Idox plc
(‘Idox’ or the ‘Group’ or the ‘Company’)
FY20 Results

Idox plc (AIM: IDOX), a leading supplier of specialist information management software and solutions to the public and asset intensive sectors, is pleased to report its audited financial results for the year ended 31 October 2020.

Financial Highlights

  • Revenue increased by 4% to £68.0m (2019: £65.5m).
  • Recurring revenue* increased by 5% to £37.4m (2019: £35.7m).
  • Order book for contracted software and services up 31% to £15.9m (2019: £12.1m).
  • Adjusted EBITDA** increased by 36% to £19.6m (2019: £14.4m). Adjusted EBITDA margin improved to 29% (2019: 22%).
  • Cash conversion of Adjusted EBITDA to net cash from operating activities improved to 109% (2019: 86%). Free cashflow*** of £11.2m (2019: £4.4m).
  • Adjusted EPS**** for continuing operations increased by 39% to 1.81p (2019: 1.30p).
  • Net debt***** at 31 October 2020 down 39% at £16.1m (2019: £26.4m).
  • Final dividend of 0.3p per share (2019: £Nil) declared, in line with the stated intention to restore dividend payments.

Statutory Equivalents

Reconciliations between adjusted and statutory earnings are contained within these financial statements. The statutory equivalents of the above results are as follows:

  • Profit before tax £2.7m (2019: £0.03m loss). Loss before tax on discontinued operations of £Nil (2019: £0.6m).
  • Basic EPS of 0.29p (2019: loss 0.26p) for continuing operations. Basic EPS of £Nil (2019: loss 0.14p) on discontinued operations.

Operational Highlights

Idox has continued to improve all areas of the business within its Four Pillars framework during FY20, with successful initiatives including:

  • Fully integrating our 2019 Tascomi acquisition, recently rebranded as ‘Idox Cloud’;
  • Significant progress in delivering Digital Transformation to clients with several new wins for Idox Cloud and new software developments based upon the Idox Cloud development framework;
  • Fully exiting sub-scale operations in Ireland and Malta;
  • Consolidating UK statutory entities, and completing a rebrand;
  • Establishing the first Group-wide CRM, which is already yielding improved sales performance;
  • Fully integrating our operational processes creating a single Idox Software unit; and
  • Idox has not utilised any government job support schemes to date.

Current Trading and Outlook

  • Confident that our public sector markets, software solutions and high levels of recurring revenues will continue to be resilient.
  • We remain cognisant of the ongoing impact of the Covid-19 pandemic and the recurring national lockdowns.
  • Significant improvements in H2 orderbooks compared to H1, including EIM orderbook, carried into FY21 up over 50% on FY20.
  • Combination of recurring revenue and growing order book provides good visibility for current year revenue outlook.
  • FY21 year-to-date trading in line with expectations.

 David Meaden, Chief Executive of Idox said:

 “We have achieved the objectives we set out for our financial year 2020 and continue to operate within our Four Pillars framework of revenue expansion, margin improvement, simplicity and communication. Our financial performance has further strengthened, as we remained disciplined in managing costs and generating cash across our Group.

I have been pleased with the progress we have made across several fronts including reorganising all our software businesses under a single Idox Software leadership structure, implementing our first Group-wide CRM to underpin our sales team stratification efforts; consolidation of our development methodologies; and more recently, the appointment of our first Head of Professional Services. We continue to improve management information and standardise processes throughout our organisation and I would like to thank all our people for their strong commitment to this change as we have sought to improve our organisation. We remain well placed to deliver value and quality products to our customers and the markets we serve.

The Group remains ambitious to grow its leadership positions in public sector software for the future. Idox strives to be a trusted partner of choice for customers, colleagues and suppliers in addition to our banking partners and shareholders as we continue to grow revenues, margin, and cash.

We look forward to our financial year 2021 with both ambition and energy. We have a full programme of continued organic expansion from the stable platform we have created, and will look to scale our Group further through carefully selected bolt-on acquisitions to bring public sector software businesses into our portfolio.

We are excited and confident in the outlook for the business.”

 For further information please contact:

Idox plc +44 (0) 870 333 7101
Chris Stone, Non-Executive Chairman  
David Meaden, Chief Executive  
Rob Grubb, Chief Financial Officer  
 
Peel Hunt LLP (NOMAD and Broker) +44 (0) 20 7418 8900
Edward Knight  
Paul Gillam  
Nick Prowting
MHP Communications + 44 (0) 203 128 8170
Reg Hoare  idox@mhpc.com
James Bavister
Amy O’Sullivan

About Idox plc

For more information see www.idoxplc.com @Idoxgroup

Alternative Performance Measures
These items are excluded from statutory measures of profit to present a measure of cash earnings from underlying activities on an ongoing basis. This is in line with the management information requested and presented to the decision makers in our business; and is consistent with how the business is assessed by our debt and equity providers. The alternative performance measures for 2019 do not include the impact of the adoption of IFRS 16 – Leases which was adopted on a modified retrospective basis in FY20 without restatement of comparative amounts. Details are included within the financial review section of the Strategic Report.

There have been no adjustments to any of our reporting metrics for any impact of the Covid-19 pandemic.

* Recurring revenue is defined as existing, contracted annuity revenues that have a high expectation of renewal for a minimum of twelve months.

** Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs. Share option costs are excluded from Adjusted EBITDA as this is a standard measure in the industry and how management and our shareholders track performance.

*** Free cashflow is defined as net cashflow excluding: acquisitions / disposals, debt repayments & drawdowns, and shareholder placing & dividends.

**** Adjusted profit and adjusted EPS excludes amortisation on acquired intangibles, restructuring, financing, impairment and acquisition costs.

***** Net debt is defined as the aggregation of cash, bank borrowings and long-term bond.

ANNUAL FINANCIAL REPORT ANNOUNCEMENT

The extracts below are from the Annual Financial Report 2020. Note references refer to notes included in this Annual Financial Report Announcement 2020.

CHAIRMAN’S STATEMENT

Introduction

My second year as Chairman of Idox has been a very different one from the first. Where the first year was characterised by dealing with a large number of significant legacy issues that were getting in the way of our Group delivering the financial results that we expected, this second year has been focused on delivering the value of which our business is capable. I am very pleased to say that our financial performance is now more in line with what we should expect from a business with strong positions in well-defined niche software markets.

Our Chief Executive, David Meaden, has articulated a Walk, Run, Fly vision for the business, and we are now firmly in the Run phase. Over the past twelve months we have consistently delivered performance in line with expectations, and the growth in revenues, profits, and most importantly, cash, has re-established the credibility of the business leading to significant increases in the level of trust shown towards us by all of our stakeholders.

The main driver of this financial improvement has been the improvement in our operational performance. This started with a focus on delivering clear, tangible benefits to our customers in line with their changing needs. The Group has outstanding positions in the markets we serve, and we now have the processes and capabilities in place to make sure that we continue to evolve our offerings to suit our customers evolving requirements. Much of this has come from organic improvements, where we are seeing the benefits of an integrated CRM system that identifies all of our customer needs and helps target opportunities for us to cross-sell services. However, we have also seen the benefits of well targeted and executed acquisitions, with the benefits of the Tascomi acquisition that was completed at the end of the previous financial year starting to come through very clearly. It was apparent that one of the evolving needs of our clients was a requirement to be able to transition to cloud solutions, and whilst we could have spent a long time and a lot of cash in building this capability ourselves, the addition of Tascomi to our solution suite has allowed us to offer this evolution to our customers much more quickly. It also brought some new end user functionality beyond just the cloud infrastructure, adding additional solutions that we can sell to our current customers.

The leaner, simpler organisational model that has been implemented has allowed us to turn a lot more of this revenue growth into profits, delivering a significant improvement in operating profit. As a relatively mature software business we can expect this trend to continue, with a target for our mature operations of over 30% Adjusted EBITDA margin.

Lastly, the investments and improvements that we have made in our Finance operations, both in the team and supporting systems, has driven a much better convergence of these operating profits into cash. This enhancement also underlines the major improvement in the underlying quality of our reported business, in turn the result of the major improvement to governance and standards across the Group.

As we move into the new financial year, we expect these improving trends to continue, but we will also continue to look for inorganic opportunities to improve and grow our business within our current markets. We believe that there are a good number of opportunities for us to continue to make relatively low ticket, low risk additions to our portfolio. We have established a strong platform for growth and integration, and our experience with Tascomi shows that we are ready to make good use of that platform.

It is impossible for me to review the past year without discussing the impact of the Covid-19 pandemic and the resulting national lockdowns. Idox has been very fortunate compared to many businesses in that underlying demand for our products and services has not really dropped throughout the period, but I have been enormously impressed by the resilience and resourcefulness of our colleagues who have adapted to the new, more remote working patterns so well. Our senior management team has worked hard to make sure that our colleagues are supported through these changes, and in turn that has allowed them to maintain the clear focus on supporting our customers. It would be foolish to believe that there have been no negative impacts from such a wholesale change in such a short period of time, but the evidence is that our business has continued to grow and improve, and I am pleased to say that our employee attrition levels have also improved. We have not had to take advantage of any of the government employment support schemes, other than taking advantage of the VAT deferral opportunity.  As always, I am hugely grateful to all of our colleagues who choose to build their careers with Idox. This year has been a real test of the resourcefulness of our colleagues, but also a test of the covenant we have with them. I hope that this experience will strengthen that covenant in both directions.

Group Strategy

The Group continued its focus on providing digital solutions and services to the public sector in the United Kingdom, complemented by our Content businesses in Europe and Engineering Information Management (EIM) business servicing customers across the world. The key to our success is to ensure we deliver better user results and productivity improvements for customers through focusing on usability, functionality and application of integrated digital and increasingly cloud-based technologies and solutions. As mentioned above, we expect to accelerate the development of this strategy through the integration of further acquisitions where we identify businesses that can enhance our progress.

 Board

FY20 has seen a number of changes to the Board of Directors:

  • On 14 April 2020, Alice Cummings was appointed as a Non-Executive Director, and Chair of the Audit Committee. Alice has brought strong relevant experience having formerly been Group CFO at the InHealth Group, the healthcare services and solutions business for over seven years.
  • On 14 April 2020, Oliver Scott stepped down from the Board. I would like to thank Oliver for his contribution to Idox since November 2018.
  • On 28 August 2020, Jeremy Millard stepped down from the Board following the Group’s Annual General Meeting (AGM). I would like to thank Jeremy for his contribution to Idox since 2013.

Each member of the Board brings different skills and experience to the Board and the Board Committees and I am pleased with this balance which has supported the effectiveness of the Board throughout FY20.

I am satisfied that there is sufficient diversity in the Board structure to bring a balance of skills, experience, independence and knowledge to the Group however, I intend to keep this balance under review and continued assessment.

Corporate Governance

We are cognisant of the important responsibilities we have in respect of Corporate Governance and shaping our culture to be consistent with our objectives, strategy and business model which we set out in our Strategic Report and our description of principal risks and uncertainties. The Group is committed to conducting its business fairly, impartially, in an ethical and proper manner, and in full compliance with all laws and regulations. In conducting our business, integrity is the foundation of all Company relationships, including those with customers, suppliers, communities and employees.

Corporate Simplification

As highlighted above, during the financial year the trade and assets of Tascomi Limited and McLaren Software Limited were hived into Idox Software Limited in line with our corporate simplification strategy.

Dividends

The Board has proposed a final dividend of 0.3p to be paid (2019: £Nil) for FY20 bringing the total for the year to 0.3p (2019: £Nil). The restoration of the dividend is in line with the Group’s intention as stated in the FY19 results to introduce a final dividend in respect of FY20, taking into consideration the pace of recovery in our business.

Summary

The financial results of the last year reflect the quality of the Idox business. We operate in good markets, with excellent market positions and insights, and we have every confidence that we can continue the excellent progress we have seen in FY20. The changes that we have made to the team, our structure, systems and processes have delivered a step-change improvement in our financial performance. However, these results reflect the work that has been done over a longer period of time than just the last twelve months. I am pleased to have had the opportunity to work with all of my Idox colleagues during a period of such tremendous improvement, and look forward to continuing that work in delivering growing value to all our stakeholders.

Finally, I would like to extend my thanks to the entire workforce of the Group, who have maintained their focus on looking after the most important asset of our business, our customers. Our colleagues’ expertise and diligence have continued to deliver the support and value that our customers expect, even with all the challenges of the Covid-19 disruptions, and we are fortunate to have them choose Idox.

Chris Stone
Chairman

CHIEF EXECUTIVE’S REVIEW

Overview

It has been a successful year at Idox. The business has performed well and has delivered a strong set of results despite the obvious impacts of the Covid-19 pandemic. I am very grateful to the whole team here at Idox for responding so positively to the uncertainty caused by the pandemic and the subsequent restrictions on our working lives. All of our teams have shown great resilience and adaptability in incorporating the necessary changes to our operational and working practices. It has been a pleasure to see them performing so effectively.

This strong set of results demonstrates the effectiveness of the major reforms that we have undertaken as a Group since I arrived in June 2018. I would like to thank all our teams for the tremendous efforts over the past two years. Having comprehensively addressed the issues that had long beset the Group, we are now focussed completely on the needs of our customers, what they need to get ahead in their changing markets and in leading the way in innovative thinking and problem solving.

Today Idox is well placed in a number of markets where we improve professional and expert processes and support clients in their transition to modern, agile organisations operating digitally and through the cloud. We are leaders and experts in software for the built environment, modern transportation networks, digitisation (for example digital twins), elections and facilities management. We empower those that need extra support in special educational needs and disability and our software also manages the sexual health of the nation.

Managing our business

Across our organisation we focus on our Four Pillars of Revenue, Margin, Simplification and Communication. This approach provides cohesion for the whole Group. The Four Pillars are well-articulated across the organisation and embedded into our onboarding process for people joining the organisation. This focus ensures that everyone in the Group can make a meaningful contribution to our overall success and has provided the basis on which the organisation has discovered and articulated its values.

Revenue

We have established strong business controls such that we do not pursue revenue for the sake of growth, but that we focus upon our products and the certainty of delivering lasting value to customers. We make sure that we fully understand the financial and operational implications for each piece of business that we contract. We focus on improving the amount of recurring revenue in the business and this provides a strong foundation for future growth in both revenues and margins.

During the year we improved revenues by 4% to £68.0m. Order intake across the Group grew significantly, which helped to support the in-year revenue growth and the development of the future orderbook for software and services which grew by over 31%.

Some markets and Business Units were more impacted by the Covid-19 pandemic than others, but our Idox Software Local Government, Health and Elections businesses all had particularly strong performances that helped drive the overall Group performance.

Sales Orders

FY20 Sales order intake in the Local Government area was up 30% on a year over year basis, with significant wins and customer extensions to existing contracts. We saw an improved performance in sales to the existing customer base, where expansion of functionality and capabilities in our existing solutions and remote access facilities drove additional sales. Idox Cloud had a successful year winning new customers at Cheshire East Council, 3C Shared Services and Wiltshire Council alongside adoptions at Wirral Council and West Berkshire Council.

Sales orders in the Health Business Unit were up over 60% on a like for like basis with new wins across the entire portfolio of iFit, iAssets and our sexual health product Lilie. Significant contracts included the University Hospitals of North Midlands NHS Trust, Homerton University Hospital NHS Foundation Trust and Chelsea & Westminster Hospital NHS Foundation Trust.

In Elections, sales orders were up year over year by 75%. Order growth included the December 2019 General Election and a significant contract for the Scottish eCount programme, working in conjunction with Fujitsu.

Despite the significant challenges of working from home and the effect of the Covid-19 pandemic on the Dutch market, consultancy revenues were up by 5%, mainly driven by the growth in WBSO (R&D) revenues.

In the business areas more impacted by the conditions created by the pandemic, the CAFM business saw sales orders decline on a year over year basis by ~16%. However, with a new software release incorporating Covid-19 pandemic functionality, H2 saw improvements in order intake as customers looked to utilise the solution to manage return to work policies and processes. H2 FY20 orders versus H2 FY19 saw a 24% improvement on the previous year’s performance although this was not enough to recover the year fully.

A number of key EIM markets were also affected by the Covid-19 pandemic and the reduction in oil prices. However, order intake improved H2 on H1 by 39%, with a very strong Q4 performance. EIM sales operations have benefited from a tighter integration with the Idox Software Division, leveraging the new sales desk capabilities and sales leadership. The orderbook in EIM carried into FY21 is up over 50% on FY20. Key deals in the latter part of the year included new contracts with existing customers TAQA, CRNL, Cenovus Energy Inc. & PSEG. In addition, we added several new customers including Iluka which became our first FusionLive deal in the Australia and New Zealand region.

Compliance sales were showing signs of recovery throughout Q4, including a record month for new orders in October 2020. This was supported by new business activity from Jabil, Smurfit Kappa & Dosch Holdings alongside existing customer contracts from Bureau Veritas, Wittur Holdings & RWE AG.

Margins

We have seen an improvement in Adjusted EBITDA margins from 22% to 29% in the business over the past twelve months and recorded a statutory profit before tax of £2.7m (2019: £0.03m loss). We believe we are well positioned to sustain and improve margins in the business moving forward as we gain share in our respective markets with our IP led solutions. As is now commonplace across the business, we have maintained a sharp focus on cash generation, and I am pleased to report a further reduction in our ongoing net debt position to £16.1m. We have seen net cash generation and a reduction in debt over the last two financial years of £15.7m.

Across the Group we have continued to drive initiatives that we believe will produce improved margins. During the year we fully automated the existing business approvals process and integrated this with the Group’s CRM tools. We also implemented a Bid to Win methodology focussed on winning higher value and margin deals whilst ensuring that we qualify out of opportunities where appropriate. Formal tender responses are managed through the Idox Bid Team and we registered a win rate above 60% across the business. The team also managed the process of having 59 of our offerings made available through the new Government G-Cloud 12 framework.

Further improvements in how we engage and deploy skills within our professional services group has resulted in better planned utilisation of resources, leading to improving timescales and completion of projects. Overall, we have seen a 12% improvement in these engagements.

During Q4 we released the new version of the Education, Health and Care Hub (EHC Hub) to clients. This product set is the first of the Idox Software products to be re-platformed on the Idox Cloud (formerly Tascomi) technology framework. FY21 will see the full rollout of this solution across the client base, improving margins through resource pooling and infrastructure efficiencies.

Simplification

During the year we have made great strides in our operations. We have brought the software assets and development activities of all of our previously separate businesses together into a single Idox Software operation. This sits alongside similarly combined professional services and support services groups. The resulting benefits of these changes have been substantive. As well as providing our clients with a consistent support and service experience across product sets, we have enabled our creative talents across the company to work more collaboratively across product domains, improving innovation and the agility of our approach. As a result, we have seen direct improvement in our performance and team satisfaction.

We continue to ensure that we are using our capital investments in the most productive way and during the year we consolidated our elections software onto a single product platform, Eros. This has brought greater focus and more meaningful investment to a single product set and helped improve margins in this part of the operation by over 10%.

I have spoken previously of our efforts to consolidate, simplify and improve the customer service desk operations at Idox. Over the last twelve months through a combination of improved focus on KPIs, better Management Information (MI), collaboration with product development and improved use of resources, we have reduced our ticket backlog by 52% and improved our Service Level Agreement (SLA) performance during this time period.

Within the software sales organisation, we have continued to invest in improving our engagement with customers and improving their experience in dealing with Idox. We have reorganised our customer engagement to create a superior and more efficient customer experience, incorporating marketing tools alongside our CRM implementation to ensure we have end to end visibility of client engagements and the effectiveness of our efforts. We have also analysed and stratified our sales activity, incorporating a sales desk that improves regular and consistent engagement with customers and manages the volume of activities on a day to day basis. Across Idox over 80% of order volume and 20% of order value falls below £25k. By focussing the skills and teams into the relevant activities we have been able to improve the intake of orders above £100k, which were up over 60% in both terms of value and volume.

We have maintained and expanded our commitment to high quality processes by renewing our ISO 9001 (Quality Management), ISO 14001 (Environmental Management), BS OHSAS 18001 (Occupational Health & Safety) and ISO 27001 (Information Security Management) as well as achieving certification for ISO 22301 (Business Continuity).

Communication

Communication across the Group plays a pivotal role in our collective success and this has been particularly true during a year in which our home and work lives have been challenged by the Covid-19 pandemic.

We have embraced more flexibility in our working patterns across the Group and have listened carefully to our teams about what works for them and is practical. Whilst the majority of the teams at Idox worked from home for at least some part of the week prior to the Covid-19 pandemic, we have seen the benefits for the Group and our teams of having greater flexibility in how and where we work, and we will continue to embrace and experiment with further flexible working initiatives as the pandemic subsides. We have also enhanced existing initiatives such as the Idox Workplace Wellbeing program during this period, inviting external speakers to share knowledge with the workforce. This in particular has been welcomed and appreciated by our teams and came from a program initiated by a small collaboration of people across the Group. We all benefit from their engagement and are grateful for the time and care they put into this undertaking.

I mentioned earlier that we have taken time to discover the Group’s core values. The values encapsulated in Idox DRIVE were defined by our teams across the Group and set the tone for how we work together and aspire to be better. We have also established Idox Voice, an employee engagement forum where individuals working at Idox can help shape our future and culture.

Supporting our initiatives, we have also invested in a leadership development programme with 15 high potential individuals embarking on an eighteen month leadership course leading to a Level 5 qualification in Operations and Departmental Management. We have a further 35 who will attend a twelve month development course on ‘Leading Together’ ensuring we are developing our future Idox leaders.

We have also taken the opportunity to bring our corporate branding up to date with the strategic thinking, integrated capabilities and the progress prevalent across the business. This has been appreciated by all our stakeholders and we now have a clear brand and messaging across internal and external channels, including social media that more accurately reflects our integrated approach, values and ethos.

Outlook

The Chairman referred to the Walk, Run, Fly phases that describe and define our progress at Idox. We have been firmly in the Run phase during FY20 with good progress in customer acquisition, improved service and more efficient operations. We have seen positive improvements in revenue, margins, order book, recurring revenue and cash generation. Importantly, we have built the governance, processes and infrastructure that will support continued success and we have the resources at our disposal for accretive and enhancing acquisitions to further improve shareholder value moving forward.

We will continue to invest selectively to grow our capabilities and support our customers. The business has a strong foundation in property and asset-based solutions and this, along with our focus on digital transformation and Cloud provision, will underpin our future strategy and growth. Our FY21 has started well and in line with our plan, and we continue to trade in line with expectations.

David Meaden
Chief Executive Officer

Financial Review

The financial year ended 31 October 2020 has built upon the changes that were enacted in FY19, including the acquisition of Tascomi which was rebranded Idox Cloud during the period. A strong focus on sales and commercial governance has enabled us to pursue only earnings-enhancing revenues. This approach has resulted in improving Adjusted EBITDA and improved cash generation compared to prior periods.

During the year ended 31 October 2020, our UK Databases businesses, encompassing our GRANTfinder and RESEARCHconnect products, were transferred from our Idox Content division to Idox Software (Public Sector Software) division as the customers of these products are largely public sector.

The following table sets out the revenues and Adjusted EBITDA for each of the Group’s segments from its continuing activities, with our UK Databases reclassified from Idox Content to Idox Software (Public Sector Software) in FY19 to enable appropriate year-on-year comparison:

FY20 FY19 Variance
£000 £000 £000 %
Revenue
– Public Sector Software 48,426 44,925 3,501 8%
– Engineering Information Management 8,858 9,170 (312) (3%)
– Idox Software 57,284     54,095 3,189 6%
– Idox Content 10,733     11,397 (664) (6%)
– Total 68,017     65,492 2,525 4%
Revenue Split
– Public Sector Software 71% 69%
– Engineering Information Management 13% 14%
– Idox Software 84% 83%
– Idox Content 16% 17%
Adjusted EBITDA*
– Public Sector Software 16,599 12,391 4,208 34%
– Engineering Information Management 1,988 1,410 578 41%
– Idox Software 18,587     13,801 4,786 35%
– Idox Content 997        560 437 78%
– Total 19,584     14,361 5,223 36%
Adjusted EBITDA Margin Split
– Public Sector Software 34% 28%
– Engineering Information Management 22% 15%
– Idox Software 32% 26%
– Idox Content 9% 5%
– Total 29% 22%

* Adjusted EBITDA is defined as earnings before amortisation, depreciation, restructuring, acquisition costs, impairment, financing costs and share option costs.

Idox Software

During the year we brought together our PSS and EIM divisions to form a new Idox Software division under a single operational management structure and shared technical resources. This Idox Software division, accounting for 84% of Group revenues (2019: 83%), delivered revenues of £57.3m (2019: £54.1m).

FY20 FY19 Variance
£000 £000 £000 %
Idox Software Revenues
– Recurring (PSS) 28,863     27,427 1,436 5%
– Recurring (EIM) 6,886 7,100 (214) (3%)
– Non-Recurring (PSS) 19,563     17,498 2,065 12%
– Non-Recurring (EIM) 1,972 2,070 (98) (5%)
57,284     54,095 3,189 6%
– Recurring* 62% 64%
– Non-Recurring** 38% 36%

* Recurring revenue is defined as revenues associated with access to a specific ongoing service, with invoicing that typically recurs on an annual basis and underpinned by either a multi-year or rolling contract. These services include Support & Maintenance, SaaS fees, Hosting services, and some Managed Service arrangements which involve a fixed fee irrespective of consumption.

** Non-Recurring revenue is defined as revenues without any formal commitment from the customer to recur on an annual basis.

 Recurring revenues have increased due to the first full year of revenues from the Idox Cloud business purchased in August 2019, and improved sales governance and strategic focus on recurring and cloud revenues across the remainder of the Idox Software division. The proportion of recurring revenues has decreased slightly due to non-recurring revenues growth slightly outpacing our recurring revenues.

Non-recurring revenues have increased also due to the impact of the improved sales governance resulting in higher recoveries, and the impact of the transformations in the PSS business in the first half of FY19 which had resulted in lower revenues in that period.

Adjusted EBITDA increased by 35% to £18.6m (2019: £13.8m), delivering a significantly improved EBITDA margin of 32% (2019: 26%). Of this increase in adjusted EBITDA, £0.8m was attributable to the adoption of IFRS 16 – Leases which changed the accounting treatment of certain leases from operating expenses to depreciation and interest associated with recognition of property assets and liabilities, thereby directly improving our adjusted EBITDA measure for FY20, without a corresponding change required in FY19.

Excluding the impact of adopting IFRS 16, the balance of the increase of £4.0m in adjusted EBITDA was due to the increased revenues converting strongly to margin, and the full-year benefit of the transformation in FY19 taking effect in FY20.

We continue with our efforts to improve efficiencies through marginal gains across our sales, development, professional services and support activities, and leverage our common resources to drive higher margins through improved economies of scale.

Idox Content

The Content division recorded a revenue reduction of 6% to £10.7m (2019: £11.4m), due to lower revenues in our German and Belgium Compliance business due to the impact of the Covid-19 pandemic which lengthened buying cycles in this part of our business, and the general slow-down in the German economy which preceded it.

FY20 FY19 Variance
£000 £000 £000 %
Idox Content Revenues
– Recurring 1,626 1,209 417 34%
– Non-Recurring 9,107  10,188 (1,081) (11%)
10,733 11,397 (664) (6%)
– Recurring 15% 11%
– Non-Recurring 85% 89%

Adjusted EBITDA increased by 78% to £1.0m (2019: £0.6m), delivering an increased EBITDA margin of 9% (2019: 5%). Of this increase in adjusted EBITDA, £0.6m was attributable to the adoption of IFRS 16 – Leases.

Excluding the impact of adopting IFRS 16 – Leases, the Idox Content division saw a decrease of £0.2m in adjusted EBITDA due to the decreased revenues from our Compliance business for the reasons noted above, offset with cost reductions given the lower levels of activity.

We continue to explore ways to improve EBITDA margin, both through targeting higher-margin revenue activities, and also actively managing cost.

Profit / (Loss) Before Tax

The following table provides a reconciliation between adjusted EBITDA and statutory profit / (loss) before taxation.

FY20 FY19 Variance
£000 £000 £000 %
Adjusted EBITDA 19,584     14,361 5,223 36%
Depreciation and Amortisation (11,339)     (9,128) (2,211) 24%
Restructuring costs (1,838)     (2,155) 317 (15%)
Acquisition costs (125)        (174) 49 (28%)
Financing costs (306)        (368) 62 (17%)
Share option costs (1,057)        (859) (198) 23%
Net finance costs (2,217)     (1,702) (515) 30%
Profit / (loss) before taxation 2,702           (25) 2,727 109%

The reported profit before tax was £2.7m (2019: £0.03m loss).

Restructuring costs were £1.8m (2019: £2.2m) as the Group continued to restructure business units, office locations and Group processes to improve the Group’s current and future financial performance and prospects. Restructuring costs are analysed as follows:

FY20 FY19 Variance
£000 £000 £000 %
Redundancies 327 285 42 15%
Disposal of Malta and Ireland businesses 397 397 n/a
Litigation 42 697 (655) (94%)
Property 1,072 1,173 (101) (9%)
Total restructuring costs 1,838 2,155 (317) (15%)

Acquisition costs of £0.1m (2019: £0.2m) relates to the final settlements in relation to the acquisition of Idox Cloud (formerly Tascomi) in August 2019.

There were no impairments in the year (2019: £Nil).

Financing costs of £0.3m (2019: £0.4m) relate to professional fees incurred as part of the refinancing in December 2019, and prior to that in February 2019.

Share option costs of £1.1m (2019: £0.9m) relate to the accounting charge for awards made under the Group’s Long-term Incentive Plan.

Net finance costs have increased to £2.2m (2019: £1.7m) as a result of more interest being payable in respect of the Group’s enlarged banking facilities which were fully drawn in the second half of the year as part of our Covid-19 pandemic defensive actions; and as a result of increased effective interest rate accounting adjustments and lease liability interest as a consequence of the Group adopting IFRS 16 – Leases in the year.

The Group continues to invest in developing innovative technology solutions across the Idox Software portfolio and has incurred capitalised development costs of £4.7m (2019: £4.4m).

Taxation

The effective tax rate (ETR) for the period was (52.78%) (2019: (190.07%)).

The main factors for the reduction in the volatility in the ETR on the profit before tax position was the significant increase in the profit before tax in the year meaning permanent and other differences giving rise to ETR effects were proportionately lower. These differences included routine non-allowable amounts in addition to international losses not recognised in the period and higher overseas tax rates.

There are substantial carried-forward losses not recognised for deferred tax purposes to date, owing to adoption of a prudent loss recognition position. The gross value of these losses not recognised to date totals £12.6m, split across Malta (£9.1m), the UK (£0.7m), Germany (£1.4m) and France (£1.4m). The Board is hopeful that the Group will benefit from these unrecognised tax losses, with the exception of Malta and Germany, in future and these will be recognised at the point where utilisation becomes more certain.

Earnings Per Share and Dividends

Basic earnings per share for continuing and discontinued operations improved to 0.29p (2019: loss of 0.41p) as a result of the Group reporting a profit after tax compared to a loss in FY19. Diluted earnings per share improved to 0.29p (2019: loss of 0.41p).

Adjusted earnings per share for continuing operations increased to 1.81p (2019: 1.30p) as a result of the Group reporting a profit after tax compared to a loss in FY19, as well as reduced restructuring costs in the year. Adjusted diluted earnings per share increased to 1.78p (2019: 1.29p).

The Board proposes a final dividend of 0.3p per share (2019: £Nil), in line with stated intention to restore dividend payments, which represents a total dividend for the year of 0.3p per share (2019: £Nil), at a total cost of £1.3m.

Balance Sheet and Cash Flows

The Group’s net assets have increased to £47.0m compared to £44.6m at 31 October 2019. The constituent movements are detailed in the Group’s consolidated Statement of Changes in Equity: which are summarised as follows:

12 months to

31 October 2020 £000

Total Equity as per FY19 Financial Report 44,611
Transactions with owners (credit to share-based payments reserve) 1,058
Profit for the year 1,276
Disposal of Non-controlling interest 110
Exchange gains on translation of foreign operations (97)
Total Equity as per FY20 Financial Report 46,958

This movement of £2.4m is reflected in the changes in the Group’s assets and liabilities as follows:

12 months to

31 October 2020 £000

Total Equity as per FY19 Financial Report 44,611
Intangible assets (4,352)
Trade and other receivables & payables, and Other liabilities 447
Provisions (1,374)
Corporate taxes, Social security and other taxes payable (2,982)
Change in net debt items 10,282
Other items 326
Total Equity as per FY20 Financial Report 46,958

The increase in the Group’s net assets is principally due to the profit for the year, with a significant improvement in net debt in the year as the Group targeted cash generative revenues and margins across its business. This is partially offset by the reduction of intangible assets due to in year amortisation, the recognition of provisions in respect of employee holiday pay, obligations we have in respect of our previous London property, and an increased VAT liability due to the deferrals offered by HMRC in light of the Covid-19 pandemic. The Group has deferred VAT of £3.9m as at 31 October 2020 (2019: £Nil), of which it is anticipated £2.8m will be repaid in the year ended 31 October 2021, and £1.1m in the year ended 31 October 2022.

Cash generated from operating activities after tax as a percentage of Adjusted EBITDA was 94% (2019: 86%). This increase was due primarily to the VAT liability deferrals the Group took advantage of as part of its early Covid-19 pandemic defensive actions which will be settled across FY21 and FY22. The Group generally continues to have high levels of adjusted EBITDA to cash conversion.

Free cashflow at 31 October 2020 was £11.2m (2019: £4.4m). Free cashflow has improved in the year due to improvements in underlying profitable trading, working capital management and the VAT liability deferral referred to previously.

FY20 FY19
£000 £000
Net cashflow 23,683 1,360
Add back:
Acquisitions / disposals 200 6,394
Debt repayments 25,762 12,039
Drawdowns (38,575) (8,000)
Net cost of staff share schemes / (Issue of shares) 118 (7,350)
Free cashflow 11,188 4,443

The Group ended the year with net debt of £16.1m (2019: £26.4m), a significant improvement on the previous year. Net debt comprised cash of £30.8m less bank borrowings of £35.1m and the Maltese listed bond of £11.8m.

The Group’s total signed debt facilities at 31 October 2020 consisted of a revolving credit facility of £35m and £10m accordion facility with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc (the “Lenders”).

The Group has carefully assessed the likely impact of the Covid-19 pandemic on the business and our customers. Idox is fundamentally resilient due to the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities and has strong headroom against financial covenants. We continue to monitor the situation and adapt our approach as required.

Rob Grubb
Chief Financial Officer

Stakeholder Engagement

Introduction

The Directors confirm that during the year, they have conducted themselves in a manner which promotes the long-term success of the Idox Group and of the key stakeholders. The Group considers the interests of these stakeholders when long-term decisions are made as set out in Section 172 of the Companies Act 2006. The key stakeholders are considered to be; the shareholders, the employees, the customers, the suppliers, local communities and our banking partners.

The methods in which the Group engages with the key stakeholders in order to understand any issues they have are noted in the following table:

Key stakeholder Method of engagement
Shareholders Direct meetings
Supporting equity research
Market communications
Employees All staff annual events
Regular senior broadcasts
Appraisal cycle
HR sponsored team leader engagement
Customers Marketing
Account management
Technical services and on-going support
Suppliers Account management
Local communities Indirect individual staff interaction via charity work and events
Banking partners Regular direct meetings with existing and prospective providers of finance

The Group continues to engage with its Key stakeholders, and the Board incorporates the outcomes of these engagements in its principal decision making. The following table details this for the main operational and strategic topics facing the Group:

Topic Stakeholder Engagement Outcome of engagement Principal decisions
Long-term strategy of the Group Shareholders, employees, customers and local communities A desire for a Corporate strategy that is focused, clear and regularly articulated and re-enforced. This should be supported by a meaningful capital allocation to support strategic goals. The Board continues to assess the best strategic direction of the Group to build overall value and establish a credible path to continued growth in recurring revenues, EBITDA and cash generation. The Board has concluded in the year our current strategy remains sound and well supported by our business model and the markets we address.

In addition, the Board has reviewed the budget in respect of the year ended 31 October 2021 in detail and debated which investment and spending decisions will have the biggest impact on our strategy.

Performance of the Group Shareholders, employees and banking partners The Group should continue to set itself stretching but realistic financial targets, and adjust pace and quantum of investment if required to meet these targets. The performance of the Group is reviewed in detail by the senior management team on a monthly basis and further reviewed by the Board at every Board meeting.

These financial and operational reviews typically involve presentation of management report with extensive qualitative and quantitative detail, analysis through to discussion to understand any variances to forecast performance, and agreeing of adaptive actions as the situation dictates.

Financing and capital Shareholders, employees, customers, suppliers and banking partners The Group should utilise debt facilities where available to maximise earnings potential, but be cautious where leverage (Net debt / adj. EBITDA) exceed 1.5. Beyond this, either equity financing or reducing investment plans should be considered.

Cash generation should remain a priority of the business, and declaration of a dividend is a sign of financial health in addition to providing shareholders a return.

The capital structure is regularly considered as a standing agenda item included in the finance section of the Board’s regular meetings. The CEO and CFO regularly meet existing and prospective investors and banking partners to gauge likely sources and costs of funding and associated longer-term trends.

The Group’s levels of financing, and its capital allocation policy are regularly discussed at the Board’s regular meetings.

During the year ended 31 October 2020 the Board formally approved new financing facilities for the Group and re-established its dividend policy. This policy is to intend to pay a final dividend of 0.3 pence in respect of the year ended 31 October 2020 and to continue to progress incrementally beyond that depending on cash and earnings affordability.

Employees and culture Local communities, shareholders and employees Idox should strive to be an employer of choice to attract and retain the best staff that will help scale the business in a profitable and cash-generative way.

Investment in Idox’s people should go beyond financial rewards, and the Group should engender a fair, culturally strong and socially-aware ethos that existing and prospective employees will be excited to be part of.

The Senior Management team have initiated a number of employee-support programmes during the year ended 31 October 2020, which the Board has actively discussed and endorsed as part of its wider considerations of the wellbeing of our staff, particularly given the impact of the Covid-19 pandemic.

These initiatives have included:

·       Idox Voice – regular employee communications

·       Idox Elevate – gender equality

·       Idox Drive – establishing agreed values

·       Idox Leads – managers support programme

·       Workplace Wellbeing – mental health support for our people

·       CEO Broadcasts – ensuring our leadership is regularly visible and communicating to our people

·       Leadership Together – leadership programme for our top performers

During the year ended 31 October 2020 the Group recorded an employee engagement net promoter score increase of 33 points on the prior year’s results. While the NPS is now at 0, we are confident that as we embed our employee engagement programme we will continue to see this score improve over time. The Board continues to monitor these initiatives, the impact on our people and employee churn metrics more generally.

Risk, governance and internal control environments Shareholders, employees, customers, suppliers, local communities and banking partners As a PLC with a public-sector customer base and banking partners, Idox should strive for the best risk management and governance framework commensurate with its scale. The Board actively monitors and discusses the risks facing the Group, risk appetite for such risks, and the measures in place to manage these risks.

During the year the Board appointed a new Audit Committee Chair, Alice Cummings. Following this, the Board and Senior Management Team have put in place additional risk management documentation to encapsulate all of the material aspects of the risk management that occurs throughout the Group. This material has been prepared at the specific request of the Board.

The Group has considered whether the addition of internal audit would strengthen the Group’s processes for risk identification and management and concluded whilst such an appointment for the FY20 is not appropriate, this maybe something the Group embarks on in FY21, particularly if Idox continues to grow and further acquires new operations into the Group.

Local Communities

Environmental

Idox Group recognises the importance of environmental protection and is committed to operating its business responsibly and in compliance with all legal requirements. It is the Group’s declared policy to operate with and to maintain good relations with all regulatory bodies. In support of this policy, the Group operates an Environmental Management System which is included in the accreditation to BS EN ISO 14001:2015. The Group participates in the Energy Saving Opportunities Scheme (ESOS) and meets the requirements of the Streamlined Energy and Carbon Reporting (SECR) regulations.

It is the Group’s objective to carry out all measures reasonably and practicable to meet, exceed or develop all necessary or desirable requirements and to continually improve environmental performance through the implementation of the following:

  • Assess and regularly re-assess the environmental effects of the Group’s activities.
  • Training of employees in environmental issues.
  • Minimise the production of waste.
  • Minimise material wastage.
  • Minimise energy wastage.
  • Promote the use of recyclable and renewable materials.
  • Reduce and / or limit the production of pollutants to water, land and air.
  • Control noise emissions from operations.
  • Minimise the risk to the general public and employees from operations and activities undertaken by the Group.

Whilst our business model of software development and deployment is significantly lower-consumption than most other industries which require creation of physical product or require regular transport of either goods or staff; we nonetheless recognise we as a business have our part to play in reducing carbon emissions in all our communities.

Due to the low environmental impact of Idox activities, there is no supplier training, but we prefer to work with suppliers and other parties who have ISO 14001 accreditation which inherently encompasses this.

We pro-actively manage office-based consumption, and seek to minimise the impact on the environment by limiting travel of our people. The limitations arising from the Covid-19 pandemic have accelerated our pace with these changes in the way of working. As a result, we are now considering a more balanced approach to home and office working, and continue to keep our office footprint under review. We also are cognisant that managing our impact on the environment is a collective effort and therefore seek to promote climate change awareness through our management teams and staff body more generally.

Given the low environmental impact of our activities, whilst we do continue to actively monitor our consumption and impact on the environment, these actions do not currently have a material impact on our Group’s strategy, business model or risk management processes. We continue to consider this on an ongoing basis.

We recognise there is always more to do and we are considering on an ongoing basis how to improve the effectiveness of our efforts and monitoring of this via reporting as part of our wider ESG improvement efforts.

Social

As noted above, the Senior Management team have initiated a number of employee-support programmes to improve people development, wellbeing and diversity in our Group.

We encourage our people to get involved in charitable events in their communities, and support their causes by matching financial support with their own fundraising efforts, and communicating individual and team successes throughout our wider Group using our monthly Idox Voice newsletter

This report was approved by the Board of Directors and authorised for issue. Signed on its behalf by:

David Meaden
Chief Executive Officer

  Note 2020  2019
£000 £000
Continuing operations
Revenue 4 68,017 65,492
Cost of sales (18,806) (19,481)
Gross profit 49,211   46,011
Administrative expenses (44,292) (44,334)
Operating profit 4,919   1,677
 
Analysed as:
Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs 4 19,584   14,361
Depreciation (2,057) (839)
Amortisation (9,282) (8,289)
Restructuring costs (1,838) (2,155)
Acquisition costs (125) (174)
Financing costs (306) (368)
Share option costs (1,057) (859)
 
Finance income 181 172
Finance costs (2,398) (1,874)
       
Profit / (loss) before taxation 2,702   (25)
Income tax charge (1,426) (1,192)
 
Profit / (loss) for the year from continuing operations 1,276 (1,217)
 
Discontinued operations
 
Loss for the year from discontinued operations 5 (602)
 
Profit / (loss) for the year 1,276 (1,819)
 
Non-controlling interest 113
 
Profit / (loss) for the year attributable to the owners of the parent 1,276 (1,706)
Other comprehensive loss for the year

Items that will be reclassified subsequently to profit or loss:

Exchange movements on translation of foreign operations net of tax

(97) (180)
Other comprehensive loss for the year, net of tax (97) (180)
Total comprehensive profit / (loss) for the year     1,179   (1,999)
Total comprehensive profit / (loss) for the year attributable to owners of the parent     1,179   (1,886)
           
Earnings per share attributable to owners of the parent during the year
From continuing operations
Basic 6 0.29p (0.26)p
Diluted 6 0.29p (0.26)p
From continuing and discontinued operations
Basic 6 0.29p (0.41)p
Diluted 6 0.29p (0.41)p

The comparative figures for FY19 have not been restated as a result of the adoption of IFRS 16.

The accompanying accounting policies and notes form an integral part of these financial statements.

Note 2020 2019
£000 £000
ASSETS
Non-current assets
Property, plant and equipment 1,183 1,162
Intangible assets 7 81,652 86,004
Right-of-use-assets 3,726
Investment 18 18
Deferred tax assets 1,111 1,368
Total non-current assets 87,690 88,552
Current assets
Stock 77
Trade and other receivables 18,700 19,972
Current tax receivable 1,117 251
Cash and cash equivalents 30,812 7,023
Total current assets 50,629 27,323
Total assets 138,319 115,875
 
LIABILITIES
Current liabilities
Trade and other payables 6,084 7,136
Deferred consideration 57 381
Other liabilities 26,839 23,892
Provisions 1,261 384
Lease liabilities 1,188
Borrowings 21,809
Total current liabilities 35,429 53,602
Non-current liabilities
Deferred tax liabilities 3,907 4,015
Deferred consideration 27 74
Lease liabilities 2,695
Other liabilities 1,791 1,878
Provisions 612 111
Bonds in issue 11,848 11,584
Borrowings 35,052
Total non-current liabilities 55,932 17,662
Total liabilities 91,361 71,264
Net assets 46,958 44,611
 
EQUITY
Called up share capital 4,450 4,446
Capital redemption reserve 1,112 1,112
Share premium account 41,356 41,348
Treasury reserve (621) (621)
Share option reserve 2,618 1,837
Other reserves 7,528 7,528
ESOP trust (373) (365)
Foreign currency translation reserve (161) (64)
Accumulated losses (8,951) (10,500)
Issued capital and reserves attributable to the owners of the parent 46,958 44,721
Non-controlling interest (110)
Total equity 46,958 44,611

The comparative figures for FY19 have not been restated as a result of the adoption of IFRS 16.

The financial statements were approved by the Board of Directors and authorised for issue on 1 February 2021 and are signed on its behalf by:

David Meaden                                                 Rob Grubb
Chief Executive Officer                               Chief Financial Officer

The accompanying accounting policies and notes form an integral part of these financial statements.

Company name: Idox plc               Company number: 03984070

   

Called up share capital

£000

 

Capital redemption

reserve

£000

 

Share

premium

account

£000

 

 

Treasury reserve

£000

 

Share

option

reserve

£000

 

 

Other reserves

£000

 

 

ESOP

trust

£000

Foreign currency translation reserve

£000

 

 

Restated retained earnings

£000

Non-controlling interest*

£000

 

 

 

 

Total

£000

Balance at 1 November 2018 4,169 1,112 34,188 (621) 1,232 7,528 (399) 116 540 3 47,868
IFRS 15 opening adjustment (11,532) (11,532)
IFRS 15 deferred tax opening adjustment 1,944 1,944
 
Issue of share capital 277 7,160 7,437
Share option costs 859 859
Exercise / lapses of share options (254) 254
ESOP trust 34 34
Transactions with owners 277 7,160 605 34 254 8,330
Loss for the year (1,706) (1,706)
Non-controlling interest (113) (113)
Other comprehensive loss  
Exchange movement on translation of foreign operations (180) (180)
Total comprehensive loss for the year (180) (1,706) (113) (1,999)
Balance at 31 October 2019 4,446 1,112 41,348 (621) 1,837 7,528 (365) (64) (10,500) (110) 44,611
Issue of share capital 4 8 12
Share option costs 1,054 1,054
Exercise / lapses of share options (273) 273
ESOP trust (8) (8)
Disposal of investment 110 110
Transactions with owners and non-controlling interests 4 8 781 (8) 273 110 1,168
Profit for the year 1,276 1,276
Other comprehensive loss                      
Exchange movement on translation of foreign operations (97) (97)
Total comprehensive (loss) / profit for the year (97) 1,276 1,179
Balance at 31 October 2020 4,450 1,112 41,356 (621) 2,618 7,528 (373) (161) (8,951) 46,958

The comparative figures for FY19 have not been restated as a result of the adoption of IFRS 16.

The accompanying accounting policies and notes form an integral part of these financial statements.

*relates to a 30% non-controlling interest in Six-PM Health Solutions (Ireland) Ltd, a subsidiary of 6PM Holdings plc.

Note 2020 2019
£000 £000
Cash flows from operating activities
Profit / (loss) for the year before taxation 2,702 (627)
Adjustments for:
Depreciation of property, plant and equipment 817 839
Depreciation of right-of-use assets 1,240
Amortisation of intangible assets 9,282 8,289
Acquisition credits – release of deferred consideration (750)
Loss on disposal of subsidiary 380
Finance income (5) (172)
Finance costs 2,210 1,629
Debt issue costs amortisation 189 (54)
Research and development tax credit (134) (182)
Share option costs 1,057 859
Loss on disposal of leases 36
Movement in stock 54 38
Movement in receivables 1,192 4,923
Movement in payables 4,329 (3,595)
Cash generated by operations 23,349 11,197
(Tax on profit paid) / tax on loss refunded (2,000) 1,185
Net cash from operating activities 21,349 12,382
 
Cash flows from investing activities
Acquisition of subsidiaries (6,394)
Disposal of subsidiaries (200)
Net cash arising on disposal of discontinued operations 44
Purchase of property, plant and equipment (931) (780)
Purchase of intangible assets (5,998) (5,871)
Finance income 5 172
Net cash used in investing activities (7,124) (12,829)
 
Cash flows from financing activities
Interest paid (1,644) (1,423)
New loans 38,575 8,000
Loan related costs (48) (81)
Loan repayments (25,762) (12,039)
Principal lease payments (1,545)
Issue of own shares (118) 7,350
Net cash flows from financing activities 9,458 1,807
 
Net movement in cash and cash equivalents 23,683 1,360
Cash and cash equivalents at the beginning of the year 7,023 5,534
Exchange gains on cash and cash equivalents 106 129
Cash and cash equivalents at the end of the year 30,812 7,023

The comparative figures for FY19 have not been restated as a result of the adoption of IFRS 16.

The accompanying accounting policies and notes form an integral part of these financial statements.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

1 BASIS OF PREPARATION

The financial information contained in these condensed financial statements does not constitute the Group’s statutory accounts within the meaning of the Companies Act 2006.

Statutory accounts for the year ended 31 October 2019 and 31 October 2020 have been reported on, with an unqualified opinion.

Whilst the financial information included in this Annual Financial Report Announcement has been computed in accordance with International Financial Reporting Standards (IFRS) this announcement, due to its condensed nature, does not itself contain sufficient information to comply with IFRS.

This Annual Financial Report Announcement includes note references that refer to notes in this Annual Financial Report Announcement 2020.

Statutory accounts for the year ended 31 October 2019 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 October 2020, prepared under IFRS, are available on the Group’s website: https://www.idoxgroup.com/investors/financial-reporting/ and will be delivered to the Registrar in due course. The Group’s principal accounting policies as set out in the 2019 statutory accounts have been applied consistently in all material respects.

Going Concern

The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to continue in business for the foreseeable future. In making this assessment, which covers a minimum period of twelve months from approval of these accounts, the Directors have considered the Group’s trading budget, cash flow forecasts, available headroom and projected financial covenants on the banking facility, and levels of recurring revenue.

In December 2019 the Group had refinanced with the Royal Bank of Scotland plc, Silicon Valley Bank and Santander UK plc. The facilities, which comprise a single revolving credit facility of £35,000,000, are committed until December 2022, with an option to extend this commitment for a further two years.

Covid-19 pandemic impact on Going Concern assessment

Idox along with most companies has been impacted by the Covid-19 pandemic and recurring national lockdowns, however the impact on our Group has in the main been limited to the initial disruption of the early stages of the emerging challenges, including restrictions on physical movement. We have largely seen our operations return to their pre-Covid-19 pandemic levels across our Group.

We remain cautious in respect of the ongoing impact of the Covid-19 pandemic and the recurring national lockdowns. From our experience of the impact of the Covid-19 pandemic since March 2020, we are confident we are fundamentally resilient to the challenges of the Covid-19 pandemic due to the Group’s high recurring revenue base, its focus on public sector markets and the high proportion of staff that routinely work from home. The Group retains significant liquidity with cash and available committed bank facilities, and has significant projected headroom on financial covenants which has improved considerably throughout FY20 and the duration of the Covid-19 pandemic as anticipated.

We continue to assess the impact of the Covid-19 pandemic on the business, taking actions to mitigate or limit the impacts on our organisation where we can and supporting our staff, customers and partners in dealing with the ongoing impacts.

As part of the preparation of our FY20 results, the Group has carefully assessed if any ongoing impact of the Covid-19 pandemic creates any material uncertainty in our going concern assessment. We have performed detailed financial forecasting, as well as severe stress-testing in our financial modelling, but have not identified any credible scenarios that would cast doubt on our ability to continue as a going concern.

The Group has performed sensitivity analysis to identify what circumstances could lead to liquidity shortfalls. This analysis has demonstrated that the Group would only breach the projected financial covenants in the most severe of circumstances which are not considered reasonably possible. Under this sensitivity analysis, recurring revenues were assumed to be 19% lower than plan and non-recurring revenues lower by 39% for each of FY21 and FY22, with no corresponding action on costs to address these shortfalls. Under this scenario, the Group would be in compliance with all financial covenants for the next twelve months but likely to be in breach of its leverage banking covenants during Q4 of FY22 although the Group would still retain significant liquidity and be able to continue to make debt servicing payments at this point. This scenario is not considered credible given:

  • Idox typically starts its financial year with strong visibility of 85% to 90% over revenues for the following year given its high proportion of recurring revenues and its opening orderbook of non-recurring revenues. Specifically, the Group enters FY21 with total outstanding contracted performance obligations of £60.5m, of which 75% of this will be recognised as revenue in FY21, in addition to an expectation of a high rate of renewal of existing revenues;
  • in the unlikely event that revenue does begin to deteriorate to this extreme level, we anticipate reducing costs in the Group to avoid a covenant breach that is otherwise anticipated to arise in Q4 of FY22 in this scenario. These actions could include reducing any operations that may have become severely loss-making due to the Covid-19 pandemic, either through further reduction in operational spend, restructuring of business units, or utilising available government financial support with job retention schemes; and
  • the Group has, and continues to have, strong liquidity as a result of its committed banking facilities in place. Available liquidity at year end of £30.8m, and available liquidity at the end of January 2021 of £29.2m. If the described extreme scenario does begin to emerge, Idox anticipates having sufficient financial resources and sufficient notice as the situation emerges to take action and reduce costs as described previously to avoid any covenant breach.

Therefore, this supports the going concern assessment for the business.

The Annual Financial Report Announcement was approved by the Board of Directors on 1 February 2021 and signed on its behalf by David Meaden and Rob Grubb.

2 RESPONSIBILITY STATEMENTS UNDER THE DISCLOSURE AND TRANSPARENCY RULES

The Directors confirm that:

  • the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation taken as a whole;
  • the strategic report includes a fair review of the development and performance of the business and the position of the company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and
  • the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the company’s position and performance, business model and strategy.

The name and function of each of the Directors for the year ended 31 October 2020 are set out in the Annual Financial Report 2020.

3 IFRS 16 ‘leases’

In the current year, the Group, has applied IFRS 16 – Leases (as issued by the IASB in January 2016) that is effective for annual periods that begin on or after 1 January 2019.

IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance leases and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets when such recognition exemptions are adopted. The impact of the adoption of IFRS 16 on the Group’s consolidated financial statements is described below.

The date of initial application of IFRS 16 for the Group is 1 November 2019.

The Group has applied IFRS 16 using the modified retrospective basis which:

  • Requires the Group to recognise the cumulative effect of initially applying IFRS 16 as an adjustment to the opening balance of retained earnings / (accumulated losses) at the date of initial application.
  • Does not permit restatement of comparatives, which continue to be presented under IAS 17 and IFRIC 4.

(a) Impact on the new definition of a lease

The Group has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those leases entered or changed before 1 November 2019. The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. This is in contrast to the focus on ‘risks and rewards’ in IAS 17 and IFRIC 4. The Group applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or changed on or after 1 November 2019 (whether it is a lessor or a lessee in the lease contract). In preparation for the first-time application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition in IFRS 16 will not significantly change the scope of contracts that meet the definition of a lease for the Group.

(b) Impact on lessee accounting

(i) Former operating leases

IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off-balance sheet.

Applying IFRS 16, for all leases, (except as noted below), the Group:

  • recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments, with the right-of-use asset adjusted by the amount of any prepaid or accrued lease payments in accordance with IFRS 16:C8(b)(ii);
  • recognises depreciation of right-of-use assets and interest on lease liabilities in the Consolidated statement of profit or loss; and
  • separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.

Lease incentives (e.g. rent free period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental expenses on a straight line basis.

Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.

For short-term leases (lease term of twelve months or less) and leases of low-value assets the Group has opted to recognise a lease expense on a straight-line basis as permitted by IFRS 16. This expense is presented within administration expenses in the statement of comprehensive income.

The Group has used the following practical expedients when applying the modified retrospective basis to leases previously classified as operating leases applying IAS 17:

  • The Group has applied a single discount rate to a portfolio of leases with reasonably similar characteristics.
  • The Group has elected not to recognise right-of-use assets and lease liabilities to leases for which the lease term ends within twelve months of the date of initial application.
  • The Group has excluded initial direct costs from the measurement of the right-of-use asset at the date of initial application.
  • The Group has used hindsight when determining the lease term when the contract contains options to extend or terminate the lease.

(ii) Former finance leases

For leases that were classified as finance leases applying IAS 17, the carrying amount of the leased assets and obligations under finance leases measured applying IAS 17 immediately before the date of initial application is reclassified to right-of-use assets and lease liabilities respectively without any adjustments, except in cases where the Group has elected to apply the low-value lease recognition exemption.

The right-of-use asset and the lease liability are accounted for applying IFRS 16 from 1 November 2019.

(c) Financial impact of initial application of IFRS 16

The weighted average lessees incremental borrowing rate applied to lease liabilities recognised in the statement of financial position on 1 November 2019 is 3.73%.

The following table shows the operating lease commitments disclosed applying IAS 17 at 31 October 2019, discounted using the incremental borrowing rate at the date of initial application and the lease liabilities recognised in the statement of financial position at the date of initial application.

£000
Operating lease commitments at 31 October 2019 3,497
Short-term leases and leases of low-value assets (892)
Effect of discounting the above amounts (466)
Present value of lease payments due in periods not previously included in operating lease commitments 2,686
Lease liabilities recognised at 1 November 2019 4,825

The Group has recognised £4,825,000 of right-of-use assets and £4,825,000 of lease liabilities upon transition to IFRS 16. The difference of £Nil is recognised in retained earnings / (accumulated losses). There has been an reduction of £285,000 to the opening right-of-use asset in relation to release of prepaid and accrued rent free periods and capital contributions which were previously offset against the rental costs.

4 SEGMENTAL ANALYSIS

During the year ended 31 October 2020, the Group was organised into three operating segments, which are detailed below.

Financial information is reported to the chief operating decision maker, which comprises the Chief Executive Officer and the Chief Financial Officer, monthly on a business unit basis with revenue and operating profits split by business unit. Each business unit is deemed an operating segment as each offers different products and services.

  • Public Sector Software (PSS) – delivering specialist information management solutions and services to the public sector.
  • Engineering Information Management (EIM) – delivering engineering document management and control solutions to asset intensive industry sectors.
  • Content (CONT) – delivering funding and compliance solutions to corporate, public and commercial customers.

As part of the Group’s continued work on corporate simplification, PSS and EIM have been combined into a single business unit named Idox Software during the latter part of the year ended 31 October 2020. As a result of the timing of this combination of PSS and EIM, the individual business units have been shown separately in this segmental analysis with sub-totals showing the combined position.

Also, during the year ended 31 October 2020, our UK Databases businesses, encompassing our GRANTfinder and RESEARCHconnect products, were transferred from our Idox Content division to Idox Software (Public Sector Software) division given as the customers of these products are largely public sector. UK Databases has therefore been reclassified from Idox Content to Idox Software (Public Sector Software) in 2019 in the below disclosures to enable appropriate year-on-year comparison.

Segment revenue comprises sales to external customers and excludes gains arising on the disposal of assets and finance income. Segment profit reported to the Board represents the profit earned by each segment before the allocation of taxation, Group interest payments and Group acquisition costs. The assets and liabilities of the Group are not reviewed by the chief operating decision maker on a segment basis. The Group does not place reliance on any specific customer and has no individual customer that generates 10% or more of its total Group revenue.

The segment revenues by geographic location are as follows:

    2020

£000

2019

£000

Revenues from external customers
United Kingdom 47,900 43,416
USA 6,106 5,448
Europe 12,801 14,948
Australia 408 315
Rest of World 802 1,365
68,017 65,492

Revenues are attributed to individual countries on the basis of the location of the customer.

The segment revenues by type are as follows: 

    2020

£000

2019

£000

Revenues by type
Recurring revenues – PSS** 28,863 27,427
Recurring revenues – EIM 6,886 7,100
Recurring revenues – Software* 35,749 34,527
Recurring revenues – Content** 1,626 1,209
Recurring revenues 37,375 35,736
Non-recurring revenues – PSS** 19,563 17,498
Non-recurring revenues – EIM 1,972 2,070
Non-recurring revenues – Software* 21,535 19,568
Non-recurring revenues – Content** 9,107 10,188
Non-recurring revenues 30,642 29,756
68,017 65,492
Revenue from sale of goods 22,302 23,247
Revenue from rendering of services 45,715 42,245
68,017 65,492

Recurring revenue is income generated from customers on an annual contractual basis. Recurring revenue amounts to approximately 55% (2019: 55%) of continuing revenue, which is revenue generated annually from sales to existing customers.

All revenues are recognised over the period of the contract, unless our only performance obligation is to license or re-license a customer’s existing user without any further obligations, in which case the revenue is recognised upon completion of the obligation.

All contracts are issued with commercial payment terms without any unusual financial or deferred arrangements and do not include any amounts of variable consideration that are constrained.

The Group’s total outstanding contracted performance obligations at 31 October 2020 was £60,506,000 and it is anticipated that 75% of this will be recognised as revenue in FY21 and 15% in FY22.

*The Software BU sub-total has been included within the FY19 figures in order to provide a comparison to the FY20 figures. No figures have been restated as a result of this categorisation.

** UK Databases has been reclassified from Idox Content to Idox Software (Public Sector Software) in 2019 to enable appropriate year-on-year comparison.

The segment results by business unit for the year ended 31 October 2020:

PSS

£000

EIM

£000

SOFTWARE

£000

CONTENT

£000

Total

£000

Revenue 48,426 8,858 57,284 10,733 68,017
Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs 16,599 1,988 18,587 997 19,584
Depreciation (708) (83) (791) (26) (817)
Depreciation – right-of-use assets (617) (89) (706) (534) (1,240)
Amortisation – software licences, customer lists, order backlog and R&D (3,803) (753) (4,556) (269) (4,825)
Amortisation – acquired intangibles (3,570) (440) (4,010) (447) (4,457)
Restructuring costs (1,652) (96) (1,748) (90) (1,838)
Acquisition costs (125) (125) (125)
Share option costs (1,004) (1,004) (53) (1,057)
Adjusted segment operating profit / (loss) 5,120 527 5,647 (422) 5,225
Financing costs   (306)
Finance income   181
Finance costs   (2,398)
Profit before taxation   2,702

The corporate recharge to the business unit EBITDA is allocated on a head count basis.

The segment results by business unit for the year ended 31 October 2019:

 

 

PSS**

£000

 

 

EIM

£000

 

 

SOFTWARE*

£000

 

 

CONTENT**

£000

Continuing Operations

Total

£000

Discontinued Operations

Digital

£000

 

 

Total

£000

Revenue 44,925 9,170 54,095 11,397 65,492 65,492
Earnings before depreciation, amortisation, restructuring, acquisition costs, impairment, financing costs and share option costs 12,391 1,410 13,801 560 14,361 14,361
Depreciation (720) (93) (813) (26) (839) (839)
Amortisation – software licences, customer lists, order backlog and R&D (2,991) (772) (3,763) (340) (4,103) (4,103)
Amortisation – acquired intangibles (3,270) (440) (3,710) (476) (4,186) (4,186)
Restructuring costs (1,613) (30) (1,643) (512) (2,155) (2,155)
Acquisition costs (174) (174) (174) (174)
Share option costs (850) (850) (9) (859) (859)
Adjusted segment operating profit 2,773 75 2,848 (803) 2,045 2,045
Financing costs (368) (368)
Loss from the sale of discontinued operations (602) (602)
Finance income 172 172
Finance costs (1,874) (1,874)
Loss before taxation (25) (602) (627)

*The Software BU sub-total has been included within the FY19 figures in order to provide a comparison to the FY20 figures. No figures have been restated as a result of this categorisation.

** UK Databases has been reclassified from Idox Content to Idox Software (Public Sector Software) in 2019 to enable appropriate year-on-year comparison.

5 DISCONTINUED OPERATIONS

On 12 September 2018 the Group resolved to seek to dispose of the Digital division which carried out the Groups digital consultancy operations. The disposal was effected in order to limit the Group’s exposure to future losses and liabilities and improve the working capital position. The disposal was completed on 2nd November 2018, on which date control of the Digital division was passed to the acquirer.

The results of the discontinued operations, which have been excluded in the consolidated statement of comprehensive income, were as follows:

   
2020 2019
£000 £000
Revenue
Expenses
Loss on Disposal (602)
Loss before tax (602)
Attributable tax credit
Net loss attributable to discontinued operations (602)

6 EARNINGS PER SHARE

The earnings per ordinary share is calculated by reference to the earnings attributable to ordinary shareholders divided by the weighted average number of shares in issue during each period, as follows:

Continuing Operations 2020 2019
£000 £000
Profit / (loss) for the year 1,276 (1,104)
Basic earnings per share
Weighted average number of shares in issue 439,245,132 420,788,528
Basic earnings per share 0.29p (0.26)p
 
Weighted average number of shares in issue 439,245,132 420,788,528
Add back:
Dilutive share options 7,279,721 2,215,726
ESOP shares 1,316,142
Weighted average allotted, called up and fully paid share capital 446,524,853 424,320,396
Diluted earnings per share
Diluted earnings per share 0.29p (0.26)p

Diluted earnings per share cannot further dilute the loss attributable to the owners, therefore, diluted earnings per share during a loss making period is the same as basic earnings per share.

Adjusted earnings per share 2020

£000

2019

£000

Profit / (loss) for the year 1,276 (1,104)
Add back:
Amortisation on acquired intangibles 4,457 4,215
Acquisition costs 125 174
Restructuring costs 1,838 2,155
Financing costs 306 368
Share option costs 1,057 859
Tax effect (1,122) (1,210)
Adjusted profit for year 7,937 5,457
Weighted average number of shares in issue – basic 439,245,132 420,788,528
Weighted average number of shares in issue – diluted 446,524,853 424,320,396
Adjusted earnings per share 1.81p 1.30p
Adjusted diluted earnings per share 1.78p 1.29p
Discontinued Operations 2020 2019
£000 £000
Loss for the year (602)
Basic earnings per share
Weighted average number of shares in issue 439,245,132 420,788,528
Basic earnings per share (0.14)p
 
Weighted average number of shares in issue 439,245,132 420,788,528
Add back:
Dilutive share options 7,279,721 2,215,726
ESOP shares 1,316,142
Weighted average allotted, called up and fully paid share capital 446,524,853 424,320,396
Diluted earnings per share
Diluted earnings per share (0.14)p
Total Operations 2020 2019
£000 £000
Profit / (loss) for the year 1,276 (1,706)
Basic earnings per share
Weighted average number of shares in issue 439,245,132 420,788,528
Basic earnings per share 0.29p (0.41)p
 
Weighted average number of shares in issue 439,245,132 420,788,528
Add back:
Dilutive share options 7,279,721 2,215,726
ESOP shares 1,316,142
Weighted average allotted, called up and fully paid share capital 446,524,853 424,320,396
Diluted earnings per share
Diluted earnings per share 0.29p (0.41)p
Adjusted earnings per share 2020

£000

2019

£000

Profit / (loss) for the year 1,276 (1,706)
Add back:
Amortisation on acquired intangibles 4,457 4,215
Acquisition costs 125 174
Restructuring costs 1,838 2,155
Financing costs 306 368
Share option costs 1,057 859
Tax effect (1,122) (1,210)
Adjusted profit for year 7,937 4,855
Weighted average number of shares in issue – basic 439,245,132 420,788,528
Weighted average number of shares in issue – diluted 446,524,853 424,320,396
Adjusted earnings per share 1.81p 1.15p
Adjusted diluted earnings per share 1.78p 1.14p

 7 INTANGIBLE ASSETS

  Goodwill Customer relation-

ships

Trade names Software Develop-ment costs Order backlog Customer lists Total
£000 £000 £000 £000 £000 £000 £000 £000
Cost
At 1 November 2018 77,564 30,807 12,593 16,038 14,116 311 151,429
Foreign exchange 22 9 31
Additions 8 2,206 4,351 273 6,838
Additions on acquisition 2,269 1,151 4,448 799 8,667
Disposals (5) (5)
At 31 October 2019 79,841 31,958 12,593 22,687 19,288 320 273 166,960
Foreign exchange (9) 27 (8) 5 15
Additions 380 4,672 5,052
Fair Value (113) (113)
At 31 October 2020 79,728 31,958 12,593 23,058 23,987 312 278 171,914
 
Amortisation  
At 1 November 2018 31,709 17,477 7,868 10,053 5,369 166 72,642
Foreign exchange 2 17 7 (1) 25
Amortisation for the year 1,663 697 2,512 3,172 85 160 8,289
At 31 October 2019 31,709 19,142 8,565 12,565 8,558 258 159 80,956
Foreign exchange (9) 29 (7) 11 24
Amortisation for the year 1,685 675 2,998 3,755 61 108 9,282
At 31 October 2020 31,709 20,827 9,240 15,554 12,342 312 278 90,262
 
Carrying amount at 31 October 2020 48,019 11,131 3,353 7,504 11,645 81,652
 
Carrying amount at 31 October 2019 48,132 12,816 4,028 10,122 10,730 62 114 86,004
Average remaining amortisation period (years)
31 October 2020 n/a 6.6 5.0 2.5 3.1
31 October 2019 n/a 7.7 5.8 4.0 3.4 0.7 0.7

During the year, goodwill and intangibles were reviewed for impairment in accordance with IAS 36, ‘Impairment of Assets’. An impairment charge of £Nil (2019: £Nil) was processed in the year.

Fair value adjustments are in relation to the finalisation of acquisition accounting in respect of Tascomi Limited.

Impairment test for goodwill

For this review, goodwill was allocated to individual Cash Generating Units (CGUs) on the basis of the Group’s operations as disclosed in the segmental analysis. As the Board reviews results on a segmental level, the Group monitors goodwill on the same basis.

The carrying value of goodwill by each CGU is as follows:

2020 2019
Cash Generating Units £000 £000
– Public Sector 30,624 30,737
– Engineering Information Management 9,974 9,974
Idox Software 40,598 40,711
Idox Content 7,421 7,421
48,019 48,132

The recoverable amount of all CGUs has been determined using value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering the next five financial years. The key assumptions used in the financial budgets relate to revenue and EBITDA growth targets. Cash flows beyond this period are extrapolated using the estimated growth rates stated below. Growth rates are reviewed in line with historic actuals to ensure reasonableness and are based on an increase in market share.

For value-in-use calculations, the growth rates and margins used to estimate future performance are based on financial year 2021 budgets (as approved by the Board) which is management’s best estimate of short-term performance based on an assessment of market opportunities and macro-economic conditions. In the year to 31 October 2020, the Weighted Average Cost of Capital for each CGU has been used as an appropriate discount rate to apply to cash flows. The same basis was used in the year to 31 October 2019.

The assumptions used for the value-in-use calculations are as follows and are considered appropriate for each of the risk profiles of the respective CGUs:

Cash Generating Units Discount rate

Current year

Compound Annual Growth Rate Long term growth rate

Current year

Discount rate

Prior year

Growth rate Prior year
Idox Software (excluding EIM) 11.8% 10.9% 1.5% 12.4% 1.5%
Idox Software (EIM only) 12.7% 21.2% 1.5% 13.1% 1.5%
Idox Content 12.7% 6.3% 1.5% 11.8% 1.5%

Individual Weighted Average Costs of Capital were calculated for each CGU and adjusted for the market’s assessment of the risks attaching to each CGUs cash flows. The Weighted Average Cost of Capital is recalculated at each period end.

Management considered the level of intangible assets within the Group in comparison to the future budgets and have processed an impairment charge of £Nil within the year (2019: £Nil).

The Group has conducted sensitivity analysis on the impairment test of each CGU and the group of units carrying value. Sensitivities have been run on the discount rate applied and management are satisfied that a reasonable increase in the discount rate used would not lead to the carrying amount of each CGU exceeding the recoverable amount.

Sensitivities have also been run on cash flow forecasts for all CGUs EBITDA by 10%. Management are satisfied that this change would not lead to the carrying amount of each CGU exceeding the recoverable amount.

Sensitivities have also been run on cash flow forecasts for all CGUs reducing the growth rate to 0%. Management are satisfied that this change would not lead to the carrying amount of each CGU exceeding the recoverable amount.

Management have further considered the CGUs for which prior period impairments were recorded to reduce the value-in-use of those CGUs to their recoverable amount, and how such carrying values are subject to the current year sensitivities noted above.

Whilst the current year impairment reviews and sensitivities have not provided any indicators of further impairment on these assets, management have considered whether a reversal of the prior period impairment is required and concluded this is not appropriate at this time due to the ongoing transformation and improvement of those businesses.

8 POST BALANCE SHEET EVENTS

The national lockdowns that occurred in January 2021 as a result of the Covid-19 pandemic and the finalisation of the Brexit deal have had no material impact on the Group.

9 ADDITIONAL INFORMATION

Related Party Transactions

No related party transactions have taken place during the year that have materially affected the financial position or performance of the Company.

Principal Risks and Uncertainties

The principal risk and uncertainties facing the Group together with the actions being taken to mitigate them and future potential items for consideration are set out in the Strategic Report section of the Annual Financial Report 2020.

Rule 26

Last updated: February 2nd, 2021