REG - Tialis Essential IT - Final Results and Notice of AGM
10/05/2024 07:00
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RNS Number : 8793N Tialis Essential IT PLC 10 May 2024
Tialis Essential IT Plc
("Tialis" or the "Company")
Audited Results for the Year Ended 31 December 2023 and Notice of AGM
Tialis, the mid-market IT Managed Services provider, is pleased to announce
its audited results for the year ended 31 December 2023.
Highlights in the year include:
· 54% growth in revenue to £22.4 million (2022: £14.5 million)
· The successful asset purchase & integration of the Allvotec
business
· Improved payment terms on all resource-based contracts
· Renewals & extensions in the following sectors: nuclear
industry, UK utilities, government/public sector, global entertainment
company, international health-care corporation, investment management company
· New business awards in the following sectors: printing solutions
market leader, UK utilities, consumer health-care corporation,
government/public sector, international vehicle rental, workplace and facility
management, postal service and courier company, international multi-sourcing
service integration
· Award of ISO 14001 together with Award of Gold Ecovadis status and
developing a new carbon neutral lifecyle solution
· Successful renewals ISO 9001, ISO 20000-1 & ISO 27001
certifications
· Cyber Essentials & Cyber Essentials Plus re-award
· Significant D&B score improvement
· Rebranding of company and new website
· Part of a consortium that has won a significant preferred
supplier agreement with the government/public sector
· New partnership agreements signed with six new major partners, and
two further partners who have expressed interest in signing agreements.
· Strong start to 2024 with numerous new end-user customer contract
awards expected, including four new channel partners, gives us a multi year
current pipeline (new business and contract renewals) of over £20.1m, giving
us strong visibility over future growth
The Annual Report and Accounts for the year ended 31 December 2023 will
shortly be available on the Company's website at www.tialis.com
(http://www.tialis.com) .
Copies of the Annual Report and Accounts will be posted to shareholders by 13
May 2024 along with the notice of AGM which will be held at 10.00am on 26 June
2024 at the offices of Cavendish, 1 Bartholomew Close, London EC1A 7BL.
For more information, contact:
Tialis Essential IT Plc Tel: +44 (0)344 874 1000
Andy Parker, Executive Chairman
Cavendish Capital Markets Ltd Tel: +44 (0)20 7220 0500
Nominated Adviser and Broker
Corporate finance: Jonny Franklin-Adams/ Abby Kelly
ECM: Tim Redfern
Chairman's Statement
I am delighted to report the growth that Tialis has achieved in 2023,
demonstrated by our growth in revenue of by 54% to £22.4 million (2022:
£14.5 million). These results are based on developing long-term relationships
with third-party system integrators and supply contracts typically with
3-5-year terms. Therefore, as we experience further growth, we are generating
a strong annuity income stream, with a strong pipeline of prospects.
We have had a strong start to 2024 with eight new end-user customer contract
awards, including four new channel partners, giving us a multiyear current
pipeline (new business and contract renewals) of £20.1 million, allowing us
strong visibility over future growth.
Following the Groups reorganisation and series of acquisitions and divestments
in recent years we now have a strong base to support a period of sustained
growth and we are exploring organic and further acquisitive methods to
accelerate this development.
This year we welcomed Nicolas Bedford and Matthew Riley as Non-Executive
Directors to Board. Their experience and input have been invaluable and we
welcome their advice and support as we continue to deliver on our strategic
ambitions.
Highlights in the year include:
· 54% growth in revenue to £22.4 million (2022: £14.5 million)
· The successful asset purchase & integration of the Allvotec
business
· Improved payment terms on all resource-based contracts
· Renewals & extensions in the following sectors: nuclear
industry, UK utilities, government/public sector, global entertainment
company, international health-care corporation, investment management company
· New business awards in the following sectors: printing solutions
market leader, UK utilities, consumer health-care corporation,
government/public sector, international vehicle rental, workplace and facility
management, postal service and courier company, international multi-sourcing
service integration
· Award of ISO 14001 together with Award of Gold Ecovadis status and
developing a new carbon neutral lifecyle solution
· Successful renewals ISO 9001, ISO 20000-1 & ISO 27001
certifications
· Cyber Essentials & Cyber Essentials Plus re-award
· Significant D&B score improvement
· Rebranding of company and new website
· Part of a consortium that has won a significant preferred
supplier agreement with the government/public sector
· New partnership agreements signed with six new major partners,
and two further partners who have expressed interest in signing agreements.
· Strong start to 2024 with numerous new end-user customer contract
awards expected, including four new channel partners, gives us a multi year
current pipeline of over £20.1m, giving us strong visibility over future
growth
People
Employee numbers within the Manage business increased by 48% within the year
following the Allvotec acquisition and the company taking on more onsite
managed service contracts.
The management team has made continued progress in simplifying the structure
of the business and aligning services better to support our clients. The board
would like to recognise and thank its employees who have worked hard to
deliver excellent client service and retain existing key clients.
Strategy
We intend to continue with our organic initiatives that continue to
demonstrate positive growth, including the expansion of our partner network
and we are also exploring expansion into Europe. After four long years of
restructuring the Group is considering growth through acquisition and would
consider synergistic targets that would expand and deepen our service
offerings.
We are also exploring additional complementary solutions that can be added to
our current services portfolio, which would increase our offering to customers
in the end user device market. In addition to this, we are also looking at
marketing strategies to increase our brand awareness to the direct market,
which can deliver quicker turnaround on RFP wins and therefore faster in year
revenue recognition. The transformation of traditional on-site support
maintenance solutions, to our Lifecycle services is also key, as it improves
our margins, reduces costs for our customers and has less risk of margin
erosion than traditional people-based services.
We also recognise the importance placed on sustainability and plan to continue
to improve on our ESG targets and our offering of carbon neutral solutions to
our customers.
Current trading and outlook
Trading in the current financial year remains in line with Board expectations.
Our multi-year pipeline (new business and contract renewals) stands at £20.1
million and continues to grow, giving us strong visibility over future growth.
Our expectation for the year is that 85% of revenue will come from existing
contracts with the remainder through new business wins. This, together with a
buoyant pipeline, gives us great confidence in another positive year of strong
growth for the Group.
The key objective for 2024 is to increase the focus and utilisation of our
lifecycle facility which provides much greater efficiencies for our end-user
customer, higher levels of customer satisfaction, together with better
margins. Initiatives are underway with our most significant partner to see an
increase in this area. Adding six new partners to our partner portfolio
provides the company with further opportunities, and we continue to target new
partners to expand our channel reach.
Tialis has carved out a unique niche as a provider of support services and
contract engineering resources to large BPO operators. The lifecycle solution
it has developed is widely admired and is gaining traction quickly both among
the new partners and existing end-user customers and is a real differentiator
for the company.
Financial Review
Results
Revenue for the full year at £22.4 million (2022: £14.5 million), and we
have seen gross profit margin fall by 5%, from 35% to 30% as expected, due to
the additional engineering contracts acquired through Allvotec. Resulting
gross profit has increased year-on-year to £6.7 million (2022 continuing
operations: £5.1 million). Adjusted EBITDA* remained at £2.0 million (2022:
Adjusted EBITDA of £2.0 million). The net loss after tax for the year from is
£1.5 million (2022: loss £0.4 million), after £2.2 million amortisation and
impairment expense (2022: £1.2 million amortisation and £0.9 million gain on
conversion of the secured loan notes).
* Adjustments are as followed; Non underlying items, depreciation,
amortisation, impairment, share-based payments, fair value profit on deferred
consideration
Non-underlying items
Non-underlying items relating to restructuring and reorganisation amount to
£0.7 million in the year (2022: £0.4 million).
Finance costs
After incurring net finance charges of £0.6 million relating to interest and
arrangement fees for loan notes, leases and bank debt (2022: £2.3 million),
the loss before tax is £1.8 million (2022: loss of £1.3 million).
Taxation
The utilisation of tax losses and the benefit of the increase in the rate of
corporation tax on the deferred tax asset has resulted in a tax credit for the
year of £0.2 million (2022: tax credit £0.8 million).
Loss on continuing operations
Whilst the underlying trading performance of Manage shows significant positive
EBITDA, group costs, finance costs and amortisation charges on the software
licences result in a loss after tax for the year of £1.5 million (2022: £0.6
million), which equates to a basic loss per share of 6.45 pence (2022: loss
per share of 0.10 pence).
Statement of Financial Position
Non-current assets
The Group has property, plant and equipment of £0.9 million (2022: £1.1
million) all of which are subject to depreciation as per the policies set out
in the accompanying financial statements. During the year there were additions
of £0.2 million (2022: £0.5 million additions).
Further, intangible assets of customer contracts and related relationships are
£7.1 million (2022: £7.1 million) and are subject to amortisation as per the
policies set out in the accompanying financial statements.
Trade and other receivables
Trade and other receivables have increased to £5.0 million from £3.7
million.
Trade and other payables
Trade and other payables amounted to £4.4 million (2022: £4.5 million),
including trade payables of £2.4 million (2022: £2.7 million) taxation and
social security of £1.0 million (2022: £0.8 million) and accruals of £0.9
million (2022: £1.0 million).
Contract liabilities arise from customers being invoiced in advance of
services delivered, in accordance with individual contractual terms, at the
balance sheet date this amounted to £0.7 million (2022: £0.1 million).
Contract liabilities have increased in 2023 as a result of the Allvotec
acquisition.
Cashflow and net debt
Net cash generated from operating activities during the year was £0.7 million
(2022 £1.5 million generated). Our Manage business continues to be cash
generative and has developed excellent relationships with key strategic
partners. The Group invested £0.08 million (2022: £0.2 million) in fixed
assets. There were no new loans in 2023 (2022: £nil), but repayment of lease
liabilities consumed £0.2 million (2022: £0.3 million) of cash. The result
is that as at 31 December 2023 there were no bank borrowings or overdraft debt
and the cash balance was £0.3 million (2022: £0.4 million).
Borrowings
As at 31 December 2023, the convertible loan notes liability in the balance
sheet was £nil (2022: £130,437) as these were repaid in August 2023, and the
secured loan notes liability was £3,964,663 (£2022: £3,489,991).
Donations to charities
There were no donations to charities in the year (2022: £33).
Going concern
The Directors have produced detailed trading and cashflow forecasts. In
reaching their conclusion on the going concern basis of accounting, the
Directors note and rely on the improved trading performance, the positive cash
generation that the business is now experiencing and the current signed order
book. A reverse stress test of the model has been run to determine at what
level of shortfall in revenues the Group would run out of cash. Given the
committed orders already obtained and the visibility of future revenues, the
directors do not consider it likely that revenues could drop to such an extent
that the Group would run out of cash. They have also considered the impact of
any delayed customer payments and have developed plans to mitigate any such
delays to ensure that the group can continue to settle its liabilities as they
fall due and operate as a going concern.
The directors therefore have an expectation that the Group and Company have
adequate resources available to them to continue in operational existence for
a period of at least 12 months from the date of approval of these financial
statements. Accordingly, the Group and Company continue to adopt the going
concern basis in preparing these consolidated financial statements.
Financing and dividend
The Directors do not propose a dividend in respect of the current financial
year (2022: £nil).
Andy Parker
Executive Chairman
9 May 2024
Strategic Report
Review of the Business
A detailed review of the business is set out in the Chairman's Statement and
the Financial Review. The year under review was a positive one for the
business with both continuing revenues and gross margin remaining consistent
year-on-year and adjusted EBITDA* remaining positive, although the Group
reported a post-tax loss due to finance costs, impairments and restructuring.
Future developments and current trading and prospects are set out in the
Chairman's Statement and the Financial Review. These reports together with the
Corporate Governance Statement are incorporated into this
Strategic Report by reference and should be read as part of this report. The
Group's strategy is focused on maximising value for stakeholders by increasing
revenues and profits by upselling to our current customer base as well as by
bringing new customers on board.
At 31 December 2023, the Board comprised four Directors (2022: two) all of
which were male. At 31 December 2023 the Group had 290 employees including
Directors (2022: 196) of which 245 were male (2022:164) and 45 were females
(2022:36).
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation, impairment charges, non-underlying items, loss on disposal of
fixed assets and share-based payments.
Principal Risks and Uncertainties
Identifying, evaluating, and managing the principal risks and uncertainties
facing the Group is an integral part of the way the Group does business. There
are policies and procedures in place throughout the operations, embedded
within our management structure and as part of our normal operating processes.
The Board reviews the principal risks on a bi-annual basis. The risks have
been amended following the sale of the Connect business with the resultant
Group being greatly simplified. The impact, measures in place and tactics to
mitigate risks are assessed on a regular basis. The risk categories, set out
below, have been identified by the Board as those currently considered to
potentially have the most material impact on the Group's future performance.
In addition to these risks, note 23 contains details of financial risks.
Customer concentration
The Group has a significant revenue concentration with a single Partner (83%).
This is mitigated as there are a number of end customers, all with different
agreements and contract end dates. The Group has traded with the Partner for
over 20 years and has long standing relationships. The Group is also focused
on reducing this concentration and is working on several opportunities to
achieve this.
Market and Economic Conditions
Market and economic conditions are recognised as one of the principal risks in
the current trading environment. Risk is mitigated by the monitoring of
trading conditions and changes in government legislation, the development of
action plans to address specific legislative changes and the constant search
for ways to achieve new efficiencies in the business without impacting service
levels.
The Board does not believe the current macro-economic outlook has changed the
Group's prospects given the large proportion of the end-customers being in the
public sector. The Group has also undertaken stress testing of the detailed
trading forecasts and cashflows taking into account inflation and interest
rate increases. The Board does not consider that these will change the outlook
at present. In relation to interest rates increases, the Group's debt is at
a fixed rate.
Reliance on Key Personnel and Management
The success of the Group is dependent on the services of key management and
operating personnel. The Directors believe that the Group's future success
will be largely dependent on its ability to retain and attract highly skilled
and qualified personnel and to train and manage its employee base. During the
year, the restructuring programme continued which resulted in more members of
staff being made redundant and other members of staff moving into new roles.
For those who remain there are several employee benefits and active
communication is encouraged within the business to mitigate the risk of losing
skilled and qualified individuals. Furthermore, there is an apprenticeship
scheme which the Group believes will assist in training and retaining younger
individuals going forward.
Competition
The Group operates in a highly competitive marketplace and while the Directors
believe the Group enjoys certain strengths and advantages in competing for
business, some competitors are much larger with considerable scale. The Group
monitors competitors' activity and constantly reviews its own services and
prices to ensure a competitive position in the market is maintained.
Technology
The market for our services is in a state of constant innovation and change.
We devote significant resource to the development of new service lines,
ensuring new technologies can be incorporated and integrated with the Group's
core services. The nature of the Group's services means that they are exposed
to a range of technological risks, such as viruses, hacking and an
ever-changing spectrum of security risk. We maintain constant pro-active
vigilance against such risks and the Group maintains membership of some of the
highest levels of security accreditation as part of the service it offers its
customers.
s.172(1) Companies Act 2006: Statement of Directors' Duties to Stakeholders
Promoting the success of the Company
The Directors are aware of their duty under section 172(1) of the Companies
Act 2006 to act in the way which they consider, in good faith, would be most
likely to promote the success of the Company for the benefit of its members as
a whole and, in doing so, to have regard (amongst other matters) to:
· The likely consequences of any decision in the long term;
· The interests of the Company's employees;
· The need to foster the Company's business relationships with
suppliers, customers and others;
· The impact of the Company's operations on the community and the
environment;
· The desirability of the Company maintaining a reputation for high
standards of business conduct; and
· The need to act fairly between members of the Company.
The Board recognises that the long-term success of the Company requires
positive interaction with its stakeholders. Positive engagement with
stakeholders will enable our stakeholders to better understand the activities,
needs and challenges of the business and enable the Board to better understand
and address relevant stakeholder views which will assist the Board in its
decision making and to discharge its duties under Section 172 of the Companies
Act 2006.
Our Commitment
The Company is committed to operating with an inclusive, transparent, and
respectful culture and places particular emphasis on operating to the highest
ethical and environmental standards.
The Directors take personal ownership of the policies and maintenance of the
necessary exacting standards of business conduct throughout the organisation
and for delivering these corporate and social responsibilities.
Stakeholder Engagement
Recruitment and employee management are undertaken in line with the Company
Employment Policy which has committed to a working environment with equal
opportunities for all, without discrimination and regardless of sex, sexual
orientation, age, race, ethnicity, nationality, religion, or disability.
We are committed to being an equal opportunities employer and oppose all forms
of unlawful discrimination. We believe that staff members should be treated on
their merits and that employment-related decisions should be based on
objective job-related criteria such as aptitude and skills. For these reasons,
all staff members, and particularly managers with responsibility for
employment-related decisions, must comply with the practices described below:
• recruitment;
• pay and benefits;
• promotion and training;
• disciplinary, performance improvement and redundancy procedures.
As part of the induction of all employees and on a recurring annual basis, all
employees have to complete a mandatory set of training courses, one of which
is on equality, diversity and inclusion in both the workplace and local
communities.
We conduct a gender pay analysis annually and the report is published on the
Company's website.
Tialis seeks to attract and retain staff by acting as a responsible employer.
The health, safety and well-being of employees is important to the Company. On
the sale of Connect, we engaged with the acquirer and supported all the
employees through the transition. All employees had access and were encouraged
to use the Employee Assistance Program with a 24-hour helpline.
Furthermore, the Company has committed to continuous development schemes and
will support employees to attain the best for themselves and the Company
through personal assessment, training and mentoring.
Externally, Tialis has established long-term partnerships that complement its
in-house expertise and has built a network of specialised partners within the
industry and beyond.
The Directors have committed to promoting a company culture that treats
everyone fairly and with respect and this commitment extends to all principal
stakeholders including shareholders, employees, consultants, suppliers,
customers, and the communities where it is active.
All Directors are encouraged to act in a way they consider, in good faith, to
be most likely to promote the success of the Company for the benefit of its
shareholders. In doing so, they each have regard to a range of matters when
making decisions for the long-term success of the Company.
Health and Safety
Tialis Group cares profoundly about the health and safety of our employees,
customers and the communities who could be affected by our activities and aims
to protect them from any foreseeable hazard or danger arising from our
activities. To this end in 2023 the Company completed a series of safety
related studies and reviews, including electrical and gas, quantified risk
assessments and layer of protection analysis using external experts to review
the product risk and the application on our Dartford site. In all instances
the findings of the safety risk assessments have demonstrated that the risk
arising from the Tialis Group's activities is well within acceptable tolerable
risk levels. In 2024 the Company will revisit these assessments to identify
any changes that have been introduced which may represent new or variants of
risk.
We have a Health and safety policy and as mentioned above all employees have
to complete a mandatory set of training courses, which include several health
and safety courses, including manual handling, mental health awareness, stress
awareness, bullying and harassment, display screen set-up and a general health
and safety course.
The Directors recognise that the key to successful health and safety
management requires an effective policy, organisation, and arrangements which
reflect the commitment of senior management. The executive management team
implement the Company's health and safety policy and ensure that the Company
Health and Safety (HSE) management system and safety standards are all
maintained, monitored, and improved where necessary.
The Company's activities at its Dartford site were delivered HSE incident free
in 2023.
Environment Policies
The Company's Environmental Policy recognises the importance of our technology
from a global challenge perspective. The Company will regularly evaluate the
environmental impact of its activities, products, and services, taking all
actions necessary to continually improve the Company's and its products'
environmental performance.
The Company is proud to have been awarded ISO 14001.
Tialis Group has a Carbon Reduction Strategy which is published on the company
website. We at Tialis Group are committed to reducing our impact on the
environment in order to help safeguard our planet for future generations. We
have committed to a well-below 2 degrees Celsius trajectory and to maintaining
our scope 1 and scope 2 greenhouse gas emissions at a level 30% lower than in
our base year of 2018. We have invested in an environmental management system
certified to ISO 14001 to ensure that we can monitor and manage our activities
to meet our targets.
In addition to committing to maintaining our scope 1 and 2 emissions at 30%
less than they were in 2018, we will also work to reduce our overall
greenhouse gas emissions (scopes 1, 2 and 3) by 2.5% every year from a 2023
baseline. We have engaged with Science Based Targets (SBTi) to validate our
30% reduction target. SBTi has confirmed that our target of a 30% reduction
from 2018 has been accepted and will be published on their website. They have
undertaken due diligence on the 2018 information we provided and verified its
accuracy. As the work we have done in the last few years has helped us achieve
the 30% target already, we will now ensure that we maintain this lower level.
As mentioned above all employees have to complete a mandatory set of training
courses, which include an environmental awareness course.
Strategy
We intend to continue with our organic initiatives that continue to
demonstrate positive growth, including the expansion of our partner network
and we are also exploring expansion into Europe. After four long years of
restructuring the Group is considering growth through acquisition and would
consider synergistic targets that would expand and deepen our service
offerings.
We are also exploring additional complementary solutions that can be added to
our current services portfolio, which would increase our offering to customers
in the end user device market. In addition to this, we are also looking at
marketing strategies to increase our brand awareness to the direct market,
which can deliver quicker turnaround on RFP wins and therefore faster in year
revenue recognition. The transformation of traditional on-site support
maintenance solutions, to our Lifecycle services is also key, as it improves
our margins, reduces costs for our customers and has less risk of margin
erosion than traditional people-based services.
We also recognise the importance placed on sustainability and plan to continue
to improve on our ESG targets and our offering of carbon neutral solutions to
our customers.
On behalf of the Board
Andy Parker
Executive Chairman
9 May 2024
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2023
Year ended Year ended
31 December 31 December
Note 2023 2022
£000 £000
Continuing operations
Revenue 3 22,412 14,463
Cost of sales 4 (15,762) (9,408)
Gross profit 6,650 5,055
Administrative expenses 4 (7,866) (4,011)
Adjusted EBITDA* 1,985 1,950
Non underlying items 6 (713) (421)
Depreciation 12 (312) (208)
Amortisation and impairment 13 (2,187) (1,169)
Gain on the conversion of secured loan notes - 892
Fair value profit on deferred consideration 4 22 -
Charges for share-based payments 26 (11) -
Operating (loss)/profit (1,216) 1,044
Finance income 7 102 10
Finance costs 8 (658) (2,334)
Loss on ordinary activities before taxation (1,772 ) (1,280)
Income tax 10 227 843
Loss for the year from continuing operations (1,545) (437)
Derecognition of foreign currency reserve and discontinued operations 9 (150)
Loss for the year and total comprehensive loss attributable to owners of the (1,536) (587)
parent company
From continuing operations
Basic and diluted loss per share 11 (6.45) p (0.10) p
From discontinued operations
Basic and diluted loss per share 11 0.04 p (0.04) p
Total basic and diluted loss per share 11 (6.41) p (0.14) p
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation, impairment charge, non-underlying items, loss on disposal of
fixed assets and share-based payments
The notes are an integral part of these financial statements.
Statements of Financial Position
As at 31 December 2023
Note Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Non-current
assets
Property, plant and equipment 12 943 1,076 - -
Intangible assets 13 7,097 7,062 - -
Investments 14 - - 18,211 18,211
Deferred tax asset 10 3,335 3,108 - -
Trade and other receivables 15 100 100 645 9
11,475 11,346 18,856 18,220
Current assets
Trade and other receivables 15 5,020 3,661 32 79
Cash and cash equivalents 16 274 414 6 3
5,294 4,075 38 82
Total assets 16,769 15,421 18,894 18,302
Current liabilities
Trade and other payables 17 4,389 4,544 322 778
Contract liabilities 18 676 51 - -
Borrowings 20 259 210 - -
5,324 4,805 322 778
Non-current liabilities
Borrowings 20 4,561 4,255 3,965 3,490
Convertible loan notes 21 - 143 - 143
Provisions 19 301 245 - -
4,862 4,643 3,965 3,633
Total liabilities 10,186 9,448 4,287 4,411
Net/assets 6,583 5,973 14,607 13,891
Equity attributable to equity holders of the parent
Share capital 25 12,610 12,586 12,610 12,586
Share premium 52,865 50,754 52,865 50,754
Equity reserve 58 58 58 58
Share based payment reserve 11 - 11 -
Retained earnings (58,961) (57,425) (50,937) (49,507)
Total equity 6,583 5,973 14,607 13,891
The notes are an integral part of these financial statements. The Company made
a loss of £1.4 million in the year ended 31 December 2023 (2022: Loss £6.3
million) and in accordance with s408 of the Companies Act 2006 has not
presented a company statement of comprehensive income. These financial
statements were approved by the Board of Directors on 9 May 2024 and were
signed on its behalf by:
Ian Smith
Executive
Director
Company registered number: SC368538
Statements of Changes in Equity
for the year ended 31 December 2023
Group Share Capital (a) Share Premium (b) Equity reserve (c) Share based payments reserve (d) Retained Earnings (e) Foreign currency translation reserve(f) Total equity
£000 £000 £000 £000 £000 £000 £000
Balance at 1 January 2022 12,418 35,882 58 - (56,838) (150) (8,630)
Loss for the financial year and total comprehensive expense - - - - (587) - (587)
Shares issued for the conversion of secured loan notes and in lieu of a bonus 168 14,872 - - - - 15,040
to an employee (note 25)
Transactions with owners recorded directly in equity
Derecognition of foreign exchange reserve - - - - - 150 150
At 31 December 2022 12,586 50,754 58 - (57,425) - 5,973
Balance at 1 January 2023 12,586 50,754 58 - (57,425) - 5,973
Loss for the financial year and total comprehensive expense - - - - (1,536) - (1,536)
Shares issued for the acquisition of Allvotec and in lieu of a bonus to an 24 2,111 - - - - 2,135
employee (note 25)
Transactions with owners recorded directly in equity
Share based payments charge (note 26) - - - 11 - - 11
At 31 December 2023 12,610 52,865 58 11 (58,961) - 6,583
(a) Share capital represents the nominal value of equity shares and
deferred shares
(b) Share premium represents the excess over nominal value of the fair
value of consideration received for equity shares net of expenses of the share
issue
(c) The equity reserve consists of the equity component of convertible
loan notes that were issued as part of the fundraising in August 2018 less the
equity component of instruments converted or settled
The fair value of the equity component of convertible loan notes issued is the
residual value after deduction of the fair value of the debt component of the
instrument from the face value of the loan note
(d) Share based payments reserve represents the accumulated cost of the
share options in issue
(e) Retained earnings represents retained profits and accumulated losses
(f) On consolidation, the balance sheets of the Group's foreign
subsidiaries are translated into sterling at the rates of exchange ruling at
the balance sheet date. Exchange gains or losses arising from the
consolidation of these foreign subsidiaries are recognised in the foreign
currency translation reserve.
Company Share Capital (a) Share Premium (b) Equity reserve (c) Share based payments reserve (d) Retained Earnings (e) Total equity
£000 £000 £000 £000 £000 £000
Balance at 1 January 2022 12,418 35,882 58 - (43,209) 5,149
Total comprehensive loss for the year
Loss for the year - - - - (6,298) (6,298)
Shares issued for the conversion of secured loan notes and in lieu of a bonus 168 14,872 - - - 15,040
to an employee (note 25)
Share based payments charge - - - - - -
Balance at 31 December 2022 12,586 50,754 58 - (49,507) 13,891
Total comprehensive loss for the year
Loss for the year - - - - (1,430) (1,430)
Shares issued for the acquisition of Allvotec and in lieu of a bonus to an 24 2,111 - - - 2,135
employee (note 25)
Share based payment charge - - - 11 - 11
Balance at 31 December 2023 12,610 52,865 58 11 (50,937) 14,607
(a) Share capital represents the nominal value of equity shares and
deferred shares
(b) Share premium represents the excess over nominal value of the fair
value of consideration received for equity shares net of expenses of the share
issue
(c) The equity reserve consists of the equity component of convertible
loan notes that were issued as part of the fundraising in August
2018 less the equity component of instruments converted or settled
The fair value of the equity component of convertible loan notes issued is the
residual value after deduction of the fair value of the debt component
of the instrument from the face value of the loan note
(d) Share based payments reserve represents the accumulated cost of the
share options in issue.
(e) Retained earnings represents retained profits and accumulated losses
Statements of Cash Flows
for the year ended 31 December 2023
Group Note 2023 2022
£000 £000
Cash flows from operating activities
Profit/(loss) from continuing operations: (1,772) (1,280)
Profit from discontinued operations 9 -
Total loss before tax (1,763) (1,280)
Adjustments for:
Depreciation of property, plant and equipment 12 312 208
Amortisation of intangible assets 13 2,187 1,169
Net finance expenses 7, 8 556 2,324
Share based payments 26 11 -
Gain on conversion of secured loan notes - (892)
Decrease/(increase) in trade and other receivables (1,359) 521
Increase/(decrease) in trade and other payables and contract liabilities 658 (461)
Increase/(decrease) in provisions 56 (114)
Net cash generated from operating activities 658 1,475
Cash flows from investing activities
Acquisition of property, plant and equipment (75) (208)
Net cash used in investing activities (75) (208)
Cash flows from financing activities
Interest received 19 10
Interest paid (84) (268)
Supplier finance repaid (281) (558)
Convertible loan notes repaid (152) -
Nimoveri loan note repaid - (100)
Repayment of lease liabilities 20 (225) (286)
Net cash generated from/ (absorbed by) financing activities (723) (1,202)
Net (decrease)/increase in cash and cash equivalents (140) 6
5
Cash and cash equivalents at 1 January 414 349
Cash and cash equivalents at 31 December 274 414
Cash and cash equivalents comprise
Cash at bank 16 274 414
for the year ended 31 December 2023
Company Note 2023 2022
£000 £000
Cash flows from operating activities
Loss before tax for the year (1,430) (4,298)
Adjustments for:
Net financial expenses 484 2,067
Share based payments 11 -
(935) (2,231)
Decrease in trade and other receivables 47 (49)
(Decrease)/increase in trade and other payables (456) 239
Net cash used in operating activities (1,344) (2,041)
Cash flows from investing activities
Amounts repaid by subsidiaries 1,499 2,042
Net cash generated from investing activities 1,499 2,042
Cash flows from financing activities
Repayment of loan notes, net of expenses (152) -
Net cash generated from financing activities (152) -
Net decrease in cash and cash equivalents 3 1
Cash and cash equivalents at 1 January 3 2
Cash and cash equivalents at 31 December 16 6 3
Notes to the Consolidated Financial Statements
1 Accounting policies
Tialis Essential IT PLC ("Tialis Group") is a company incorporated in
Scotland, domiciled in the United Kingdom and limited by shares which are
publicly traded on AIM, the market of that name operated by the London Stock
Exchange. The registered office is 24 Dublin Street, Edinburgh EH1 3PP and the
principal place of business is in the United Kingdom.
The principal activity of the Group is the provision of network, cloud and IT
managed services.
The principal accounting policies, which have been applied consistently in the
preparation of these consolidated and parent company financial statements
throughout the year and all by subsidiary companies are set out below.
1.1 Basis of preparation
The consolidated and parent company financial statements of Tialis Group have
been prepared on the going concern basis and in accordance with UK-adopted
International Accounting Standards. The consolidated financial statements have
been prepared under the historical cost convention. The Company has elected to
take the exemption under section 408 of the Companies Act 2006 to not present
the parent Company's Income Statement.
The accounting framework requires the use of certain critical accounting
estimates. It also requires management to exercise its judgement in the
process of applying the Group's accounting policies. The areas involving a
higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the consolidated financial statements are
disclosed in note 1.26 in the accounting policies. The financial statements
are prepared in GBP (being the functional currency of the Group) and rounded
to the nearest £1,000.
Going concern
The Directors have produced detailed trading and cashflow forecasts. In
reaching their conclusion on the going concern basis of accounting, the
Directors note and rely on the improved trading performance, the positive cash
generation that the business is now experiencing and the current signed order
book. A reverse stress test of the model has been run to determine at what
level of shortfall in revenues the Group would run out of cash. Given the
committed orders already obtained and the visibility of future revenues, the
directors do not consider it likely that revenues could drop to such an extent
that the Group would run out of cash. They have also considered the impact of
any delayed customer payments and have developed plans to mitigate any such
delays to ensure that the group can continue to settle its liabilities as they
fall due and operate as a going concern. The directors therefore have an
expectation that the Group and Company have adequate resources available to
them to continue in operational existence for a period of at least 12 months
from the date of approval of these financial statements. Accordingly, the
Group and Company continue to adopt the going concern basis in preparing these
consolidated financial statements.
1.2 Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the
Group has control. The Group controls an entity when the Group is exposed to,
or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the Group. They are deconsolidated from the date that control
ceases.
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the total
of the fair values of the assets transferred, the liabilities incurred to the
former owners of the acquiree and the equity interests issued by the Group.
The consideration transferred includes the fair value of any asset or
liability resulting from a contingent consideration arrangement. Identifiable
assets acquired, liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition
date. The Group recognises any non-controlling interest in the acquiree on an
acquisition-by-acquisition basis, either at fair value or at the
non-controlling interest's proportionate share of the recognised amounts of
the acquiree's identifiable net assets.
Acquisition related costs are expensed as incurred.
Intercompany transactions, balances and unrealised gains on transactions
between Group companies are eliminated on consolidation. Accounting policies
of subsidiaries have been changed where necessary to ensure consistency with
policies adopted by the Group.
1.3 Investments
Investments in subsidiaries are held at cost less accumulated impairment
losses. A formal assessment of the recoverability of the investment values is
undertaken on an annual basis by the Directors. Where indicators of impairment
are identified, fixed asset investments are impaired accordingly.
1.4 Intangible assets
Goodwill
Goodwill is initially measured as the excess of the aggregate of the
consideration transferred and the fair value of any non- controlling interest
over the fair value of the net identifiable assets acquired and liabilities
assumed. If this consideration is lower than the fair value of the net assets
of the subsidiary acquired, the difference is recognised in the income
statement as a bargain purchase.
Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
For the purposes of impairment testing, goodwill acquired in a business
combination is allocated to a cash generating unit.
Goodwill impairment reviews are undertaken annually or more frequently if
events or changes in circumstances indicate a potential impairment. Any
impairment is recognised immediately as an expense and is not subsequently
reversed.
Other intangible assets arising from business combinations
Intangible assets that meet the criteria to be separately recognised as part
of a business combination are carried at cost (which is equal to their fair
value at the date of acquisition) less accumulated amortisation and impairment
losses. An intangible asset acquired as part of a business combination is
recognised outside of goodwill if the asset is separable or arises from
contractual or other legal rights and its fair value can be measured reliably.
Intangible assets acquired in this manner include trademarks and customer
contracts. They are amortised over their estimated useful lives on a
straight-line basis as follows:
· Customer contracts and related
relationships 2-13 years
·
Trademarks
5 years
Impairment and amortisation charges are included within the administrative
expenses line in the income statement.
Technology development
Expenditure on internally developed technology is capitalised if it can be
demonstrated that:
- it is technically feasible to develop the technology for it to be used or
sold
- adequate resources are available to complete the development
- there is an intention to complete and for the Group to use or sell the
technology
- use or sale of the asset will generate future economic benefits, and
- expenditure on the project can be measured reliably.
Capitalised development costs are amortised over the periods the Group expects
to benefit from using or selling the assets developed. The amortisation
expense is included within the administrative expenses line in the income
statement. Development expenditure not satisfying the above criteria and
expenditure on the research phase of internal projects are recognised in the
consolidated income statement as incurred.
Software and licensing
Separately acquired software and licenses are shown at historical cost less
accumulated amortisation and impairment losses.
They are amortised over their estimated useful lives on a straight-line basis
as follows:
· Software and
licensing
8 years
Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation
and any impairment in value. The cost includes the original price of the asset
and the cost attributable to bringing the asset to its current working
condition for its intended use.
Depreciation, down to residual value, is calculated on a straight-line basis
over the estimated useful life of the asset, which is reviewed on an annual
basis, as follows:
· Leasehold
property
Over remaining lease term
· Network
infrastructure
3 - 10 years
· Equipment, fixtures and
fittings
3 - 5 years
An item of property, plant and equipment is de-recognised upon disposal or
when no future economic benefits are expected to arise from the continued use
of the asset. Any gain or loss arising on derecognition of the asset
(calculated as the difference between the net disposal proceeds and the
carrying amount of the item) is included in the income statement in the year
the item is de-recognised.
Right-of-use assets
A right-of-use asset is recognised at the commencement date of a lease. The
right-of-use asset is measured at cost, which comprises the initial amount of
the lease liability, adjusted for, as applicable, any lease payments made at
or before the commencement date net of any lease incentives received, any
initial direct costs incurred, and, except where included in the cost of
inventories, an estimate of costs expected to be incurred for dismantling and
removing the underlying asset, and restoring the site or asset.
Right-of-use assets are depreciated on a straight-line basis over the
unexpired period of the lease or the estimated useful life of the asset,
whichever is the shorter. Where the Group expects to obtain ownership of the
leased asset at the end of the lease term, the depreciation is over its
estimated useful life. Right-of use assets are subject to impairment or
adjusted for any remeasurement of lease liabilities.
1.5 Impairment of assets
Goodwill is not subject to amortisation and is reviewed for impairment
annually or more frequently if events or changes in circumstances indicate the
carrying value may be impaired. As at the acquisition date, any goodwill
acquired is allocated to each of the cash generating units expected to benefit
from the business combination's synergies. Impairment is determined by
assessing the recoverable amount of each cash generating unit to which the
goodwill relates. When the recoverable amount of the cash generating unit is
less than the carrying amount, including goodwill, an impairment loss is
recognised.
Other intangible assets and property, plant and equipment are subject to
amortisation and depreciation and are reviewed for impairment whenever events
or changes in circumstances indicate the carrying values may not be
recoverable. If any such indication exists and where the carrying value
exceeds the estimated recoverable amount, the assets or cash generating units
are written down to their recoverable amount.
The recoverable amount of intangible assets and property, plant and equipment
is the greater of the fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are discounted to
their present values using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the
asset. For an asset that does not generate largely independent cash inflows,
the recoverable amount is determined by the cash generating unit to which the
asset belongs. Fair value less costs to sell is, where known, based on actual
sales price net of costs incurred in completing the disposal. Non-financial
assets, other than goodwill, that were impaired in previous periods are
reviewed annually to assess whether the impairment is still relevant.
1.6 Share capital
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of new shares or options are shown in equity as a
deduction from proceeds.
1.7 Leases
A lease liability is recognised at the commencement date of a lease. The lease
liability is initially recognised at the present value of the lease payments
to be made over the term of the lease, discounted using the interest rate
implicit in the lease or, if that rate cannot be readily determined, the
Group's incremental borrowing rate. Lease payments comprise of fixed payments
less any lease incentives receivable, variable lease payments that depend on
an index or a rate, amounts expected to be paid under residual value
guarantees, exercise price of a purchase option when the exercise of the
option is reasonably certain to occur, and any anticipated termination
penalties. The variable lease payments that do not depend on an index or a
rate are expensed in the period in which they are incurred.
Lease liabilities are measured at amortised cost using the effective interest
method. The carrying amounts are remeasured if there is a change in the
following: future lease payments arising from a change in an index or a rate
used; residual guarantee; lease term; certainty of a purchase option and
termination penalties. When a lease liability is remeasured, an adjustment is
made to the corresponding right-of use asset, or to profit or loss if the
carrying amount of the right-of-use asset is fully written down.
1.8 Provisions
Provisions are recognised when the Company has a present obligation (legal or
constructive) as a result of a past event where it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material, provisions
are determined by discounting the expected future cash flows at a risk-free
rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
1.9 Current and deferred income tax
Current tax assets and liabilities are measured at the amount expected to be
recovered from or paid to the taxation authorities, based on tax rates and
laws that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided for on all temporary differences at the
balance sheet date between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes, with the following
exceptions:
· where the temporary difference arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not
a business combination that at the time of the transaction neither affects
accounting nor taxable profit or loss;
· in respect of taxable temporary differences associated with
investments in subsidiaries, where the timing of the reversal of the temporary
differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future; and
· deferred income tax assets are recognised only to the extent that
it is probable that taxable profits will be available against which deductible
temporary differences carried forward tax credits or tax losses can be
utilised.
1.10 Trade and other receivables
Trade receivables, which principally represent amounts due from customers, are
recognised at amortised cost as they meet the IFRS 9 classification test of
being held to collect, and the cash flow characteristics represent solely
payments of principal and interest.
The Group has applied the Simplified Approach applying a provision matrix
based on number of days past due to measure lifetime expected credit losses
and after taking into account customers with different credit risk profiles
and current and forecast trading conditions.
Trade receivables are written-off when there is no reasonable expectation of
recovery, such as a debtor failing to engage in a repayment plan with the
company. The Group's trade and other receivables are non-interest bearing.
1.11 Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in
hand and short-term deposits with an original maturity of three months or
less.
For the purposes of the consolidated cash flow statement, cash and cash
equivalents consist of cash and cash equivalents as defined above.
1.12 Foreign currencies
The presentational currency of the Group is Pound Sterling (£) and the Group
conducts the majority of its business in Sterling. Transactions in foreign
currencies are initially recorded in the presentational currency by applying
the rate of exchange ruling at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies are retranslated at the
presentational currency rate of exchange ruling at the balance sheet date. All
differences are taken to the income statement.
1.13 Pensions
The Group operates a defined contribution scheme. Pension costs are charged
directly to the income statement in the period to which they relate on an
accruals basis. The Group has no further payment obligations once
contributions have been made.
The Group also operates two individual defined benefit plans, as a result of
two employees who were TUPE'd into the Group. These are closed to any other
employees. A defined benefit plan defines the pension benefit that the
employee will receive on retirement, usually dependent upon several factors
including age, length of service and remuneration. A defined benefit plan is a
pension plan that is not a defined contribution plan.
The liability is recognised in the balance sheet in respect of the defined
benefit plan is the present value of the defined benefit obligation at the
reporting date less the fair value of the plan assets at the reporting date.
If the defined benefit plan is in surplus an asset is only recognised if this
is deemed recoverable.
The defined benefit obligation is calculated using the projected unit credit
method. Annually the Group engages independent actuaries to calculate the
obligation. The present value is determined by discounting the estimated
future payments using market yields on high quality corporate bonds that are
denominated in sterling and that have terms approximating the estimated period
of the future payments ('discount rate').
The fair value of plan assets is measured in accordance with the FRS 102 fair
value hierarchy and in accordance with the company's policy for similarly held
assets. This includes the use of appropriate valuation techniques.
Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions are charged or credited to other comprehensive income.
These amounts together with the return on plan assets, less amounts included
in net interest, are disclosed in other comprehensive income.
The cost of the defined benefit plan, recognised in profit or loss as employee
costs, except where included in the cost of an asset, comprises:
(a) the increase in pension benefit liability arising from
employee service during the period; and
(b) the cost of plan introductions, benefit changes,
curtailments and settlements.
The net interest cost is calculated by applying the discount rate to the net
balance of the defined benefit obligation and the fair value of plan assets.
This cost is recognised in profit or loss as 'finance expense/ income'.
The company also contributes to group personal pension policies, such
contributions being charged against profits when paid.
1.14 Accrual for employee benefits, including holiday pay
Provision is made for employee benefits, including holiday pay, to the extent
of the liability as if all employees of the Group had left the business at its
reporting date.
1.15 Financial assets and liabilities
The Group's financial assets and liabilities mainly comprise cash, borrowings,
trade and other receivables and trade and other payables. These are accounted
for in accordance with the relevant accounting policy note.
Trade and other payables are not interest bearing and are stated at their
amortised cost.
1.16 Convertible loan notes
The component parts of convertible loans issued by the Company are classified
separately as financial liabilities and equity in accordance with the
substance of the contractual arrangements and the definitions of a financial
liability and an equity instrument. At the date of issue, the fair value of
the liability portion of convertible loan notes is determined using a market
interest rate for a comparable loan note with no conversion option. This
amount is recorded as a liability on an amortised cost basis using the
effective interest method until the loan notes are redeemed or converted
either during or at the end of the term of the convertible loan notes. The
remainder of the carrying amount of the loan notes is allocated to the
conversion option and shown within equity and is not subsequently remeasured.
When the conversion option remains unexercised at the maturity date of the
convertible note, the balance recognised in equity will be transferred to
retained earnings. No gain or loss is recognised in the income statement upon
conversion or expiration of the conversion options.
1.17 Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly
attributable transaction costs. After initial recognition, interest-bearing
loans and borrowings are subsequently measured at amortised cost using the
effective interest method. Gains and losses arising on the repurchase,
settlement or otherwise cancellation of liabilities are recognised in the
finance cost line in the income statement.
1.18 Finance costs
Loans are carried at fair value on initial recognition, net of unamortised
issue costs of debt. These costs are amortised over the loan term.
All other borrowing costs are recognised in the income statement on an
accruals basis, using the effective rate method.
1.19 Revenue
Revenue is measured at the fair value of the consideration received or
receivable for the sale of goods and services in the ordinary course of the
Group's activities. Revenue is shown net of Valued Added Tax, returns, rebates
and discounts and after the elimination of sales within the Group.
The Group recognises revenue when the amount of revenue can be reliably
measured, it is probable that future economic benefits
will flow to the entity and when specific criteria have been met for each of
the Group's activities as described below.
Recurring revenue
The largest portion of the Group's revenues relates to a number of network,
cloud and IT managed services, which the Group offers to its customers. All of
the revenue in this category is contracted and includes a full range of
support, maintenance, subscription and service agreements. Revenue for these
types of services is recognised as the services are provided on the basis that
the customer simultaneously receives and consumes the benefits provided by the
Group's performance of the services over the contract term. In terms of
performance obligations, the customer can benefit from each service on its own
and the Group's promise to transfer the service to the customer is separately
identifiable from other promises in the contract. The transaction price for
each service is allocated to each performance obligation. The costs incurred
for these revenue streams typically match the revenue pattern. A contract
liability is recognised when billing occurs ahead of revenue recognition. A
contract asset is recognised when the revenue recognition criteria were met
but in accordance with the underlying contract, the sales invoice has not been
issued yet.
Project revenue
These project services include mainly installation and consultancy services.
Performance obligations are met once the hours or days have been worked.
Revenue is therefore recognised over time based on the hours or days worked at
the agreed price per hour or day. The costs incurred for this revenue stream
generally match the revenue pattern, as a significant portion of consultancy
costs relate to staff costs, which are recognised as incurred. Consultancy
services are generally provided on a time and material basis.
1.20 Government Grants
Grants from the government are recognised at their fair value where there is a
reasonable assurance that the grant will be received and the Group will comply
with all attached conditions.
1.21 Non-underlying items
It is the policy of the Group to identify certain costs, which are material
either because of their size or nature, separately on the face of the Income
Statement in order that the underlying profitability of the business can be
clearly understood. These costs are identified as non-underlying items, and
comprise;
a) Professional fees incurred in sourcing and completing acquisitions
and disposals including legal expenses
b) Professional fees incurred in restructuring and refinancing
acquisitions
c) Integration costs which are incurred by the Group when integrating
one trading business into another, including rebranding of acquired businesses
d) Redundancy costs, including employment related costs of staff made
redundant up to the date of their leaving as a consequence of integration
e) Property costs such as lease termination penalties and vacant
property provisions and third-party advisor fee
1.22 Discontinued operations
Cash flows and operations that relate to a major component of the business
that has been disposed of or is classified as held for sale or distribution
are shown separately from continuing operations.
1.23 Segmental reporting
The Chief Operating Decision Maker has been identified as the Executive Board.
The Chief Operating Decision Maker reviews the Group's internal reporting in
order to assess performance and allocate resources. For management reporting
purposes and operationally, the continuing operations of the Group consist of
Tialis IT Essential Manage Limited for this year and the prior year.
1.24 Standards and interpretations not yet applied by the Group
For the purposes of the preparation of these consolidated financial
statements, the Group has applied all standards and interpretations that are
effective for accounting periods beginning on or after 1 January 2023. There
was no significant impact of new standards and interpretations adopted in the
year.
No new standards, amendments or interpretations to existing standards that
have been published and that are mandatory for the Group's accounting periods
beginning on or after 1 January 2024, or later periods, have been adopted
early. The new standards and interpretations are not expected to have any
significant impact on the financial statements when applied.
1.25 Critical accounting estimates and judgements
Estimates
The Group makes estimates and assumptions concerning the future, which by
definition will seldom result in actual results that match the accounting
estimate. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amount of assets and liabilities
within the next financial year are discussed below:
Recoverability of deferred tax asset -This includes estimates of the level
of future profitability, and a judgement as to the likelihood of the group
undergoing a restructure of its finances which would result in significant
finance cost savings.
A change in the estimate of future profits would result in an equivalent
change to the deferred tax asset recognised of 25% of the change in profits.
There are no reasonably plausible scenarios which would result in the future
profitability not being sufficient to enable full recovery of the tax losses
in the assessment period.
Impairment of intercompany balances - The directors use estimates in assessing
the level of impairment of intercompany balances at each period end, including
the likely methods of recovery of the balances and future profitability of the
underlying trade which would enable repayments to be made.
Judgements
In the process of applying the Group's accounting policies, management makes
various judgements which can significantly affect the amounts recognised in
the financial statements. Critical judgements are considered to be:
Classification of non-underlying items - the Directors have exercised
judgement when classifying certain costs arising during integration and
strategic reorganisation projects. The Directors believe that these costs are
all related to the types of costs described in 1.22 above and are
appropriately classified.
Recoverability of deferred tax asset - the Directors have exercised judgement
on the recoverability of tax losses attributable to future trading profits
generated by the Group, and in doing so this has given rise to a deferred tax
asset, details of which are shown in note 10 to the financial statements. The
judgement involves assessing the extent to which trading losses can be offset
against future profits.
Useful economic lives of tangible and intangible assets - The annual
depreciation and amortisation charge for tangible and intangible assets are
sensitive to changes in the estimated useful economic lives and residual
values of the assets. The useful economic lives and residual values are
re-assessed annually. They are amended when necessary to reflect current
estimates, based on technological advancement, future investments, economic
utilisation and the physical condition of the assets. The remaining useful
economic life of the Allvotec contract lists and assets are considered a
source of estimation uncertainty.
Deferred Consideration - the Directors have exercised judgement on the costs
that will arise for the deferred consideration and the valuation as shown in
note 13 to the financial statements. At the year end, the deferred
consideration amounted to £0.08m (31 December 2022: £nil).
2 Segment reporting
The Group has only one operating segment, the Manage Business.
3 Revenue
Disaggregation of revenue from contracts with customers is as follows:
Year ended 31 December 2023 Managed Projects Total
services
Geographical regions £000 £000 £000
United Kingdom 17,172 5,198 22,370
Europe 39 3 42
Total 17,211 5,201 22,412
Timing of revenue recognition
Goods transferred at a point in time 98 - 98
Services transferred over time 17,113 5,201 22,314
Total 17,211 5,201 22,412
The revenue from the largest customer was £18.7m (2022: £11.7 million) or
83% of total revenue (2022: 81%). No other customers account for more than 10%
of revenue.
Year ended 31 December 2022 Managed Projects Total
Services
Geographical regions £000 £000 £000
United Kingdom 10,770 3,632 14,402
Europe 61 - 61
Total 10,831 3,632 14,463
Timing of revenue recognition
Goods transferred at a point in time 84 - 84
Services transferred over time 10,747 3,632 14,379
Total 10,831 3,632 14,463
Contract balances
2023 2022
£000 £000
Receivables included within trade and other receivables 3,748 2,499
Contract assets 622 664
4,370 3,163
Contract liabilities (676) (51)
Total 3,694 3,112
Contract assets predominantly relate to fulfilled obligations in respect of
projects and managed services which are billed monthly and in arrears. At the
point where completed work is invoiced, the contract asset is derecognised,
and a corresponding receivable recognised. Contract liabilities relate to
consideration received from customers in advance of work being completed.
The Group's standard payment terms are 30 days from the date of invoice.
Refunds are only due in the exceptional circumstances where the Group does not
meet the performance obligations set out in a contract. The majority of
revenue for services is invoiced monthly, sometimes quarterly, in advance, and
goods are invoiced on delivery.
Unsatisfied performance obligations
All contracts for the provision of services are for periods of one year or
less or are billed based on resources utilised. As permitted under IFRS 15,
the transaction price allocated to these unsatisfied contracts is not
disclosed.
4 Expenses by nature
2023 2022
£000 £000
Direct staff costs 9,408 6,048
Third party cost of sales 6,354 3,360
Employee costs within administrative expenses 3,196 2,027
Amortisation of intangible assets 2,187 1,169
Depreciation 312 208
Share-based payments 11 -
Non-underlying items 713 421
Profit on sale of assets (9) -
Fair value profit on deferred consideration 22 -
Gain on the conversion of secured loan notes - (892)
Other administrative costs 1,434 1,078
Total cost of sales and administrative expenses 23,628 13,419
5 Auditor's remuneration
2023 2022
£000 £000
Audit of these financial statements 30 28
Amounts receivable by auditors and their associates in respect of:
Audit of financial statements of subsidiaries of the Company 50 45
Additional fees charged in respect of prior year's audit - 14
Total 80 87
6 Non-underlying costs
In accordance with the Group's policy in respect of non-underlying costs, the
following charges were incurred for the year in relation to continuing
operations:
2023 2022
£000 £000
Allvotec acquisition expense 242 -
Due diligence on potential acquisitions in the year 25 -
Employee share option plan set-up expense 49 -
One-off legal fees 9 -
Rebranding as Tialis from IDE Group 35 -
Restructuring and reorganisation costs 353 421
713 421
Restructuring and reorganisation costs in the year ended 31 December 2023 and
the year ended 31 December 2022 relate to costs incurred on the restructure of
the Group, predominantly redundancy costs, of which £0.4 million are staff
related as disclosed in note 9 (2022: £0.04 million). Other integration costs
relate to the costs incurred in integrating the Allvotec acquisition. The
redundancy costs include employment related costs of staff made redundant
because of restructuring post the Allvotec acquisition. The legal and
rebranding expenses were non-recurring expenses incurred during the year.
7 Finance Income
Continuing Operations 2023 2022
£000 £000
Unwinding of discounted liabilities 83 -
Interest received 19 10
102 10
8 Finance costs
Continuing Operations 2023 2022
£000 £000
Interest expense on lease liabilities 84 98
Unwind of discount on trade payables 90 170
Interest expense in respect of convertible loan notes 9 12
Interest expense in respect of loan notes 475 2,054
658 2,334
9 Employee benefits expense
Staff costs for the year for the Group, including Directors, relating to
continuing operations amounted to:
2023 2022
£000 £000
Wages and salaries 10,643 6,750
Social security costs 1,086 739
Other pension costs 876 586
Restructuring costs 380 -
12,985 8,075
At 31 December 2023, the Group employed 284 staff, including Directors (2022:
191).
The average monthly number of persons employed by the Group during the year,
including Directors, analysed by category, and relating to continuing
operations, was as follows:
Number of employees
2023 2022
Operations 250 168
Sales and Marketing 9 6
Administration 21 15
Directors 4 2
Total average monthly headcount 284 191
The Company employed an average of 5 employees during 2023 (2022: 2), which
were the Non-Executive Chairman Andy Parker, the Non-Executive Director
Nicolas Bedford and the Executive Directors Ian Smith and Matthew Riley, and
the Chief Financial Officer. Their remuneration is as shown below. No social
security costs were payable.
For Directors who held office during the year, emoluments for the year ended
31 December 2023 for the Group were as follows:
Salary/fees Salary/fees
2023 2022
£ £
Executive
Ian Smith1 221,000 221,000
Andy Parker 181,250 53,333
Non-Executive
Nicolas Bedford 40,000 -
Matthew Riley 36,667 -
Total 478,917 274,333
1. Directors' emoluments to Ian Smith were paid to MXC Advisory
Limited, a subsidiary of MXC Capital Limited.
2. Andy Parker stepped down from his role as Executive Chairman to
become Non-Executive Chairman on 1 June 2020. On 1 February 2023, Andy Parker
was reappointed Executive Chairman. Included in Andy Parker's salary/fees,
there was a bonus of £25,000 paid during the year which is disclosed in the
non-recurring costs - see note 6.
Social security costs in respect of Directors' emoluments were £32,168 (2022:
£6,354). No pension contributions were made to any Director during the year
(2022: £nil).
None of the Directors made any gains on the exercise of share options in 2023
or 2022.
10 Taxation
2023 2022
£000 £000
Current tax
Current year - -
Current tax - -
Deferred tax credit (227) (843)
Total tax credit (227) (843)
(a) Tax on loss on ordinary activities
Reconciliation of the total income tax credit:
2023 2022
£000 £000
Loss before taxation from continuing operations (1,772) (1,280)
Tax using the United Kingdom corporation tax rate of 25% (2022: 19%)
(243)
(443)
Non-deductible expenses 312 (117)
Amortisation and impairment of goodwill and intangibles - non qualifying - -
assets
Tax losses utilised - not previously recognised (106) (279)
Adjustment for rate change (16) (202)
Prior year adjustment 26 (2)
Total tax credit (227) (843)
(b) Deferred tax (asset)/liability
2023 2022
£000 £000
At 1 January (3,108) (2,265)
Credit to income statement (227) (843)
At 31 December (3,335) (3,108)
(Asset) Liability Net (asset)/
liability
£000 £000 £000
At 1 January 2022 (4,323) 2,058 (2,265)
Timing differences in respect of tangible assets 140 - 140
Timing differences in respect of intangible assets - (292) (292)
Short term timing differences 4 - 4
Recognition of losses (695) - (695)
(551) (292) (843)
At 31 December 2022 (4,874) 1,766 (3,108)
Timing differences in respect of tangible assets 83 83
Timing differences in respect of intangible assets - (292) (292)
Short term timing differences (3) - (3)
Recognition of losses 310 (325) (15)
390 (617) (227)
At 31 December 2023 (4,484) 1,149 (3,335)
Deferred tax liabilities arose in respect of the amortisation of intangible
assets recognised on acquisitions as follows:
2023 2022
£000 £000
Fixed asset timing differences 1,474 1,766
At 31 December 1,474 1,766
Deferred tax assets arose in respect of trade losses and fixed asset and other
differences, details as follows:
2023 2022
£000 £000
Tax losses recognised 4,152 4,454
Other temporary differences - 5
Depreciation in advance of capital allowances 332 415
At 31 December 4,484 4,874
Deferred tax assets are recognised for tax losses carried forward of £17.9
million (2022: £15.8 million) to the extent that the realisation of the
related tax benefit through future taxable profits is probable. In assessing
recoverability, management considers that the appropriate period over which
profits can be assessed with a reasonable degree of certainty, and therefore
used to offset the losses, is the period to 31 December 2029. The future
taxable profits are assumed to include the impact of the planned conversion of
borrowings to equity.
The evidence supporting the recognition of the deferred tax asset for losses
is the partial use of losses in the year.
The Group had unrecognised trading losses carried forward at 31 December 2023
of £3.3 million (2022: £3.1 million). The Company has no deferred tax assets
or deferred tax liabilities as at 31 December 2023 or 31 December 2022.
The Finance Bill 2023, which was substantively enacted on 24 May 2023,
included the announcement that the corporation tax rate for years starting
from April 2023 would increase to 25% on profits over £250,000 and that the
rate for small profits under £50,000 will remain at 19% and there will be a
tapered rate for businesses with profits under £250,000 so that they pay less
than the main rate. Deferred tax balances have been re-measured at the
reporting date taking into account the new rate of tax.
11 Earnings per share
Basic earnings per share has been calculated using the loss after tax for the
year of £1.5 million (2022: Loss £0.6 million and a weighted average number
of ordinary shares of 23,973,027 (2022: 418,575,630). The weighted average
number of ordinary shares for the purpose of calculating the basic and diluted
measures is the same. This is because the outstanding warrants details of
which are given in note 26, would have the effect of reducing the loss from
continuing operations per ordinary share and therefore would be anti-dilutive
under the terms of IAS 33.
Continuing operations
2023 2022
Basic and diluted loss per share (pence) (6.45) p (0.10) p
Discontinued operations
Basic and diluted loss per share (pence) 0.04 (0.04) p
Total basic and diluted loss per share (6.41)p (0.14) p
11 Property, plant and equipment
Group Leasehold property Car Leases Equipment, fixtures, and fittings Computer software Total
£000 £000 £000 £000 £000
Cost
At 1 January 2023 1,821 11 151 116 2,099
Additions - 105 70 4 179
Disposals (306) - - - (306)
At 31 December 2023 1,515 116 221 120 1,972
Accumulated depreciation
At 1 January 2023 954 2 57 10 1,023
Charge for the year 208 21 44 39 312
Disposals (306) - - - (306)
At 31 December 2023 856 23 101 49 1,029
Net carrying amount
31 December 2023 659 94 119 71 943
31 December 2022 867 9 94 106 1,076
Group Leasehold property Car Leases Equipment, fixtures, and fittings Computer software Total
£000 £000 £000 £000 £000
Cost
At 1 January 2022 1,549 278 2,751 337 4,915
Additions 272 11 92 116 491
Disposals - (278) (2,692) (337) (3,307)
At 31 December 2022 1,821 11 151 116 2,099
Accumulated depreciation
At 1 January 2022 784 272 2,718 328 4,102
Charge for the year 170 8 20 10 208
Disposals - (278) (2,681) (328) (3,287)
At 31 December 2022 954 2 57 10 1,023
Net carrying amount
31 December 2022 867 9 94 106 1,076
31 December 2021 765 6 33 9 813
Right of use assets
The carrying amounts of property, plant and equipment include right of use
assets as detailed below:
Leasehold Network Infrastructure Car leases Total
Cost £000 £000 £000 £0000
At 1 January 2022 1,549 - 278 1,827
Additions 272 - 11 283
Disposal - - (278) (278)
At 31 December 2022 1,821 - 11 1,832
Additions - - 105 105
Disposal (306) - - (306)
At 31 December 2023 1,515 - 116 1,631
Accumulated depreciation
At 1 January 2022 784 - 272 1,056
Charge for the year 170 - 8 178
Disposal - - (278) (278)
At 31 December 2022 954 - 2 956
Charge for the year 208 - 20 228
Disposal (306) - - (306)
At 31 December 2023 856 - 22 878
Net carrying amount
31 December 2023 659 - 94 753
31 December 2022 867 - 9 876
Additions to the right-of-use assets during the year were £0.1 million (2022:
£0.3 million).
The depreciation charge for the year of £0.3 million (2022: £0.2 million)
relates to continuing operations and has been charged to administrative
expenses.
Company
The Company has no property, plant and equipment at 31 December 2023 or at 31
December 2022.
13 Intangible assets
Group Goodwill Trademarks Customer contracts and related relationships Technology development Software and Licensing Total
£000 £000 £000 £000 £000 £000
Cost:
At 1 January 2022 15,598 1,707 15,196 935 1,833 35,269
Additions - - - - - -
At 31 December 2022 15,598 1,707 15,196 935 1,833 35,269
Additions ** - - 2,222 - - 2,222
At 31 December 2023 15,598 1,707 17,418 935 1,833 37,491
Impairment and amortisation:
At 1 January 2022 15,598 1,707 6,965 935 1,833 27,038
Amortisation for the year * - - 1,169 - - 1,169
Disposal - - - - - -
At 31 December 2022 15,598 1,707 8,134 935 1,833 28,207
Amortisation for the year * - - 2,187 - - 2,187
Disposal - - - - - -
At 31 December 2023 15,598 1,707 10,321 935 1,833 30,394
Net carrying amount:
At 31 December 2023 - - 7,097 - - 7,097
At 31 December 2022 - - 7,062 - - 7,062
*£2.8 million of the amortisation charge is included in the loss for the year
from continued operations in the Income Statement within administrative
expenses.
The remaining unamortised life of the intangible assets at 31 December 2023 is
as follows:
· Tialis IT Essential Manage customer contracts and related
relationships - 7 years, net carrying value £5.9 million.
· Allvotec customer contracts acquired 2023 and related
relationships - 2 years, net carrying value £1.2 million.
Allvotec asset acquisition February 2023 **
On 1 February 2023, Tialis Essential IT PLC acquired the profitable partner
contracts from Allvotec Limited, a division of Daisy Group, for an initial
consideration of £2.042 million. On the same date, Tialis Essential IT Manage
Limited, a subsidiary of Tialis Essential IT PLC, acquired the same contracts
from Tialis Essential IT PLC for the consideration of £2.042 million.
In addition to the partner contracts the Company has provided for the
estimated deferred consideration of £0.1 million, onerous contract provision
of £0.08 million and subtracted £0.008 million of acquired tangible assets
to arrive at the £2.222 million addition for the year.
Company 2023 2022
£000 £000
Additions ** 2,222 -
Disposals ** (2,222) -
At 31 December - -
The company had no intangible assets at 1 January 2022 or 31 December 2022.
14 Investments
Company 2023 2022
£000 £000
At 1 January 2022 18,211 7,877
Additions - 20,211
Impairment of investment in subsidiary companies - (9,877)
At 31 December 18,211 18,211
The Company has the following investments in subsidiaries:
Country of Class of Ownership
Incorporation shares held 2023 2022
Held directly by Tialis Essential IT PLC
IDE Group Limited(2) England1 Ordinary 100% 100%
Tialis Essential IT Financing Limited England1 Ordinary 100% 100%
Held indirectly by Tialis Essential IT PLC
Tialis Essential IT Manage Limited England1 Ordinary 100% 100%
IDE Group Subholdings Limited(2) England1 Ordinary 100% 100%
IDE Group Voice Limited(2) England1 Ordinary 100% 100%
1 Registered office is located at Unit 2, Quadrant
Court, Crossways Business Park, Greenhithe, Dartford, England, DA9 9AY.
2 In solvent liquidation at the year-end 31 December
2023.
At 31 December, the only trading subsidiary of the Company was Tialis
Essential IT Manage Limited.
Tialis Essential IT Manage Limited's activity consists of IT Managed services.
The following subsidiary is non-trading.
Tialis Essential IT Financing Limited is exempt from the requirements of the
Companies Act relating to the audit of individual accounts by virtue of
Section 479A and the parent company has guaranteed all their liabilities at
the reporting date.
15 Trade and other receivables
Group Company
Current 2023 2022 2023 2022
£000 £000 £000 £000
Trade receivables 3,748 2,499 - -
Contract assets 622 664 - -
Prepayments and other receivables 650 498 - 2
Taxation and social security - - 32 77
3,661 79
5,020 32
Group Company
Non-current 2023 2022
£000 £000 2023 2022
£000 £000
Other receivables 100 100 - -
Amounts due from subsidiary undertakings - - 645 9
100 9
100 645
In accordance with IFRS 9, the Group reviews the amount of credit loss
associated with its trade receivables, and contract assets.
Customer credit risk is managed according to strict credit control policies.
The majority of the Group's revenues are derived from national or
multi-national organisations with no prior history of default with the Group.
There is low incidence of default in the top 50 customers. In respect of these
customers credit risk is deemed lower on customers that contribute higher
revenue due to an increased dependency on the group's services for business
continuity, and because they are larger more secure businesses.
The Group has applied the Simplified Approach applying a provision matrix
based on categorisation of the customer based on total revenue received by the
group per annum to measure lifetime expected credit losses and after taking
into account customers with different credit risk profiles and current and
forecast trading conditions and the days past due. The historical loss rates
will be adjusted to reflect current and forward-looking information on
macroeconomic factors affecting the ability of customers to settle the
receivables.
At period end, customers were categorised into three categories based on spend
in the last 12 months:
1. Top 10
2. Top 50
3. Other
Impairment was calculated based on the category the customer falls in to:
Category Impairment Rate Carrying amount Credit loss allowance
(net of VAT)
2023 2022 2023 2022 2023 2022
% % £000 £000 £000 £000
Top 10 0 0 3,748 2,499 - -
Top 50 2 2 - - - -
Other 5 5 - - - -
Specific 100 100 - - - -
3,748 2,499 - -
The group is exposed to credit concentration risk with its largest customer
comprising 83% (2022: 82%) of outstanding trade receivables.
Specific provisions are also made based on known issues or changes in the
lifetime expected credit loss. As at 31 December 2023, trade receivables of
£nil (2022: £nil) were impaired and fully provided for.
The creation and release of a provision for impaired receivables has been in
the main included in "administrative expenses" in the Income Statement, with
an amount being set against contract assets, £nil (2022: £nil). The other
asset classes within the Group's trade and other receivables do not contain
impaired assets.
Amounts due from subsidiary undertakings
The Company has funded the trading activities of its principal subsidiaries by
way of inter-company loans. The amounts advanced do not have any specific
terms relating to their repayment, are unsecured and are interest free. As all
loans to subsidiaries are to be treated as due on demand, they fall within the
scope of IFRS 9.
In accordance with IFRS 9, the Company is required to make an assessment of
expected credit losses. Having considered the quantum and probability of
credit losses expected to arise, management concluded that no additional
impairment charge was required for expected credit loss. There is no movement
in the provision.
The calculation of the allowance for lifetime expected credit losses requires
a significant degree of estimation and judgement, in particular in determining
the probability weighted likely outcome for each scenario considered to
determine the expected credit loss in each scenario. Should the assumptions in
the business plan vary, this could have a significant impact on the carrying
value of the intercompany loans in following periods.
The recoverability is sensitive to the probability of the achievement of
future cash flows; however, given the trading projections and the level of
provisions, there is currently no reasonably plausible scenario in which the
provision would alter materially. A breakdown of the balances is set out in
note 19.
16 Cash and cash equivalents
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Cash and cash equivalents 274 414 6 3
The table below shows the balance with the major counterparty in respect of
cash and cash equivalents.
Group Company
2023 2022 2023 2022
Credit rating £000 £000 £000 £000
A 274 414 6 3
17 Trade and other payables
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Current
Trade payables 2,431 2,719 253 536
Amounts due to subsidiary undertakings - - 5 175
Other payables -
85 - -
Taxation and social security 951 846 - -
Accruals 922 979 64 67
4,544 778
4,389 322
Amounts due to subsidiary undertakings are unsecured, interest free and are
repayable on demand.
18 Contract liabilities
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Contract liabilities recognisable within 12 months 676 51 - -
Income is deferred to the Statement of Financial Position when invoicing of
revenue to customers occurs ahead of revenue recognition in the Income
Statement.
19 Provisions
Property provision
Dilapidation provisions are built up over the associated lease based on
estimates of costs of work required to fulfil the Group's contractual
obligation under the lease agreements to return the property to the same
condition as at the commencement of the lease. The provision is not expected
to be utilised until 2027.
Other provisions
Other provisions relate to payments payable by the Group with regards to
defined benefits pension schemes in which one employee is a participant - see
note 27.
Group Property provision Other provision
Total
£000 £000 £000
Balance at 1 January 2023 245 - 245
Increase in year 42 14 56
Balance at 31 December 2023 301
287 14
2023 2022
£000 £000
Non-current 301 245
The Company has no provisions at 31 December 2023 (31 December 2022: £nil).
20 Borrowings
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Non-current
Lease liabilities 596 765 - -
Loan Notes 3,965 3,490 3,965 3,490
4,255 3,490
4,561 3,965
Group Company
2023 2022 2023 2022
£000 £000 £000 £000
Current
Lease liabilities 259 210 - -
210 -
259 -
The carrying value is not materially different to the fair value of these
liabilities.
In January 2019 the Company issued £5.3 million of secured loan notes with a
six-year term and a 12% coupon which is compounded, rolled up and payable at
the end of the term ("Loan Notes"). In February and March 2019, a further
£4.7 million in total of secured Loan Notes were issued. The Loan Notes carry
an arrangement fee of 2.5 per cent., payable at the end of the term, and an
exit fee of 2.5 per cent, also payable at the end of the term. The security
comprises a debenture over all the assets of the Group.
In December 2019 the Company issued an additional £1.5 million of Loan Notes
(with the same terms as those issued in the first quarter of the year).
The Loan Notes are held at amortised cost using the effective interest rate
method. The effective interest rate for the Loan Notes has been calculated to
be 18%.
The Company issued a further loan note ("Loan Note 2025") net of expenses for
proceeds of £1m on 1 December 2021. The terms of the loan were that the rate
of interest is 1.5% per month if repaid by 31 January 2022, 2.5% per month if
repaid by 28 February 2022 and 3% per month if repaid by 31 March 2022. If
not repaid by 31 March 2022 the amount due at that date including fees
(£1.1875m) is then subject to interest at 20.4% per annum compound. The
maturity date is 23 December 2025. The Loan Note 2025 was included in the 2
November 2022 conversion.
On 2 November 2022 the members meeting at the Annual General Meeting, and then
at the General Meeting that followed, voted to convert £25.5 million of loan
notes (including fees and interest) into share capital. Details of the capital
reorganisation and consolidation are set out in Note 25.
Lease liabilities
The present value of lease liabilities is as follows:
31 December 2023
Group Gross contractual amounts payable Interest
Carrying amount
2023 2023 2023
£000 £000 £000
Less than one year 331 72 259
Between one and five years 672 76 596
148
1,003 855
31 December 2022
Group Gross contractual
amounts Carrying
payable Interest amount
2022 2022 2022
£000 £000 £000
Less than one year 288 78 210
Between one and five years 894 129 765
207
1,182 975
The Company has no lease liabilities at 31 December 2023 (31 December 2022:
nil)
Reconciliation of borrowings:
Group Non-current Lease liabilities Current Lease liabilities Non-current Borrowings Convertible Loan Notes Supplier Finance Total Borrowings
£000 £000 £000 £000 £000 £000
Balance at 1 January 2023 765 210 3,490 143 1,091 5,699
Non-cash changes
Transfer from current to non-current (169) 169 - - - -
New finance leases - 105 - - - 105
Loan note interest - - 475 9 - 484
Interest - - - - 90 90
Lease interest - 84 - - - 84
Cash flows
Lease interest paid - (84) - - - (84)
Repayment - - - (152) (281) (433)
Repayment of lease liabilities - (225) - - - (225)
Balance at 31 December 2023
596 259 3,965 - 900 5,720
The total cash outflow for leases in the year including interest was £309,000
(2022: £384,000).
Company Lease liabilities Current Borrowings Non-current Borrowings Total Borrowings
£000 £000 £000 £000
Balance at 1 January 2023 - - 3,490 3,490
Non-cash changes
Loan note interest - - 475 475
Balance at 31 December 2023
- - 3,965 3,965
21 Convertible loan notes
Group and Company
£000
Balance at 1 January 2023 143
Interest unwound 9
Loan repaid August 2023 (152)
Balance at 31 December 2023 -
On 21 August 2018, as part of a wider fundraising, the Company issued £2.55
million of unsecured loan notes, which have a term of 5 years and a zero per
cent coupon ("CLNs"). The CLNs can be converted into new ordinary shares in
the capital of Tialis Essential IT plc at a price of 2.5 pence per share.
Conversion is at the option of the holder at any time during the 5-year term.
At the end of the term, if the holder has not chosen to convert the CLNs, the
CLNs will be settled with a cash repayment. At issue, the CLNs have a fair
value of £2.54 million, split into an equity component (£0.96 million) and a
debt component (£1.58 million).
On 7 June 2022 £2,397,519 of the unsecured convertible loan notes issued in
August 2018 were converted into 95,900,760 Ordinary shares of 2.5p each, at a
conversion price of 2.5p per share.
On 21 August 2023 the CLNs were repaid.
22 Financial instruments by category
The objectives of the Group's treasury activities are to manage financial
risk, secure cost-effective funding where necessary and minimise adverse
effects of fluctuations in the financial markets on the value of the Group's
financial assets and liabilities, on reported profitability and on cash flows
of the Group.
The Group's principal financial instruments for fundraising are convertible
loan notes and loan notes. The Group has various other financial instruments
such as cash, trade receivables and trade payables that arise directly from
its operations.
Group
2023 2022
Assets £000 £000
Amortised cost:
Trade receivables net of credit loss provision 3,748 2,499
Contract assets 622 664
Other receivables 650 498
Cash and cash equivalents 274 414
Total 5,294 4,075
Company
2023 2022
Assets £000 £000
Amortised cost:
Amounts due from subsidiary undertakings 645 9
Cash and cash equivalents 6 3
Total 651 12
The carrying amount of these assets is equivalent to their fair value. At 31
December 2023, trade receivables are reported net of the expected credit loss
provision of £nil (2022: £nil), amounts due from subsidiary undertakings are
reported net of the expected credit loss provision of £nil (2022: £nil).
Group
2023 2022
Liabilities at amortised cost £000 £000
Trade payables 2,431 2,719
Accruals and other payables 1,007 979
Lease liabilities 855 975
Convertible loan notes - 143
Loan Notes 3,965 3,490
Total 8,258 8,306
Company
2023 2022
Liabilities £000 £000
Trade payables 253 536
Accruals and other payables 64 67
Intercompany payables 5 175
Convertible loan notes - 143
Loan Notes 3,965 3,490
Total 4,287 4,411
The carrying amount of these liabilities is equivalent to their fair value.
The Group has not entered into any derivative financial instruments in the
current or preceding period.
23 Financial risk management
The Group's activities are exposed to a variety of financial risks: market
risk (including cash flow interest rate risk and price risk), credit risk and
liquidity risk. The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise potential adverse
effects on the Group's financial performance.
Risk management is carried out centrally under policies approved by the Board
of Directors. Management identifies, evaluates and seeks to mitigate financial
risks. The Board of Directors provides principles for overall risk management
as well as policies covering specific areas, such as foreign exchange risk,
interest rate risk, credit risk, use of derivative financial instruments and
non-derivative financial instruments, and investments of excess liquidity.
Cash flow interest risk
The Group pays interest on its borrowings.
The Group has no borrowings at variable rates which would expose the Group to
cash flow interest rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk. The Group does not enter into
derivatives.
Price risk
The Group is not exposed to significant commodity or security price risk.
Credit risk
Credit risk is managed at a subsidiary level. Credit risk arises from cash and
cash equivalents as well as credit exposures to customers, including
outstanding receivables. Individual risk limits are set based on internal and
external ratings and reviewed by management. The utilisation of credit limits
is regularly monitored with appropriate action taken by management in the
event of the breach of a credit limit. The Group has applied the simplified
approach applying a provision matrix based on number of days past due to
measure lifetime expected credit losses and after taking into account
customers with different credit risk profiles and current and forecast trading
conditions. The Group has recognised a provision in respect of trade
receivables of £nil (2022: £nil).
Liquidity risk
Management reviews cash forecasts of trading companies of the Group in
accordance with practice and limits set by the Group. The Group's liquidity
management policy involves projecting cash flows and considering the level of
liquid assets necessary to meet these.
The parent company's operations expose it to the following risks:
Interest rate risk
The Company pays interest on its loan note borrowings. These are at fixed
rates and therefore there is no exposure to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Company to fair value interest
rate risk. The Company does not enter into derivatives.
Credit risk
The Company is exposed to credit risk mainly in respect of inter-company
receivables. Details of the approach to credit loss provisions in respect of
intercompany receivables is set out in note 15 and note 24.
The tables below analyse the Group and the Company's financial liabilities
into relevant maturity groupings based on the remaining period at the balance
sheet date to the contractual maturity date. These amounts disclosed in the
table are the contracted undiscounted cash flows. Balances within 12 months
equal their carrying balances as the impact of discounting is not significant.
Group
Within 1 year 1-2 years More than 2 years Total
At 31 December 2023 £000 £000 £000 £000
Trade and other payables 4,389 - - 4,389
Lease liabilities 259 596 - 855
Loan Notes - 3,965 - 3,965
4,648 9,209
4,561 -
Group
Within 1 year 1-2 years More than 2 years Total
At 31 December 2022 £000 £000 £000 £000
Trade and other payables 4,544 - - 4,544
Lease liabilities 210 728 37 975
Convertible loan notes 143 - - 143
Loan Notes - - 3,490 3,490
4,897 728 9,152
3,527
Company
Within 1 year 1-2 years More than 2 years Total
At 31 December 2023 £000 £000 £000 £000
Trade and other payables 253 - - 253
Intercompany payables 5 - - 5
Loan Notes - 3,965 - 3,965
258 3,965 - 4,223
Company
Within 1 year 1-2 years More than 2 years Total
At 31 December 2022 £000 £000 £000 £000
Trade and other payables 536 - - 536
Intercompany payables 175 - - 175
Convertible loan notes 143 - - 143
Loan Notes - - 3,490 3,490
854 - 3,490 4,344
24 Capital risk management
The Group's objectives when managing capital are to safeguard the Group's
future growth and its ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital structure
to reduce the cost of capital. The Group operates in the network and cloud
hosting sector, which, from time-to-time requires substantial fixed asset
investments, but the Group is financed predominately by equity.
In order to maintain or adjust the capital structure, the Group has previously
both issued new shares, bank debt and bank facilities, and both unsecured and
secured loan notes. The Group monitors capital on the basis of the ratio of
net debt to Adjusted EBITDA. As at 31 December 2023 the ratio was 2.3. Net
debt as at 31 December 2023 is calculated as total bank borrowings, as at 31
December 2023 nil, and loan notes (including 'current and non-current
borrowings' as shown in the consolidated balance sheet), plus loans, less cash
and cash equivalents. Adjusted EBITDA is defined as earnings before interest,
tax, depreciation, amortisation, impairment charge, non-underlying items,
(loss)/gain on disposal of fixed assets and share-based payments.
The loan note instrument under which the Secured Loan Notes were issued does
not contain any covenants, however, the Group continues to carefully monitor
its capital position. The Group adopts a risk-averse position with respect to
borrowings and maintains significant headroom to ensure that any unexpected
situations do not create financial stress.
The Group has not proposed a dividend for the current or prior year.
25 Called up share capital - Group and Company
Shares issued and fully paid 2023 2022
£000 £000
24,222,744 (2022: 21,829,449) Ordinary shares at 1p 242 218
496,702,800 (2022: 496,702,800) deferred shares at 2.49p 12,368 12,368
Shares issued and fully paid 12,610 12,586
Shares issued and fully paid 2023 2022
£000 £000
Beginning of the year 12,586 12,418
Issued during 2023 to acquire Allvotec assets (see note 13). 23 -
Issued during the year on conversion of secured loan notes (see below) - 167
Issued during the year in lieu of 2021 staff bonus (see below) 1 1
Shares issued and fully paid 12,610 12,586
Share capital allotted, called up and fully paid 2023 2023 2022
No. Ordinary Shares No. Deferred Shares No. Shares
Beginning of the year 496,702,792 shares at 2.5p 21,829,449 496,702,800 496,702,792
Issue to the Company Secretary of 8 new shares at 2.5p - - 8
Sub-division of 496,702,780 shares into a redenominated 0.01p share and a - - 496,702,800
deferred share 2.49p
Consolidation of 496,702,800 redenominated 0.01p share to 4,967,028 shares at - - (491,735,772)
1p
Issue of 104,000 shares at 1p in lieu of 2021 staff bonus (first and second 104,000 - 104,000
tranche of three tranches)
Issue of 16,758,421 shares at 1p on conversion of secured loan notes - - 16,758,421
Issue of 2,289,295 to acquire Allvotec (see Note 13) 2,289,295 - -
End of the year 24,222,744 496,702,800 518,532,249
The par value of the shares new Ordinary shares is 1p and the Deferred shares
is 2.49p (2021: old Ordinary shares 2.5p).
The holders of ordinary shares are entitled to receive dividends as declared
from time to time and are entitled to one vote per share at meetings of the
Company.
The holders of Deferred shares are not entitled to receive dividends, nor are
they entitled to vote. The holders of Deferred shares are entitled to £1 for
the entire class on winding up. The Company at anytime may, at its option,
redeem all the Deferred shares for £1. The Directors consider the Deferred
shares of no economic value.
On 3 February 2023 2,289,295 new Ordinary 1p shares were allocated to acquire
the assets and liabilities of Allvotec (see note 13).
On 31 May 2023 104,000 new Ordinary 1p shares were allotted to a member of
staff in lieu of one-third of his 2021 bonus.
As at 31 December 2023 the Company has a total number of shares in issue of
520,925,544 with a total nominal value of £12,610,127. The Company has
24,222,744 new Ordinary shares of 1p and 496,702,800 Deferred shares of 2.49p.
26 Share-based payments
The share-based payment charge comprises:
2023 2022
£000 £000
Equity-settled share-based charges arising from share options 11 -
Total charge 11 -
On 15 December 2023 the Company granted a total of 1,547,288 share options to
executive directors, senior managers, employees and consultants of the Company
(the "Share Options"). Of the total Share Options, 400,000 were granted to
Andy Parker, Executive Chairman, and 400,000 were granted to Ian Smith,
Executive Director. The award of the Share Options is part of Tialis' Long
Term Incentive Plan ("LTIP") and is designed to retain and motivate the senior
leadership team, employees and consultants. Under the rules of the LTIP, the
Share Options are being granted at nil cost or the nominal value of the
Company's ordinary shares of 1p each and are subject to vesting rules (the
"Vesting Rules").
Under the Vesting Rules, the Share Options vest as follows:
- the second anniversary of the Grant Date: One-third of Award vests;
- the third anniversary of the Grant Date: Two-thirds of Award vests; and
- the fourth anniversary of the Grant Date: Remainder of Award vests.
The shares cannot be issued until the Group releases them in accordance with
the rules of the LTIP. If the relevant trading company of Tialis is sold or
the overall Group is taken over, the award will vest and be released in full,
subject to the detailed rules of the LTIP. It is at this point that the
employee can realise the value of their Share Options.
The resulting interests of Andy Parker and Ian Smith in Tialis can be
summarised as follows:
Director Ordinary shares of 1p held % of issued share capital LTIP Options held prior to this award LTIP Options awarded
Andy Parker - - - 400,000
Ian Smith* 293,000 1.21% - 400,000
* Ian Smith is also the Chief Executive Officer and major shareholder of MXC
Capital Limited ("MXC") whose holding of 18,204,685 Ordinary Shares represents
75.16% of the Company's issued ordinary share capital. Ian Smith and MXC hold
in aggregate 18,497,685 Ordinary Shares, representing 76.36% of the Company's
issued ordinary share capital.
Following the grant of Share Options, there is a total of 1,547,288 Share
Options outstanding, representing approximately 6.39% of the current issued
share capital of the Company with an Exercise Price of 1p.
In determining the fair value of the share options granted during the year,
the Company assessed the historical share price volatility associated with the
Company's share price. The fair value of options issued during the year were
calculated using a Black-Scholes model. The share price at grant date was 62p
per share and no dividend yield was expected.
27 Pensions
The Group operates a defined contribution pension scheme. The assets of the
scheme are held separately from those of the Group in an independently
administered fund. The pension cost charge represents contributions payable by
the Group to the fund and amounted to £0.9 million for the year ended 31
December 2023 (year ended 31 December 2022: £0.7 million). Contributions
totalling £0.1 million (31 December 2022: £0.1 million) were payable to the
fund at 31 December 2023 and are included in creditors: amounts due within one
year.
In addition, the Group operates two individual defined benefit pension
schemes; details of each are noted below.
The Mercer DB Master Trust - Tialis Group Limited Section
This scheme is open. It has one individual who is no longer employed by the
Group and as a result is a deferred member. The value of plan assets is £0.04
million. The value of plan liabilities is £0.02 million. Total net assets are
£0.02 million and the funding level is 189%. Due to the size and nature of
the scheme, and the fact that the funding is a positive position, and the
Directors are not certain that the Group will get a recovery on the scheme, so
therefore no amounts have been provided in the accounts.
The impact on the statement of comprehensive income for this scheme was £0.02
million during the year ended 31 December 2023. (31 December 2022: £0.02
million). This is in relation to fees. In addition, in the year ending 31
December 2022, the Group paid £0.009 million in employer's pension
contributions.
The assets are held as follows:
£000 %age
Mercer Flex LDI Real Enhanced Match 10 27
Mercer Diversified Growth Fund 13 34
Mercer Passive Global Equity CCF 10 26
Net Current Assets 5 13
Total Assets 38 100
Future funding obligations
The Trustees are required to carry out an actuarial valuation every 3 years.
The last actuarial valuation of the Schemes was performed by the Scheme
Actuary for the Trustees as at 5 April 2023.
Refer to other commitments, note 30 for the fees funding position going
forward.
Railways Pension Scheme - Omnibus Section
This scheme is open. It has one individual who is employed by the Group and as
a result is an active member. No further deficit contribution commitment will
be sought outside of the Trustees have estimated Tialis would need to pay in
the event the employee left the scheme or retired.
The Trustees have estimated that Tialis would need to provide an additional
amount of £0.01 million for every £0.01 million of pension contributions
paid. The Company has therefore provided an additional amount of £0.01
million, which can be seen in the Provisions note 19.
The impact on the statement of comprehensive income for this scheme was £0.02
million during the year ended 31 December 2023. (31 December 2022: £0.003
million). This is in relation to the employer's contributions and the
provision noted above.
Future funding obligations
The Trustees are required to carry out an actuarial valuation every 3 years.
The last actuarial valuation of the Schemes was performed by the Scheme
Actuary for the Trustees as at 31 December 2022.
28 Related parties
Key management comprise of the Directors, Chief Financial Officer, the Group
Managing Director, and the Group Director. Directors' emoluments are disclosed
in note 9.
Key management personnel
Total remuneration for key management personnel 2023 2022
£000 £000
Compensation 525 622
Social security 90 19
Pension contributions to money purchase pension scheme 44 73
Total 659 714
Number of key management personnel accruing benefits under defined 4 3
contributions
Ian Smith, Executive Director at 31 December 2023, held 1.21% (2022: 0.54%)
through his Self-Invested Pension Plan. Ian Smith is also Chief Executive
Officer and a substantial shareholder of MXC Capital Limited (MXC). MXC owned
75.2% (2022: 83.4%) of the issued share capital of the Company at 31 December
2023. Together, Ian Smith and MXC owned 76.4% (2022: 83.9%) of the issued
share capital of the Company at 31 December 2023.
During the year, the Group and Company paid MXC Capital Markets LLP, a
subsidiary of MXC, for corporate finance advice and other services amounting
to £30,000 (2022: £94,800). The balance owed to MXC Capital Markets LLP as
at 31 December 2023 was
£15,000 (2022: £33,000).
In addition, the Group paid MXC Advisory Limited, a subsidiary of MXC, fees of
£221,000 (2022: £221,000) in respect of the services of Ian Smith as
Executive Director. The balance owed to MXC Advisory Limited as at 31 December
2023 was £110,500 (2022: £265,200).
The Group also paid MXC Guernsey Limited, a subsidiary of MXC Capital Limited
in the past in respect of underwriting of loan notes and guarantee fee of the
finance leases with Lombard. The balance owed to MXC Guernsey as at 31
December 2023 was £nil (2022: £nil).
The Company had the following balances with its subsidiary companies:
2023 2022
Receivables £000 £000
Tialis Essential IT Manage Limited 636 -
IDE Group Protect Limited 9 9
Total 645 9
2023 2022
Payables £000 £000
Tialis Essential IT Mange Limited - 66
Selection Services Limited - 61
Hooya Digital Limited - 42
Connexions4London Limited 5 5
Aggregated Telecom Limited 1 1
Total 6
175
29 Contingent liabilities
There was a contingent liability in the prior year in respect of tax owed of
£819,047 by a former owner, when the business was privately owned relating to
a tax scheme from 2006. This was settled by the individual in 2023. The Board
is confident there will be no recourse to the Group as the Group would only
have a liability if the individual was unable to pay.
30 Other commitments
The Group has signed an agreement for the administration of the defined
benefit pension with Mercer Trust with regards to an employee. Tialis has an
obligation under this agreement to continue to remit £2,000 per month for
management and administration charges until the employee either withdraws from
the pension or retires. A commitment of £288,000 based on his retirement date
of 2036 (12 years x £24,000 pa) has been estimated by the Board.
31 Post balance sheet events
There are no post balance sheet events.
32 Ultimate controlling party
MXC Capital Limited (MXC) is the ultimate controlling party and, at 31
December 2023, owned 75.2% of the issued share capital and voting rights of
the Company. There is no ultimate controlling party of MXC.
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