REG - KRM22 PLC - Final Results
22/05/2024 07:00
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RNS Number : 3811P KRM22 PLC 22 May 2024
KRM22 plc
("KRM22", the "Group" and the "Company")
AUDITED RESULTS STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2023
KRM22 plc (AIM: KRM.L), the technology and software company focused on risk
management in capital markets, announces its audited results for the year
ended 31 December 2023 ("2023", the "Year").
Financial highlights
· Annualised Recurring Revenue (ARR)(( 1 )) as at 31 December 2023 of
£5.4m (2022: £4.8m as reported, £4.6m at constant FX rate) - growth of
17.4% at constant FX rate
o New contracted ARR in 2023 of £1.1m (2022: £1.3m)
o Total ARR attributable to the relationship with Trading Technologies
International, Inc. ("TT") of £0.4m (2022: £0.1m)
· Total revenue recognised of £5.3m (2022: £4.3m) - growth of 23.3%
· Adjusted EBITDA loss(( 2 )) of £1.4m (2022: loss of £1.7m)
· Loss before tax of £4.9m (2022: loss of £3.3m)
· Gross cash as at 31 December 2023 of £0.9m (2022: £1.9m)
· New £5.0m convertible loan provided by TT, of which £4.5m was drawn
down in the year, to replace the previous Kestrel £3.0m convertible loan that
was due to mature in September 2023
Operational highlights
· 12 new ARR contracts signed in the year including 7 new customers
· First sales of Limits Manager product generated through the TT sales
channel
· 42 institutional customers as at 31 December 2023
Post year-end events
· Growth in ARR to £6.0m as at the date of this report
· New Limits Manager product contract win worth £0.6m over three years
with a major Futures Commission Merchant ("FCM"), one of the industry's top 15
largest FCMs
· Group restructure and rationalisation to implement a focused cost
savings programme, with annual cost savings of £1.2m
· Board changes announced on 7 March 2024 with appointment of Dan
Carter as CEO and Garry Jones as Non-Executive Chairman, replacing Stephen
Casner and Keith Todd respectively, with Keith Todd remaining on the Board as
Executive Director
Garry Jones, Non-Executive Chairman of KRM22, commented:
"2023 was another year of growth for KRM22, with increases in ARR and in year
recognised revenue. This momentum has continued into 2024 with further
increases in ARR to £6.0m. The product suite, team and strong pipeline of
sales opportunities, together with the cost savings plan and Board changes
announced in February and March 2024 respectively, mean that KRM22 has never
been in a better position to deliver growth and become a cash positive
business in due course."
1 Annualised Recurring Revenue (ARR) is the value of contracted
Software-as-a-Service (SaaS) revenue normalised to a one year period and
excludes one-time fees.
2 Adjusted EBITDA is the reported loss for the year, adjusted for recurring
non-monetary costs including depreciation, amortisation, unrealised foreign
exchange (loss)/gain and share-based payment (credit)/charges and
non-recurring costs, both monetary and non-monetary, including impairment of
intangible assets, profit on disposal of tangible/intangible assets and
acquisition, deferred consideration write back, gain on extinguishment of debt
and acquisition, funding and debt related costs.
For further information please contact:
KRM22 plc
InvestorRelations@krm22.com
Garry Jones, Non-Executive Chairman
Dan Cater, CEO
Kim Suter, CFO
Cavendish Capital Markets Limited (Nominated Adviser and Broker)
+44 (0)20 7220 0500
Carl Holmes / George Dollemore (Corporate Finance)
Sunila de Silva (ECM)
The information contained within this announcement was deemed by the Company
to constitute inside information as stipulated under the Market Abuse
Regulations (EU) No. 596/2014 as it forms part of UK domestic law by virtue of
the European Union (Withdrawal) Act 2018 as amended. With the publication of
this announcement via a Regulatory Information Service, this inside
information is now considered to be in the public domain.
About KRM22 plc
KRM22 is a closed-ended investment company which listed on AIM on 30 April
2018. The Company has been established with the objective of creating value
for its investors through the investment in, and subsequent growth and
development of, target companies in the technology and software sector, with a
focus on risk management in capital markets.
Through its investments and the Global Risk Platform, KRM22 helps capital
market companies reduce the cost and complexity of risk management. The
Global Risk Platform provides applications to help address firms' trading and
corporate risk challenges and to manage their entire enterprise risk profile.
Capital markets companies' partner with KRM22 to optimise risk management
systems and processes, improving profitability and expanding opportunities to
increase portfolio returns by leveraging risk as alpha.
KRM22 plc is listed on AIM and the Group is headquartered in London, with
offices in several of the world's major financial centres.
See more about KRM22 at KRM22.com (https://www.krm22.com/) .
CHAIRMAN'S STATEMENT
2023 was another year of growth for KRM22, with Annual Recurring Revenue
("ARR") continuing to achieve a new high of £5.4m, a 17.4% increase on 2022
at constant FX rates, as the business added more customers and further
developed its broad product offering. Twelve new ARR contracts were signed
during 2023 including seven new customers.
Continued market volatility and turbulent geopolitical conditions have
naturally resulted in some conservatism from companies throughout the year
when assessing capital expenditure on new systems and services. It is
exactly these conditions that our risk management products are built for and
can add real value, transparency and security in uncertain times. We
continue to be progressing with extensions to services for existing customers,
whilst pushing hard to add new Tier one financial institutions to our customer
portfolio.
Our product range of Limits Manager, Risk Manager, Market Surveillance and
Risk Cockpit can be utilised individually, or in conjunction with each other,
to provide a complete range of risk management services.
In March 2024, we made some internal changes and appointed Dan Carter as our
new CEO. Dan has been at KRM22 since its inception and has vast experience
in the technology services industry. I have every confidence that Dan and
the management team will drive and accelerate our business to new heights. I
am also honoured to have been appointed as KRM22's chairman at the same time,
and look forward to the challenges ahead. I would like to take this
opportunity to recognise Stephen Casner and Keith Todd, our predecessors as
CEO and Chairman respectively, for all of their contributions to the Company
since IPO just over six years ago.
The Board and I also wish to thank our loyal customers and investors for their
continued commitment to our long-term vision of delivering high quality
products and services to the capital markets and derivatives risk community.
The quality of our customers and their importance to the traded markets gives
us much confidence that we are hitting the mark with industry professionals,
who rely on KRM22's products and services to add value to their business.
I also want to congratulate the entire KRM22 team for another year of
progress, and to recognise their continued hard work and loyalty to the
Company.
I look forward to further growth in 2024, a continued increase in ARR, and
becoming a cash generative business in due course. KRM22 has never been in a
better position as we progress through 2024 and beyond.
Garry Jones
Non-Executive Chairman
CEO'S REPORT
I am delighted to have been appointed CEO of KRM22 in March 2024. The
opportunity that KRM22 has to be the market leader of risk technology to the
capital markets industry is incredibly exciting. We have very strong
foundations in place, implemented under the leadership of Keith Todd and
Stephen Casner, a strong product offering and a motivated and ambitious
team. I have been at KRM22 since our inception in 2018, and in my former
roles in the Sales and Customer Services teams, have seen first hand how KRM22
can satisfy our customers needs and deliver first class technology to the
industry.
Revenue growth
KRM22 continued to make great progress during 2023 with continuing growth in
annualised recurring revenue ("ARR") year on year with the goal of becoming a
£10.0m ARR business firmly in our sights. The value behind the Global Risk
Platform, and the ability to integrate various aspects of a firms risk is
starting to be leveraged by firms. At 31 December 2023, we had six of the
top 15 Futures Commissions Merchants ("FCMs") in the world using our Limits
Manager product. The Limits Manager product has embedded itself as a true
market leader and is providing firms with a much more efficient way of
managing trading limits whilst at the same time giving firms a full audit of
changes made. As we progress through 2024 we anticipate the Risk Manager
product to become another industry standard and achieve similar demand and
success as Limits Manager has before it, allowing firms to manage and control
risk in complete sync.
In 2023 we continued to grow ARR through our two distinct sales "channels" -
our direct sales team as well as the product distribution agreements with
various distributors including Trading Technologies International, Inc.
("TT"). KRM22 added new ARR in 2023 of £1.1m with £0.9m from direct sales
and £0.2m from the TT sales channel. The growth in ARR was primarily driven
by sales of Market Surveillance (42%), Limits Manager (21%) and Risk Manager
(21%), which incorporates the legacy functionality from the At-Trade P&L
and Post-Trade Stress products.
The Customer Services team, made up of industry experts who have many years of
experience between them, continue to ensure our service levels are of the
highest quality and thus customer churn is kept to manageable levels.
The partnership with TT continues to go from strength to strength from a sales
and revenue perspective. The TT distribution agreement allows the Limits
Manager product to be deployed to their customers on their platform without
the timely and burdensome vendor onboarding processes that KRM22 experiences
as a new vendor, thus helping to reduce the length of sales cycles. In
addition to revenue generated through the distribution agreement with TT, the
partnership has also provided other revenue opportunities for KRM22 with both
ARR and non-recurring revenue for specific projects, both internal and
external to TT.
Products
In 2023 we simplified KRM22's product offering under the two key distinct
areas of risk: Trading Risk, covering the Limits Manager and Risk Manager
products, and Compliance Risk, covering the Risk Cockpit and Market
Surveillance products.
Limits Manager
Having been launched in early 2022, 2023 saw the continued development of
Limits Manager with the addition of more user functionality which benefits
both the execution services and risk management teams that use the product,
and therefore created further operational efficiencies for those using the
product. Automation workflows have been delivered and firms are beginning to
automate limit change requests that meet specific conditions when raised. As
we look ahead to 2024 we will continue to develop more reporting functions for
the Limits Manager product to enhance visibility and further user
understanding of what is happening with their limit change processes.
Risk Manager
When KRM22 launched in 2018, the goal and investment strategy was to bring the
various aspects of risk management together in one place and 2023 saw us
invest heavily in the development of Risk Manager, bringing real-time P&L,
Margin, Stress scenario analysis and VaR together in one product. The Risk
Manager product also allows time series analysis of these key data points
showing key trend analysis to the user when reviewing the account, or making
limit change approval decisions. We will continue to invest in the product
as we migrate existing customers using the legacy At-Trade and Post-Trade
products onto Risk Manager whilst also delivering the product to new
customers.
Integration of Limits Manager and Risk Manager
As we progress through 2024, KRM22 is excited to bring the integration of the
Limits Manager and Risk Manager products into production. This integration
will allow risk managers the ability to review key risk metrics from Risk
Manager and display it alongside the limit changes raised by a client within
Limits Manager. When the risk team within the financial institution approves
the change, these values will be stored in the audit trail - a crucial view of
what standing the account was in and why the decision was made at that time.
This will provide risk teams with more visibility and information in real-time
when making these key decisions.
Market Surveillance
The Market Surveillance product continues to adapt with new alerts, including
Spoofing by Order Depth, Cross Trades and Gilt Closing alongside key
functional changes. We now have over 80 alert types available to customers
in the application. In 2023 KRM22 signed an agreement with TT to integrate
Score, TT's AI/ML surveillance application, with KRM22's Market Surveillance
product, which is a human calibrated alerting tool, to allow compliance
officers to ensure their calibrations are valid. The planned release date
for this integrated product is late 2024 for TT to market and sell directly.
The project has already generated ARR and non-recurring revenue for KRM22 and
the integrated product is expected to generate further revenue for KRM22 once
product sales crystalise for TT though a revenue share model.
Outlook
We have continued to make good progress in the year towards our target of
becoming a £10.0m ARR business with net ARR growth in 2023 of 17.4% and the
addition of seven new customers using our products. As of the date of this
report, the use of the Limits Manager product by seven of the top 15 FCMs in
the world demonstrates that there is demand for such product and that it,
together with the Risk Manager product, has the ability to become the industry
standard for FCMs.
The team is experienced, energised and ready to grow the business and improve
on the results reported in 2023 as we continue the journey towards a £10.0m
ARR business generating positive EBITDA and cashflows. The pipeline of sales
opportunities is strong and the reorganisation of our workforce in early 2024
will help us manage the cost base of the business as we look towards the move
to positive adjusted EBITDA and cashflows.
Dan Carter
CEO
CFO'S REPORT
KRM22's financial results for the year ended 31 December 2023 has seen a
continuation of the financial turnaround initially reported in the prior year,
with growth of 23.3% in total revenue recognised to £5.3m from £4.3m
reported for the year ended 31 December 2022.
ARR continued to increase, with ARR exceeding £5.0m for the first time in
2023 since KRM22's inception in 2018, to end the year at £5.4m from £4.6m at
31 December 2022 at constant FX rates - a year-on-year increase of 17.4%.
Adjusted EBITDA loss reported for 2023 was £1.4m, an improvement on the
£1.7m reported in 2022. This growth was set against continued global
economic uncertainty and extended sales cycles.
Profit and Loss
Total revenue
Revenue recognised for the year to 31 December 2023 was £5.3m (2022: £4.3m),
an increase of 23.3% compared with the prior year, with 90.6% (2022: 92.3%) of
total revenue generated from recurring customer contracts. Non-recurring
revenue for the year ended 31 December 2023 totalled £0.5m (2022: £0.3m) and
related principally to customer implementations, product development and proof
of concept work.
Recurring revenue
ARR is a key metric and KPI for KRM22 and as at 31 December 2023, ARR had
increased by 17.4% to £5.4m (2022: £4.8m as reported, £4.6m at constant FX
rates), a net increase of £0.8m at constant FX rates (2022: net increase of
£1.0m).
New contracted ARR in the year totalled £1.1m (2022: £1.3m) of which £0.6m
(2022: £0.7m) was from seven new customers and £0.5m (2022: £0.6m) was
generated from existing customers. Included within the £0.6m of new ARR
from new customers was £0.2m (2022: £nil) of ARR generated from sales of the
Limits Manager product under the distribution agreement which KRM22 has with
TT. The £0.5m of new ARR generated from existing customers was a
combination of these existing customers purchasing additional products and
contractual renewals for existing products, with an increase in ARR and
extensions of contractual terms.
The amount of ARR generated through partner products and services, primarily
through data and news feeds, with minimal margin to KRM22, accounted for 4.6%
(2022: 6.9%).
Total churn in ARR for the year was £0.4m (2022: £0.6m), from three
institutional customers, of which £0.1m was anticipated as it related to a
customer acquired through the acquisition of Object+ in 2019 using a bespoke
product that does not form part of the current product offering. A further
£0.1m of churn was from a customer directly impacted by the SVB collapse in
March 2023. The third customer, with churn of £0.1m, related to data feeds
which, whilst impacting ARR and revenue recognition, had minimal profit margin
and so the effect on the operating loss is £nil.
Gross profit
Gross profit for the year to 31 December 2023 was £4.1m (2022: £3.3m).
There was a small increase in gross profit margin to 78% compared to the prior
year margin of 77% which was due to an improvement in foreign currency rates,
compared with the prior year when there was volatility and adverse movements,
with a significant proportion of the Group's cost of sales being Amazon Web
Services server costs which are invoiced in US dollars.
Capitalised development
A total of £1.1m (2022: £0.8m) of development was capitalised in the year to
31 December 2023. Capitalised development is amortised over three years.
Adjusted EBITDA
Adjusted EBITDA is the key metric that the Company considers in order to
understand the cash-profitability of the business. This is due in particular
to the non-cash items that impact the Income Statement under IFRS accounting,
such as non-cash share-based payment charges.
Adjusted EBITDA for the year to 31 December 2023 was a £1.4m loss (2022: loss
of £1.7m). Whilst the adjusted EBITDA loss reported for the year is a
£0.3m improvement on the prior year, this reduction is not proportional to
the increase in total revenue recognised in the year compared with the prior
year and this was due to the increase in administrative expenses.
The increase in administrative costs was primarily driven by two factors.
Firstly, in 2022 KRM22 used the investment proceeds from TT's investment in
KRM22 in December 2021 to invest in Revenue, Customer Services and Development
resource to help drive the business forward and the timing of this new
resource joining KRM22 occurred throughout 2022. Administrative costs for
the year ended 31 December 2023 therefore includes a full year of increased
staff costs compared with the prior year. In addition to the aforementioned
investment in resource, the rate of inflation in 2022 and 2023 meant that
staff salary reviews, which are completed on an annual basis in the first
quarter of each year, resulted in a significantly higher average pay increase
in 2023 compared to 2022. The average pay increase in 2023, whilst being
higher than 2022, was not matched to the rate of inflation.
A reconciliation of Adjusted EBITDA loss to the reported operating loss is
provided as follows:
2023 2022
£'m £'m
Adjusted EBITDA loss (1.4) (1.7)
Depreciation and amortisation (1.3) (1.6)
Impairment of intangible assets (1.6) -
Unrealised FX (losses)/gain (0.5) 0.8
Deferred consideration write back 0.1 -
Acquisition and debt expenses 0.0 -
Gain on extinguishment of debt 0.1 -
Shared-based payment (credit)/expense 0.1 (0.1)
Operating loss (4.5) (2.6)
Operating loss
Reported operating loss for the year to 31 December 2023 was £4.5m (2022:
loss of £2.6m) and includes an impairment charge of £1.6m primarily related
to a revision in the estimated recoverable amount of goodwill using a
value-in-use model by projecting cashflows for future years using different
inputs to the model compared with prior years.
Finance charges
Net finance expense in the year was £0.4m (2022: £0.6m) and includes:
· Loan interest of £0.4m (2022: £0.3m);
· IFRS16 lease liability interest of £0.0m (2022: £0.1m); and
· Derivative financial instrument fair value adjustment of £0.0m
(2022: £0.2m).
Taxation
The tax credit in the year was £0.3m (2022: credit of £0.2m) which includes
a £0.2m (2022: £0.1m) R&D tax credit received.
Financial position
Assets
The cash balance as at 31 December 2023 was £0.9m (2022: £1.9m).
Current assets at 31 December 2023 include trade and other receivables of
£1.1m (2022: £1.5m).
Non-current assets were £5.8m (2022: £7.8m) relating principally to: £4.2m
for goodwill and assets acquired (2022: £6.1m), £1.4m (2022: £1.3m) for
capitalised development costs, and £0.1m for right of use assets recognised
under IFRS16 (2022: £0.4m).
Liabilities
As at 31 December 2023, our principal liabilities were:
· £4.5m convertible loan owed to TT plus accrued interest of £0.2m.
· £0.7m (US$0.9m) deferred consideration for earn out payments for the
acquisition of Object+. The deferred consideration can be satisfied in
either cash or Company Ordinary Shares in KRM22 at the Company's discretion.
· £0.4m for the right of use assets relating to all future payments of
leased-office rentals under IFRS16 'Leases' whereby such lease payments are
provided for at today's value. KRM22 has one remaining lease in London which
expires in 2024.
· £2.2m of deferred revenue; contracted and paid services that will be
released in a future period.
Investors
As an AIM quoted business, a large proportion of KRM22's shareholders are
professional investment funds. In addition, the Directors together owned
3,764,958 shares at the year end, representing 10.6% of the Company's issued
share capital.
Funding
On 17 June 2023, KRM22 entered into an agreement for a new three year £5.0m
convertible loan facility (the "TT Convertible Loan") with TT, the Company's
largest shareholder. At 31 December 2023, KRM22 had drawn down £4.5m of the
total facility amount and these proceeds were used to replace the Company's
existing convertible loan (the "Kestrel Convertible Loan") with Kestrel
Partners LLP. The outstanding balance of the Kestrel Convertible Loan,
inclusive of principal and accrued interest was £3.1m.
The interest rate payable on the TT Convertible Loan is the average 90 day
Secured Overnight Financing Rate ("SOFR") and a margin of 5.5%, subject to a
minimum aggregate percentage rate per annum of 9.25%. Interest is payable
quarterly in arrears however KRM22 has the ability to defer interest payments
in the initial 18 months (the "Initial Interest Period"), with the total
deferred interest in the Initial Interest Period being paid in two equal
instalments on the calendar quarters ending after the 18(th) and 21(st) month
anniversary of the facility, i.e. 31 December 2024 and 31 March 2025.
Under the terms of the TT Convertible Loan agreement dated 17 June 2023 (the
"TT Loan Agreement"), any amounts drawn down from the TT Convertible Loan
could be converted into new Ordinary Shares in the Company by TT at any time
at the lowest conversion price of: £0.46, the volume weighted average price
of the Company's ordinary shares for the three month period prior to service
of conversion notice; or the lowest daily closing price for the 30 completed
calendar days prior to service of conversion notice. On 1 July 2023, the TT
Loan Agreement was amended to remove the variability of the conversion price
and replace with a fixed conversion price of £0.46. TT has the right to
prevent any conversion which would trigger a Rule 9 event under the Takeover
Code.
The TT Convertible Loan is secured on certain KRM22 assets and includes
covenants based on the Group's financial performance including ARR, revenue
recognition and solvency.
Use of cash in the year
Our net cash outflow in the year was £1.0m, which included £4.5m draw down
receipts from the TT Convertible Loan, of which £3.0m was used to settle the
Kestrel Convertible Loan principal, £1.1m was used for capitalised
development, £0.2m was used to pay interest on the Kestrel Convertible Loan
and the balance was used to provide working capital for KRM22.
Going concern
The financial statements have been prepared on a going concern basis based on
a range of cashflow forecasts and scenarios covering a period of at least
twelve months from the date of this report. The time to close new customers
and the value of each customer, which are deemed individually as high value
and low volume in nature, is key to the forecast being achieved. Even if the
forecast is achieved, there remains a material uncertainty around KRM22
operating within the financial covenants associated with the TT Convertible
Loan. The Board have received a letter of support from TT that they would be
willing to enter into discussions with KRM22 around amending the terms of the
TT Convertible Loan to ensure that KRM22 does not breach the financial
covenants. Further analysis of KRM22's going concern position is detailed in
note 2 (notes to the financial information).
Shareholdings and Earnings per share
As at 31 December 2023, KRM22 had 35,666,336 shares in issue and this was also
the undiluted weighted average number of shares for the period. The
resulting Earning per Share ("EPS") is a 13.0p loss per share (2022: loss of
8.7p). Due to the loss made by the Company in the year, the diluted EPS is
the same as EPS.
Conclusion
In 2023, KRM22 has continued to grow with recognised revenue increasing by
23.3% to £5.3m, ARR increasing to £5.4m which, as at the date of this
report, has further increased to £6.0m. Whilst administrative costs
increased in 2023 compared with the prior year, the Board took action in early
2024 to review the underlying cost base of the business and have since
implemented a focused cost savings programme to generate annual cost savings
of approximately £1.2m. This cost savings programme, together with
significant sales pipeline opportunities, both from direct selling
opportunities and through the TT distribution agreement, will improve the
adjusted EBITDA position going forward and accelerate the Company's path to
profitability.
Kim Suter
CFO
Consolidated income statement and statement of comprehensive income
for the year ended 31 December 2023
Note 2023 2022
£'000 £'000
Revenue 3 5,266 4,273
Cost of sales
(1,145) (955)
Gross profit 4,121 3,318
Other operating income 142 131
Administrative expenses (8,788) (6,077)
Operating loss before interest, taxation, depreciation, amortisation, share (1,399) (1,684)
based payment and exceptional items ('Adjusted EBITDA')
Depreciation and amortisation (1,298) (1,637)
Impairment of intangible assets (1,593) -
Profit on disposal of tangible/intangible assets - 14
Deferred consideration write back 115 -
Gain on extinguishment of debt (net) 127 -
Unrealised foreign exchange (loss)/gain (539) 812
Acquisition, funding and debt related expenses (38) -
Share based payment credit/(charge) 100 (133)
Operating loss (4,525) (2,628)
Finance charge (net) (353) (641)
Loss before taxation (4,878) (3,269)
Taxation 259 168
credit
Loss for the year (4,619) (3,101)
Loss for the year attributable to:
Equity shareholders of the parent (4,619) (3,101)
(4,619) (3,101)
Other comprehensive income
Item that may be reclassified subsequently to profit and loss:
Exchange gain/(loss) on translation of foreign operations 334 (563)
Total comprehensive loss for the year (4,285) (3,664)
Total comprehensive loss for the year attributable to:
Equity shareholders of the parent (4,285) (3,664)
(4,285) (3,664)
Loss per ordinary share
Basic losses per share 4 (13.0p) (8.7p)
Diluted losses per share 4 (13.0p) (8.7p)
Consolidated statement of financial position
at 31 December 2023
Note 2023 2022
£'000 £'000
Non-current assets
Goodwill 5 3,516 5,167
Other intangible assets 5 2,105 2,244
Property, plant and equipment 21 11
Right of use assets 136 369
5,778 7,791
Current assets
Trade and other receivables 1,142 1,462
Cash and cash equivalents 886 1,900
2,028 3,362
Total assets 7,806 11,153
Current liabilities
Trade and other payables 3,900 3,853
Lease liabilities 369 493
Loans and borrowings 391 2,974
Derivative financial liability 196 255
4,856 7,575
Net current liabilities (2,828) (4,213)
Non-current liabilities
Trade and other payables - 30
Lease liabilities - 122
Loans and borrowings 3,887 -
Deferred tax liability 164 245
4,051 397
Total liabilities 8,907 7,972
Net (liabilities)/assets (1,101) 3,181
Equity
Share 3,567 3,567
capital
Share premium 20,517 20,517
Merger reserve (190) (190)
Convertible debt reserve 327 224
Foreign exchange reserve (114) (448)
Share-based payment reserve 2,945 3,045
Retained deficit (28,153) (23,534)
Total equity 1,101 3,181
Consolidated statement of cash flows
for the year ended 31 December 2023
2023 2022
£'000 £'000
Cash flows from operating activities
Loss for the year (4,619) (3,101)
Adjustments for:
Tax credit (259) (168)
Net finance expense 353 641
Amortisation of intangible assets 1,059 1,324
Depreciation of property, plant and equipment and right of use assets 239 313
Impairment of intangible assets 1,593 -
Profit on disposal of intangible/tangible assets - (14)
Deferred consideration write back (115) -
Gain on extinguishment of debt (127) -
Unrealised loss/(gain) on non-GBP denominated loans 539 (812)
Equity-settled Share-based payment (credit)/expense (100) 133
Income taxes received 186 97
(1,251) (1,587)
Decrease/(increase) in trade and other receivables 320 (721)
Increase in trade and other payables 52 187
Net cash flows used in operating activities (879) (2,121)
Cash flows from investing activities
Acquisition deferred consideration payment (43) -
Purchase of intangible assets (1,105) (840)
Purchase of property, plant and equipment (16) (8)
Net cash used in investing activities (1,164) (848)
Cash flows from financing activities
Lease payments principal (232) (217)
Lease payments interest (18) (33)
Receipts from borrowings 4,500 -
Interest paid (208) (285)
Repayments of borrowings (3,000) -
Net cash from/(used in) financing activities 1,042 (535)
Net decrease in cash and cash equivalents (1,001) (3,504)
Cash and cash equivalents at beginning of year 1,900 5,362
Effect of foreign exchange rate changes (13) 42
Cash and cash equivalents at end of year 886 1,900
Consolidated statement of changes in equity
for the year ended 31 December 2023
Ordinary Share premium Merger Convertible debt reserve Foreign exchange reserve Share based payment reserve Retained Total equity
shares
reserve
losses
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 January 2022 3,567 20,517 (190) 224 115 2,912 (20,433) 6,712
Loss for the year - - - - - - (3,101) (3,101)
Other comprehensive loss - - - - (563) - - (563)
Total comprehensive loss - - - - (563) - (3,101) (3,664)
Share-based payments - - - - - 133 - 133
At 31 December 2022 3,567 20,517 (190) 224 (448) 3,045 (23,534) 3,181
Loss for the year - - - - - - (4,619) (4,619)
Other comprehensive gain - - - - 334 - - 334
Total comprehensive gain/(loss) - - - - 334 - (4,619) (4,285)
Convertible debt option - - - 103 - - - 103
Share-based payments - - - - - (100) - (100)
At 31 December 2023 3,567 20,517 (190) 327 (114) 2,945 (28,153) (1,101)
Notes to the financial information
1. Accounting basis
The financial information set out in this document does not constitute the
Group's statutory accounts for the years ended 31 December 2022 or 2023.
Statutory accounts for the years ended 31 December 2022 and 31 December 2023,
which were approved by the Directors on 21 May 2024, have been reported on by
the Independent Auditors. The Independent Auditor's Reports on the Annual
Report and Financial Statements for each of 2022 and 2023 were unqualified,
did draw attention to a matter by way of emphasis, being going concern and
did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Statutory accounts for the year ended 31 December 2022 have been filed with
the Registrar of Companies. The statutory accounts for the year ended 31
December 2023 will be delivered to the Registrar of Companies in due
course and will be posted to shareholders shortly, and thereafter will be
available from the Company's registered office at 5 Ireland Yard, London,
England, EC4V 5EH and from the Company's website: http://krm22.com/investors
(http://krm22.com/investor-relations) /
The financial information set out in these results has been prepared using the
recognition and measurement principles of International Accounting Standards,
International Financial Reporting Standards and Interpretations in conformity
with the requirements of the Companies Act 2006. The accounting policies
adopted in these results have been consistently applied to all the years
presented and are consistent with the policies used in the preparation of the
financial statements for the year ended 31 December 2023, except for those
that relate to new standards and interpretations effective for the first time
for periods beginning on (or after) 1 January 2022. There are deemed to be
no new standards, amendments and interpretations to existing standards, which
have been adopted by the Group, that have had a material impact on the
financial statements.
The Group's financial information has been presented in Pounds Sterling
(GBP). Amounts are rounded to the nearest thousand, unless otherwise stated.
2. Going concern
These financial statements have been prepared on the going concern basis.
The Directors have reviewed KRM22's going concern position taking into account
of its current business activities, budgeted performance and the factors
likely to affect its future development, which are set out in this Annual
Report, and include KRM22's objectives, policies and processes for managing
its capital, its financial risk management objectives and its exposure to
credit and liquidity risks.
The Directors have undertaken a significant assessment of the cashflow
forecast covering a period of at least twelve months from the date of approval
of the financial statements. Cashflow forecasts have been prepared based on
a range of scenarios including, but not limited to, existing customer churn at
different churn rates, no new contracted sales revenue, delayed sales and a
combination of these different scenarios.
Having assessed the sensitivity analysis on cashflows, the key risks to KRM22
remaining a going concern and not being in breach of the financial covenants
associated with the TT Convertible Loan is existing customers paying on
payment terms and within 45 days of invoice, customer churn or up to 10%,
conversion of some of the sales opportunities that are currently at contract
negotiation stage and maintaining control of the cost base.
The time to close new customers and the value of each customer, which are
deemed individually as high value and low volume in nature, is key to the
forecast being achieved and KRM22 continuing to operate within its existing
facilities, this being KRM22's current cash balance and the ability to
drawdown on the remaining funds available through the TT Convertible Loan.
However, even if the forecast is achieved, there remains a material
uncertainty around KRM22 operating within the financial covenants associated
with TT Convertible Loan. The TT Convertible Loan includes financial
covenants, reported at the end of each quarter, based on the Group's financial
performance and there is a risk that KRM22 breaches the Cash Covenant, which
requires KRM22 to retain a minimum amount of cash, on the 31 December 2024 and
31 March 2025 measurement dates. Failure to comply with a financial covenant
will result in an Event of Default which may result in TT withdrawing the TT
Convertible Loan with all accrued amounts becoming immediately due and payable
which would result in KRM22 becoming insolvent.
The Board have received a letter of support from TT that they would be willing
to enter into discussions with KRM22 around amending the terms of the TT
Convertible Loan to ensure that KRM22 does not breach the Cash Covenant.
Amendments could include, but are not limited to, reducing the value of the
Cash Covenant at each measurement date so that KRM22's cash exceeds the
minimum cash requirement on each measurement date, and deferring the accrued
interest payments that are due on 31 December 2024 and 31 March 2025 to 30
June 2025 and 30 September 2025 respectively. If the TT Convertible Loan was
not amened, KRM22 would be obliged to seek alternative resolution including
implementing extensive cost reduction measures.
The Directors have concluded that the circumstances set forth above indicates
the existence of a material uncertainty that may cast significant doubt on
KRM22's ability to continue as a going concern. However, given KRM22's
forecast, visible sales pipeline, working capital needs and letter of support
from TT, the Directors have considered it appropriate to prepare the financial
statements on a going concern basis and the financial statements do not
include the adjustments that would be required if KRM22 were unable to
continue as a going concern.
3. Segmental reporting
The Board of Directors, as the chief operating decision maker in accordance
with IFRS 8 Operating Segments, has determined that KRM22 have identified two
areas of risk management as operating segments, together with a third segment
where the two areas of risk management are not easily separable, however for
reporting purposes into a single global business unit and operates as a single
operating segment, as the nature of services delivered are common.
The internal management accounting information has been prepared in accordance
with IFRS but has a non-GAAP 'Adjusted EBITDA' as a profit measure for the
overall group. This amount is reported on the face of the income statement.
KRM22's revenue from external customers and information about its non-current
assets, excluding deferred tax, by geography is detailed below:
Non-current Non-current
Revenue assets Revenue assets
2023 2023 2022 2022
£'000 £'000 £'000 £'000
UK 1,906 2,109 1,712 2,694
Europe 792 1,466 716 1,955
USA 2,215 2,203 1,520 3,141
Rest of world 353 - 325 1
Total 5,266 5,778 4,273 7,791
The Directors consider that the business has two areas of risk management:
Trading Risk and Corporate Risk as is described in the Strategic Report.
Within these segments, there are two revenue streams with different
characteristics, which are generated from the same assets and cost base.
For the year ended 31 December 2023, no customer generated more than 10% of
total revenue recognised in the year. For the year ended 31 December 2022,
one customer, reported within the UK segment, generated more than 10% of total
revenue and the total revenue received from this customer was £0.5m.
Non-current assets include goodwill and intangible assets recognised on
consolidation and are classified by reference to the geographical location of
the KRM22 group company which initially acquired the acquiree.
Recurring revenue is recognised over the period of time and non-recurring
revenue is recognised at a point in time.
2023 2022
£'000 £'000
Recurring revenue 4,769 3,945
Non-recurring revenue 497 328
Total revenue 5,266 4,273
2023 2022 2020
£'000 £'000 £'000
Trading Risk 2,487 1,867 420
Corporate Risk 2,593 2,258 2,476
Multiple Risk 72 148
TT platform 114 - 1,673
Total 5,266 4,273 4,594
4. Loss per share
Basic earnings per share is calculated by dividing the loss attributable to
the equity holders of KRM22 by the weighted average number of shares in issue
during the year.
KRM22 has dilutive ordinary shares, this being warrants, restricted stock
awards and share options granted to employees. As KRM22 has incurred a loss
in the year, the diluted loss per share is the same as the basic earnings per
share as the loss has an anti-dilutive effect.
2023 2022
£'000 £'000
Loss for the year attributable to equity holders of the parent (4,619) (3,101)
Basic weighted average number of shares in issue 35,666,336 35,666,336
Diluted weighted average number of shares in issue 46,492,491 46,671,529
Basic and diluted loss per share (13.0p) (8.7p)
5. Intangible assets
Acquired
software & Capitalised
Goodwill on related assets development
consolidation £'000 costs Total
£'000 £'000 £'000
Cost
At 1 January 2023 8,053 2,944 3,564 14,561
Additions - - 1,105 1,105
Foreign exchange movements
(246) (57) (20) (323)
At 31 December 2023 7,807 2,887 4,649 15,343
Accumulated amortisation
At 1 January 2023 2,886 1,976 2,288 7,150
Amortisation for the year - 228 826 1,054
Impairment charge for the year
1,497 - 96 1,593
Foreign exchange movements
(92) 19 (2) (75)
At 31 December 2023 4,291 2,223 3,208 9,722
At 31 December 2022 5,167 968 1,276 7,411
At 31 December 2023 3,516 664 1,441 5,621
6. Events after the reporting date
On 7 March 2024, Dan Carter was appointed CEO of the Company, whilst Stephen
Casner, a founder director and former CEO of the Company, resigned from
KRM22. In addition, Keith Todd relinquished his role as Executive Chairman,
whilst remaining an Executive Director of the Company and Garry Jones
succeeded Keith Todd of Non-Executive Chairman of the Company.
On 10 April 2024, the Company issued 140,187 new ordinary shares of 10 pence
each in the Company at a price of 85 pence per Ordinary Share as consideration
for a partial settlement of the deferred consideration payable in respect of
the historical acquisition of Object+ Holding B.V.
7. Cautionary statement
This document contains certain forward-looking statements relating to KRM22.
KRM22 considers any statements that are not historical facts as
"forward-looking statements". They relate to events and trends that are
subject to risk and uncertainty that may cause actual results and the
financial performance of the Company to differ materially from those contained
in any forward-looking statement. These statements are made by the Directors
in good faith based on information available to them and such statements
should be treated with caution due to the inherent uncertainties, including
both economic and business risk factors, underlying any such forward-looking
information.
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