23 June 2022

DeepVerge plc

("DeepVerge" or the "Company")

Final Results for the year ended 31 December 2021

Revenue grew 107% to £9.3m

EBITDA losses fell by 98% to just £0.017m

DeepVerge (AIM: DVRG), is pleased to announce its audited financial results for the year ended 31 December 2021. The Company's Annual Report is included at the end of this announcement and is available on the Company's website at www.deepverge.com.

Gerry Brandon, CEO of DeepVerge plc, commented:

"For the third year running, DeepVerge has delivered fantastic triple digit percentage growth. Revenues jumped by 107% to £9.3m and EBITDA losses fell by 98% to just £0.017m, bringing us ever closer to our first full year of profitability.  The Company has truly transformed over those three years, and astute investment is now delivering significant revenues across two equally successful divisions, human health and environmental test services. The customer base has grown both in terms of number of customers and geographically, and we have delivered new and important services which will continue to drive the future growth of the business.

Labskin is thriving and 2021 saw the launch of the Skin Trust Club which has rapidly gained momentum and is firmly cemented as the new era of personalised skin care.  Through Modern Water, we expanded our geographic reach and we have been actively involved in multiple government, regional and municipal city infrastructure trials to deliver real-time alerts for the identification of viruses, pathogens and forever chemicals.  I could not be prouder of the hard work and commitment delivered by the DeepVerge team and 2022 Q1 sales have increased by 84% and this momentum of growth is expected to continue."

Financial Highlights:

·    Total 2021 revenue up 107% to £9.3m (2020: £4.5m). Orders exceeded £10m but supply chain and COVID pushed some shipments into Q1 2022

·    H2 2021 revenue growth tripled over the first half with strong sales of £6.0m leading to the Company's first EBITDA profitable half year (excluding exceptional costs)

·    EBITDA losses before exceptional items fell by 98% to £0.017m (2020: £0.859m)

·    Gross margin increased to 57% (2020: 41%)

·    Administration costs increased by 91% to £8.7m (2020: £4.6m) with full year of Modern Water

·    Operating loss increased by 8% to £2.897m (2020: £2.718m) includes intangible asset depreciation and amortisation of acquired businesses amounting to £3.2m (2021: £1.1m)

·    Robust financial position following £10m Placing; £25m Mezzanine Loan facility

Operational Highlights (including post period events):

·    Group Sales for 2022 Q1 are up 84% to £2.38m (Q1 2021: £1.29m)

·    Labskin

-     Revenues increased exponentially year-on-year, growing in excess of 10 times 2018 revenues

-     Labskin laboratory expansion in US to support for Tier 1 skin care manufacturing clients

·    Skin Trust Club

-     Largest skin microbiome database in the world with expanding range of applications

-     Over 20,000 members, 30,000 skin microbiota sampled and more than 50,000 consumer site visits per month

-     Intense interest post US Launch resulted in unprecedented demand for Skin Trust Club test kits

-     The marketplace service expanding rapidly with more than 300 products available from leading skin care companies

-     Best New Disruptor Brand 2022 from the Pure Beauty Global Awards

·    Modern Water

-     Production orders up 39% worth £5m for Modern Water equipment

-     £1.1m acquisition of Glanaco Engineering to reduce chain supply challenges

-     Expanding collaboration with Microsaic Systems plc with Manufacturing services framework

-     Engagement with multiple US cities for wastewater pathogen detection

-     First UK Deployments of Microtox^®PD Pathogen Detection Systems in UK Wastewater

-     Modern Water sales to India £1.9m in 2021

-     Multiple £1m+ installations bids for sites in the Middle East and South Asia.

-     Framework agreement with Abingdon Health plc for Lateral Flow Tests to integrate with Modern Water optofluidic units to increase the volume of recurring consumable tests

Enquiries:

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About DeepVerge plc (www.deepverge.com)

DeepVerge is an environmental and life science group of companies that develops and applies AI and IoT technology to analytical instruments for the analysis and identification of bacteria, virus and toxins; Utilising artificial intelligent data analytics to scientifically prove the impact of skincare product claims on skin.

Dear Fellow Shareholder,

I have pleasure presenting the Company's report and results for the year ended 31 December 2021.

Our Business

DeepVerge Plc ("DeepVerge", "Group" or "the Company") was incorporated and registered in England and Wales on 28 May 2016 and was admitted to trading on the AIM market of London Stock Exchange plc on 5 April 2017. The current management team took control of the business in August 2018. The core Labskin health division was dramatically altered with the strategic acquisitions of artificial intelligence software company Rinocloud Limited, in 2019, and environmental equipment and services company Modern Water plc, in November 2020. The enlarged DeepVerge Group now comprises two distinct divisions, human health and environmental test services, each reliant on the use of artificial intelligence to inform new products, services and insights for customers and partners.

Labskin revenues have increased exponentially year on year, growing in excess of a multiple of 10 times since 2018. It now incorporates multiple routes to market validating skincare products and ingredients for skin care manufacturers and underwrites the recently launched Skin Trust Club consumer test services and smartphone app. This new personalised skin health tracking and skincare recommendations service democratises and personalises skin care for individual consumers and provides new personalised shopping experiences for partners' customers. The Labskin division's UK laboratory space has increased from 924 sq. ft in 2018 to 9,378 sq. ft in 2021.  We have opened new laboratories in Fermoy, Cork, Ireland to serve the EU market. Additional laboratory space in New Castle, Delaware, USA is currently close to completion bringing a further 5,000 sq. ft in Q3 2022 for our Labskin B2B and Skin Trust Club Direct to Consumer (D2C) services.

Skin Trust Club is a disruptive lifestyle technology platform for personalised beauty, offering an entirely new marketplace for skin care manufacturers, who are Labskin test clients, to sell skin microbiome friendly products directly to Skin Trust Club members. It is also a B2B platform offering retailers a new personalised shopping and loyalty club enhancing experience for their customers. Operating in the healthcare wellness consumer sector, the combination of home test kit and smartphone app data technology platform creates new market opportunities using skin as a monitor. With the largest skin microbiome database in the world, built from 15 years of R&D Labskin heritage, Skin Trust Club offers a unique blend of skin science, AI/data science, informatics, and modern web technologies to personalise skin care for consumers to have scientifically tested products specifically recommended to match their own unique skin microbiome. 

The Company's acquisition of Modern Water plc ("Modern Water") completed in November 2020 expanded DeepVerge's offering to include environmental data management, monitoring and analysis of water contamination using AI. The roll out of equipment and services across the environmental division has more than doubled revenues in the first year since completion of the acquisition and production capacity has been secured for the current demand, with excess capacity and service support available for accelerated growth as demand increases from external contract manufacturers and partners. Development continues on the miniaturisation of Microtox®PD units for wastewater detection of a range of pathogens, including SARS-CoV-2 and its variants. Further details are included in the CEO Report.

Results

Yet again, this year has been transformational for DeepVerge, attributable to enhancing an already successful business model and illustrated by better than expected first EBITDA profitable half-year in H2, 2021, before costs of Modern Water acquisition. In addition, orders exceeded £10m but supply chain delays and pandemic related issues pushed some  equipment shipments and reagent supplies into Q1 2022. Increased demand required additional employees across all subsidiaries and expansion of laboratory space was maintained throughout 2021 and continues into 2022.

Financial Highlights:

·      Total 2021 revenue up 107% to £9.3m (2020: £4.5m). Orders exceeded £10m but supply chain and COVID issues pushed some shipments into Q1 2022

·      H2 2021 revenue growth tripled over the first half with strong sales of £6.0m leading to the Company's first EBITDA profitable half year (excluding exceptional costs)

·      EBITDA losses before exceptional items fell by 98% to £0.017m (2020: £0.859m)

·      Gross margin increased to 57% (2020: 41%)

·      Administration costs increased by 91% to £8.7m (2020: £4.6m) with full year of Modern Water

·      Operating loss increased by 8% to £2.897m (2020: £2.718m) includes intangible asset depreciation and amortisation of acquired businesses amounting to £3.2m (2021: £1.1m)

·      Robust financial position following £10m Placing; £25m Mezzanine Loan facility

Operational Highlights (including post period events):

·      Group 2022 Q1 Sales up 84% to £2.38m (Q1 2021: £1.29m)

·      Labskin

-       Revenues increased exponentially year-on-year, growing in excess of 10 times 2018 revenues

-       Labskin laboratory expansion in US, UK and EU to support for Tier 1 skin care manufacturing clients

·      Skin Trust Club

-       Largest skin microbiome database in the world with expanding range of applications

-       Over 20,000 members, 30,000 skin microbiota sampled and more than 50,000 consumer site visits per month

-       Intense interest post US Launch resulted in unprecedented demand for Skin Trust Club test kits

-       The marketplace service is expanding rapidly with more than 300 products available from leading skin care companies

-       Best New Disruptor Brand 2022 from the Pure Beauty Global Awards

·      Modern Water

-       Production orders up 39% worth £5m for Modern Water equipment

-       £1.1m acquisition of Glanaco Engineering to reduce chain supply challenges

-       Expanding collaboration with Microsaic Systems plc with Manufacturing services framework

-       Engagement with multiple US cities for wastewater pathogen detection

-       First UK Deployments of Microtox®PD Pathogen Detection Systems in UK Wastewater

-       Modern Water sales to India £1.9m in 2021

-       Multiple consortium £1m+ installations bids for projects in the Middle East and South Asia

-       Framework agreement with Abingdon Health plc for Lateral Flow Tests to integrate with Modern Water optofluidic units to increase the volume of recurring consumable tests

Further information on our products, technologies and advances Post-Year-End can be found in the Chief Executive's Report.

Corporate governance

I believe that good corporate governance is important to support our future growth and the Board, which has extensive experience in publicly listed companies and running companies in the personal healthcare sector, is committed to the highest standards. 

Outlook

If 2019 and 2020 were defined by acquisition growth and integration of tried and tested diverse technologies, 2021 has seen adaption and consolidation leading to the creation of multiple revenue streams that have expanded rapidly driving growth across all divisions. Laboratories have expanded on two continents and staff have increased to 81 to meet demand of new products and services. The outcome has once again resulted in an increase of new and core business from Labskin, Modern Water and the new Skin Trust Club consumer division. These include new products and services coming online throughout 2022.

The injection of capital from the £10m placing in June prepared the Group for an increase in staff, upgraded laboratories, and expansion of our offering of innovative products and services across all divisions. While we have seen supply chain issues effect external consortium partners, to date there has been minimal impact on Group sales. The Board expect growth in sales in 2022 to continue the Q1 momentum.

Ross Andrews

Chairman

23 June 2022

Dear Fellow Shareholder,

DeepVerge

DeepVerge is an environmental and life science group of companies that develops and applies AI and web technology for the analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent data analytics to scientifically prove the impact of skincare product claims on skin microbiome for most of the top 20 global cosmetic company clients and remotely detect and identify in real-time, dangerous pathogens, such as SARS-CoV-2 in wastewater treatment plants, drinking water, rivers, lakes and reservoirs.

High Bar for 2021:

The Board set a high bar in January 2021 with guidance on revenues to December 2021 hitting £10m.

·      Orders exceeded £10 million. Supply chain delays pushed shipments of reagent supplies into 2022.

·      Yet another triple digit percentage growth year, up 107% to £9.3 million from £4.5 million in 2020.

·      EBITDA loss was only £0.017m (2020: £0.859m).

·      EBITDA Margin loss of just 1.4% (2020: 19%).

Our core services:

·      Labskin human skin equivalent platform to validate and verify the safety and impact on skincare companies' products for regulatory authority approval & Labskin test services for skin care product manufacturers.

·      AI and microbiome platform to facilitate clinical trials for skincare companies.

·      Regulated environmental toxicology services.

·      Monitoring and data analytics platform for real-time detection and identification of pathogens in water and wastewater.

Our evolving services:

·      Skin Trust Club Direct to Consumer (D2C) home test kit and consumer app.

·      Skin Trust Club Business to Business (B2B) home test kit sales and data supplier for retail store loyalty programs.

·      Skin Trust Club B2B home test kit services for medical (dermatology).

·      Skin Trust Club test kit sales for R&D and Business to Government (B2G) - military programs.

·      Anonymised data sales and services to pharma, medical, cosmetic, and industrial clients for R&D.

Labskin expansion in US

Labskin has successfully demonstrated its sales growth capabilities throughout 2021 and continues exhibiting new products and service developments at conferences in San Diego, San Francisco, London, and Paris. Major existing and several Tier 1 customers urged the Labskin division to expand laboratories in the USA for skin testing services. Part of the proceeds of the Placing in June 2021 provided for the expansion of the life science division for new business in the US market.  Labskin unveiled new products and services including a new scalp model and has received demand for a very strong pipeline of new business across the hair care and shampoo sector.

Modern Water

Acquired in 2020, Modern Water continues to deliver as the Gold standard for heavy metals and toxicity pollution monitoring with its equipment and reagents now significantly upgraded. This includes the increasing use of AI to leverage data generated in water and wastewater, currently in beta testing on the predictive abilities of the old and new technologies. Demand for the Microtrace heavy metals and Microtox toxicity product ranges continue to grow strongly through an expanding network of local and international distributors.

New Generation

New Microtox®PD instruments came on stream this year using optofluidic technology to identify pathogens including the addition of mass spectroscopy to identify PFAS (Forever Chemicals) also in real time. Partnership with Microsaic Systems has helped redesign existing equipment and pioneer new instruments that deliver on-site and remote mass spectrometry-based monitoring of PFAS. The combined Microsaic micro-electronic engineering team and Modern Water scientists, engineers and technologists are currently working on the next generation - mobile, miniature, and rugged - designs of the Microtox®PD range for pathogen detection.

The integration of three levels of pollution detection - heavy metals/toxicity of pathogens, PFAS - now offers the 'last mile' of detection. The automation of integrated technologies can now fulfil the demand for point-of-need detection, into partner and customer solutions such as SCADA. This was achieved with Rinocloud software and machine learning aided by Acumen PTY, a specialist software collaborator in South Africa. Reference sites in the UK, US, EU, China and India have been deployed to show the total ecowaterOS solution in action and its benefits.

Membrane Business

Modern Water membrane division installed multiple water treatment reference sites showing the company's reverse and forward osmosis technology. Clients were secured in the garment industry, chemicals sector, oil and gas, and local authorities across China, the Middle East and India. The company also deployed a mobile membrane service that can be moved between landfill sites.

Expertise in Manufacturing

In March 2022, DeepVerge completed the acquisition of Cork-based manufacturing firm Glanaco Limited. Glanaco is a specialist engineering services company, originally providing solutions for the management of dirty water from municipal dumps and engineering/construction projects with a range of owned and partner equipment. The business has since expanded its facility to assemble and maintain equipment ranging from robotic extensions for large plants to biohazard wash systems and to Modern Water's All Membrane Brine Concentration (AMBC) systems. Glanaco extends Modern Water's engineering services to the design, production, maintenance, upgrading and shipping of instruments that were traditionally controlled by Modern Water's suppliers.

3-Step Strategic Plan Across All Divisions

The group has consolidated the acquisitions and leveraged consortium and collaboration partners to offer multiple products with multi uses, as in-demand needs, to clients and consumers. This has been achieved through well established multiple routes to markets, built on the heritage of 35 years of Modern Water and 15 years of Labskin's strategy leveraging its core platforms. It is also actively building Intellectual Property to create value during this process, also establishing further barriers to entry for future competition. We are also putting collaborations and partnerships at the core of our research and development.

1.      Grow Profits Across Related Markets

We will continue to leverage existing blue-chip clients and collaboration partner relationships to secure additional high value product test service contract revenues, as well as creating new products and accessing cost effective routes to market with additional sales resources.

2.      Product & Service Investment

In addition, AI and analysed data continues to be a key and growing enabling factor that delivers services across the Group. All divisions control the generation of their own data, generating results and delivering on learnings from that data. This data informs and helps create new products and services and provides new and invaluable insights for customers, clients and partners. The roll-out of physical and digital cloud-based reporting services, to keep our Life Science and Environmental Health offering competitive and relevant to our clients, is key to delivering more value to our clients and increasing revenue per client in return.

3.      Collaboration & Acquisition

We actively pursue a broader portfolio of services through revenue shared collaboration and acquisitions targeting partnerships across science and technology, that expands our reach and ability to serve customers and markets. These areas have been previously mentioned in RNS announcements and include, but are not limited to, data analytics, software and biophysics integration services. All of these have lead to extending the scope and reach of all divisions. The key criteria in our collaboration and partner targets is to increase revenue per client and earnings from repurposed assets to enhance shareholder value.

Gerard Brandon

Chief Executive Officer

23 June 2022

Ross Andrews, Non-Executive Chairman

Ross was appointed Chairman on 21 May 2019, having been a non-executive director since April 2017. He is a corporate financier with over 30 years' experience, has a strong understanding of corporate governance regimes and is chairman and non-executive director of several UK listed companies. In 2018, he established Guild Financial Advisory, a corporate finance boutique focused on ambitious and fast-growing companies.

Gerard Brandon (Chief Executive Officer)

Gerard was appointed Director and CEO of DeepVerge in August 2018. Previously, he joined Cellulac Limited (Ireland) as its Chief Executive Officer in May 2012 and assumed the same role for Cellulac plc in October 2013. In 1996 he became founder and CEO of Alltracel Pharmaceuticals PLC, where he built a team that oversaw numerous patents granted on refined cellulose. Alltracel was admitted to trading on AIM in 2001. In 2004, he was appointed as a Managing Partner for Farmabrand Private Equity. In 2009, he was appointed as an Executive Consultant to Eplixo Limited. He is a Fellow of the Ryan Academy of Entrepreneurs in Dublin.

Camillus Glover (Chief Financial Officer)                       

Camillus was appointed Director and COO of DeepVerge on 8 August 2018. On 29 August 2018 he took over as Chief Financial Officer. Previously, he joined Cellulac Limited (Ireland) as Chief Financial Officer in May 2012 and assumed the same role for Cellulac plc in October 2013. He is a Fellow of the Institute of Chartered Accountants Ireland. In 2003, he joined Alltracel Pharmaceuticals plc as Commercial Director and was appointed Chief Operations Officer in 2005 until it was acquired in 2008 by Hemcon Medical Technologies ("Hemcon"). Between 2009 and 2012, he was VP of Global Business Development for Hemcon prior to joining Cellulac plc.

Fionán (Fin) Murray, (Chief Operations Officer)

Fin is the founder of Rinocloud Limited. He was appointed Sales Director of DeepVerge on 2 May 2019 following the acquisition of Rinocloud Ltd. On 26 February 2020 he was appointed COO of DeepVerge. He is a seasoned sales executive with more than 30 years' experience in worldwide distribution deals, selling complex software solutions into the multi-national corporate sectors in financial services, biotech, utilities and government departments. He is former CEO of LeT Systems Ltd and a senior executive at KBC Bank and Kindle Banking systems. He was appointed Chief Operations Officer on 26 February 2020.

Dr Nigel Burton (Non-Executive Director)

Nigel was appointed non-executive director of the Company on 10 November 2020 following the acquisition of Modern Water where Nigel was a non-executive director.  Nigel worked for over 14 years as an investment banker at leading London City institutions including UBS Warburg and Deutsche Bank, including serving as a Managing Director responsible for the energy and utilities industries.  Following these roles Nigel spent 15 years as Chief Financial Officer or Chief Executive Officer of a number of private and public companies and is a Non-Executive Director of a number of other listed companies including BlackRock Throgmorton Trust, eEnergy Group, Microsaic Systems and Location Sciences.

Review of the business

A comprehensive review of the year is given in the Chairman's and Chief Executive's Statements on pages 2 to 6.

Principal risks and uncertainties

The Directors continually identify, monitor and manage the risks and uncertainties of the Group. Risk is inherent in all businesses. Set out below are certain risk factors which could have an impact on the Group's long-term performance and mitigating factors adopted to alleviate these risks. This list does not purport to be an exhaustive summary of the risks affecting the Group.

Management and employees

The Group's future success will be dependent on key employees and their on-going relationships with customers. To maintain continuity of the customer relationship the Group encourages customer relationships to be maintained by more than one individual. Retention of key employees are incentivised through a mixture of competitive remuneration, share options and sales commission and recruitment of talent is encouraged using competitive packages and favourable working conditions. Board Directors are incentivised as detailed in the Directors' Remuneration Report.

Delay in product delivery

The Group has identified product and service development projects to take to market, some of which are dependent on consumer satisfaction with the end product and service. The Group launched Skin Trust Club in the UK and soft launched in the US and demand for home test kits for skin microbiome is growing exponentially. If the provision of test kits and delivery of reports  to consumers takes longer than expected, this could damage consumer confidence in the brand. The Group is monitoring supplier performance on a continuous basis and actively looks for alternative suppliers to mitigate risk of dependency on any one supplier. The Group also has expansion plans underway at UK and US sites to address volume demand.

Potential funding requirement for products and services development

Ongoing development of products and service and any future acquisitions, partnership or joint venture expansion may require additional capital. The Group may seek to raise additional funds through equity or debt financings or from other sources. There can be no guarantee that the necessary funds will be available on a timely basis, on favourable terms, or at all, or that such funds if raised would be sufficient. The Group tries to reduce this risk by driving financial planning to improve  the financial resiliency of the Group.

Competition risk

The Group's current and future potential competitors include, amongst others, major multinational healthcare and environmental health companies with substantially greater resources than those of the Group. There can be no assurance that competitors will not succeed in developing systems, products and services that are more effective or economic than any of those developed by the Group, which would render the Group's products obsolete or otherwise non-competitive. The Group seeks to reduce this risk by ensuring that a professional and high standard product and service is provided to its customers, maintaining confidentiality agreements and selecting leading businesses in their respective fields as collaboration and joint development partners capable of addressing significant competition, should it arise.

Currency exchange risk

The Company's financial statements are denominated in pounds sterling, its functional currency. The Group's global growth drives foreign exchange risk. The Group mitigates this risk by increased rigour in its financial planning and ongoing monitoring of the markets to protect the Group against this risk. The Group intends to develop a hedging policy and currently hedges organically by driving sales in local currency.

Data Breach

Some of the Group's activity involves processing personal customer data.  Deliberate theft of loss of this personal data due to inadequate technical controls could cause significant reputational damage as well as regulatory penalties.  Security controls and processes are updated regularly and the IT security team are constantly monitoring activity and providing updates to mitigate against risk of loss. 

COVID-19 risk

While COVID-19 is no longer a principal risk its impact continues to be monitored within the relevant principal risks above.

Financial risk management

The Group has instigated certain financial risk management policies and procedures which are set out in note 3 to the financial statements.

Companies Act S.172 Statement

The Directors are fully appraised of their responsibilities under section 172(1) of the Companies Act 2006 and are so advised and updated on a regular basis by the Company Secretary of DeepVerge plc.

Business

The Group's strategic plan was designed to have a long-term beneficial impact on the Group and our customers by delivering the range of products and services as the go-to brand for animal testing alternatives for human skin, within Labskin, the go-to brand for environmental health testing in water and wastewater in Modern Water. The Directors will continue to operate the business within tight budgetary control and in line with regulatory requirements.

Employees

The Group has increased employees because of increased demand as well as ahead of expected future demand for products and services. Management of HR is critical to the delivery of the Group's strategic plan. The Directors ensure that the Group complies with all employment laws in the respective jurisdictions of each subsidiary and have implemented appropriate standards and systems to monitor and to ensure the welfare of all employees. For more detail on how the Directors support the employees, see Corporate And Social Responsibility report in this Annual Report.

Stakeholder engagement

The Group has built and maintained relationships with shareholders, advisers and suppliers. The Directors have taken steps to develop and strengthen them through dialogue and engagement. These relationships are regularly monitored at Board level. The Chairman ensures that he is available to discuss issues with key shareholders outside of the shareholder meetings which are held. The Company complies with its disclosure obligations as set out in the AIM Rules for Companies, published by London Stock Exchange to ensure that shareholders are updated on key developments on a timely basis.

Governance

The Board recognises that good standards of corporate governance help the Group to achieve its strategic goals and is vital for the success of the Company. For more detail on the corporate governance of the Group, see Corporate Governance Report in this annual report.

Disclosure of information to the Auditors

The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make him aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Outlook

Key Performance Indicators (KPIs)

The key performance indicators currently used by the Group are revenue, adjusted EBITDA and cash resources. The Group intends to establish other key performance indicators in due course once the Group has matured sufficiently. The Group does not use and does not at present intend to use non-financial key performance indicators.

Review of strategy and business model

Labskin, originally developed as a research laboratory grown human skin equivalent that allows our clients in skincare, healthcare, pharmaceutical manufacturers and the cosmetic industry to test and validate their product claims on human-like skin in a real-world environment with full access to multiple state-of-the-art partner technologies. Adding the digital platform developed by Rinocloud, acquired in 2019 has contributed to an entirely new market place for our Labskin skincare clients and created a world first personalised skincare service that is revolutionising consumer skincare.

Modern Water, the environmental health division, with its 35 year heritage of toxicity testing across 60 countries has been transformed into a real-time monitoring platform with external partners and consortia members in EcoWaterOS to deliver a new kind of monitoring for dangerous pathogens and infectious diseases, which includes but not restricted to SARS-CoV-2, the virus that causes COVID19. These new monitoring units, developed with origins from the Rinocloud acquisition in both engineering design and digital detection capabilities has the potential to transform global monitoring of future endemic and pandemic global health risks.

The data analytics and use of artificial intelligence to enhance the capabilities of existing equipment and services of both the life science and environmental health divisions remains core to our growth strategy to achieve our long term objectives. It continues to open opportunities to explore options of collaboration, partnership and acquisitive growth to achieve Company goals of meeting increased demands from our clients, regulatory compliance and enhance shareholder value.

Environment

The Directors consider that the nature of the Group's activities is not inherently detrimental to the environment.

Employees

The Group places value on the involvement of its employees and they are regularly briefed on the Group's activities. The Group closely monitors staff attrition rates which it seeks to maintain at current low levels and aims to structure staff compensation levels at competitive rates in order to attract and retain high calibre personnel.

Disabled employees

Applications for employment by disabled persons are always fully considered, bearing in mind the specific aptitudes of the applicant involved. It is the policy of the Group that the training, career development and promotion of disabled persons, as far as possible, be identical with that of other employees.

Social, community, and human rights

The Board recognises that the Group has a duty to be a good corporate citizen and to respect the laws, and where appropriate the customs and culture of the territories in which it operates. It contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices.

The Strategic Report was approved by the Board on 23 June 2022 and signed on its behalf by:

__________________

Gerard Brandon

Chief Executive Officer

Report of the Directors

The Directors have pleasure in submitting this report together with the audited financial statements of DeepVerge Plc for the year ended 31 December 2021.

Corporate details

DeepVerge Plc is incorporated in England and Wales with registration number 10205396. The registered office is York Biotech Campus, Sand Hutton, York, North Yorkshire, YO41 1LZ.

Directors

The Directors who held office during the year and as at the date of signing the financial statements were as follows:

Gerard Brandon                                                  

Camillus Glover                                                   

Ross Andrews                                                      

Fionán Murray                                                     

Nigel Burton                                                         

Principal activities

The Group is an environmental and life science group of companies that develops and applies AI and IoT technology to analytical instruments for the analysis and identification of bacteria, virus and toxins. Utilising artificial intelligent data analytics to scientifically prove the impact of skincare product claims on skin microbiome for most of the top 20 global cosmetic company clients and remotely detect and identify in real-time, dangerous pathogens in wastewater treatment plants, drinking water, rivers, lakes and reservoirs.

Specific information, including key risks and future developments, have not been included in the Directors' Report because they are shown in the Strategic Report, Chairman's Statement and CEO Statement as permitted by section 414C (11) of the Companies Act.

Our core services:

·      Regulated environmental toxicology services;

·      Human skin equivalent platform to validate and verify the safety and impact on client products for regulatory authority approval;

·      AI and microbiome platform to facilitate clinical trials for skincare companies and remote test-kits for consumer skin;

·      Monitoring and data analytics platform for real-time detection and identification of pathogens in water and wastewater.

Dividends

There were no dividends paid or proposed by the Company during the period (2020: none).

Going concern

The Directors have considered the applicability of the going concern basis in the preparation of these financial statements.

The Directors have prepared cash flow projections to determine funding requirements of the Group. The Directors have looked at the forecast for the next 12 months from the date of this report, expected growth in revenues, some of which is contracted, the cash at bank available, loan facilities and existing liabilities as at the date of approval of this report and are satisfied that the Group should be able to cover its working capital requirements.

During June 2021 the Company raised £10m by issuing new shares to fund accelerated sales opportunities and for general working capital purposes.

In March 2022 the Company secured a 3-year mezzanine loan facility of up to £25m with Riverfort Global Opportunities PCC Limited and YA II PN, Ltd available until March 2025.

After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt a going concern basis in preparing the annual report and consolidated financial statements.

Directors' interests

The interests of the Directors who served during the year and previous year in the share capital of the Company (all held beneficially) as at 31 December 2021 were as follows:

¹ Includes 194,942 shares held by family member

Details of share options issued to Directors are detailed in the Report of the Remuneration Committee on page 19.

Substantial shareholdings

At the date of signing of these financial statements, the following interests in 3% or more of the issued Ordinary Share capital had been notified to the Company:  

Fionán Murray                                                                                                                    8,786,758                                                          4.00%

Helium Rising Stars Fund                                                                                                                                                    8,703,433                                                          3.96%

Gerard Brandon                                                                                                                8,564,844¹                                                          3.90%

¹ Includes 194,942 shares held by family member

Post balance sheet events

The following events have taken place since the year end:

Director Purchase of Ordinary Shares

On 17 March 2022 Gerard Brandon, Director, purchased 150,000 Ordinary Shares of 0.1p each on the open market at a price of 13.4p per share.

Acquisition of Glanaco Limited

On 16 March 2022 Rinocloud Ltd acquired 100% of the share capital of Irish registered engineering services company Glanaco Limited for  consideration of £1.08 million comprising £0.65 million in equity and £0.43 million in cash.

Riverfort Loan Facility

Also on 16 March 2022 the Company secured a 3 year mezzanine loan facility of up to £25.0 million with Riverfort Global Opportunities PCC Limited and YA II PN, Ltd ("Lenders") available until March 2025.

Further details have been disclosed in note 35.

Statement of Directors' responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have prepared the Group and Parent Company financial statements in accordance with UK adopted International Accounting Standards. 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 the Parent Company and of the profit or loss of the Group and the Parent Company for that period. In preparing these financial statements, the Directors are required to:

·      select suitable accounting policies and then apply them consistently;

·      make judgements and accounting estimates that are reasonable and prudent;

·      state whether applicable UK adopted International Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

·      prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and the Parent Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Parent 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 Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the Parent Company's website (www.deepvergeplc.com). Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors consider that the annual report and the accounts, taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group and the Parent Company's performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the Report of the Directors confirm that, to the best of their knowledge:

·      the Group financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company;

·      the Parent Company financial statements, which have been prepared in accordance with IFRSs as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Parent Company; and

·      the Chairman's Statement and Chief Executive's Statement include a fair review of the development of the business and the position of the Group and the Parent Company, together with a description of the principal risks and uncertainties that it faces.

Directors' liability insurance

The Company maintains Directors and Officers liability insurance, which is reviewed annually and is considered to be adequate by the Company and its insurance advisers.

Independent auditors

Jeffreys Henry LLP were appointed during the year and have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed at the forthcoming Annual General Meeting.

Due to change in nature and structure of the Group in 2021, advantage has been taken of Section 3.15 of the 2016 Ethical Standards, allowing the audit engagement partner to continue in his role for the audit for the year ended 31 December 2021.

Disclosure of information to the Auditors

The Directors who hold office at the date of approval of this report confirm that so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware, and each Director has taken all the steps that he ought to have taken as a Director in order to make him aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Annual General Meeting

A copy of the notice convening the Annual General Meeting will be sent out shortly under separate cover.

The Directors' report was approved by the Board on 23 June 2022 and signed on its behalf by:

___________________________

Gerard Brandon

Chief Executive Officer

Compliance

The Directors recognise the value of the principles of the Corporate Governance Code for Small and Mid-Size Quoted Companies issued by the Quoted Companies Alliance (QCA).

The following statement describes how the Group seeks to address the principles underlying the Code where practicable and appropriate for a company of this size.

Board composition and responsibility

The Board currently comprises five Directors.  The Non-executive Chairman, three executive Directors and two non-executive Director. The Board has determined that the Non-executive Directors are independent in character and judgement and that there are no relationships or circumstances which could materially affect or interfere with the exercise of their independent judgement. The Board is satisfied with the balance between executive and non-executive Directors which allows it to exercise objectivity in decision making and proper control of the Group's business. The Board considers this composition is appropriate in view of the size and requirements of the Group's business and the need to maintain a practical balance between executives and non-executives.

All Directors are subject to election by shareholders at the first Annual General Meeting after their appointment and are subject to re-election at least every three years. The Board does not automatically re-nominate non-executive Directors for election by shareholders. The terms of appointment of the non-executive Directors can be obtained by request to the Company Secretary.

The Board's primary objective is to focus on adding value to the assets of the Group by identifying and assessing business opportunities and ensuring that potential risks are identified, monitored and controlled. Matters reserved for Board decisions include strategic long-term objectives and capital structure of major transactions. There is a division of responsibilities between the Non-Executive Chairman, who is responsible for the overall strategy of the Group, and the CEO, who is responsible for implementing the strategy and day to day running of the Group. He is assisted by the CFO and the COO.

Board meetings

21 Board meetings were held during the period. The Director's attendance record during the period is as follows:

Gerard Brandon                                                                                                                   16

Camillus Glover                                                                                                                    19

Ross Andrews                                                                                                                       18

Fionán Murray                                                                                                                      21

Nigel Burton                                                                                                                         15

Audit and Risk Committee membership and activities

The Chair of the Audit Committee is Non-executive Director Ross Andrews. The Committee welcomed Dr Nigel Burton to the Board as a second Non-executive Director during the year and the third member of the Committee is Executive Director Fionán Murray. All three Directors possess the necessary depth of financial and commercial expertise to fulfil their role. Although not members of the Audit Committee, the CEO and CFO are also invited to attend meetings, unless they have a conflict of interest. Other senior members of the business are invited to attend meetings as appropriate. The Audit Committee met twice for scheduled meetings during the year.

Key activities during the year

·      Reviewed the Annual Report and Accounts, including whether they were fair, balanced and understandable, the material judgements and estimates, going concern and viability statements.

·      Considered the external auditor's report on the full- and half-year audits.

·      Reviewed the full- and half-year results announcements.

·      Appraised the effectiveness and performance of our external auditors, assessed their independence and objectivity, and recommended their reappointment.

·      Considered the external audit fees and terms of engagement.

·      Reviewed earnings releases.

·      Reviewed the external audit fees and terms of engagement. 

·      Reviewed third party related transactions.

·      Evaluated executive compensation.

Financial reporting

The Committee's primary responsibility in relation to the Group's financial reporting is to review, with management and the external auditor, the quality and appropriateness of the annual and half-yearly financial statements. The Committee focuses on the quality of accounting policies and practices, the appropriateness of underlying assumptions, judgements and estimates made by management, key audit matters identified by the external auditor, the clarity of the disclosures and compliance with financial reporting standards, an assessment of whether the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position and performance, business model and strategy, and advising the Board on the form and basis underlying the three step strategic plan.

Nomination Committee membership and activities

The Chair of the Nomination Committee is Non-executive Director Ross Andrews. The Board welcomed Dr Nigel Burton to the Board as Non-executive Director during the year and Dr Burton joined the Nomination Committee as its second Non-executive Director.  The third member of the Committee is executive Director Fionán Murray.  All three Directors possess the necessary depth of management and commercial expertise to fulfil their role. Although not members of Nomination Committee, the CEO and CFO are also invited to attend meetings, unless they have a conflict of interest. Other senior members of the business are invited to attend meetings as appropriate. The Nomination Committee met twice for scheduled meetings during the year.

By appointing Dr Nigel Burton to the Board we are ensuring that we have the world- class experience, skills and expertise necessary to drive the Group forward through its three step strategic plan. 

In the coming year, the Committee will turn its focus to ensuring the continued growth of the executive and senior management team. 

Remuneration Committee membership and activities

The Chair of the Remuneration Committee is Non-executive Director Ross Andrews Dr Nigel Burton joined the Committee as the second as Non-executive Director.  The third member of the Committee is executive Director Fionán Murray.  Appropriate members of the management team, as well as the Committee's advisers, are invited to attend meetings as appropriate, unless there's a potential conflict of interest.  The remuneration of Non-executive Directors is determined by the Executive Directors.  The Remuneration Committee met twice for scheduled meetings during the year.

During the year the Committee:

-  Determined and recommended to the Board the Group's overall remuneration policy.

-  Determined and recommended to the Board the remuneration of Executive Directors.

-  Monitored, reviewed and approved the levels and structure of remuneration for other senior managers.

Internal control

The Directors are responsible for ensuring that the Group maintains a system of internal control to provide them with reasonable assurance regarding the reliability of financial information used within the business and for publication and that the assets are safeguarded. There are inherent limitations in any system of internal control and accordingly even the most effective system can provide only reasonable, but not absolute, assurance with respect to the preparation of financial reporting and the safeguarding of assets.

The Group, in administering its business has put in place strict authorisation, approval and control levels within which senior management operates. These controls reflect the Group's organisational structure and business objectives. The control system includes clear lines of accountability and covers all areas of the organisation. The Board operates procedures which include an appropriate control environment through the definition of the above organisation structure and authority levels and the identification of the major business risks.

Internal financial reporting

The Directors are responsible for establishing and maintaining the Group's system of internal reporting and as such have put in place a framework of controls to ensure that the on-going financial performance is measured in a timely and correct manner and that risks are identified as early as is practicably possible. There is a comprehensive budgeting system and monthly management accounts are prepared which compare actual results against both the budget and the previous year. They are reviewed and approved by the Board, and revised forecasts are prepared on a regular basis.

Relations with shareholders

The Company reports to shareholders twice a year. The Company dispatches the notice of its Annual General Meeting, together with a description of the items of special business, at least 21 days before the meeting. Each substantially separate issue is the subject of a separate resolution and all shareholders have the opportunity to put questions to the Board at the Annual General Meeting. The Chairman of the Audit and Remuneration Committees normally attend the Annual General Meeting and will answer questions which may be relevant to their work. The Chairman advises the meeting of the details of proxy votes cast on each of the individual resolutions after they have been voted on in the meeting.

The Chairman and the non-executive Directors intend to maintain a good and continuing understanding of the objectives and views of the shareholders.

Corporate social responsibility

The Board recognises that it has a duty to be a good corporate citizen and is conscious that its business processes minimise harm to the environment, contributes as far as is practicable to the local communities in which it operates and takes a responsible and positive approach to employment practices.

Statement of compliance

This report does not constitute a Directors' Remuneration Report in accordance with the Directors Remuneration Regulations 2007 which do not apply to the Company as it is not fully listed. This report sets out the Group policy on Directors' remuneration, including emoluments, benefits and other share-based awards made to each Director.

Policy on Executive Directors' remuneration

Remuneration packages are designed to motivate and retain executive Directors to ensure the continued development of the Company and to reward them for enhancing value to shareholders. The main elements of the remuneration package for executive Directors are basic salary or fees, performance related bonuses, benefits and share option incentives.

Directors' remuneration

The remuneration of the Directors of the Company for the year ended 31 December 2021 and 2020 is shown below:

¹On 26 November 2021 Directors Camillus Glover and Gerard Brandon settled for cash their salaries for which they had contracted for shares in lieu in respect of their employment from 8 August 2018 to 30 June 2019. Under the original 2018 shares in lieu of salary arrangement the Directors would have been allotted 2,384,724 Shares with the effect of diluting existing shareholders' holdings by 1.1%. Issuing these 2,384,724 shares would also have resulted in a charge to the profit and loss account of £684,592.  The Directors instead waived their rights to the shares and were paid their salaries at a premium of 25% which was a cost to the Company of £243,438. An amount of £194,750 had been accrued to 30 June 2019 in the accounts resulting in an additional £49,688 charge in the current year.

Directors' share options

2017 Share Option Scheme

In April 2017, the Company awarded options to five officers of the Company over 6,720,000 ordinary shares of 1p each.  These options were exercisable after two years provided that the holder of the options is still an employee of the Company.

Four of the officers have since left the Company, resulting in 6,081,600 of the options lapsing.

There have been a number of share reorganisations in the interim period and the remaining options under the scheme as at 31 December 2021 were as follows:

¹ 50% of the shares will vest at an exercise price of 50p and 50% at an exercise price of 60p 0.1p ordinary shares.

2020 Employee Share Option Scheme

On 18 September 2020 the Company implemented a group wide share option scheme for staff. The scheme incorporated an EMI Share Option Scheme for UK employees, a Share Option Scheme for Irish employees and Non-Approved Scheme to recognise the work and to reward, retain and recognise their contribution to date and their importance to the Company going forward. The share option program will reward the innovation that has been delivered by all team associates, across the DeepVerge Group, and put in place, motivation for our most valuable assets to continue to deliver shareholder value over the next 3 years. The EMI share options will lapse on 18 September 2030 and the Irish Share Options will lapse on 17 September 2027.

On 19 November 2020 share options were awarded to the directors of Company:    

The fair value calculation of the share options has been calculated using the Black Scholes Model. The charge to the income statement in 2021 for the director share options is as follows:

Opinion

We have audited the financial statements of DeepVerge Plc (the 'parent company') and its subsidiaries (the 'group') for the year ended 31 December 2021 which comprise the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company statements of financial position, the consolidated and company statements of cash flows, the consolidated and company statements of changes in equity and notes to the financial statements, including a summary of significant accounting policies.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and UK-adopted International Accounting Standards and, as regards the parent company financial statements, as applied in accordance with the provisions of the Companies Act 2006.

In our opinion:

•     the financial statements give a true and fair view of the state of the group's and of the parent company's affairs as at 31 December 2021 and of the group's loss for the year then ended;

•     the group financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards;

•     the parent company financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards and as applied in accordance with the provisions of the Companies Act 2006; and

•     the financial statements 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 company 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, 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.

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 entity's ability to continue to adopt the going concern basis of accounting included reviews of expected cash flows for a period of 12 months, to determine expected cash burn, which was compared to the liquid assets held in the entity and the loan facility available to draw down.

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 group's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.

Key audit matters

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. This is not a complete list of all risks identified by our audit.

Our application of materiality

The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.  These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole.

Based on our professional judgment, we determined materiality for the financial statements as a whole as follows:

For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £5,000 and £67,000.

We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £7,500 (2020: £11,050) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.

An overview of the scope of our audit

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we looked at where the directors made subjective judgments, for example in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.

How we tailored the audit scope

We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.

The Group financial statements are a consolidation of eight reporting units, comprising the Group's operating businesses and holding companies.

We performed audits of the complete financial information for DeepVerge Plc, Innovenn UK Limited, Integumen Ireland Limited, Stoer Ireland Limited, Rinocloud Limited and Modern Water Plc, reporting units, which were individually financially significant and accounted for over 100% of the Group's revenue and over 99% of the Group's absolute loss before tax (i.e. the sum of the numerical values without regard to whether they were profits or losses for the relevant reporting units).

The Group engagement team performed all audit procedures.

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.

Opinions on other matters 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 the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and

•      the strategic report and the 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 the knowledge and understanding of the group and parent company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.

We have nothing to report in respect of the following matters in relation to which 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' responsibilities statement set out on page 12, 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 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.

As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

·      Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

·      Obtain 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.

·      Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.

·      Conclude 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 company to cease to continue as a going concern.

·      Evaluate 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.

·      Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the Group to express an opinion on the financial statements. We are responsible for the direction, supervision and performance of the audit. We remain solely responsible for our audit opinion.

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.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:

www.frc.org.uk/auditorsresponsibilities 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.

Sanjay Parmar (Senior Statutory Auditor)

For and on behalf of Jeffreys Henry LLP, Statutory Auditor

Finsgate

5-7 Cranwood Street

London EC1V 9EE

23 June 2022