technology services group limited accounts fy16.pdftechnology services group limited strategic...

Company Registration No. 04816673

Technology Services Group Limited

Annual Report and Financial Statements

For the year ended 31 March 2016


Annual report and financial statements


Contents Page

Strategic report 1

Directors’ report 4

Directors’ responsibilities statement 6

Independent auditor’s report 7

Consolidated profit and loss account 9

Consolidated statement of total comprehensive income 10

Consolidated balance sheet 11

Company balance sheet 12

Consolidated statement of changes in equity 13

Company statement of changes in equity 14

Consolidated cash flow statement 15

Notes to the financial statements 16


Strategic report

1

The principal activity of the Group and Company is the provision of IT solutions and support to UK businesses.

Background

Technology Services Group Limited (“TSG”) provides best of breed IT Solutions to businesses throughout the UK.

In addition, the Group and Company develops software applications suitable for certain vertical markets.

Results

A summary of the results for the year and prior year is as follows:

Year to

31 March

2016

Year to

31 March

2015

Turnover (£’000) 34,554 36,267

Recognised recurring revenue * (shown as % of turnover) 60.6% 56.2%

Gross profit (£’000) 13,499 13,855

Gross profit (%) ** 39.1% 38.2%

Adjusted Operating profit (£’000) *** 387 67

Adjusted EBITDA (£’000) **** 688 511

Cash generated/(absorbed) by operating activities (£’000) 61 (1,734)

* recognised revenue from recurring income streams which renew at the end of each period of supply

** after allocation of service and support delivery salary costs

*** before goodwill amortisation and exceptional costs

**** earnings (operating result) before interest, taxation, exceptional items, non-cash share based payments,

depreciation and amortisation of goodwill and development costs

In addition to the Company's key performance results shown above, the Company monitors performance against a

number of benchmarks which enables the board to measure progress in the business. In selecting these key performance

indicators (“KPIs”) the board considers both financial and non-financial measures which link directly to the corporate

objectives. Measures range from evaluating the efficiency of the sales, service and business support teams to customer

and employee satisfaction.

The board has continued to execute the business strategy to decrease the level of fixed costs, whilst maintaining the

highest standard of support, implementation and consultancy services to the business’s established customer base. The

result of this action is an increase in operating profit (pre goodwill amortisation and exceptional costs – see note 4) to

£387,000 (2015: £67,000). There has also been a significant turnaround in cash generated by operating activities, the

business generated £61,000 in 2016 (2015: £1,734,000 absorbed). A key component of the business strategy is to build

our presence in London, we have expanded the sales engagement team during the year and opportunity pipeline

continues to build. We expect to see strong returns on this investment in the coming year.

As with last year, the 5% drop in turnover is not unexpected. The successful implementation of a decision by the board

to put greater focus upon rebuilding our recurring income streams (including subscription and cloud services) as

opposed to project based service delivery continues to impact our turnover growth. As the business continues to win

new subscription, support and cloud service business, this turnover decline is expected to plateau, and at the same time

allowing the business to rely on a consistent and reliable contractual income stream.


Strategic report (continued)

2

Results (continued)

The result of this continued focus is that Monthly Recurring Revenues (“MRR”) now account for 60.6% of total

turnover, up from 56.0% last year. Monthly Recurring Revenues represent recurring revenues recognised in a chosen

month from income streams which renew at the end of a predefined period of supply. The growth and development of

high quality recurring income streams, based on customer loyalty and owned IP, is a key element of the board’s strategy.

The Company continues its investment in product development and during the year the business invested an additional

£578,000 in Tribe and Traveller, the former is a feature-rich membership management product built on Microsoft CRM,

the latter a complaints management system designed specifically for the travel industry. These products, supplement

existing offerings, and are predominantly sold on a subscription basis. Whilst no material income has been recognised

in the year, these products are now being deployed in live environments and once established the board firmly believes

it will add to the size and quality of TSG’s recurring income streams.

Following significant investments in R&D an operating profit (before goodwill amortisation and exceptional costs) of

£387,000 was reported (2015: £67,000) and Adjusted EBITDA was a £688,000 profit compared to £511,000 in the

previous year.

During the year our principal shareholder injected a further £1,000,000 in the form of repayable loans in the business

to finance the costs of restructuring which is an indicator of his support in both the strategy of the business and the

board’s ability to execute it successfully.

Risk and uncertainties

The operation of the Company involves a series of risks and uncertainties across a range of strategic, commercial,

operational and financial areas. As an organisation which has grown primarily through acquisition, TSG faces specific

challenges around the need to develop and improve control systems which keep pace with the planned growth of the

business. The Company therefore has a set of internal controls and risk management processes that are designed to

identify and provide assurance over the key risks and uncertainties faced by the Company. They cannot however seek

to avoid all risks.

Outlined below are the potential risks that could have a material impact on the Company’s performance.

Customers and Competitors

The Company manages the risks presented by its customer base and the competitive environment that characterises

the market place through delivery of high quality services designed to meet customer needs. During the period

significant investment has been made in an integrated support and remote end point management suite, which will

deliver an improved customer experience and deliver further operating efficiencies.

Changes in technology

The Company manages risks presented by changes in technology by engaging with software and hardware vendors

at senior level. In addition, the Company has a Chief Technology Officer to ensure that future technology trends

are planned into product and service development activities.

Employees – retention and recruitment

Reward, assessment, training and communication programmes are used to retain and attract suitably experienced

employees. Failure to retain and recruit employees could impact the Company’s ability to meet its service

obligations.

Liquidity

The Company maintains a significant equity base and further finances its operations through a mixture of cash

generation and director’s loans. The Company’s principal financial assets are cash, trade and other debtors. These

balances are actively monitored to avoid significant concentrations of credit risk. In order to manage credit risk

customer credit limits are set based on a combination of payment history and third party credit references. These

credit limits are reviewed on a regular basis in conjunction with debt ageing and collection history. Detailed cash

forecasting is also used to manage financial risk and ensuring sufficient liquidity is available to meet the foreseeable

needs of the business.


Strategic report (continued)

3

Going concern

After making enquiries, the directors have a reasonable expectation that the Group and Company will have adequate

financial resources to continue in operational existence for the foreseeable future. Accordingly, they consider it

appropriate to continue to prepare the financial statements on a going concern basis.

As described above, the current economic environment creates an element of uncertainty over demand for the Group

and Company’s products and services. However, the Company’s forecasts and projections, taking account of

reasonably possible changes in trading performance, show that the Group and Company are expected to have sufficient

financial resources available through the facilities currently in place and expected to be available. In addition, the

directors are confident that they will have the continued financial support of the principal shareholder for the foreseeable

future. The directors believe that the Group and Company are well placed to manage its business risks successfully

despite the economic uncertainty.

Future prospects

The IT needs of businesses are changing as Cloud based services gain both credence and traction and clients seek a mix

of on and/or off premise commoditised or bespoke solutions to fit their business requirements. TSG has the strategy,

structure, product suite and, most importantly, people to deliver in this changing market place.

The business has taken, and will continue to take, steps to ensure profitability yet deliver an improving customer

experience.

Proposed dividend

The directors do not recommend the payment of a dividend (2015: nil).

By order of the board

D C Stonehouse

Director

One Gosforth Parkway

Gosforth Business Park

Newcastle upon Tyne

NE12 8ET

7th December 2016


Directors’ report

4

The principal risks and uncertainties, the Company’s research and development activities, and an indication of future

developments in the company have been discussed within the Strategic Report.

Directors

The directors who held office during the financial year and up to the date of signing the financial statements except as

otherwise detailed were as follows:

David Stonehouse

Graham Wylie

Steve Cox (resigned 30 June 2016)

Employees

The directors have always recognised the importance of good communications and have continued to inform and consult

with employees on all matters likely to affect them. Regular staff meetings are held to enable information to be

disseminated to all employees. There is also an annual staff survey conducted to ensure employees have an effective

mechanisim to provide feedback to the directors.

The Company recognises its social and statutory obligation with respect to the employment of disabled persons, and

considers such persons for employment where the requirements of the job are such that the duties can be effectively

and safely covered by a handicapped or disabled person. In the event of employees becoming disabled, every effort is

made to ensure that their employment with the Company continues, bearing in mind the handicap or disability.

The need to develop the careers of disabled employees is accepted by the Company and the necessary steps are taken

to train and promote disabled employees where it is in their own and the Company’s best interest.

Directors indemnities

The Company has made qualifying third party indemnity provisions for the benefit of its directors which were made

during the year and remain in force at the date of this report.

Disabled employees

Applications for employment by disabled persons are always fully considered, bearing in mind the abilities of the

applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their

employment with the Group continues and that appropriate training is arranged. It is the policy of the Group and the

Company that the training, career development and promotion of disabled persons should, as far as possible, be identical

to that of other employees.

Disclosure of information to auditor

The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware,

there is no relevant audit information of which the Company’s auditor is unaware; and each director has taken all the

steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to

establish that the Company’s auditor is aware of that information.

Auditor

Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and Deloitte LLP

will therefore continue in office.


Directors’ report

5

Strategic Report

The directors have chosen in accordance with section 414C(11) of the Companies Act 2006 to include in the Strategic

Report matters otherwise required to be disclosed in the Directors' Report as the directors consider these are of strategic

importance to the company, including the fair review of the business, future developments, research and development,

principle risks and uncertainties, key performance indicators and going concern.

By order of the board

D C Stonehouse

Director

One Gosforth Parkway

Gosforth Business Park

Newcastle upon Tyne

NE12 8ET

7th December 2016


Directors’ responsibilities statement

6

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable

law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law they have

elected to prepare the Group and parent company financial statements in accordance with UK Accounting Standards

and applicable law (UK Generally Accepted Accounting Practice), including FRS 102 “The Financial Reporting

Standard applicable in the UK and Republic of Ireland”.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a

true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period. In

preparing each of the Group and parent company financial statements, the directors are required to:

select suitable accounting policies and then apply them consistently;

make judgments and accounting estimates that are reasonable and prudent;

state whether applicable UK Accounting Standards have been followed, subject to any material departures

disclosed and explained in the financial statements; and

prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group

and the parent company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent

company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company

and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible

for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of

fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on

the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements

may differ from legislation in other jurisdictions.

7

Independent auditor’s report to the members of Technology Services

Group Limited

We have audited the financial statements of Technology Services Group Limited for the year ended 31 March 2016

which comprise the Consolidated profit and loss account, the Consolidated statement of comprehensive income, the

Consolidated and Parent Company balance sheets, the Consolidated and Parent Company statement of changes in

equity, the Consolidated cash flow statement and the related notes 1 to 25. The financial reporting framework that has

been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom

Generally Accepted Accounting Practice), including FRS 102 “The Financial Reporting Standard applicable in the UK

and Republic of Ireland”.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the

Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those

matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted

by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a

body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditor

As explained more fully in the Directors’ responsibilities statement, the directors are responsible for the preparation of

the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and

express an opinion on the financial statements in accordance with applicable law and International Standards on

Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards

for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give

reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or

error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent

company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of

significant accounting estimates made by the directors; and the overall presentation of the financial statements. In

addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies

with the audited financial statements and to identify any information that is apparently materially incorrect based on,

or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become

aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2016 and

of the group’s loss for the year then ended;

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matter prescribed by the Companies Act 2006

In our opinion the information given in the Strategic report and the Directors’ report for the financial year for which

the financial statements are prepared is consistent with the financial statements.

8

Independent auditor’s report to the members of

Technology Services Group Limited (continued)

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to

you if, in our opinion:

adequate accounting records have not been kept by the parent company, or returns adequate for our audit have

not been received from branches not visited by us; or

the parent company financial statements are not in agreement with the accounting records and returns; or

certain disclosures of directors’ remuneration specified by law are not made; or

we have not received all the information and explanations we require for our audit.

Matthew Hughes Bsc (Hons) ACA (Senior Statutory Auditor)

for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor

Newcastle, United Kingdom

7th December 2016


Consolidated profit and loss account


9

Notes 2016 2015

£’000 £’000

Turnover 3 34,554 36,267

Cost of sales (21,055) (22,412)

Gross profit 13,499 13,855

Administrative expenses* (14,181) (15,077)

Operating loss (682) (1,222)

Interest receivable 7 - 1

Interest payable and similar charges 8 (69) (113)

Loss on ordinary activities before taxation 4 (751) (1,334)

Tax on loss on ordinary activities 9 189 (100)

Loss for the financial year (562) (1,434)

* includes exceptional costs of £526,000 (2015: £778,000) (note 4).


Consolidated statement of comprehensive income


10

2016

£’000

2015

£’000

Loss for the financial year (562) (1,434)

Other comprehensive income - -

Total comprehensive loss for the year (562) (1,434)


Consolidated balance sheet

As at 31 March 2016

11

Notes

2016

£’000

2016

£’000

2015

£’000

2015

£’000

Fixed assets

Intangible assets

Goodwill 10 6,405 6,625

Development costs 10 1,612 1,034

8,017 7,659

Tangible assets 11 829 822

8,846 8,481

Current assets

Stocks 13 543 515

Debtors

- due within one year

14

5,662

8,785

- due after one year 14 - 16

Cash at bank and in hand 72 84

6,277 9,400

Creditors: amounts falling due within one year 15 (8,015) (8,224)

Net current (liabilities)/assets (1,738) 1,176

Total assets less current liabilities 7,108 9,657

Creditors: amounts falling due after more

than one year

16

(1,000)

(338)

Deferred Income

17

(4,039)

(6.677)

Net assets 2,069 2,642

Capital and reserves

Called up share capital 19 40,441 40,441

Share premium account 7,091 7,091

Profit and loss account (45,463) (44,890)

Shareholders’ funds 2,069 2,642

The financial statements of Technology Services Group Limited (registered number 04816673) were approved by the

Board of Directors and authorised for issue on 7th December 2016 and were signed on its behalf by:

D C Stonehouse

Director


Company balance sheet

As at 31 March 2016

12

Notes

2016

£’000

2016

£’000

2015

£’000

2015

£’000

Fixed assets

Intangible assets

Goodwill 10 5,919 6,118

Development costs 10 1,612 1,034

7,531 7,152

Tangible assets 11 829 822

Investments 12 8,752 8,752

17,112 16,726

Current assets

Stocks 13 543 515

Debtors

- due within one year

14 5,662

8,785

- due after one year 14 - 16


6,277

9,400

Creditors: amounts falling due within one year 15 (16,767) (16,975)

Net current liabilities (10,490) (7,575)

Total assets less current liabilities 6,622 9,151

Creditors: amounts falling due after more than

one year

16

(1,000)

(338)

Deferred Income

17

(4,039)

(6,677)

Net assets 1,583 2,136

Capital and reserves

Called up share capital 19 40,441 40,441

Share premium account 7,091 7,091

Profit and loss account (45,949) (45,396)

Shareholders’ funds 1,583 2,136

The financial statements of Technology Services Group Limited (registered number 04816673) were approved by the

Board of Directors and authorised for issue on 7th December 2016 and were signed on its behalf by:

D C Stonehouse

Director


Company balance sheet

As at 31 March 2016

13

Called up

share capital

£’000

Share

premium

account

£’000

Profit and

loss account

£’000

Total

£’000

Balance at 31 March 2014 (as previously stated) 38,441 7,091 (43,243) 2,289

Changes on transition to FRS 102 (see Note 25) - - (226) (226)

Balance at 1 April 2014 38,441 7,091 (43,469) 2,063

Loss for the year - - (1,434) (1,434)

Total comprehensive loss - - (1,434) (1,434)

Issue of share capital (Note 19) 2,000 - - 2,000

Credit to equity for equity settled share

based payments (Note 23)

-

-

13

13

Balance at 31 March 2015 40,441 7,091 (44,890) 2,642

Loss for the year - - (562) (562)

Total comprehensive loss - - (562) (562)

Issue of share capital (Note 19) - - - -

Debit to equity for equity settled share

based payment (Note 23)

-

-

(11)

(11)

Balance at 31 March 2016 40,441 7,091 (45,463) 2,069


Company statement of changes in equity

As at 31 March 2016

14

Called up

share capital

£’000

Share

premium

account

£’000

Profit and

loss account

£’000

Total

£’000

Balance at 31 March 2014 as previously stated 38,441 7,091 (43,769) 1,763

Changes on transition to FRS 102 (Note 25) - - (226) (226)

Balance at 1 April 2014 as restated 38,441 7,091 (43,995) 1,537

Loss for the year and

total comprehensive loss

-

-

(1,414)

(1,414)

Issue of share capital (Note 19) 2,000 - - 2,000

Credit to equity for equity settled share

based payments (Note 23)

-

-

13

13

Balance at 31 March 2015 40,441 7,091 (45,396) 2,136

Loss for the year and

total comprehensive loss

-

-

(542)

(542)

Issue of share capital (Note 19) - - - -

Debit to equity for equity settled share

based payment (Note 23)

-

-

(11)

(11)

Balance at 31 March 2016 40,441 7,091 (45,949) 1,583


Consolidated cashflow statement


15

Note

2016

£’000

2015

£’000

Net cash flows from operating activities 22 61 (1,734)

Cash flows from investing activities

Purchase of equipment (322) (246)

Interest received - 1

Tax received/(paid) 226 (6)

Research and development costs (578) (378)

Purchase of goodwill - (3)

Payments in respect of previous acquisitions (324) -

Net cash flows from investing activities (998) (632)

Cash flows from financing activities

Repayments of borrowings (300) (251)

Proceeds on issue of shares - 2,000

Bank and director loan interest paid (69) (114)

New directors loans raised 1,000 -

Repayments of obligations under finance lease rentals (19) -

Net cash flows from financing activities 612 1,635

Net decrease in cash and cash equivalents (325) (731)

Cash and cash equivalents at beginning of year (1,173) (442)

Effect of foreign exchange rate changes - -

Cash and cash equivalents at end of year (1,498) (1,173)

Reconciliation to cash at bank and in hand:


Bank loans and overdrafts (1,570) (1,257)

Cash and cash equivalents (1,498) (1,173)


Notes to the financial statements


16

1. Accounting Policies

The priciple accounting policies are summarised below. They have been applied consistently in the current and

preceding year.

General information and basis of accounting

Technology Services Group Limited is a company incorporated in the United Kingdom under the Companies Act. The

address of the registered office is given on pages 3 and 4. The nature of the group’s operations and its principal activities

are set out in the strategic report on pages 1 to 3.

The financial statements have been prepared under the historical cost convention, modified to include certain items at

fair value, and in accordance with Financial Reporting Standard 102 (FRS 102) issued by the Financial Reporting

Council.

The prior year financial statements were restated for material adjustments on adoption of FRS 102 in the current year.

For more information see note 25.

Business combinations that took place prior to the date of transition have not been restated.

The functional currency of Technology Services Group Limited is considered to be pounds sterling because that is the

currency of the primary economic environment in which the Company operates. The consolidated financial statements

are also presented in pounds sterling. Foreign operations are included in accordance with the policies set out below.

Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit

and loss account.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings

made up to 31 March each year. The acquisition method of accounting has been adopted. Under this method, the results

of subsidiary undertakings acquired or disposed of in the year are included in the consolidated profit and loss account

from the date of acquisition or up to the date of disposal.

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and

position are set out in the Strategic Report. The Group and Company manages its day to day working capital and

funding requirements through operating cash flows and the shareholder loan facility. The Group meets part of its day

to day working capital requirements through a committed overdraft facility which is due for renewal in June

2017. Having held discussions with its bankers, no matters have been drawn to the directors’ attention to suggest that

it will not be renewed at the end of June 2017.

After making enquiries, the directors have a reasonable expectation that the Group and Company will have adequate

financial resources to continue in operational existence for the foreseeable future. Accordingly, they continue to prepare

the financial statements on a going concern basis.



For the year ended 31 March 2016 (continued)

17

1. Accounting policies (continued)

Goodwill

Purchased goodwill (representing the excess of the fair value of the consideration given over the fair value of the

separable net assets acquired) arising on business combinations in respect of acquisitions is capitalised. Positive

goodwill arising on acquisitions by the Group and on the trade and net assets of business purchased by, or transferred

to the Company is being amortised in full, on a straight line basis. The period for Goodwill amortisation is 20 years.

The directors are of the opinion that this treatment is appropriate as it reflects the Company's strategy to focus on

building long term recurring revenue streams. This is the period over which the directors consider that benefit will be

derived.

Adjustments to Group and Company goodwill comprise adjustments to the assets and liabilities acquired in respect of

acquisitions in the previous financial period.

On the subsequent disposal or termination of an acquisition, the profit or loss on disposal or termination is calculated

after charging the unamortised amount of any related goodwill.

Goodwill is reviewed for impairment when events or changes in circumstances indicate that the carrying amount of the

goodwill may not be recoverable. If any such indication exists, the asset’s recoverable amount is estimated and an

impairment loss recognised whenever the carrying amount of the asset or its income generating unit exceeds its

recoverable amount. Impairment losses are recognised in the profit and loss account.

Investments

In the Company’s financial statements, investments in subsidiary undertakings are stated at cost less impairment or,

where the Company has adopted the true and fair override as detailed per note 10, less amounts transferred to goodwill.

Tangible fixed assets and depreciation

Tangible fixed assets are stated at cost or valuation, net of depreciation and any provision for impairment.

Depreciation is provided to write off the cost less the estimated residual value of tangible fixed assets over their

estimated useful economic lives as follows:

Short leasehold land and buildings - life of lease

Fixtures, fittings, tools and equipment - 20-33% per annum, straight line

Government grants

Government grants are included within accruals and deferred income in the balance sheet and credited to the profit and

loss account over the period to which they relate.

Leases

Assets acquired under finance leases are capitalised and the outstanding future lease obligations are shown in creditors.

Operating lease rentals are charged to the profit and loss account on a straight line basis over the period of the lease.

Where the Group has entered in to a sale and leaseback transaction, whereby assets previously capitalised are sold and

the use of those assets are immediately reacquired by entering in to a lease with the buyer, the above lease classifications

are applied in determining the accounting treatment. For sale and finance leasebacks, any apparent profit or loss from

the sale is deferred and amortised over the lease term. For sale and operating leasebacks, generally the assets are sold

at fair value and the profit or loss from the sale is recognised immediately. Following initial recognition, the lease

treatment is consistent with those principles described above.




18


Post-retirement benefits

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 amount charged to the profit and loss account represents

contributions payable to the scheme in respect of the accounting period.

Research and development expenditure

Expenditure on research is written off to the profit and loss account in the year in which it is incurred. Development

expenditure is capitalised only where there is a clearly defined project, the expenditure is separately identifiable, the

outcome of the project can be assessed with reasonable certainty, aggregate costs are expected to be exceeded by related

future profits and adequate resources exist to enable the project to be completed. Development expenditure capitalised

relates to the development of software products which are to be written off over a 3 to 5 year period.

Stocks

Stocks are stated at the lower of cost and net realisable value. In determining the cost of consumables and goods

purchased for resale, the FIFO method is used. Provision is made for obsolete, slow moving or defective items where

appropriate.

Taxation

Current tax, including UK corporation tax and foreign tax, is provided at amounts expected to be paid (or recovered)

using the tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet

date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in

the future have occurred at the balance sheet date. Timing differences are differences between the Group's taxable

profits and its results as stated in the financial statements that arise from the inclusion of gains and losses in tax

assessments in periods different from those in which they are recognised in the financial statements.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, on the basis of all available

evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future

reversal of the underlying timing differences can be deducted.

When the amount that can be deducted for tax for an asset (other than goodwill) that is recognised in a business

combination is less (more) than the value at which it is recognised, a deferred tax liability (asset) is recognised for the

additional tax that will be paid (avoided) in respect of that difference. Similarly, a deferred tax asset (liability) is

recognised for the additional tax that will be avoided (paid) because of a difference between the value at which a liability

is recognised and the amount that will be assessed for tax. The amount attributed to goodwill is adjusted by the amount

of deferred tax recognised.

Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes, the

resulting current or deferred tax expense or income is presented in the same component of comprehensive income or

equity as the transaction or other event that resulted in the tax expense or income.

Current tax assets and liabilities are offset only when there is a legally enforceable right to set off the amounts and the

Group intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Deferred tax assets and liabilities are offset only if: a) the Group has a legally enforceable right to set off current tax

assets against current tax liabilities; and b) the deferred tax assets and deferred tax liabilities relate to income taxes

levied by the same taxation authority on either the same taxable entity or different taxable entities which intend either

to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities simultaneously,

in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or

recovered.




19


Taxation (continued)

Deferred tax is measured using the tax rates and laws that have been enacted or substantively enacted by the balance

sheet date that are expected to apply to the reversal of the timing difference.

Turnover

Turnover is the amount derived from the provision of goods and services during the financial year, after deduction of

valued added tax, and is recognised when the goods have been despatched or the services have been provided. Deferred

income arises from the allocation of invoiced amounts over the period to which they relate.

Where a contract has only been partially completed at the balance sheet date turnover represents the value of the service

provided to date based on a proportion of the total contract value. Where payments are received from customers in

advance of services provided, the amounts are recorded as deferred income and included as part of Creditors due within

one year.

Profit is recognised on long term contracts, if the final outcome can be assessed with reasonable certainty, by including

in the profit and loss account turnover and related costs as contract activity progresses. Turnover is calculated by

reference to the value of work performed to date as a proportion of the total contract value.

All turnover is generated from the Group’s principal activity and arises entirely in the UK.

Share based payments

The Company Share Option Plan allows employees to acquire shares of the Company. The Group issues equity settled

share based payments to certain employees. The fair value of options granted is recognised as an employee expense

with a corresponding increase in equity.

The fair value is measured at grant date and spread over the period during which the employees become unconditionally

entitled to the options. The fair value of the options granted is measured using an option pricing model, taking into

account the terms and conditions upon which the options were granted.

Share based payments (continued)

The amount recognised as an expense is adjusted to reflect the actual number of awards for which the related service

and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is

based on the number of awards that do meet the related service and non-market performance conditions at the vesting

date.

Dividends on shares presented within shareholders’ funds

Dividends are only recognised as a liability to the extent that they are declared prior to the year end. Unpaid dividends

that do not meet these criteria are disclosed in the notes to the financial statements.

Cash

Cash, for the purpose of the cash flow statement, comprises cash in hand and deposits repayable on demand, less

overdrafts payable on demand.




20


Financial instruments

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions

of the instrument.

Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements

entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after

deducting all of its liabilities.

(i) Financial assets and liabilities

All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for

those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which

is normally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction.

If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present

value of the future payments discounted at a market rate of interest for a similar debt instrument.

Financial assets and liabilities are only offset in the statement of financial position when, and only when there exists a

legally enforceable right to set off the recognised amounts and the Company intends either to settle on a net basis, or to

realise the asset and settle the liability simultaneously.

Debt instruments which meet the following conditions are subsequently measured at amortised cost using the effective

interest method:

(a) The contractual return to the holder is (i) a fixed amount; (ii) a positive fixed rate or a positive variable rate; or

(iii) a combination of a positive or a negative fixed rate and a positive variable rate.

(b) The contract may provide for repayments of the principal or the return to the holder (but not both) to be linked

to a single relevant observable index of general price inflation of the currency in which the debt instrument is

denominated, provided such links are not leveraged.

(c) The contract may provide for a determinable variation of the return to the holder during the life of the instrument,

provided that (i) the new rate satisfies condition (a) and the variation is not contingent on future events other than (1) a

change of a contractual variable rate; (2) to protect the holder against credit deterioration of the issuer; (3) changes in

levies applied by a central bank or arising from changes in relevant taxation or law; or (ii) the new rate is a market rate

of interest and satisfies condition (a).

(d) There is no contractual provision that could, by its terms, result in the holder losing the principal amount or any

interest attributable to the current period or prior periods.

(i) Financial assets and liabilities (continued)

(e) Contractual provisions that permit the issuer to prepay a debt instrument or permit the holder to put it back to

the issuer before maturity are not contingent on future events, other than to protect the holder against the credit

deterioration of the issuer or a change in control of the issuer, or to protect the holder or issuer against changes in levies

applied by a central bank or arising from changes in relevant taxation or law.

(f) Contractual provisions may permit the extension of the term of the debt instrument, provided that the return to

the holder and any other contractual provisions applicable during the extended term satisfy the conditions of paragraphs

(a) to (c).

Debt instruments that are classified as payable or receivable within one year on initial recognition and which meet the

above conditions are measured at the undiscounted amount of the cash or other consideration expected to be paid or

received, net of impairment.




21


Financial instruments (continued)

Financial assets are derecognised when and only when a) the contractual rights to the cash flows from the financial

asset expire or are settled, b) the Company transfers to another party substantially all of the risks and rewards of

ownership of the financial asset, or c) the Company, despite having retained some, but not all, significant risks and

rewards of ownership, has transferred control of the asset to another party.

Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or

expires.

(ii) Equity instruments

Equity instruments issued by the Company are recorded at the fair value of cash or other resources received or

receivable, net of direct issue costs.

(iii) Fair value measurement

The best evidence of fair value is a quoted price for an identical asset in an active market. When quoted prices are

unavailable, the price of a recent transaction for an identical asset provides evidence of fair value as long as there has

not been a significant change in economic circumstances or a significant lapse of time since the transaction took place.

If the market is not active and recent transactions of an identical asset on their own are not a good estimate of fair value,

the fair value is estimated by using a valuation technique.

2. Critical accounting judgements and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in note 1, the directors are required to make

judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent

from other sources. The estimates and associated assumptions are based on historical experience and other factors that

are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are

recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the

revision and future periods if the revision affects both current and future periods.

Critical judgements in applying the Group’s accounting policies

The following are the critical judgements, apart from those involving estimations (which are dealt with separately

below), that the directors have made in the process of applying the Group’s accounting policies and that have the most

significant effect on the amounts recognised in the financial statements;

Turnover relating to installation, consultancy and development (Services) is recognised when the Services have been

provided. Invoices are raised for such services on a milestone basis. Profit is recognised on long term contracts, if the

final outcome can be assessed with reasonable certainty, by including in the profit and loss account turnover and related

costs as contract activity progresses. The amount by which recorded turnover is in excess of amounts invoiced to

customers is classified as amounts recoverable on contracts and separately disclosed within debtors. The turnover is

calculated by reference to the value of work performed to date as a proportion of the total contract value. The critical

judgement applied assumes the Services will be delivered in line with expectations and that the percentage of the value

of work performed to date is accurate. The value of amounts recoverable on contracts at the balance sheet date was

£392,000.




22

2. Critical accounting judgements and key sources of estimation uncertainty (continued)

Critical judgements in applying the Group’s accounting policies (continued)

All intangible assets are considered to have a finite useful life. In the case of Goodwill, the directors are of the opinion

that a period of 20 years is appropriate as it reflects the Groups strategy to focus on building long term recurring revenue

streams. In the case of Development Costs, the directors are of the opinion that these costs be amortised over a period

of 5 years, this reflects the longer term contractual nature of these agreements, and the period over which returns are

expected as a minimum.

Key source of estimation uncertainty

Impairment of goodwill

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to

which goodwill has been allocated. The value in use calculation requires the entity to estimate the future cash flows

expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value. The

carrying amount of goodwill at the balance sheet date was £6,404,575, no impairment loss was recognised during 2016.

Impairment of Development Costs

Determining whether capitalised development cost is impaired requires an estimation of the value in use of the cash-

generating products, over a period of time to which development cost has been allocated. The value in use calculation

requires the entity to estimate the future cash flows expected to arise from the products and a suitable discount rate in

order to calculate present value. The carrying amount of capitalised development costs at the balance sheet date was

£1,612,247, no impairment loss was recognised during 2016.

3. Turnover

An analysis of the Group’s turnover by class of business is set out below.

Turnover:

2016

£’000

2015

£’000 Recurring support contracts, subscriptions and licences 20,950 20,403

Consultancy, development and installation services 6,911 7,872

Hardware and software 6,693 7,992

34,554 36,267

An analysis of the Group’s turnover is as follows:

2016

£’000

2015

£’000

Sale of goods 6,693 7,992

Provision of Services and Support 27,861 28,275

34,554 36,267




23

4. Loss on ordinary activities before taxation

2016

£’000

2015

£’000

Loss on ordinary activities before taxation is stated after charging:

Depreciation and other amounts written off tangible fixed assets:

Owned 272 386

Leased 29 29

Operating lease costs – other 1,111 1,275

Cost of stock recognised as an expense 5,426 6,629

Impairment of stock recognised as an expense 122 44

Amortisation of goodwill 543 510

Amortisation of capitalised development costs - 16

Exceptional costs – staff costs 466 713

Exceptional costs – aborted acquisition costs - -

Exceptional costs – property costs 60 65

The company’s loss for the financial year was £542,000 (2015: £1,425,000).

The company has taken advantage of section 408 of the Conmpanies Act 2006 and consequently a profit and loss

account for the Comnpany alone is not presented.

Amortisation of intangible assets and Goodwill is included in administrative expenses.

Exceptional staff costs include redundancy and rationalisation costs incurred as a result of further reorganisation and

centralisation during the year.

Exceptional property costs were incurred as a result of exiting a number of properties during the year.

Auditor’s remuneration:

The analysis of remuneration paid to Deloitte LLP is as follows:

2016 2015

£’000 £’000 Audit of these financial statements 42 33

Amounts receivable by the auditor and their associates in respect of:

- other services relating to taxation compliance 11 45

- other taxation advisory services 15 5

Company’s financial statements, have not been disclosed as the information is required instead to be disclosed on a

consolidated basis.

Exceptional staff costs include redundancy and rationalisation costs incurred as a result of further reorganisation and

centralisation during the current and preceding year.

Exceptional property costs were incurred as a result of exiting a number of properties during the year.




24

5. Remuneration of directors

2016

£’000

2015

£’000

Directors’ emoluments 405 644

Company contributions to money purchase pension schemes 21 23

Compensation for loss of office - 194

2016 2015

No. No. Retirement benefits are accruing to the following number of directors under:

Money purchase schemes 2 2

The aggregate emoluments of the highest paid director were £245,718 (2015: £236,784) including company pension

contributions of £9,200 (2015: £9,039) which were made to a money purchase scheme on his behalf.

No share options were exercised during the year.

6. Staff numbers

The monthly average number of persons employed by the Group (including directors) during the year, analysed by

category, was as follows:

Group

2016 2015 No. No.

Technical 239 258

Sales and administration 139 149

378 407

The aggregate payroll costs of these persons were as follows:

Group

2016

£’000

2015

£’000

Wages and salaries 13,729 15,003

Share based payments (see note 22) (10) 13

Social security costs 1,576 1,720

Other pension costs (see note 21) 660 719

15,955 17,455

The total remuneration for key management personnel for the year totalled £816,877 (2015: £1,180,462).




25

7. Interest receivable

2016

£’000

2015

£’000

Bank interest - 1

8. Interest payable and similar charges

2016

£’000

2015

£’000

On bank loan and overdrafts 38 30

On all other loans 31 83

69 113

Interest expense for financial liabilities is measured at amortised cost.

9. Taxation

Analysis of tax (credit)/charge for the year

2016

£’000

2015

£’000

Current tax on loss on ordinary activities

UK corporation tax (189) (122)

Adjustments in respect of prior periods - (63)

Total current tax (189) (185)

Deferred tax (see note 18)

Origination/reversal of timing differences - 14

Effect of decreased tax rate - (14)

Change in estimate of recoverable deferred tax asset - 285

Total deferred tax - 285

Total tax on loss on ordinary activities (189) 100




26

9. Taxation (continued)

Factors affecting the tax (credit)/charge for the current year

The current tax (credit)/charge for the year is higher than the standard rate of corporation tax in the UK 20% (2015:

21%). The differences are explained below.

Group

2016

£’000

2015

£’000

Loss on ordinary activities before tax (751) (1,345)

Current tax at 20% (2015: 21%) (150) (282)

Effects of:

Expenses not deductible for tax purposes (primarily goodwill amortisation) 114 129

Deferred tax not recognised 36 75

Enhanced deduction for R&D net of losses surrendered (189) (44)

Adjustments in respect of prior periods - (63)

Tax losses arising in the period not recognised - -

Change in estimate of recoverable deferred tax asset - 285

Total tax (credit)/charge for the year (189) 100

Factors that may affect future current and total tax charges

The Group has unrelieved UK corporation tax losses of approximately £18,118,767 (2015: £17,151,318) available to

carry forward.

Finance Act No.2 2015, which was substantively enacted on 26 October 2015, includes provisions to reduce the

corporation tax to 19% with effect from 1 April 2017 and 18% with effect from 1 April 2020. Accordingly these rates

have been applied when calculating the unrecognised deferred tax assets and liabilities as at 31 March 2016.

In addition, Finance Bill 2016 was substantively enacted on 6 September 2016 which introduced a further reduction in

the main rate of corporation tax from 18% to 17% from 1 April 2020. As this had not been substantially enacted at the

balance sheet date these rates do not apply to the deferred tax position at 31 March 2016.

There is no expiry date on the unrecognised timing differences, unused tax losses or tax credits.




27

10. Intangible fixed assets

Group

Development

costs

£’000

Goodwill

£’000

Cost

At 1 April 2015 1,497 32,184

Additions 578 324

At 31 March 2016 2,075 32,508

Amortisation and impairment

At 1 April 2015 463 25,560

Charged in year - 543

At 31 March 2016 463 26,103

Net book value

At 31 March 2016 1,612 6,405

At 31 March 2015 1,034 6,625

Company

Development

costs

£’000

Goodwill

£’000

Cost

At 1 April 2015 1,497 30,510

Additions 578 324

At 31 March 2016 2,075 30,834

Amortisation and impairment

At 1 April 2015 463 24,392

Charged in year - 523

At 31 March 2016 463 24,915

Net book value

At 31 March 2016 1,612 5,919

At 31 March 2015 1,034 6,118

Additions to Group and Company goodwill of £324,000 consist of adjustments to the fair value of assets and liabilities

acquired in relation to the purchase of the trade and assets of Aegis Ltd on the 31st of March 2015. Additional liabilities

were identified as existing at acquisition and therefore the fair value of assets and liabilities acquired and resulting

Goodwill has been subsequently adjusted.




28

11. Tangible fixed assets

Group

Short

leasehold

land and

Buildings

Fixtures,

fittings,

tools and

equipment Total

£’000 £’000 £’000

Cost

At 1 April 2015 972 2,796 3,768

Additions 203 119 322

Disposals (22) - (22)

At 31 March 2016 1,153 2,915 4,068

Depreciation

At 1 April 2015 589 2,357 2,946

Charge for year 59 242 301

Eliminated on disposal (8) - (8)

At 31 March 2016 640 2,599 3,239

Net book value

At 31 March 2016 513 316 829

At 31 March 2015 383 439 822

Company

Short

leasehold

land and

buildings

Fixtures,

fittings,

tools and

equipment Total

£’000 £’000 £’000

Cost

At 1 April 2015 971 2,784 3,755

Additions 203 119 322

Disposals (22) - (22)

At 31 March 2016 1,152 2,903 4,055

Depreciation

At 1 April 2015 588 2,345 2,933

Charge for year 59 242 301

Eliminated on disposals (8) - (8)

At 31 March 2016 639 2,587 3,226

Net book value

At 31 March 2016 513 316 829

At 31 March 2015 383 439 822




29

12. Fixed asset investments

Company

Shares in group

undertakings

£’000

Cost and net book value

At 1 April 2015 and 31 March 2016 8,752

The cost of the Company’s investment in the Group undertakings acquired reflected the underlying fair value of their

net assets and goodwill at the time of acquisition. As a result of the subsequent hive up of the trade and net assets of

these subsidiaries, the value of the Company’s investment in the subsidiary undertakings transferred fell below the

amount at which it was stated in the Company’s accounting records. Companies Act 2006 requires that the investment

be written down accordingly and that the amount be charged as a loss in the Company’s profit and loss account.

However, the directors consider that, as there has been no overall loss to the Company, it would fail to give a true and

fair view to charge that diminution to the Company’s profit and loss account for the years in which the transfers took

place and it should instead be re-allocated to goodwill and the identifiable net assets transferred, so as to recognise in

the Company’s individual balance sheet the effective cost to the Company of those net assets and goodwill. The effect

of this departure is a net increase in the Company’s loss for the current financial year of £375,000 (2015: £312,000)

and to increase the net cumulative amount of goodwill capitalised, net assets and shareholders’ funds by £3,336,000

(2015: £3,711,000).

At the year end the Company holds the entire issued share capital of 30 dormant subsidiary undertakings detailed below,

all of which are included in the consolidated financial statements up to 31 March 2016. As the subsidiaries are dormant

and non-trading they have no profit or loss for the financial year. As the trade and assets were hived up post acquisition

net assets for each entity are not material and therefore do not principally affect the figures shown in the financial

statements.

The undertakings in which the group holds interests at the year end are as follows:

Subsidiary undertakings Company Reg.

No.

County of

incorporation

Principal

activity

Accounting

reference

date

%

Joynson Limited 03838547

England and Wales Dormant 31 October 100

Millhouse Computers

Limited

02471307


CPA Systems Limited 02877063


Orlando Computer Systems

Limited

02565291


Xchange Information Systems

Limited

03754225





30

12. Fixed asset investments (continued)


No.

County of

incorporation

Principal

activity

Accounting

reference

date

%

Nordic Data Limited SC085873 Scotland Dormant 31 October 100

TSG Scotland Limited SC235599 Scotland Dormant 31 October 100

Clydeforth Digital

Solutions Limited

SC067229 Scotland Dormant 31 October 100

Baron Corporate Systems

Limited

03423940


Forty One Limited 04299027 England and Wales Dormant 31 October 100

CCL First Limited 03048833 England and Wales Dormant 31 October 100

Forty First Company Limited 03492230 England and Wales Dormant 31 October 100

System Advantage Limited 02580996 England and Wales Dormant 31 October 100

Omega Computers

(Hampshire) Limited

01768946


Computers and Systems

Maintenance Limited

SC126558

Scotland Dormant 31 October 100

Logsol Limited 02264281 England and Wales Dormant 31 October 100

Agenda Business Systems

Limited

02726838


Edinburgh Microsystems

Centre Limited

SC069453


PJ Howlett Business Systems

Limited

02339093


AC Computer Services Limited 03594197 England and Wales Dormant 31 October 100

Open Systems Services Limited 02592446 England and Wales Dormant 31 October 100

Accounting Answers Limited 02459986 England and Wales Dormant 31 October 100

Accountings Answers (UK)

Limited

02331844


Savtec Computer Technology

Limited

03122345


Taylor Made Technology

Limited

02412736

England and Wales Dormant 31 August 100

Rocket Solutions Limited 06488388 England and Wales Dormant 31 January 100




31

12. Fixed asset investments (continued)


No.

County of

incorporation

Principal

activity

Accounting

reference

date

%

CCL Technologies Limited 02672809 England and Wales Dormant 31 March 100

Concentrix Limited 03891450

England and Wales Dormant 31 March 100

Croft Inc.Limited 04044015


Croft Technology Limited 00974011


13. Stocks

Group

and

Company

Group

and

Company

2016

£’000

2015

£’000

Finished goods and goods for resale 543 515

There is no material difference between the carrying value of stocks and their replacement cost.




32

14. Debtors

Group

and

Company

Group

and

Company

2016

£’000

2015

£’000

Trade debtors 4,561 7,669

Corporation tax recoverable 312 349

Other debtors - 46

Prepayments and accrued income 397 292

Amounts recoverable on contracts 392 445

5,662 8,801

Trade debtors for Group and Company include amounts billed in advance of the commencement of the contract but

which are settled on a monthly basis. At the year-end these debts totalled £103,831 (2015: £2,737,000). Of these trade

debtors £nil (2015: £16,000) are due after more than one year.

Trade and other debtors are measured at undiscounted amount receivable.

15. Creditors: amounts falling due within one year

Group Group Company Company

2016

£’000

2015

£’000

2016

£’000

2015

£’000

Director’s loan (see note 16) 337 300 337 300

Bank overdraft 1,570 1,257 1,570 1,257

Trade creditors 2,692 2,153 2,692 2,153

Amounts owed to group undertakings - - 8,752 8,752

Corporation tax - - - -

Other taxation and social security 1,204 1,277 1,204 1,277

Other creditors 780 1,215 780 1,214

Hire purchase creditor 72 - 72 -

Accruals 1,360 2,002 1,360 2,002

Deferred consideration - 20 - 20

8,015 8,224 16,767 16,975

The bank overdraft is secured by an unlimited debenture and guarantee provided by the principal shareholder.

Directors’ loans are measured at amortised cost.

The bank overdraft is measured at undiscounted amount payable.

Trade and other creditors are measured at undiscounted amount payable.




33

16. Creditors: amounts falling due after more than one year

Group

and

Company

Group

and

Company

2016

£’000

2015

£’000

Director’s loan 1,000 338

1,000 338

Analysis of debt:

Group

and

Company

Group

and

Company

2016

£’000

2015

£’000

Debt can be analysed as falling due:

- In one year or less, 1,907 1,557

- Between one and two years 400 300

- Between two and five years 600 38

2,907 1,895

Director’s loans totalling £1,000,000 and £337,500 as at 31st of March 2016 are secured by a fixed and floating charge

over the Company’s assets, are repayable in quarterly instalments over the next 5 years, and are subject to interest at a

fixed rate of 5% & 4.5% respectively per annum.

Directors’ loans are measured at amortised cost.

17. Deferred Income

Group

and

Company

Group

and

Company

2016

£’000

2015

£’000

Deferred Income can be analysed as falling due:

- In one year or less 3,983 6,615

- Greater than one year 56 62

4,039 6,677




34

18. Deferred taxation

Group and Company

2016

£’000

2015

£’000

Asset at beginning of year - 285

Debit to the profit and loss account for the year - (285)

Asset at end of year - -

The elements of deferred taxation which have been provided for are as follows:

Group

and

Company

Group

and

Company

2016

£’000

2015

£’000

Difference between accumulated depreciation and capital allowances 227 140

Other timing differences (23) (54)

Tax losses (204) (86)

Deferred tax asset - -

There also exists an unprovided deferred tax asset as follows:

Group

and

Company

Group

and

Company

2016

£’000

2015

£’000

Tax losses and other deductions 3,057 3,344

The directors have not recognised this deferred tax asset as they consider it would be imprudent to do so as the related

future taxable profits cannot be forecast with sufficient certainty.

19. Called up share capital

2016

£’000

2015

£’000

Allotted, called up and fully paid

26,190,107 A Ordinary shares of £1 each 26,190 26,190

14,250,812 B Ordinary shares of £1 each 14,251 14,251

915,000 C Ordinary shares of £0.0001 each - -

2,500,000 D Ordinary shares of £0.0001 each -

40,441 40,441




35

19. Called up share capital (continued)

During the prior year the company issued 2,000,000 ‘A’ Ordinary shares of £1 each.

During the year the company issued 915,000 C Ordinary shares and 2,500,000 D Ordinary shares of £0.0001 each.

The ‘A’ Ordinary shares, ‘B’ Ordinary shares, ‘C’ Ordinary shares and ‘D’ Ordinary shares have the same rights to

income and rank pari passu in respect of dividend rights, and redemption rights. The holders of ‘A’ Ordinary shares

have enhanced voting rights in respect of certain, limited decisions but otherwise all shares have the same voting

rights. The ‘A’ Ordinary shares and ‘B’ Ordinary shares have the same rights to capital and rank pari passu on a

winding up. The ‘C’ Ordinary shares and ‘D’ Ordinary shares have different rights to return on capital (whether as a

result of a winding up or otherwise) which are calculated by reference to hurdles which must be achieved.

20. Commitments

Total future minimum lease payments under non-cancellable operating leases are as follows:

Land and

buildings Other

Land and

buildings Other

2016

£’000

2016

£’000

2015

£’000

2015

£’000

Group and Company

Within one year 826 262 872 194

Between one and five years 1,940 417 2,105 293

More than five years 324 - 432 -

21. Pension scheme

The Group operates a defined contribution pension scheme. The pension cost charge for the year represents

contributions payable by the Group to the scheme and amounted to £659,564 (2015: £719,494).

Contributions amounting to £54,411 (2015: £55,510) were payable to the scheme and are included in creditors at the

year end.

22. Cash flow statement

2016

£’000

2015

£’000

Operating (loss) (682) (1,222)

Adjustment for:

Impairment loss on property, plant and equipment

Share-based payment expense (11) 13

Depreciation and amortisation 844 941

Profit on sale of tangible fixed assets - -

Operating cash flow before movement in working capital 151 (268)

(Increase)/decrease in stocks (28) 378

Decrease in debtors 3,102 2,401

Decrease in creditors (519) (2,533)

Decrease/(increase) in deferred income (2,645) (1,712)

Cash generated/(absorbed) by operations 61 (1,734)




36

23. Employee share scheme

Share based payments – Group and Company

On 24 October 2008 the Company established the Technology Services Group Limited approved Company Share

Option Plan 2008. In accordance with its rules, options may only be issued to full time employees at the absolute

discretion of the directors.

The plan is an “exit-based” option scheme and as such, options may only be exercised on sale or flotation of the

business. In the event that options are not exercised, they will lapse on the tenth anniversary of the date on which they

have been granted.

The terms and conditions of grant are as follows:

Grant date

Method of

settlement

accounting

Number of

instruments

Vesting conditions

Contractual life

of options

2 December 2008 Equity 225,000 (i) Service conditions, exit event 10 years

20 October 2009 Equity 342,500 (ii) Service conditions, exit event 10 years

18 November 2010 Equity 195,000 (iii) Service conditions, exit event 10 years

7 December 2011 Equity 207,500 (iv) Service conditions, exit event 10 years

970,000

i. 90,000 of which had been forfeited by the year end

ii. 145,000 of which had been forfeited by the year end

iii. 85,000 of which had been forfeited by the year end

iv. 95,000 of which had been forfeited by the year end

The number and weighted average exercise prices of share options are as follows:

2016

£’000

2016

£’000

2015

£’000

2015

£’000

Weighted

average

exercise

price

Number of

options

Weighted

average

exercise

price

Number of

options

Outstanding at the beginning of the year 103 485,000 103p 555,000

Forfeited during the year 101 (110,000) 105p (70,000)

Outstanding at the end of the year 103 375,000 103p 485,000

Exercisable at the end of the year - - - -

The options outstanding at the year end had an exercise price in the range 100p to 115p and a weighted average

contractual life of 5.01 years (2015: 4.95 years) at the balance sheet date.

The fair value of services received in return for share options granted was measured by reference to the fair value of

the share options granted at the grant date. The fair value of the services received was measured using a Black-Scholes

model.




37

23. Employee share scheme (continued)

Measurement inputs and assumptions are as follows:

7 December

2011

18 November

2010

20 October

2009

2 December

2008

Fair value at measurement date 61.362p 56.539p 56.686p 50.696p

Share price 115p 100p 100p 100p

Exercise price 115p 100p 100p 100p

Dividend yield - - - -

Option life (years) 6.99 8.04 9.12 10.00

Risk free interest rate (based on national

government bonds)

2.34%

3.62%

3.68%

4.51%

Expected volatility 40% 40% 40% 30%

The expected volatility was based on the historic volatility of quoted companies in a similar market environment.

No options were granted during the current year.

Included in administrative expenses is a credit of £10,472 (2015: charge of £12,540) in relation to equity settled share

based payment transactions.

On the 7th May 2015, the Company gifted a total of 3,415,000 C and D shares to two directors and one member of key

management personel. The nominal value of these shares of £341.50 was fully paid in cash by Graham Wylie (a director

of the Company). See note 19 for the rights attached to these shares.

24. Controlling party and related party disclosures

The Company is controlled by A W G Wylie, Non-Executive Director of the Group and principal shareholder of the

Company.

Related party transactions, all of which were on an arm’s length basis, were as follows:

Rent paid to A W G Wylie on premises occupied by the Group of £408,871 (2015: £381,767). At the balance sheet

date £nil (2015: £nil) remained outstanding within creditors.

Technology Services Group Limited invoiced sales of £124,978 (2015: £201,000) to businesses in which A W G Wylie

has an interest. At the balance sheet date £37,465 (2015: £141,632) remained outstanding in debtors.

Charges for services of £41,628 were payable to A W G Wylie in respect of other business interests (2015: £127,303).

At the balance sheet date £350 (2015: £5,334) remained outstanding within creditors.

Director’s loans totalling £377,500 (2015: £638,000) and £1,000,000 are secured by a fixed and floating charge over

the Company’s assets, are repayable in quarterly instalments over the next 5 years, and are subject to interest at a fixed

rate of 4.5% per annum and 5% per annum respectively. Interest payable to A W G Wylie on outstanding director’s

loans was £16,347 (2015: £40,150). At the balance sheet date £nil (2015: £7,172) was included within creditors.

On the 7th May 2015, the Company gifted a total of 3,415,000 C and D shares to two directors and one member of key

management personel. The nominal value of these shares of £341.50 was fully paid in cash by Graham Wylie (a director

of the Company). See note 19 for the rights attached to these shares.




38

25. Explanation of transition to FRS 102

This is the first year that the Company has presented its financial statements under Financial Reporting Standard 102

(FRS 102) issued by the Financial Reporting Council. The following disclosures are required in the year of transition.

The last financial statements under previous UK GAAP were for the year ended 31 March 2015 and the date of transition

to FRS 102 was therefore 1 April 2014. As a consequence of adopting FRS 102, a number of accounting policies have

changed to comply with that standard.

Reconciliation of equity

Group Company

Note

At 1 April

2014

£’000

At 31

March

2015

£’000

At 1 April

2014

£’000

At 31

March

2015

£’000

Equity reported under previous UK GAAP 2,289 2,857 1,763 2,351

Adjustments to equity on transition to FRS 102

1 Holiday pay accrual (226) (215) (226) (215)

Equity reported under FRS 102 2,063 2,642 1,537 2,136

Notes to the reconciliation of equity at 1 April 2014

1. In accordance with Section 28 of FRS 102 the group and company is required to book a holiday pay accrual

where previously no accrual had been recorded

Reconciliation of profit or loss for 2015

Note Group

£’000

Company

£’000

Loss for the financial year under previous UK GAAP (1,445) (1,425)

1 Holiday pay movement 11 11

Loss for the financial year under FRS 102 (1,434) (1,414)

Notes to the reconciliation of profit or loss for 2015

1. In accordance with Section 28 of FRS 102 the group and company is required to book a holiday pay accrual

where previously no accrual had been recorded

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