Final Results

2 October 2023 - Beeks Financial Cloud Group plc (AIM: BKS), a cloud computing and connectivity provider for financial markets, is pleased to announce its final results for the year ended 30 June 2023.

Financial highlights

• Revenues1 increased 22% to £22.36m (2022: £18.29m)
• Annualised Committed Monthly Recurring Revenue (ACMRR) up 23% to £23.8m (2022: £19.3m) increasing further to £25.0m by the end of August 2023 following a strong start to the new financial year
• Gross profit up 15% to £9.12m (2022: £7.94m)
• Underlying2 EBITDA increased 33% to £8.42m (2022: £6.31m)
• Underlying profit before tax3 increased 13% to £2.33m (2022: £2.06m)
• Underlying diluted EPS4 3.96p (2022: 4.19p)
• Net cash5 as at 30 June 2023 of £4.41m (30 June 2022: £7.86m)

1 Revenue referenced throughout the accounts excludes grant income and rental income

5 Net cash is defined as closing cash less closing asset financing loans and bank loans.

Statutory Equivalents

• Loss before tax was £0.65m (2022: Profit before tax £0.07m)
• Basic (LPS)/EPS was (0.14p) (2022: EPS 1.43p)

Operational highlights

• Continued customer base expansion and growing pipeline:
• Continued customer base expansion and growing pipeline. Johannesburg Stock Exchange (JSE) - the largest stock exchange in Africa, signed a multi-year contract for Exchange Cloud. The contract went live during September 2023 with capacity now sold to JSE customers and follow on opportunities advancing The Exchange Cloud pipeline continues to build with advanced discussions taking place with major Exchanges across the globe, including additional proof of concept implementations.
• Continued product innovation:
• Major user interface refresh of the Beeks infrastructure automation portal, allowing clients to tailor the user experience for their own users.
• Re-architecture of the underlying server hosting platform to improve the efficiency of the Group, driving long-term cost benefits.
• Investment in enhanced security:
• Completed stage 1 of industry-leading SOC 2 security accreditation with a view to being SOC 2 compliant by calendar year end.
• Launch of Beeks Security Operations, providing end to end security detection and response capabilities for our customers, through partnership with cybersecurity service provider BlueVoyant.
• Investment in inventory, team and sales and marketing, to deliver on the growth opportunity:
• Investment into inventory, ensuring the Group is capable of delivering against all contracts either signed or in the immediate pipeline.
• Implementation of new inventory management system to streamline stock management and audit compliance.
• Increased average headcount to 103 (2022: 89) to support the product development roadmap.
• Increased brand awareness through attendance at international industry conferences in Bangkok, Chicago, Boca Raton and Paris.

Outlook

• The Company continues to be supported by underlying market trends, with the ongoing shift of the financial services sector to cloud computing.
• Well positioned moving forward, with an established reputation and a track record of sustained growth.
• Core focus on converting the record pipeline of opportunities across the Group's product offerings, in particular the Exchange Cloud offering with a number of contracts at an advanced stage.
• Exchange Cloud remains a potentially transformational opportunity for Beeks, with significant traction with both existing and new customers, including additional proof of concept implementations, albeit contracts of this size take time to convert.
• The Board is confident in achieving growth acceleration and results for FY24 in line with its expectations. Confidence underpinned by high levels of contracted, recurring revenue, a unique proposition and growing international profile.

Gordon McArthur, CEO of Beeks, commented: "With an established reputation and a track record of sustained growth, we are well-positioned to capitalise on the shift of the financial services sector to cloud computing and continue on our growth trajectory. The deals signed to date and our exit ACMRR mean the Board is confident in achieving results for FY24 in line with its expectations.

We remain focused on converting our record pipeline of opportunities across our product offerings, and in particular the recently launched Exchange Cloud offering. The advanced nature of several of these discussions, including additional proof of concept implementations, provides confidence in our ability to provide growth acceleration in FY24.

With high levels of contracted, recurring revenue, a unique proposition and growing international profile, we look to the future with continued confidence."

beeksgroup.com

Chairman's Statement

It has been a year of further progress for Beeks, with the Group growing the sales pipeline for its transformational Exchange Cloud offering, while continuing to deliver services across the globe. Revenues increased by 22% to £22.4m, and underlying EBITDA by 33% to £8.4m. The Group delivered an exit ACMRR of £23.8m, up 23% in the year, providing a strong basis for continued growth in FY24.

The growth potential of the business is significant, typified by the scale of the first two customers now secured for Exchange Cloud, the largest stock exchange in Africa as well as a division of Intercontinental Exchange, the world's largest exchange group and owner of the New York Stock Exchange. We remain in discussions with a number of further major global exchanges, including additional proof of concept implementations, with the market opportunity remaining transformational. However, that said, as previously flagged, deals of this magnitude with organisations such as these will take longer to progress through to signed contracts than Private and Proximity Cloud deals, which continue to provide a growing foundation for the business.

The funds raised early in 2022 have provided the ability to invest into resources, ensuring the business is appropriately configured to address the significant market opportunity. During the period strong progress has been made in the development of the Beeks offering, the expansion of the team and the purchase of inventory to deliver against all contracts either signed or in the immediate pipeline. With these investments having been made, and no immediate requirements to expand either the team or stock held, the potential to expand the profit margins of the Group upon delivery of further contracts is considerable.

While the macroenvironment has continued to present challenges to all businesses, particularly surrounding supply chain issues and general inflationary pressures, the Group has continued to trade resiliently amidst the challenging backdrop, these aspects have been well managed within Beeks, as reflected by the businesses' continued healthy operating margins.

On behalf of the Board, I would like to express my gratitude to our staff for their commitment and work ethic. They have created offerings unique in the market while delivering excellent customer service. We are fortunate to have such a talented team and I have every confidence in their ability to capitalise on the opportunity ahead.

With a unique compelling proposition and a growing list of high profile customers, the Group is ideally positioned to benefit from long-term trends towards cloud-computing within the Financial Services sector. The Group's strong financial fundamentals: increasing Annualised Contracted Monthly Recurring Revenue, sufficient cash reserves for medium term organic growth, low levels of debt, a highly scalable business model and a record sales pipeline, provide for high levels of optimism within the business moving forward. The team is keenly focused on the conversion of the sales pipeline, and the achievement of greater operational leverage as these deals flow through into revenues and profits.

Mark Cubitt

Chairman

Strategic Report

Market Overview

"Organisations today view cloud as a highly strategic platform for digital transformation."

Sid Nag, research vice president at Gartner

Growth in Cloud Adoption

We operate in a considerable, and growing, market. Cloud computing is driving the next phase of digital business, as organisations pursue disruption through emerging technologies like generative artificial intelligence (AI) and Web3.

The global cloud computing market size was valued at USD 337.76 billion in 2022. It is projected to reach USD 1412.39 billion by 2031, growing at a CAGR of 17.23% during the forecast period (2023-2031)1. Infrastructure-as-a-service (IaaS) is forecast to experience the highest end-user spending growth in 2023 at 30.9%2.

The finance industry has been increasingly adopting cloud solutions due to their scalability, cost-efficiency, and flexibility. Managed cloud providers have been a key enabler of this trend, as we offer expertise in managing complex financial systems on cloud infrastructure.

The finance sector faces strict regulatory requirements and Beeks has spent over 12 years developing solutions and services tailored to meet these requirements, which makes us attractive to financial institutions seeking to maintain compliance while leveraging the cloud. Data security and privacy are paramount in finance. Beeks has invested heavily in security measures and technologies to protect financial data. As financial institutions continue to migrate sensitive operations to the cloud, the demand for secure managed cloud services is expected to grow.

Cost management remains a critical concern for finance companies and Beeks offer tools and services to help organisations optimise their cloud spending, which is especially important as cloud costs can quickly spiral if not managed effectively.

Beeks has developed industry-specific solutions for finance, including trading platforms, asset management systems, and regulatory reporting tools and these specialised offerings are expected to drive demand in the financial sector.

Many financial organisations are adopting hybrid and multi-cloud strategies to balance the benefits of the public cloud with the need for on-premises infrastructure. Beeks primary Proximity Cloud and Exchange Cloud products were built to facilitate the management and integration of these complex environments. As financial institutions expand their global footprint, they require cloud solutions that can support operations in multiple regions. With our global presence and pre-built rack solutions that can be deployed anywhere in the world, Beeks are well positioned to capture this market.

Selecting the right capital markets and financial services managed cloud provider involves careful consideration of an organisation's specific requirements, including trading strategies, regulatory obligations, and data management needs. Beeks continues to play a crucial role in enabling financial organisations to leverage the benefits of cloud technology while navigating the complex landscape of the financial industry.

Our addressable market is extensive with up to 21,000 banks and hundreds of global Exchanges, a large percentage of which maintain their own IT infrastructure and are yet to move to the Cloud computing model.

Cloud's scale, resiliency and continuous innovation mean it will likely form a critical part of every future business and technology roadmap. The Independent Software Vendors (ISVs) market has witnessed significant growth due to the adoption of cloud computing in addition to the surge in automation and visualisation for business process.

With further predicted annual growth of 13.6%3 and a faster lead to sale timescale, the financial ISV space is another area of focus for the sales team in the next financial year.

Our innovations, enhanced product range, growing number of Tier 1 customers, breadth of asset classes and a clear focus in the rapidly growing Independent Software Vendor space, position us well to benefit from the increased appetite in the market for automated trading and the evolution of Cloud adoption by financial services organisations.

1 Source: Straits Research (August 2023)

2 Source: Gartner (April 2023)

3 Source: Market Research Future (September 2020)

Business Model

#PoweredbyBeeks

For over twelve years Beeks has honed its infrastructure provision and cloud compute approach in direct response to its customers' needs and requirements.

Beeks' mission is to deliver cloud-based low-latency compute power; ensure maximum security; and optimise performance in the exceedingly fast-moving capital markets and finance sector. Beeks provide cloud deployment for capital markets and financial enterprises within our global backbone of key financial data centres as well as on-premise, helping them formulate a cloud strategy and replicate that in different regions.

The Group's on-demand offering continues to operate successfully in an ambitious, time-sensitive industry and is uniquely positioned to take advantage of the rapid acceleration of Cloud deployment in the finance sector as well as the growing need for analytics around those infrastructure environments. These latency-sensitive environments need to be built, connected, and analysed, and Beeks is one of the few companies in the world that can fulfil those requirements.

Our latest iteration of Proximity Cloud, a fully configured and pre-installed physical trading environment was derived from an identified demand from global exchanges for a secure, multi-client private cloud environment.

Explicitly designed for global financial exchanges and electronic communication networks (ECNs), Exchange Cloud is a multi-home version of Proximity Cloud. While Proximity Cloud makes it easier to quickly deploy on premise, Exchange Cloud takes it one step further by introducing multi-home capabilities, essentially enabling Exchanges and ECNs to become the cloud.

Building on the successful launch of Exchange Cloud, further improvements have been made to the offering in the areas of network automation, reporting and reduced installation times, further increasing Beeks' lead over other providers in offering an integrated infrastructure solution for capital markets.

The continued development of our trading analytics division complements our product offering to include the required analytics around those cloud infrastructure environments. Two major releases of the Beeks Analytics product provide significant benefits to our clients including a new flexible dashboard user experience with the introduction of Grafana as our graphical user interface (GUI) of choice. These releases also enabled easier integration points for clients to use the power of Beeks Analytics within their own applications.

The setup experience for Beeks Analytics has been reimagined from the ground up, allowing the product to reach new users who don't have the time or resources for more complicated configuration tasks.

Beeks provides:

• Dedicated bare metal and virtual servers that host Capital Markets and financial services organisations in key financial data centres around the world
• Ultra-low latency connectivity between customers and key financial venues and exchanges
• Colocation for customers to position their own computing power in our space, benefitting from our proximity to financial hubs
• In-house security software to protect client infrastructure from cyber attacks
• The management of hybrid cloud deployments for customers wishing to combine the Beeks IaaS with the public cloud hyperscalers
• Our model focuses on efficiency and flexibility, offering our customers the ability to scale up and scale down as needed. Due to market fluctuations and the inherent risk involved in algorithmic trading, this makes our services highly desirable
• Beeks has a unique self-service customer portal that facilitates the same-day deployment of a host of services allowing customers to manage their own servers
• Beeks analytics offers comprehensive monitoring and performance analysis to allow users to independently track and analyse real-time performance of every single price, quote or trade traversing business critical processes.

Strategy

Our purpose is to provide a global rapid deployment service using secure and scalable environments, both public and private, which are easy to consume for small, medium and large financial enterprises.

Our vision is to empower our clients to work with speed and agility.

Our main strategic priority is to continue to grow our customer base both for public, private and secure cloud deployment as well as complementary analytics solutions.

To satisfy existing demand and attract new customers, we will continue along our product development roadmap to develop and improve innovative new products such as Proximity and Exchange Cloud. We also continue to plan to selectively expand into new asset classes and geographies, encouraged by the significant opportunities we have identified.

Chief Executive's Review

FY23 was another year of progress, in which we secured landmark customers across our Exchange and Private Cloud offerings while raising our profile across the global financial services industry. While the timing of contract signatures and delivery means the financial performance was at the lower end of our original expectations, we are continuing to grow at pace, reporting significantly increased metrics against the prior period. The size of deals within our sales pipelines and our position as sole vendor within these negotiations places us in a position of strength. Following the launches of Proximity and Exchange Cloud, we have now an expanded product set, serving a wider pool of potential customers, including the world's largest exchanges. Exchange Cloud, launched in June 2022, is explicitly designed for global financial exchanges and electronic communication networks. The response by the market has been extremely positive and we believe it has the potential to be transformative for Beeks, with no comparable offering on the market.

We have received notable early endorsements of Exchange Cloud, securing our first two customers, ICE Global Network, a division of Intercontinental Exchange, the world's largest exchange group, and Johannesburg Stock Exchange (JSE), the largest stock exchange in Africa. We were delighted to take the JSE live in September 2023, and highlighting the speed with which these significant implementations can launch once contracts are signed, underpinning our FY24 performance. Feedback received from Exchange Cloud customers has been extremely positive, and both contracts signed to date have the ability for considerable expansion moving forwards.

We remain in talks with a number of major exchanges globally, including additional proof of concept implementations, and while the lead times on deals can take time, as previously disclosed, we remain confident in our ability to convert them. The prior investments we have made into fixed inventory means we have the capability to deliver deals rapidly, once secured.

We similarly have a strong pipeline across our Proximity Cloud offering, launched in August 2021. We secured notable private and exchange cloud wins and this has continued post period end into FY24. Our Proximity Cloud and Exchange Cloud pipeline are at record levels and there are multiple contracts in final stages of negotiations. We are encouraged by a building number of leads and are providing confidence in securing further deals in FY24.

Confidence levels are high moving into FY24, with the size of deals within our sales pipelines as well as our position as a sole vendor within negotiations underpinning optimism and placing us in a position of strength during the current period, such that the Board is confident in achieving results for FY24 in line with its expectations.

Financial performance

Revenue in the period grew by 22% to £22.4m (2022: £18.3m), resulting in an increase in underlying EBITDA of 33% to £8.4m (2022: £6.3m). Beeks continues to have a strong recurring revenue profile, with 91% of revenue in the year recurring (2022: 76%) and customer retention remained within target. Our percentage of recurring revenue can change year on year depending on the mix of private/public and proximity/exchange cloud sales, given the upfront revenue recognition associated with proximity and exchange cloud contracts. Our ACMRR grew 23% to £23.8m at 30 June 2023 (2022: £19.3m).

Revenue growth in FY23 was largely due to continued momentum across our Private Cloud offering. Whilst we have not recognised any new revenue from Exchange Cloud during the year, the recently deployed JSE contract has given us a strong start into FY24, which we expect to be further enhanced by our strong proximity and exchange cloud pipeline. Operating margins have reduced in the year due to prior year investment but these are expected to increase as we move into FY24 and convert the considerable pipeline of opportunities ahead.

Operational Expansion

We invested in the expansion of our team during the year, in order to capitalise on the considerable market opportunity ahead. The main priority when expanding the team was to build out the software development team division, to support the roll out and evolution of Exchange Cloud. Investment in this area was largely complete in H1, with the average headcount during the year increasing to 103 from 89 as at 30 June 2023.

Investment made into inventory during FY23 ensures we are appropriately configured to deliver against all contracts, including those which are signed already and those which are in the immediate pipeline. It is pleasing to have the capability to deliver deals quickly once secured, with significant investment into inventory serving as a sign of confidence in the conversion of our pipeline. The implementation of a new inventory management system to streamline our stock management and audit compliance was introduced in FY23, driving internal efficiencies.

In May, we were delighted that OneChronos, a U.S. equities Alternative Trading System (ATS), selected Beeks to power high performance compute and private environment of their new ATS, standing out as the strongest provider over Beeks' direct competitors. The collaboration is an endorsement of Beeks' value in delivering global, rapid deployment solutions using secure and scalable environments, with the flexibility of no long-term contracts or commitments. Off the back of a volatile year for equities in 2022, OneChronos have seen substantial success on their value proposition delivery since selecting Beeks to enhance their Smart Market Technology, in particular by meeting the ever-growing need for on-demand compute. Adjustments to Beeks' infrastructure automation portal have been made in FY23, which will drive improved efficiencies across the Group as a result of long-term cost benefits. The changes have been well-received, with the major user interface refresh allowing Proximity and Exchange Cloud customers to tailor the user experience for their own users.

The business has continued to show resilience in the face of inflationary pressures and supply chain disruption during the year. Appropriate price increases have been passed on to customers and we are pleased to see an improving picture with regards to supply chain disruption.

We have continued to increase our data centre presence in the year with a focus on existing locations. We will continue with our approach of expanding into areas where we already have customer demand. The Beeks brand continues to grow its presence globally, and we were pleased to attend international industry conferences in Bangkok, Chicago, Boca Raton and Paris during the year, showcasing the value of our offering to new audiences.

Product roadmap

We have continued to streamline our products and enhance them including a focus on the investment into the security of our products during the year.

Throughout the year we focused on security automation where possible, this included the deployment of vulnerability scanning, patch management, malware protection and secure configuration technology. The enhancements have strengthened the security of our Proximity/ Exchange Cloud offering to provide customers with the confidence and assurance that their infrastructure is secure. Furthermore, the investments we continue to make show the commitment to align our products to industry leading information security certifications and standards including (but not limited to) GDPR, ISO/IEC 27001, NIST CSF, and CIS.

We have a fully funded product roadmap that extends out for the next few years and see significant opportunity through investing resources in our two major product lines: our Private Cloud and our Proximity/Exchange Cloud offerings.

We have continued to streamline our products and enhance them, with a focus on the investment into the security of our products during the year. The most significant being a new strategic partnership with 'BlueVoyant', a Managed Security Services Provider (MSSP). BlueVoyant provide Beeks with Managed Extended Detection & Response (MXDR) services underpinned by their 24x7 Security Operations Centre (SOC) based in New York. The MXDR service has been fully integrated into our Proximity/ Exchange Cloud offering which provides end to end security detection and response capabilities for our customers.

Sales and Marketing

Our central marketing strategy continues to revolve around inbound marketing, with our ongoing efforts to expand global brand awareness serving as a driving force behind our sales and marketing initiatives this year.

After the pandemic, our emphasis shifted towards in-person events and investing in prominent industry event booths, specifically targeting the global institutional market at JSE Trade Connect, FIA Boca and TradeTech Paris, as well as the retail market at iFX Expo Bangkok.

Furthermore, senior managers and representatives from our sales team participated in key industry events, including AWS Re-Invent, Security Traders Association Chicago, FIA London Tech and FIA IDX London.

We extended our STAC membership and successfully secured professional memberships with both the FIA and FISD, bolstering our industry presence and reputation. STAC plays a crucial role in supporting our product team by facilitating a deeper comprehension of customer preferences, competitive landscape, collaborative opportunities, and the assessment of our company's offerings.

FIA stands as the foremost global trade organization for futures, options, and centrally cleared derivatives markets, with a significant focus on the Americas market. Meanwhile, FISD serves as the preferred global forum for essential stakeholders in the value chain, encompassing consumer firms, third-party entities, and data providers.

Our professional memberships serve as a valuable platform for Beeks to engage and establish connections with industry experts. These connections can potentially result in business opportunities, partnerships, and collaborations as well as offer access to valuable competitor insights. Furthermore, they set us apart from large-scale cloud service providers.

Customers

We are witnessing substantial growth in the range of customers we serve, as Beeks now provides support to a diverse clientele, including banks, brokers, hedge funds, cryptocurrency traders and exchanges as well as insurance companies, financial technology firms, payment providers, and Independent Software Vendors (ISVs)

Significant new customers secured in the year include:

• Two Exchange Cloud customers, described above (JSE and ICE), both with further expansion potential.
• The JSE contract went live in September 2023, with all units pre-sold to JSE customers with contract extension discussions underway.
• Two multi-year Private Cloud contracts with global Asset Management firms, worth $2 million in aggregate over three years, for deployments across US, APAC and EMEA.

Post year end we have seen further momentum, securing Private Cloud contracts in July with a total contract value of over $4 million, including a significant win via a partner with one of the UK's largest banks.

Future Growth and Outlook

With an established reputation and a track record of sustained growth, we are well-positioned to capitalise on the shift of the financial services sector to cloud computing and continue on our growth trajectory.

The deals signed to date and our exit ACMRR mean the Board is confident in achieving results for FY24 in line with its expectations.

We remain focused on converting the pipeline of opportunities across all of our product offerings, and in particular the recently launched Exchange Cloud offering. The advanced nature of several of these discussions provides confidence in our ability to would provide growth acceleration in FY24.

With high levels of contracted, recurring revenue, a unique proposition and growing international profile, we look to the future with continued confidence.

Gordon McArthur

CEO

Financial Review

Key Performance Indicator Review

1Revenue excludes grant income and rental income

2Gross profit margin is statutory gross profit divided by Revenue

4Underlying EBITDA margin is defined as Underlying EBITDA divided by Revenue

6Underlying profit before tax margin is defined as Underlying profit before tax divided by Revenue

Revenue

FY23 was another good year in terms of revenue growth. Group revenues grew by 22% to £22.36m (2021: £18.29m) driven mainly by our core Private Cloud offering across both existing and new customers. Refer to note 3 for a further breakdown of the Group's revenues. 91% of revenues (2022: 76%) were recurring with Tier 1 customers now representing 45% of delivered revenue (2022: 35%). Historically we have always had high percentage levels of recurring revenue. The different revenue recognition principles of Proximity and Exchange Cloud, where a significant proportion is recognised upfront, will mean more fluctuations in our percentage of recurring revenue each year depending on the mix of Private/Public/Proximity and Exchange Cloud sales. It is pleasing to see another good year of growth in contracted recurring revenue as represented by our ACMRR growth of 23% to £23.8m which increased further to £25.0m by the end of August following a strong start to the year.

Gross Profit

Statutory gross profit earned increased 15% to £9.12m (2022: £7.94m), with gross margin reduced due to increased depreciation and amortisation charges following the investment made during FY23 into both Exchange Cloud and across our global asset base. The investment in both Proximity Cloud and Exchange Cloud including Analytics during the year has incurred internal gross capitalised development costs of £2.87m (2022: £2.59m) in line with the additions to the software development team made during the year.

With a strong pipeline of Proximity and Exchange Cloud deals and with investment expected to be at a lower quantum when compared to sales growth, we anticipate gross margins to increase as these deals are converted.

Underlying Administrative Expenses

Underlying administrative expenses, which are defined as administrative expenses less share based payments and non-recurring costs, have increased by £1.08m from £5.94m to £7.02m primarily as a result of headcount increases within our software development and engineering functions. We had an average headcount of 103 throughout the year (2022: 89) therefore gross staff costs have increased by 23%, from £5.64m to £6.91m. Given a high proportion of recruitment has been to support our Proximity and Exchange Cloud development some of these costs are capitalised. Net staff costs, which is defined as total staff costs less capitalised development costs, has increased by 33%. Most of our headcount increase has been to support future product and sales growth with a relatively small increase in support staff given our automation and self-service strategy. We have largely completed our recruitment drive and anticipate incremental headcount increases moving forward as deals are converted and we look to deliver better operating margins.

Underlying EBITDA

Earnings before interest, tax, depreciation, amortisation and exceptional non-recurring costs ("Underlying EBITDA") increased by 33% to £8.42m (2022: £6.31m). The growth in Underlying EBITDA has been driven by continued organic revenue growth.

Underlying EBITDA, underlying profit before tax and underlying earnings per share are alternative performance measures, considered by the Board to be a better reflection of true business performance than statutory measures only. The key adjusting items are share based payments, amortisation, grant income and unrealised exchange rate gains and losses.

Underlying Profit before tax increased to £2.32m (2021: £2.06m) as a result of the changes in the key financial metrics discussed above.

Statutory Profit before tax decreased to a loss of £0.65m (2022: Profit of £0.07m). The other reconciling differences are shown on the table below:

*Other non-recurring costs in the year relates exceptional costs in relation to one off staff termination payments, and other one off property costs. Prior year non-recurring costs were incurred due to refinancing, acquisition transition costs and Covid-19 related expenditure. All of these costs are not expected to recur and are therefore disclosed separately to trading results.

**EBITDA is defined as earnings before depreciation, amortisation, acquisition costs, share based payments and non-recurring costs

Taxation

The effective tax rate ('ETR') for the period was (73.46%), (2022: -1,151.51%).

The overall effective tax rate has benefitted from the UK Super-deduction on plant and machinery assets, deferred tax on share options and prior year adjustments for R&D claims.

See tax notes 9 and 12 for further details.

Earnings per Share

Underlying earnings per share decreased 4.00% to 4.31p (2022: 4.49p). Underlying diluted earnings per share decreased to 3.96p (2022: 4.19p). The decrease in underlying EPS is largely as a result of the increased group share capital following the equity raise in April-22 given the increased underlying profitability and higher tax credit in FY23. See note 24 for further details.

Basic loss per share decreased to 0.14p (2022: earnings per share of 1.43p). The decrease in basic EPS is as a result of the statutory loss in the period as well as the additional share capital in FY23 following last year's equity raise. Diluted loss per share has also decreased to 0.13p (2022: earnings per share 1.35p).

Statement of Financial Position and Cash flows

The statement of financial position shows an increase in total assets to £47.44m (2022: £44.75m) with operating cash flows during the year increased by 34% to £9.01m (2022: £6.70m). The equity raise in FY22 provided us with the ability to further enhance our core products, most notably in Proximity and Exchange Cloud whilst also funding additional working capital including advanced purchases of IT rack capacity, computer servers and other associated hardware. Our strategy is always to have sufficient infrastructure capacity both across our global data centre network and to hold a sufficient level of IT inventory at our Glasgow Head Office. As such, a proportion of our capital spend during the year is to satisfy the growing pipeline demand for the year ahead. Investment in property, plant and equipment, hardware and infrastructure was again significant with £4.1m (2022: £5.2m) of additions (excluding Property and new leases in accordance with IFRS 16) throughout our expanding global network and supporting the client and revenue growth made during the year. We hold a stock supply of almost £2m in IT infrastructure which will cover a significant amount of FY24 sales pipeline. As global supply chain issues ease, we will not require these levels of stock which should assist working capital requirements going forward.

During the year we took on additional borrowings via asset finance of £2.0m in order to preserve cash. We repaid debt of £0.5m against our borrowing facilities. Our net cash at the end of the year is £4.4m (30 June 2022: net cash £7.9m) and gross borrowings at £3.4m remain at 0.4x Underlying EBITDA of £8.4m which we believe is a very comfortable level of debt to carry given the recurring revenue business model and strong cash generation. We note the increases to the cost of borrowing and will look to maintain or reduce our interest rate cover as we move forward.

At 30 June 2023 net assets were £32.8m compared to net assets of £30.8m at 30 June 2022.

Fraser McDonald

Chief Financial Officer

Consolidated Statement of Comprehensive Income

The above income statement should be read in conjunction with the accompanying notes.

Consolidated Statement of Financial Position

These financial statements were approved by the Board of Directors on 29th September 2023 and were signed on its behalf by:

Gordon McArthur, Chief Executive Officer,

Beeks Financial Cloud Group Plc,

Company number: SC521839

The above statement of financial position should be read in conjunction with the accompanying notes.

Consolidated Statement of Changes in Equity

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Consolidated Cash Flow Statement

The above cash flow statement should be read in conjunction with the accompanying notes.

Notes to the Consolidated Financial Statements

Summary of significant accounting policies

Corporate information

Beeks Financial Cloud Group PLC is a public limited company which is listed on the AIM Market of the London Stock Exchange and is incorporated in Scotland. The address of its registered office is Riverside Building, 2 Kings Inch Way, Renfrew, Renfrewshire, PA4 8YU. The principal activity of the Group is the provision of information technology services. The registered number of the Company is SC521839. The financial statements are prepared in pounds sterling and rounded to the nearest thousand. In certain cases, amounts in the report have been rounded to the nearest pound.

Basis of preparation

These financial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006.

International Financial Reporting Standards and Interpretations issued but not yet effective

New and revised IFRSs in issue but not yet effective and have not been adopted by the Group.

At the date of authorisation of these financial statements, the following standards, interpretations, and amendments have been issued but are not yet effective and have no material impact on the Group's financial statements:

• IFRS 17 (including the June 2020 Amendments to IFRS 17) - Insurance Contracts
• Amendments to IAS 1 - Classification of Liabilities as Current or Non-current
• Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies
• Amendments to IAS 8 - Definition of Accounting Estimates
• IFRS16 - Lease Liability in a Sale and Leaseback transaction
• IFRS 4 - Amendments to IFRS 4 Insurance Contracts - deferral of IFRS 9

None of these have been adopted early and the Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods.

Adoption of new and revised Standards - amendments to IFRS that are mandatorily effective for the current year

There are no new accounting policies applied in the year ended 30 June 2023 which have had a material effect on these accounts. In addition, the Directors do not consider that the adoption of new and revised standards and interpretations issued by the IASB in 2021 has had any material impact on the financial statements of the Group.

Going concern

The Directors have assessed the current financial position of Beeks Financial Cloud Group PLC, taking account of its business activities, together with the factors likely to affect its future development, performance and position as set out in the Strategic Report on pages 7 to 22.

The key factors considered by the Directors were:

• Historic and current trading and profitability of the Group
• The rate of growth in sales both historically and forecast
• The competitive environment in which the group operates
• The current level of cash reserves
• Current level of debt obligations
• Ability to comply with existing covenants
• The finance facilities available to the Group, including the availability of any short term funding required through the use of the Revolving Credit Facility

The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Chief Financial Officer's Report on pages 13 to 16.

We take great comfort from the resilience of our business model. The level of customer churn across our business has remained low and cash collection has been in line with our typical profile. We do however remain vigilant to the economic impact the ongoing macro-economic environment may create, particularly on the SME segment of the market. Note 16 to the financial statements includes the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The directors are of the opinion that the Group can operate within their current debt facilities and comply with its banking covenants. At the end of the financial year, the Group had net cash of £4.41m (2022: Net cash £7.86m) a level which the Board is comfortable with given the strong cash generation of the Group and low level of debt to EBITDA ratio. The Group has a diverse portfolio of customers with relatively low customer concentration which are split across different geographic areas. As a consequence, the directors believe that the Group is well placed to manage its business risks.

The directors have considered the Group budgets and the cash flow forecasts to December 2024, and associated risks, including the potential impact of the current economic climate. We have run appropriate scenarios applying reasonable downside sensitivities and are confident we have the resources to meet our liabilities as they fall due including the base case assumption of our existing loan facilities not being made available at the end of current terms (December 2024). The budgets and cash flow forecasts have assumed all loan facilities being repaid in full. We have also run reverse stress test scenarios in order to identify circumstances where cash reserves would be depleted. The circumstances that would lead into such scenarios (such as moving from revenue growth to revenue attrition) are not considered plausible given the historic track record and trading prospects of the group.

Accordingly, the Directors have adopted the going concern basis in preparing the Report for the year ending 30th June 2023.

Principles of consolidation

Foreign currency transactions

Foreign currency transactions are translated into pound sterling using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses resulting from the retranslation of inter-company balances are recognised in profit or loss. Non-monetary assets are translated at the historical rate.

Foreign operations

Business Combinations

Where the Group's assessment of the net fair value of a subsidiary's identifiable assets acquired and liabilities assumed is less than the fair value of the consideration including contingent consideration of the business combination then the excess is treated as goodwill. Where the Group's assessment of the net fair value of a subsidiary's net assets and liabilities exceeds the fair value of the consideration including contingent consideration of the business combination then the excess is recognised through profit or loss immediately.

Where an acquisition involves a potential payment of contingent consideration the estimate of any such payment is based on its fair value. To estimate the fair value an assessment is made as to the amount of contingent consideration which is likely to be paid having regard to the criteria on which any sum due will be calculated and is probability based to reflect the likelihood of different amounts being paid. Where a change is made to the fair value of contingent consideration within the initial measurement period as a result of additional information obtained on facts and circumstances that existed at the acquisition date then this is accounted for as a change in goodwill. Where changes are made to the fair value of contingent consideration as a result of events that occurred after the acquisition date then the adjustment is accounted for as a charge or credit to profit or loss.

Revenue recognition

Revenue arises from the provision of Cloud-based localisation. To determine whether to recognise revenue, the group follows a 5-step process as follows:

o Identifying the contract with a customer

o Identifying the performance conditions

o Determining the transaction price

o Allocating the transaction price to the performance conditions

o Recognising revenue when/as performance obligation(s) are satisfied.

Revenue is measured at transaction price, stated net of VAT and other sales related taxes, if applicable.

Infrastructure services

Monitoring software and maintenance services

The group also provides software products that analyse and monitor IT infrastructure. Revenue from the provision of software licences is split between the delivery of the software licence and the ongoing services associated with the support and maintenance. The supply of the software licence is recognised on a point in time basis when control of the goods has transferred, being the delivery of the item to the customer, whilst the ongoing support and maintenance service is recognised evenly over the period of the service being rendered on an over time basis. The group applies judgement to determine the percentage of split between the licence and maintenance portions, which includes an assessment of the pricing model and comparison to industry standards.

Where an agreement includes a royalty fee as a result of future sales by a customer to third parties and there is a minimum amount guaranteed, this is recognised at point in time when the delivery of the item is complete. Where such contracts include a financing component, the group also adjusts the transaction price to reflect the time value of money. Finance income is recognised as other income in the statement of the comprehensive income

Set up fees

• Any set up fees that are material rights are spread over the group's average contract term

Hardware and software sales

Revenue from the supply of hardware is recognised when control of the goods has transferred. For hardware, this occurs upon delivery of the item to the customer. For software, control is deemed to pass on provision of the licence key to the customer being the point in time the customer has the right to use the software.

The Group has concluded it acts as a principal in each sales transaction vs an agent. This has been determined by giving consideration to whether the Group holds inventory risk, has control over the pricing over a particular service, takes the credit risk, and whether responsibility ultimately sits within the Group to service the promise of the agreements. Refer to note 2 for more detail on these considerations.

Professional and consultancy services

Revenue from professional and consultancy services are recognised as these services are rendered and the performance obligation satisfied. Any unearned portion of revenue (i.e. amounts invoiced in advance of the service being provided) is included in payables as a contract liability.

Proximity and Exchange Cloud Services

• Delivery and installation of the hardware, and provision of the software licence
• Delivery of maintenance and technical support over the contract
• Delivery of unspecified upgrades and future software releases

The delivery and installation of the hardware, and provision of the software licence are highly interrelated and considered to be one performance obligation. This is recognised on a point in time basis when the control of the goods have been transferred, being when delivery of the item is completed and the right to use the software is granted.

The maintenance and technical support over the contract, as well as the delivery of the unspecified upgrades and future software releases are recognised evenly on an over time basis over the period of the contract. The performance obligation for both is considered to be that of standing ready to provide technical product support and unspecified updates, optional upgrades and enhancements on a when-and-if-available basis over the period of service being rendered.

These contracts include multiple deliverables. The group applies judgement to determine the transaction price to be allocated between a) the delivery and installation of the hardware and provision of the software licence, recognised on a point in time basis and b) the stand ready services (support, maintenance, unspecified upgrades) recognised over time. The Group applies the expected cost plus margin approach to the stand ready services and the delivery and installation of the hardware and provision of software licence is estimated using the residual approach, given this is a new product to market and standalone selling prices are not directly observable. Further detail is provided within key judgement and estimations on page 84.

Where such contracts include a financing component, the group also adjusts the transaction price to reflect the time value of money. Finance income is recognised as other income in the statement of the comprehensive income.

Government grant income

Rental Income

Cost of sales

Costs considered to be directly related to revenue are accounted for as cost of sales. All direct production costs and overheads, including indirect overheads that can reasonably be allocated, have been classified as cost of sales.

Interest

Other non-recurring costs

Taxation and deferred taxation

Current and non-current classification

Deferred tax assets and liabilities are always classified as non-current.

Cash and cash equivalents

Financial instruments

Financial assets

Trade and other receivables

Trade and other receivables are initially recognised at transaction price, less allowances for impairment. These are subsequently measured at amortised costs using the effective interest method. An allowance for impairment of trade and other receivables is established when there is evidence that Beeks Financial Cloud Group PLC will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtors, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade and other receivables may be impaired. The amount of the allowance is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within 'administrative expenses'. When a trade or other receivable is uncollectible, it is written off against the allowance account for trade and other receivables. Subsequent recoveries of amounts previously written off are credited against 'administrative expenses' in the Consolidated statement of comprehensive income.

IFRS 9 requires an expected credit loss ("ECL") model which requires the Group to account for expected credit losses and changes in those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. The main financial asset that is subject to the expected credit loss model is trade receivables, which consist of billed receivables arising from contracts.

Financial liabilities

Trade and other payables

Borrowings

Defined contribution schemes

Fair value measurement

Share based payments

The Group operates equity-settled share based remuneration plans for its employees. Options are measured at fair value at grant date using the Black Scholes model. Where options are redistributed, options are measured at fair value at the redistribution date using the Black Scholes Model. The fair value is expensed on a straight line basis over the vesting period, based on an estimate of the number of options that will eventually vest.

The Group has no legal or constructive obligation to repurchase or settle the options in cash.

Property, plant and equipment (PPE)

• Leasehold property and improvements over the lease period
• Freehold property over 50 years
• Computer Equipment over 5 years and over the length of lease
• Office equipment and fixtures and fittings over 5-20 years

Inventories

At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of inventories over its estimated selling prices less costs to complete and sell is recognised as an impairment loss in the income statement. Reversals of impairment losses are also recognised in profit or loss.

Leases

At the lease commencement date, the Group recognises a right-of-use asset and a corresponding lease liability on the Consolidated statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability measured at the present value of future lease payments, any initial direct costs incurred by the Group. The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group assesses the right-of-use asset for impairment under IAS 36 'Impairment of Assets' where such indicators exist.

Lease payments included in the measurement of the lease liability can be made up of fixed payments and an element of variable charges depending on the estimated future price increases, whether these are contractual or based on management's estimate of potential increases. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is re-measured to reflect any reassessment or modification, or if there are changes in fixed payments. When the lease liability is re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to

zero. Where non-contractual payment discounts are subsequently received from suppliers, these are treated as a discharge of the lease liability with a credit recognised in the profit or loss statement.

Intangible assets and amortisation

Goodwill

Customer relationships

Development costs

Development costs incurred are capitalised when all the following conditions are satisfied:

• The Group intends to complete the intangible asset and use or sell it;
• The Group has the ability to use or sell the intangible asset;
• The intangible asset will generate probable future economic benefits;

Impairment

Equity

Earnings per share

Basic earnings per share

Diluted earnings per share

Value-added tax ('VAT') and other similar taxes

Alternative performance measures

Underlying EBITDA

Underlying profit before tax

Underlying profit before tax is defined as profit before tax adjusted for the following:

• Amortisation charges on acquired intangible assets;
• Exchange variances on statement of final position gains and losses;
• Share-based payment charges;
• M&A activity including:

o Professional fees;

Underlying diluted earnings per share

Net cash/Net Debt

Operational costs

Profit after Tax

Annualised Committed Monthly Recurring Revenue

Segment Information

In the current year there is one customer that account for more than 10% of Group revenue. The total revenue for this customer amounts to £7.10m (2022 - £4.58m). £0.3m of this revenue has occurred within the Proximity Cloud operating segment, with the other £6.80m of revenue included within public/private cloud revenue.

Revenues by Operating segment, further disaggregated are as follows:

During the year £267k (2022: £419k) was recognised in other income for grant income received from Scottish Enterprise and £94k (2022: £93k) was recognised as rental income.

The employee benefits expense during the year was as follows:

Wages and salary costs directly attributable to the development of products are capitalised in intangible assets (note 10). The total additions capitalised in intangible assets relates to payroll costs and external third party costs.

Directors' emoluments

The effective tax rate (ETR) for the year was 86.31% (2022: -1,151.51%).

Intangible assets

Development costs have been recognised in accordance with IAS 38 in relation to the network automation project and development of the Proximity and Exchange Cloud products, including analytics and its integration into this product. Development costs in relation to Proximity and Exchange Cloud have a useful life of 5 years.

Brought forward development costs consist of £2.5m which was originally capitalised in July 2021. These assets now have a carrying value of £1.5m and a remaining useful life of 3 years.

During the year, a total of £2.9m of development costs relating to the development of Proximity Cloud/Exchange Cloud were capitalised. Included within this was the release of Exchange Cloud which launched in July 2022. £1.7m was capitalised in relation to this which now has a carrying value of £1.4m at June 2023. The remaining amortisation period on this asset is 4 years. In addition, £1.7m was capitalised in relation to further releases of the product. This has also been amortised over a useful life of 5 years. All costs incurred during the preliminary stages of development projects are charged to profit or loss.

Impairment test for goodwill

For this review, goodwill was allocated to individual cash generating units (CGU) on the basis of the Group's operations as disclosed in the segmental analysis. As the Board reviews results on a segmental level, the Group monitors goodwill and annually assesses it on the same basis for impairment.

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

2023

£'000

Goodwill has been allocated to the public/private segment and management have reviewed and confirmed that there is no indication of impairment. Within the Proximity/Exchange Cloud segment in the current year, an impairment review was carried out solely on the projects within development costs for which amortisation is yet to begin.

• Historic and current trading
• Weighted sales pipeline
• Potential changes to cost base (including staff to support the CGU)
• External factors including competitive landscape and market growth potential

Management performed a full impairment assessment on the goodwill allocated to Public/Private Cloud. This included including modelling projected cash flows based on the current weighted sales pipeline, a discount rate based on the calculated pre-tax weighted average cost of capital (15%) and cost base assumptions that included contingency and investment to deliver against the weighted sales pipeline. Conservative mid-term rates of 20% and terminal growth rates of 2% were estimated, which were significantly less than both the Group's internal business plan and external market mid-term forecasts.

An impairment review was carried out on the two development projects, for which amortisation is yet to begin, in line with the testing on impairment of intangible assets as referenced within the Group's accounting policies in note 1. For Exchange Cloud, the existing weighted sales pipeline was used as a typical pipeline profile for current and future years. Discount rates and cost base assumptions were consistent to what has been detailed above in regards to the impairment testing on goodwill. For Open Integration, cost comparisons of the two platform were compared based on current pricing with discount rates again consistent with the impairment testing on goodwill.

Based on an analysis of the impairment calculation's sensitivities to changes in key parameters (growth rate, discount rate and pre-tax cash flow projections) there was no reasonably possible scenario where these recoverable amounts would fall below their carrying amounts therefore as at 30 June 2023, no change to the impairment provision against the carrying value of intangibles was required. The revaluation of these from prior year represents exchange adjustment only.

Non-current assets - Property, plant and equipment

Of the total additions in the year of £6.2m, £2.1m relates to right-of-use assets held under IFRS16 (2022 - £2.0m).

Non-current assets - Deferred tax

Deferred tax is recognised at the standard UK corporation tax of 25% for fixed assets in the UK (2022: 25%). Deferred tax in the US is recognised at an average rate of 21% for 2022 (2022: 21%). The deferred tax asset relates to the difference between the amortisation period of the US acquisitions for tax and reporting purposes as well as the impact of the share options exercised during the year and tax losses carried forward in both UK and overseas companies. Deferred tax assets and liabilities on statement of financial position prepared after the substantive enactment of the new tax rate are calculated using a tax rate of 25% to the extent that the temporary differences will reverse after 2023.

The split of the deferred tax asset and liabilities are summarised as follows:

The movement in deferred tax assets and liabilities during the year is as follows:

With the launch of Proximity Cloud in the previous year, the Group holds hardware which can be used in the sale of Proximity or Exchange Cloud contracts. Subsequent to the year end, if they are not used as part of a Proximity or Exchange Cloud sale, they will be reclassified as PPE at the point in which they are delivered into one of the Group's data centres.

During the period, £nil (2022 - £0.99m) of inventories were recognised as an expense in the period.

Current assets - Trade and other receivables

The contract assets primarily relate to our rights to a consideration for goods or services delivered but not invoiced at the reporting date. The contract assets are transferred to receivables when invoiced. Contract liabilities relate to deferred revenue. At the end of each reporting period, these positions are netted on a contract basis and presented as either an asset or a liability in the Consolidated Statement of Financial Position. Consequently, a contract balance can change between periods from a net contract asset balance to a net contract liability balance in the statement of financial position.

The credit risk relating to trade receivables is analysed as follows:

Movements in the allowance for expected credit losses are as follows:

The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value. The group has applied the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss allowance for all trade receivables. The expected credit loss allowance under IFRS 9 as at 30 June 2023 is £25k (2022 - £74k). The decrease in expected credit loss allowance is in line with the change in the lower risk profile of trade receivables during the year.

The ECL rate in the current year has been reduced in line with the risk profile of trade receivables, historic trade losses and continued tight credit control procedures.

Trade receivables consist of a large number of customers across various geographical areas. The aging below shows that almost all are less than three months old and historic performance indicates a high probability of payment for debts in this aging. Those over three months relate to customers without history of default for which there is a reasonable expectation of recovery.

Past due but not impaired

The aging of trade receivables at the reporting date is as follows:

Current assets - Financial instruments and risk management

Financial risk management objectives and policies

The impact of the risks required to be discussed under IFRS 7 are detailed below:

Market risk

Foreign exchange risk

Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the functional currency of the operations. The Group had potential exchange rate exposure within USD trade payable balances of £1,255,542 at 30 June 2023 (£1,512,444 at 30 June 2022) and potential exchange rate exposure within EUR trade payables balances of £59,768 (£26,500 at 30 June 2022). The Group had potential exchange rate exposure within USD trade receivables of £1,179,455 (£403,700 at 30 June 2022) and potential exchange rate exposure within EUR trade receivables of £37,262 (£9,300 at 30 June 2022). The Group had potential exchange rate exposure within USD intercompany balances of £5,807,729 (£1,157,893 as at 30 June 2022) and within JPY intercompany balances of £189,028 (£236,780 as at 30 June 2022). The Group also has potential exchange rate exposure within USD bank balances of £3,644,955 (£159,534 as at 30 June 2022) and £607,023 within EUR bank balances (£164,421 as at 30 June 2022).

Cash flow and interest rate risk

The Group has relatively limited exposure to interest rate risk in respect of cash balances and long-term borrowings held with banks and other highly rated counterparties. Loans are at variable rates of interest based on the Bank of England's base rate therefore the Group is subject to changes in interest rates. Given the relatively low level of debt the Board do not consider this to be a significant risk. At a total debt level of £3.4m, with £1.8m contracted on a variable rate and is the remainder under a fixed interest rate, 1% increase in interest rates would give rise to an additional annual interest rate charge of £18,140.

Credit risk

Credit risk is managed on a Group basis. Credit risks arise from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial losses to the Group. The Group provides standard credit terms (normally 30 days) to all of its customers which has resulted in trade receivables of £2,139,000 (2022: £956,000) which are stated net of applicable allowances, and which represent the total amount exposed to credit risk.

None of the Group's financial assets are secured by collateral or other credit enhancements.

Liquidity risk

Current Non-current

Other risks

• Non-current liabilities - Borrowings and other financial liabilities

The bank loan derives from a £1.8m term loan facility taken out from Barclays Bank in December 2020 and a £1.47m property loan facility taken out from Barclays Bank in December 2021. The term loan was renewed during the financial year leaving 6 quarterly instalments of £0.125m due from March 2023. The property loan is repayable in 8 quarterly instalments of £0.03m which commenced in December 2021 along with a bullet balance which was repaid at Maturity in September 2023. This, along with the Group's revolving credit facility available of £3.5m, is used to fund the Group's working capital requirements when required. The available revolving credit facility balance of £3.5m was unutilised as at 30 June 2023.

Barclays have been given security for the facility of the UK assets of the Group and an unlimited guarantee is afforded to Barclays.

Costs of £21,500 have been amortised over the life of the term loan and aged in line with the capital repayments.

During the year, the Group entered into two new asset financing arrangements. These asset financing agreements have been disclosed under lease liabilities (note 19).

Changes in liabilities arising from financing activities:

Included within the lease liabilities balance of £4.01m is £1.61m of asset finance lease liabilities.

Current liabilities - Trade and other payables

The Group does not face a significant liquidity risk with regard to its lease liabilities. The interest expense on lease liabilities amounted to £165k for the year ended 30 June 2023 (2022: £131k). Lease liabilities are calculated at the present value of the lease payments that are not paid at the commencement date.

The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight line basis. During the year ended 30 June 2023, in relation to leases under IFRS 16, the Group recognised the following amounts in the Consolidated statement of comprehensive income:

Ordinary shares

During the year, 164,670 share options were exercised.

Share based payments

The movements in the share options during the year, were as follows:

The Group granted a total of 1,549,000 share options to members of its management team on 2nd December 2022.

During the year 1,574,850 shares from Grant 2 vested, with 164,670 shares being exercised in the year. The remaining balance remain as exercisable at the end of the year.

The total expense recognised from share based payments transactions on the Group's profit for the year was £2,291,120 (2022: £1,661,273).

Equity - Reserves

Retained earnings represents retained profits and losses.

The other reserve arose on the share for share exchange and reflects the difference between the value of Beeks Financial Cloud Group Limited and the share capital of the Group being acquired through the share for share exchange. Also included in the other reserve is the fair value of the warrants issued on the acquisition of VDIWare LLC.

Related party transactions

Parent entity

Beeks Financial Cloud Group PLC is the parent entity.

Subsidiaries

Interests in subsidiaries are set out in note 25.

Transactions with related parties

The following transactions occurred with related parties:

During the financial year, Beeks Financial Cloud Limited received services in the normal course of its business and at arm's length from A&B Property and Rental Services Scotland Limited, a company owned by Gordon McArthur. During the year, Beeks Financial Cloud Limited paid for services of £17,700 (2022: £nil) to A&B Property and Rental Services Scotland Limited and the amounts due at the year end was £nil (2022: £nil).

The Group recognise that the total withdrawals from the director exceeded the limit as defined in the Companies Act 2006 requiring shareholder approval. In order to rectify this, the amounts due by the director will be repaid subsequent to the financial year end.

Key management personnel

Subsidiaries

The subsidiary undertakings are all 100% owned, with 100% voting rights.

In accordance with S479A of the Companies Act 2006, Velocimetrics Limited (06943398) have not prepared audited accounts. Beeks Financial Cloud Group plc guarantees all outstanding liabilities in this company at the year ended 30 June 2023, until they are satisfied in full.

Prior Period Adjustment

During the year, it was identified that share options which contained conditions relating to future years' performance targets were not included in the diluted EPS figure, despite the options having already achieved their performance conditions related to EBITDA in the current period.

IAS 33 'Earnings per share' considers the conditions at the period end as if these were the conditions at the end of the contingent period (i.e the future performance period) and as such, these options should then be included in the diluted EPS figure even though the vesting date and associated future profit metric has not yet been achieved.

The error has been corrected. The number of shares included in the diluted earnings per share calculation has increased to include options of 3.33m that meet the above conditions taking the total number of shares within the diluted earnings per share calculation from 57.98m to 61.31m. As a result, the diluted earnings per share has been restated from 1.42p to 1.35p as disclosed in note 24.

Ultimate controlling party

The Directors have assessed that there is no ultimate controlling party.