driver of long-term value for the Group. ARR has grown strongly due to the ongoing transition from a perpetual licence model to a SaaS model and through the acquisition of businesses with similar high proportions of recurring revenues.

ARR recognised during the year increased by 38% to £43.1 million (2019: £31.2 million), representing an increase to 76% of total revenues from 67% the previous year. This proportion has improved consistently since 2016 when recurring revenues represented only 54% of total revenues.

The ARR book at 30 April 2020 was up 34% to approximately £48.7 million from £36.4 million at 30 April 2019. This comprises organic growth of £6.9 million, representing a 19% organic growth rate, combined with acquisition-led growth of £5.4 million from the three acquisitions made in the year.

Revenue for the year ended 30 April 2020 ("FY19/20") increased by 21% to £56.6 million (2019: £46.7 million).

SaaS revenues increased by 61% to £22.1 million (2019: £13.7 million) which at 39% (2019: 29%) now represents the largest element of Group revenue. Support & Maintenance revenues continued to grow in value terms both through new perpetual licence sales and through business acquisitions, particularly from the full year effect of the acquisition of Morgan Kai in the prior year which historically derived a high proportion of revenue from the perpetual licence model. Support & Maintenance revenues increased by 20% to £21.0 million (2019: £17.5 million) representing 37% of total revenues unchanged on the prior year due to the focus on SaaS growth.

Professional services revenues represented 10% (2019: 11%) of total revenues. The slight decline is due to the increasing proportion of SaaS sales which require less configuration work. This was partly offset by the acquisition of Redland which historically had a higher proportion of professional services revenues.

Perpetual licence revenues decreased to £7.2 million (2019: £9.7 million) representing 13% (2019: 21%) of total revenue in line with the ongoing transition from perpetual licences to SaaS.

Pro-forma organic revenue growth was 5% (2019: 8%). Pro-forma organic revenue growth is calculated by comparing revenue for the year against the previous year, as if acquired businesses had been in the Group for the same period in the previous year. This is calculated based on a comparison with pro-forma revenue for 2019 of £54.1 million which includes revenues for InspectionXpert, Morgan Kai, Scannell, Redland, Optima and Workrite for the equivalent period that they were owned by the Group in the year ended 30 April 2020.

Adjusted EBITDA is defined as EBITDA before taking into account share-based payment charges, costs of acquiring businesses, restructuring costs and exceptional items which are shown separately on the group statement of comprehensive income. The Board considers this to be the most appropriate measure of profitability for the Group.

Adjusted EBITDA reported on an IFRS16 basis increased by 30% to £18.5 million (2019: £14.3 million reported on an IAS17 basis). On a like for like IAS17 basis, adjusted EBITDA grew by 22% to £17.5 million. Adjusted EBITDA under IFRS16 is greater due to lower office rent charges within operating costs.

The adjusted EBITDA margin increased to 32.7% (2019: 30.6%) largely as a result of the adoption of IFRS16. On the previous IAS17 basis, the adjusted EBITDA margin would have increased marginally to 30.9%. Gross margin reduced slightly to 90.9% (2019: 91.6%) due to increasing SaaS revenues which have a hosting cost element. Operating costs continue to be tightly controlled representing 58.2% (2019: 61.1%) of revenue. On an IAS17 basis operating costs in the year would have represented 60.1% of revenue. We recognise the need to continue targeting investment in our staff and the operational systems of the business to support continued organic growth and to provide a strong, scalable platform for the integration of future acquisitions.

The Group has significant intangible assets, primarily from the acquisitions that it has made. Amortisation of acquisition intangibles of £9.5 million (2019: £7.5 million) represents the majority of the total depreciation and amortisation charge of £12.9 million (2019: £9.4 million). Amortisation of development costs amounted to £1.8 million (2019: £1.4 million). Following the adoption of IFRS16 on 1 May 2019, a number of Right of use assets in respect of the group's leased offices were recognised for the first time. At 30 April 2020 the net book value of the Right of use assets amounted to £8.3 million. The depreciation charge on these assets in the year amounted to £1.0 million.

The share-based payment charge of £1.7 million (2019: £1.5 million) relates to the Group's equity-settled share option schemes including the Long-Term Incentive Plans and the Share Incentive Scheme for employees. The charge included £nil (2019: £0.4 million) of national insurance costs on the exercise of non-tax efficient options. Excluding the national insurance costs, the share-based payment charge does not represent a cash cost to the Group.

The Group incurred costs of £0.4 million in acquiring the businesses of Redland, Optima and Workrite during the year (2019: £1.3 million in respect of the acquisitions made in that financial year).

During March and April 2020, in response to the COVID-19 pandemic, the Board took several decisions to reduce the cost base of the Group to better align it with an uncertain economic environment. This included the restructuring of certain operational functions which involved making a number of redundancies. This has resulted in a restructuring cost of £0.8 million (2019: £0.5 million).

There has also been a £2.0 million non-recurring exceptional impairment of receivables this year. Due to Covid-19 related uncertainties, the directors have re-assessed the recoverability of certain trade receivables and those with customers operating in markets such as aviation and other impacted industrial sectors. It was concluded that specific balances in respect of three customers, which had originally been recognised in previous periods, had an increased risk of recoverability and would therefore not be pursued and were written off. Additional expected credit losses were also recognised for customers in markets expected to be impacted.

Finance costs for the year were £0.8 million (2019: £0.3 million), the increase being due to the use of our borrowing facilities to assist with financing business acquisitions made in the year.

As a result of the above, the Group made a loss before tax of £0.1 million (2019: profit of £1.4 million), the reduced profit at a pre-tax level being largely due to the non-recurring £2.0 million exceptional impairment charge against receivables.

A reconciliation of Adjusted EBITDA to Loss before taxation is given below.

The adjusted Group tax charge amounted to £2.1 million (2019: £1.5 million) as set out in note 5. This has been adjusted to exclude the deferred tax effects associated with the amortisation of acquisition intangibles and share based payment charges and the tax effects of the exceptional bad debt and restructuring costs. The adjusted Group tax charge represents 14.5% (2019: 12.3%) of adjusted profit before tax of £14.3 million (2019: £12.2 million). The increased tax rate is largely due to the increased level of profits earned in the United States which attract higher rates of tax than in the UK. The tax charge also includes an additional £0.1 million of deferred tax in the year ended 30 April 2020 resulting from the UK government's decision not to reduce corporation tax rates from 19% to 17%. This has also slightly increased the adjusted tax rate. The Group's use of R&D tax credit claims and tax deductions linked to the exercises of share options in particular have significantly reduced the Group's cash liability to UK corporation tax on the profits for the year.

Although the introduction of IFRS16 has significantly reduced operating costs and increased depreciation charges as detailed above, the overall effect of IFRS16 has been to reduce profit before taxation and earnings in FY19/20 by less than £0.1 million compared with applying the former IAS17 basis. A comparison of the results for the year as reported on an IFRS16 basis with the former IAS17 basis has been presented in note 2 to the financial statements.

Adjusted diluted earnings per share on an IFRS16 basis increased by 12% to 5.36 pence (2019: 4.80 pence). Earnings per share on an IAS17 basis for FY19/20 would have been marginally higher at 5.37 pence.

The Group's financial position has continued to strengthen during the year with net assets increasing to £76.9 million (2019: £73.7 million).

The value of intangible assets increased to £113.8 million (2019: £90.7 million) mainly as a result of the three acquisitions completed during the year. The Group capitalised £3.9 million (2019: £2.7 million) of R&D development costs during the year which represented 6.9% (2019: 5.7%) of total revenues. The increase is mainly due to costs capitalised in respect of strategic product development particularly focused on our new ICSA platform and enhancements to the core Q-Pulse and Coruson products during the year.

Following the adoption of IFRS16 "Leases" on 1 May 2019, the Group has recognised lease liabilities and corresponding right of use non-current assets and a lease receivable on a number of the group's leased offices. At 30 April 2020, the Group had right of use assets of £8.3 million, a lease receivable of £0.5 million and total lease liabilities of £8.8 million. The application of IFRS16 as compared with the former IAS17, has resulted in a minimal overall reduction in net assets of less than £0.1 million at 30 April 2020.

Over the last two years, the Group's approach to the funding of acquisitions has been more evenly balanced between using debt and equity together with the Group's own cash generation. The strong cash flow and recurring revenue profile of the business mean that the Group has been able to secure relatively inexpensive debt funding. The acquisitions of Redland, Optima and Workrite during the year were funded through a combination of the Group's own cash generation and drawdowns from the Group's Revolving Credit Facility. In the prior year, the Group raised £19.4 million net of costs through a share placing as part of the funding for acquisitions made in that year.

Cash generated by operations during the year was strong, amounting to £18.1 million on an IFRS16 basis or £17.0 million on an IAS17 basis (2019: £12.3 million). This represents cash conversion of approximately 97% (2019: 86%) of adjusted EBITDA. The prior year comparative, as previously explained, was unusually impacted by a tax payment and, aside from that payment, would have been similar to the current financial year at approximately 94% of adjusted EBITDA.

The Board is highly focussed on cash generation and the statement of cash flows is the most illustrative demonstration of this, insofar that it excludes the effect of the acquisitions made in the year and the £2.0 million exceptional impairment of receivables charge. An increase in trade and other receivables of £2.2 million is largely matched by the £1.7 million increase in the deferred revenue creditor.

Movements in the three main elements of working capital on both a year-end balance sheet basis and on a cash flow statement basis are set out below.

Total trade receivables at 30 April were £15.3million (2019: £14.7million) of which 51% was not yet due (2019: 47%). As explained above, there was an exceptional charge of approximately £2 million in the year against trade receivables. 

Cash collection has been robust and represents a key operational metric for the business. Days Sales Outstanding were in line with the previous year at 76 as at 30 April 2020 (2019: 74) based on a count-back methodology calculated by reference to invoiced sales as the most appropriate metric to measure. This reflects the Group's seasonal billing profile of which 45% is H1 and 55% is H2 compared to a relatively even split of revenue.

The deferred income creditor of £22.8 million (2019: £18.6 million) represents the element of ARR which has been invoiced to customers in advance but is deferred to be recognised as revenue in the future. This does not represent a cash liability.

Free Cash Flow, defined as net cash generated by operating activities less capital expenditure, amounted to £11.1 million on an IFRS16 basis (i.e. before lease payments) or £10.1 million on the former IAS17 basis (2019: £6.3 million on an IAS17 basis). This represents 19.6% of Revenue on an IFRS16 basis or 17.9% on an IAS17 basis (2019: 13.5% of Revenue on an IAS17 basis) of adjusted EBITDA or 13.5% of Revenue. Adjusted Free Cash Flow, which is before payments of acquisition costs of £0.9 million in the year, was £12.0 million on an IFRS16 basis representing 21.2% of Revenue or £11.0 million on an IAS17 basis representing 19.5% of Revenue.

The Group ended the year with net bank debt of £16.8 million (2019: £1.3 million) representing less than 1 times adjusted EBITDA for the year. The increase in net bank debt over the year of £15.5 million is after taking into account net payments of £24.1 million for businesses acquired in the year and £2.0 million of deferred and contingent consideration in respect of acquisitions in the prior year.

Outstanding deferred consideration on business acquisitions amounted to £0.5 million at 30 April 2020 which has subsequently been paid post year end.

The deferred income tax liability of £9.1 million (2019: £7.3 million) is mainly in respect of the Group's intangible assets and also does not represent a future cash liability for the Group.

Key Performance Indicators

The Board measures the performance of the Group against budgets and its strategic objectives on a regular basis. The following key financial performance indicators are used by management as part of this ongoing assessment.

Emma Hayes

Chief Financial Officer

Ideagen plc

Group Statement of Comprehensive Income for the year ended 30 April 2020

Ideagen plc

Group Statement of Financial Position at 30 April 2020

Ideagen plc

Group Statement of Financial Position at 30 April 2020 (continued)

Ideagen plc

Group Statement of Cash Flows for the year ended 30 April 2020

Ideagen plc

Group Statement of Cash Flows for the year ended 30 April 2020 (continued)

Ideagen plc

Group Statement of Changes in Equity for the year ended 30 April 2020

Ideagen plc

Group Statement of Changes in Equity for the year ended 30 April 2019

Notes

1 Basis of information and going concern

The financial information included in this preliminary announcement is audited. This information does not constitute the annual report and accounts of the Group for the year ended 30 April 2020 within the meaning of section 434 of the Companies Act 2006. This will be available from www.ideagen.com in due course. The audited annual report and accounts of the Group for the year ended 30 April 2019 has been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain any statement under section 498 (2) or (3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

Consistent accounting policies have been applied in the preparation of this information except that the Group has adopted IFRS16 "Leases" with effect from 1 May 2019 which replaces the previous accounting standard IAS17 "Leases". Prior year information has not been restated. Further information on the impact of the adoption of IFRS16 is set out in note 2 below.

Going Concern

Our going concern assessment and related disclosure has been enhanced this year in view of the ongoing uncertainty around the COVID-19 pandemic, and its potential macroeconomic impact. The approach focuses on a review of the following factors:

· External market dynamics and any changes or trends likely to impact demand or the competitive landscape

· Current financial condition of the business, including recurring revenue, profitability and cashflow trends and forecasts

· Banking facilities and liquidity position

· Customer relationships

· Other business risks

A comprehensive assessment is made of each area taking into account all available information - internal and external - and focused on a one year period from approval of the financial statements.

Our decisions and actions during the pandemic have been based on the principles of protecting our people, ensuring our business remains strong and working collaboratively with our customers through the challenges they face. Management of this transition has been effective and due to systems and processes established prior to the pandemic has had a limited impact on the operational performance of the Group.

At the outset of the pandemic in the UK, the directors reviewed the business and took the strategic decision to reduce cost via a targeted redundancy programme. These decisions were both an acceleration of strategic initiatives in moving towards a digital marketing function and a reshaping of the operational cost base. The savings provided additional financial resilience at a point when COVID-19 was starting to unfold.

The situation in 2020 is unprecedented and the overall economic impact still unknown. The Board is encouraged by the buoyancy shown in terms of trading results but there remains an overarching macro uncertainty to which Ideagen is not immune. Given the Group's large recurring revenue base and relatively predictable costs, we are able to forecast with a reasonable degree of confidence. These uncertain times also present opportunities. Some of the Group's core sectors have seen growth and there is scope to take advantage of market share and acquisition opportunities.

The Group has sufficient liquidity and funding facilities. As at 30 April 2020 the Group was £25 million drawn down against its total Revolving Credit Facility ("RCF") of £40 million (which is in place until March 2023) and had cash on hand of £8.2million. Since the year-end, the Group acquired Qualsys Limited. The initial £14million consideration paid at completion was funded via a further drawdown of the RCF. In September 2020 the RCF facility was extended by £10million to provide additional headroom. This Group's facilities are subject to certain financial covenants.

The Directors have prepared trading and cash flow forecasts for a period of one year from the date of the financial statements. The base case assumptions make allowance, where relevant, for anticipated effects of COVID-19. These have been subject to sensitivity analysis which considered reasonable downside scenarios and further stress testing of the forecasts.

The Board is satisfied that even under these scenarios there remains sufficient headroom for both liquidity and covenants through the period considered. This also assumed no mitigating actions which would be in the Group's control, but the situation where this would be required is considered unlikely.

While the future economic outlook remains uncertain, profitable current trading, cash generation, positive indicators of growth, and sufficient facilities means that the Directors remain confident that the Group is in a secure financial position and well placed to achieve its plans. The Directors therefore have a reasonable expectation that the Group will have adequate cash and covenant headroom for the foreseeable future. On this basis, the Directors continue to adopt the going concern basis in preparing the financial statements.

2 Adoption of IFRS16 - new accounting standard on leases

Effective from 1 January 2019, IFRS 16 has replaced IAS 17 "Leases" and IFRIC 4 "Determining whether an Arrangement Contains a Lease".

The Group has adopted IFRS 16 with a transition date of 1 May 2019. The Group has chosen not to restate comparatives on adoption of the standard, and therefore, the revised requirements are not reflected in the prior year financial information to 30 April 2019. Rather, these changes have been processed at the date of initial application (i.e. 1 May 2019). Details of the impact of the adoption of IFRS 16 are given below.

IFRS 16 provides a single lessee accounting model, requiring the recognition of assets and liabilities for all leases, together with options to exclude leases where the lease term is 12 months or less, or where the underlying asset is of low value. IFRS 16 substantially carries forward the lessor accounting in IAS 17, with the distinction between operating leases and finance leases being retained. The Group does not have significant leasing activities acting as a lessor.

The Group adopted IFRS 16 using the modified retrospective approach, with recognition of transitional adjustments on the date of initial application (1 May 2019), without restatement of comparative figures.

The Group elected to apply the practical expedient to not reassess whether a contract is, or contains a lease at the date of initial application. Contracts entered into before the transition date that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed. The definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 May 2019.

IFRS 16 provides for certain optional practical expedients, including those related to the initial adoption of the standard. The Group applied the following practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17:

(a) Apply a single discount rate to a portfolio of leases with reasonably similar characteristics

(b) Exclude initial direct costs from the measurement of right-of-use assets at the date of initial application for leases where the right-of-use asset was determined as if IFRS 16 had been applied since the commencement date;

(c) Reliance on previous assessments on whether leases are onerous as opposed to preparing an impairment review under IAS 36 as at the date of initial application; and

(d) Applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of lease term remaining as of the date of initial application.

As a lessee, the Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred substantially all of the risks and rewards of ownership. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most leases. However, the Group has elected not to recognise right-of-use assets and lease liabilities for some leases of low value assets based on the value of the underlying asset when new or for short-term leases with a lease term of 12 months or less.

As an intermediate lessor, the Group accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlaying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.

The adoption of IFRS 16 on 1 May 2019 has impacted certain categories of assets and liabilities in the Group Statement of Financial Position as set out below.

1 The right of use assets recognised under IFRS16 were in respect of leases of office premises.

2 The impact on Trade and other receivables was in respect of lease prepayments.

There was no overall impact on Net Assets or Equity from the initial adoption of IFRS 16 on 1 May 2019.

Lease liabilities reconciliation

Future lease payments at 1 May 2019 were discounted at the Group's incremental borrowing rates as follows:

· UK leases 1%

· US leases 2%

· Other overseas leases 2.75%

The Group has applied the practical expedient to classify all long lease leases for which the lease term ends within 12 months of the date of adoption of IFRS16 as short-term leases. All other leases of under 12 months length are also classified as short-term leases.

In order to show the impact of IFRS 16 and to facilitate a comparison of results with the prior year, a reconciliation is presented below of the Statement of Comprehensive Income for the year ended 30 April 2020 as reported on an IFRS 16 basis with the former IAS17 basis.

Notes

1 Reduced lease rental charges on an IFRS16 basis

2 Additional depreciation on right of use assets recognised under IFRS16

3 Additional Interest cost on leases recognised under IFRS16

3 Revenue

An analysis of the Group's revenue is given below.

4 Earnings per share information

Basic earnings per share is computed by dividing the profit for the year attributable to equity holders of the parent by the weighted-average number of ordinary shares outstanding during the year. Diluted earnings per share is computed by dividing the profit for the year attributable to equity holders of the parent by the weighted-average number of ordinary shares outstanding during the year as adjusted for the effect of all dilutive potential ordinary shares.

The following tables set out the computations for basic and diluted earnings per share:

Diluted loss per share

The weighted average number of shares and the loss for the year for the purposes of calculating diluted loss per share are the same as for the basic loss per share calculation. This is because the outstanding share options would have the effect of reducing the loss per share and would not, therefore, be dilutive under the terms of IAS 33.

In order to better demonstrate the performance of the Group, an adjusted earnings per share calculation has been presented below which adds back or deducts items outlined in further detail below, which are typically adjusted for by users of financial statements. The calculations of the adjusted basic and diluted earnings per share amounts are based on the following information:

Adjustments to earnings and EBITDA

Share-based payment charges are in respect of the Group's equity settled share option schemes and the share incentive scheme and are excluded in the calculation of adjusted earnings and EBITDA due to their volatility from year to year which impacts on the underlying level of profitability.

Restructuring costs relate to redundancy and other costs linked to the COVID-19 pandemic and the closure of offices. Restructuring costs and the one-off costs related to the acquisition of businesses such as professional fees and stamp duty are excluded in the calculation of adjusted earnings and EBITDA as they are not part of the underlying trading activities of the Group and relate to events which are not expected to reoccur.

The exceptional impairment of receivables is a non-recurring charge this year. Due to COVID-19 related uncertainties, the directors have re-assessed the recoverability of certain trade receivables and those with customers operating in markets such as aviation and other impacted industrial sectors. It was concluded that specific balances in respect of three customers, which had originally been recognised in previous periods, had an increased risk of recoverability and would therefore not be pursued and were written off. Additional expected credit losses were also recognised for customers in markets expected to be impacted. This has been excluded in the calculation of adjusted earnings and EBITDA as it is not expected to reoccur

5 Adjusted profit before taxation and adjusted taxation charge in the Income Statement