REG - Sorted Group Hldgs. - Annual Financial Report
19/06/2024 07:00
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RNS Number : 9512S Sorted Group Holdings PLC 19 June 2024
This announcement contains inside information for the purposes of Regulation
11 of the Market Abuse (Amendment) (EU Exit) Regulations 2019/310. With the
publication of this announcement via a Regulatory Information Service, this
inside information is now considered to be in the public domain.
19 June 2024
Sorted Group Holdings Plc
("Sorted", the "Company" or the "Group")
Audited Results for the year ended 31 December 2023
Sorted (AIM: SORT) announces its audited results for the year ended 31
December 2023.
Financial Performance
· Revenues in 2023 were £53,066 compared to £110,856 in 2022
representing a 52.1% decrease in revenues year-on-year.
· Administrative costs excluding depreciation and amortisation for
the year to 31 December 2023 were £551,530 (2022: £723,149)
· Loss before exceptional items, amortisation and depreciation for
the year to 31 December 2023 was £512,832 (2022: £641,651)
· Loss per share from continuing operations decreased from 0.029p
in 2022 to 0.065p in 2023
Financial Position at Year End
· Net assets were £2,606,608 (2022: £4,330,452)
· Net current assets were £2,606,608 (2022: £4,195,778)
· Cash and cash equivalents of £955,112 (2022:
£4,125,571)
· Borrowings were £Nil (2022: £Nil)
· Potential deferred tax asset of £5,527,410 (2022:
£4,109,997)
A copy of this announcement and the Company's report & accounts will
shortly be available on the Company's website.
For further information please contact:
Sorted Group Holdings
plc
Tel: +44 (0)3300 555 284
Simon Wilkinson, Chairman
Allenby Capital Limited (Nominated
Adviser)
Tel: +44 (0)20 3328 5656
David Hart
Vivek Bhardwaj
Turner Pope Investments (TPI) Ltd
(Broker)
Tel: +44 (0)20 3657 0050
James Pope
Andy Thacker
About Sorted
Sorted's Delivery Experience supports retailers in providing exceptional
delivery experiences and analysing post-purchase performance. It enables
customers to track deliveries and returns or exchange of parcels with ease.
Founded more than a decade ago, Sorted is trusted by leading retailers - such
as Asda, ASOS and M&S - to make customer purchase experiences a
differentiator.
www.sorted.com (http://www.sorted.com)
@SortedOfficial (https://twitter.com/SortedOfficial)
Media contact - Shaun Weston - shaun.weston@sorted.com
(mailto:shaun.weston@sorted.com)
CHAIRMAN'S REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
Dear Shareholders,
I am pleased to present the Chairman's statement for the Sorted Group Holdings
PLC (the "Company" or the "Group") 2023 report and accounts.
2023 marked a significant turning point for Sorted Group Holdings PLC. On 28
June 2023, we announced a secured convertible bridge loan agreement (the
"Convertible Loan Agreement") with Sorted Holdings Limited ("SHL") to lend it
up to £2.6 million (the "Loan") for working capital purposes. The Convertible
Loan Agreement had a redemption premium of 50% and was secured by a first
fixed and floating charge over SHL's business and assets. At the Company's
option, the Loan could be converted into shares representing nearly 100% of
the fully diluted share capital of SHL.
Additionally, we simultaneously announced entering into an exclusive
non-binding heads of terms for a potential acquisition of the entire issued
share capital of SHL by the Company for a nominal consideration of £1.00 (the
"Proposed Acquisition"). As part of the Proposed Acquisition, the Company
would assume approximately £4.0 million of SHL's outstanding debt. Existing
subscribers, including shareholders of SHL, would be given the opportunity to
participate in a cash subscription for up to £5 million of new shares in
Location Sciences Group PLC (now named as Sorted Group Holdings PLC) to align
their interests with existing shareholders. The Proposed Acquisition
constituted a reverse takeover under the AIM Rules for Companies (the "AIM
Rules"). Accordingly, in accordance with rule 14 of the AIM Rules, the
Company's ordinary shares were suspended from trading on AIM on 28 June 2023.
Post the period end, on 30 January 2024 we announced and published an AIM
admission document in connection with the Proposed Acquisition. The AIM
admission document detailed, inter alia, the proposed acquisition of SHL, a
proposed subscription of 2,285,712 new ordinary shares at 87.50 pence per new
ordinary share to raise approximately £2.0 million, a proposed 625 to 1 share
consolidation, a proposed change of name and AIM ticker symbol to Sorted Group
Holdings PLC and SORT respectively, director appointments, a notice of general
meeting, and the restoration of trading of the Company's existing ordinary
shares on AIM. Terms were agreed for the acquisition of the entire issued and
to be issued share capital of SHL for an aggregate nominal consideration of
approximately £66.73 to be paid in cash at completion.
The Proposed Acquisition was outlined as attractive for a number of reasons.
These included:
· Significant opportunity to leverage Sorted's technology and
substantial capital investment (exceeding £70 million)
· Attractive software-as-a-service ("SaaS") business model in the
ecommerce sector with scalable, predictable revenue performance
· Diverse customer base of household retail brands and strong
industry partnerships
· Global ecommerce market forecast to grow significantly.
· Highly fragmented market
· UK-based business with over 60 employees
On 16 February 2024, all resolutions were duly passed at a general meeting of
the Company. The proposals set out in the AIM admission document completed on
19 February 2024 with the enlarged group successfully admitting to AIM on the
same day ("Admission"). As part of this, Carmen Carey was appointed as Chief
Executive Officer, Mahmoud Warriah as Chief Financial Officer and Petar
Cvetkovic as Non-Executive Director. To reflect the Company's new name, the
website changed to www.sorted.com on Admission.
The financial year ended 31 December 2023 ("FY23") presented its share of
challenges, with a decline in revenue to £53,066 (2022: £110,856). However,
I am pleased to report that we entered the financial year ending 31 December
2024 ("FY24") with a solid financial foundation. The successful fundraises
that took place in 2021 and 2024 provided us with ample resources and,
together with the loan facility agreement with Bidco 3 Limited for up to £3.0
million, enabled us to pursue our strategic acquisition objective in the
backdrop of the complex business landscape.
Throughout the acquisition process, we have remained committed to our key
stakeholders, particularly our shareholders. We recognise that change brings
uncertainty, and we have made every effort to navigate these challenges with
transparency and fairness. Our team has shown remarkable resilience and
adaptability during this period of transition, and we are grateful for their
dedication to our shared vision.
Looking forward, we remain cautiously optimistic. The acquisition of SHL has
provided us with a valuable platform for potential growth opportunities. Armed
with this knowledge, we are actively exploring avenues for sustainable
expansion and enhancement of our offerings.
On 28 May 2024, it was announced that Carmen Carey stepped down as Chief
Executive Officer ("CEO") and Executive Director of the Group with immediate
effect and will continue to support Sorted during a three month notice period.
Finally, I would like to express my heartfelt gratitude to our shareholders,
clients, and partners for their unwavering support throughout this
transformative period. Your confidence in our ability to navigate these
challenges and capitalise on emerging opportunities has been instrumental in
our progress.
In conclusion, while FY23 presented its fair share of hurdles, we are
well-funded and strategically positioned for the future. With a solid
financial foundation, streamlined operations, and a focus on delivering a new
strategic path going forward, we are confident in our ability to create
long-term value for our shareholders. We thank our shareholders and
stakeholders for our continued trust and support.
Yours sincerely,
Simon Wilkinson
Executive Chairman, Sorted Group Holdings PLC
INDEPENDENT DIRECTORS FINANCIAL REVIEW FOR THE YEAR ENDED 31 DECEMBER 2023
Dear Shareholders,
As the Independent Director of Sorted Group Holdings PLC, I am pleased to
present my report alongside the Executive Chairman's statement for the FY23
report and accounts. As a member of the board of directors of the Company (the
"Board" or the "Directors"), my role is to provide an unbiased perspective and
to act in the best interests of the Company and its shareholders.
Throughout FY23, I actively participated in the strategic review process and
monitored the Company's performance, governance, and risk management. I have
assessed the decisions made and actions taken by the Board, ensuring that they
align with the company's values and objectives.
Financial Performance
The financial performance of Sorted Group Holdings PLC in FY23 reflected the
challenges faced by the Company and the broader market environment. I have
scrutinised the financial statements and worked closely with the team to
understand the underlying causes and evaluate the appropriateness of the
strategic initiatives undertaken. I have enclosed below a summary of the
Group's financial performance and statement of financial position at the end
of the year:
Year to 31 December 2023 Six months to 30 June 2023 Year to 31 December 2022 Comparison to prior year
All figures in £GBP
(unless otherwise stated)
Revenue 53,066 33,765 110,856 (52.1%)
Administrative costs 551,530 150,716 723,149 23.7%
Loss before tax 1,723,845 232,538 850,578 (96.8%)
Loss per share 0.065p 0.010p 0.029p (102.2%)
Net assets 2,606,608 4,097,915 4,330,452 (38.7%)
Net current assets 2,606,608 4,097,915 4,195,778 (36.7%)
Cash at bank 955,112 3,498,243 4,125,571 (76.8%)
Group borrowings Nil Nil Nil -
The Board made further reductions in overhead during the FY23 and the impact
of these can be seen in the decreased administration costs in FY23 of
£551,530 compared to the financial year ended 31 December 2022 ("FY22") of
£723,149, representing a 23.7% year on year reduction. The loss before tax
includes the costs of the acquisition of SHL.
Strategic Review and Actions Taken
During FY22, the Board embarked on a comprehensive strategic review to
pinpoint the most viable pathways for sustainable growth and the creation of
shareholder value. This exercise led to the identification of SHL as a prime
target and the most viable option to provide long-term sustainable growth and
create shareholder value. The acquisition of SHL completed on 19 February
2024.
Corporate Governance
We are committed to upholding the highest standards of corporate governance.
Throughout the year, we monitored the Company's compliance with applicable
laws, regulations, and best practices. We reviewed the effectiveness of
internal controls, risk management systems, and ethical practices. We are
pleased to report that Sorted Group Holdings PLC has maintained a robust
governance framework, with appropriate checks and balances in place to
safeguard shareholder interests.
Stakeholder Relations
As the Independent Director, I place great importance on the company's
relationships with its key stakeholders. I have closely monitored the
engagement efforts undertaken by the team to foster a positive team culture,
ensure fair treatment, and provide opportunities for professional growth.
Furthermore, I have assessed the Company's relationships with clients,
suppliers, and other stakeholders, ensuring that open lines of communication
are maintained and that their expectations are being met.
Looking Ahead
As the Independent Director, I remain committed to our fiduciary duties and to
serving the best interests of Sorted Group Holdings PLC and its shareholders.
I will continue to provide oversight, guidance, and independent perspectives
to the Board as the company navigates the evolving landscape. I will monitor
progress against strategic objectives, evaluate risk management practices, and
advocate for responsible and sustainable business practices.
Whilst the Group plans to appoint a new CEO, in the intervening period, Simon
Wilkinson, the Group's Chairman, will also take on the role of Executive
Chairman. In addition to Simon Wilkinson's software and general management
expertise, Sorted will also draw on the significant experience of its other
existing board members to oversee the operations of the business, including
the distribution and logistics expertise of Petar Cvetkovic, a Non-Executive
Director.
In order to recognise Simon Wilkinson's increased involvement in the
operations of the business, Sorted has entered a consultancy arrangement with
him whereby the Group will pay Mr Wilkinson a daily consultancy rate of
£1,750.00 (the "Consultancy Arrangement"). It is anticipated that Mr
Wilkinson will work a maximum of three days per week pursuant to the
Consultancy Arrangement.
In conclusion, I express our appreciation for the trust placed in us by the
shareholders of Sorted Group Holdings PLC. I believe that the Company's
strategic initiatives, including the disposal of the Insights business and the
ongoing commitment to find a new strategic direction for the Group, will
position it for long-term success. I remain vigilant in our oversight role and
are dedicated to the company's continued growth and value creation.
Respectfully submitted,
Dr Nigel Burton
Independent Non-Executive Director, Sorted Group Holdings PLC
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors present their strategic report for the year ended 31 December
2023.
Fair review of the business
The fair review of the business is set out in the Executive Chairman's and
Independent Director's reviews, which describe in detail the financial results
and future plans for Sorted Group Holdings PLC.
The Board monitors progress on the overall Group strategy and the individual
strategic elements by reference to KPls. The primary measures are revenue,
costs, EBITDA before exceptional items and working capital levels.
Principal risks and uncertainties
The principal and commercial risks to the Group are as follows:
Description The Group's strategic review does not deliver the expected improved
shareholder returns.
Impact The Group may not deliver shareholder value.
Mitigation During the year, the Board conducted a thorough target acquisition review and
identified Sorted Holdings Limited as the most viable option to provide
long-term sustainable growth and create shareholder value.
Description Sorted Group Holdings PLC continues to be in a cash consumption phase.
Impact Going concern has been carefully considered and details are provided in the
Corporate Governance Report below and in note 2 of the Group's financial
statements.
Mitigation As at 31 December 2023, the Group had just under £1 million in net cash
resources and a loan to Sorted Holdings Limited. Considering drawdown £2.5
million, the post-year-end acquisition of Sorted Holdings Limited, the £2
million fundraise, and the £3 million Bidco 3 Limited loan facility, the
Group has more than sufficient funds to meet its requirements for the
foreseeable future.
Description Changes in regulation negatively impact the Group's market.
Impact The Group may find the demand for its products is reduced and/ or the Group
may be forced to change or stop selling one or more of its products.
Mitigation The Board takes account of commentators and industrial bodies as to the
direction of policy change.
The Board meets regularly to review specific and general risks that face the
Group. The Board strives to position the Group in a way that any risks can be
minimised and met, should the need arise.
The Group's performance will be dependent on the outcome of the strategic
review and the implementation of the results of this review. As part of our
strategic review, we have thoroughly analysed market trends, customer needs,
and emerging opportunities to ensure the long-term success and sustainable
growth of the company.
The Group is managing this risk by reducing the overheads of the Group and
continuing to analyse new opportunities as they arise. The Board are committed
to delivering shareholder value in the long-term.
Strategic risks
Following the strategic review, Sorted Group Holdings PLC has identified key
initiatives, such as seeking acquisition targets and optimising operational
efficiency. A significant milestone in this strategy was achieved with the
purchase of Sorted Holdings Limited on 19 February 2024, aligning with the
strategic goals set out in the FY23 financial accounts.
However, a strategic risk lies in the effective execution of these
initiatives. Ensuring successful implementation, alignment across the
organisation, and timely delivery of desired outcomes require careful
planning, resource allocation, and effective management of change. Any delays,
misalignment, or inadequate execution could impede the company's ability to
achieve its strategic objectives and may result in lost opportunities, lower
competitiveness, and suboptimal financial performance.
It is important for Sorted Group Holdings PLC to establish clear goals,
allocate appropriate resources, and monitor the progress of these strategic
initiatives. The Company should implement robust project management practices,
establish effective communication channels, and regularly evaluate and adjust
the execution plan as needed. Additionally, strong leadership and stakeholder
engagement are crucial to drive alignment and foster a culture of
accountability throughout the organisation.
By proactively addressing this strategic risk and implementing effective
execution strategies, Sorted Group Holdings PLC can enhance its chances of
successfully realising the desired outcomes of the strategic initiatives and
drive long-term value for shareholders.
This report, in conjunction with the Chairman's statement and Independent
Directors report, form the Strategic Report for the purposes of s414A of the
Companies Act 2006.
Section 172 statement
The Directors believe that they have effectively implemented their duties
under section 172 of the Companies Act 2006 through adherence to the Quoted
Companies Alliance Corporate Governance Code, as disclosed on pages 14 to 16
and as published on our website:
www.sorted/investor-relations/board-governance. The Chairman's Report and
Chief Executive's Review details the Group's future plans to achieve its
long-term strategy.
The Group is committed to maintaining an excellent reputation and strive for
high standards, while maintaining an awareness of the environmental impact of
the work that it does and strives to reduce its carbon footprint.
The Directors recognise the importance of the wider stakeholders in delivering
their strategy and achieving sustainability within the business; in ensuring
that all our stakeholders are considered as part of every decision process we
believe we act fairly between all members of the company.
CORPORATE GOVERNANCE
The Board recognises the importance of good corporate governance in order to
protect and build upon the substantial investments made by our diverse
shareholder base. We have chosen to apply the Quoted Companies Alliance
Corporate Governance Code (the 'QCA Code'), which was developed by the QCA in
consultation with a number of significant institutional small company
investors, as an alternative corporate governance code applicable to AIM
companies. The underlying principle of the QCA Code is that "the purpose of
good corporate governance is to ensure that the company is managed in an
efficient, effective and entrepreneurial manner for the benefit of all
shareholders over the longer term". The Board anticipates that whilst the
Company will continue to comply with the QCA Code, given the Group's size and
plans for the future, it will also endeavour to have regard to the provisions
of the UK Corporate Governance Code as best practice guidance to the extent
appropriate for a company of its size and nature.
An explanation of how these principles have been applied during FY23 is set
out both below and in the Directors' remuneration, Audit Committee and
internal control sections of this report.
Certain information required under the QCA code is included within the
Strategic report and the Directors Remuneration Report.
Name Date Appointed Date Resigned Role Committees
Simon Wilkinson 25/05/2021 - Chairman Remuneration, Nomination, Audit
Nigel Burton 25/05/2021 - Non-Executive Director Remuneration, Nomination, Audit
The Board is responsible to the shareholders for the proper management of the
Group through setting the overall strategy of the business and to review the
people, performance, policies and budgets of the Group. The Board typically
meets quarterly and also meets for any other extraordinary matters as they may
arise. Detailed information on matters to be discussed during the meetings are
circulated in advance of the meeting to ensure non-executive directors can
contribute in an educated manner.
Independence
The roles of the Chairman, Simon Wilkinson, and the Independent Director, Dr
Nigel Burton, have a formal division. The Chairman is responsible for
delivering the outcome of the strategic review and ensure that adequate and
effective resources are in place to deliver shareholder value. The Independent
Director is responsible for monitoring the Board and ensuring no individual or
group takes control of the Board's decision making and that all key
stakeholders are fully briefed on matters and their responsibilities.
Board Balance
A minimum of 50% of the Board will always consist of non-executive directors
including the Chairman. During FY23 all non-executive directors were
independent of the management team and are not involved in any other business
or relationship, both as an executive or non-executive, which may impair their
independent nature and judgement.
Nomination Committee
The Group's nomination committee is responsible for reviewing and making
proposals to the Board on the appointment of Directors and meets as necessary.
During FY23, the Group's nomination committee consisted of Simon Wilkinson,
who acted as Non-Executive Chairman of the committee, and Dr. Nigel Burton.
Performance Evaluation and Re-election
The Board has continued to evaluate its effectiveness and performance during
FY23, taking into account the Financial Reporting Council's Guidance on Board
Effectiveness. It is anticipated that following the completion of the Board
strategic review, director appraisals will be performed to ensure that their
performance is, and continues to be, effective, that where appropriate they
maintain their independence and that they are demonstrating continued
commitment to the role. The Directors will be evaluated internally based on
their responsibilities to the Board. New Directors resign and stand for
re-election at the Group's first AGM following their appointment. 50% of
continuing Directors stand for re-election on an annual basis.
The Directors carry out continued professional development throughout the year
where appropriate and each Director keeps up to date with market changes
through the use of market articles and industry contacts.
Remuneration Committee
The Group's remuneration committee is responsible for the specific
remuneration and incentive packages for each of the Company's executive
directors, senior executives and managers. During FY23, the Group's
Remuneration Committee consisted of Nigel Burton and Simon Wilkinson, who
acted as Non-Executive Chairman of the committee. Further details of the
Committee's remit are contained in the Directors' Remuneration Report on pages
11 to 13.
Relations with Shareholders
The Group encourages two-way communication with both its institutional and
private investors and responds promptly to all queries received. The
Non-Executive Directors communicate regularly with the Group's institutional
shareholders and ensure that their views are communicated fully to the Board.
The Board recognises the Group's AGM as an important opportunity to meet with
the Group's private shareholders. The Directors are available to listen to the
views of shareholders informally immediately following the AGM.
Annual General Meeting
The Annual General Meeting of the Group provides shareholders with the
opportunity to be updated on the Group's progress and to ask questions of the
Board.
Financial Reporting and Internal Control
The Company has established policies covering the key areas of internal
financial control and the appropriate procedures, controls, authority levels
and reporting requirements which must be applied throughout the Group.
The key procedures that have been established in respect of internal financial
control are:
· An annual budget set by the Board
· Monthly management accounts with comparisons to budget
· Monthly forecast updates with comparisons to budget
· Monthly cashflow forecasts with comparisons to budget
· Weekly meetings of the Executive Directors and Senior Management
to review priorities and issues
· Restriction of user access to systems, including but not limited
to Financial, HR and Technology.
The above controls have been established to support the growth of the business
and to protect against future risks.
Corporate Culture
It is the Board's view that the Group's corporate culture is consistent with
its objectives, strategy and business model. The Board is aware that the
culture set by the Board will greatly impact all aspects of the Group and the
way that employees behave. The Board invites employees to provide feedback on
their peers and management.
Consolidated Accounts
The before mentioned Financial Reporting and Internal Controls apply to all
subsidiaries. The accounts of all subsidiaries are combined with those of the
Company to form consolidated accounts each month. Following Admission, the
Chief Financial Officer is responsible for producing the consolidated
accounts, including the elimination of intercompany transactions and balances.
Audit Committee
The Group's Audit Committee is responsible for ensuring the financial
performance of the Group is properly monitored and reported on, the
effectiveness of accounting systems and financial reporting procedures. During
FY23, the Group's Audit Committee consisted of Nigel Burton and Simon
Wilkinson, who acted as Non-Executive Chairman of the committee.
The Committee considers all proposals for non-audit services and ensures that
these do not impact on the objectivity and independence of the auditor. The
Audit Committee reviews, with the external auditor, the safeguards and
procedures developed by the auditor to counter threats or perceived threats to
their objectivity and independence. Non-audit services performed by the
external auditor are assessed for threats to objectivity and independence on a
case-by-case basis.
Board and Committee Attendance
Name Main Board Audit Committee Remuneration Committee Nomination Committee
Simon Wilkinson 4/4 1/1 1/1 1/1
Nigel Burton 4/4 1/1 1/1 1/1
Going concern
The directors have taken a view of the Group as a whole.
Included in our net assets as at 31 December 2023, an amount of £2,516,491 is
outstanding from Sorted Holdings Limited relating to a secured convertible
bridge loan agreement in anticipation of acquiring Sorted Holdings Limited.
This outstanding balance was never intended to be recouped in cash and the
assessment of going concern reflects this position.
The Group ended FY23 with cash resources of £955,112, no debt and a cash burn
of £3.17 million. The cash burn consists of an annualised cash burn of £653k
and a once-off £2.517m to Sorted Holdings Limited as a secured convertible
bridge loan.
The Group continued to operate Verify which has a global client base with
customers in Europe and South Africa. The post FY23 acquisition of Sorted
Holdings Limited resulted in the exit from the Verify business to focus on the
SHL business to deliver shareholder value in the long term.
However, despite the actions of the Board, the Group continued to operate with
a trading loss during FY23. The new funds raised during 2021 were utilised to
acquire the Sorted Holdings Limited business on 19 February 2024. The Board
will continue to monitor cash resources and progress the ongoing business
review.
Based on the current status, after making enquiries and considering the
existing cash resources of the business and the further cost reductions made
during 2023, plus the Sorted Holdings Limited acquisition, the £2m fundraise
and the £3m Bidco 3 Limited facility, the Board has a reasonable expectation
that the Group will be able to execute its plans in the medium term such that
the Group will have adequate resources to continue in operational existence
for the foreseeable future. This provides the Board with assurance on the
Group's ability to continue as a going concern, and therefore adopt the going
concern basis of accounting in preparing the annual financial statements.
DIRECTORS' REMUNERATION REPORT
As a Company admitted to trading on AIM, Sorted Group Holdings PLC is not
required to present a directors' remuneration report, however, a number of
voluntary disclosures have been made. The Company has complied with the
disclosure requirements set out in the AIM Rules for Companies.
Remuneration Committee
During FY23, the Remuneration Committee, comprising Simon Wilkinson and Nigel
Burton, determines the Group's policy for executive remuneration and the
individual remuneration packages for executive directors. In setting the
Group's remuneration policy, the committee considers a number of factors
including:
· salaries and benefits available to executive directors of
comparable companies; and
· the need to both attract and retain executives of appropriate
calibre
Remuneration of executive directors
Consistent with this policy, benefit packages awarded to executive directors
comprise a mix of basic salary and performance-related remuneration that is
designed as an incentive. The remuneration packages can comprise the following
elements:
· base salary: the Remuneration Committee sets the base salaries to
reflect responsibilities and the skills, knowledge and experience of the
individual;
· bonus scheme: the executive directors are eligible to receive a
bonus dependent on both individual and Group performance as determined by the
Remuneration Committee;
· equity: share options; and
· various other add on· benefits such as private medical
insurance.
The executive directors are engaged under separate contracts which require a
notice period of three or six months given at any time by the individual.
Remuneration of non-executive directors
The fees and equity awarded to non-executive directors are determined by the
Board. The non-executive directors do not receive any other forms of benefit
such as private medical insurance.
Year to 31 December 2023
Director Salary and fees Bonus Pension Benefits Share-based payments Total
£ £ £ £ £ £
S Wilkinson (Non-executive) 83,437 - - - - 83,437
N Burton (Non-executive) 76,406 - - - - 76,406
159,843 - - - - 159,843
Included within directors' remuneration for S Wilkinson and N Burton is
remuneration of £83,837 and £76,406 respectively that was settled by issue
of ordinary shares.
Year to 31 December 2022
Director Salary and fees Bonus Pension Benefits Share-based payments Total
£ £ £ £ £ £
M Slade (Executive)* 77,600 - 660 - - 78,260
D Rae (Executive)* 64,667 - 660 - - 65,327
S Wilkinson (Non-executive) 101,563 - - - - 101,563
N Burton (Non-executive) 71,094 - - - - 71,094
314,924 - 1,320 - - 316,244
Included within directors' remuneration for S Wilkinson and N Burton is
remuneration of £101,563 and £71,094 respectively that was settled by issue
of shares.
* Resigned 22 June 2022
Director Grant Date Exercise Price At 31 December 2023 At 31 December 2022
Number Number
M Slade (Executive)* 29/11/2018 2.25p - -
D Rae (Executive)* 29/11/2018 2.25p - -
Notes: The options were to vest in three equal tranches when certain share
price targets have been reached, the share price targets are as follows:
• 4.8 pence per New Ordinary Share
• 7.3 pence per New Ordinary Share
• 9.7 pence per New Ordinary Share
The options in place at the end of 31 December 2021 were forfeit on 22 June
2022 when the option holders ceased to hold office.
Director Warrants
Non-transferable warrants to subscribe for, in aggregate, 120,000,000 Ordinary
Shares were issued to the Executive Directors and the Non-Executive Directors,
exercisable at 0.20p for five years from 25 May 2021, provided that the
Ordinary Shares have traded at a Volume Weighted Average Price (VWAP) at or
above 0.30p for 20 consecutive Business Days, or on a change of control of the
Company.
Name Number of Ordinary Shares subject to Director Warrants
Simon Wilkinson 30,000,000
Dr Nigel Burton 30,000,000
Mark Slade 30,000,000
David Rae 30,000,000
Broker Warrants
Transferable warrants to subscribe for, in aggregate, 41,250,000 Ordinary
Shares were issued to the Executive Directors and the Non-Executive Directors,
exercisable at 0.20p for five years from 25 May 2021.
Name Number of Ordinary Shares subject to Broker Warrants
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
Promoter Warrants
Promoter warrants were issued to certain investors in the fundraising
completed on 25 May 2021 in consideration of those persons assembling and
co-ordinating the Concert Party's investment in the Company. As part of this
issuance, non-transferable warrants to subscribe for, in aggregate,
500,000,000 Ordinary Shares were issued to Simon Wilkinson, exercisable at
0.20p for five years from 25 May 2021.
DIRECTORS' REPORT FOR THE YEAR ENDED 31 DECEMBER 2023
The Directors are pleased to present the annual report and audited financial
statements of Sorted Group Holdings PLC for the year ended 31 December 2023.
Dividends
The Directors do not recommend the payment of a dividend.
Board of Directors
Simon Wilkinson, Executive Chairman
Simon joined Sorted Group Holdings PLC as Non-Executive Chairman in May 2021
and executive chairman 24(th) May 24. Simon is a highly experienced software
executive and entrepreneur, having been involved with a number of public and
private companies over his career. He was most recently CEO then Chairman of
Mobica, a world-leading, award-winning software services company offering
bespoke development, QA and consultancy. He was previously Chief Executive
Officer of Myriad Group AG, which was listed in Zurich, and founder and Chief
Executive Officer of Magic4 Ltd, a mobile messaging software market leader,
backed by 3i, Philips Ventures and Motorola Ventures.
Nigel Burton, Non-Executive Director
Nigel was appointed as a Non-Executive Director in May 2021. Nigel spent 14
years as an investment banker at leading. City institutions including UBS
Warburg and Deutsche Bank, including as the Managing Director responsible for
the energy and utilities industries. Following this he spent 15 years as Chief
Financial Officer or Chief Executive Officer of a number of private and public
companies. He is currently a Non-Executive Director of BlackRock Throgmorton
Investment Trust pie, DeepVerge pie, eEnergy Group pie, Mobile Streams pie and
Microsaic Systems pie.
Mahmoud Warriah, Chief Financial Officer
From startups to blue chips, Mahmoud has a strong track record of successfully
delivering commercial, transitional and business transformational change. He
is a qualified chartered accountant with extensive experience across multiple
sectors and draws upon his computer science degree to resolve complex
operational challenges. Mahmoud has been Sorted's acting interim Chief
Financial Officer since 3 October 2022 and was appointed Chief Financial
Officer on 29 January 2024.
Petar Cvetkovic, Non-Executive Director
Petar is the Founder and current Chairman of Welford Investments Limited,
which specialises in equity holdings in growth companies, ownership of
freehold commercial properties and advisory work. Over the course of his
36-year career, he has led some of the UK's best-known logistic firms, working
in parcels, contract and shared-user distribution as well as supply chain and
international logistics. Petar was formerly the Chief Executive Officer of DX
(Group) Plc and Target Express.
As noted in the Company's AIM admission document, the Directors intends to
appoint a further independent Non-Executive Director to the Board within 12
months from 19 February 2024.
Research and development
Due to the reorganisation of the business following the Board's strategic
review, Sorted Group Holdings PLC ceased investing into research and
development with no expense for 2022 or 2023.
Financial Risk Management
The Group's financial instruments comprise cash and cash equivalents, trade
receivables and payables and borrowings. The main risks arising from the
Group's financial instruments are interest rate risk, credit risk, liquidity
risk and foreign currency risk.
Interest rate and credit risk - the principal assets of the Group are its cash
deposits. These are short-term liquid assets and as a result the exposure to
interest rate income risk is not considered significant. The principal focus
of the Directors has been to minimise any credit risk in relation to its cash
deposits even at the expense of interest income received. Borrowings include
financial instruments on fixed interest rate terms and a revolving credit
facility at a variable rate. As a result, the exposure to interest rate
expense risk is low and no active management of interest rate risk is
undertaken by the Board.
Foreign currency risk - the main functional currency is sterling. Throughout
2023, the Company's transactions have primarily been denominated in sterling
and the Group has had low exposure to foreign currency risk.
Liquidity risk - the Board's policy is to ensure that sufficient cash and cash
equivalents are held on a short-term basis at all times in order to meet the
Group's operational needs. The Group does actively raise funds through
market placings and other loan facilities.
The Group has been operating at a trading loss due to its stage of development
and seeks to ensure that its investments will deliver long term value to
shareholders. Liquidity risk is actively managed through regular review of
cash requirements of the business in conjunction with the strategic and
operational plans for the Group.
Substantial shareholdings
As at 18 June 2024 the Directors had been notified of the following holdings
representing 3% or more of the issued share capital of the Company. These
shareholdings were effective 16 February 2024 upon the acquisition of Sorted
Holdings Limited.
Percentage of
Number of issued share
ordinary shares capital
Shard Credit Partners Venture Debt Fund I LP 2,752,140,000 36.02%
Richard Hughes 320,000,000 4.19%
Mahmud Kamani 320,000,000 4.19%
SDI (Retail Co 8) Limited 285,714,000 3.74%
Directors
The Directors, who held office during the FY23, were as follows:
S Wilkinson
N Burton
The Company maintains director and officers' liability insurance.
Statement of Directors' responsibilities
The Directors acknowledge their responsibilities 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 the Directors have elected to prepare the
financial statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. 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
company and of the profit or loss of the group and company for that period. In
preparing these financial statements, the directors are required
to:
• select suitable accounting policies and apply them consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable International
Financial Reporting Standards (IFRSs) as adopted by the European Union 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 company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the group's and the company's transactions and
disclose with reasonable accuracy at any time the financial position of the
group and the company and enable them to ensure that the financial statements
comply with the Companies Act 2006. They are also responsible for safeguarding
the assets of the group and the company and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
Directors' interests in shares
During FY23, the Directors held the following interests in Sorted Group
Holdings PLC:
At 16 February 2024 At 31 December 2022 and at 31 December 2023
Ordinary Shares of 0.1p each Options over Ordinary Shares of 0.1p each Warrants over Ordinary Shares of 0.1p each Ordinary Shares Options over Ordinary Shares of 0.1p each Warrants over Ordinary Shares of 0.1p each
of 0.1p each
S Wilkinson 228,571,000 - 800,048,000 100,000,000 - 530,000,000
N Burton 204,571,000 - 40,048,000 85,000,000 - 55,000,000
The market price of the Company's shares at the end of FY23 was 0.14p.
Disclosure of information to auditor
Each of the persons who are directors at the time when this director's report
is approved has confirmed that:
· so far as that director is aware, there is no relevant audit
information of which the Company's auditor is unaware; and
· that director has taken all the steps that ought to have been
taken as a director in order to be aware of any relevant audit information and
to establish that the auditor is aware of that information.
Annual General Meeting
Notice of the forthcoming Annual General Meeting of the Company together with
resolutions relating to the Company's ordinary business will be given to the
members separately.
Reappointment of auditors
The auditors, Hazlewoods LLP, will be proposed for reappointment in accordance
with section 485 of the Companies Act 2006.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF SORTED GROUP HOLDINGS PLC
Opinion
We have audited the financial statements of Sorted Group Holdings PLC,
formerly Location Scienced Group PLC (the 'parent company') and its
subsidiaries (the 'group') for the year ended 31 December 2023, which comprise
the Consolidated Income Statement, Consolidated Statement of Financial
Position, Statement of Financial Position, Consolidated Statement of Changes
in Equity, Statement of Changes in Equity, Consolidated Statement of Cash
Flows, Statement of Cash Flows, and Notes to the Financial Statements,
including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK adopted international accounting standards.
In our opinion the financial statements:
• give a true and fair view of the state of the group's and the
parent company's affairs as at 31 December 2023 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor's responsibilities for the
audit of the financial statements section of our report. We are independent of
the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the FRC's Ethical
Standard as applied to listed entities·, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Our approach to the audit
Our audit approach was based on a thorough understanding of the Group's
business and is risk based. In arriving at our opinions set out in this
report, we highlight the key audit matters that in our judgment, had the
greatest effect on the financial statements.
Key audit matters How our scope addressed this matter
Key audit matters are those matters that, in our professional judgment, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) we identified, including those
which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters
Recognition of revenue
Revenue consists of the value of services provided. Revenue recorded for Our audit work included but was not restricted to:
services is recorded to the extent that the Group has performed its
contractual obligations. We therefore identified revenue recognition as a risk - For revenue recognised in the year our audit work include,
that required particular audit attention. assessing whether the Group's accounting policy for revenue recognition was in
accordance with IFRS 15 'Revenue';
- Sampling service sales in the year and comparing them to
usage reports and stated performance dates;
- Performing cut-off testing of sales around the year end;
and
Analytical review of revenue recognised in the year including variance review.
Internally generated intangible assets
The Group capitalises development costs when the following criteria have been Our audit work included, but was not restricted to:
met: The product is technically viable, it is intended for sale, a market
exists, expenditure can be measured reliably, and sufficient resources are - Assessing the nature of the costs capitalised to ensure they met the
available to allow completion of the project. When the Board is sufficiently required accounting criteria for capitalisation;
confident that these criteria are met, the costs are capitalised. We therefore
identified internally generated intangibles as a risk that required particular - Discussions with management to ensure that all criteria for capitalisation
audit attention. had been met and supporting evidence was obtained to corroborate this.
Considering whether there are any impairment indicators and, where these
exist, reviewing impairment reviews prepared by management
Going concern
Trading performance of the Group has previously indicated the existence of Our audit work included, but was not limited to:
material uncertainty, which may cast significant doubt about the Company and
the Group's ability to continue as a going concern - considering funds and resources available to the Group in the year;
- review of forecasts prepared by management to support the going concern
assumption; and
consideration of customer contracts
Our application of materiality
We apply the concept of materiality in planning and performing our audit, in
evaluating the effect of any identified misstatements and in forming our
opinion. For the purpose of determining whether the group financial statements
are free from material misstatement, we define materiality as the magnitude of
a misstatement or an omission from the financial statements or related
disclosures that would make it probable that the judgement of a reasonable
person, relying on the information would have been changed or influenced by
the misstatement or omission. We also determine a level of performance
materiality, which we used to determine the extent of testing needed, to
reduce to an appropriately low level that the aggregate of uncorrected and
undetected misstatements exceed materiality of the group financial statements
as a whole.
We establish materiality for the financial statements as a whole to be
£37,000, which is 1% of the value of the trading subsidiary's total assets.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the director's
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate.
Our evaluation of the directors' assessment of the company's ability to
continue to adopt the going concern basis of accounting. included discussions
with management to support assumptions included in forecasts and the Group
ongoing strategy and assessing the level of resource available to the Group.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the company's ability to continue
as a going concern for a period of at least twelve months from when the
original financial statements were authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to
going· concern are described in the relevant section of this report.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report, other than the
financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the
other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to
report that fact.
We have nothing to report in this regard.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic
Report and Directors' Report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic Report and Directors' Report have been prepared in
accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of our knowledge and understanding of the group and the parent
company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Strategic Report and the Directors'
Report.
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.
Responsibilities of directors
As explained more fully in the Directors' Report set out on page 16, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the Group's and the parent Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to
liquidate the Group or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above; to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are capable of detecting
irregularities, including fraud is detailed below.
Based on our understanding of the company and its activities, we identified
that the principal risks of non- compliance with laws and regulations related
to UK tax legislation and money laundering, and we considered the extent to
which non-compliance might have a material effect on the financial statements.
We also considered those laws and regulations that have a direct impact on the
preparation of the financial statements such as UK GAAP and the Companies Act
2006. We evaluated management's incentives and opportunities for fraudulent
manipulation of the financial statements (including the risk of override of
controls), and determined that the principal risks were related to posting
inappropriate or fictitious journal entries to manipulate the financial
performance or financial position of the company.
As part of an audit in accordance with ISAs (UK), we exercise professional
judgement and maintain professional scepticism throughout the audit. We also
planned and performed audit procedures including:
• Gaining an understanding of the legal and regulatory framework and
considering the risk of any acts which may be contrary to applicable laws and
regulations, including fraud.
• Obtaining an understanding of internal control relevant to the audit in
order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the
company's internal control.
• Evaluation of the appropriateness of accounting policies used and the
reasonableness of accounting estimates and related disclosures made by the
directors.
• Making inquiries with management including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud.
• Testing journal entries and other adjustments for appropriateness and
evaluating the business rationale of any significant transactions outside the
normal course of business.
• Evaluation of the overall presentation, structure and content of the
financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that
achieves fair presentation.
• Conclusion on the appropriateness of the directors' use of the going
concern basis of accounting and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group's ability to continue as a going concern. If we
conclude that a material uncertainty
• exists, we are required to draw attention in our auditor's.report to
the related disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are based on the audit
evidence obtained up to the date of our auditor's report. However, future
events or conditions may cause the Group to cease to continue as a going
concern.
There are inherent limitations in the audit procedures described above. We are
less likely to become aware of instances of non-compliance with laws and
regulations that are not closely related to events and transactions reflected
in the financial statements. Also the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations or through collusion.
We communicate with those charged with governance regarding, among other
matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we
identify during our audit.
A further description of our responsibilities is available on the Financial
Reporting Council's website at:www.frc.org.uk/auditorsresponsibililies.
(http://www.frc.org.uk/auditorsresponsibililies) This description forms part
of our auditor's report.
Use of this report
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.
Ryan Hancock (Senior Statutory Auditor)
For and on behalf of Hazlewoods LLP, Statutory Auditor
Staverton Court Staverton Cheltenham GL51 OUX
Date: 18 June 2024
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2023
2023 2022
Continuing Operations Note £ £
Revenue 4 53,066 110,856
Cost of sales (14,368) (29,358)
Gross profit 38,698 81,498
Administrative expenses (551,530) (723,149)
Other operating income - -
Operating loss before exceptional administrative expenses, amortisation and (512,832) (641,651)
depreciation
Amortisation and depreciation (134,674) (259,335)
Exceptional administrative expenses 6 (1,110,346) 42,040
Operating loss 6 (1,757,852) (858,946)
Finance income 7 34,007 8,368
Loss before tax (1,723,845) (850,578)
Income tax 11 - -
Loss for the year for the financial year from continuing operations (1,723,845) (850,578)
Discontinued operations
Profit (loss) for the year from discontinued operations 5 - 92,357
Loss for the financial year (1,723,845) (758,221)
Earnings per share
Loss per share - basic and diluted 12 (0.065p) (0.029p)
The above results were derived from continuing operations.
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own statement of
comprehensive income in these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
2023 2022
Note £ £
Assets
Non-current assets
Intangible assets 13 - 134,674
- 134,674
Current assets
Trade and other receivables 15 2,692,134 228,072
Cash and cash equivalents 955,112 4,125,571
3,647,246 4,353,643
Current liabilities
Trade and other payables 16 (1,040,638) (157,864)
Net current assets 2,606,608 4,195,778
Total assets less current liabilities 2,606,608 4,330,453
Net assets 2,606,608 4,330,453
Equity
Share capital 18 16,340,507 16,340,507
Share premium 20,088,118 20,088,118
Merger relief reserve 11,605,556 11,605,556
Capital reserve 209,791 209,791
Reverse acquisition reserve (9,225,108) (9,225,108)
Equity reserve 1,135,319 1,135,319
Retained earnings (37,547,575) (35,823,730)
Equity attributable to owners of the company 2,656,608 4,330,453
STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2023
2023 2022
Note £ £
Assets
Non-current assets
Investments 15 3,034,374 3,034,374
Current assets
Trade and other receivables - 58,797
Current liabilities
Trade and other payables 16 (452,094) (76,000)
Net current assets (452,094) (17,203)
Total assets less current liabilities 2,582,280 3,017,171
Net assets 2,582,280 3,017,171
Equity
Share capital 18 16,340,507 16,340,507
Share premium 20,088,118 20,088,118
Merger relief reserve 11,605,556 11,605,556
Equity reserve 1,135,319 1,135,319
Retained earnings (46,587,220) (46,152,329)
Equity attributable to owners of the company 2,582,280 3,017,171
The Company has taken advantage of the exemption allowed under section 408 of
the Companies Act 2006 and has not presented its own statement of
comprehensive income in these financial statements. The loss after tax for the
parent Company for the year was £434,891 (2022: £169,747).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER
2023
Share capital Share premium Merger relief reserve Capital reserve Reverse acquisition reserve Equity reserve Retained earnings Total
£ £ £ £ £ £ £ £
At 1 January 2022 16,298,007 20,034,993 11,605,556 209,791 (9,225,108) 1,135,319 (34,879,987) 5,178,571
Loss for the year - - - - - - (758,221) (758,221)
Total comprehensive income - - - - - - (758,221) (758,221)
New share capital subscribed 42,500 53,125 - - - - - 95,625
Share-based payments - - - - - - (185,522) (185,522)
At 31 December 2022 16,340,507 20,088,118 11,605,556 209,791 (9,225,108) 1,135,319 (35,823,730) 4,330,453
Share capital Share premium Merger relief reserve Capital reserve Reverse acquisition reserve Equity reserve Retained earnings Total
£ £ £ £ £ £ £ £
At 1 January 2023 16,340,507 20,088,118 11,605,556 209,791 (9,225,108) 1,135,319 (35,823,730) 4,330,453
Loss for the year - - - - - - (1,723,845) (1,233,845)
Total comprehensive income - - - - - - (1,723,845) (1,233,845)
At 31 December 2023 16,340,507 20,088,118 11,605,556 209,791 (9,225,108) 1,135,319 (37,547,575) (2,606,608)
STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023
Share capital Share premium Merger relief reserve Equity reserve Retained earnings Total
£ £ £ £ £ £
At 1 January 2022 16,298,007 20,034,993 11,605,556 1,135,319 (45,797,060) 3,276,815
Loss for the year - - - - (169,747) (169,747)
Total comprehensive income - - - - (169,747) (169,747)
New share capital subscribed 42,500 53,125 - - - 95,625
Share-based payments - - - - (185,522) (185,522)
At 31 December 2022 16,340,507 20,088,118 11,605,556 1,135,319 (46,152,329) 3,017,171
Share capital Share premium Merger relief reserve Equity reserve Retained earnings Total
£ £ £ £ £ £
At 1 January 2023 16,340,507 20,088,118 11,605,556 1,135,319 (46,152,329) 3,017,171
Loss for the year - - - - (434,891) (434,891)
Total comprehensive income - - - - (434,891) (434,891)
At 31 December 2023 16,340,507 20,088,118 11,605,556 1,135,319 (46,587,220) (2,582,280)
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 2022
Cash flows from operating activities £ £
Loss for the year from continuing activities (1,723,845) (850,578)
Loss for the year from discontinued activities - 92,537
Adjustments to cash flows from non-cash items:
Depreciation and amortisation 6 134,674 259,335
Impairment charge 6 - 143,482
Finance income 7 (34,007) (8,368)
Share based payment transactions 19 - (185,522)
Shares issued other than for cash - 85,000
Uplift in fair value of directors' fees - 10,625
(1,623,178) (453,669)
Working capital adjustments
Decrease / (Increase) in trade and other receivables 52,429 103,487
Decrease in trade and other payables 882,774 (25,310)
Cash used in operations (687,975) (375,492)
Income taxes received - 113,871
Net cash flow from operating activities (687,975) (261,622)
Cash flows from investing activities
Interest received 7 34,007 8,368
Net cash flows from investing activities 34,007 8,368
Cash flows from financing activities
Decrease / (Increase) in secured convertible bridge loan (2,516,491) -
Net cash flows from financing activities (2,516,491) -
Net increase/(decrease) in cash and cash equivalents (3,170,459) (253,254)
Cash and cash equivalents at 1 January 4,125,571 4,378,825
Cash and cash equivalents at 31 December 955,112 4,125,571
2023 2022
£ £
Non-cash financing activities:
Directors' fees settled by share issues - 95,625
For full details on non-cash financing activities see note 21.
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2023
Note 2023 2022
Cash flows from operating activities £ £
Loss for the year (434,891) (169,747)
Adjustments to cash flows from non-cash items:
Shares issued other than for cash - 85,000
Uplift in fair value of directors' fees - 10,625
(310,891) (74,122)
Working capital adjustments
Decrease/ (Increase) in trade and other receivables 58,797 74,1227
Decrease in trade and other payables 376,094 -
Net increase/(decrease) in cash and cash equivalents - -
Cash and cash equivalents at 1 January - -
Cash and cash equivalents at 31 December - -
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
1 General information
The company is a public company limited by share capital, incorporated and
domiciled in England. The address of its registered office is:
Level Six
111 Piccadilly
Manchester
M1 2HY
The Company's ordinary shares are traded on the Alternative Investment Market
(AIM) of the London Stock Exchange.
Principal activity
In previous years, the Group developed a global platform called Verify, which
brings transparency to the location based mobile advertising market. Verify
allows marketeers to authenticate where their adverts have been viewed and
uses proprietary technology to detect location ad-fraud, which would otherwise
go unnoticed.
2 Accounting policies Statement of compliance
The group financial statements have been prepared in accordance with
International Financial Reporting Standards and its interpretations adopted by
the UK ("adopted IFRS's").
Summary of significant accounting policies and key accounting estimates
The principal accounting policies applied in the preparation of these
financial statements are set out below. These policies have been consistently
applied to all the years presented, unless otherwise stated.
Going concern
The directors have taken a view of the Group as a whole.
Included in our net assets as at 31 December 2023, an amount of £2,516,491 is
outstanding from Sorted Holdings Limited relating to a secured convertible
bridge loan agreement in anticipation of acquiring Sorted Holdings Limited.
This outstanding balance was never intended to be recouped in cash and the
assessment of going concern reflects this position.
The Group ended FY23 with cash resources of £955,112, no debt and a cash burn
of £3.17 million. The cash burn consists of an annualised cash burn of £653k
and a once-off £2.517m to Sorted Holdings Limited as a secured convertible
bridge loan.
The Group continued to operate Verify which has a global client base with
customers in Europe and South Africa. The post FY23 acquisition of Sorted
Holdings Limited resulted in the exit from the Verify business to focus on the
SHL business to deliver shareholder value in the long term.
However, despite the actions of the Board, the Group continued to operate with
a trading loss during FY23. The new funds raised during 2021 were utilised to
acquire the Sorted Holdings Limited business on 19 February 2024. The Board
will continue to monitor cash resources and progress the ongoing business
review.
Based on the current status, after making enquiries and considering the
existing cash resources of the business and the further cost reductions made
during 2023, plus the Sorted Holdings Limited acquisition , the £2m fundraise
and the £3m Bidco 3 limited facility, the Board has a reasonable expectation
that the Group will be able to execute its plans in the medium term such that
the Group will have adequate resources to continue in operational existence
for the foreseeable future. This provides the Board with assurance on the
Group's ability to continue as a going concern, and therefore adopt the going
concern basis of accounting in preparing the annual financial statements.
Basis of consolidation
The group financial statements consolidate the financial statements of the
company and its subsidiary undertakings drawn up to 31 December 2023 in
accordance with IFRS 10.
A subsidiary is an entity controlled by the company. Control is achieved where
the company has the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are
included in the income statement from the effective date of acquisition or up
to the effective date of disposal, as appropriate. Where necessary,
adjustments are made to the financial statements of subsidiaries to bring
their accounting policies into line with those used by the group.
The purchase method of accounting is used to account for business combinations
that result in the acquisition of subsidiaries by the group. The cost of a
business combination is measured as the fair value of the assets given, equity
instruments issued and liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the business combination.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair values
at the acquisition date. Any excess of the cost of the business combination
over the acquirer's interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised is recorded as goodwill.
Inter-company transactions, balances and unrealised gains on transactions
between the company and its subsidiaries, which are related parties, are
eliminated in full.
Intra-group losses are also eliminated but may indicate an impairment that
requires recognition in the consolidated financial statements.
Accounting policies of subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the group. Non-controlling
interests in the net assets of consolidated subsidiaries are identified
separately from the group's equity therein. Non-controlling interests consist
of the amount of those interests at the date of the original business
combination and the non-controlling shareholder's share of changes in equity
since the date of the combination. Total comprehensive income is attributed to
non-controlling interests even if this results in the non-controlling
interests having a deficit balance.
Changes in accounting policy
For the purpose of the preparation of these consolidated financial statements,
the Group has applied all standards· and interpretations that are effective
for accounting periods beginning on or after 1 January 2023. None of the
standards that have been applied have had a material effect on the financial
statements.
New standards, interpretations and amendments not yet effective
No new standards, amendments or interpretations to existing standards that
have been published and that are mandatory for the Group's accounting periods
beginning on or after 1 January 2023, or later periods, have been adopted
early.
None of the standards, interpretations and amendments which are effective for
periods beginning after 1 January 2023, and which have not been adopted early,
are expected to have a material effect on the financial statements.
Segmental reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision maker for the use in
strategic decision making and monitoring of performance. The Group considers
the chief operating decision maker to be the Executive Board.
Revenue recognition
Revenue represents the invoice value of services and software licences
provided to external customers in the period, stated exclusive of value added
tax.
Consideration received from customers in respect of services is only recorded
as revenue to the extent that the Group has performed its contractual
obligations in respect of that consideration. Management assess the
performance of the Group's contractual obligations against project milestones
and work performed to date.
Revenue from software licences sold in conjunction with services is invoiced
separately from those services and recognised over the period of the licence.
Revenue from software licences for the use of the technology platform is
recognised over the period of the license.
Revenue from software development is recognised to the extent that the Group
has obtained the right to consideration through its performance.
The IFRS 15 practical expedient has been applied whereby the promised amount
of consideration has not been amended for the effects of a significant
financing component as at the contract inception there are no contracts where
the period between transfers of promised goods or services and customer
payment is expected to exceed one year.
Under the Group's standard contract terms, customers have a right of return
within 30 days. At the point of sale, a refund liability and a corresponding
adjustment to revenue is recognised for those products expected to be
returned. It is considered highly probable that a significant reversal in the
revenue recognised will not occur given the consistent low level of returns
over previous years.
Grants
Grants for revenue expenditure are presented as part of the Income Statement
in the periods in which the expenditure is recognised.
Foreign currency transactions and balances
Items included in the financial statements of each of the Group's entities are
measured using the currency of the primary economic environment in which the
entity operates ("the functional currency"). The consolidated financial
statements are presented in sterling, which is the Parent's presentational
currency.
Transactions in foreign currencies are recorded at the rate ruling at the date
of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated at the rate of exchange ruling at the balance sheet
date.
The results and financial position of all Group entities that have a
functional currency different from the presentational currency of the Group
are translated into sterling follows:
• Assets and liabilities for each balance sheet presented are translated at
the closing rate at the date of the balance sheet.
• Income and expenses for each income statement are translated at the
average exchange rate for the month where these approximate the exchange rate
at the date of the transaction; and
• All resulting exchange differences are recognised within other
comprehensive income and taken to the foreign exchange reserve.
Tax
The current tax charge is calculated on the basis of tax rates and laws that
have been enacted or substantively enacted by the reporting date in the
countries where the group operates and generates taxable income.
Deferred tax is provided for using the liability method on temporary
differences at the balance sheet date between tax basis of assets and
liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised in full for all temporary differences
other than those relating to goodwill on investments in subsidiaries. Deferred
tax assets are recognised for all deductible temporary differences carried
forward of unused tax credits and unused tax losses to the extent that it is
probable that taxable profit will be available against which the deductible
temporary differences and carry-forward of unused tax credits and unused tax
losses can be utilised.
The carrying amount of deferred tax assets is assessed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profit will be available to allow all or part of the deferred tax
asset to be utilised. Unrecognised deferred tax assets are reassessed at each
balance sheet date and are recognised to the extent that it is probable that
future taxable profits will allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period when the asset is realised, or the liability
settled, based on tax rates that have been enacted or substantively enacted at
the balance sheet date.
The tax currently receivable is based on the taxable loss for the period and
relates to R&D tax credits. Taxable loss differs from net loss as reported
in the consolidated income statement because it excludes items of income or
expense that are taxable or deductible in other periods and it further
excludes items that are never taxable or deductible. This is calculated using
rates and laws enacted or substantively enacted at the reporting date.
Financial instruments
The Group recognises financial instruments when it becomes a party to the
contractual arrangements of the instrument. Financial instruments are
de-recognised when they are discharged or when the contractual terms expire.
The Group's accounting policies in respect of financial instruments
transactions are explained below:
Financial assets
The Group classifies all of its financial assets as loans and receivables.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise
principally through the provision of goods and services to customers (e.g.
trade receivables), but also incorporate other types of contractual monetary
assets. They are initially recognised at fair value plus transaction costs
that are directly attributable to their acquisition or issue and are
subsequently carried at amortised cost using the effective interest rate
method, less provision for impairment. Discounting is omitted where the effect
of discounting is immaterial.
lmpairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterpart or default
or significant delay in payment) that the Group will be unable to collect all
of the amounts due under the terms receivable, the amount of such a provision
being the difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired receivable. For
trade receivables, which are reported net, such provisions are recorded in a
separate allowance account with the loss being recognised within
administrative expenses in the Income Statement. On confirmation that the
trade receivable will not be collected, the gross carrying value of the asset
is written off against the associated provision.
Financial liabilities
The Group classifies all of its financial liabilities as liabilities at
amortised cost. Liabilities are classified as current liabilities when the
Group has an unconditional right to defer settlement of the liability for at
least 12 months after the balance sheet date.
Intangible assets
Internally developed software
Intangible assets are predominantly internally generated software development
costs for Location Sciences' technologies. Development costs are capitalised
when certain criteria are met. The product must be technically feasible, sale
is intended, a market exists, expenditure can be measured reliably, and
sufficient resources are available to complete the project. The extent of
capitalisation is limited to the amount, which taken together with further
related costs, will be recovered from the future economic benefits related to
the asset. When the Board is sufficiently confident that all of the criteria
for capitalisation are met, development costs are amortised over the expected
useful life, currently 5 years, from the date the asset is available for use.
Development costs that have been capitalised, but where amortisation has not
yet commenced are reviewed annually for impairment. If no intangible asset can
be recognised based on the above, then development costs are recognised within
administrative expenses in the Consolidated Income Statement.
Amortisation
Asset class Amortisation method and rate
Development costs 20% straight line
Amortisation is recognised within administrative expenses and disclosed
separately on the Consolidated Income Statement.
Depreciation
Asset class Depreciation method and rate
Computer equipment 33.33% straight line
Office equipment 33.33% straight line
Right of use assets Straight line over lease term
Depreciation is recognised within administrative expenses and disclosed
separately on the Consolidated Income Statement.
Impairment of non-financial assets
At each Statement of Financial Position date, the Group performs an impairment
review in respect of goodwill and any intangible assets not yet ready for use
and reviews the carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets have suffered any
impairment. If any such indication exists, the recoverable amount of the asset
(being the higher of fair value less costs to sell and value in use) is
estimated in order to determine the extent of any impairment. Any impairment
loss is recognised as an expense in the Consolidated Income Statement in the
period in which it was identified.
Investments
Investments are carried at cost, less any impairment in value.
The Company grants options over its equity investments to the employees of its
subsidiaries. The carrying value of the investment in this subsidiary is
increased by an amount equal to the value of the share-based payment charge
attributable to the option holder in the subsidiary.
Dividends on equity securities are recognised in income when receivable.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and call deposits, and other
short-term highly liquid investments that are readily convertible to a known
amount of cash, and are subject to an insignificant risk of changes in value,
and have a maturity of less than 3 months from the date of acquisition. For
the purpose of the statement of cash flows, cash and cash equivalents consist
of cash in hand and bank deposits.
Trade receivables
Trade receivables are amounts due from customers for licences sold or services
performed in the ordinary course of business. If collection is expected in one
year or less (or in the normal operating cycle of the business if longer),
they are classified as current assets. If not, they are presented as
non-current assets.
Trade receivables are recognised initially at the transaction price. They are
subsequently measured at amortised cost using the effective interest method,
less provision for impairment. A provision for the impairment of trade
receivables is established when there is objective evidence that the group
will not be able to collect all amounts due according to the original terms of
the receivables.
Trade payables
Trade payables are obligations to pay for goods or services that have been
acquired in the ordinary course of business from suppliers. Accounts payable
are classified as current liabilities if payment is due within one year or
less (or in the normal operating cycle of the business if longer). If not,
they are presented as non-current liabilities.
Trade payables are recognised initially at the transaction price and
subsequently measured at amortised cost using the effective interest method.
Leases
Assets held under leases are recognised as assets of the Group at the fair
value at the inception of the lease or if lower, at the present value of the
minimum lease payments. The related liability to the lessor is included in the
Balance Sheet as a finance lease obligation. Lease payments are apportioned
between interest expenses and capital redemption of the liability. Interest is
recognised immediately in the Consolidated Income Statement, unless
attributable to qualifying assets, in which case they are capitalised to the
cost of those assets.
Exemptions are applied for short life leases and low value assets, with
payments made under operating leases charged to the Consolidated Income
Statement on a straight-line basis over the period of the lease.
Share capital
Ordinary shares are classified as equity. Equity instruments are measured at
the fair value of the cash or other resources received or receivable, net of
the direct costs of issuing the equity instruments. If payment is deferred and
the time value of money is material, the initial measurement is on a present
value basis.
Defined contribution pension obligation
A defined contribution plan is a pension plan under which fixed contributions
are paid into a separate entity and has no legal or constructive obligations
to pay further contributions if the fund does not hold sufficient assets to
pay all employees the benefits relating to employee service in the current and
prior periods.
For defined contribution plans contributions are paid publicly or privately
administered pension insurance plans on a mandatory or contractual basis. The
contributions are recognised as employee benefit expense when they are due. If
contribution payments exceed the contribution due for service, the excess is
recognised as an asset.
Share based payments
The Group operates an equity-settled, share-based compensation plan.
Equity-settled share-based payments are measured at fair value at date of
grant. The fair value determined at the grant date of the equity-settled
share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group's estimate of shares that will eventually vest.
Fair value is measured by use of the Black Scholes or a binomial options
valuation model as appropriate depending on the terms of the options.
Equity
Equity comprises:
· Share capital - the nominal value of ordinary shares is
classified as equity.
· Share premium - represents the excess over nominal value of the
fair value of consideration received for equity shares, net of expenses of the
share issue.
· Merger relief reserve - the difference between cost or fair value
and the nominal value of shares issued on the exchange of shares with Location
Sciences Al Limited and on acquisition of subsidiaries where shares are issued
as part of the consideration.
· Translation reserve - the foreign exchange difference arising on
consolidation.
· Capital reserve - represents a capital contribution to the
Company.
· Equity reserve - represents the fair value of warrants over
shares issued as part of the May 2021- fundraise.
· Reverse acquisition reserve - the balance of the amount
recognised as issued equity instruments arising on restatement of Location
Sciences Al Limited to reflect the parent equity structure, further to the
reverse acquisition basis of accounting adopted in 2013 on the share exchange
by Sorted Group Holdings Plc for 100% of the shares of Location Sciences Al
Limited.
· Retained earnings - includes all current and prior period
retained profits/(losses).
3 Critical accounting judgements and key sources of estimation uncertainty
The preparation of financial information in conformity with IFRS requires the
directors to make critical accounting estimates and judgements that affect the
application of policies and reported amounts of assets and liabilities, income
and expenses. An assessment of the impact of these estimates and judgements on
the financial statements is set out below.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. Actual results could differ
from these estimates and any subsequent changes are accounted for with an
effect on income at the time such updated information is available.
Fair values for employee share schemes
The establishment of fair values in respect of employee services received in
exchange for share options require the exercise of judgement and estimation in
respect of the life of the option, the expected dividend yield and, in
particular, the volatility of the underlying shares. A calculated value for
the latter may not accurately reflect the future share price movements given
the Group's stage of development.
Assessing whether development costs meet the criteria for capitalisation
The point at which development costs meet the criteria for capitalisation is
critically dependent on management's judgement of the point at which technical
feasibility is demonstrable. Commercial success of the development projects
remains uncertain at the time of recognition and therefore impairment reviews
are undertaken based on current estimates of future revenue streams. This
assessment has resulted in the impairment of £nil (2022:
£143,482) of development costs.
Fair values of warrant instruments
Warrants issued in May 2021 are valued based on the fair value of the
underlying services received. The Directors' warrant instruments have been
valued with reference to the fair value of the other warrants issued to third
parties.
Classification and valuation of financial instruments
The Group previously issued financial instruments including conversion
features and warrants. The valuation of these financial instruments, including
Level 3 fair values where there are no observable market inputs, are performed
in consultation with third party valuation specialists, with the overall aim
of maximising the use of market based information.
Assessing whether revenue meets the criteria for recognition
Contracts can include both the sale of licences and provision of services
including integration and development. Revenue is recognised based on the
analysis of individual contracts and the point at which significant risks and
reward of ownership transfer is dependent on the contractual terms. In respect
of a licence, this would usually be on delivery of the software. Software
development and other consulting services generally recognised on the basis of
work done but where issues of client acceptance are identified, then revenue
is deferred until issues are resolved.
4 Segmental analysis
Operating segments are based on internal reports about components of the
Group, which are regularly reviewed and used by the Board for strategic
decision making, to allocate resources across segments and to assess
performance by segment.
Since 2018 the Group maintained a holding company structure with one operating
subsidiary. For financial reporting, Sorted Group Holdings Plc segments the
Group based on its two distinct products. Firstly, its UK Data and Insights
platform, which gives customers access to its data lake of over 36 billion
location data points. This helps customers in a variety of ways, for example,
competitor and footfall analysis, attribution services for advertisers, and
even the ability to enhance the sustainability of transport systems. Secondly,
Sorted Group Holdings Plc has developed a global platform called Verify, which
brings transparency to the location based mobile advertising market. Verify
allows marketeers to authenticate where their adverts have been viewed and
uses proprietary technology to detect location ad-fraud, which would otherwise
go unnoticed. The Insights segment was disposed of during the year.
It should be noted that a segmental analysis of the Balance Sheet is not part
of routine management reporting and consequently no segmental analysis of
assets is shown here.
The analysis of the Group's revenue from contracts with customers for the year
is as follows:
2023 2022
£ £
Verify 53,066 110,856
53,066 110,856
An analysis of the Group's revenue by geographical segment is as follows:
2023 2022
£ £
UK 27,800 63,249
ROW 25,266 50,607
53,066 110,856
All non-current assets of the Group are held in the UK.
During the year there was revenue from individual customers that represented
more than 10% of revenue as follows:
2023 2022
£ £
Verify - customer 1 25,266 58,109
Verify - customer 2 27,800 50,607
Average payments terms are set out in note 15. There are no significant
financing components, nor variable consideration elements in customers'
contracts.
5. Discontinued operations
Sale proceeds received in relation to the portion of the business sold £nil
FY23 (FY22: £92,357).
This deferred consideration was not included in the sale proceeds recognised
during 2021 as they did not meet the requirements for recognition within the
accounting period.
6. Loss before taxation
Arrived at after charging/(crediting)
2023 2022
£ £
Depreciation expense - -
Amortisation expense 134,674 259,335
Exceptional administrative expenses* (1,110,346) (42,040)
Auditors remuneration
- Company audit 10,560 10,000
- Subsidiary audit 15,840 15,000
Non-audit services:
- Tax and other compliance services 3,575 7,750
*In 2023, Exceptional administrative expenses wholly relates to the Sorted
Holdings Limited reverse takeover, which completed on 19 February 2024. In
2022, exceptional administrative expenses includes impairment of intangible
assets of £143,482 and a credit on the reversal of share-based payments on
the forfeit of share options of £185,522.
7. Finance income and costs
2023 2022
£ £
Finance income
Interest income on bank deposits 34,007 8,368
8. Staff costs
The aggregate payroll costs (including directors' remuneration) were as
follows:
2023 2022
£ £
Wages and salaries 159,844 331,703
Social security costs 19,950 38,899
Pension costs, defined contribution scheme - 1,431
Share-based payment expense (credit) - see note 19 - (185,522)
179,794 187,000
The average number of persons employed by the group (including directors)
during the year, analysed by category was as follows:
2023 2022
No. No.
Finance and operations - 1
Non-executive Directors 2 2
2 3
The average number of persons employed by the company (including Directors)
during the year, analysed by category was as follows:
2023 2022
No. No.
Finance and operations - 1
Non-executive Directors 2 2
2 3
9. Key management compensation and directors' remuneration
Details of aggregate key management emoluments for the year are as follows:
2023 2022
£ £
Salaries and other short-term employee benefits 159,844 314,924
Pension costs - 1,320
159,844 316,244
The Directors are of the opinion that the key management of the Group
comprises the executive and the non- executive directors of Sorted Group
Holdings Plc. These persons have authority and responsibility for planning,
directing and controlling the activities of the entity, directly or
indirectly.
Directors' remuneration is disclosed in the Directors' Remuneration Report on
pages 11 to 13. Directors' remuneration includes salaries settled by issue of
shares, as disclosed in note 16.
10. Auditors' remuneration
2023 2022
£ £
Audit of the Company's financial statements 10,560 10,000
Audit of the subsidiaries' financial statements 15,840 15,000
26,400 25,000
All other non-audit services comprising interim review and permitted tax 15,000 7,750
services
11. Income tax
Tax charged/(credited) in the income statement
2023 2022
£ £
Current taxation
UK R&D tax credit -
The tax on profit before tax for the year is higher than the standard rate of
corporation tax in the UK (2022 - higher than the standard rate of corporation
tax in the UK) of 25% (2022 - 19%).
The differences are reconciled below:
2023 2022
£ £
Loss before tax (1,723,845) (758,221)
Corporation tax at standard rate (430,961) (144,062)
Effect of expenses not deductible 311,441 42,208
Unrecognised deferred tax assets 119,520 101,854
Total tax credit - -
Subject to the UK tax authority's agreement, the Group has UK tax losses of
approximately £22,097,511 (2022:
£21,616,768) available to carry forward and offset against future taxable
profits arising from the same trade. The Group has a potential deferred tax
asset of £5,527,410 (2022: £4,109,997) which will not be recognised until it
is regarded as more likely than not that there will be sufficient taxable
profits from which the tax losses can be deducted. In addition, no deferred
tax asset is recognised in respect of future tax deductions on exercise of
share options.
12. Loss per share
The calculation of loss per share is based on the loss of £1,723,845 (2022:
£758,221) and on the number of shares in issue, being the weighted average
number of equity shares in issue during the period of 2,647,587,398 0.1p
ordinary shares (2022: 2,647,587,398 0.1p ordinary shares).
2023 2022
£ £
Loss for the financial year (1,723,845) (758,221)
Earnings per share
Loss per share - basic and diluted (0.065p) (0.029p)
Dilutive instruments
Instruments that could potentially dilute basic loss per share in the future
but are not included in the calculation of diluted loss per share because they
are anti-dilutive.
13. Intangible assets
Internally generated software development costs
£
Cost or valuation
At 1 January 2022 1,305,240
Additions -
At 31 December 2022 1,305,240
At 1 January 2023 1,305,240
Additions -
At 31 December 2023 1,305,240
Amortisation
At 1 January 2022 767,749
Amortisation charge 259,335
Impairments 143,482
At 31 December 2022 1,170,566
At 1 January 2023 1,170,566
Amortisation charge 134,674
At 31 December 2023 1,305,240
Carrying amount
At 31 December 2023 -
At 31 December 2022 134,674
Internal development represents the cost incurred in developing the Group's
Verify proprietary location verification software with net book value of £nil
(2022: £134,674). These· internal costs have been capitalised in accordance
with the Group's accounting policies where all the conditions for
capitalisation have been met.
The intangible assets have been fully amortised as at 31 December 2023.
Impairment of research and development is considered within the conditions of
capitalisation. Amortisation charges are included in administrative expenses,
disclosed separately on the Consolidated Income Statement.
14. Investments
Company
2023 2022
£ £
Investment in subsidiaries 2,045,589 2,045,589
Capital contribution arising from IFRS 2 Share-based payments charge 988,785 988,785
3,034,374 3,034,374
Subsidiaries
£
Cost or valuation
At 1 January 2022 3,219,896
Revaluation (185,522)
At 31 December 2022 3,034,374
Revaluation -
At 31 December 2023 3,034,374
Carrying amount
At 31 December 2023 3,034,374
At 31 December 2022 3,034,374
At 1 January 2022 3,219,896
Details of the Group subsidiaries held as direct investments of the Company as
at 31 December 2023 are as follows:
Name of subsidiary Principal activity Registered office Proportion of ownership interest and voting rights held
2023 2022
Location Sciences AI Limited Verify Same registered office address as group 100% 100%
15. Trade and other receivables
Group Company
2023 2022 2023 2022
£ £ £ £
Trade receivables 105,753 160,892 - -
Prepayments 14,042 47,534 - 58,797
Convertible bridge loan 2,516,491 - - -
Other receivables 81,389 19,646 - -
Provision for bad debts (25,541) - - -
2,692,134 228,072 - 58,797
Trade and other receivables are all current and the net carrying amount of
trade receivables is considered a reasonable approximation of fair value.
Average credit terms were 47 days (2022: 60) and average debtor days
outstanding were 56 days (2022: 80) excluding balances that have been fully
provided for.
All of the Group's trade and other receivables have been assessed for
impairment based upon the expected credit losses model. In order to manage
credit risk, the Directors set limits for customers based on a combination of
payment history and third-party credit references. Credit limits are reviewed
on a regular basis in conjunction with debt ageing and collection history.
Trade receivables are regularly reviewed for bad and doubtful debts. The
Group's policy is to include a provision for impairment based on estimated
credit losses. This includes an assessment where relevant of forward-looking
information on macroeconomic factors that may affect the ability of customers
to settle receivables. Trade receivables are written off where is no
reasonable expectation or recovery, for example where the customer has entered
insolvency proceedings or where a customer has failed to make contractual
payments for an extended period.
The Group's exposure to credit and market risks, including impairments and
allowances for credit losses, relating to trade and other receivables is
disclosed in the financial risk management and impairment note.
Trade receivables above include amounts (detailed below) that are past due at
the end of the reporting period and which an allowance for doubtful debts has
not been recognised as the amounts are still considered recoverable and there
has not been a significant change in credit quality.
Age of trade receivables that are past due but not impaired Group
2023 2022
£ £
31 to 60 days 479 18,738
61 to 90 days 8,467 12,068
91 to 120 days 3,234 6,711
3 to 6 months 91,363 103,253
103,543 140,771
Convertible bridge loan
The convertible bridge loan of £2,516,491 relates to a loan agreement with
Sorted Holdings Limited. This agreement was entered into on 28 June 2023 for
the purpose of providing Sorted Holdings Limited with working capital. The
loan has a redemption premium of 50% and is secured by a first fixed and
floating charge over Sorted Holdings Limited's business and assets. At the
Company's option, the loan can be converted into shares representing nearly
100% of the fully diluted share capital of Sorted Holdings Limited. Refer to
the discussions relating to the Sorted Holdings Limited acquisition for
further detail.
This secured convertible bridge loan agreement has been assessed for doubtful
debts. The Group did not recognise any allowance for doubtful debts due to the
secured nature of the amount outstanding. The underlying collateral is
sufficient to ensure recoverability of the outstanding amount.
16. Trade and other payables
Group Company
2023 2022 2023 2022
£ £ £ £
Trade payables 90,800 7,170 - -
Payables to related parties 1,852 - - -
Accrued expenses 890,986 89,660 271,094 19,000
Social security and other taxes 57,000 57,000 57,000 57,000
Other payables - 4,034 - -
1,040,638 157,864 328,094 76,000
The Directors consider that the carrying amount of trade and other payables
approximated their fair value. Trade payables are paid between 30 and 60 days
of receipt of the invoice.
The Group's exposure to market and liquidity risks, including maturity
analysis, related to trade and other payables is disclosed in the financial
risk management and impairment note.
17. Financial risk management and impairment of financial assets
Treasury risk management
The Group manages a variety of market risks, including the effect of changes
in foreign exchange rates, liquidity and counterparty risks.
Credit risk
The Group's principal financial assets are bank balances, cash, trade and
other receivables.
The credit risk on liquid funds is limited because the counterparties are UK
banks or "Blue Chip" companies with high credit ratings assigned by
international credit rating agencies.
The credit risk associated with trade receivables is minimal as invoices are
based on contractual agreements with long-standing customers. Credit losses
historically incurred by the Group have consequently been considered by the
Directors to be exceptional in their occurrence. The Group maintains a
provision against receivables, however, this is not necessarily linked to
credit risk and the ageing of receivables is not the most relevant indicator
to determine the potential impairment of a receivable. The nature of the
Group's operations is such that misunderstandings or minor disagreements may
arise during the course of contracts, which may sometimes require an
adjustment to be made to achieve settlement and the Group's provisions are
made on a case by case basis, based on Directors' knowledge of the
circumstances surrounding overdue balances as they arise.
As a result, investment returns and credit risk to the Group in this regard
are not material to the financial statements.
The Group's maximum exposure to credit risk is limited to the carrying amount
of financial assets at the reporting date. No collateral is held in respect of
these amounts which are expected to be received in full. In order to manage
credit risk, credit limits are reviewed on a regular basis in conjunction with
debt ageing and collection history.
The Company has significant credit risks associated with the inter-company
debt due from its subsidiary, which is fully provided for as at the year end.
As with the Group's policy for making provisions against trade receivables,
provisions against inter-company debt is considered based on the Directors'
knowledge of the subsidiary's trading activity and financial position.
Currency risk
The Group's operations are primarily located in the United Kingdom. The
Group's transactions during 2022 were predominantly denominated in sterling,
with consequently little exposure to foreign currency risks. Due to the
limited risks to the Group, forward exchange contracts are not considered
necessary and are not used. At the year end, the Group operated both sterling
and dollar bank accounts. Going forward the Directors will continue to monitor
the currency risk.
The translation risk on the Group's foreign exchange payables and receivables
is considered to be immaterial due to their short-term nature.
Liquidity risk
The Group has sufficient capital resources to meet its external current
liabilities as they fall due in 2023.
Operational cash flow represents on going trading revenue and costs,
administrative costs and research and development activities. The Group
manages its liquidity requirements by the use of both short-term and long-term
cash flow forecasts. The Group's policy is to ensure facilities are available
as required or to issue equity share capital to ensure cash resources
available are in accordance with long-term cash flow forecasts. The Group
currently has no overdrawn committed facilities as at 31 December 2023.
The Group actively manages its working capital to ensure it has sufficient
funds for operations and planned research and development activities.
The Group's main financial liabilities include trade payables and operational
costs. All amounts for trade and other payables are due for payment in
accordance with agreed settlement terms with suppliers or statutory deadlines.
All such payment terms are within six months.
Capital management
The Group's activities are of a type and at a stage of development where the
most suitable capital structure is that of one primarily financed by equity.
The Directors will reassess the future capital structure when projects under
development are sufficiently advanced.
The Group's financial strategy is to utilise its resources and current trading
revenue streams to commercialise its products and grow revenues. The Group
keeps investors informed of its progress with its projects through regular
announcements and raises additional equity finance at appropriate times.
The Group manages capital on the basis of the carrying amount of equity, and
debt with regard to maintaining sufficient liquidity to enable the Group to
continue to trade and invest in commercialisation. As at the year end the
equity to overall financing ratio, excluding IFRS 16 adjustments, is 6 (2022:
1).
Categories of financial instruments
All of the Group's financial assets are classified as loans and receivables;
see note 15. The Directors consider that the carrying amount of trade and
other receivables approximates their fair value.
All of the Group's financial liabilities are classified as liabilities at
amortised cost: see note 16. The Directors consider that the carrying amount
of trade and other payables approximates their fair value. All financial
liabilities are due within one year.
The accounting policies applied are set out in note 2.
18. Share capital
Allotted, called up and fully paid shares
2023 2022
No. £ No. £
New Ordinary shares of 0.1p each 2,647,587,398 2,647,587 2,647,587,398 2,647,587
Deferred shares of 0.99p each 1,040,712,398 10,303,054 1,040,712,398 10,303,054
New deferred shares of 0.9p each 376,651,734 3,389,866 376,651,734 3,389,866
4,064,951,530 16,340,506 4,064,951,530 16,340,506
Share rights
Ordinary shares have attached to them full voting, dividend and capital
distribution (including on winding up) rights; they do not confer any rights
of redemption.
Deferred shares have attached to them no voting, dividend or capital
distribution (including on winding up) rights; they do not confer any rights
of redemption.
Warrants in Issue
1) Promoter Warrants - non-transferable warrants to subscribe for up to
1,500,000,000 Ordinary Shares, exercisable at the 0.20p for five years from 25
May 2021, were issued to certain members of the Concert Party in consideration
of those persons assembling and coordinating the Concert Party's investment in
the Company in May 2021 and facilitating the appointment of Simon Wilkinson as
Non-Executive Chairman.
Name Number of Ordinary Shares subject to Promoter Warrants
Richard Hughes 500,000,000
Mahmud Kamani 500,000,000
Simon Wilkinson 500,000,000
2) Cornerstone Investor Warrants - non-transferable warrants to subscribe
for up to 250,000,000 Ordinary Shares, exercisable at 0.20p for five years
from 25 May 2021, were issued to the Cornerstone Investors of the May 2021
placing.
Name Number of Ordinary Shares subject to Cornerstone Investor Warrants
Ben Turner 50,000,000
Donna Turner 75,000,000
James Pope 50,000,000
Maxine Pope 75,000,000
3) Broker Warrants - transferable warrants to subscribe for up to 100,000,000
Ordinary Shares, exercisable at the 0.20p for five years from 25 May 2021 were
issued as shown below.
Name Number of Ordinary Shares subject to Broker Warrants
Turner Pope 58,750,000
Dr Nigel Burton 25,000,000
Mark Slade 10,000,000
David Rae 6,250,000
4) Director Warrants - non-transferable warrants to subscribe for, in
aggregate, 120,000,000 Ordinary Shares were issued to the Executive Directors
and the Non-Executive Directors, exercisable at 0.20p for five years from 25
May 2021, provided that the Ordinary Shares have traded at a Volume Weighted
Average Price (VWAP) at or above 0.30p for 20 consecutive Business Days, or on
a change of control of the Company.
Name Number of Ordinary Shares subject to Broker Warrants
Mark Slade 30,000,000
David Rae 30,000,000
Simon Wilkinson 30,000,000
Dr Nigel Burton 30,000,000
The expense recognised in respect of all warrants issued as part of the May
2021 fundraise has been recognised directly in the share premium reserve,
based on the fair value of the services received that are considered to
directly relate to the issuing of shares.
19. Share-based payments
The share option scheme was originally adopted by the company on 29 September
2011. It was established to attract and retain the best available personnel
for positions of responsibility, to provide additional incentive to employees,
officers or consultants of the company and to promote the success of the
company's business. Further to the acquisition of the business by Location
Sciences Group pie , the options were granted over shares in the parent
entity. The share option scheme was and continues to be administered by the
directors.
All outstanding options as at 1 January 2018 and outstanding options issued in
March 2018 and May 2018 were surrendered and replaced by options issued in
November 2018. Further in 2019 part of the outstanding share options issued in
November 2018 were surrendered and replaced by options issued in July 2019.
Share options surrendered are accounted for as modified options under IFRS 2.
The incremental value of the modified share options is not material.
Share options issued in November 2018, February 2019, May 2019 and October
2019 are to be settled by way of issues of Ordinary Shares. The options have
no vesting period but cannot be exercised until target share prices are
achieved and have a maximum term of 10 years.
The target share prices are as follows: Target A: £0.048
Target B: £0.073 Target C: £0.097
The movements in the number of share options during the year were as follows:
2023 2022
Number Number
Outstanding, start of period - 24,666,666
Forfeited during the period - (24,666,666)
Outstanding, end of period - -
All share options were forfeited during the year ended 31 December 2022.
The movements in the weighted average exercise price of share options during
the year were as follows:
2023 2022
£ £
Outstanding, start of period - 2.25
Forfeited during the period - 2.25
Outstanding, end of period - 2.25
All share options were forfeited during the year ended 31 December 2022.
There was a credit on the reversal of share-based payments on the forfeit of
share options of £nil during the period (2022: share-remuneration expense
£185,522).
20 Commitments
No capital expenditure was committed to as at 31 December 2023 (2022: £Nil).
21 Related party transactions
None during the period.
22 Net debt note
The Group and Company has no debt, thus no net debt note is presented.
23 Post balance sheet events
Following an announcement on 28 June 2023 where we entered into an exclusive
non-binding heads of terms for a potential acquisition of the entire issued
share capital of Sorted Holdings Limited (the "Proposed Acquisition"), we
published an AIM admission document on 30 January 2024. This document detailed
the proposed acquisition of SHL, a proposed subscription of 2,285,712 new
ordinary shares at 87.50 pence per new ordinary share to raise approximately
£2.0 million, a proposed 625 to 1 share consolidation, a proposed change of
name and AIM ticker symbol to Sorted Group Holdings PLC and SORT respectively,
director appointments, a notice of general meeting, and the restoration of
trading of the Company's existing ordinary shares on AIM. Terms were agreed
for the acquisition of the entire issued and to be issued share capital of SHL
for an aggregate nominal consideration of approximately £66.73 to be paid in
cash at completion.
All the relevant resolutions were passed on 16 February 2024 and the above
proposals completed on 19 February 2024. The enlarged group was successfully
admitting to AIM on the same day. As part of this, Carmen Carey was appointed
as Chief Executive Officer, Mahmoud Warriah as Chief Financial Officer and
Petar Cvetkovic as Non-Executive Director.
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. END FR BRGDLBGBDGSIRecent news on Sorted group
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