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DATALEX PLC 2020 Annual Report and Financial Statements
Dublin, Ireland – 29 April 2021: Datalex plc (the “Company” or the “Group”) (Euronext Dublin: DLE), a market leader in digital retail technology focused on the airline market, announces that it has today published an electronic version of its 2020 Annual Report and Financial Statements for the year ended 31 December 2020 (the “2020 Annual Report”) on its website.
Key highlights
• 2020 was a year of meaningful progress against a backdrop of unique Covid induced challenges.
• The Group was impacted by COVID-19 in 2020. Revenues declined by 38% versus 2019, from USUS$45.1 million in 2019 to US$28.1 million in 2020. Excluding once-off revenues recognised in 2019, revenues declined by 29% versus 2019 on a like for like basis. This is in the context of a year where airline passenger demand fell by 65.9%i in 2020 compared to 2019. The Group’s exposure was mitigated by its SaaS revenue model and geographical reach and mix.
• Foreign Currency Adjusted EBITDAii increased from US$0.7 million in 2019 to US$3.4 million in 2020. This increase was enabled by taking quick and decisive action to reduce costs in Q2 and through rigorous cost management throughout 2020.
• The Group incurred a loss after tax of US$6.5 million for the year compared to loss after tax of US$12.1 million in 2019. This loss after tax includes Exceptional Costs of US$2.8m (US$8.3m in 2019), Depreciation and Amortisation of US$2.1m (US$2.6m 2019), Foreign exchange impact US$1.6m ($0.2m in 2019) and Interest Costs of US$2.9m (US$1.5m in 2019).
• The Group managed cash flow effectively during a very difficult year. No additional funding was required during the year and no funds have been drawn from the additional debt facility provided by the Company's lender, Tireragh Limited (a company ultimately beneficially owned by Mr. Dermot Desmond, also a substantial shareholder in the Group via IIU nominees Ltd). Further, Tireragh Limited has signalled its willingness to extend the repayment date of the Company’s existing loan facility to September 2022, if required.
• The Group is strongly positioned to capitalise on market opportunities once travel resumes. Due to ongoing market uncertainty, the Group feels it would be premature to issue formal guidance at this time. In 2021, we will continue to progress our strategy to drive accelerated and sustainable growth by supporting our existing customers, and by continuing to invest in our product roadmap which will further support new customer acquisition.
Commenting on the results Sean Corkery, Chief Executive Officer, said:
"In 2020, I am pleased that we continued to make solid progress in our recovery and competitiveness. Notwithstanding the disruption of COVID-19, we increased both our EBITDA and Foreign Currency Adjusted EBITDA and we were operationally cash generative. We made serious strides in product development and cloud- based delivery and are now well positioned to deliver SaaS based Product and Services to our existing and future customers in a market place ripe for transformation using digital retail. I am confident that the progress made in 2020 will support the Group’s next phase of growth.”
© Datalex PLC Page 2 of 2
2020 Results Presentation
A management presentation on the 2020 results is available on our website at www.datalex.com/investors
2020 Annual Report
The 2020 Annual Report is available to download at www.datalex.com/investors
A copy of the 2020 Annual Report has been submitted to Euronext Dublin where it is available for inspection and copies will be posted to shareholders who have elected to receive them.
i IATA 2020 Worst Year in History for Air Travel Demand https://www.iata.org/en/pressroom/pr/2021-02-03-02
ii Foreign Currency Adjusted EBITDA is a new KPI introduced in 2020. Our functional currency is US Dollars. As explained in our debt financing note (Note 14), in 2019 the Company received €11.3m debt financing from Tireragh Limited. This loan funding was denominated in Euro. We present this measure because we believe that the measure provides useful and necessary information to investors and other interested parties for the following reasons: • It ensures that the underlying business performance is presented clearly in the accounts and is not adversely or favourably affected by changes in the relative exchange rates which would be outside the control of the business. • It is the metric that is used for internal performance analysis. The foreign exchange input is arrived at by combining the foreign exchange movements per Note 22 of the Annual Report (both realised and unrealised Foreign exchange) and the additional foreign exchange movements on those Euro denominated Trade Debtor balances fully provided at the end of 2019 and reported as an exceptional item.
About Datalex Media Enquiries Michael Moriarty Datalex is a market leader in transformative airline retail products and solutions. FleishmanHillard The Datalex Digital Commerce Platform provides airlines with a unique solution to drive revenue and profit as digital retailers. Today the platform enables a travel +353 87 243 2550 marketplace of over one billion shoppers covering every corner of the globe, driven [email protected] by some of the world’s most innovative airline retail brands. Datalex’s customers include Air China, JetBlue Airways, Hainan Group, SAS, Philippine Airlines, Aer Investor Enquiries Lingus, Brussels Airlines, Air Transat and Trailfinders. The Group is headquartered in Sean Corkery Dublin, Ireland, and maintains offices across Europe, the USA and China. Datalex Datalex plc plc is a publicly listed company on Euronext Dublin (DLE). +353 1 806 3500 [email protected] Learn more at www.datalex.com or follow on twitter @Datalex.
©© Datalex Datalex PLC PLC Transforming Airline Retail Annual Report 2020 Contents 02 Strategic Report Datalex at a Glance 2 Chairman's Statement 4 Chief Executive Officer's Review 8 Our Strategy 12 Our Products 14 Our Stakeholders 16 COVID-19 24 Financial and Operational Review 26 Risk Report 34 43 Going Concern 38 Directors' Report Financial Viability Statement 40 Board of Directors 44 Executive Leadership Team 46 Corporate Governance Report 48 Our story is one Nomination & Governance Committee Report 60 Audit & Risk Committee Report 64 Remuneration Committee Report 74 Directors' Report 92 of determination, Directors' Responsibilities Statement 98 grit, learning and innovation. 101 Financial Statements Independent Auditor's Report 102 Group Financial Statements 110 Company Financial Statements 115 Notes to the Financial Statements 118 187 Supplementary Information Contacts & Other Information 188
See all investor information online at datalex.com/investors Datalex Who we are What we do Our values Datalex provides airlines with products to drive One team at a Glance revenue and profit as digital retailers. Our products Datalex’s offer airlines the ability to deliver a competitive Perform and differentiated airline retail experience on every device, across every sales channel and at every Do right purpose is touchpoint in the customer journey. Results matter
We innovate to transform Our Products airline retail Our products and platform operate at scale with over one billion shoppers annually, covering every Our strategy
corner of the globe and used by some of the Datalex world’s most innovative airline retail brands.
The company, founded in 1985, is • Our strategy headquartered in Dublin, Ireland, and has Datalex Direct Annual Report 2020 offices across Europe, America and China. is to drive Our products are used by some of the world’s Datalex NDC accelerated most innovative airline retail brands. • Datalex Dynamic Datalex is a public company and is listed on and sustainable Strategic Report Euronext Dublin (DLE). Datalex Merchandiser growth by creating Our Customers Our Strategic Pillars market leading
Customer at the core Air China Air Changan Trailfinders products JetBlue Airways SAS KLM Product first and future proofed platform that enable airlines to grow Tianjin Airlines Aer Lingus Turkish Airlines People West Air Brussels Airlines Philippine Airlines revenue and Operational excellence Guangxi Beibu Gulf Airlines Air Transat Copa Airlines profit as digital Urumqi Air Edelweiss Commercial strength retailers.
2 3 The Group is using this time of uncertainty 2020, a new set of challenges to invest wisely. We remain committed to 2020 was my first full year as Chairman of progressing our growth strategy and continued Datalex Plc. I noted in last year's Annual Report to invest in product development, research that 2019 was an exceptionally difficult year for and development ("R&D") and new talent in the Group and unfortunately, I am describing 2020. Our underlying and determined focus is 2020 as another challenging year for the Group. to return Datalex to a growing, sustainable and However, whilst 2019 and 2020 have both been cash generative business creating value for our difficult years, the challenges the Group has shareholders. faced have been distinctly different.
Careful management of the business was Lifting of the suspension of trading in the required to navigate the unique trading Company's shares on Euronext Dublin environment created by the evolving impact of the COVID-19 pandemic. A fundamental commitment of the new Board and management team was to restore the listing and trading of the Company’s ordinary shares on Euronext Dublin in 2020. This was important 2020 performance to enable existing shareholders to trade their Fortunately, as I outlined in last year’s Annual shares and to allow new shareholders to have the Report, despite the rapid onset of COVID-19 opportunity to invest in Datalex. in the early months of 2020, the Group was already well structured to react with a new I am very pleased that this commitment was management team in place, a resilient revenue honoured on 14 July 2020 when the Company’s model and strong customer relationships. listing on Euronext Dublin was restored. Datalex The Group responded in a proactive manner and a number of cost reduction actions were The restoration of the listing was a thorough • taken in April 2020 to mitigate the impact process, requiring the Directors to satisfy to its financial performance. We continued Euronext Dublin that the suspension of trading Annual Report 2020 to protect our cash position throughout the was no longer warranted. year, and I am very pleased to report that we generated a positive foreign currency adjusted The Directors have progressed the issues that earnings before interest, tax, depreciation led to a breakdown in internal financial controls and amortisation ("Foreign Currency Adjusted in early 2019 and the restoration of the Group's EBITDA") of US$3.4m. listing is a solid indicator of the progress that has •
been made in this area. Strategic Report We were transparent in last year’s Annual Report that COVID-19 brought an unprecedented level of uncertainty and that it would be some time Board and corporate governance before the full impact would be revealed. This Chairman’s statement is still the case. Datalex is a software During 2020, there were no changes to the company focused on transforming airline retail, composition of the Board of Directors. which means the impact of the COVID-19 pandemic on airlines has affected Datalex’s The Group continues to apply the principles and Statement ability to achieve its growth plans. During 2020, provisions of the 2018 UK Corporate Governance the Group saw a noticeable reduction in the Code and the additional requirements of the number of airlines tendering for airline retail Irish Annex, further details are set out on pages solutions. Whilst the Group has seen a moderate 43 to 99. 2020 was a year of meaningful progress increase in activity and airline engagement against a backdrop of unique challenges in recent months, it is difficult to determine The Board continues to operate effectively when airlines will be in a position to invest with regular Board meetings and Committee until they have completed their own internal meetings. The Group continues to benefit from restructuring and have more clarity on the the experience and expertise of each Board roadmap to recovery for the industry and their Member, and I would like to sincerely thank the underlying business. However, crises accelerate Directors and the Company Secretary for their innovation, and we are confident that this crisis dedication and commitment and going above has accelerated a number of trends which will be and beyond during 2020. in our favour once the market returns.
4 5 1. Full year / December From a corporate governance perspective, the Mr. Desmond has informed the Company 2020 Air Passenger lifting of the Group's suspension of trading that he will support the equity fundraising and Market Analysis, in the Company's shares on Euronext Dublin will procure the participation of IIU Nominees International Air was a primary objective in 2020. In addition Limited for at least its pro rata entitlement. Transport Association to this, the Board implemented several other I would like to extend my thanks to Mr. Desmond (IATA). important governance objectives. One of for his continued support. these objectives was to appoint a Director of Workforce Engagement. In December 2020, Christine Ourmières-Widener, was appointed to Looking ahead this role. This newly appointed role will enable the Board to develop a better understanding 2021 will be another year where the Group of the workforce and improve communication continues to make progress whilst tackling the between the Board and employees of the ongoing impact of COVID-19 on the travel Group. Christine will spend time in the first half industry. The International Airline Association’s of 2021 engaging with people across all areas (IATA) baseline forecast for 2021 is for a 50.4%1 of the organisation. Another objective was to improvement on 2020 demand, which would conduct an externally facilitated evaluation bring the industry to 50.6% of 2019 demand of the Board, its committees, and individual levels. Positively, the roll out of vaccinations Directors and this was undertaken during 2020. has commenced, however, there is ongoing A full overview of the enhancements we have uncertainty regarding new variants of the virus, made to our governance practices is detailed the designated pathway for the reopening of in the Governance section of this report on borders and the processes and controls that will pages 43 to 99. need to be in place in order for international air
travel to resume fully. Datalex
Datalex has a track record of responding and Group funding
adapting to new and unforeseen circumstances •
I had said in last year's Annual Report that it and has deep reserves of resilience. I have every Annual Report 2020 was the intention of the Group to arrange a confidence that the Group will be able to deal capital raise in order to strengthen the Group's with the challenges it faces in 2021 with this balance sheet and liquidity position. same agility and resilience. That remains our intention. The Board of Directors determined not to proceed with I, and my colleagues on the Board, would like a capital raise in 2020, due to the prevailing to thank the entire Datalex team, led by Sean •
COVID-19 related uncertainty and stock market Corkery, CEO, and his Executive team, for their conditions. The timing of any fundraising will be contribution in 2020. Strategic Report key to its success. I would like to thank our customers for their At the time of writing last year's Annual Report, loyalty and support, particularly in a year that has I noted that Tireragh Limited (a company been so challenging for each of their businesses. ultimately beneficially owned by Mr. Dermot Desmond, also a substantial ultimate beneficial Finally, on behalf of the Board, I would like to shareholder in the Group via IIU Nominees thank you, our shareholders. We look forward Limited) had signalled their intent to provide an to building on the progress achieved in 2020 extension of the term of the Tireragh Limited to drive sustainable growth in the future. loan facility to 1 November 2021 and to provide an additional debt facility of up to €10 million. That extension and additional funding was secured in September 2020 and approved by David Hargaden our shareholders that month. At the time of print, Chairman this additional funding has not been required, 28 April 2021 and no drawdowns were made against this additional facility during 2020.
Subsequent to the year end, Tireragh Limited has confirmed that it is willing to extend the repayment of the loan facility to September 2022 which will allow the Company to proceed with a capital raise at the appropriate time, market and other conditions permitting.
6 7 Financial performance We improved financial stability in 2020 1. Full year / December by extending and upsizing our debt facility. 2020 Air Passenger Our commitment to timely action to protect Despite an additional facility of €10 million Market Analysis, the interests of all our stakeholders was evident International Air being secured in September 2020, zero funds throughout 2020. On 12 March 2020, we Transport Association were drawn down during the year. Careful cash announced to the market that the pandemic (IATA). management resulted in a closing cash balance would have an adverse effect on our business. of US$3.0 million. At the date of publication of our last Annual Report, whilst it was difficult to accurately A complete and detailed review of our financial quantify the impact on our financial performance is set out on pages 26 to 33. performance, the Group decided to take immediate action. This included a targeted restructuring programme, a renegotiation of business partner agreements, elimination of Our strategy discretionary spending, a recruitment freeze, In 2020 we implemented a new strategic and reducing working hours for employees on plan focused on achieving accelerated and a temporary basis for part of the year. These sustainable growth. Whilst the acceleration actions allowed us to have more cost certainty in aspect of our strategy has been restrained a period of significant uncertainty. by the impact of COVID-19 on our industry, our commitment to our SaaS strategy From a financial perspective, whilst we did not remains firm. achieve revenue growth in 2020, we did exceed our post-COVID-19 revenue expectations. We are focused on building winning products Revenues declined by 38% versus 2019.
that enable airlines to grow revenue as digital Datalex Excluding once-off revenue items, revenues retailers. All of our products are now cloud-based. declined by 29% versus 2019 on a like for like basis (refer to Note 18). This is in the context of a
With over thirty-five years’ experience working • year where global airline passenger demand fell
in travel technology, Datalex is fortunate to Annual Report 2020 by 65.9% in 2020 compared to 2019.1 and where have a portfolio of highly innovative airlines as airlines paused or cancelled many technical customers. We have ensured that our product initiatives, both internally and with external strategy is designed to support these airlines third-party vendors. As a Software as a Service with their needs today and their needs in ("Saas") company our commercial model has the recovery period. fixed and variable components, which buffered our exposure in 2020. In addition to this, most • Chief Executive COVID-19 has been a real catalyst for change,
of our customers proceeded with service projects Strategic Report and we see this period – 2021 and beyond - in 2020 leading to services revenue (excluding as a strategic inflection point for many airlines. once-off revenue) declining at the lower rate of Datalex is primed to work with any airline Officer's Review 19% year on year. seeking to enhance their digital retailing as travel resumes and we return to growth. In terms of profitability, I am pleased to report that the Group generated a positive foreign Further detail on our strategy is set out on 2020 was a year which brought unique and currency adjusted EBITDA of US$3.4m pages 12 and 13. unforeseen challenges for our industry largely in 2020. This performance was largely driven driven by the COVID-19 pandemic. These challenges by reducing our cost base by 39% in 2020 versus 2019. Whilst reducing our cost base, not only impacted our business performance, we continued investing in our products and our they severely affected the customers we serve, platform in 2020. This was critical to our product the societies in which we live and the way in which led strategy in 2020, as outlined below. we go about our daily business. As we have outlined previously, and detailed transparently, the challenges Datalex faced prior to 2020 and unrelated to COVID-19, had largely been progressed. This meant that the Group was in a strong position to respond to this latest challenge and I believe has given us a small advantage in terms of recovery.
8 9 Supporting our customers when it Our products engagement across the Company. Having 2. With a smaller demand pool, conversion rate matters most introduced the Great Place to Work Trust Index optimisation will be of more importance than 2020 was a big breakthrough year in our Survey in 2019, the results of the 2020 survey ever before. At Datalex, we enable airlines to One of our most important priorities in 2020 development as a product first company. saw a significant improvement in our results. make the right offer to the right customer at the was to support our customers throughout this This is a critical part of our new strategy and an Improvements were made across all five areas of right time and offer a better customer experience, challenging year and to clearly illustrate how area where we made strong progress during the survey – credibility, respect, fairness, pride and which is critical for improving conversion. Datalex is a trusted and flexible business partner. the year. Specifically, we transitioned from camaraderie. As a result of this, I am very pleased selling a Digital Commerce Platform to 3. There will be more of an appetite to innovate to say that Datalex has been certified as a Great In 2020, most airlines had to make technical selling four cloud based flagship products – and this will lead to an acceleration of Place to Work and, perhaps more importantly, adjustments to respond to the ever-changing Datalex Direct, Datalex NDC, Datalex Dynamic investment in Dynamic Offer. Datalex, with that this improved workplace experience was needs of their customers. For example, many and Datalex Merchandiser. Each of our flagship core expertise in price determination and achieved in the most challenging of years. changes were required regarding new health products can be deployed as a standalone product determination, is uniquely positioned & safety measures and also in the area of product or can be used in conjunction with our to win market share in this new market with We recognise that we operate as part of much larger cancellations and refunds. Datalex enabled other products. its Datalex Dynamic product. global community and that our impact matters. airlines to make these changes as quickly and As we consider the areas of environmental, social 4. Airlines will continue to focus on generating as efficiently as possible. In some cases, Our new product strategy allows us to target and governance within a sustainability framework, additional ancillary revenues across the end- changes were implemented for customers more customer segments in the market while we will prioritise the social pillars whereby we will to-end customer journey to drive profitability. in less than 24 hours. significantly improving the time required to continue to nurture our diverse and inclusive culture. Datalex Merchandiser enables airlines to sell implement our products. Digital Configurator, a ancillaries at every customer touchpoint. This During the year we delivered product capability self-service tool, was launched in 2020 and has product can be implemented in 30 days and that would address some of the immediate pain helped the ease of implementation and ongoing requires very little upfront capital investment points experienced by our customers relating customer change. It enables our customers to Lifting of the suspension of trading in the which is important for airlines in the current to the pandemic. For example, in 2020, we configure directly and independently, in real Company's shares on Euronext Dublin climate. implemented a fully integrated ‘Vouchers as time, any changes they require to optimise
As mentioned by our Chairman, the lifting of the Datalex a form of payment’ product enabling airline revenue, price and ancillaries. We see this 5. There will be a shift from having in-house suspension of trading of the Company's shares customers to use vouchers as a method of full flexibility as game-changing for airline retailing. developed booking engines to outsourcing to on Euronext Dublin on 14 July 2020 was a major payment or partial payment when making new best in class products available in the market. It
milestone for Datalex and the final one on our • bookings. For customers that have implemented In parallel, and in line with our SaaS strategy, is costly for airlines to keep pace with regulatory
RESET Transformation plan. It was a priority for the Annual Report 2020 this product capability, we have seen over we executed our cloud-hosting migration to changes and retailing trends, and this will be a Board of Directors and the Executive Leadership one third of transactions being booked using Amazon Web Services (AWS) in order to better big area of opportunity for Datalex. Team and an important step towards establishing vouchers as a form of payment, thereby deliver and scale utilisation of our products. greater financial stability for the Company. The reducing considerably the burden on call-centre All of our products are now hosted on cloud. Whilst I believe there are industry tailwinds that lifting of the suspension was also a testament to staff who would otherwise have had to manage In November 2020, Datalex achieved AWS Datalex will be able to capitalise on once the industry the improvements the Group made from a these transactions manually. Travel and Hospitality Status. This designation recovers, from a financial planning perspective, we governance perspective. recognises the deep domain expertise that have a conservative plan in place which assumes no •
Delivering high quality releases on time and on Datalex has and our readiness to leverage the material signs of recovery in 2021. The Group plans Strategic Report budget in 2020 was critical and we continue agility and breadth of services provided by AWS. to raise additional finance through a capital raise, to perform in this area. All delivery and support Looking ahead at the appropriate time, which will strengthen the targets were met for completed projects. Further detail on our products is set out on Company's balance sheet and provide the Group Uncertainty remains across all industries regarding pages 14 and 15. with working capital to support the implementation the timing and trajectory of the COVID-19 Most importantly, our customers have confirmed of new revenue opportunities. recovery, not least where travel is concerned. that they valued our support during this most There is general alignment that the post- difficult year. At Datalex we use the industry From an operational planning perspective, we People COVID-19 ‘new normal’ will be different and standard Net Promoter Score survey to regularly are working on the basis that the recovery could airlines are preparing for this new opportunity. measure customer satisfaction. The results Without people, there would be no performance happen at any time and that we need to be from the survey in Q4 2020 were the highest and our result in 2020 is attributable to our fully prepared. This balance between short term As a software company, specialising in Digital results Datalex has ever received and showed team of people who demonstrated the resilience prudence with readiness for future growth will Retail for airlines, we are uniquely positioned to significant improvement versus previous years. I have spoken about in previous Annual Reports. continue to be our modus operandi for 2021. help our customers on this change journey and, I am pleased that the operational emphasis at the pace of recovery, to add new airlines to introduced during my time as CEO at Datalex is Our teams adapted to remote working very We will continue to adapt and respond to new our customer list. Our global footprint will be now reflected in some part by these results. quickly. Any concerns that we may have had challenges that arise with resilience and speed. beneficial and we see early upside opportunity in about our ability to engage remotely on fast- China, where Datalex has a strong presence. Notwithstanding the above, in our 2020 paced delivery initiatives were quickly dispelled We remain confident that progress we have Guidance and Trading Update issued last by the outcome, performance and productivity made in 2020, and the further progress we will A number of industry trends have become more November, we announced that two of our achieved. We will leverage this capacity into make in 2021, will support Datalex’s eventual pronounced during the COVID-19 pandemic. Our customers, one European and one Asia-Pacific 2021 and beyond as we determine what the return to demonstrable and profitable growth. view is that this accelerated change in the industry based, planned to consolidate their technology optimal organisational needs are, as current will work in Datalex's favour, These trends include: leading to a reduction in scope and eventual government restrictions are reduced. cessation of services. 1. Faster recovery on the digital direct channel. Our culture is vital to our future success. We Sean Corkery The direct channel is our core area of refined our values and saw real improvements Chief Executive Officer expertise and all of our customers use in terms of Company values, trust and 28 April 2021 our Datalex Direct product.
10 11 Strategic pillars to drive accelerated and sustainable growth
Our Customer Product First & Future People Operational Commercial Strategy at the Core Proofed Platform Excellence Strength
Driving accelerated and sustainable growth What this means for Datalex What this means for Datalex What this means for Datalex What this means for Datalex What this means for Datalex Our product-led business strategy Our strategy is to drive accelerated and › Customers are at the core of Our people drive every part of A lean and efficient operating model, In pursuing our growth and strategic and investment in our platform sustainable growth by creating market leading all that we do at Datalex. our business model. with the appropriate processes, objectives, we will only do so if an is key to unlocking our growth products that enable airlines to grow revenue structure, and measures in place to opportunity has commercial viability › Customer execution and potential and is central to our and profit as digital retailers. support future growth. in the long term. delivery is critical. customer acquisition plans. In achieving our strategy, we are creating value for our stakeholders – our customers, our Examples of our 2020 Examples of our 2020 Examples of our 2020 Strategy Examples of our 2020 Strategy Examples of our 2020 Strategy people, our shareholders. Strategy in Action Strategy in Action in Action in Action in Action
In last year’s Annual Report, we outlined our › Provided unparalleled › Continued to invest in adding › Delivered on commitments arising › Introduced a new quality first › Responded quickly to the impact 2020 strategic plan to return to growth over support to our customers in new and differentiating from 2019 Trust Index Survey program which has demonstrated of COVID-19 – execution of a cost Datalex the next three years. a time of crisis. We enabled capability to our products, feedback. These actions included measurable improvements in first reduction program to in response customers to quickly respond focusing on capabilities that improvements in the areas of time quality (hence reducing UAT to same. • We aim to primarily drive growth organically to the changing needs of their will enable airlines to drive training and development, flexible and production support issues).
› Completed an Financial Position Annual Report 2020 from our existing business and from winning customers. their retailing revenues, work arrangements, team building, Exceeded target reduction of and Prospects Procedures ('FPPP') new customers. These growth objectives are improve their customer’s service recognition and graduate support issues by 19%. › Customer delivery – continued process and relisted on Euronext underpinned by the following five strategic experience and reduce costs. recruitment. to deliver on time and on › Maintained a stable velocity level Dublin on 14 July 2020. pillars outlined on this page. › Undertook a Trust Index survey in budget to our customers › Delivered the Digital with our development teams. December 2020 (facilitated by › Implemented a new ERP system. in 2020. Configurator on time and Whilst revenues declined in 2020 (vs 2019), Great Place to Work). Based on the on budget. The Digital › Reviewed and updated our 2020 was a year that presented significant › Received the highest Net survey results, Datalex was certified • Configurator enables airlines commercial model
external market challenges. We achieved Promoter Score ('NPS') score as a Great Place to work and listed Strategic Report to be in control of their significant progress in all areas of our strategy ever received since we first as a 2021 Best Workplace. offering and allows our that are within our control. The progress we conducted this survey in 2014. customers to easily make › Implemented cross functional achieved in 2020 means that the Group has changes in real time. scrum teams at scale within strengthened its platform to achieve future engineering and rolled out a full stack growth and is well positioned to capitalise on Priorities for 2021 › Launched Datalex Merchandiser Priorities for 2021 Priorities for 2021 development programme in 2020. future market opportunities. and can deliver this product to › Continue to be a trusted › Continue to make incremental › Execute a capital raise and a customer in 30 days. business partner, delivering improvements to our operating strengthen balance sheet to ensure valuable capability on-time › In line with our SaaS strategy, Priorities for 2021 model to align with our SaaS we have sufficient working capital The market opportunity and on budget. executed a data centre › Deliver on our commitments in business model. for new revenue opportunities. migration project on time Datalex has a strong market proposition – › Continue to measure and response to the 2020 Employee › Achieve revenue and foreign and on budget which involved helping airlines cut through the complexity improve customer satisfaction, Engagement Survey. Areas of focus currency adjusted EBITDA targets. the migration of customers created by legacy systems so that they can and ensure that areas of include performance & recognition, to cloud. provide a modern retailing experience that is improvement are identified wellbeing, development and CSR. expected by their customers. and actioned. › Carry out the Trust Index Priorities for 2021 Engagement Survey in Q4 2021 Datalex has a growing addressable market. to ensure that our people still A significant portion of this growth will be in › Deliver our 2021 product believe that Datalex is a great the area of Dynamic Offer and this is a large roadmap on time and place to work. part of our investment roadmap. on-budget. › Continue to invest in retaining and › Decommission our on-premise developing key talent. data centre with all customers being hosted on cloud. › Continue to invest in the full stack development Program. › Continue to deliver new capability to our existing › Continue to attract new talent in customer base in line with 2021, particularly in the area of their digital strategies. graduate recruitment.
12 13 Our Products
Datalex Direct Datalex Dynamic Powers Next Generation Omni-Channel Intelligent Price and Product Revenue for the Digital Airline Determination
Datalex Direct is an innovative, customer-centric digital Datalex Dynamic arms airlines with the intelligence, commerce product for travel retailing via airlines’ direct ultra-flexibility, and speed to adjust offers in real-time channels, putting power in the hands of the airline to drive that reflect and adapt to super-fast-moving demand revenue and profit as digital retailers. Datalex Direct enables trends. It equips airlines with a powerful, data-driven airlines to increase digital sales by offering their customers a pricing strategy to vastly improve the relevance and smoother and improved direct booking experience, across conversion of fare recommendations, by dynamically different touchpoints and devices, allowing airlines to matching price with travellers’ personas as well as their embrace a full and sophisticated retail model. willingness and capacity to pay.
Datalex Direct allows for great flexibility and customisation With Datalex Dynamic, airlines can strategically and Datalex to meet the needs of each airline while permitting rich intelligently adjust fares which will be a vital strategy and differentiated content management, dynamic offers, for airlines as they emerge from COVID-19 and will • seamless order management and digital payments. It accelerate their path to customer-centric airline retailing. ensures airlines have more direct customer engagement Annual Report 2020 at the point of sale, which is key to reassure and influence travellers to return to the skies, drive increased demand and high value revenue as airlines recover from COVID-19. •
Strategic Report Datalex Merchandiser Datalex NDC Unlock New Revenues Enhanced Retailing The Digital Configurator Beyond the Seat Across All Channels Real-Time Retail Control Datalex Merchandiser is an airline-controlled merchandising Datalex NDC offers airlines full offer and To truly excel in digital retailing, airlines need to be empowered with engine that allows airlines to create customer-centric product order management capabilities to control and tools that enable much greater offer control and self-service capabilities and service offers across all retailing touchpoints and points- optimise offers and enable a consistent customer across all channels and touchpoints, and with a much faster speed to of-sale, to generate significantly increased ancillary revenue. experience across the indirect channels. It ensures market. The Digital Configurator was designed to do just this. Datalex Merchandiser does this by converting purchasing airlines can have greater control over their indirect ‘micro-moments’ across the travel lifecycle into revenue with distribution strategies and control and manage indirect A key capability of the Datalex products, the Digital Configurator contextualised, personalised offers. It enables merchandising channels at the same pace as their direct channels, provides airlines with nano-second offer control, removes the reliance with value-add customer interactions that extend far beyond adjusting content and pricing of offers continuously on IT for data configuration and enables a faster market response time the customer’s flight, that connect travellers with content that and consistently across both. The airline has the than ever before. Through a highly sophisticated, cloud-based interface, matches their need when they need it, that engages them power to determine the optimal distribution portfolio the Digital Configurator provides full and real-time retail control of pre, during and post journey and that extends to non-travel for its branded NDC API and provides Online Travel the rule data needed to manage fares, ancillary products, pricing and products as well as travel specific products. Agent's (OTA's), Corporate Travel Agents, Sellers and services. With a core focus on simplicity, speed and self-service, Digital Aggregators with the workflows needed to fully support Configurator enables airlines to realise significant savings in time and With a fast implementation time of 30 days, airlines can their shopping, booking and order servicing needs. cost and enables airlines to be extremely agile in adapting their product quickly launch a sophisticated merchandising solution at low and pricing in response to market, competition and customer needs. cost and with a high return in terms of ancillary revenue and customer engagement.
14 15 Our people. Our Stakeholders As referenced in our strategy section on page 12, 38% our people drive every part of our business and are a critical part of our strategy to drive accelerated and sustainable growth. Quite simply, Datalex’s people are its most important asset. The energy, expertise, integrity, and passion of our people underpin our potential.
Datalex’s People Strategy is to unlock the full potential of our talented workforce and maintain a culture of high engagement. Women make up 38% of senior COVID-19 Business Continuity Task Force: management In response to the COVID-19 global pandemic, (top two levels) our priority was to protect the health and in the Group well-being of our employees throughout this challenging and uncertain time.
A cross-functional COVID-19 Business Continuity Task Force was established in February 2020 to take timely and effective action to mitigate
any health and safety risks that were within our Datalex control. This involved providing our employees with the option to work from home and also
involved making our offices compliant with •
COVID-19 specific health & safety guidelines Annual Report 2020 and regulations. As the year progressed and the virus continued to spread across the world, it became evident that most of our employees would need to continue to work from home for the foreseeable future. Our focus shifted to the impact that this was having on wellness, mental •
health and physical health in general and how we, as an employer, could make remote working a Strategic Report better environment to work in.
The Task Force continues to be actively engaged in preparing for a hybrid working model once regulations allow. Remote working has proven to be productive and will remain part of our future operating model. We also recognise that many employees look forward to returning to the office and we look forward to welcoming our employees back once safe to do so.
At Datalex, we are committed to Culture & Engagement creating value for our stakeholders. Culture and engagement is important for the We understand the importance of, success of our people and teams at Datalex. and are committed to, ongoing and In 2020, we undertook a Trust Index constructive engagement with our Engagement Survey facilitated by Great Place stakeholders. to Work (“GPTW”). We had conducted this survey in 2019 and saw significant year on year Datalex engages with four key groups: improvements in 2020 across all areas of the survey, including credibility, respect, fairness, our people, our customers, our pride and camaraderie. shareholders, and our communities.
16 17 71% of our people feel that Learning And Development: Datalex is a great place to work Our success is driven by our people and it One team and based on our 2020 survey is a priority that we enable our employees results, Datalex was certified as to further their learning and development a Great Place to Work and listed at Datalex. We are one team committed to as a Best Workplace ® Ireland. a common purpose, clear goals In 2020, we continued to provide our and high-performance. Everyone employees with the opportunity to learn and understands that we need each In a year where most of our people were working develop their skills with a focus on how we can other to collectively achieve our remotely, engagement was a priority for us and best do this in a remote and online context. We shared ambitions. we held frequent virtual All Hands meetings and continued our Lunch and Learn programme conducted regular pulse surveys throughout with events hosted by industry partners and the year. We will continue this engagement employees on a variety of relevant topics programme in 2021. including sessions on our products, strategy, innovation, leadership and technology. We Our Values also ran a programme on communication Perform Our values are measured through our styles and how to communicate effectively Performance Management process and in a virtual environment. embedded in all that we do. We have a motivating purpose. Diversity: We have audacious goals and › One Team Datalex is committed to creating an inclusive objectives. We know what work environment where diversity is valued in all › Perform needs to be done. We must perform its forms. Creating and sustaining a diverse and deliver what is expected by
› Do Right and inclusive culture is core to our purpose. all our stakeholders. Datalex We endeavour to ensure that our talent and › Results Matter hiring process is fair. Equally, we are committed
› We Innovate to ensuring that every employee can continue •
to develop and succeed at Datalex regardless Annual Report 2020
of age, status, gender, ethnicity, or any other attribute. Do Right
We always endeavour to do what
is right, to adhere to the highest •
standards of conduct and behaviour, Strategic Report to lead by example, and to make hard decisions. We keep our promises and commitments to our customers and to each other.
Results Matter
We are responsible for business- critical enabling technology for our customers. We make a significant positive impact on their commercial performance. What matters most is that we deliver in line with their expectations and our promises.
We Innovate
We innovate, create, and generate solutions for our customers. We solve complex problems by imagining what ‘possible’ can look like. We do this in an efficient and resourceful way.
18 19 In our 2020 engagement survey, Health And Wellbeing: Stakeholder Engagement other regulatory announcements, we provided an average of 91% of employees Supporting employee health & wellbeing regular updates to the market detailing the indicated that they feel people are particularly during COVID-19 has been our Our customers. impact of COVID-19 and our ongoing initiatives treated fairly from a diversity and main priority for 2020. Due to the COVID-19 Customers are at the core of what we do and are to manage and mitigate the impact. inclusion perspective. pandemic, all of our employees across the fundamental to Datalex's success. We are acutely globe (Ireland, UK, US, China & Netherlands) aware that COVID-19 has been challenging for the We are committed to fostering long-term transitioned to a remote working model. airline industry and in 2020, we were fully focused relationships with our shareholders through on actively working with our customers to help and As of 31 December 2020, women made up transparent communication. Our Company Recognising the importance of work life support them through this difficult period. 30% of total employees (2019: 27.7%) and Secretary is available to shareholders, and our balance, we continue to build a better 38% of senior management (top two levels) Senior Independent Director and Chairman working culture by offering flexible working Feedback from our customers is critical to ensure in the Group (2019: 31.8%). Throughout the are available to shareholders through the hours, a variety of leave types and time for that our products solve their business needs Group, 18 nationalities are represented within Company Secretary if required. The Group colleagues to connect and provide social today, but is equally important to ensure that our our workforce (2019: 19). welcomes queries via telephone, post, or email support to each other. product roadmap will solve their business needs and up to date contact details are available on of the future. We are participants in the Women ReBooT the Group’s website, www.datalex.com. The When safe for staff to return to the office programme run by Technology Ireland. This website also provides an archive of all relevant environment, we have finalised a plan which The Group engages with its customers on multiple programme is designed to encourage women shareholder communications, financial results offers hybrid working arrangements for those levels and communicates with customers to re-enter the workforce after prolonged and updates, and a history of the Company’s wishing to work from our offices and from frequently via a range of formal and informal absences and has proven successful in share price. Attendance by, and questions from, home as appropriate. channels. We also conduct a Net Promoter Score attracting a talent pipeline to the Group. shareholders at the Company’s general meetings survey with our customers regularly. In 2020, Datalex co-sponsored the Women are welcomed by the Board. The Board also During 2020, we provided support for all in STEM Campaign, the aim of which was encourages shareholders to make use of their staff by ensuring staff are aware of where Our shareholders. to highlight the range of opportunities for votes at all general meetings.
and how they can access mental health and The Board recognises the importance of Datalex girls in STEM programmes and careers psychological support services as well as engaging with all shareholders and values regular within Ireland. In person meetings were affected by facilitating access to such services. dialogue. The Group prioritises effective dialogue government restrictions relating to COVID-19
with shareholders to ensure that we capture and • We also took pride in celebrating initiatives during 2020.
The Employee Assistance Programme embrace feedback relating to areas of interest Annual Report 2020 including International Women’s Day, Pride continues to be a valuable service to our and areas of concern, and to ensure that our and World Mental Health Day in 2020. employees during such a period of change. We obligations are met. During 2020, as well as maintain regular contact with colleagues at all A company diversity policy and Board diversity levels in the organisation to ensure that they policy were implemented in 2020. are receiving the advice and support that they require to protect their physical and mental •
well-being and remain engaged. Strategic Report Code of Conduct / Whistleblowing Policy: All colleagues are expected to abide by our general Code of Conduct, which outlines specific principles of behaviour everyone is expected to follow, always, in the key areas of integrity, confidentiality, lawful behaviour and disclosure of interests. We are committed to ensuring and maintaining an environment that is free from bullying and/or harassment and where the dignity of every person at work is respected and upheld.
We implemented a Whistleblowing Policy that sets out how a colleague can raise a concern, the way the Group will respond, and how the rights of colleagues who raise a concern, and those who are the subject of reports, are to be protected. We have an independent whistleblowing hotline that any employee can access confidentially should they not feel safe reporting a concern internally.
20 21 Our communities Corporate Social Responsibility Datalex is committed to social responsibility.
We believe that our social impact begins with living by our values in our interactions with our customers, our suppliers, our shareholders and with the global communities in which we operate.
We have a thorough on-boarding process with our suppliers, designed to ensure that we select suppliers who share our views on social impact and the importance of operating responsibly.
2020 was a challenging time for many charities and during the year, the Group continued to support causes aligned to its purpose and values. We continued our 250 Club initiative whereby all employees can apply for funding to support local charities.
Sustainability As a software company, our main activities Datalex that have an environmental impact are the consumption of electricity and business travel. •
We aim to offset our carbon footprint through Annual Report 2020 a number of initiatives, including sourcing recyclable or degradable office supplies where available, using low energy lighting, providing reusable water bottles and coffee cups for all office staff to reduce plastic consumption. •
Whilst we did not measure our carbon emissions Strategic Report generated from these activities in 2020, our impact in 2020 would have been much lower than previous years as most of our employees worked from home for a large part of the year. COVID-19 accelerated the pace of digital transformation from a workplace perspective and proved how effective it can be.
We also integrate with a carbon offsetting provider so that our customers can offer a carbon offsetting option to their customers as part of their booking flow.
We do not envisage that we will return to a position where all of our employees will work from a Datalex office location on full-time basis. As we review our office strategy in 2021, we will also review our sustainability strategy.
22 23 employees as the lockdown eases with individual 12 months. These include a range of estimated building plans covering access control, physical impacts primarily based on length of time various COVID-19 distancing measures, cleaning/sanitising and levels of restrictions are in place and the severity signage. We maintain regular engagement with of the consequent impact of those restrictions. colleagues at all levels in the organisation to ensure that they are receiving the advice and The Group continues to monitor the impact on support that they require to protect their physical our business on a monthly basis and will take the and mental wellbeing. necessary actions for the good of the business. In addition to the actions already taken, there are a number of further cost saving measures which Background eliminating discretionary spending, freezing could be implemented if required. However, the recruitment, implementing voluntary leave Risks and governance The COVID-19 pandemic has resulted in a global Group has assessed the impact of COVID-19 on its options and temporarily reduced working hours economic shock of unprecedented speed and The Board and management moved quickly to future cash flow forecasts and is satisfied that the for our employees. scale and has been a challenging period not just evaluate the likely impact on the business and Group will have sufficient cash to meet its debts for Datalex, but for the airline and travel industry have taken the initial immediate actions described as detailed in the Going Concern Statement on as a whole. The decisions by governments above. The Board is monitoring all developments page 38 and 39. around the world to limit travel and in cases to Our people closely and receiving frequent updates, including impose severe travel restrictions have resulted in regular updates of financial forecasts and cash As described in our CEO's Statement, we believe As mentioned in 'Our people' section on page 17 some airlines operating at as low as 1% of normal flows. The Group’s strategic plan has considered that Datalex is in a strong position with our and 18, prior to COVID-19, and as a key measure capacity during the year. Consequently, bookings a number of potential scenarios linked to the customers to help them navigate through the to retain and attract talent, a Remote Working have collapsed, with airlines retrenching and recovery of the airline industry post-COVID-19, challenges arising from COVID-19 as the industry Policy had already been implemented. We focusing on surviving this crisis. though there is widespread acknowledgment that begins its recovery. Our focus on meeting their established a COVID-19 Business Continuity Task it is impossible to accurately predict the outcome needs throughout 2020 has resulted in our best Force in February 2020 and were in a position Many airlines continue to require government at this point in time. The Board will continue Net Promoter Score demonstrating that the
to effectively implement remote working for all. Datalex or other third-party investment to support to monitor developments closely and to take relationships have improved over the year. We quickly mobilised all staff to work from home them at this time; most have furloughed large necessary actions. and cancelled all business travel. The task force numbers of staff and are engaged in significant Over and above managing the business through
provided: • restructuring. COVID-19 has been catastrophic the pandemic, we must continue to create value for the airline industry and we continue to work for our shareholders by being prepared for a Annual Report 2020 › Clear, consistent and personal messages Outlook in the context of COVID-19 with our customers to help and support them recovery. Importantly, our customer relationships for staff; through this difficult period. COVID-19 has brought an unprecedented level of have demonstrated remarkable resilience through › Practical support and guidance to aid working uncertainty to the aviation industry and airlines 2020 and in to 2021. We did not experience any from home including early identification and will face huge challenges going forward. The significant payment delays from our customers sourcing of equipment, test days to ensure Group continues to monitor performance against during 2020, an acknowledgment of the strength Business impact systems worked remotely, cyber security various stress test scenarios regarding the duration of our partnership and continued relevance of •
The Group announced on 12 March 2020 that training and ongoing technical support; of COVID-19 and the varying shapes of recovery. our products during this time. Datalex has been Strategic Report COVID-19 would have an adverse effect on Throughout the pandemic, the Group has able to react flexibly to customer needs and we › Mental and physical health prioritised and our business in 2020. One year after the crisis remained focused on conserving balance sheet have worked with our customers to seamlessly regular contact to support wellbeing. Social began, it remains difficult to accurately quantify strength and liquidity and has implemented a implement important updates and, in particular, initiatives were also implemented to combat the impact of COVID-19 on our financial and number of measures to ensure continued delivery changes in the areas of cancellations, refunds and isolation and boost morale; and trading performance. It is not known how long over the medium term. Tentative recovery signs tax policies. Post COVID-19, we will continue to the pandemic will persist and how long the › Flexibility and staff autonomy promoted and have been emerging from the industry recently. leverage this flexibility as our customers adapt to recovery phase will last. On 29 September training provided on managing teams remotely However, it remains difficult to make precise a rapidly changing environment. Organic growth 2020, the International Air Transport Association with support and guidance from HR. judgements about how consumers will react as from our existing customer base is the Group's ('IATA') released an updated global passenger we emerge from lockdown. Most airlines have foundation for growth. forecast stating that the recovery in traffic Our people adapted quickly to remote working indicated a desire to return to the air taking into has been slower than expected. For 2020, and dealing with the operational aspects of account the safety of all passengers. The majority The Board believes that the actions taken, and global passenger numbers declined by 65.9% COVID-19. Employees have indicated a strong will be ready to ramp up their capacity in line with the resilience of our revenue model, together compared to 2019 (In July 2020, IATA had appetite for a balanced remote/office approach market demand and government guidelines. with the support of our customers and ongoing forecast that the decline would be 55%). IATA post COVID-19. We will continue to offer hybrid flexibility from our business partners, mean predicts strong recovery in late 2021 and 2022 working arrangements subject to government It is likely to be some time before the full impact that the Group is positioned as best as it can be though global passenger traffic will not return to guidelines for those wishing to work from our becomes known. Preparing financial forecasts for to withstand the ongoing impact of COVID-19. pre-COVID-19 levels until 2024, a year later than offices and from home as appropriate and the business is challenging in this environment We are responding dynamically to the rapidly previously projected, and with Asia Pacific the are confident of maintaining a high level of as there are several different outcomes, both changing situation that COVID-19 has created. region expected to recover first. productivity and performance. Our IT structure positive and negative, which could arise as a We will continue with our current focused has supported remote working with minimal result of COVID-19. As part of the Directors’ management approach to protect the Company business disruption. We are using software such consideration of the appropriateness of adopting and its key stakeholders until the impact of as Microsoft Teams to communicate effectively the Going Concern basis in preparing the financial COVID-19 abates. Our priorities remain the health Actions taken within the Group and outside it. statements, a range of severe scenarios has been and safety of our staff, customer service, financial Upon the outbreak of COVID-19, immediate reviewed. The assumptions modelled are based discipline and business continuity. actions were taken by the Group including We have adopted all government and public on the estimated potential impact of COVID-19 a targeted restructuring programme, health authority guidelines in each of our markets. restrictions and regulations, along with our re-negotiating business partner arrangements, We have prepared our buildings for a return of proposed responses over the course of the next
24 25 We are seeing domestic travel in the US starting We are pleased with the progress we have to recover, while in Europe our customers made, while recognising that the programme of Financial and have been focused on managing their costs transformation will continue into 2021. During and being operationally ready for when air 2020, we appointed Mazars to provide internal travel traffic returns. audit services on an outsourced basis. We Operational have hired additional qualified financial In a year significantly impacted by COVID-19, accountants into the financial reporting team the Group made a loss after tax for the year of and completed the implementation of a modern US$6.5m. While it compares favourably with fully integrated accounting system (the Group Review 2019 the outturn for the year is not reflective of ERP), which we have internally called Jet. Jet our ambition for the Group. As outlined on pages enables a number of systematic approval 24 and 25 we believe that we are well positioned processes and enhanced management reporting to exit this period of fundamental change. capabilities. During 2021 we intend to leverage the ERP system to further reduce our month During 2020, Datalex agreed with Tireragh end close time and significantly improve the Limited an extension to the Tireragh credit quality and management insight available to Datalex began 2020 confident that the reset and restructuring work facility to November 2021 and the provision by operate the business. completed in 2019 would position the Group well for growth in the Tireragh of an additional debt facility of up to year. In March 2020, the Global COVID-19 pandemic presented the €10 million. These arrangements were approved The Group completed a comprehensive, by shareholders in September 2020. The Group externally supported review of its Financial greatest challenge ever faced by the travel industry. The Group took has not needed to draw down additional funds Position and Prospects Procedures ("FPPP") immediate and swift action to respond to the pandemic and as a from the increased credit facility with Tireragh during the first half of 2020, as part of the result we are pleased to be able to report increased foreign currency Limited during 2020 and, at 31 December 2020 restoration of its listing on Euronext Dublin. As adjusted EBITDA compared to 2019. and at the date of this report, the Group had €10 part of that process, the Board has confirmed Datalex million of undrawn facilities available to support to Euronext Dublin that it has established its working capital requirements. The amounts procedures which provide a reasonable basis
drawn down on the loan facility accrue interest for it to make proper judgments on an ongoing •
Our airline customers have seen significant processes resulted in no material change in our at a rate of 10% per annum. We recognise the basis as to the financial position and prospects Annual Report 2020 decreases in booking transactions as a result of closing cash balance. Datalex has maintained continued support of Mr. Dermot Desmond and of the Group. The review involved an extensive government travel restrictions, with a collapse strong relationships with our customers during Tireragh Limited for the Group. independent external review of the controls in passenger numbers carried. This has severely 2020. We continue to receive cash payments operating across the Group, compared to best impacted on our ability to generate revenues. from our customers despite the significant The Board has identified a risk to the Going practice. The FPPP work was supported by PwC Excluding the impact of one-off revenues in challenges that they face. This is a testament to Concern assumption for the Group relating to and reviewed by our listing sponsor, Goodbody. 2019 (Note 18), our 2020 revenues decreased the importance that they place on our products the repayment of the Tireragh Limited loan •
by US$11.4m when compared to 2019. and services to their future growth and recovery. facility. The loan facility is due to be repaid At this point, I would like to recognise and on 1 November 2021 but, subsequent to the thank the efforts of the Finance team for their Strategic Report In response to this reduction in revenues, Datalex The Group incurred material exceptional costs year-end, Tireragh Limited has confirmed its commitment and professionalism in a very took action to mitigate the lost revenues by in 2020. These costs were driven by 3 major willingness to provide an extension of the challenging year. We have continued to make curtailing expenditure, restructuring its cost base, factors: repayment date to September 2022 on the meaningful transformative progress, while also and ensuring active management of cashflows same terms as the existing credit facility. Further supporting the vital day-to-day needs of the from operations. These actions included targeted i) The restructuring programme that discussion on the repayment of the Tireragh business in a constantly changing environment. reduction in our entire cost base, supplementing commenced in 2019 was extended as part Limited loan facility has been included in the the significant savings already made in 2019. of the Groups reaction to COVID-19 and Going Concern section on pages 38 and 39. The Group’s consolidated financial statements Measures included reduction in discretionary resulted in further redundancy costs; and the Company’s financial statements have pay, reduction in the use of external contractors, ii) The Group incurred costs in relation to the The Company intends to strengthen its financial been prepared on a going concern basis, which application of a four-day week for part of the lifting of the suspension of trading in the position by completing a capital raise during assumes that the Group and Company will be financial year and a comprehensive review of Company's shares on Euronext Dublin; and 2021, market and other conditions permitting. able to continue in operational existence for the entire cost base. Our total operating costs iii) The Group incurred further legal costs in the foreseeable future. The Group has prepared (US$29.3m) reduced by US$18.4m from 2019 relation to the recovery of balances owed by In my previous report for 2019, we emphasised a strategic plan and performed a detailed and US$25.6m from 2018. Lufthansa and Swiss Airlines. the importance the Board has placed on going concern assessment for a period of strengthening the Finance Function and the one year from the date of the approval of the Further details on these measures have been The overall travel industry environment remains Internal Control environment. consolidated financial statements. set out in the COVID-19 impact section of our uncertain, there are changing regulatory Annual Report on pages 24 and 25. requirements associated with air travel, The Board is of the opinion that Datalex is a including advance testing, quarantine and viable business and is a market leader. As a result of the early actions taken, we were documentation requirements. In China, we saw able to increase our foreign currency adjusted some resilience and increase in activity in the EBITDA from US$0.7m in 2019 to US$3.4m in second half of the year. 2020. Close control of our cash management
26 27 Key financial results Revenue Whilst labour (staff and contractor) costs (after exceptional items) continue to account for the Platform revenue 2020 2019 majority of the Group’s cost base, the Group as Platform revenue of US$16.6m was down As Reported As Reported noted above has continued to reduce these costs year-on-year by US$10.2m or 38%. There are US$'M US$'M during 2020. This large decrease was the result two primary drivers of the decreased revenue of the cost restructuring programme that was (1) during 2020. Firstly, there was US$1.7m of Platform revenue 16.6 26.8 undertaken in 2019 and the management actions one-off revenue, relating to the sale of legacy taken in 2020, including the implementation of Services revenue 10.1 16.4 historic code that was no longer supported, a four-day week and additional reductions in the recognised in Platform revenues in the prior labour base. The Group has further reduced its Consultancy revenue 1.2 1.7 year that were not replicated in the current year. costs to a more sustainable level during 2020. The remaining reduction of US$8.5m is directly Other revenue 0.2 0.2 attributable to the lower airline flight bookings We recorded a foreign currency adjusted during 2020 as a result of COVID-19. Total revenue 28.1 45.1 EBITDA of US$3.4m in 2020 which compares to US$0.7m in 2019. This was due to the actions Services revenue taken in 2019 and further early intervention The overall services revenue of US$10.1m Operating costs (2) 29.3 47.8 and active management of our cost base decreased from US$16.4m or 38% since 2019. during 2020. Exceptional costs (including income tax) 2.8 8.3 There are two primary drivers of reduced services revenue in 2020. Firstly, there was Despite the challenges of 2020 we continued Adjusted EBITDA (3) 1.4 0.5 US$4.0million of one-off services revenue to invest in production innovation and the recognised in 2019, relating to the recognition development of new solutions for use by Foreign exchange loss 2.0 0.2 of non-refundable advanced payments on a our customers. We capitalised US$1.1m of (4) terminated contract, that was not replicated in
Foreign currency adjusted EBITDA basic 3.4 0.7 costs associated with product development. Datalex 2020. The remaining reduction of US$2.3m This compares to a capitalisation of US$0.1m in is attributable to some customers pausing or Loss after tax (6.5) (12.1) 2019. As outlined in the Chairman’s report, we feel reprioritising a small number of services projects
that these product developments will facilitate • in 2020 as their business priorities changed with
greater revenue generation opportunities for our Annual Report 2020 the onset of COVID-19. Cash and cash equivalents 3.0 3.1 airline customers. Our 2020 development spend largely represented a continuation from 2019 Cash generated from/(used in) in operations 3.5 (15.0) activity and reflected core product development Operating costs work. The spend incurred was across our five key Net working capital (5) (23.0) (16.5) product areas Datalex Direct, Datalex Dynamic, Our operating costs (before exceptional items) Datalex Merchandiser, Datalex NDC and The decreased by US$18.4m to US$29.3m (2019: •
Digital Configurator, and further supports our
US$47.8m) as per Note 19. The main driver of Strategic Report EPS – basic (cent) (8.1) (15.1) project roadmap. the decrease was a significant reduction in labour costs. The employee benefit expense (before EPS – diluted (cent) (8.1) (15.1) Exceptional costs have decreased from exceptional items) also decreased by US$4.7m US$8.3m in 2019 to US$2.8m in 2020. The to US$14.6m (2019: US$18.9m) as a result of high exceptional costs in 2019 were mainly actions taken to rebase the Groups costs in (1) Platform revenue is earned from the use of the Group’s Digital Products by our customers. See also Note 18. due to costs incurred relating to the events of 2020. Further reductions have been achieved in (2) Operating costs are as stated in Note 19. Amounts are stated before separately disclosed exceptional items. 2018, including Professional fees of US$1.6m, consultants and contractor costs during 2020, (3) Adjusted EBITDA (Note 18) is defined as earnings from operations before (i) interest income and interest expense, severance costs of US$2.6m, provisions for with a reduction (before exceptional items) of (ii) tax expense, (iii) depreciation and amortisation expense, (iv) share-based payments cost and (v) exceptional items regulatory costs US$1m, provisions in relation US$8.8m in 2020 to US$6.0m. In addition, (see Note 23). to Lufthansa and Swiss litigation of US$2.9m professional fees decreased by US$0.3m to (4) Foreign currency adjusted EBITDA (Note 18) is a new KPI introduced in 2020. Our functional currency is US$. As and impairment of contract assets of US$0.2m. US$1.2m (2019: US$1.5m), reduction in deferred explained in our debt financing note (Note 14), in 2019 the Company received €11.3m debt financing from Tireragh A detailed explanation of the US$2.8m of commission amortisation costs decreased by Limited. This loan funding was denominated in Euro as a result the adjusted EBITDA (Note 18) results of the group exceptional items in 2020 is set out below US$0.5m to US$0.1m (2019:US$0.6m) and are subject to movements beyond managements control arising from movements in foreign exchange rates. The (see also Note 23): foreign exchange input into the foreign currency adjusted EBITDA (Note 18) KPI is arrived at by combining the foreign travel costs decreased by US$0.5m to US$0.2m exchange movements per Note 18 and the additional foreign exchange movements on those Euro denominated (2019: US$0.7m). These operating cost decreases › Professional fees in relation to investigations, Trade Debtor balances fully provided at the end of 2019 and reported as an exceptional item per Note 23. were further supported by a significant movement business transformation programme and (5) Net working capital is calculated as current assets less current liabilities. The current assets and current liabilities in net impairment losses on financial and contract litigation procedures (US$1.8m) – Further subtotals can be found in the consolidated statement of financial position on page 110. Narrative reconciling assets (before exceptional items) of US$3.5m in professional fees were incurred during 2020 the movement in the net working capital is detailed in the “Cash and Financial Position at 31 December 2020” the year (moving from a debit balance in 2019 of as the business seeks to return to a normal commentary on page 30. US$1.9m to a credit balance in 2020 of US$1.7m). operating model. These costs included This movement is the result of cash receipts from amounts associated with the FPPP, relisting, the HNA Group during 2020 which were fully a capital raise and further costs incurred provided for at the end of 2019. responding to the events of 2018.
28 29 › Severance pay costs (US$0.5m) - Charges in Reconciliation of loss after tax to adjusted EBITDA and Foreign currency adjusted EBITDA Key performance indicators relation to a voluntary severance programme, carried out in 2020 as part of the Group's Foreign currency adjusted EBITDA is a new KPI 2020 2019 response to COVID-19. The Group identified introduced in 2020. Our functional currency is US$'000 US$'000 14 roles across the Group which were included US$. As explained in our debt financing note in the severance programme. As of the year (Note 14), in 2019 the Company received €11.3m Loss after tax (6,477) (12,061) end date all identified roles have departed debt financing from Tireragh Limited. This loan Adjustments: with US$0.5m being paid out during 2020. funding was denominated in Euro as a result the adjusted EBITDA results of the group are subject › Provision for costs associated with complying Tax (credit)/charge (59) 66 to movements beyond managements control with regulatory investigations (US$0.03m) – In arising from movements in foreign exchange Interest expense 2,897 1,503 prior year the Group recognised a provision rates. The foreign exchange input into the foreign which relates to legal and compliance costs currency adjusted EBITDA KPI is arrived at by Interest income - (4) of ongoing regulatory investigations and the combining the foreign exchange movements necessary requirements to obtain an end to Depreciation and amortisation expense 2,142 2,615 per Note 18 and the additional foreign exchange the suspension order on the trading of the movements on those Euro denominated Trade Share-based payment cost 67 83 Company's shares on the Euronext Dublin Debtor balances full provided at the end of 2019 exchange. The charges in the current year and reported as an exceptional item per Note 23. Total adjustments before exceptional items 5,047 4,263 relate to the unwinding of the discount rate on this provision. Exceptional costs (before income tax) (see Note 23) 2,772 8,293 › Provision for non-recovery of customer Cash and financial position at Total adjustments after exceptional items 7,819 12,556 receivable balances, which are subject to 31 December 2020 litigation (US$0.2m) - On 4 September Adjusted EBITDA 1,342 495
2019, the Group received a termination Our cash and short-term investments at 31 Datalex notice from Lufthansa AG (“Lufthansa”). December 2020 totalled US$3.0 m (2019: Foreign exchange loss 2,013 198 The Group strongly disputes the legality of US$3.1m). Cash generated from operations Foreign currency adjusted EBITDA 3,355 693
this notice and has commenced proceedings was US$3.5m (2019 Cash used in operations: •
against Lufthansa in Landgericht Frankfurt US$15.0 m), which is further explained in Note Annual Report 2020 (Regional Court of Frankfurt) in order to 26 to the consolidated financial statements. achieve resolution of the matter and to Throughout the year, we maintained very recover amounts due and general business close control over our cash management. We damages. On 5 March 2020, the Group conducted regular updates of cash forecasting issued a notice of dispute and invocation and ensured very close links between our finance of a contractual arbitration clause to recover and customer facing teams. •
amounts owed to the Group by Deutsche Lufthansa AG in connection with services Net current liabilities at 31 December 2020 Strategic Report provided to its subsidiary, Swiss International were US$23.0m (2019: US$16.5m) which Airlines Limited. At 31 December 2020, represents a year-on-year decrease of US$6.5m the invoiced balances due by Lufthansa in working capital. This increase in the net current and its subsidiary company, Swiss liabilities is primarily driven by the reduction International Airlines Limited, amounted to in contract assets at the year end date. Strong US$2.9 million. The additional balance in management of the working capital resulted 2020 relates to contractual amounts due in minor movements in the trade debtors and from Swiss Airlines invoiced during the year. trade creditors balances year on year whilst maintaining our year end cash balances. › Impairment of & closure of Atlanta office (US$0.3m) - Following a review of the Group's real estate the Atlanta office was deemed to be surplus to the needs of the Group. Subsequent to the review, the Group entered into a sub-lease arrangement for the entire building. The sub-lease rental payments are less than those on the head lease with the landlord, and as such the IFRS 16 Right-of- use asset recorded in the Group Balance Sheet was deemed to be impaired. The Group recorded as a charge in the current year an impairment on the discount cash flows associated with the sub-lease arrangement along with certain costs incurred to prepare the building for sub-lease.
30 31 by the European Securities and Markets Subsequent events Conclusion Authority and the Central Bank of Ireland) and On 31 March 2021, Datalex Ireland gave notice the time limits within which budget projections 2020 has been a challenging year for the Group. of termination to the landlord on the lease on and other periodic reporting obligations were The corrective actions that the management our global headquarters in Block U, Eastpoint, provided during the year. Further, Tireragh team has undertaken with the support of the Dublin, D03 H704, Ireland. This notice issued Limited provided a waiver extending the time Board are continuing to show benefits. The to the landlord is part of the Group’s intention to deliver specified security documents in restructuring of the cost base has resulted in a to review the existing office requirements to connection with a subsidiary of the Group and leaner and more agile Datalex, as can be seen support the continued operations of the Group provided a waiver permitting the Group flexibility in our response to COVID-19. The work that going forward. to negotiate extended payment terms with key has been undertaken to improve the control suppliers in connection with COVID-19 measures environment, along with the implementation of On 1 of April 2021, Tireragh Limited notified the taken by the Group. the new Group ERP system will result in richer, Board of Directors, by way of letter, confirming more in-depth information being available to that it would be willing to extend the Termination On 1 April 2021, Tireragh indicated by way of a management and the Board. This will allow for date of the loan facility to 30 September 2022 letter to the Board of its willingness to extend faster and better decision making as Datalex on the basis that all other provisions of the loan the repayment date of the loan facility to the partners with customers to chart a route to facility agreement remain in place. 30 September 2022. The Board is grateful for success and return to growth of the airline the continued support of Tireragh Limited. The industry. Datalex is on a journey of continual The Directors deem the above subsequent Board is keeping the issue of funding under improvement as we strive to develop a world events to be non-adjusting events. There have ongoing review and as signalled in the 2019 class organisation for all our stakeholders. been no other subsequent events that impact on Annual Report, and elsewhere in this document, the 2020 consolidated financial statements up intends to raise additional capital to facilitate the to the date of this report. repayment of the loan facilities. Datalex
Financing completed in 2020 and further Dividends • financing requirements
The Board is not recommending that a dividend Annual Report 2020 During 2020 the Group obtained shareholder be paid in respect of 2020 (2019: US$nil). approval for the extension of the repayment date of the loan facility with Tireragh Limited (a company ultimately beneficially owned by Mr. Taxation Dermot Desmond, also a substantial ultimate beneficial shareholder in the Group via IIU The effective rate of tax in the Group remains •
Nominees Limited) to 1 November 2021. As part at zero due to the losses incurred in 2020 and of this facility, the Group currently has access 2019. The Group also has historic tax losses. Strategic Report to an undrawn facility in the amount of €10m. Due to the uncertainties of whether there will There have been no additional draw downs on be sufficient taxable profits in the future, the the Tireragh loan facility since December 2019 Directors have decided that the recognition (please see Note 14 & Note 31). The Company of a deferred income tax asset for the losses has achieved the relevant financial covenant carried forward is not yet appropriate, and no targets to date. During 2020, Tireragh Limited deferred tax asset has been recognised at 31 waived obligations to provide certain financial December 2020. information within specified time limits, including delivery of the Group's 2019 annual report within 120 days of year end (as permitted
32 33 Risk Report
The Board of Directors (“Board”) and the Executive Leadership Team The following structure is in place within the Group (“ELT”) are responsible for ensuring that the Group (including Datalex plc) Function Responsibilities has effective systems of internal controls and risk management in place to Board of Directors Overall responsibility for determining the nature and extent of the significant identify, measure, mitigate and monitor significant risks that may impact the risks it is willing to take in achieving the Group’s strategic objectives. achievement of the Group’s strategic objectives. This includes setting the Audit & Risk Risk oversight with responsibility for approving risk management policy and Group’s risk appetite. The Board has delegated the monitoring of the internal Committee procedures, the risk register and risk appetite prior to their submission to the controls and risk management systems to the Audit & Risk Committee. Board. Datalex
Executive Leadership Risk monitoring within the business with responsibility for ensuring policies •
Team are implemented throughout the Group.
The intention of the Board is that the Group’s Our Risk Management Framework Annual Report 2020 risk management systems should ensure Chief Risk Officer Executive with specific responsibility for the operation, development and that business risks, whether to the integrity reporting on of the Group’s risk management framework. of key processes, systems and data, or the Heads of Department/ Risk owners within the business with responsibility for ensuring risk successful execution of our growth strategy, Risk Risk Owners management is embedded in day-to-day activities, taking a proactive are fully incorporated into decision making Identification and performance reporting. approach to risk identification and mitigation. • All Staff Responsible for identifying and managing risks and promptly reporting any Strategic Report Risk Risk exceptions, near miss, risk incidents, concerns and/or control issues to the Reporting Assessment relevant Head of Department or Chief Risk Officer. Risk Risk Management in Action Emerging Risks
Risk Risk Risk management is led from the top of an In addition to principal risks and uncertainties, Monitoring Mitigation organisation and operated based on clearly the Board assesses and monitors emerging risks defined structures and responsibilities. It is which, while not currently having a significant embedded in the normal working routines impact on the business, have the potential to and activities of the organisation, with all staff adversely impact the business in the future. The conscious of the relevance of risk to achieving emerging risks identified and discussed with their objectives. management and the Audit and Risk Committee as part of the risk management process included In 2021, the Board conducted a thorough review the availability of and competition for high of the Group’s risk management processes. This quality personnel in the markets in which we included adoption of a new Risk Management operate and the execution risk of a rapid increase Policy, a robust assessment of the principal risks in customer activity as airlines recover from the facing the business, consideration of the Group’s COVID-19 crisis and normalise their operations. risk appetite statement and the appointment of These emerging risks will be subject to detailed a Chief Risk Officer for the Group. and continuous review and assessment in order to identify any changes to the risk profile.
34 35 Principal Risks and Uncertainties Our Strategic Pillars Risk Potential Impact Mitigation Strategic Pillar The Group maintains a risk register, which records identified risks across Delivery, Competition Increased competitor activity In 2020, the Group implemented a Customer at the core Product Performance, Customer Satisfaction, could adversely impact the new strategic plan focused on achieving Organisation Development, Financial, Cyber Risk Trend Group’s market share and its accelerated and sustainable growth. Execution Security and Business Continuity, and Business Product first & future proofed platform ability to win new customers. of this plan involves: Growth. Each risk is measured in terms of The Group must continue › Retention of existing customers and financial impact and probability. Mitigating to invest in its products People targeting new customer acquisition. actions are listed which inform the residual risk and technology to ensure it rating. The risk register is reviewed and updated remains competitive. › Cementing our product first approach and periodically and was most recently reviewed by Operational excellence investing in areas that will enable airlines to the ELT, the Audit & Risk Committee and the grow as digital retailers. Board in April 2021. The main risk categories Commercial strength › Increasing our product management that the Board considered are the following: interactions with customers to ensure they derive maximum value from the Datalex product offering. Risk Potential Impact Mitigation Strategic Pillar Ability to The Group’s ability to The Group has implemented a new implement implement new customer organisation structure and added expertise COVID-19 and COVID-19 has had a significant During 2020, we provided unparalleled new customer wins is dependent on in key areas. The Group engages in regular its impact on adverse impact on the aviation support to our customers in a time wins having appropriately skilled resource planning meetings with delivery our customers industry and there remains of crisis enabling them to quickly employees and business partners where new opportunities for growth
uncertainty as to when the respond to the changing needs of their Risk Trend partners available to meet are considered. Datalex Risk Trend industry will recover. This leads customers. deliverables in a timely manner to the risk that airlines could which might otherwise result in
fail in the near future due to The Group has developed a plan delays or increased costs. •
the travel restrictions imposed assessing a number of scenarios that Annual Report 2020 by governments throughout ensures the Group’s continuance. The Inadequate Inadequate management The Group has significantly improved its the world. There is also a risk plan has been developed to support a Management of the development and project management and financial planning that potential new customers post COVID-19 environment return to of New implementation of the Group’s systems overseen by experienced and may be unwilling to contract growth. Projects products could adversely qualified commercial, finance, legal and in the current environment. affect expected revenue and project management personnel. The Group has increased the frequency Risk Trend profitability margin. •
of cashflow and financial reporting to the In 2020 the Group implemented a new ERP
ELT and the Board to facilitate accurate system facilitating rigorous financial planning Strategic Report business continuity planning during this and continuous monitoring of budgeted unprecedented period. In addition, during versus actual costings which are monitored by 2020, the Group secured an extension the ELT and Board on a regular basis. to its credit facility with Tireragh Limited Business Any failure of the Group’s IT The Group has extended its business and an additional facility of €10 million to interruption or security systems, or those continuity and disaster recovery plans which ensure the Group has adequate resources and IT upon which it relies, could are tested on a regular basis and continues to and liquidity to support its operations Systems result in significant business invest in infrastructure in these areas. as it recovers from the impact of the Security and disruption, reputational COVID-19 pandemic and as it prepares Compliance damage, or the unauthorised Our COVID-19 response has resulted in for a capital raise in 2021. access to sensitive financial, the Group enabling all employees to work remotely through the use of appropriate Financing If the Group is unable to In July 2020, trading in the Company’s Risk Trend personal and commercial modern technology. Risk attract appropriate finance, shares was restored on Euronext Dublin information. this would impact our ability establishing greater financial stability for Foreign Risk Trend to continue as a going the Company. Further, during 2020, the There are inherent risks The level of risk has increased principally Exchange concern. This could also Group secured an extension to its credit associated with fluctuations in due to the impact of the global COVID-19 Rates result in the Group breaching facility with Tireragh Limited and an foreign exchange rates which pandemic on global capital markets. financial covenants on its loan additional facility of €10 million. could impact the Group’s Risk Trend facility with Tireragh Limited. financial results. The Group intends to raise capital in 2021 to In 2021, the Group intends to raise repay outstanding debt which will mitigate The Group’s ability to invest capital to repay outstanding debt and foreign exchange risk on our outstanding debt and grow is dependent on strengthen the Company’s balance and facilitate improved treasury and foreign having the required financial sheet. exchange risk management processes. resources. The events of the past two years have caused a significant reduction in the Group’s financial resources.
36 37 The significant reduction in costs incurred in the › The assumed loss of a small number of financial year has mitigated some of the impact customers; Going of the loss of revenues from our customers. › The removal of further anticipated cash collections from HNA Group subsidiaries and In evaluating our cash flow needs for the next related companies; and Concern twelve months, the Directors have taken into account our commitments to customers in both › Additional cost saving measures across the deployment and ongoing service commitments. business being implemented, impacting headcount, contractors and operating costs. The UK Corporate Governance Code requires the Board to assess and report on the prospects Based on the forecasts prepared by management, of the Group and whether the business is a and the additional sensitivity analysis performed, going concern. In considering this requirement, both of which have been approved by the Board, the Directors have taken into account the following drawdown of the available €10m facility, The Group and Parent Company financial statements have been prepared Group’s (including Datalex plc) forecast cash no cash shortfalls are anticipated in the 12 month flows, liquidity, borrowing facilities and related period to 30 April 2022. on the going concern basis, which assumes that the Group (including Datalex covenant requirements and the expected plc) will be able to continue in operational existence for the foreseeable operational activities of the Group. The Group is currently required to repay the future. The time period that the Board has considered in evaluating the Tireragh Limited loan facility - which at the year appropriateness of the going concern basis in preparing the Group and To prepare financial forecasts for the business is end date consisted of a principal of €11.3m, challenging in this environment, as there are a accrued interest of €1.3m and facility arrangement Parent Company financial statements for 2020 is a period of twelve months number of different outcomes, both positive and fees of €2.7m on 1 November 2021. The Group’s from the date of approval of these financial statements. negative which could arise as a result of COVID-19. current forecasts indicate that there will not be
The Directors have prepared its 12 month future sufficient resources to repay the loan facility as it Datalex forecast to take into account the potential impacts falls due, and additional funding will be required that COVID-19 could have on the Group, such as: by the Group in order to repay the amount owing. The Group incurred a loss of US$6.5m in 2020 › Obtained shareholder approval for the extension
However, subsequent to the year-end, the Board • (2019: US$12.1m). At 31 December 2020, of the repayment date of the loan facility
› Slow recovery of transaction volumes as the has received from Tireragh Limited, confirmation Annual Report 2020 the Group had net liabilities of US$23.7m with Tireragh Limited (a company ultimately Group emerges from COVID-19. The Group of its willingness to extend the facility repayment (2019: US$17.1m) and net current liabilities of beneficially owned by Mr. Dermot Desmond, expects transaction volumes to be 56% of date to 30 September 2022. This extension, should US$23.0m (2019: US$16.5m). The total decrease also a substantial shareholder in the Group via 2019 levels in H1 2021, improving to 68% in it be required, would be subject to independent in cash was US$0.03m (2019: decrease of IIU Nominees Limited) to 1 November 2021. As H2 2021 and 74% in H1 2022; shareholder approval as a related party transaction US$5.3m). part of this facility, the Group currently has access under Euronext Dublin Listing Rules. to an undrawn facility in the amount of €10m. › A material reduction in the assumed cash The Group and Parent Company continues to There have been no additional draw downs on collected from the HNA Group subsidiaries •
During 2021, the Company intends to raise
operate in a competitive environment which has the Tireragh loan facility since December 2019. and related companies, whom have been Strategic Report sufficient capital, net of expenses, for the been further impacted by the global COVID-19 The Company has achieved the relevant financial impacted by the HNA Group restructuring repayment of the loan facility, including related pandemic. COVID-19 has had a significant covenant targets to date. During 2020, Tireragh process in China; interest charges and arrangement fees, and the adverse impact on the aviation industry to date Limited waived obligations to provide certain › Except for customers whom have indicated funding of the Group's working capital needs. The and there remains uncertainty as to when the financial information within specified time limits, their intention to migrate away from the extension of the repayment date on the loan facility industry will recover from it. This leads to the risk including delivery of the Group's 2019 annual Group over the next 12 months, the Group will will provide the Group with the capability to choose that airlines could fail in the near future due to report within 120 days of year end (as permitted retain all customers; the most optimal time and structure to raise such the travel restrictions imposed by governments by the European Securities and Markets capital. Capital fundraising remains the preferred throughout the world. This gives rise to material Authority and the Central Bank of Ireland) and › The extended delay to a large project source of funding for the Group. Mr. Desmond has uncertainties for the business that may cast the time limits within which budget projections implementation; informed the Group that he will support the capital significant doubt on the Group and Parent and other periodic reporting obligations were › The continued delay to new win opportunities fundraising and will procure the participation of IIU Company's ability to continue as a going concern. provided during the year. Further, Tireragh due to the impact of COVID-19 on airlines; Nominees Limited, the Groups largest shareholder, Limited provided a waiver extending the time for at least its pro rata entitlement. The actions taken by the Group and Parent to deliver specified security documents in › Significant reduction across all operating costs Company in 2019 and 2020 have assisted connection with a subsidiary of the Group and of the business; and The Directors recognise that, there are material in navigating the challenges associated with provided a waiver permitting the Group flexibility › Continued ability to negotiate extended uncertainties which may cast significant doubt as to COVID-19. Over the course of 2020, the Group to negotiate extended payment terms with key payment terms with some suppliers. the Group and Parent Company's ability to continue and Parent Company: suppliers in connection with COVID-19 measures as a going concern. Nevertheless, on the basis of taken by the Group. (Refer to Note 14 and 31). › Secured the lifting of the suspension of In their sensitivity analysis, the Directors made Tireragh Limited’s intention to continue to support trading of the Company shares on Euronext › Took early & decisive action by reducing further assumptions to reflect COVID-19 having the Group (including Datalex plc), including the Dublin. This facilitates greater liquidity in operating expenses and improving cash flows. a more adverse impact on the global economy, availability of the undrawn loan facilities as detailed the shares and allows the Group and Parent These actions include a targeted redundancy the aviation industry & Datalex, together with above, the Directors have a reasonable expectation Company to raise capital with the market programme, re-negotiating business partner certain actions the Group would take in these that the Group and Parent Company will be able to assist with the funding requirements of arrangements, eliminating discretionary circumstances, such as: to successfully navigate the present uncertainties the Group and Parent Company. The Board spending, freezing recruitment, implementing and as a result, are satisfied that the financial are assessing the current market conditions voluntary leave options and temporary reduced › Slower recovery in transaction volumes and statements be prepared on a going concern basis. and waiting for the appropriate time to raise working hours for all employees. post go-live services versus forecast; additional capital. › Continued to successfully negotiate extended payment terms with key suppliers. 38 39 During 2021, the Company intends to raise The financial viability is dependent on the sufficient capital, net of expenses, for the satisfactory outcome of the assumptions Financial Viability repayment of the loan facility, including related underlying the going concern assertion as interest charges and arrangement fees, and the described on pages 38 and 39. The Directors funding of the Group’s working capital needs until are satisfied that appropriate disclosures have Statement at least December 2023. The extension of the been included on the basis on which the Viability repayment date on the loan facility will provide Statement is supported. the Group with the capability to choose the most optimal time and structure to raise such capital. Whilst the Board acknowledges that the A capital raise remains the preferred source of potential severity of the risks assessed may funding for the Group. change, based on their assessment of viability, the Board has a reasonable expectation that Raising sufficient capital remains subject to the Group will be able to continue in operation significant third party, internal and external risks. and meet its liabilities as they fall due over the In accordance with provision 31 of the 2018 UK Corporate Governance In particular, the market uncertainty resulting three-year period to 31 December 2023. from COVID-19 is a significant risk to the capital Code, the Board of Directors (the “Board” or the “Directors”) have assessed raising. In addition, a capital raise, depending the viability of the Group and its ability to continue to operate and meet on its structure, may require the convening its liabilities as they fall due for the remainder of 2021 and through to of an Extraordinary General Meeting at which December 2023. shareholder approval of the arrangements would be sought. There is a risk that one or more of these steps may not be completed, or may not be completed in time, and any capital raise may
A three-year period has been deemed an In performing the assessment of the Group’s not successfully complete. Datalex appropriate time frame for the Directors’ financial viability, the Board assessed the assessment as it is in line with the strategic resilience of the Group, its current position and
plan presented to and approved by the Board. the principal risks that it faces. Each of these •
This plan takes into account the strategy of the principal risks, along with their potential impact Annual Report 2020 Group, the Board’s risk appetite, the market and and mitigating factors are conveyed in the competitive landscape and assesses the impact “Principal Risk and Uncertainties” section on of COVID-19 on our Group and the wider page 36 of the Annual Report. This assessment aviation industry. has considered the potential impacts of these risks on the business model, future performance, As the impact of COVID-19 on the airline solvency and liquidity over the period. •
industry begins to stabilise, the Group expects to win new customers which will drive increased As set out in some detail in the Going Concern Strategic Report licence and services revenues going forward Statement above and within Note 2.5 to the and will help to grow foreign currency adjusted consolidated financial statements, preparing EBITDA each year. The three-year strategic plan a financial plan is challenging as there are a makes certain assumptions, including: number of possible outcomes. The Group relies on a small number of significant customers. The › Airline booking transactions will continue to loss of any customer could result in a significant improve throughout the period 2021 to 2023; impact on the Group’s financial position, and the loss of a number of customers would threaten › The Group will win new customers in both the Group’s viability. 2022 and 2023; › Except for customers whom have indicated In the Going Concern Statement on pages 38 their intention to migrate away from the and 39, it is noted that Tireragh Limited has Group over the next 12 months, the Group will signalled its intent to provide an extension of the retain all customers; loan facility repayment date on the loan facility to 30 September 2022 with no change to the › Continued active management of the cost pre-existing loan terms and conditions. This will control levers; and result in a significant debt balance of a principal › Sufficient product investment and capital of €11.3m, accrued interest of €1.3m, and facility expenditure to support the product strategy arrangement fees of €2.7m becoming repayable and growth. on 30 September 2022.
40 41 Directors' Report
42 43 Board of Directors
David Sean John Christine Peter Mike Niall Hargaden Corkery Bateson Ourmières-Widener Lennon McGearty O’Sullivan Chairman Chief Executive Non-Executive Non-Executive Director Non-Executive Lead Independent Chief Financial
Officer Director Director for Workforce Director Director Officer Datalex Engagement
Age: 64 Age: 63 Age: 57 Age: 56 Age: 64 Age: 47 Age: 56 •
Nationality: Irish Nationality: Irish Nationality: Irish Nationality: French & British Nationality: Irish Nationality: Irish Nationality: Irish Annual Report 2020 Appointed to Board: Appointed to Board: Appointed to Board: Appointed to Board: Appointed to Board: Appointed to Board: Appointed to Board: 7 November 2019 12 April 2019 20 November 2006 3 October 2019 4 August 2000(1) 9 December 2019 4 June 2019 Independent: N/A Independent: No Independent: No Independent: Yes Independent: No Independent: Yes Independent: No Independent on appointment Committee Memberships: Committee Memberships: Committee Memberships: Committee Memberships: Committee Memberships: Committee Memberships: Committee Memberships: None Remuneration, Nomination Audit & Risk, Nomination & Remuneration (Chair), Audit & Risk (Chair), None Audit & Risk, Remuneration & Governance (Chair) Governance Nomination & Governance Remuneration •
Skills and experience: Skills and experience: Skills and experience: Skills and experience: Skills and experience: Skills and experience: Skills and experience: Directors' Report David Hargaden is an Sean was appointed as John Bateson is the Managing Christine Ourmieres-Widener Peter Lennon brings a Mike McGearty is the Niall was appointed as experienced Board member Non-Executive Director Director of International is a highly respected Chief wealth of specialised legal former CEO of CarTrawler Chief Financial Officer and technology investor and Interim Chief Executive Investment and Underwriting, Executive Officer (CEO) and industry expertise. and a qualified Chartered and Director of Datalex and is the CEO of Unity Officer of Datalex in April Unlimited Company ("IIU") and senior business leader A practicing lawyer and Management Accountant. plc in June 2019. Niall is an Technology Solutions, one of 2019 and was subsequently a related party. John is a in the Travel & Transport partner in the law firm Under his leadership, expert in financial strategy, Ireland’s leading IT Managed appointed as the permanent Business Studies graduate of Infrastructure sectors. She Ronan Daly Jermyn, he CarTrawler consistently transformation, accounting Services businesses. He is CEO in October 2019. Trinity College Dublin and, was CEO of Flybe until July specialises in litigation recorded high double- and compliance in high tech currently a Non-Executive He also served as Acting having qualified with KPMG, 2019, CEO of CityJet for five and advises many Irish digit year on year growth, industries. Prior to joining Director of ding.com, the Chairman between June and is a Fellow of the Institute years and has represented Air and English underwriters completed two major private Datalex, Niall was Finance international mobile top-up November 2019. Sean is a of Chartered Accountants France-KLM in Europe and in and airlines on liability equity investments as well as Director, EMEA at Google provider (2006 to present); highly experienced executive in Ireland. Prior to joining North America. Christine has claims matters. the acquisition of the online Inc. where he led accounting, a former Non-Executive having held multiple senior IIU, John spent six years significant board experience; assets of Holiday Autos from financial compliance and Chairman of Cartrawler.com, positions in the technology with the corporate finance Flybe Group, IATA, the Irish (1) Peter Lennon has been a Lastminute.com. Revenue controls for the EMEA region. Europe’s largest car rental site industry including Senior arm of NCB Group. Sports Council and today Director of the Datalex increased from €1m to more Niall has also led global Group since 1993, prior to (2004 to 2011); and a founder Vice President of Global The Met Office . Supporter the incorporation of Datalex than €200m annually. Prior finance operations and and former Non-Executive Operations at Dell Inc; of Diversity, she received the plc on 4 August 2000. to joining CarTrawler, Mike executed complex finance Chairman of myHome.ie, COO at Esat Telecom; inaugural IATA “Inspirational worked for eWare, a leading transformation projects for Ireland’s largest property Vice President of Global Role Model Award” during developer of CRM software technology PLCs such as portal (2001 to 2006). David Operations at AST / Samsung her term on the board which was acquired by the Pearson PLC, Vodafone PLC was Head of Corporate and Director of Pacific of governors of IATA. software accounting giant, and for corporations such Finance at BDO Ireland (2001 Operations at Apple Inc. Prior Passionate about Corporate SAGE plc. He also worked at as Oracle and Dell. Within to 2008) and Managing to joining Datalex, Sean was Sustainability and Climate Point Information Systems, Vodafone, Niall was CFO Partner at Hargaden Moor, Chairman and CEO at Actavo Change, she is a board a CRM provider, which for Eircell, Vodafone Ireland Chartered Accountants and he is a non-executive member of ZeroAvia, builder was acquired by S1. He is and Vodafone Portugal from 1992 to 2001. He director of a number of of the first practical zero- currently Chairman of the prior to leading Global has also been Chairman of private companies. emission aviation powertrain. Board at CitySwift, a high Finance Transformation and Point Information Systems growth technology platform Operations for all Vodafone and eWare, software for Bus companies. worldwide subsidiaries. development companies 44 specialising in CRM. 45 Executive
Leadership Sean Corkery Niall O’Sullivan Ryan Estes Andrei Grigoriev Avril Halpin Chief Executive Chief Financial VP Technology & Academy VP of Engineering Director of Human Resources Team Officer Officer Prior to joining Datalex, Ryan has Andrei has 20 years of diverse international Avril is an experienced HR Leader Refer to Board of Refer to Board of previously held advisory, senior experience in enterprise software and active member of the HR Tech Directors Section Directors Section management and board roles in IT start- development, product management and community. With wide experience in for biographical for biographical ups across Europe and the US. He brings organizational leadership. He joined Datalex the tech industry, she takes pride in information. information. with him over 18 years of experience from Aptiv where he was responsible for partnering with both employees and in the software and technology field, the global analytics platform. Before that Senior Leaders to provide the best HR including expertise in delivering large, Andrei was Vice-President of Engineering solutions possible within a fast-paced complex, and distributed e-commerce at SAP where he led the development of global environment. products and systems. industry-first AI/ML powered cloud analytics solutions for IoT & digital supply chain in co-innovation with leading brands in automotive and aerospace. Datalex •
Annual Report 2020
Alison Bell Emma Holohan Neil McLoughlin Conor O’Sullivan SVP Global Sales Marketing VP of Strategy & Transformation Group General Counsel & Chief Product Officer Company Secretary
Alison has held senior management roles in Emma has a wide range of experience Conor has extensive product •
technology and business consulting for the in strategy and transformation. Prior Neil brings significant legal and management and technology
airline, hospitality, and travel agency sectors, to joining Datalex, Emma worked in management experience having held leadership experience. Having Directors' Report including positions at Travelport, Mobile management consulting in KPMG a number of leadership roles in public joined Datalex as a graduate, he Travel Technologies and TravelClick. She has advising organisations across a range and private companies. Prior to joining was promoted to roles as Head of extensive experience in travel distribution, of industries including infrastructure, Datalex, Neil was Chief Operating Officer Architecture and Head of Engineering. digital marketing and enterprise software aviation, banking, and retail. Prior to this, at Malin Corporation plc and before He has intimate knowledge of our sales and was the founder of her own start- Emma worked in strategy and corporate that spent 10 years at Elan plc where he platform and product capabilities and up online business. development at Aesop. Emma is a fellow served as Associate General Counsel and has carved a role as a thought leader of Chartered Accountants Ireland and Assistant Secretary. in the airline industry. completed her training in Corporate Finance in Deloitte.
JJ Cahill Ellen Treacy VP Commercial Finance & Partner Management VP of Operations
JJ has significant finance & corporate finance Ellen has comprehensive operations experience from both public & private companies and software process management across a diverse range of industries. JJ spent 4 experience and prior to her current role, years in CRH plc, working in strategy, acquisitions was Director of Operations and Software & integration as well as his role as Financial Process Management at Datalex. She has Performance Director for the Asia-Pacific held senior software technical roles at division, based in Singapore. Immediately prior Fujitsu and at IONA Technologies. to joining Datalex, JJ was CFO for WaterWipes. 46 47 Corporate Corporate Governance Framework Board of Directors
The Board of Directors (“Board”) is responsible for the overall leadership and strategic direction of the Group and for overseeing Governance and guiding the management of the business. The Board’s responsibilities are active and not passive and include the responsibility for setting strategy, regularly evaluating management policies and the effectiveness with which management implements Report strategy and policies. The Board is also responsible for establishing a framework to assess and manage risk. Board Committees
The Board has three standing Committees which support the operation of the Board through their focus on specific areas of governance. Each Committee has formal terms of reference approved by the Board which set out how it should operate including its role, membership, authority and duties and is governed by a statement of general principles and rules of procedure adopted by the Board. These are available on request from the Company Secretary.
Audit & Risk Committee Remuneration Committee Nomination & Governance Committee
The role of the Audit & Risk Committee The primary role of the The role of the Nomination & is to assist the board in fulfilling its Remuneration Committee is to Governance Committee is to: oversight responsibilities by reviewing ensure that the remuneration
and monitoring: policy and practices of the › Ensure the board composition is Datalex Company are designed to regularly reviewed and refreshed. › The integrity of the financial and support strategy and promote › Oversee the development of
narrative statements and other •
long-term sustainable success, a diverse pipeline for orderly financial information provided reward fairly and responsibly, Annual Report 2020 succession to positions on the Board to shareholders. with a clear link to corporate and as regards senior executives, and individual performance, › The Company’s system of internal including the Company secretary Dear Shareholder, Despite the very challenging market conditions having regard to statutory and controls and risk management. (senior management). in 2020, the Company made significant progress regulatory requirements I am pleased to present our 2020 Corporate over the course of the year. The priority areas › The internal and external audit process › Monitoring the Company’s compliance Governance Report, which describes our of Board focus in 2020 are set out in my and auditors. The Report of the Remuneration with corporate governance best • governance structures and practices. Datalex introduction to this Annual Report on page Committee is set out on pages practice, legal, regulatory and
› The processes for compliance with Directors' Report has adopted the provisions of the 2018 UK 4. From a corporate governance perspective 74 to 91. listing requirements. laws, regulations and ethical codes Corporate Governance Code (“the Governance restoration of the Company’s listing on Euronext of practice. Code”) and the additional requirements of Dublin was a key objective for 2020. Allied to The Report of the Nomination & the Irish Annex. The Governance Code can be this, we undertook meaningful shareholder and Governance Committee is set out The Report of the Audit & Risk Committee obtained from the Financial Reporting Council’s broader stakeholder engagement as we rebuilt on pages 60 to 63. is set out on pages 64 to 73. website, www.frc.org.uk. The Irish Corporate trust with all who depend on, and interact with, Governance Annex is available on Euronext our Company. We also achieved a number of Dublin’s website, www.euronext.com. Under important governance objectives set by the the interpretative provisions of the Irish Annex, Board in 2020 including the appointment of a Chief Executive Officer Datalex is not regarded as being an equivalent designated Director for Workforce Engagement, The responsibilities of the Chief Executive Officer (the “CEO”) are set out in the Board Roles and Responsibilities section. size to a company included in the FTSE 350 an externally facilitated Board evaluation and the Index on the basis of its market capitalisation. implementation of further robust governance processes to demonstrate our commitment to Executive Leadership Team In the following pages we describe our the highest standards of corporate governance. corporate governance framework, the roles The Executive Leadership Team supports the CEO in the implementation of strategy, allocation of resources and the control of and responsibilities of each component of that I hope you find this report informative and I expenditure and reports to the CEO at weekly management meetings. The members of the Executive Leadership Team are set framework and outline the work of the Board look forward to speaking with you at our Annual out on pages 46 and 47. and each of the Board Committees. Reports General Meeting in 2021. of the Chairs of our Nomination & Governance Committee, Audit & Risk Committee and David Hargaden Remuneration Committee are set out between Chairman pages 60 and 91. 28 April 2021
48 49 Board Roles and Responsibilities Board of Directors The Board routinely meets at least 9 times a year and additionally as required. In 2020, given At 31 December 2020 and at the date of the significant workload on the Board including Chairman The roles of Chairman and Chief Executive Officer are separate with a publication, the Board comprised of seven activities related to the reinstatement of the David Hargaden clear division of responsibilities between them. Directors: the non-executive Chairman, two Company’s listing on Euronext Dublin, the Board Executive Directors and four Non-Executive met 34 times. Details of Directors’ attendance at The Chairman is responsible for the leadership and management Directors, two of whom are considered these meetings are set out below. of the Board, establishing and maintaining an effective working Independent Non-Executive Directors under the relationship with the CEO and for ensuring there is transparent interpretative provisions of the Governance Code The Chairman sets the agenda for each meeting and appropriate communication with shareholders and broader and the Irish Annex. stakeholders. in consultation with the CEO, the Company Secretary and, where appropriate, the Lead In the past two years there were five new Independent Director. The agenda and Board appointments to the Board reflecting the Board’s Chief Executive Officer The CEO is responsible for the operation of the business of the papers are circulated prior to each meeting to desire to ensure that the composition of the Sean Corkery Group and for the implementation of strategy and policies agreed by provide the Directors with relevant information Board has the diversity, skills and expertise the Board. and to enable them to fully consider the agenda necessary to drive the Group’s future success. items in advance of the meeting. In the event The Board is aware of the other commitments of In executing his responsibilities, the CEO is supported by the Chief a Director is unavailable to attend a Board its Directors and is satisfied these did not or do Financial Officer (“CFO”) and the Company Secretary who, with meeting, he or she will receive the Board papers not conflict with their duties as Non-Executive the CEO, are responsible for ensuring that high quality information in advance of the meeting and can communicate Directors of the Company. The CEO and CFO do is provided to the Board on the Group’s operational, financial and their views on any items, to be raised through the not hold any directorships in public companies strategic performance. Chairman at the meeting. outside of the Datalex Group. The matters considered by the Board at each Lead Independent Director The Lead Independent Director coordinates, in a lead capacity, the The Board is responsible for the success of the
meeting include a review of actual performance Datalex Mike McGearty other independent Directors and his duties include providing ongoing Company but, given the size and complexity against approved budget and forecast and direct feedback from the Directors to the Chairman and the CEO; of its operations, the day-to-day operations performance through to the end of the period, communicating the Board’s annual evaluation of the Chairman and of the Company are managed on a delegated
the Group’s operational performance and • the CEO; organising and leading the periodic review of the Board’s basis by certain board committees, the CEO
customer satisfaction, the current status of the Annual Report 2020 governance procedures. and the senior executives working with the sales pipeline and any market and/ or product CEO. However, certain matters are reserved developments since the previous meeting, and The Lead Independent Director is available to shareholders who have for decision by the Board as a whole. These any changes to the business risk environment, concerns that cannot be addressed through the Chairman, CEO, include approving annual operating and capital including any credit risk events. The Board also CFO or Company Secretary, and he is also available to meet major budgets, and decisions on strategic investments periodically reviews the strategic development of shareholders on request. and direction. The Board also monitors Group the business. performance against agreed objectives and •
considers the sustainability of the Group’s Directors' Report Non-Executive Directors – The Non-Executive Directors have varied backgrounds and experience business model. The Non-Executive Directors Listed on pages 44 and 45 and bring constructive challenge to bear on issues of strategy, meet without executive management present performance, resources and standards of conduct. Collectively, on a regular basis. the Non-Executive Directors possess a wide range of financial, commercial and general management experience, investment expertise and software industry expertise. The experience and skills of the individual Board members are set out on pages 44 and 45. Board Member Meeting Attendance Tenure
Scheduled Unscheduled Chief Financial Officer The CFO is primarily responsible for managing the financial affairs Niall O’Sullivan of the Company and positioning the Company for optimal financial David Hargaden 9/9 25/25 1 year performance. The CFO is also responsible for taxation matters. Sean Corkery 9/9 22/25 2 years
John Bateson 9/9 25/25 14 years Company Secretary All Directors have access to the advice and services of the Company Neil McLoughlin Secretary, who is responsible for ensuring that Board procedures are Christine Ourmieres-Widener 9/9 24/25 1 year followed, for advising the Board on all governance matters and for ensuring that applicable rules and regulations are complied with. The Peter Lennon 9/9 25/25 20 years (1) appointment and removal of the Company Secretary is a matter for Mike McGearty 9/9 25/25 1 year the Board as a whole. The Company Secretary is also responsible for risk management at an executive level. Niall O’Sullivan 9/9 22/25 1 year
(1) Peter Lennon has been a Director of the Datalex Group since 1993 prior to the incorporation of Datalex plc on 4 August 2000.
50 51 Board Engagement with Stakeholders Date of appointment (and length of service to date of this Annual Report) to the Board of Directors and Committees of Datalex plc Shareholders and Communications with shareholders are given high priority and there is regular Investors dialogue with individual shareholders, as well as general presentations at the time of the release of the annual and interim results. Name Datalex plc Board Audit & Risk Remuneration Nomination & of Directors Committee Committee Governance During 2020, there was significant engagement with the Company’s shareholders Committee and there were three general meetings held at which shareholders had the David Hargaden 7 November 2019 30 January 2020 30 January 2020 - opportunity to ask questions of the Board. In addition, a number of trading (1 year 5 months) (1 year 3 months) (1 year 3 months) updates were issued to the market during the year. Periodically, the CEO, CFO and Company Secretary meet with shareholders and regular updates are Sean Corkery 12 April 2019 - - - provided to the Board on matters raised by shareholders to ensure the Non- (2 years) Executive Directors have a full understanding of the views of shareholders. When necessary, the Board and Committee Chairpersons engage with shareholders John Bateson 20 November 2006 - 21 April 2010 21 April 2010 on specific topics and where relevant provide feedback to the Directors. The (14 years 5 months) (11 years) (11 years) Lead Independent Director is available to shareholders if contact through normal channels is inappropriate or has failed to resolve concerns. Christine 3 October 2019 30 January 2020 - 30 January 2020 Ourmières‑Widener (1 year 6 months) (1 year 3 months) (1 year 3 months) Workforce In 2020, the Board appointed Christine Ourmières-Widener, as Director of Workforce Engagement. This newly appointed role will enable the Board to Peter Lennon (1) 4 August 2000 - 4 August 2000 30 January 2020 develop a better understanding of the workforce and improve communication (20 years 8 months) (20 years 8 months) (1 year 3 months) and engagement between the Board and employees of the Group. Mike McGearty 9 December 2019 30 January 2020 30 January 2020 - (1 year 4 months) (1 year 3 months) (1 year 3 months) Our people drive every part of our business model. The Board engage with our workforce in various ways, including meetings with management and employees Datalex Niall O’Sullivan 4 June 2019 - - - around Board meeting, employee engagement surveys, the annual kick off (1 year 10 months) meeting, hackathons and recognition programmes. A detailed People update is •
included at every scheduled meeting of the Board and the Board receives regular updates from the designated Director for Workforce Engagement. Annual Report 2020 (1) Peter Lennon has been a Director of the Datalex Group since 1993 prior to the incorporation of Datalex plc on 4 August 2000.
In 2020, a cross-functional COVID-19 Business Continuity Task Force was established in order to remain informed and to recommend action to mitigate against any associated health and safety risks.
Customers and We have deep and long-standing relationships with our customers and suppliers •
Suppliers who are fundamental to Datalex success. The Board is regularly updated on the
engagement and relationships with our customers and suppliers. We are acutely Directors' Report aware that COVID-19 has been catastrophic for the airline industry and we are actively working with our customers, and with the support of our major suppliers, to help and support them through this difficult period.
Communities The Board are regularly updated on CSR and sustainability initiatives.
Director for Workforce Engagement › Engage with a representation of the workforce In December 2020, Christine Ourmières-Widener at the Company’s annual Kick-Off meetings; was appointed by the Board as the designated › review the results of the annual HR Non-Executive Director for the purposes of engagement surveys and provide strategic engagement with the workforce, in accordance input to key initiatives arising from the survey with Provision 5 of the Governance Code. The findings; and purpose of the role is to assist the Board in understanding the views of the workforce and › update the Board regularly on the activities in taking account of employees interests in its of the designated Director for Workforce discussions and decisions. Engagement and their findings on the views and needs of the workforce. A formal engagement plan was agreed by the Board, which envisages the key responsibilities of Since Christine's appointment, Christine has met the designated Non-Executive Director as being: with the Director of HR to review the key findings of the Employee Engagement Survey. In addition, › Meet with Executive Leadership Team Christine joined the Company's 2021 Hackathon members on a regular basis to review the where a team developed the key initiatives arising employee engagement framework across from the Employee Engagement Survey findings. the organisation; Christine will act as Board sponsor to the team implementing those initiatives in 2021.
52 53 Culture and Values The Board has concluded that Peter Lennon Terms of Appointment the results of which will be reviewed with the The Company’s core values were reviewed and and John Bateson were not deemed to be Non-Executive Directors are engaged under other independent directors. The Remuneration updated in 2020 and communicated to the Independent under the considerations outlined a letter of appointment. A copy of the Committee will use the evaluation of the CEO organisation at Datalex’s 2020 Kick-Off meeting. above and in accordance with provision 10 of the standard letter of appointment is available in the course of its deliberations when reviewing Performance on values is a mandatory element Governance Code. Specifically: on request from the Company Secretary. and considering his compensation. of all employees’ annual performance review. On appointment, Directors are provided › Peter Lennon has served on the Board since with briefing materials on the Group and In 2020, external consultants, The Governance The Board monitors culture to ensure it is aligned 1993, and is a partner of the firm Ronan Daly its operations. Visits to the business and Company, were engaged to facilitate the external with purpose, values and strategy. The Board Jermyn, which has provided legal services meetings with management are arranged, and evaluation of the effectiveness of the Chairman, does this by interaction with management to the Group. ongoing briefings are provided as appropriate. the Board and its Committees', the purpose teams and employees at Company events, of which was to review and further improve › John Bateson has served on the Board review of employee surveys and through Conflicts of Interest the Board’s and Committees performance since 2006 and is a director of the the work and briefings of the Director for The Board has adopted a Conflicts of Interest and identify any development needs. The largest shareholder in the Company, IIU workforce engagement. Policy and actively manages conflicts of Governance Company was retained following Nominees Limited. interest including those resulting from a detailed selection process undertaken by the Board Balance, Effectiveness and Independence significant shareholdings. For example, John Committee which involved detailed evaluation The Board believes that the Group benefits A key element of ensuring the Board continues Bateson did not participate in any discussions of four providers. The Governance Company from the continuity of tenure and considerable to operate effectively is independent oversight, in 2020 involving the proposal, which was has no other connection with the Group or any experience that Mr. Lennon and Mr. Bateson which allows Non-Executive Directors to subsequently approved by shareholders, individual director. The process that was followed bring to bear on the Group's governance. scrutinise and, when necessary, challenge to enter into financing arrangements with for the 2020 review and the conclusions of the David Hargaden was considered independent management proposals and strategy. The Board Tireragh Limited a company associated with evaluation are set out below: on his appointment as Chairman on 7 November has evaluated the independence of each Non- our largest shareholder, IIU Nominees Limited. 2019 and his other commitments are set out on Executive Director by considering a number of 1. Each Director completed a detailed page 44.
factors, including: Retirement and Re-election online questionnaire produced by Datalex In accordance with the requirements of the The Governance Company; Under provision 11 of the Governance Code, at › Has any Director been an employee of the Governance Code, each of the Directors will least half the Board, excluding the Chairman
Company within the last five years? submit themselves for re-election each year at 2. The Governance Company conducted a • should be Non- Executive Directors whom
the Annual General Meeting of the Company. review of the Board and Committee papers Annual Report 2020 › Has any Director had a material business the Board considers independent. Datalex and key governance policies and procedures; relationship with the Company, directly or does not meet this requirement as, of the six Remuneration and share-ownership indirectly, in the last three years? Directors (excluding the Chairman) only Christine Details of Directors’ remuneration and 3. The Governance Company conducted Ourmières-Widener and Mike McGearty are › Does any Director receive additional interests in share options and share awards interviews with each Board member and key considered Independent Non-Executive remuneration from the Company, apart together with details of Directors’ beneficial members of senior management; Directors at the date of publication of this Annual from Directors’ fees? interests in the share capital of the Company Report. The Board, in conjunction with the •
are set out in the report of the Remuneration 4. The results of stages 1-3 were collected and
› Does any Director have links to other Nomination & Governance Committee intends Directors' Report Committee on Directors’ remuneration on analysed by The Governance Company and Directors, or family ties with the Company’s to address the composition of the Board in 2021. pages 74 to 91. a report was prepared and discussed with senior managers or advisors? the Group Chairman, the Chairman of the Induction and Development › Does any Director hold cross-Directorships D&O Cover Nomination & Governance Committee and On appointment, Non-Executive Directors or have significant links with other Directors The Group maintains insurance cover the Company Secretary; and undertake a structured induction programme through involvement in other companies in respect of the liability of its Directors which includes meetings with the Executive or bodies? and officers. 5. The results were presented by The Leadership Team, meetings with the Company’s Governance Company to Nomination & › Does any Director represent a financial and legal advisors and with the External Governance Committee in February 2021 and significant shareholder? Auditor. In addition, new Non-Executive to the Board and discussed at its meeting in Directors receive a detailed induction pack Board Performance Evaluation › Has any Director served on the Board for March 2021. describing the structure and operations of the more than nine years from the date of their The annual Board evaluation process is an Board, Group and business. first election? important element in ensuring and enhancing An action plan for 2021, listing areas of focus the effective and efficient operation of the from the evaluation, was agreed at a Board The Chairman invites external experts to attend Board. The Group has established a formal meeting in March 2021. and present at specific Board meetings to process for the annual evaluation of the inform the directors on key areas of relevance performance of the Board and its principal to the business. Individual Directors may seek Committees, including a triennial external independent professional advice at the Group’s evaluation which was conducted in 2020. The expense, where they judge it necessary to external evaluation supplements the internal discharge their responsibility as a Director. Board performance evaluation processes. Led by the Lead Independent Director, the non- executive directors meet annually, without the Chair present, to evaluate the performance of the Chair. On behalf of the Board, the Nomination & Governance Committee conducts the annual evaluations of the CEO,
54 55 Accountability and Audit Compliance Statement on Risk Management and Internal Control Board Assessment The Directors’ responsibility for preparing the Code of Conduct consolidated financial statements is explained That there is an on-going process for identifying, evaluating Confirmed The Group adopted a new Code of Conduct in in the Directors’ Responsibilities Statement and managing the principal risks faced by the Group 2020 which was provided to every employee and the auditor’s responsibilities are set out in of the Group. The Code of Conduct provides the Independent Auditor’s Report. The Board That the systems have been in place for the year under See conclusion on the effectiveness guidance to employees on the standards that is responsible by law for keeping adequate review and up to the date of approval of the Annual Report of the Group’s risk management and are expected across a range of areas applicable accounting records, which disclose at any time and accounts internal control systems on page 56 to the business, including personal obligations, the financial position of the Company and That they are regularly reviewed by the Board Confirmed discrimination, conflict of interest, anti-bribery, the Group. The Board is also responsible for insider trading, antitrust, use and protection of overall management of the Company and the The extent to which the systems accord with the guidance in See conclusion on the effectiveness business assets and information and compliance Group including strategy, policy and reporting. this document of the Group’s risk management and with the law. The Company strives to ensure that In discharging these mandates, the Board internal control systems on page 56 our business partners understand our standards pays particular attention to economic issues, and, wherever possible, act accordingly in all strategy, investment programmes, financial areas of concern. performance and personnel matters. The Audit & Risk Committee, in 2020, continued › A new ERP system was implemented the significant level of oversight outlined in the during the year including new processes Whistleblowing Risk Management and Internal Control 2019 Annual Report , with 11 meetings in 2020 and and procedures across the Financial Control The Group’s whistleblowing arrangement In accordance with provision 29 of the reviewed and satisfied itself as to the adequacy of environment. includes an externally facilitated hotline through Governance Code, the Board is responsible the Group's internal control and risk systems. The Financial Reporting Process which all employees and third parties can for reviewing the effectiveness of the risk CFO and Head of Finance attended each of these The Group has in place procedures to identify, raise concerns in confidence about possible management and the internal control systems. meetings, and outside the formal meetings have evaluate and manage significant risks in wrong doings in financial reporting and other been in regular dialogue with the Chair of the Audit accordance with the Governance Code. These
matters, 24 hours a day by phone or online. During 2020, the Board has directly, and & Risk Committee. Datalex procedures were in place for the full year All whistleblowing incidents are reviewed by through delegated authority to the Audit under review, and up to and including the the Lead Independent Director and formally & Risk Committee, overseen and reviewed The main features of the Group’s systems of date of approval of the consolidated financial
investigated by the Board depending on the performance and evolution of risk internal controls and risk management which • statements. The process is subject to review by
the nature of the concern raised. The Board management activities and practices and operated in the period are as follows: Annual Report 2020 the Board. is satisfied that the Group’s whistleblowing internal control systems within the Group. arrangements are operating effectively. These systems include financial controls which › Key risks, with reference to achievement of The key procedures established by the Board, enable the Board to meet its responsibilities the Group’s business objectives are assessed with a view to reviewing the effectiveness Share Ownership and Dealing for the integrity and accuracy of the Group’s and revised periodically. The risk register was of the internal control environment, include The Group has a Share Dealing Policy which accounting records, operational controls in reviewed throughout 2020 and updated in the following: provides guidance to all directors and employees each functional area of the Group, and an April 2021. This update was approved by both •
to ensure that they do not misuse, or place assessment of general business risks. The Audit the Board and the Audit & Risk Committee.
› The organisation structure has clearly defined Directors' Report themselves under suspicion of misuse, & Risk Committee has reported in the past on The Audit & Risk Committee is also currently lines of authority; information about the Group which they may the risk of manual intervention and need for undertaking an in-depth review of the Group’s have and which is not public. The Group also process improvements. During 2020 the Audit overall risk environment, with respect to › There is a formal schedule of matters reserved has a Share Dealing Code which applies to all Committee has overseen the implementation both risks to the achievement of the Group’s for the Board, as outlined in the Company’s Directors and certain employees and which, in of the group ERP system. Further work is business objectives, and risks to the integrity Board Control Manual; addition to providing guidance on non-public required to minimise manual intervention, and effectiveness of the Group’s key systems › A comprehensive system of financial information, sets out the rules and procedures reliance on complex excel sheets and cross and processes. In particular, the Committee reporting involving periodic reporting, to be followed when dealing in the shares of the training within the finance team. recognises the importance of successful budgeting, variance analysis and forecasting, Company or any other type of securities issued customer delivery, and pays particular of all business units; by or related to the Company. The Board acknowledges its responsibility for attention to areas such as the availability of key reviewing the risk management and the internal domain resources and skills, the performance › An Audit & Risk Committee, made up of control systems and notes the following with and integrity of critical infrastructure in our Non-Executive Directors which reviews key regards to the FRC’s 2014 “Guidance on Risk hosting facility, and control over the Group’s control matters; Management, Internal Control and Related cost base. The Committee also recognises › There are policies and procedures in relation Financial and Business Reporting” with the competitive dynamics of our market, to key financial controls, capital expenditure, respect to 2020: and closely monitors any changes in pricing operational risk and treasury and credit or product offerings that may impact on our risk management; ability to continue to win new business and retain existing customers. Any mitigating › All investment decisions are subject to formal actions required are monitored and reported levels of authorisation and approval; and to the Audit & Risk Committee on a periodic › Where professional expertise is necessary, basis. A summary of key risks, together with professional advisors are engaged. mitigating actions, is set out on pages 34 to 37; › The Group has written procedures and authority limits for all operating and capital expenditure; and
56 57 The Group has also put in place a system to › Audit & Risk Committee composition: › Board Diversity Policy: Provision 23 of the identify and report on risks and associated Provision 24 of the Governance Code Governance Code states that the Board controls. The Board has reviewed the outputs recommends that Audit & Risk Committee’s should describe its policy on diversity from this process during the year and adopted consist of a minimum of two Independent and inclusion, its objectives and linkage the risks and controls as appropriate for Non-Executive Directors (smaller company to company strategy, how it has been monitoring and reporting. The Board has also provisions). On 30 January 2020, the Audit & implemented and progress on achieving reviewed the risks identified to ensure they are Risk Committee was reconstituted to comprise the objectives. In May 2020 the Board still relevant for monitoring. Mike McGearty (Chairman), David Hargaden adopted a Board Diversity Policy but has and Christine Ourmières-Widener. The Board, not yet evaluated the progress towards The Group have appointed Mazars as a suitably on appointment of David Hargaden to the achieving its objectives. Therefore the Group qualified, independent third party to provide Audit & Risk Committee, recognised that the did not comply with this provision in 2020 internal audit services on an outsourced basis. appointment of the Chairman of the Board but intends to complete this work in 2021, Please see page 72 for further details. As outlined as a member of the Audit & Risk Committee including adopting and implementing a policy on pages 66 and 68, members of the Audit is not in accordance with provision 24 of for inclusion. & Risk Committee periodically examine the the Governance Code, however, the Board › Director for Workforce Engagement: operation of key accounting processes in the considered it appropriate for Mr. Hargaden to Provision 5 of the Governance Code business and report back to the Committee. serve on the committee given the expected requires the Board to state their methods workload of the committee in 2020 and Mr. for workforce engagement. Christine Fair, balanced and understandable Hargaden’s relevant knowledge, experience Ourmières-Widener was appointed Director The Annual Report and Financial Statements and financial expertise. The membership of for Workforce engagement in 2020 meaning present a fair, balanced and understandable the Audit & Risk Committee will be reviewed that although the Company now complies assessment of the Group's position and by the Nomination & Governance Committee with this provision, it did not for the full prospects and provides the information in 2021. year. Further information on the work of the
necessary for shareholders to assess the Group's Datalex › Remuneration Committee Composition: Director for Workforce Engagement is set out position, performance, business model and Provision 32 of the Governance Code on page 53. strategy. This assessment was completed by the recommends that all of the members of
Audit Committee as outlined in its Report on › Remuneration Policy: The Company • the Remuneration Committee should be
page 66. adopted and shareholders approved a Annual Report 2020 independent. During 2020 Peter Lennon, new Remuneration Policy in September who is not considered independent, was Governance Compliance Statement 2020 in accordance with Provision 40 of Chairman of the Remuneration Committee. The Group has applied the principles and the Governance Code and as required by Given that Mr. Lennon had significant provisions of the Governance Code and the Irish the European Union (Shareholders’ Rights) experience serving on Remuneration Annex throughout the year ended 31 December Regulations 2020. Committees, the Board had considered 2020, with the following exceptions: this and wanted to take advantage of Mr. › Internal Audit: The Company did not have •
Lennon’s skills and experience in this area. The an internal audit function for the full financial Directors' Report › Board composition: Provision 11 of the membership of the Remuneration Committee year. In September 2020, the Audit & Risk Governance Code recommends at least half will be reviewed by the Nomination & Committee appointed Mazars as a suitably the Board, excluding the Chairman should be Governance Committee in 2021. qualified, independent third party to provide Non-Executive Directors whom the Board internal audit services on an outsourced basis. considers independent. Datalex does not › Nomination & Governance Committee meet this requirement as, of the six Directors composition: Provision 17 of the Governance (excluding the Chairman) only Christine Code recommends that a majority of Ourmières-Widener and Mike McGearty are members of the Nomination Committee considered Independent Non-Executive should be independent non-executive Directors at the date of publication of this directors. On 30 January 2020, the Annual Report. The Board, in conjunction with committee was reconstituted to comprise the Nomination & Governance Committee, John Bateson (Chairman), Peter Lennon is committed to addressing this issue in 2021 and Christine Ourmières-Widener. As John and is in the process of initiating a formal, Bateson and Peter Lennon are not considered rigorous and transparent process for the independent the committee does not appointment of new Board members in 2021. comply with Provision 17 of the Governance Code. The membership of the Nomination & Remuneration Committee will be reviewed in 2021.
58 59 Nomination & Governance Committee Report Datalex Dear Shareholder The Committee met twice in 2020. Member attendance at meetings is detailed below.
The Board appointed me as Chairman of the (1) • Committee Member Meeting Attendance Committee Tenure
Nomination & Governance Committee (the Annual Report 2020 “Committee”) with effect from 30 January 2020 John Bateson (Chair) 2/2 1 year(2) and I am pleased to present the report of the Committee for the year ended 31 December Peter Lennon 2/2 1 year 2020. The report outlines the main areas of Christine Ourmières-Widener 2/2 1 year focus of the Committee in the past year and the areas of priority going forward.
(1) With effect from 30 January 2020, the members of the Committee are John Bateson (Chairman), Peter Lennon •
and Christine Ourmières-Widener. Directors' Report (2) Tenure as Chair. Mr. Bateson was a member of the Committee prior to his appointment as Chair. Role of the Committee The Committee assists the Board in discharging In 2020, a majority of the members of the Committee were not independent as required by the its responsibilities relating to the composition Governance Code. As detailed below this issue will be considered by the Committee in 2021. of the Board and corporate governance. The Committee is responsible for reviewing, identifying and recommending suitable candidates for appointment as Directors. The Committee also has responsibility for recommending to the Board best practice corporate governance principles including providing insights on culture and values which support the Company’s strategic priorities.
The Company Secretary acts as secretary to the Committee and provides support as required. The Terms of Reference of the Nomination & Governance Committee, including its role and the authority delegated to it by the Board, and the standard letter of terms and conditions of appointment to the Board, are available on demand from the Company Secretary.
60 61 Key Areas of Activity During 2020 Workforce Engagement Diversity Priorities for the Year Ahead In accordance with Provision 5 of the Board Composition and Renewal Governance Code, the Committee The Group recognises the importance and Our priorities for the coming year will include On an annual basis the Committee reviews the recommended to the Board in 2020 that one of benefit of ensuring diversity throughout the the appointment of new Board members in size, structure and composition of the Board, the Non-Executive Directors be appointed as the organisation. In 2020, the Board adopted a 2021 and an appropriate reconstitution of the and makes recommendations to the Board designated Non-Executive Director for workforce Board Diversity Policy the objective of which Board Committees in light of the requirements with regard to any changes required, within engagement and included recommendations on is to ensure that all Board appointments are of the Governance Code. In addition, the the context of the ongoing development and the proposed work programme for that director made on merit, in the context of the skills, Committee will oversee implementation of the evolution of the business. over the course of a year. Christine Ourmières- experience, independence and knowledge recommendations arising from the externally Widener was appointed as the director for which the Board as a whole requires to be facilitated board evaluation conducted in 2020. The Committee ensures that prior to the workforce engagement in December 2020. effective. The policy also acknowledges that appointment of any new Director, the candidate The role, remit and planned 2021 activity of the an effective Board will include and make good On behalf of the Nomination & has sufficient available time to discharge their director for workforce engagement is described use of differences in the skills, regional and Governance Committee. duties as a Director. Prior to the appointment of on page 53. industry experience, background, race, gender Directors, the Committee evaluates the balance and other distinctions between directors. These John Bateson of skill, knowledge, experience and diversity of differences are considered in determining the Chair, Nomination & Governance Committee the Board, and in light of this evaluation, prepares optimum composition of the Board and when 28 April 2021 a description of the roles and capabilities Experience and Skills possible will be balanced appropriately. In 2021 required for the appointments. To facilitate the The Committee is responsible for ensuring that, the Committee intends to update its policies search for suitable candidates, the Committee through effective succession planning, the Board, to incorporate a policy on inclusion and report may use the services of external consultants. its Committees and senior management have the on how these policies have been implemented, correct balance of skills, knowledge and experience including progress on achieving their objectives. Under provision 11 of the Governance Code, at to effectively lead the Group both now and in least half the Board, excluding the Chairman
the longer term. During 2020, the Committee Throughout the Group, a total of 18 nationalities Datalex should be Non-Executive Directors whom continued to consider the longer-term talent are represented within our workforce, and we the Board considers independent. Datalex strategy to understand the changing competencies strive to ensure that our culture promotes and does not meet this requirement as, of the 6
required to ensure the development of a skilled respects everyone, irrespective of nationality • Directors (excluding the Chairman) only Christine
workforce which will support the Group’s strategy, or gender. The Board also acknowledges the Annual Report 2020 Ourmières-Widener and Mike McGearty are purpose, culture and values. importance of promoting female participation considered Independent Non-Executive at all levels in the Group. At 31 December 2020, Directors at the date of publication of this women made up 27.7% (2019: 27.7%) of total Annual Report. The Committee is committed to employees and 31.8% (2019: 31.8%) of senior addressing this issue in 2021 and is in the process Corporate Governance Developments management (top two levels) in the Group. At 31 of initiating a formal, rigorous and transparent December 2020, women made up 14% (2019: process for the appointment of new Board The Committee advises the Board on •
14%) of the Board following the appointment of
members. significant developments in the law and Directors' Report Christine Ourmières-Widener in October 2019. practice of corporate governance and monitors Board Evaluation the Company’s compliance with corporate The Group has established a formal process governance best practice, with particular for the annual evaluation of the performance reference to the Governance Code. The areas of of the Board and its principal Committees, divergence from the Governance Code for the including a triennial externally facilitated which year ended 31 December 2020 are set out on was conducted in 2020 and presented to the pages 58 and 59. Committee in February 2021. The external evaluation is described in the Corporate Governance Report on page 55.
The conclusion from the 2020 process was that the performance of the Committee and of the Chairman of the Committee were satisfactory. The Committee will focus on agreed actions arising from the 2020 evaluation process.
62 63 Audit & Risk Committee Report
Dear Shareholder meets throughout the year with, and without, David Hargaden, Christine Ourmières-Widener Key Areas of Activity During 2020 management, as appropriate. These meetings and I all have recent and relevant experience 2020 was a very busy year for the Audit & The Board appointed me as Chairman of the with the external and internal auditors ensure working with financial and accounting matters Risk Committee with considerable time being Audit & Risk Committee (the “Committee”) with that there are no restrictions on the scope of with competence in accounting and experience spent dealing with the 2019 audit, overviewing effect from 30 January 2020 and I am pleased to their audits and allow discussion of any matters of preparing consolidated financial statements the enhancements to the Group's financial present the report of the Committee for the year that the auditors might not wish to raise in the under IFRS. All members of the Committee have and operational internal control environment, ended 31 December 2020. The report outlines presence of management. financial and commercial experience relevant overseeing the implementation of the Group’s
the main areas of focus of the Committee in the to the industry and the broader commercial Datalex new ERP system, overseeing the completing of past year and the areas of priority going forward. The Committee may obtain, at the Group’s environment within which we operate. Therefore, the FPPP activities and appointing a new internal expense, outside legal or other professional the Committee, the Nomination Committee and auditor. The Audit & Risk Committee continues
advice needed to perform its duties. The Chair the Board are satisfied that the Committee, as a • to engage with management to drive control and
of the Committee reports to the Board on whole, has competence relevant to the sector in Annual Report 2020 Role of the Committee oversight improvements. the key outcomes from each meeting and on which the Group operates. The Committee has been charged by the Board how the Committee has discharged its duties. The Audit & Risk Committee continues to oversee of Directors (“Board”) with the task of providing The minutes of all Committee meetings are Until the reconstitution of the Committee on 30 the process to resolve the control deficiencies governance and oversight over the integrity circulated to the Board for information. January 2020, the Committee did not consist of that gave rise to the 2018 and 2019 audit opinion of the accounting, financial reporting, internal a minimum of two Independent Non-Executive disclaimers. Further enhancements have been control and risk management processes of the Only members of the Committee have a Directors, as required under provision 24 of the made during 2020 with additional manual •
Group. It also monitors the performance of the right to attend Committee meetings. Regular Governance Code. The Board, on appointment of
oversight, the engagement of new personnel Directors' Report external auditors. attendees include the Chief Executive Officer, David Hargaden to the Audit & Risk Committee, in finance, newly introduced processes and the Chief Financial Officer and employees recognised that the appointment of the implementation of the Group’s new ERP system. The Committee has written terms of reference from a variety of departments to aid their Chairman of the Board as a member of the which set out its role, responsibilities and duties. understanding of the business and to assist in Audit & Risk Committee is not in accordance with Throughout 2020 the Audit Committee These can be obtained from the Datalex website discharging their duties. The external auditor, provision 24 of the Governance Code, however, received regular updates on the progress of the at the following link: https://www.datalex.com/ Deloitte Ireland LLP ("Deloitte"), also attends the Board considered it appropriate for Mr. Implementation of the new ERP system, Jet, investor/ or via a written request to the Company Committee meetings and has direct access Hargaden to serve on the Committee given which went live on 1st September. Jet was part Secretary. to the Chair of the Committee. The Company the workload of the Committee in 2020 and of an overall finance transformation programme, Secretary acts as secretary to the Committee Mr. Hargaden’s relevant knowledge, experience which included the FPPP programme and To discharge its responsibilities effectively, and provides support as required. and financial expertise. recruitment of new and qualified staff. the Committee has unrestricted access to the Group’s external auditor, the Group’s internal The Committee met 11 times in 2020. Member Our auditors, Deloitte were appointed on auditor, and the Finance function, with whom it attendance at meetings is detailed below. 31 December 2019. On an annual basis, the Committee reviews the appointment of the external auditor, taking into account the auditor’s Committee Member Meeting Attendance Committee Tenure effectiveness and independence. On that basis, Mike McGearty (Chair) 11/11 1 year the Committee recommended to the Board that Deloitte should continue in office as the auditor Christine Ourmières-Widener 11/11 1 year to the Group in respect of the year ending 31 December 2020. David Hargaden 11/11 1 year In addition to having Terms of Reference, the Audit & Risk Committee also agrees a committee schedule of items which it considers to be of significance in order to ensure that all items are discussed appropriately and on a timely basis.
64 65 The Audit & Risk Committee assists the Board in discharging its responsibilities with regard to:
Matter Actions Taken Matter Actions Taken Considered Considered
Financial › Monitoring the integrity of the financial statements and the formal Internal audit The Committee appointed Mazars as a suitably qualified, independent third party reporting announcements relating to the Group’s financial performance. to provide internal audit services on an outsourced basis. › Reviewing significant financial reporting judgements. Since its appointment, Mazars has identified risk management, cyber security, › Assessing and reporting on the Group’s viability in line with the 2018 UK Code revenue recognition, remote working and GDPR as the main areas of focus. During requirements and the appropriateness of the going concern basis. 2020, they commenced their review over risk management. › Considering the report of the external auditor on the financial statements and The Audit & Risk Committee is responsible for: the year-end audit. › Ensuring compliance with relevant regulations for financial reporting. › Monitoring and reviewing the effectiveness of the Group’s Internal Audit function. In advance of the year-end audit work, the Committee received the external › Considering the results of internal audits undertaken and management’s auditor’s 2020 year-end audit plan. Throughout the final audit process, the Chairman responses to the findings, including updates on actions identified. of the Audit & Risk Committee held a number of meetings with the external audit partner to discuss the status of the field work and areas of focus arising. › Approving any changes to the Internal Audit Plan for 2020 and approval of the Internal Audit Plan for 2021.
Fair, › The Committee has considered whether the Annual Report and accounts, › Reviewing and approving amendments to the Internal Audit Charter. Datalex balanced and taken as a whole, is fair, balanced and understandable and provides the understandable information necessary for shareholders to assess the Company’s position and Risk The Audit & Risk Committee is responsible for: performance, business model and strategy. In conducting this assessment, the •
management Committee assessed the work undertaken by management in the preparation and internal › Assessing the appropriateness of the Group’s overall risk management and Annual Report 2020 of the accounts and the Annual Report, the analysis performed of changes to control internal control framework. applicable standards and reporting requirements, and the arrangements for review and verification of the information contained in the Annual Report. The › Ensuring that there is a robust process in place to monitor and evaluate the Committee also considered that the content of the Annual Report provides principal risks to which the Group is exposed, including those that would both positive and negative aspects of performance and developments in a clear threaten its business model, future performance, solvency or liquidity. and meaningful way as well as the links between discussions of performance, › Reviewing the Group’s whistleblowing arrangements by which employees
financial position and cash flows. The Committee was provided with all relevant • may, in confidence, simply and anonymously, raise concerns about possible
information and, in particular, with detailed briefings from management on how Directors' Report improprieties in matters of financial reporting or indeed any other matters of specific issues are managed and challenged management as required. concern. › Reviewing processes for detecting fraud, misconduct and control weaknesses External audit The Audit & Risk Committee is responsible for: and considering responses to any such occurrence.
› Reviewing and making a recommendation to the Board in relation to the continued appointment of Deloitte as the external auditor and, as a Accounting The Audit & Risk Committee has active oversight over the finance function: Committee, approving Deloitte’s remuneration and terms of engagement for Review the 2020 financial year. The Audit & Risk Committee: › Considered the External Audit Plan for 2020 presented by Deloitte, including › Has a regular schedule of meetings with the CFO and Head of Finance; a total consideration of its key areas of risk and the audit approach applied by Deloitte, of 11 meetings were held in 2020, at which all members attended. the proposed areas of coverage of Deloitte’s audit and any changes thereto during the year. › Considered the proposed new finance structure and its implementation. › Considering Deloitte’s updates during 2020 in relation to the External Audit › Reviewed the interim financial statements for the period 30th June 2020. Plan and related actions. › Reviewed Euronext Announcements regarding market guidance and updates. › Evaluating the performance of Deloitte, including its independence and › Received regular updates on the progress of the 2019 external audit. objectivity and monitoring any non-audit services provided by Deloitte. › Received regular updates on the progress of the 2020 external audit. › Reviewing and approving the Group’s Non-Audit Services Policy (the Non-Audit Policy) and, in advance, approving any non-audit services and related fees to › Approved the appointment of Mazars as our internal auditors for 2020. be provided by Deloitte during 2020.
66 67 Matter Actions Taken Significant Areas Considered The Audit & Risk Committee’s reporting remit requires specific discussion in respect of the work the Audit & Risk Committee undertook during the year in discharging its responsibilities, and the significant issues Internal During 2020, the Committee with the support of management undertook a it dealt with, and how such issues were addressed. Most importantly perhaps, it is expected that such controls number of actions to strengthen and enhance the control environment. These matters would at least include those items communicated to the Board by the external auditor during review actions included the successful completion the Financial Position and Prospects the year. Procedures (‘FPPP’). The FPPP is a prerequisite requirement before obtaining clearance for a company’s shares to be traded on Euronext Dublin. The FPPP The significant areas considered by the Committee were: required management to document the control environment operating across the organisation which was then subject to an independent review. The Group also Matter Actions Taken deployed a new Enterprise Resource Planning (‘ERP’) during 2020 and appointed Considered an internal auditor during 2020. The new ERP system replaced the Group's legacy accounting system. Going Concern The Committee was fully involved in the Going Concern assessment, including Throughout 2020 there has been a continuous improvement in the quality of assessment review and challenge of the detail in each of the going concern scenarios, key quantitative and qualitative reporting to the Board along with appropriate levels assumptions used by management in forecasting cashflow projections which of challenge and questioning which are designed to ensure robust internal and incorporate the impact of COIVD-19 and any mitigating actions that are available external reporting. The operation of a delegated control framework across the to the Group. Group ensures that significant transactions and contracts are reviewed, challenged and assessed prior to the Group entering into new commercial arrangements. IFRS 15 Revenue The key judgments considered by the Committee in relation to revenue Recognition recognition for 2020 included: The Committee continues to provide oversight of and continually assesses the Group’s material risks and effectiveness of internal controls. The ongoing › Determining contract term, considering renewal/termination clauses; Datalex development of risk management and internal controls to ensure that they remain effective is a priority for the Board. › Identification of performance obligations (performed at contract inception); •
› Assessing whether performance obligations are distinct; Annual Report 2020 Other In addition to the above areas, the Audit & Risk Committee has undertaken › Establishing standalone selling prices for each performance obligation; the following: › Determining transaction price, inclusion of “variable consideration”, bonuses, › Reviewing arrangements by which staff of the Group may, in confidence, penalties; and raise concerns about possible improprieties in matters of financial reporting or › Recognition of revenue for each performance obligation. other matters.
The Committee reviewed the assessment of each key judgments in accordance •
› Reviewing the effectiveness of the Group’s internal control system through
delegated authority from the Board. In particular, the Audit & Risk Committee with accounting standard IFRS 15, Revenue from Contracts with Customers. Directors' Report is mindful of the requirements in relation to the risk management and internal Following these discussions, the Committee is satisfied that the significant control systems arising from provision 25 of the Governance Code. In this regard, judgement exercised in determining individual performance obligations, the Audit & Risk Committee reviews the Group Internal Risk Register periodically, determining appropriate Standalone Selling Prices, whether certain performance as noted above. obligations should be bundled and the identification of material rights are appropriate. › The Committee closely monitors effectiveness of key business processes, internal control systems and the overall risk environment of the Group, for example critical resource levels, pricing of new contracts, and controls around Classification The Committee reviewed all elements of the exceptional items. In particular, service and quality levels. of exceptional the Committee reviewed the classification of Statement of Profit & Loss iItems items as exceptional, including a review of the professional fee details relating › Reviewing the communications with regulators. to investigations, the business transformation programme and litigation › Reviewing and monitoring the implementation of process improvements procedures. The Committee considered the assessment and content of the identified both by management and the external auditor during the year and in provision for costs associated with complying with regulatory investigations. prior years. › Reviewing the effectiveness of key accounting processes, such as the capitalisation of development expenditure and the revenue recognition process. › Reviewing the analysis underpinning the Viability and Going Concern statements arising from the requirements included in the Governance Code. › Reviewing the Committee’s Terms of Reference. › Reviewing the Committee’s schedule of proposed matters for its 2021 meetings.
68 69 Matter Actions Taken Independence of External Auditor Effectiveness of External Audit Considered Our external auditor, Deloitte, was appointed for The Committee has reviewed the effectiveness the 2019 year-end on 31 December 2019 and of external audit. The Board received the Audit Capitalisation New procedures and controls were introduced over development costs, led by continue to act as external auditors. Our lead Plan including judgments about materiality, of development new personnel in finance. audit engagement partner is Daniel Murray. selection of areas of focus and related audit costs approach including the applicable key audit A total balance of US$1.1m was capitalised in 2020. Recognising the The Committee’s policy on the provision of evidence tailored to the Group’s operations and judgments involved, the Committee reviewed the process and value of product non-audit services by the external auditor is systems. The Committee monitored the conduct development expenditure during 2020. The review included consideration that, whilst it is appropriate and cost effective for and effectiveness of external audit during the of an accounting paper prepared by management and a review of the key the external auditor to provide tax compliance year through a review of: elements of spend in 2020. The Committee was satisfied with the treatment of services to the Group, other services should only development expenditures in 2020. be provided where alternative providers do not › The experience and expertise of the audit exist or where it is cost effective or in the Group’s firm and its key audit team members; interest for the external auditor to provide such Deferred tax The Committee reviewed the assumptions underlying the amount of the › The fulfilment of the external audit plan services. In all cases the provision of non-audit deferred income tax assets at 31 December 2020. Similarly, this topic was also and any variations from this plan; addressed over time during 2020 with papers tabled by management for review services is carefully monitored by, and subject to, and discussion. Having considered the uncertainties as to the future profitability the prior approval of the Committee. › The auditor’s understanding of the Group’s of the Group, it was determined that it continued to be not appropriate to business and industry, the environment recognise deferred tax assets in respect of losses carried forward and R&D The external auditor would not be invited to in which the Group operates and of the tax credits. provide any non-audit services where it was felt applicable legal and regulatory framework; that this could conflict with their independence › The auditor’s assessment of key areas of or objectivity. Such services would include the focus throughout the audit;
Impairment of The Committee reviewed the judgements regarding the future financial provision of internal audit and management Datalex investments performance of the subsidiaries. consulting services. The policy exists to ensure › Interaction between management and the in subsidiaries that the external auditor does not audit its own auditor, including ensuring that management
(Company) Investments in subsidiaries are tested for impairment at each statement of work, participate in activities that would normally dedicates sufficient time to the audit process; •
financial position date or earlier if events or circumstances indicate that the be undertaken by management, have a mutuality Annual Report 2020 › Communication with, and support to, the carrying amount exceeds its recoverable amount, this test includes a range of of financial interests with the Group or act in Committee including their assessment of assumptions as well as subsequent events. an advocacy role to the Group. No non-audit new accounting and corporate governance services were provided by Deloitte in the period. developments; Legal and The Committee reviewed the judgements used by management in arriving at › The content of external reports and their compliance the potential provision in respect of the costs relating to the ongoing regulatory ability to raise potential issues as they
costs investigations and suspension of trading of the Group's shares. • become aware thereof; Directors' Report › Independence, objectivity and Uncertain tax Uncertain tax positions arise as a result of tax reviews undertaken by the Group scepticism; and positions across multiple jurisdictions. The Committee has reviewed the judgement › The auditor’s recommendations on and estimates involved in determining the provision and the amount of any internal controls. associated liabilities. Private discussions are held with the external auditor at the Audit & Risk Committee meeting Expected credit The Committee has reviewed the yield spreads provided by a third party which when the audit findings are presented to provide losses are used in managements methodology to calculate the expected credit loss additional opportunity for open dialogue and under IFRS. feedback from the Committee and the auditor without management being present. In addition to these private meetings, the Chairman met with the external audit partner to facilitate effective and timely communication.
70 71 Internal Audit › Procure to Pay - Review of the internal Priorities for the Year Ahead control framework with respect to Procure During 2020, the Group appointed Mazars a The focus of the Audit & Risk Committee to Pay processes to ensure that there are suitably qualified, independent third party to for 2021 has been and continues to be the adequate key controls, segregation of duties provide internal audit services on an outsourced ongoing strengthening of internal controls, risk and appropriate approval processes in place. basis. Since its appointment, Mazars has management framework and financial reporting. identified the below as its main areas of activity: › Data Privacy/GDPR - Review arrangements in line with specific Articles of GDPR. The Committee will continue to monitor › Risk Management - Advise on the adequacy governance and ensure adequate oversight › Technical Disaster Recovery and and effectiveness of the risk management over the integrity of the Group’s financial Business Continuity Planning - Review arrangements in place. Assess risk reporting and the Group’s internal control and of the existence, adequacy and operating management practices against the relevant risk management frameworks as well as the effectiveness controls to ensure the specific requirements of ISO 31000 (as Internal Audit function and Deloitte as the availability of Datalex systems and data in the appropriate). This review was carried out external auditor. event of a disaster scenario. in November 2020. › Internal Financial Controls - A key focus for On behalf of the Audit & Risk Committee. › Cyber Security - Review of the existence, all organisations is to ensure that internal adequacy and operating effectiveness financial controls are adequate and effective. Mike McGearty controls in operation to reduce the risk of Chair, Audit & Risk Committee Datalex being exposed to a cyber attack. › Cultural Audit - The Cultural Audit would 28 April 2021 assess and highlight any potential gaps › Order to Sales, Contract Management and between the desired and actual culture within Revenue Recognition - Review of the internal the organisation. control framework with respect to Order
to Sales processes, to ensure that there are As at year end, the risk management review Datalex adequate key controls, segregation of duties was finalised. The remaining reviews are to be and appropriate approval processes in place. performed in 2021.
Review could also focus on the arrangements •
in place for onboarding new contracts, Annual Report 2020 agreeing terms of contracts, monitoring the Annual Evaluation of Performance performance of contractual arrangements and the decision-making processes to As detailed on page 55, the Board conducts an extend/renew a contract. annual evaluation of its own performance and that of its Committees, Committee Chairmen › Corporate Governance - Datalex has and individual Directors. The conclusion from adopted the provisions of the UK Corporate •
the 2020 process was that the performance of
Governance Code 2018 – ‘UK Code’. Mazars Directors' Report the Audit & Risk Committee and of the Chairman will perform a review of compliance with of the Committee were satisfactory. The relevant provisions of the UK Code. Committee will focus on agreed actions arising › Office365 and Remote Working - Utilising from the 2020 evaluation process. industry security standards (CIS Security Benchmarks) this activity will conduct a full review of Datalex’s Office365 security configuration against the industry standard.
72 73 As evidenced by the Board member biographies 2020 Remuneration Policy on page 44, the Committee, both individually At our AGM in September 2020, shareholders Remuneration and collectively, possess significant experience overwhelming endorsed the new Datalex and expertise in remuneration matters across Remuneration Policy. The Policy incorporates the a range of companies and industries. None of use of awards under a new long-term incentive the Committee members have any financial Committee plan - The Datalex PLC Long Term Incentive interest other than as shareholders in the Plan 2020 - and the introduction of a new SAYE matters to be decided by the Committee Scheme both of which were also approved by and no potential conflicts of interests arising shareholders at the 2020 AGM. Willis Towers Report from cross‑directorships. Watson provided advice to the Remuneration Committee in relation to competitive positioning The Board considered the positions of Mr. and developments in remuneration policy and Lennon and Mr. Bateson as members of the practice. Willis Tower Watson has no other Committee, both of whom do not meet the connection with the Group or its individual independence criteria of the Governance Code. directors. The Board considered it appropriate for Mr. Lennon to continue to serve as Chairman of The Group’s policy in respect of the remuneration the Committee given his experience serving on of Executive Directors is based on attracting, remuneration committees and in light of the retaining and motivating executives to ensure requirement under the Governance Code that that that they are incentivised to successfully the Chairman of the Remuneration Committee implement the Board’s strategy and that should have served on a remuneration remuneration is aligned with the interests committee for at least 12 months prior to
of shareholders and other stakeholders over Datalex their appointment. The Board considered it Dear Shareholder, the Group’s policy on compensation of the longer term. appropriate for Mr. Bateson to serve on the Directors and senior executives and making Committee for the purpose of continuity. The
I am pleased to present our Remuneration recommendations to the Board of Directors Performance related elements of remuneration • Chairman of the Board, who is a member of
Report for the year ended 31 December 2020. (“Board”) on the Group’s policy on executive are designed to form an appropriate portion of Annual Report 2020 the Committee, was considered independent remuneration, determining the remuneration the overall remuneration package of Executive on appointment in accordance with the The Report includes the following sections: and benefits of the Executive Directors and Directors and link remuneration to business requirements of the Governance Code. The Company Secretary and recommending performance and individual performance, Chairman absents himself from discussion › This Chairman’s Introduction and monitoring the remuneration of senior while aligning the interests of Executive around his own remuneration. management below Board level. Directors with those of shareholders. The › Remuneration Policy Summary Directors’ Remuneration Policy focuses on •
› Annual Report on Remuneration The Terms of Reference of the Remuneration incentivising the successful implementation of Committee, including its role and the COVID-19 and 2020 Business Performance our corporate strategy, consistent with our risk Directors' Report authority delegated to it by the Board, are management framework. 2020 was an unprecedented year for our available on demand from the Company Role Of The Committee business. Management and the Board adjusted Secretary. The Company Secretary acts as In its decision-making process regarding the rapidly to the impact of the COVID-19 pandemic The Committee has responsibility for secretary to the Committee and provides determination of the revised Remuneration and took immediate actions for the good of the determining, within agreed terms of reference, support as required. Policy, the Remuneration Committee business. However, our financial performance considered its appropriateness to support was nonetheless negatively impacted in 2020. the business, its alignment with shareholders’ The Committee has been very conscious, interests and evolving best practice and and sensitive to, the duration and full impact regulatory developments. The Committee of the pandemic on all of our stakeholders, developed the Policy taking into account the including our employees, customers, partners, views and consulted with the Company’s shareholders and wider stakeholders. Whilst major shareholders, whose views were overall the future remains uncertain, the Committee very positive. The Committee was mindful The Committee met 11 times in 2020. Member attendance at meetings is detailed below. believes that the actions taken, and the resilience of managing any conflicts of interest during of our revenue model, mean that the Group the process and no individual was involved in is positioned well to withstand the impact Committee Member Meeting Attendance Committee Tenure determining his/her own arrangements. of COVID-19. Peter Lennon (Chair) 11/11 21 years The Remuneration Policy will provide the John Bateson 11/11 11 years framework for remuneration decisions made by the Remuneration Committee from the date of David Hargaden(1) 11/11 1 year the 2020 Annual General Meeting. It is intended that the policy will apply until the 2024 Annual Mike McGearty(1) 11/11 1 year General Meeting unless a new policy is put to shareholder vote at an earlier date. (1) Appointed on 30 January 2020.
74 75 Performance for the Year The Committee acknowledges that shareholders Priorities for the Year Ahead have a right to have a ‘say on pay’ by putting the As described in the Chairman’s statement Our priorities for the coming year will include Remuneration Report and the Remuneration 2020 was a very difficult year dominated by implementation of the new Remuneration Policy Policy, as required, to advisory votes at the the COVID-19 crisis. The Group reported a as approved by shareholders in September 2020 AGM. At the 2021 AGM, a resolution on positive foreign currency adjusted EBITDA and taking appropriate account of the impact of the Remuneration Report (excluding the of US$3.4m being an increase on 2019 COVID-19 on the business. Remuneration Policy) will be put to shareholders, performance US$0.7m. on an advisory rather than on a binding basis. The Chair of the Remuneration Committee The Group responded in a proactive manner to attends the Annual General Meeting to answer Conclusion these challenges, in particular with strong cost questions on the Report, on the Committee's saving measures and active management of I am satisfied that the Remuneration Policy activities and matters within the scope of the the Group’s cash position. The increase in the adopted by the Board and overwhelmingly Committee’s responsibilities. customer Net Promoter Score is an important endorsed by shareholders in 2020 successfully indicator that the Group is well positioned to incentivises the implementation of our corporate Details of shareholders’ proxy votes on the serve our customers as they reposition for strategy, consistent with our risk management Remuneration Policy in 2020 are set out on growth following the COVID-19 crisis. framework. In 2021 the Committee will focus on page 91. the implementation of the Group’s Remuneration Policy in a manner that properly reflects the performance of the Group in the year. Bonuses UK Corporate Governance Code and Datalex offers an annual bonus to incentivise and Shareholders Rights Directive II We hope to receive your support for the Annual reward delivery of the Group’s business strategy Report on Remuneration at the 2021 AGM. In 2020 the Committee refined the Company's and financial targets. Due to the impact of
approach to remuneration to reflect the Datalex COVID-19 on the Group’s business, bonuses were On behalf of the Remuneration Committee updated principles and provisions of the not paid to Executive Directors in 2020. Governance Code and the European Union Peter Lennon
(Shareholders' Rights) Regulations 2020. As an • Chair, Remuneration Committee
Irish incorporated company, the Company is Annual Report 2020 28 April 2021 Long Term Incentive Plan and Save As You not subject to the UK executive remuneration Earn Scheme requirements as set out in the Large and Medium-sized Companies and Groups (Accounts At our AGM in September 2020, shareholders and Reports) (Amendment) Regulations 2013. approved the Datalex Long Term Incentive Plan 2020 (the “LTIP 2020”) and a new Irish Revenue approved savings related share option scheme •
(the “SAYE Scheme”). The purpose of LTIP 2020 External Advice Directors' Report is to support the recruitment and retention of key The Committee seeks independent advice when executives, align the interests of executives with necessary from external consultants. During those of the Group’s shareholders and reflect the the year, Willis Towers Watson provided advice Group’s policy of long-term performance-based to the Remuneration Committee in relation to incentives. The SAYE Scheme will give all eligible competitive positioning and developments in employees of the Company and its subsidiaries remuneration policy and practice. Willis Towers the opportunity to invest in the Company’s Watson have no connection with the Group Ordinary Shares in a tax efficient way. or any individual director and the Committee is satisfied that the advice from Willis Towers Watson was objective and independent. Shareholder Engagement During 2020, the Committee took into account shareholder views and expectations as expressed Annual Evaluation of Performance in investor guidelines and has sought to align the As detailed on page 55, the Board conducts Remuneration Policy with these expectations, an annual evaluation of its own performance as well as market best practice and relevant and that of its Committees, Committee regulatory requirements. Datalex is committed Chairmen and individual Directors. The to an ongoing dialogue with our shareholders conclusion from the 2020 process was that on remuneration arrangements and is always the performance of the Remuneration open to hearing and carefully considering any Committee and of the Chairman of the investor feedback. Committee were satisfactory. The Committee will focus on agreed actions arising from the 2020 evaluation process.
76 77 Remuneration Policy
In 2020, Datalex, for the first time, presented › that the Group will attract, motivate and retain Element and link Operation Maximum Opportunity a Remuneration Policy to shareholders under individuals of the highest calibre; to strategy the European Union (Shareholders’ Rights) › that executives are rewarded in a fair and Regulations 2020. The Policy was put to an Base Salary balanced way for their individual and team advisory vote at the 2020 AGM, held on 24 contribution to the Group’s performance; September 2020. Attract and The Committee’s policy is to set base salaries that are There is no maximum salary opportunity. › that executives receive a level of retain skilled and competitive, that attract and retain executives, reflect However, any increases will be made in the experienced senior the size and scope of the role and business, and the context of the financial performance of the Performance related elements of remuneration remuneration that is appropriate to their scale Datalex are designed to form an appropriate portion of of responsibility and individual performance; executives. market for similar roles. Group and will normally be in line with increases the overall remuneration package of Executive awarded to colleagues in the wider business. › that the executives are sufficiently Salaries are reviewed annually, though there is no
Directors and link remuneration to business • incentivised to successfully implement the guaranteed annual increase. In setting and reviewing In addition, the Committee will take into account performance and individual performance, while Annual Report 2020 Board’s strategy and that remuneration is aligning the interests of Executive Directors with salary levels, the Committee takes into account the factors as outlined under ‘Operation’ in aligned with the interests of shareholders and those of shareholders. In setting remuneration the performance of Group and the Executive determining salary increases. other stakeholders over the longer term; levels, the Remuneration Committee takes into Directors (their progression in the role and individual consideration the remuneration practices of › that risk is properly considered in setting performance, informed by the Nominations Where warranted, for example, in cases of other international companies of similar size remuneration policy and in determining Committee), skills and experience, and pay levels of promotion, the Committee may make more and scope and trends in executive remuneration remuneration packages. similar sized companies and peers. significant salary awards to colleagues to reflect
progression in the role (for example, staged • generally. The Remuneration Committee seeks to ensure: In its decision-making process regarding the increases over time following appointment to Directors' Report determination of the revised Remuneration a new role). Policy, the Remuneration Committee considered Benefits its appropriateness to support the business, its alignment with shareholders’ interests To provide market The Group provides benefits that are competitive The cost of providing benefits can vary from and evolving best practice and regulatory competitive benefits with market practice to support the recruitment and year to year, dependent on the nature of the developments. Willis Towers Watson were retention talent. benefit and insurance premium costs. As such, engaged by the Committee to support the there is no maximum benefits opportunity, and drafting of the Remuneration Policy. The Executive Directors are entitled to benefits benefits will be maintained at a level to ensure Committee was mindful of managing any including, but not limited to, a car allowance market competitiveness. conflicts of interest during the process and no (and other car/transport benefits), private health individual was involved in determining his/her provision, life assurance, income protection own arrangements. The key elements of the scheme, and contributions toward professional remuneration for Executive Directors and other membership subscriptions. senior management under the Policy are set out in the table below. Pension To reward sustained Current and new hire Executive Directors are entitled Executive Directors are eligible to receive a contribution. to participate in the Datalex Pension Scheme (a matched pension contribution up to a maximum defined contribution scheme). of 7.5% of salary, which is aligned with the rate available to the wider workforce. This scheme is offered to ensure the Group is market competitive in its pension offering.
78 79 Element and link Operation Maximum Opportunity Element and link Operation Maximum Opportunity to strategy to strategy
Annual Bonus Long Term Incentive Plan
To reward the Datalex offers an annual bonus to incentivise and The maximum annual bonus award level for To align the interests Awards under The Datalex PLC Long Term Incentive The maximum annual face value award level achievement reward delivery of the Group’s business strategy and Executive Directors under the plan is 50% of executives with Plan 2020 are designed to align the interests of to an individual participant may not in normal of annual financial targets. of salary. those of the Group’s the Executive Directors with those of shareholders circumstances exceed 100% of salary. performance targets. shareholders and to and reward the delivery of long-term strategic Bonus awards are made annually and are reflective Annual bonus awards are currently subject to the reflect the Group’s performance objectives and the creation of The initial vesting of the LTI awards will be of achievement of both financial and non-financial following performance measures: culture of long- shareholder value through the execution of strategy. determined by performance against performance performance measures. term performance targets agreed by the Committee at the time › Company financial performance based incentivisation Annual awards of share options will be allocated at of grant. The Committee will select appropriate In determining bonus outcomes, the Committee the discretion of the Remuneration Committee. To performance metrics, for example Revenue, independently assesses performance conditions › Individual performance facilitate recruitment, the Remuneration Committee EBITDA, Earnings per Share, Return on Invested applicable to the annual bonus. The Committee has › Values performance may authorise ‘off-cycle’ awards. Capital or Total Shareholder Value. The initial the ability to exercise discretion when authorising grant under the 2020 LTIP vest (to the extent that outcomes under the Annual Bonus plan to adjust Bonus payment is contingent on achievement Awards will normally vest a third, a third, a third performance conditions are met) on the basis of outcomes upward or downward (including to of budgeted EBITDA (Earnings before interest, annually but will not be exercisable until the third one third, one third, one third annually. zero), taking account of company and individual tax, depreciation and amortisation). anniversary of their grant. Participants are not eligible performance and wider circumstances. for any dividends/ dividend equivalent payments on Achievement of threshold performance level The measures, weightings and operation are the award prior to the exercising of any award made. (90%) will ordinarily result in vesting of 90% reviewed and set by the Committee on an of the award, with 100% vesting for maximum Awards are subject to malus and clawback provisions performance, with straight-line vesting between
annual basis, including removing and changing Datalex performance measures to align with Company under the following circumstances where: 90% and 100%. and shareholders’ best interests, and any The vesting of LTIP awards is also subject to the
such changes will be clearly disclosed in the › there has been a material misstatement of the • Remuneration Committee being satisfied that the Remuneration Report on a retrospective basis. Group’s financial accounts; Annual Report 2020 Company’s underlying financial performance has › an Executive Director (as a participant) is guilty of shown a sustained improvement in the period gross misconduct or fraud; since the date of grant. › the Committee determines that the Company The measures, weightings and operation of the suffered reputational damage as a result of the LTI are reviewed and set by the Committee actions or inactions of an Executive Director (as
on an annual basis, including removing and •
a Participant).
changing performance measures to align with Directors' Report Company and shareholders’ best interests, and The clawback provision lasts for two years following any such changes will be clearly disclosed in the the vesting of an award. Remuneration Report. For future awards, the Committee has discretion The number of shares that may be issued under to implement a post-vesting holding period on the LTIP and any other discretionary employee any award. share plan (other than shares that may be issued under awards granted prior to the approval of the The scheme cannot be altered to the advantage LTIP under a historic share plan) is limited to 10% of the participants without the prior approval of of the aggregate issued ordinary shares of the shareholders in general meeting (except minor Company over a ten-year period. amendments to benefit the administration of the scheme, to take account of a change in legislation LTIP Awards are granted subject to performance or to obtain or maintain favourable tax, exchange conditions that will be determined by the control or regulatory treatment for participants in the Committee at the time of grant. Performance will scheme or for the company operating the scheme or normally be measured on an annual basis over for members of its group). the three year performance period. LTIP Awards will not form part of a participant’s pensionable earnings.
80 81 Element and link Operation Maximum Opportunity Remuneration for the Wider Business back or subject to a malus adjustment in the following circumstances: to strategy The Committee reviews wider colleague remuneration and related policies, aligning › there has been a material misstatement of SAYE incentives and rewards with the Group’s the Group’s financial statements; culture, and oversees any major benefits To align the interests The Save As You Earn ("SAYE") Scheme provides for All eligible employees who wish to participate › an Executive Director (as a participant) is structure changes. The Committee takes the of executives with grants of awards over Ordinary Shares in the form of must enter into a savings contract, to make guilty of gross misconduct or fraud; those of the Group’s options in conjunction with a formal saving scheme 36 monthly savings contributions. The current remuneration arrangements of employees shareholders and to with a qualifying institution. maximum individual savings contribution cannot generally into account when determining the › the Committee determines that the reflect the Group’s exceed €500 per month. Executive Directors arrangements for Executive Directors. For Company suffered reputational damage culture of long- The purpose of the SAYE Scheme is to support the may contribute up to this limit (or to the same example, base salary increases for Executive as a result of the actions or inactions of an term performance recruitment and retention of employees, align the limit as other colleagues if amended – for Directors will normally be aligned with increases Executive Director (as a Participant). based incentivisation interests of employees with those of the Group’s example, because of changes in legislation). awarded to the wider workforce. shareholders and provide employees with a vehicle At the end of the savings period, it is envisaged The annual bonus operates in exactly the same where they can purchase shares in Datalex in a tax that employees will have sufficient capital to Policy for Non-Executive Directors efficient manner. fund the exercise of the options and thus acquire way throughout the business, with the same the underlying shares. overall financial measures and targets. This Fees for Non-Executive Directors (excluding Employees of the Group, including Executive alignment plays an important role in the Group the Chairman) are determined by the Chairman Directors, are eligible to participate in the SAYE Each employee joining the SAYE Scheme will meeting its strategic goals. and the Executive Directors. No Director shall Scheme. The SAYE Scheme is an all employee be granted an option to acquire shares in the be involved in any decisions as to their own scheme and will be offered to all employees on Company, at market value. The number of Datalex employs over 130 people in 6 countries. remuneration. Levels of fees may be reviewed similar terms and is a Revenue approved plan for Irish shares subject to the option will be determined Remuneration arrangements across the from time to time during the policy period, tax purposes. at the time of grant and will be directly Group differ depending on the specific role having regard to any significant changes in the proportional to the level of savings to which being undertaken, the industry in which the size and scope of the role and the business, Datalex the employee commits. business operates, the level of seniority and the necessary time commitment, and material responsibilities, the location of the role and local changes in comparative market data for The number of shares that may be issued in market practice. similar roles. • respect of the SAYE Scheme or any other Annual Report 2020 discretionary employee share plan (other than Non-Executive Director remuneration levels were reviewed in December 2019 and changed shares that may be issued under awards granted Malus and Clawback Policy prior to the approval of the SAYE Scheme under so that, with effect from 1 January 2020 the fee a historic share plan) may not exceed 10% of the The Committee applies independent judgement paid to each Non-Executive Director is €50,000 issued ordinary share capital of the Company in and discretion when authorising outcomes per annum in respect of their services as any 10-year period. under the Annual Bonus plan and has the ability Directors and the Chairman is paid an annual fee to reduce the payout of any awards (including of €100,000 per annum. There was no change •
SAYE Options will vest in the ordinary course to zero) should the Committee consider it to the fees payable to Non-Executive Directors Directors' Report three years from the date of grant. appropriate to do so. during the year. The Non-Executive Directors fees paid in 2020 are outlined on page 87. SAYE Options shall be exercisable during the LTIP awards are subject to malus and clawback period commencing on the vesting date and provisions, which apply for two years following The Non-Executive Directors have letters ending six months following the vesting date. the vesting of a given LTIP award. The vesting of of appointment detailing the basis of their LTIP awards is also subject to the Remuneration appointment. The terms and conditions of Committee being satisfied that the Company’s appointment of Non-Executive Directors underlying financial performance has shown are available for inspection at the Company’s a sustained improvement in the period since registered office during normal business hours the date of grant. LTIP awards may be clawed and at the AGM of the Company.
Fees Operation Maximum Opportunity
A basic fee is paid for The remuneration of the Chairman No prescribed maximum annual Board membership. is determined by the Remuneration increase but benchmarking and Additional fees Committee for approval by the Board market practice will determine any are payable to the (excluding the Chairman). change in fees. Chairman. The remuneration of the other Non- Non-Executive Directors do not Executive Directors is determined by the participate in the Company’s Chairman and the Chief Executive Officer Annual Incentive and LTIP and for approval by the Board. do not receive any retirement benefits from the Company. The fees are reviewed from time to time, taking account of any changes in responsibilities and market practice
82 83 Policy on External Board Appointments If necessary, to facilitate an appointment, Policy for Leavers reasonable relocation benefits may be provided. The board recognises that there are benefits to The following table sets out how different elements of remuneration that would normally be treated for both the Group and Executive Directors serving Executive Directors whose service with the Group terminates: If an internal appointment is made, remuneration as non-executive board members for other arrangements awarded prior to promotion to companies. As such, Executive Directors are Executive Director level will continue to run in line Termination Salary Contractual Annual Bonus LTIP permitted to take on external appointments with the schedule and conditions determined at reason benfits with other companies, with the prior approval time of grant. (including of the Board. Any fees paid in respect of pension) these appointments are retained by the In circumstances where the Committee determines Executive Director. Resignation Paid to date of Paid to date of Eligibility ceases All unvested options that it is necessary for the recruitment of an or gross termination. termination. upon date notice will lapse immediately, Executive Director, additional cash and/or share- misconduct commences (date unless at its absolute based payments may be awarded to compensate of termination discretion the Remuneration Policy for Recruitment of the Executive Director for the forfeiture of incentive if summary Committee decides New Executive Directors awards made by the previous employer. In dismissal for gross otherwise. Vested determining any such ‘buy out’, the Committee will The Group’s policy when recruiting new Executive misconduct). options will become undertake a review of the awards that the individual Directors is to pay what is necessary to attract exercisable on will lose and consider the likelihood of the awards candidates with sufficient skills and experience to termination unless vesting should the candidate have remained in effectively deliver the Group’s strategy. termination is for gross their previous employment, the form in which they misconduct where were awarded and the time over which they would In doing so, the Committee will take into account vested but unexercised have vested. remuneration across the Group, including other options will lapse. Executive Directors, and that offered in similar
If it is determined that a buyout award is to be Datalex positions in the market and other companies of Injury/ill health, Paid to date Paid to date Eligible to be All unvested options made, the structure and level will be carefully similar size and complexity. disability, death, of termination. of termination. considered for a will vest (subject to designed by the Committee taking the above retirement (with bonus, normally the achievement
into account and will reflect and replicate the • The Committee will look to appoint new agreement of Note that in calculated on a of the performance
previous awards as accurately as possible in terms Annual Report 2020 Executive Directors with remuneration packages Datalex) the case of time pro-rata conditions) at of level and time horizon. Incentive buyouts will with the same structure and pay elements ill-health, salary basis. the end of the be liable to forfeiture or clawback in the event of as described in the Policy Table above, whilst will be paid in performance period. early departure. taking into account the individual circumstances full for the first (including current arrangements for internal 26 weeks of promotions, and compensation for loss of any absence. remuneration from a previous employer) of Service Contracts •
Negotiated Paid to date of Paid to date of Eligibility ceases All unvested options
candidates and existing Executive Directors. Directors' Report The Group’s policy is for Executive Directors to have Termination termination. termination. upon date of will vest (subject to rolling service contracts, with a notice period of termination, the achievement The maximum variable pay opportunity will be in six months. At its discretion, the Group may pay in however, the of the performance line with the above elements in the Policy table: lieu of notice, and the Committee will give careful Committee conditions) at consideration to any remuneration payable on any retains discretion the end of the › Annual Bonus: Maximum performance can termination of employment to minimise the total to override such performance period. result in 50% of salary being earned cost of severance to the business. outcomes. › LTIP: The maximum annual award level to individual executive directors is a face value The service agreements of the Executive Directors 100% of salary. are summarised in the table below: term interests and sustainability of the Group as Change of Control a whole or to assure its viability. In the event of a reorganisation or takeover, LTIP awards will automatically vest. Any such derogation would only be undertaken in exceptional circumstances, and whereby not doing so, would result in significant detrimental Name Contract Effective Notice Period Notice Period impact to the Group and/or shareholders. Derogation from the Policy Date (Director) (Company) Under any such derogation, the Committee The Policy will operate for a four-year period would have the ability to vary any part of the Sean Corkery 15 July 2020 6 months 6 months or until an amended Remuneration Policy is Remuneration Policy (as described above), Niall O’Sullivan 4 June 2019 6 months 6 months put to shareholders for approval. In line with and its implementation to mitigate against the European Union (Shareholders’ Rights) any significant detrimental forces. If such a Regulations 2020, the Committee may derogate circumstance were to apply, the Company would from this policy where doing so is necessary in commit to disclosing to shareholders as soon as exceptional circumstances, to serve the long- practicably able to do so.
84 85 Non-Executive Director Remuneration Payments 2020
Annual Non-Executive Director Base Fee Chair Fee Total 2019 Total % change in US$’000 US$’000 US$’000 US$’000 remuneration 2020 vs 2019 Report on (annualised) John Bateson 55 - 55 54 2% Remuneration David Hargaden - 112 112 16 4% Christine Ourmieres-Widener 55 - 55 13 -
Mike McGearty 55 - 55 4 -
Peter Lennon 55 - 55 54 2%
No changes were proposed or made to Non-Executive Director fees during 2020. The following section sets out our Annual Report on Remuneration, outlines decisions made by the Remuneration Committee in relation to Directors’ remuneration in respect of 2020 and how the In line with the requirements of the European Union (Shareholders’ Rights) Regulations 2020, the table Committee intends to apply the 2020 Remuneration Policy for in 2021. The 2020 Remuneration Policy below shows the year on year change and percentage change in Directors’ remuneration and the year was approved following an advisory shareholder vote at the Annual General Meeting (‘AGM’) of the on year change and percentage change in the average remuneration of employees during the year Company held in September 2020. This Annual Report on Remuneration will be subject to an advisory ended 31 December 2020 compared to the year ended 31 December 2019. shareholder vote at the 2021 AGM of the Company.
The information on pages 86 to 91 has been audited. Datalex Average remuneration on an FTE basis of employees of the Group
2020 2019 • Summary Annual Report 2020 Average remuneration per FTE employee (1) US$95.1k US$97.3k Component Sean Corkery – CEO Niall O’Sullivan - CFO US$ US$ Percentage change versus prior year (2%) -
Salary 2020(1) 367,000 304,000 Company Performance Pension Contributions 2020 28,000 25,000 Loss after tax US$6.5m US$12.1m • Annual Bonus 2020 - - Percentage change versus prior year 46% - Directors' Report LTIP Vesting 2020 - - (1) Average employee remuneration is calculated as the sum of wages and salaries, retirement benefit costs and (2) (2) LTIP Awards Granted 2020 181% of salary 186% of salary other staff expense but excluding those costs related to directors of Datalex plc. Social security costs and voluntary redundancy payments are not included. Divided by the average number of staff for the Group on a full time (1) The salary in 2020 includes a salary waiver as a result of the 4 day working week implemented as a response equivalent basis excluding directors of Datalex plc to COVID-19. (2) Calculated by reference to the number of options awarded multiplied by the market price of shares of Datalex plc on the date of grant. As described in the resolution proposing the Remuneration Policy at the 2020 AGM, the Board, 2020 Annual Bonus › Company Financial performance on recommendation of the Remuneration Committee, awarded options to the CEO and CFO were made in the recruitment of those directors and therefore were in excess of 100% of salary. Executive Directors participate in an annual › Individual performance performance incentive scheme based on a › Values performance combination of individual objectives and Group performance targets. The maximum annual Executive Director Remuneration Payments 2020 Bonus payment is contingent on achievement bonus award level for Executive Directors under of budgeted EBITDA. the plan is 50% of salary. Fixed Pay Incentive Pay For the year ending 31 December 2020 the The measures, weightings and operation are Executive Full Base Pension Other Annual Annual % change in Executive Directors and targeted employees reviewed and set by the Committee on an Director Year Salary Contribution Benefits Incentive Incentive annualised met their bonus performance targets, however annual basis, including removing and changing (payable in cash) (options) remuneration due to the impact of the COVID-19 pandemic performance measures to align with Company on the financial performance of the Group it was Sean 2020 367 28 - - - - and shareholders’ best interests, and any decided that no discretionary cash bonuses be Corkery such changes will be clearly disclosed in the 2019(1) 299 7 - - - - paid or accrued in respect of 2020. Remuneration Report on a retrospective basis. In Niall 2020 304 25 64 - - - 2020 Annual Bonus awards were subject to the O’Sullivan following performance measures: 2019(1) 185 14 32 - - -
(1) Sean Corkery and Niall O'Sullivan were appointed on 12 April 2019 and 4 June 2019 respectively.
86 87 The breakdown and resulting bonus outcomes for 2020 for the Executive Directors were: Directors’ & Secretary’s Interests in the Long-Term Incentive Plan Details of outstanding share awards, with performance conditions, granted to the Directors and the Maximum Incentive 2020 Bonus Company Secretary under the 2020 LTIP are set out below: (% of Salary) (% of Salary) At 1 Jan 20 Granted during At 31 Dec 20 Exercise Date Exercisable Expiry Sean Corkery 50% - the year Price of Award Date Date
Niall O’Sullivan 50% - Sean Corkery
- 1,000,000 1,000,000 €0.55 2 December 2 December 2 December During the year ended 31 December 2020, a contractual commitment to Niall O'Sullivan of US$58k 2020 2023 2025 (2019: US$27k) was incurred. Niall O’Sullivan
- 850,000 850,000 €0.55 2 December 2 December 2 December Long Term Incentives 2020. Sean Corkery was granted an award 2020 2023 2025 equivalent to 185% of salary to recognise his The purpose of the Company’s Long Term appointment as CEO given that no awards had Incentive Plan is to align the interests of Neil McLoughlin been made since he joined the Company in executives with those of the Group’s shareholders 2019. Niall O’Sullivan was granted an award - 250,000 250,000 €0.55 2 December 2 December 2 December and to reflect the Group’s culture of long-term equivalent to 190% of salary to recognise his 2020 2023 2025 performance based incentivisation. appointment as CFO given that no awards had been made since he joined the Company No shares were exercised or lapsed during the year. in 2019. 2020 LTIP Performance Criteria and Vesting Datalex Awards under The Datalex PLC Long Term Directors’ & Secretary’s Interests in Ordinary Share Capital LTIP Awards are granted subject to performance Incentive Plan 2020 ("LTIP 2020") are designed The interests of the Directors and Company Secretary who held office at 31 December 2020 in the conditions that will be determined by the
to align the interests of the Executive Directors issued ordinary share capital of the Company are set out in the table below. The interests disclosed • Committee at the time of grant. Performance will
with those of shareholders and reward the below include both direct and indirect interests in shares. Annual Report 2020 normally be measured on an annual basis over delivery of long-term strategic performance the three-year performance period. objectives and the creation of shareholder value Director and Secretary No. of Ordinary No. of Ordinary through the execution of strategy. The 2020 LTIP shall, subject to the terms of this Shares at 31 Shares at 31 Award Agreement and the rules of the Plan, vest December 2020 December 2019 Awards will normally vest one third annually as follows: over three years but will not be exercisable until John Bateson - - • the third anniversary of their grant. Participants David Hargaden 164,166 -
› one-third shall vest on the achievement of Directors' Report are not eligible for any dividends or dividend the performance conditions for 2020; equivalent payments on the award prior to the Christine Ourmieres-Widener - - exercising of any award made. › one-third shall vest on the achievement of Mike McGearty - - the performance conditions for 2021; In 2020, the Company made the first award Sean Corkery 500,000 - › one-third shall vest on the achievement of under the LTIP 2020 and in accordance with the the performance conditions for 2022; Peter Lennon 325,935 325,935 Remuneration Policy approved by shareholders in September 2020. Niall O’Sullivan - - The 2020 LTIP performance conditions and performance against those targets Neil McLoughlin 100,000 - Awards were made to both of the Executive were as follows: Directors, along with other key employees in There have been no changes to the Directors’ or Secretary’s interests outlined above between the year- end date and the date of approval of the consolidated financial statements. Performance condition Revenue EBITDA The table below sets out the percentage of base salary held in shares in the Company by the current Weighting 50% 50% Executive Directors as at 31 December 2020. Definition Achievement as against the Achievement as against the Revenue Target for 2020. EBITDA Target for 2020. Executive Director % of base salary(1)
Vesting level Below 90% of Revenue target, Below 90% of EBITA target, none Sean Corkery 109% none of the Award shall vest. of the Award shall vest. Between Niall O’Sullivan - Between 90% and 100% of 90% and 100% of EBITDA target, Revenue target, straight line straight line vesting shall occur. vesting shall occur. (1) Calculated by reference to the Datalex plc closing share price on Euronext Dublin on 31 December 2020 Retirement Benefits Vesting level for 2020 100% 100%
88 89 Pensions for Executive Directors are provided Historical Incentive Plans Remuneration Policy Implementation in 2021 under a defined contribution pension scheme. During 2020, there were two Directors 2012 Share Option Plan A summary of how the Remuneration Policy will be applied in 2021 is set out below. The Committee has who are members of the Company defined The Datalex Share Option Plan 2012 (“2012 considered the balance and metrics of each element of remuneration for the Executive Directors and contribution pension scheme (2019: four). Plan”) was approved by shareholders on 6 believe that they are appropriate for the scale of the Company whilst reflecting evolving market practice February 2012. Each option award currently and shareholder views. The total contributions accrued under the outstanding under the 2012 Plan has been scheme at 31 December 2020 for Sean granted subject to performance conditions Salary Corkery was US$2,684 (2019: US$2,458) relating to the achievement by the Group of The base salary of the CEO and CFO are detailed below. and for Niall O’Sullivan was US$2,224 Adjusted EBITDA and cash performance targets, (2019: US$1,813). as established by the Remuneration Committee, Executive Director 1 January 2021 1 January 2020 in the three-year period commencing on grant (US $'000) (US $'000) date, with each condition applicable to one third, respectively, of the number of options subject Sean Corkery 398 398 Payments for Loss of Office to the award. No options have been granted to Niall O’Sullivan 330 330 No payments for loss of office were made the Directors under the 2012 Plan. Please refer to during the year under review. Note 13 for further information. Annual Bonus Metrics Joint Share Ownership Plan As at the date of this Annual Report, due to the continued impact of COVID-19 on the financial The Board approved the establishment of the performance of the Group and the current ongoing uncertainty, the Company does not expect that a Payments to Past Directors Datalex Joint Share Ownership Plan (“JSOP”) performance related discretionary cash bonus will be paid to the Executive Directors in respect of 2021. There were no payments to former Directors in January 2012. The JSOP was intended to during the year. incentivise senior management in the Group This position may be reviewed should market conditions improve over the course of 2021 and in such (excluding Executive Directors) towards the an event the maximum annual bonus award level for Executive Directors under the plan in 2021 will be achievement of challenging Adjusted EBITDA 50% of salary. Any bonus payment would be contingent on achievement of budgeted EBITDA. Datalex and cash performance targets, as established by Directors’ and Secretary’s Interests in Shares the Remuneration Committee. Key members of 2020 LTIP Performance Metrics for 2021 • Directors are encouraged to acquire and the Group’s senior management (excluding the The 2021 Performance Criteria for the 2020 LTIP Award have been set as follows: maintain equity stakes in the Company to Executive Directors) acquired interests under the Annual Report 2020 strengthen the alignment of interests between plan in January 2012. Please refer to Note 13 for Revenue EBITDA Relative Total Shareholder the directors and the shareholders. further information. Return (“RTSR”)
The Directors and Secretary (including the 2015 Long Term Incentive Plan Weighting 33% 33% 34% interests of spouses and minor children), who A Long-Term Incentive Plan (the “2015 LTIP) was Definition Achievement as against Achievement as against Achievement as against were in office at 31 December 2020, and approved by shareholders at the 2015 AGM. The the Revenue Target for 2021 the EBITDA Target for 2021 the RTSR Target for 2021 •
their families, had the following beneficial LTIP was intended to enable the retention and Directors' Report interests in the share capital of Datalex plc at 31 reward of key employees and operated under Vesting Below 90% of Revenue target, Below 90% of EBITA target, Below 90% of RTSR target, December 2020 similar terms to the Company’s Share Option Level none of the Award shall vest. none of the Award shall vest. none of the Award shall vest. Plan, with vesting of cash bonuses based on Between 90% and 100% of Between 90% and 100% of Between 90% and 100% the achievement of non-market performance Revenue target, straight line EBITDA target, straight line of RTSR target, straight line conditions over a three-year period. The Group vesting shall occur. vesting shall occur. vesting shall occur. granted awards under the Plan in 2016, 2017 and 2018. No awards were granted under this The 2022 Performance Criteria will be established by the Remuneration Committee and communicated plan in 2020 or 2019. The final payment on the to shareholders in 2022. 2015 LTIP was made during 2020 and no further balance is outstanding. Pension The pension contributions for the CEO and CFO are in line with the general workforce. No changes are proposed in 2021.
Shareholders Vote on Remuneration In 2020, a resolution to approve the Remuneration Policy was put to shareholders at the Company’s AGM. Details of the votes case are set out below.
Vote Total votes Total votes Total votes Total cast for against abstentions
Advisory vote on 2020 Annual 47,781,572 47,152,600 628,972 2,779 Report on Remuneration
At the 2021 AGM the Company intends to propose its 2020 Remuneration Report to shareholders.
90 91 third calendar year before the current year shall Employees retire by rotation. However, in accordance with The Group’s employees continue to be its the requirements of the Governance Code, all Directors' most valuable asset and the health and safety Directors will retire and will offer themselves for of its employees is of particular importance re-election at the AGM in 2021. to the Board. The provision of a safe working Report environment amid COVID-19 is of paramount importance to the Group. As a result, the Board Directors’ and Secretary’s Interests has formed a COVID-19 Business Continuity Task Force to ensure that the Group responds and acts Details of the Directors’ and Company appropriately during this dynamic and evolving Secretary’s share interests and interests in situation. Flexible working arrangements have unvested share awards of the Company are set been instigated to facilitate employee safety whilst out in the Remuneration Committee Report, maintaining high levels of customer delivery and which is incorporated by reference into this support. Please see Note 20 to these consolidated Directors Report, on page 89. financial statements for details of our average number of employees.
Corporate Governance The Directors’ Statement on Corporate Share Capital Governance on pages 48 to 59 sets out As at 31 December 2020 and 2019, the the Group’s application of the principles Company’s authorised share capital comprised and compliance with the provisions of the US$10,494,000, divided into 100,000,000
Governance Code, published by the Financial Datalex ordinary shares of US$0.10 each, representing Reporting Council in July 2018 and the Irish The Directors present their report to the shareholders with the audited 95.3% of the total share capital value, 3,000,000 Corporate Governance Annex, published financial statements for the year ended 31 December 2020. ‘A’, and 1,500,000 ‘B’ convertible redeemable by Euronext Dublin and forms part of this • shares of US$0.10 each, representing 4.3% of
Directors’ Report. Annual Report 2020 the total share capital value and 30,000 deferred shares of €1.269738 each, representing 0.4% of the The Company’s Annual General Meeting (“AGM”) total share capital value. affords shareholders the opportunity to question Principal Activity, Review of Business and Dividends the Chairman and the Board. A description of Future Development At 31 December 2020, the Company had The Board of Directors is not recommending the rights of shareholders is set out in Note 12 82,153,842 ordinary shares in issue (31 December The principal activity of the Group (which that a dividend be paid in respect of the year to these consolidated financial statements. 2019: 81,983,842), including 430,000 ordinary •
consists of Datalex plc and its subsidiary ended 31 December 2020 (2019: US$nil cents Attendance of, and questions from, shareholders
shares that were held by The Datalex Employee Directors' Report companies as listed in Note 28 to the per share). at the Company’s AGM are welcomed by the Benefit Trust at that date (31 December 2019: consolidated financial statements) is the Board. The AGM also provides an opportunity 430,000). The ordinary shares are listed on the development and sale of a variety of direct for the Board to deliver presentations on the regulated market of Euronext Dublin. The rights and indirect distribution and retailing software business to shareholders, both institutional Directors and Secretary attaching to these shares are set out in the notes products and solutions to the airline industry. and private. to these consolidated financial statements, in Shareholders are referred to the Chairman’s The names of the persons who were Directors particular Note 12 and are deemed to form part Statement, Chief Executive Officer's Review, the at any time during the year ended 31 December of this report. Financial and Operational Review and the Risk 2020, and up to the date of this report, and a Principal Risks and Uncertainties Report which contain a review of operations and biographical note on each appear on pages 44 the financial performance of the Group for 2020, and 45. The Company Secretary’s details are set Under Irish law (Regulation 5(4)(c)(ii) of the outlook for 2021 and the key performance out in the Executive Leadership Team on page 47. the Transparency (Directive 2004/109/Ec) General Meetings indicators used to assess the performance of the Regulations 2007), the Group is required to The Company’s Annual General Meeting (“AGM”) Group. These are deemed to be incorporated in In accordance with the provisions contained in give a description of the principal risks and affords shareholders the opportunity to meet and the Directors’ Report. the 2018 UK Corporate Governance Code (the uncertainties which it faces. The principal ask questions of the Chairman and the Board. “Governance Code”), all Directors retired at the risks and uncertainties reflect our competitive The notice of the Annual General Meeting, the Annual General Meeting of the Company on 24 environment and the operating characteristics Form of Proxy and the Annual Report are issued September 2020 and, being eligible, offered of our industry and a summary of these risks Results for the Year to shareholders at least 21 clear days before the themselves for re-election, and all were re- and uncertainties, together with details of how meeting. At the meeting, resolutions are usually The Consolidated Statement of Profit or Loss elected to the Board on the same day. they are managed, is set out in the Risk Report voted on by a show of hands of those shareholders and Other Comprehensive Income for the year on pages 34 to 37 and which is incorporated by attending, in person or by proxy. After each ended 31 December 2020 and the Consolidated The constitution of the Company contains reference into this Directors Report. resolution has been dealt with, details are given of Statement of Financial Position at that date are provisions regarding the appointment and the level of proxy votes cast on each resolution and set out on pages 111 and 110 respectively. The retirement of Directors. At the Annual General Details of the financial risks to which the Group’s the number of votes for, against and withheld. If Group’s loss for the year ended 31 December Meeting (AGM) each year at least one-third operations are exposed and an understanding of validly requested, resolutions can be voted by way 2020 was US$6.5m (2019: US$12.1m). of the board shall retire by rotation and each how these risks are managed are set out in Note of a poll whereby the votes of shareholders present Director who has not been appointed or re- 31 to the consolidated financial statements. and voting at the meeting are added to the proxy appointed at or before the AGM held in the
92 93 votes received in advance of the meeting and the A shareholder, or a group of shareholders, At 31 December 2020 At 28 April 2021 total number of votes for, against and withheld holding at least three percent of the issued for each resolution are announced. Details of share capital of the Company, has the right Name of Holder Number of % of issued Number of % of issued proxy votes received are made available on the to put an item on the agenda or to table a US$0.10 share capital US$0.10 share capital Company’s website following the meeting. draft resolution for inclusion on the agenda ordinary shares ordinary shares of a general meeting, subject to any contrary All other general meetings of the Company are are provision in Irish Company Law. IIU Nominess Limited 24,503,981 29.8% 24,503,981 29.8% called Extraordinary General Meetings (“EGMs”). An Pageant Investments Limited 5,145,000 6.3% 5,145,000 6.3% EGM called for the passing of a special resolution The business of the Company is managed by must be called by providing at least 21 clear days’ the Board who may exercise all the powers Nick Furlong 2,670,936 3.3% 2,670,936 3.3% notice. Provided shareholders have passed a of the Company as are not by the Act or by special resolution at the immediately preceding the Articles required to be exercised by the Annual General Meeting and the Company allows Company in the general meeting. Matters Except as disclosed above, the Company has employment of suitably qualified accounting shareholders to vote by electronic means, an EGM reserved by the Act to the shareholders in the not been notified of any other interest of 3% or personnel and the maintenance of appropriate to consider an ordinary resolution may, if the Board general meeting include: more in its issued ordinary share capital nor is it accounting systems. The accounting records deems it appropriate, be called by providing at least aware of any person who directly or indirectly, are kept at the Company’s registered office in › Election of Directors; 14 clear days’ notice. jointly or severally, exercises or could exercise Block U, EastPoint, Clontarf, Dublin 3, D03 › Payment of dividends; control over the Company. H704, Ireland. A quorum for a general meeting of the Company › Appointment of external auditors; is constituted by three or more shareholders present in person or by proxy and entitled to › Amendments of the Constitution; Subsidiary Companies Going Concern And Longer-Term Viability vote. The passing of resolutions at a meeting of › Measures to increase or reduce the share the Company, other than special resolutions, The information required by the Companies The Directors’ statements on going concern and capital; and
requires a simple majority. The Company’s Articles Act, 2014 in relation to subsidiary undertakings longer term viability are included in the Risk Datalex of Association provide that the Chairman has a › Authority to issue shares. is provided in Note 28 to these consolidated Report on page 34 and Note 2.5 in the financial casting vote in the event of a tie. To be passed, a financial statements. statements.
special resolution requires a majority of at least •
75% of the votes cast. Shareholders have the right Annual Report 2020 EGMS Held in 2020 and 2021 to Date to attend, speak, and ask questions and vote at Accounting Records Information Required to be Disclosed by general meetings. A member entitled to attend, › In February 2020 shareholders approved the Euronext Dublin Listing Rule LR 6.1.77 speak and vote at a general meeting is entitled election of David Hargaden, Mike McGearty The Directors are responsible for ensuring that to appoint a proxy to attend, speak and vote on and Christine Ourmières-Widener to adequate accounting records are maintained by For the purposes of LR.6.1.77, the information his or her behalf. A proxy need not be a member the Board. the Group. The Directors believe that they have required to be disclosed by LR 6.1.77 can be of the Company. Under the Act, the Company complied with this requirement through the found at the following locations: › In September 2020 shareholders approved •
must answer any question a member asks relating
a related party transaction. Directors' Report to the business being dealt with at the general meeting unless: (i) answering the question › In February 2021 shareholders approved the Section Topic Location would interfere unduly with the preparation for CSD Migration. the general meeting or the confidentiality and 1 Interest capitalised Note 14 business interests of the Company; (ii) the answer 2 Publication of unaudited financial information Not applicable has already been given on a website in the form Constitution of an answer to a question; or (iii) it appears to the 3 Small related party transactions Remuneration Report and Note 29 Chairman of the meeting that it is undesirable in The Company’s Constitution sets out the the interests of good order of the meeting that the objects and powers of the Company and may 4 Details of long-term incentive schemes Remuneration Report and Note 15 question be answered. be amended by a special resolution passed by the shareholders at a general meeting of 5 Waiver of emoluments by Directors Remuneration Report In accordance with Irish Company Law, the the Company. Jun-14 Sections 6 – 14 of listing rule 6.1.77 Not applicable Company specifies record dates for general meetings, by which date shareholders must be registered in the register of members of the All information cross-referenced above is hereby incorporated by reference into this Directors’ Report. Substantial Holdings Company to be entitled to attend. Record dates are specified in the notice of general meeting. As at 31 December 2020 and 28 April 2021 Shareholders may exercise their right to vote (being the latest practicable date before by appointing a proxy/proxies, by electronic approval of this Annual Report), the Company means or in writing, to vote some or all of their had been notified of the following details of shares. The requirements for the receipt of interests of over 3% in the ordinary share valid proxy forms are set out in the notice of capital of the Company. general meeting. A shareholder, or a group of shareholders, holding at least five percent of the issued share capital of the Company, has the right to requisition a general meeting.
94 95 Takeover Regulations Political Donations Audit & Risk Committee With the exception of change of control The Group and the Company did not make any The Company has an Audit & Risk Committee, provisions in the loan facility agreement with political donations during the year ended 31 details of which have been included on pages Tireragh Limited, the Company is not party to any December 2020 (2019: US$nil). 64 to 73. significant agreements that would take effect, alter or terminate upon a change of control following a takeover bid other than if an airline Development Activities Information to the Auditor was to take a controlling stake in the Group, which then could result in the termination of certain The Group actively engages in research and The Directors in office at the date of this report revenue contracts. If certain change of control development activities relevant to its business. have each confirmed that: events occur, Tireragh Limited have the right to Expenditure on research and development cancel the loan facility and require Datalex to amounted to US$1.4m in 2020 (2019: › As far as they are aware, there is no relevant repay all outstanding loans together with accrued US$1.8m), of which US$1.1m (2019: US$0.1m) audit information of which the Company’s interest, and all other amounts, if any. The was capitalised as development expenditure as auditor is unaware; and Company does not have any agreements with disclosed in Note 5 to the financial statements. › They have taken all the steps that they any Director or employee that would provide ought to have taken as Directors in compensation for loss of office or employment Details of development expenditure are also order to make themselves aware of any resulting from a takeover except that provisions discussed in the CEO Statement and the relevant audit information and to establish of the Company’s Employee Share Option Financial and Operational Review. that the Company’s auditor is aware of Schemes and Long-Term Incentive Plan may that information. cause options and cash awards, respectively, granted to employees under such schemes to Directors’ Compliance Statement
vest in the event of a takeover. Datalex It is the Company's policy to comply with its Auditor relevant obligations (as defined by Section The Board, pursuant to a process to appoint
225(2)(a) of the Companies Act 2014). The • Transparency Regulations an auditor for the year ending 31 December
Directors have drawn up a compliance policy Annual Report 2020 2019, appointed Deloitte on 31 December 2019. As required by 277/2007 “Transparency (Directive statement (as defined in section 225(3)(a) of the The auditor, Deloitte, will continue in office in 2004/109/EC) Regulations 2007” concerning Companies Act 2014) and arrangements and accordance with the provisions of Section 383 the development and performance of the Group, structures are in place that are, in the Directors’ of the Companies Act 2014. the following sections of this Annual Report opinion, designed to secure material compliance shall be treated as forming part of this Directors’ with the Company’s relevant obligations. The As required under Section 381 (1)(b) of the Report: The Chairman’s Statement on pages 4 to Directors confirm that these arrangements Companies Act 2014, a resolution authorising •
7, the Chief Executive Officer’s Review on pages and structures were reviewed during the
the Board to determine the remuneration of the Directors' Report 8 to 11 and the Financial and Operational Review financial year. auditor will be proposed at the 2021 AGM. on pages 26 to 33, The Corporate Governance Report on pages 48 to 59. The Principal Risks As required by Section 225(2) of the Companies and Uncertainties on page 93, details of Earnings Act 2014, the Directors acknowledge that they Per Share in note 25 and details of the Capital are responsible for the Company’s compliance Approval of Financial Statements Structure of the Company in note 12. with the relevant obligations. In discharging their The financial statements were approved by responsibilities under Section 225, the Directors the Board on 28 April 2021. relied on the advice both of persons employed by the Company and of persons retained by Subsequent Events Signed on behalf of the Board the Company under contract, who they believe Information in respect of events since the year have the requisite knowledge and experience Sean Corkery Niall O'Sullivan end is contained in note 32 to the consolidated to advise the Company on compliance with its Chief Executive Officer Chief Financial Officer financial statements. relevant obligations.
96 97 Directors’ Responsibilities Statement
The Directors are responsible for the Directors’ Responsibilities for › Prepare the Group and Company financial maintenance and integrity of the corporate and Financial Statements statements on the going concern basis unless financial information included on the Company’s it is inappropriate to presume The Directors are responsible for preparing the website www.datalex.com. Legislation in the that the Group and Company will continue in Directors’ Report and the Group and Company Republic of Ireland governing the preparation business. financial statements in accordance with Irish law. and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors are also required by applicable law
Irish law requires the Directors to prepare Group Datalex and the Listing Rules issued by Euronext and Company financial statements for each Each of the Directors, whose names and Dublin, to prepare a Directors’ Report and financial year. Under that law, the Directors functions are listed on pages 44 and 45 of the reports relating to Directors’ remuneration
have prepared the Group financial statements Annual Report confirms that, to the best of • and corporate governance.
in accordance with International Financial each person’s knowledge and belief: Annual Report 2020 Reporting Standards (“IFRS”) as adopted In accordance with the Transparency by the European Union and Article 4 of the › The Group and Company financial (Directive 2004/109/Ec) Regulations 2007 IAS Regulation and elected to prepare the statements, prepared in accordance with (the “Transparency Regulations”), the Directors Company Financial Statements in accordance IFRS as adopted by the European Union, are required to include a management report with IFRS as adopted by the European Union, give a true and fair view of the assets, containing a fair review of the business as applied in accordance with the provisions of liabilities and financial position of the and a description of the principal risks and •
the Companies Act 2014. Company and the Group and of the loss
uncertainties facing the Group. Directors' Report of the Group; Under Irish law the Directors shall not approve The Directors are responsible for keeping › The Directors’ Report contained in the the Group and Company financial statements adequate accounting records that are sufficient to: Annual Report includes a fair review of unless they are satisfied that they give a true the development and performance of the and fair view of the Group and Company’s › Correctly record and explain the transactions business and the position of the Company assets, liabilities and financial position as at the of the Company; and Group, together with a description of end of the financial year and of the profit or loss the principal risks and uncertainties that of the Group for the financial year and otherwise › Enable, at any time, the assets, liabilities, they face; and comply with the Companies Act 2014. financial position and profit or loss of the Company and the Group to be determined › The Directors consider that the Annual In preparing these Group and Company financial with reasonable accuracy; Report and Group and Company financial statements, the Directors are required to: statements, taken as a whole, is fair, › Enable the Directors to ensure that the Group balanced and understandable and provides and Company financial statements comply › Select suitable accounting policies and then the information necessary for shareholders with the Companies Act 2014 and as regards apply them consistently; to assess the Company’s and the Group’s the Group Financial Statements Article 4 of position, performance, business model › Make judgements and estimates that are the IAS Regulation; and and strategy. reasonable and prudent; › Enable those financial statements to be › State whether the Group financial audited. The Directors’ Report for the purpose of the statements have been prepared in Transparency Directive (Directive 2004/109/EC) accordance with IFRS as adopted by the The Directors are also responsible for Regulations 2007, the Central Bank (Investment European Union and ensure that they safeguarding the assets of the Group and Market Conduct) Rules 2019, the Companies Act contain the additional information required Company and hence for taking reasonable steps 2014 and the Listing Rules issued by Euronext by the Companies Act 2014 and as regards for the prevention and detection of fraud and Dublin consists of pages 43 to 99. the Company Financial Statements as other irregularities. applied in accordance with the provision of the Companies Act 2014; and
98 99 100 Financial Statements
101 Independent auditor’s report to the members of Datalex Plc
BASIS FOR QUALIFIED OPINION REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS We were appointed auditors of Datalex plc (“the Company”) during 2019 to audit the financial statements for the financial QUALIFIED OPINION year ended 31 December 2019. In conducting that audit, in light of the disclaimer of audit opinion for the year ended 31 In our opinion, except for the possible effects on the December 2018, and the substantial changes in management comparative figures of the matter described in the basis for during 2019, we were unable to obtain sufficient appropriate qualified opinion section of our report, the Group and Parent audit evidence over the opening balances as at 1 January 2019 Company financial statements: and the associated allocation of income and expenses between the financial years ended 31 December 2018 and 31 December › give a true and fair view of the financial position of the Group 2019. As a result, we disclaimed our audit opinion on the and Parent Company as at 31 December 2020, and of the financial statements for the year ended 31 December 2019. loss of the Group for the financial year then ended; and Our opinion on the current year’s financial statements is also › have been properly prepared in accordance with the relevant modified because of the possible effect of this matter on the financial reporting framework and, in particular, with the comparability of the current year’s figures and the comparative requirements of the Companies Act 2014 and, as regards the figures. In addition, the effect of this would also impact the Group financial statements, Article 4 of the IAS Regulation. discussion of financial performance in any other information contained within the Annual Report, which includes the The financial statements we have audited comprise: directors report and corporate governance disclosures. The Group financial statements: We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable › the Consolidated Statement of Financial Position; law. Our responsibilities under those standards are described › the Consolidated Statement of Profit and Loss; below in the “Auditor’s responsibilities for the audit of the financial › the Consolidated Statement of Comprehensive Income; statements” section of our report. › the Consolidated Statement of Cash Flows; › the Consolidated Statement of Changes in Equity; and We are independent of the Group and Parent Company in › the related notes 1 to 34, including a summary of significant accordance with the ethical requirements that are relevant to accounting policies as set out in note 2. our audit of the financial statements in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting The Parent Company financial statements: Supervisory Authority (IAASA), as applied to public interest entities, and we have fulfilled our other ethical responsibilities in › the Company Statement of Financial Position; accordance with these requirements. › the Company Statement of Cash Flows; › the Company Statement of Changes in Equity; and We believe that the audit evidence we have obtained › the related notes 1 to 34, including a summary of significant is sufficient and appropriate to provide a basis for our accounting policies as set out in note 2. qualified audit opinion. The relevant financial reporting framework that has MATERIAL UNCERTAINTIES RELATING TO GOING CONCERN been applied in the preparation of the Group and Parent Company financial statements is the Companies Act 2014 In auditing the financial statements, we have concluded that and International Financial Reporting Standards (IFRS) as the directors’ use of the going concern basis of accounting in the adopted by the European Union (“the relevant financial preparation of the financial statements is appropriate. reporting framework”). We draw your attention to Note 2.5 in the financial statements, which indicates that the Group incurred a loss of US$6.5m for the financial year ended 31 December 2020, and, at that date had net current liabilities and net liabilities of US$23.0m and US$23.7m respectively. As stated in Note 2.5, the COVID-19 pandemic has had a significant adverse impact on the aviation industry to date and there remains uncertainty as to when the industry will recover from it, this indicates that a material uncertainty exists that may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern.
102 Furthermore, the ability of the Group and Parent Company In relation to the reporting on how the Group has applied the to continue as a going concern is dependent on continuing UK Corporate Governance Code, we have nothing material to support from Tireragh Limited (a company ultimately add or draw attention to in relation to: beneficially owned by Mr.Dermot Desmond, also a substantial shareholder in the Parent Company via IIU Nominees Limited), › the directors’ statement in the financial statements about to extend the repayment date of the existing debt facilities whether the directors considered it appropriate to adopt the out to 30 September 2022, and successfully implementing going concern basis of accounting; and its revenue growth and cost containment strategies. This debt › the directors’ identification in the financial statements of facility extension would be subject to independent shareholder the material uncertainties related to the Group’s and Parent approval as a related party transaction under Euronext Company’s ability to continue as a going concern over a Dublin Listing Rules. period of at least twelve months from the date of approval of the financial statements. Cash flow projections prepared by the directors (subject to obtaining a successful rescheduling of the repayment date on Our responsibilities and the responsibilities of the directors with the existing debt facility, as noted above) indicate that the funds respect to going concern are described in the relevant sections available are sufficient to meet the obligations of the Group and of this report. Parent Company for a period of at least twelve months from the date of approval of the financial statements. ● Summary of our audit approach
As stated in Note 2.5, these events or conditions, along with ● Key audit matters the other matters as set forth in Note 2.5, indicate that material uncertainties exist that may cast significant doubt on the The key audit matters that we identified in the current Group’s and Parent Company’s ability to continue as a going year were:
concern. Our qualified opinion is not modified further in respect › Revenue recognition; Datalex of this matter. › Exceptional items; › Management override of controls;
Our evaluation of the directors’ assessment of the Group’s › Capitalisation of developments costs; and •
and Parent Company’s ability to continue to adopt the going › Going concern (see ‘material uncertainties relating to going Annual Report 2020 concern basis of accounting included: concern’ section)
› obtaining an understanding of the Group’s relevant controls over the preparation of cash flow projections and approval ● Materiality of the projections and assumptions used in the cash flow The materiality for the Group that we used in the current year forecasts to support the going concern assumption and was US$145k which was determined on the basis of revenue, •
assessed the design and determined the implementation of
representing 0.5% of this benchmark (2019: US$224k, Independent auditor’s report these controls; representing 0.5% of revenue). › performing an assessment of the historical accuracy of forecasts prepared by management; The materiality for the Parent Company that we used in the › testing the clerical accuracy of the cash flow forecast model; current year was US$132k which was determined on the basis › engaging our internal specialists to assist in challenging the of third party debt representing 1% of this benchmark (2019: key assumptions used in the cash flow forecasts; US$114k, representing 1% of third party debt). › performing sensitivity analysis on the cash flow forecasts, including applying alternative reasonable downside scenarios, to assess the impact of a change in underlying ● Scoping assumptions on the Group and Parent Company’s ability to continue as a going concern; We determined the scope of our Group audit by obtaining an › assessing the financing facilities including nature of facilities, understanding of the Group and its environment, including repayment terms and covenants; Group-wide internal financial controls, and assessing the risks › assessing the letter of intention of support received by of material misstatement at the Group level. the Group from Mr. Dermot Desmond, through his vehicle Tireragh Limited, which comprises a rescheduling of the Based on that assessment, we focused our Group audit repayment date of the existing debt facility out to 30 scope primarily on the audit work in 7 components. 5 of September 2022; and these were subject to a full audit, whilst the remaining 2 were › assessing the adequacy of the disclosures in the subject to audits of specified procedures where the extent of financial statements. our testing was based on our assessment of the associated risks of material misstatement and of the materiality of the component’s operations to the Group. Analytical review procedures were performed by the Group engagement team on all other components within the Group.
103 Capitalisation of development costs is a new key audit matter ● Significant changes in our approach in the current year. Capitalisation of development costs was Impact of COVID-19 on our audit approach identified as a key audit matter, as in determining the amount to be capitalised, the directors make judgements regarding The COVID-19 pandemic has had an impact on all elements expected future cash generation of the asset and expected of local and international economies. We have considered period of benefit. As a result, there is a risk that items are the impact of COVID-19 on the Group and Parent Company’s inappropriately capitalised prior to meeting the recognition business as part of our audit risk assessment and planning. criteria of IAS 38 ‘Intangible assets’ (‘IAS 38’). This assessment resulted in an increased audit scope on key audit areas including the consideration of changes in ● Revenue Recognition manual internal controls as a result of remote working by Datalex personnel and increased focus on the Group’s and Parent Company’s key judgement and estimates in relation ● Key audit matter description to future strategic plans and profitability forecasts which As described in Note 2.7, the Group derives a significant are key inputs into the Group’s and Parent Company’s going portion of its revenue from contracts containing multiple concern assessment. performance obligations, including fixed fee elements – Platform revenue and services revenue. Key audit matters Key audit matters considered in the prior year were broadly Professional service revenue contracts which remain open aligned with the items identified above, but also included at the financial year end involve key project milestones, and opening balances which are no longer relevant for the current ongoing uncertainties around expected costs to complete financial year. and the Group’s future obligations. This requires the exercise of significant judgement in the assessment of the extent of Capitalisation of development costs is a new key audit matter progress towards completion which is estimated by reference in the current year. Capitalisation of development costs was to labour hours incurred to date as a percentage of the total identified as a key audit matter, as in determining the amount estimated labour hours to service the project. Therefore, the to be capitalised, management make judgements regarding revenue, costs and gross profit realisation can vary during expected future cash generation of the asset and expected the execution and reassessment of these projects against the period of benefit. As a result, there is a risk that items are contracted project milestones. inappropriately capitalised prior to meeting the recognition criteria of IAS 38 ‘Intangible assets’ (‘IAS 38’). The application of IFRS15 requires the recognition of deferred contract fulfilment costs. Such costs represent those already incurred in executing and delivering contractual obligations KEY AUDIT MATTERS to customers for which the associated revenue has not been recognised at the statement of financial position date. Key audit matters are those matters that, in our professional Significant judgement is exercised in determining what type judgment, were of most significance in of expenditure meets the criteria for recognition as deferred contract fulfilment costs, in particular the amount of time our audit of the financial statements of the current financial incurred by staff and contractors on customer contracts. year and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, The Audit Committee’s discussion of this key audit matter is including those which had the greatest effect on: the overall set out on page 69. 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 ● How the scope of our audit responded to the key audit matter statements as a whole, and in forming our opinion thereon, We obtained an understanding of the revenue recognition and we do not provide a separate opinion on these matters. In process and assessed the design and determined the addition to the matter described in the ‘material uncertainty implementation of the relevant controls therein including related to going concern’ section, we have determined the how management determine the percentage of completion matters described below to be the key audit matters to be on customer contracts. As a result of the deficiencies communicated in our report. identified, primarily relating to management review controls and segregation of duties, we determined that a wholly Key audit matters considered in the prior year were broadly substantive approach was appropriate. aligned with the items identified above, but also included opening balances which are no longer relevant for the current We independently obtained confirmations from customers financial year. of the contracts in place during the year ended 31 December 2020. These customer confirmations validated the work order status as at the financial year end date and the completeness of the contracts.
104 We agreed the fixed fee amounts for each contract to ● Management override of controls the signed agreements and challenged the percentage of completion calculation by independently obtaining ● Key audit matter description confirmations from customers, confirming date of completion and inquiring of management (Team Lead, PMO, and We conducted an assessment of the fraud risks arising from Customer Manager) of the rationale behind determining the management override of controls by considering potential percentage of completion. areas where the Group and Parent Company’s financial statements could be manipulated, including: On a sample basis, we recalculated the revenue to be recognised in respect of the financial year ended 31 December › Inappropriate accounting estimates and judgements; 2020 and the related accrued/deferred revenue balances. › The posting of fictitious or fraudulent journal entries; or › Accounting for significant unusual transactions arising from On a sample basis, we recalculated the deferred contract changes to the business. fulfilment costs including agreement of rates to source contracts and invoices. We have considered the impact of COVID-19 on the Group and Parent Company’s business as part of our audit risk We evaluated the adequacy of disclosures as detailed in the assessment and planning, including the consideration of Note of the consolidated financial statements. changes in manual internal controls as a result of remote working by Datalex personnel and increased focus on ● Exceptional items the Group’s and Parent Company’s key judgement and estimates in relation to future strategic plans and profitability forecasts which are key inputs into the Group’s and Parent ● Key audit matter description Company’s going concern and capitalisation of development
As described in Note 2 (accounting policies, judgements and costs assessments. Datalex estimates) and Note 23 (exceptional items) to the financial statements, the Group classified a number of significant There are a number of areas requiring the application of
expenses totalling US$2.8m as exceptional items. These judgement and estimation techniques, such as revenue •
costs include professional fees in relation to the business recognition, capitalisation of development costs, classification Annual Report 2020 transformation programme and litigation procedures, and of exceptional costs and going concern, which creates severance costs. additional risk of bias in accounting estimates. As noted within certain Key Audit Matters, during our 2020 audit we identified The classification of items as exceptional affects adjusted control design deficiencies relating to areas of judgement earnings per share and is inherently judgemental. As a result, and estimation. there is a risk that items are inappropriately classified as • exceptional items in line with the stated accounting policy. This risk can manifest itself through the posting of invalid journals, recorded to influence the financial statements, which Independent auditor’s report The Audit Committee’s discussion of this key audit matter is circumvent the controls in place to stop the recording of set out on page 69. inappropriate journals.
This had a bearing on the allocation of resources in the audit, ● How the scope of our audit responded to the key audit matter and the direction of effort of the audit team. Accordingly, we identified this as a key audit matter. We obtained an understanding of the process the directors undertook to identify and present exceptional items and assessed the design and determined the implementation of ● How the scope of our audit responded to the key audit matter the relevant controls therein. We obtained an understanding of the financial reporting We evaluated and challenged the nature and classification process and assessed the design and determined the of transactions as exceptional in accordance with the Group implementation of the relevant controls therein. We accounting policy, whilst also, evaluating whether the identified deficiencies in the design of controls at significant accounting policy for exceptional items is appropriate and is components where testing was performed in respect of consistent with previous periods. journal entries. Therefore we determined that a wholly substantive approach was appropriate. We evaluated the presentation of exceptional items and adequacy of the related disclosures in the Group’s financial We incorporated specific, directed and focused fraud criteria, statements against requirements under IFRS and Irish in our selection of journal entries processed during the Company Law. Our work focused on items of income and reporting period for testing, in the Significant Component expense that could impact the quality of earnings. ledgers, utilising data analytics tools.
We performed a retrospective review of management’s judgements and assumptions relating to significant estimates reflected in the prior year’s financial statements.
105 We evaluated certain accounting estimates for bias including We agreed the amount of development costs capitalised to revenue recognition and going concern, incorporating the underlying documentation detailing cost per project, including following procedures: timesheet data.
› We engaged our internal specialists to assist in key We engaged our internal specialists to assist in challenging the judgement areas including cashflow forecasts as part of the key assumptions used in the cash flow forecasts, in particular going concern assessment. to assess the discount rate used; and › We engaged our internal specialists to assist in challenging the key assumptions used in the cash flow forecasts, in We performed sensitivity analysis on the underlying cash particular to assess the discount rate used as part of our flow forecasts. assessment of capitalisation of development costs; › In respect of revenue recognition, we independently Our audit procedures relating to these matters were designed obtained confirmations from customers of the contracts in the context of our audit of the financial statements as a in place during the year ended 31 December 2020. These whole, and not to express an opinion on individual accounts customer confirmations validated the work order status as or disclosures. Our opinion on the financial statements is not at the financial year end date and the completeness of the modified with respect to any of the risks described above, and contracts in issue. we do not express an opinion on these individual matters.
We obtained an understanding of the business rationale of OUR APPLICATION OF MATERIALITY significant transactions, with a specific focus on the extended loan facility received from a related party, Mr Dermot We define materiality as the magnitude of misstatement that Desmond through his vehicle Tireragh Limited, during the makes it probable that the economic decisions of a reasonably year. We reviewed the shareholder approval for the loan knowledgeable person, relying on the financial statements, and obtained external confirmation of the balance as at would be changed or influenced. We use materiality both in 31 December 2020. planning the scope of our audit work and in evaluating the results of our work.
● Capitalisation of development costs We determined materiality for the Group to be US$145k which is approximately 0.5% of revenue (2019: US$224k, representing 0.5% of revenue). We have considered revenue to ● Key audit matter description be the critical component for determining materiality because As described in Note 5, the Group capitalised development it is the most important measure for users of the Group’s costs of US$1.1m during the year ended 31 December 2020. financial statements. Development expenditure in relation to internally generated intangible assets is capitalised when all of the criteria as set We determined materiality for the Parent Company to be out in IAS 38 “Intangible Assets” are met. There is a risk that US$132k which is approximately 1% of third party debt (2019: additions are made to capitalised development costs before US$114k, representing 1% of third party debt), as the most all the required capitalisation criteria are met. significant driver of the Parent Company financial statements.
Expenditure is capitalised from the date when the intangible We have considered quantitative and qualitative factors such asset first meets the recognition criteria and in determining as understanding the entity and its environment, history of the amount to be capitalised, directors make judgements mistatements, complexity of the Company, and reliabity of regarding expected future cash generation of the asset. control environment. Component materialities were set on a similar basis, giving the range $26.4k to $83.6k. The Audit Committee has included their assessment of this risk on page 70. We agreed with the Audit Committee that we would report to them any audit differences in excess of US$7.25k, as well as differences below that threshold which, in our view, warranted ● How the scope of our audit responded to the key audit matter reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when We obtained an understanding of the process and assessing the overall presentation of the financial statements. related controls for ensuring appropriate capitalisation of development costs and assessed the design and determined AN OVERVIEW OF THE SCOPE OF OUR AUDIT the implementation of the relevant controls therein. As a result of a deficiency identified relating to management review The structure of the Group’s finance function is such that the controls, we determined that a wholly substantive approach central Group finance team in Dublin provides support to Group was appropriate entities for the accounting of the majority of transactions and balances. The audit work was undertaken and performed by We reviewed the capitalised project register and completed an audit team working remotely in the current year due to procedures to determine whether the expenditure was COVID-19 restrictions. recorded accurately and whether it met the required capitalisation criteria in accordance with IAS 38.
106 We determined the scope of our Group audit on an entity In preparing the financial statements, the directors are level basis, assessing components against the risk of material responsible for assessing the Group and Parent Company’s misstatement at the Group level. Based on this assessment, ability to continue as a going concern, disclosing, as applicable, we focussed our work on 7 components covering 100% of matters related to going concern and using the going revenue and 99% of net assets. 5 of these were subject to a full concern basis of accounting unless the directors either intend audit, whilst the remaining 2 were subject to audits of specified to liquidate the Group and Parent Company or to cease procedures where the extent of our testing was based on our operations, or have no realistic alternative but to do so. assessment of the associated risks of material misstatement and of the materiality of the component’s operations to the AUDITOR’S RESPONSIBILITIES FOR Group. The legal entities, which were subject to a full scope THE AUDIT OF THE FINANCIAL STATEMENTS audit, were Datalex plc, Datalex (Ireland) Limited, Datalex Solutions (UK) Limited, Datalex Netherlands BV, and Datalex Our objectives are to obtain reasonable assurance about USA Inc. We also carried out specified audit procedures on whether the financial statements as a whole are free from Datalex China Limited and Datalex Employee Benefit Trust. material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable At the Parent Company level, we also tested the consolidation assurance is a high level of assurance, but is not a guarantee that process and carried out analytical procedures to confirm our an audit conducted in accordance with ISAs (Ireland) will always conclusion that there were no significant risks of material detect a material misstatement when it exists. Misstatements misstatement of the aggregated financial information of the can arise from fraud or error and are considered material if, remaining components not subject to a full scope audit or individually or in the aggregate, they could reasonably be specified audit procedures. expected to influence the economic decisions of users taken on the basis of these financial statements. OTHER INFORMATION
As part of an audit in accordance with ISAs (Ireland), we exercise Datalex The other information comprises the information included in professional judgment and maintain professional scepticism the Annual Report 2020, other than the financial statements throughout the audit. We also:
and our auditor’s report thereon. The directors are responsible •
for the other information contained within the annual report. › Identify and assess the risks of material misstatement of the Annual Report 2020 financial statements, whether due to fraud or error, design Our opinion on the financial statements does not cover the and perform audit procedures responsive to those risks, and other information and, except to the extent otherwise explicitly obtain audit evidence that is sufficient and appropriate to stated in our report, we do not express any form of assurance provide a basis for our opinion. The risk of not detecting a conclusion thereon. material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, •
Our responsibility is to read the other information and, in forgery, intentional omissions, misrepresentations, or the doing so, consider whether the other information is materially override of internal control. Independent auditor’s report inconsistent with the financial statements or our knowledge › Obtain an understanding of internal control relevant to the obtained in the audit or otherwise appears to be materially audit in order to design audit procedures that are appropriate misstated. If we identify such material inconsistencies in the circumstances, but not for the purpose of expressing or apparent material misstatements, we are required to an opinion on the effectiveness of the Group and Parent determine whether there is a material misstatement in the Company’s internal control. financial statements or a material misstatement of the other › Evaluate the appropriateness of accounting policies used information. If, based on the work we have performed, we and the reasonableness of accounting estimates and related conclude that there is a material misstatement of this other disclosures made by the directors. information, we are required to report that fact. › Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit Except for the possible effects of the matter described in evidence obtained, whether a material uncertainty exists the basis for qualified opinion section of our report, we have related to events or conditions that may cast significant nothing to report in this regard. doubt on the Group and Parent Company’s ability to continue as a going concern. If we conclude that a material RESPONSIBILITIES OF DIRECTORS uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial As explained more fully in the Directors’ Responsibilities statements or, if such disclosures are inadequate, to modify Statement, the directors are responsible for the preparation of our opinion. Our conclusions are based on the audit evidence the financial statements and for being satisfied that they give obtained up to the date of the auditor’s report. However, a true and fair view and otherwise comply with the Companies future events or conditions may cause the entity (or where Act 2014, and for such internal control as the directors relevant, the Group) to cease to continue as a going concern. determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
107 › Evaluate the overall presentation, structure and content REPORT ON OTHER LEGAL AND of the financial statements, including the disclosures, and REGULATORY REQUIREMENTS whether the financial statements represent the underlying transactions and events in a manner that achieves OPINION ON OTHER MATTERS PRESCRIBED BY fair presentation. THE COMPANIES ACT 2014 › Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within Except for the possible effects of the matter described in the the Group to express an opinion on the consolidated basis for qualified opinion section of our report, based solely on financial statements. The Group auditor is responsible for the work undertaken in the course of the audit, we report that: the direction, supervision and performance of the Group audit. The Group auditor remains solely responsible for the › the information given in the directors’ report is consistent audit opinion. with the financial statements and the directors’ report has been prepared in accordance with the Companies Act 2014. We communicate with those charged with governance regarding, among other matters, the planned scope and Based solely on the work undertaken in the course of the audit, timing of the audit and significant audit findings, including we report that: any significant deficiencies in internal control that the auditor identifies during the audit. › We have obtained all the information and explanations which we consider necessary for the purposes of our audit; For listed entities and public interest entities, the auditor also › In our opinion, the accounting records of the Parent provides those charged with governance with a statement that Company were sufficient to permit the financial statements the auditor has complied with relevant ethical requirements to be readily and properly audited; and regarding independence, including the Ethical Standard for › The Parent Company statement of financial position is in Auditors (Ireland) 2016, and communicates with them all agreement with the accounting records. relationships and other matters that may reasonably be thought to bear on the auditor’s independence, and where applicable, CORPORATE GOVERNANCE STATEMENT related safeguards. REQUIRED BY THE COMPANIES ACT 2014 Where the auditor is required to report on key audit matters, Except for the possible effects of the matter described in the from the matters communicated with those charged with basis for qualified opinion section of our report, we report, in governance, the auditor determines those matters that were relation to information given in the Corporate Governance of most significance in the audit of the financial statements of Statement on pages 48 to 59 that: the current period and are therefore the key audit matters. The auditor describes these matters in the auditor’s report unless law › In our opinion, based on the work undertaken during the or regulation precludes public disclosure about the matter or course of the audit, the information given in the Corporate when, in extremely rare circumstances, the auditor determines Governance Statement pursuant to subsections 2(c) and that a matter should not be communicated in the auditor’s (d) of section 1373 of the Companies Act 2014 is consistent report because the adverse consequences of doing so would with the Parent Company’s statutory financial statements in reasonably be expected to outweigh the public interest benefits respect of the financial year concerned and such information of such communication. has been prepared in accordance with the Companies Act 2014. Based on our knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified any material misstatements in this information. › In our opinion, based on the work undertaken during the course of the audit, the Corporate Governance Statement contains the information required by Regulation 6(2) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and Groups) Regulations 2017 (as amended); and › In our opinion, based on the work undertaken during the course of the audit, the information required pursuant to section 1373(2)(a),(b),(e) and (f) of the Companies Act 2014 is contained in the Corporate Governance Statement.
108 CORPORATE GOVERNANCE STATEMENT OTHER MATTERS WHICH WE ARE REQUIRED TO ADDRESS
The Listing Rules and ISAs (Ireland) require us to review the We were appointed by Datalex Plc on 31 December 2019 to directors’ statement in relation to longer-term viability and the audit the financial statements for the financial year ended 31 part of the Corporate Governance Statement relating to the December 2019 and subsequent financial periods. The period Group’s compliance with the provisions of the UK Corporate of total uninterrupted engagement including previous renewals Governance Code and Irish Corporate Governance Annex and reappointments of the firm is two years, covering the years specified for our review. ending 31 December 2019 to 31 December 2020.
Except for the possible effects of the matter described in the The non-audit services prohibited by IAASA’s Ethical Standard basis for qualified opinion section of our report, based on the were not provided and we remained independent of the work undertaken as part of our audit, we have concluded that Company in conducting the audit. each of the following elements of the Corporate Governance Statement are materially consistent with the financial Our qualified audit opinion is consistent with the additional statements and our knowledge obtained during the audit: report to the audit committee we are required to provide in accordance with ISA (Ireland) 260. › the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the USE OF OUR REPORT period is appropriate set out on pages 40 to 41; › the directors’ statement on fair, balanced and This report is made solely to the Company’s members, as a understandable set out on pages 58 and 66; body, in accordance with Section 391 of the Companies Act › the board’s confirmation that it has carried out a robust 2014. Our audit work has been undertaken so that we might assessment of the emerging and principal risks and the state to the Company’s members those matters we are required
disclosures in the annual report that describe the principal to state to them in an auditor’s report and for no other purpose. Datalex risks and the procedures in place to identify emerging risks To the fullest extent permitted by law, we do not accept or and an explanation of how they are being managed or assume responsibility to anyone other than the Company and
mitigated set out on pages 34 to 37; the Company’s members as a body, for our audit work, for this •
› the section of the annual report that describes the review report, or for the opinions we have formed. Annual Report 2020 of effectiveness of risk management and internal control systems set out on pages 34 to 37 and 56 to 58; › and the section describing the work of the audit committee set out on pages 64 to 73.
MATTERS ON WHICH WE ARE •
REQUIRED TO REPORT BY EXCEPTION Independent auditor’s report Except for the possible effects of the matter described in the Daniel Murray basis for qualified opinion section of our report, based on the For and on behalf of Deloitte Ireland LLP knowledge and understanding of the Group and the Parent Chartered Accountants and Statutory Audit Firm Company and its environment obtained in the course of the Deloitte & Touche House, EarlsfortTerrace, Dublin 2, Ireland audit, we have not identified material misstatements in the directors’ report. Date: 28 April 2021
The Companies Act 2014 also requires us to report to you if, in Notes: An audit does not provide assurance on the maintenance and our opinion, the Company has not provided the information integrity of the website, including controls used to achieve this, and in required by Section 1110N in relation to its remuneration report. particular on whether any changes may have occurred to the financial We have nothing to report in this regard. statements since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance We have nothing to report in respect of the provisions in the in this area. Companies Act 2014 which require us to report to you if, in our opinion, the disclosures of directors’ remuneration and Legislation in Ireland governing the preparation and dissemination of transactions specified by law are not made. financial statements differs from legislation in other jurisdictions.
The Listing Rules of the Euronext Dublin require us to review six specified elements of disclosures in the report to shareholders by the Board of Directors’ remuneration committee. We have nothing to report in this regard.
109 Consolidated Statement of Financial Position as at 31 December 2020
Notes 2020 2019 US$’000 US$’000
ASSETS Non-current assets Property, plant and equipment 4 509 1,077 Intangible assets 5 1,798 228 Right-of-use assets 6 4,614 5,789 Deferred contract fulfilment costs 7 2,863 2,161 Contract acquisition costs 8 - 190 Trade and other receivables 10 665 255 Total non-current assets 10,449 9,700
Current assets Contract acquisition costs 8 62 - Trade and other receivables 10 6,427 7,247 Contract assets 10 853 2,561 Cash and cash equivalents 11 3,025 3,051 Total current assets 10,367 12,859 Total assets 20,816 22,559
EQUITY Capital and reserves attributable to the equity holders of the Company Issued ordinary share capital 12 8,215 8,198 Other issued equity share capital 12 262 262 Other reserves 13 11,777 11,892 Retained loss (43,952) (37,475) Total equity (23,698) (17,123)
LIABILITIES Non-current liabilities Borrowings 14 4,818 5,487 Provisions 15 526 941 Contract liabilities 17 5,766 3,858 Total non-current liabilities 11,110 10,286
Current liabilities Borrowings 14 17,009 13,376 Provisions 15 914 1,236 Trade and other payables 16 10,862 10,963 Contract liabilities 17 4,419 3,561 Current income tax liabilities 200 260 Total current liabilities 33,404 29,396 Total equity and liabilities 20,816 22,559
For and on behalf of the Board Sean Corkery Niall O’Sullivan 28 April 2020
110 Consolidated Statement of Profit and Loss for the year ended 31 December 2020
Notes 2020 2020 2020 2019 2019 2019 Before Exceptional Before Exceptional exceptional items exceptional items items (Note 23) Total items (Note 23) Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Revenue from contracts with customers 18 28,070 - 28,070 45,148 45,148 Cost of sales 19 (19,234) - (19,234) (30,583) (2,596) (33,179)
Gross profit / (loss) 8,836 - 8,836 14,565 (2,596) 11,969 Selling and marketing costs 19 (1,116) - (1,116) (1,654) - (1,654) Administrative expenses 19 (9,102) (2,567) (11,669) (13,392) (2,821) (16,213) Net impairment gains/(losses) on financial and contract assets 10 1,729 (205) 1,524 (1,933) (2,876) (4,809) Other income 21 401 - 401 410 - 410 Other losses 22 (1,615) - (1,615) (199) - (199) Datalex Operating loss (867) (2,772) (3,639) (2,203) (8,293) (10,496) Finance income 24 - - - 4 - 4 • Finance costs 24 (2,897) - (2,897) (1,503) - (1,503) Loss before income tax (3,764) (2,772) (6,536) (3,702) (8,293) (11,995) Annual Report 2020
Income tax credit/(charge) 9 59 - 59 (66) - (66) Loss for the year (3,705) (2,772) (6,477) (3,768) (8,293) (12,061)
Loss per share (in US$ cents per share): •
Basic 25 (8.1) (15.1) Financial Statements Diluted 25 (8.1) (15.1)
111 Consolidated Statement of Comprehensive Income for the year ended 31 December 2020
Notes 2020 2019 US$’000 US$’000
Loss for the financial year (6,477) (12,061)
Other comprehensive income: Items that may subsequently be reclassified to profit or loss Foreign currency translation adjustments: - Arising in the year 13 (276) 7
Total movement in items that may subsequently be reclassified to profit or loss (276) 7
Comprehensive loss for the year (6,753) (12,054)
112 Consolidated Statement of Cash Flows for the year ended 31 December 2020
Notes 2020 2019 US$’000 US$’000
CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from/(used in) operations 26 3,514 (15,003) Income tax paid - (192) Net cash generated from/(used in) from operating activities 3,514 (15,195)
CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment 38 (280) Additions to intangible assets (1,669) (155) Contract fulfilment cost payments (702) (4,201) Interest received - 5 Restricted cash - 500 Net cash used in investing activities (2,333) (4,131) Datalex
CASH FLOWS FROM FINANCING ACTIVITIES • Proceeds from issue of shares (including share premium) 12 & 13 17 4,223 Annual Report 2020 Proceeds from borrowings - 12,220 Costs paid on entering new leases and agreements for leases 180 - Payment of interest on lease liabilities (630) (706) Payment of capital on lease liabilities (820) (1,247) Interest paid - (481) • Net cash (used in)/generated from financing activities (1,253) 14,009 Financial Statements
Net decrease in cash and cash equivalents (72) (5,317) Foreign exchange gain/(loss) on cash and cash equivalents 45 (12) Cash and cash equivalents at beginning of year 3,051 8,380
Cash and cash equivalents at end of year 11 3,025 3,051
113 Consolidated Statement of Changes in Equity for the year ended 31 December 2020
Issued Other issued ordinary equity share Other Retained Total share capital capital reserves loss equity US$’000 US$’000 US$’000 US$’000 US$’000
Balance at 1 January 2019 7,810 262 7,783 (25,230) (9,375)
Loss for the year - - - (12,061) (12,061) Other comprehensive loss - - 7 - 7 Total comprehensive loss for the year - - 7 (12,061) (12,054)
Share-based payments credit (Note 13) - - 83 - 83 Issue of ordinary shares on exercise of options (Notes 12 & 13) 2 - - - 2 Issue of ordinary shares from share placement (Notes 12 & 13) 386 - 4,019 - 4,405 Share issue costs - - - (184) (184) Balance at 31 December 2019 8,198 262 11,892 (37,475) (17,123)
Balance at 1 January 2020 8,198 262 11,892 (37,475) (17,123)
Loss for the year - - - (6,477) (6,477) Other comprehensive loss - - (195) - (195) Total comprehensive loss for the year - - (195) (6,477) (6,672)
Share based payments credit (Note 13) - - 67 - 67 Premium on shares issued (Note 13) - - 13 - 13 Issue of ordinary shares on exercise of options (Notes 12 & 13) 17 - - - 17
Balance at 31 December 2020 8,215 262 11,777 (43,952) (23,698)
114 Company Statement of Financial Position as at 31 December 2020
Notes 2020 2019 US$'000 US$'000
ASSETS Non-current assets Investments in subsidiaries 28 - - Total non-current assets - -
Current Assets Trade and other receivables 10 61 25 Cash and cash equivalents 11 92 86 Total current assets 153 111 Total assets 153 111
EQUITY Capital and reserves attribute to equity holders of the company Datalex Issued ordinary share capital 12 8,215 8,198 Other issued equity share capital 12 262 262 • Other reserves 13 50,817 50,737 Annual Report 2020 Retained loss (77,590) (72,742) Total equity (18,296) (13,545)
Current liabilities Trade and other payables 16 2,716 1,234
Borrowings 14 15,733 12,422 •
Total current liabilities 18,449 13,656 Financial Statements Total equity and liabilities 153 111
As permitted by Section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its separate statement of profit and loss in the financial statements and from filing it with the Registrar of Companies. The Company’s loss for the financial year is US$4.8m (2019: US$18.1m).
On behalf of the board
Sean Corkery Niall O’Sullivan 28 April 2021
115 Company Statement of Cash Flows for the year ended 31 December 2020
Notes 2020 2019 US$’000 US$’000
CASH FLOWS FROM OPERATING ACTIVITIES Cash (used in)/generated from operations 26 (77) 287 Loans to subsidiary undertakings - (16,808)
Net cash used in from operating activities (77) (16,521)
CASH FLOWS FROM INVESTING ACTIVITIES -
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of share capital 12 & 13 17 4,518 Proceeds from shareholder loan - 12,262 Dividends paid to shareholders 27 - - Net cash generated from financing activities 17 16,780
Net (decrease)/increase in cash and cash equivalents (60) 259 Foreign exchange gain/(loss) on cash and cash equivalents 66 (291) Cash and cash equivalents at beginning of year 86 118
Cash and cash equivalents at end of year 11 92 86
116 Company Statement of Changes in Equity for the year ended 31 December 2020
Ordinary Other equity Other Retained share capital share capital reserves earnings Total equity US$’000 US$’000 US$’000 US$’000 US$’000
Balance at 1 January 2019 7,810 262 46,635 (54,477) 230 Loss for the year - - - (18,081) (18,081) Other comprehensive income - - - - - Total comprehensive loss for the year - - - (18,081) (18,081) Share-based payments cost (Note 13) - - 83 - 83 Shares issued during the year 388 - 4,019 - 4,407 Share issue costs - - - (184) (184)
Balance at 31 December 2019 8,198 262 50,737 (72,742) (13,545)
Balance at 1 January 2020 8,198 262 50,737 (72,742) (13,545) Loss for the year - - - (4,848) (4,848)
Other comprehensive income - - - - - Datalex Total comprehensive loss for the year - - - (4,848) (4,848) Share-based payments costs (Note 13) - - 67 - 67 •
Shares issued during the year (Note 12) 17 - - - 17 Annual Report 2020 Premium on shares issued (Note 13) - - 13 - 13
Balance at 31 December 2020 8,215 262 50,817 (77,590) (18,296) •
Financial Statements
117 Notes to the Financial Statements For the year ended 31 December 2020
2.2 BASIS OF PREPARATION 1 GENERAL INFORMATION Items included in the financial statements of each of the The principal activity of the Group (which consists of Datalex Group’s entities are measured using the currency of the plc and its subsidiary companies as listed in Note 28) is the primary economic environment in which the entity operates. development and sale of digital retail products and solutions to The Consolidated financial statements are presented in US the airline industry. dollars (‘US$’) being the presentation currency of the Group. All amounts have been rounded to the nearest thousand, Datalex plc (“the Company”) is a public limited company unless otherwise indicated. The financial statements have incorporated and domiciled in Ireland and is listed on Euronext been prepared on the going concern basis of accounting Dublin. The company registration number is 329175, and the and under the historical cost convention, as modified by the registered office is Block U, EastPoint, Clontarf, Dublin 3, D03 measurement at the fair value of share options and derivative H704, Ireland. Euronext Dublin restored the listing and trading financial instruments. of the Company’s ordinary shares on the 14 July 2020. The preparation of financial statements in conformity with These Group and Company financial statements were IFRS requires the use of certain critical accounting estimates. authorised for issue by the Board of Directors on 28 April 2020. It also requires management to exercise its judgement in the process of applying the Company’s and Group’s accounting policies. Although these estimates are based on management’s 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES best knowledge of the amount, event or actions, actual results The principal accounting policies adopted in the preparation ultimately may differ from those estimates. The areas involving of these financial statements are set out below. These policies a higher degree of judgement or complexity, or areas where have been consistently applied. assumptions and estimates are significant to the entity and Group financial statements are disclosed in Note 3. 2.1 STATEMENT OF COMPLIANCE 2.3 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS The Consolidated and Company financial statements of Datalex plc have been prepared in accordance with IFRS and This section includes information on new accounting standards, their interpretations approved by the International Accounting amendments and interpretations, whether they are effective for Standards Board (‘IASB’) as adopted by the European Union the current year or in later years, and how they are expected to (“EU”) and those parts of the Companies Act, 2014 applicable impact the financial position and performance of the Group. to companies reporting under IFRS. IFRS as adopted by the EU differ in certain respects from IFRS as issued by the IASB. Adoption of New Accounting Standards & Interpretations References to IFRS hereafter should be read as references to In the current year, the Group has applied the below IFRS as adopted by the EU. The IFRS applied in these financial amendments to IFRS Standards and Interpretations issued by statements were those effective for accounting periods ending the Board that are effective for an annual period that begins on on 31 December 2020. The Consolidated financial statements or after 1 January 2020. Their adoption has not had any material are also prepared in compliance with the Companies Act, 2014 impact on the disclosures or on the amounts reported in these and Article 4 of the IAS Regulation. In presenting the Company financial statements. financial statements together with the Consolidated financial statements, the Company has availed of the exemption in Amendments to IFRS 3 Definition of a business Section 304(2) of the Companies Act, 2014 not to present or file its individual Statement of Profit and Loss and related notes The amendments clarify that while businesses usually have that form part of the approved Company financial statements. outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
Additional guidance is provided that helps to determine whether a substantive process has been acquired.
118 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Not all amendments, however, update those pronouncements 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES with regard to references to and quotes from the framework (CONTINUED) so that they refer to the revised Conceptual Framework. Some 2.3 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS pronouncements are only updated to indicate which version (CONTINUED) of the Framework they are referencing to (the IASC Framework adopted by the IASB in 2001, the IASB Framework of 2010, The amendments introduce an optional concentration test or the new revised Framework of 2018) or to indicate that that permits a simplified assessment of whether an acquired definitions in the Standard have not been updated with the new set of activities and assets is not a business. Under the optional definitions developed in the revised Conceptual Framework. concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross The amendments, where they actually are updates, are effective assets acquired is concentrated in a single identifiable asset or for annual periods beginning on or after 1 January 2020, with group of similar assets. early application permitted. This amendment did not have a material impact on the Group or Company in 2020. The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest Rate date is on or after the first annual reporting period beginning on Benchmark Reform or after 1 January 2020, with early application permitted. This amendment did not have a material impact on the Group or In September 2019, the IASB issued amendments to IFRS 9,
Company in 2020. IAS 39 Financial Instruments: Recognition and Measurement Datalex and IFRS 7 Financial Instruments: Disclosures, which concludes Amendments to IAS 1 and IAS 8 Definition of material phase one of its work to respond to the effects of Interbank
Offered Rates (IBOR) reform on financial reporting. • The amendments are intended to make the definition of material in IAS 1 easier to understand and are not intended to Annual Report 2020 The amendments provide mandatory temporary reliefs which alter the underlying concept of materiality in IFRS Standards. enable hedge accounting to continue during the period of The concept of ‘obscuring’ material information with immaterial uncertainty before the replacement of an existing interest rate information has been included as part of the new definition. benchmark with an alternative nearly risk-free interest rate (an RFR). To the extent that a hedging instrument is altered so that The threshold for materiality influencing users has been its cash flows are based on an RFR, but the hedged item is still changed from ‘could influence’ to ‘could reasonably be expected •
based on IBOR (or vice versa), there is no relief from measuring
to influence’. Financial Statements and recording any ineffectiveness that arises due to differences in their changes in fair value. The amendments are effective The definition of material in IAS 8 has been replaced by a from 1 January 2020 and must be applied retrospectively. reference to the definition of material in IAS 1. In addition, the However, any hedge relationships that have previously been de- IASB amended other Standards and the Conceptual Framework designated cannot be reinstated upon application, nor can any that contain a definition of material or refer to the term hedge relationships be designated with the benefit of hindsight. ‘material’ to ensure consistency. This amendment did not have a material impact on the Group or Company in 2020. The amendments are applied prospectively for annual periods beginning on or after 1 January 2020, with earlier application Amendment to IFRS 16 - COVID-19-Related Rent Concessions permitted. This amendment did not have a material impact on the Group or Company in 2020. The impact of COVID-19 to financial reporting is widespread and uncertain in duration. Entities are severely impacted by the Amendments to References to the Conceptual Framework in COVID-19 pandemic, which is why many lessors around the IFRS Standards world have provided or are expected to provide an economic relief in the form of rent concessions to lessees that are, Together with the revised Conceptual Framework, which in some cases, encouraged or required by governments or became effective upon publication on 29 March 2018, the IASB jurisdictional authorities. Rent concessions include rent holidays has also issued Amendments to References to the Conceptual or reduced rent payments for a period, possibly followed by Framework in IFRS Standards. The document contains increased rent payments in future periods. amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22, and SIC-32.
119 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
When applying the practical expedient, the rent relief could be 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES treated as either: (CONTINUED) 2.3 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS 1. a variable rent expense in profit or loss against the lease (CONTINUED) liability to derecognise the part of the lease liability that has been forgiven or waived, or; In May 2020 the IASB provided a practical expedient 2. a deferral of lease payments from one period to another, that permits lessees (not lessors) to not assess whether which only affects the timing of payments. A lessee would rent concessions that occur as a direct consequence of continue to recognise interest on the lease liability and the COVID-19 pandemic and meet specified conditions reduce that liability for lease payments, or; are lease modifications and, instead, to account for those 3. a combination of the above. rent concessions in profit or loss as if they were not lease modifications. This amendment did not have a material impact on the Group or Company in 2020. The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic New and revised IFRS Standards in issue but not yet effective and only if all of the following conditions are met: At the date of authorisation of these financial statements, the › the change in lease payments results in revised Group has not applied the following new and revised IFRS consideration for the lease that is substantially the same Standards that have been issued but are not yet effective: as, or less than, the consideration for the lease immediately preceding the change; › any reduction in lease payments affects only payments due on or before 30 June 2021; and › there is no substantive change to other terms and conditions of the lease.
IFRS 10 and IAS 28 (amendments) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Amendments to IAS 1 Classification of Liabilities as Current or Non-current
Amendments to IFRS 3 Reference to the Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment—Proceeds before Intended Use
Amendments to IAS 37 Onerous Contracts – Cost of Fulfilling a Contract
Annual Improvements to IFRS Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards 2018-2020 Cycle Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture
Amendment to IFRS 16 COVID-19-Related Rent Concessions
Amendments to IFRS 17 Insurance Contracts
Amendments to IFRS 9, IAS 39, Interest Rate Benchmark Reform – Phase 2 IFRS 7, IFRS 4 and IFRS 16
Amendments to IAS 1 and IFRS Disclosure of Accounting Policies Practice Statement 2
Amendments to IAS 8 Definition of Accounting Estimates
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, except as noted below:
120 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Amendments to IFRS 3 – Reference to the Conceptual Framework 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The amendments update IFRS 3 so that it refers to the 2018 Conceptual Framework instead of the 1989 Framework. They 2.3 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS also add to IFRS 3 a requirement that, for obligations within (CONTINUED) the scope of IAS 37, an acquirer applies IAS 37 to determine Amendments to IFRS 10 and IAS 28 – Sale or Contribution of whether at the acquisition date a present obligation exists as a Assets between an Investor and its Associate or Joint Venture result of past events. For a levy that would be within the scope of IFRIC 21 Levies, the acquirer applies IFRIC 21 to determine The amendments to IFRS 10 and IAS 28 deal with situations whether the obligating event that gives rise to a liability to pay where there is a sale or contribution of assets between an the levy has occurred by the acquisition date. investor and its associate or joint venture. Specifically, the amendments state that gains or losses resulting from the loss Finally, the amendments add an explicit statement that an of control of a subsidiary that does not contain a business in a acquirer does not recognise contingent assets acquired in a transaction with an associate or a joint venture that is accounted business combination. for using the equity method, are recognised in the parent’s profit or loss only to the extent of the unrelated investors’ interests The amendments are effective for business combinations for in that associate or joint venture. Similarly, gains and losses which the date of acquisition is on or after the beginning of resulting from the remeasurement of investments retained in the first annual period beginning on or after 1 January 2022. any former subsidiary (that has become an associate or a joint
Early application is permitted if an entity also applies all other Datalex venture that is accounted for using the equity method) to fair updated references (published together with the updated value are recognised in the former parent’s profit or loss only Conceptual Framework) at the same time or earlier. to the extent of the unrelated investors’ interests in the new • associate or joint venture.
Amendments to IAS 16 – Property, Plant and Equipment— Annual Report 2020 Proceeds before Intended Use The effective date of the amendments has yet to be set by the Board; however, earlier application of the amendments is The amendments prohibit deducting from the cost of an permitted. The directors of the Company anticipate that the item of property, plant and equipment any proceeds from application of these amendments will not have an impact on selling items produced before that asset is available for use, i.e. the Group’s consolidated financial statements in future periods. proceeds while bringing the asset to the location and condition necessary for it to be capable of operating in the manner • Amendments to IAS 1 – Classification of Liabilities as
intended by management. Consequently, an entity recognises Financial Statements Current or Non-current such sales proceeds and related costs in profit or loss. The entity measures the cost of those items in accordance with IAS The amendments to IAS 1 affect only the presentation of 2 Inventories. liabilities as current or non-current in the statement of financial position and not the amount or timing of recognition of any The amendments also clarify the meaning of ‘testing whether asset, liability, income or expenses, or the information disclosed an asset is functioning properly’. IAS 16 now specifies this as about those items. assessing whether the technical and physical performance of the asset is such that it is capable of being used in the The amendments clarify that the classification of liabilities as production or supply of goods or services, for rental to others, or current or non-current is based on rights that are in existence for administrative purposes. at the end of the reporting period, specify that classification is unaffected by expectations about whether an entity will If not presented separately in the statement of comprehensive exercise its right to defer settlement of a liability, explain income, the financial statements shall disclose the amounts that rights are in existence if covenants are complied with at of proceeds and cost included in profit or loss that relate the end of the reporting period, and introduce a definition to items produced that are not an output of the entity’s of ‘settlement’ to make clear that settlement refers to the ordinary activities, and which line item(s) in the statement of transfer to the counterparty of cash, equity instruments, comprehensive income include(s) such proceeds and cost. other assets or services. The amendments are applied retrospectively, but only to The amendments are applied retrospectively for annual items of property, plant and equipment that are brought to the periods beginning on or after 1 January 2023, with early location and condition necessary for them to be capable of application permitted. operating in the manner intended by management on or after the beginning of the earliest period presented in the financial statements in which the entity first applies the amendments.
121 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
The amendment is effective for annual periods beginning on or 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES after 1 January 2022, with early application permitted. (CONTINUED)
2.3 NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS IFRS 9 Financial Instruments (CONTINUED) The amendment clarifies that in applying the ‘10 per cent’ test The entity shall recognise the cumulative effect of initially to assess whether to derecognise a financial liability, an entity applying the amendments as an adjustment to the opening includes only fees paid or received between the entity (the balance of retained earnings (or other component of equity, as borrower) and the lender, including fees paid or received by appropriate) at the beginning of that earliest period presented. either the entity or the lender on the other’s behalf.
The amendments are effective for annual periods beginning on The amendment is applied prospectively to modifications and or after 1 January 2022, with early application permitted. exchanges that occur on or after the date the entity first applies the amendment. Amendments to IAS 37 – Onerous Contracts—Cost of Fulfilling a Contract The amendment is effective for annual periods beginning on or after 1 January 2022, with early application permitted. The amendments specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs IFRS 16 Leases that relate directly to a contract consist of both the incremental costs of fulfilling that contract (examples would be direct labour The amendment removes the illustration of the reimbursement or materials) and an allocation of other costs that relate directly of leasehold improvements. to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and As the amendment to IFRS 16 only regards an illustrative equipment used in fulfilling the contract). example, no effective date is stated.
The amendments apply to contracts for which the entity IAS 41 Agriculture has not yet fulfilled all its obligations at the beginning of the The amendment removes the requirement in IAS 41 for entities annual reporting period in which the entity first applies the to exclude cash flows for taxation when measuring fair value. amendments. Comparatives are not restated. Instead, the This aligns the fair value measurement in IAS 41 with the entity shall recognise the cumulative effect of initially applying requirements of IFRS 13 Fair Value Measurement to use internally the amendments as an adjustment to the opening balance of consistent cash flows and discount rates and enables preparers retained earnings or other component of equity, as appropriate, to determine whether to use pretax or post-tax cash flows and at the date of initial application. discount rates for the most appropriate fair value measurement. The amendments are effective for annual periods beginning on The amendment is applied prospectively, i.e. for fair value or after 1 January 2022, with early application permitted. measurements on or after the date an entity initially applies the amendment. Annual Improvements to IFRS Standards 2018–2020 The Annual Improvements include amendments to The amendment is effective for annual periods beginning on or four Standards. after 1 January 2022, with early application permitted.
IFRS 1 First-time Adoption of International Financial Reporting Standards The amendment provides additional relief to a subsidiary which becomes a first-time adopter later than its parent in respect of accounting for cumulative translation differences. As a result of the amendment, a subsidiary that uses the exemption in IFRS 1:D16(a) can now also elect to measure cumulative translation differences for all foreign operations at the carrying amount that would be included in the parent’s consolidated financial statements, based on the parent’s date of transition to IFRS Standards, if no adjustments were made for consolidation procedures and for the effects of the business combination in which the parent acquired the subsidiary. A similar election is available to an associate or joint venture that uses the exemption in IFRS 1:D16(a).
122 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
The actions taken by the Group and Parent Company in 2019 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES and 2020 have assisted the Group and Parent Company in (CONTINUED) navigating the challenges associated with COVID-19. Over the 2.4 BASIS OF CONSOLIDATION course of 2020, the Group and Parent Company: The Group financial statements consolidate the financial › Secured the lifting of the suspension of trading of the statement of the Company and all of its subsidiary undertakings Company shares on Euronext Dublin. This facilitates made up to the relevant year-end. The subsidiary undertakings’ greater liquidity in the shares and allows the Group to place financial years are all coterminous with those of the Company. additional equity with the market to assist with the funding requirements of the Group. The Board are assessing the Subsidiaries are all entities over which the Group has control. current market conditions and waiting for the appropriate The Group controls an entity when the Group is exposed to, time to raise additional capital. or has rights to, variable returns from its involvement with the › Obtained shareholder approval for the extension of the entity and has the ability to affect those returns through its repayment date of the loan facility with Tireragh Limited power over the entity. Subsidiaries are fully consolidated from (a company ultimately beneficially owned by Mr. Dermot the date on which control is transferred to the Group. They are Desmond, also a substantial shareholder in the Group via deconsolidated from the date that control ceases. IIU Nominees Limited) to 1 November 2021. As part of this facility, the Group currently has access to an undrawn facility The results of subsidiary undertakings acquired or disposed of in the amount of €10m. There have been no additional draw during the year are included in the Consolidated Statement of Datalex downs on the Tireragh loan facility since December 2019. Profit and Loss from the date of their acquisition or up to the The Company has achieved the relevant financial covenant date of their disposal. Where necessary, adjustments are made targets to date. During 2020, Tireragh Limited waived to the financial statements of the subsidiaries to bring their • obligations to provide certain financial information within accounting policies into line with those used by the Group. Annual Report 2020 specified time limits, including delivery of the Group’s 2019 annual report within 120 days of year end (as permitted Intra-group balances and transactions, and any unrealised by the European Securities and Markets Authority and the income and expenses arising from intra-group transactions, Central Bank of Ireland) and the time limits within which are eliminated. budget projections and other periodic reporting obligations were provided during the year. Further, Tireragh Limited 2.5 GOING CONCERN provided a waiver extending the time to deliver specified • The Group and Parent Company financial statements have security documents in connection with a subsidiary of the Financial Statements been prepared on the going concern basis, which assumes Group and provided a waiver permitting the Group flexibility that the Group (including Datalex plc) will be able to continue to negotiate extended payment terms with key suppliers in in operational existence for the foreseeable future. The connection with COVID-19 measures taken by the Group. time period that the Board has considered in evaluating the (Note 14 & Note 31). appropriateness of the going concern basis in preparing the › Took early & decisive action by reducing operating expenses Group and Parent Company financial statements for 2020 is and improving cash flows. These actions include a targeted a period of twelve months from the date of approval of these redundancy programme, re-negotiating business partner financial statements. arrangements, eliminating discretionary spending, freezing recruitment, implementing voluntary leave options and The Group incurred a loss of US$6.5m in 2020 (2019: temporary reduced working hours for all employees. US$12.1m). At 31 December 2020, the Group had net liabilities › Continued to successfully negotiate extended payment of US$23.7m (2019: US$17.1m) and net current liabilities of terms with key suppliers. US$23.0m (2019: US$16.5m). The total decrease in cash was US$0.03m (2019: decrease of US$5.3m). The significant reduction in costs incurred in the financial year has mitigated some of the impact of the loss of revenues from The Group and Parent Company continues to operate in a our customers. In evaluating our cash flow needs for the next competitive environment which has been further impacted by twelve months, the Directors have taken into account our the global COVID-19 pandemic. COVID-19 has had a significant commitments to customers in both deployment and ongoing adverse impact on the aviation industry to date and there service commitments. remains uncertainty as to when the industry will recover from it. This leads to the risk that airlines could fail in the near future due to the travel restrictions imposed by governments throughout the world. This gives rise to material uncertainties for the business that may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern.
123 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
The UK Corporate Governance Code requires the Board Based on the forecasts prepared by management, and the to assess and report on the prospects of the Group and additional sensitivity analysis performed, both of which have whether the business is a going concern. In considering this been approved by the Board, following drawdown of €10m, requirement, the Directors have taken into account the Group’s no cash shortfalls are anticipated in the 12 month period to (including Datalex plc) forecast cash flows, liquidity, borrowing 30 April 2022. facilities and related covenant requirements and the expected operational activities of the Group. The Group is currently required to repay the Tireragh Limited loan facility - which at the year end date consisted of a principal of €11.3m, accrued interest of €1.3m and facility arrangement 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES fees of €2.7m on 1 November 2021. The Group’s current (CONTINUED) forecasts indicate that there will not be sufficient resources to repay the loan facility as it falls due, and additional funding 2.5 GOING CONCERN (CONTINUED) will be required by the Group in order to repay the amount To prepare financial forecasts for the business is challenging owing. However, subsequent to the year-end, the Board has in this environment, as there are a number of different received from Tireragh Limited, confirmation of its willingness outcomes, both positive and negative which could arise as a to extend the facility repayment date to 30 September 2022. result of COVID-19. The Directors have prepared its 12 month This extension, should it be required, would be subject to future forecast to take into account the potential impacts that independent shareholder approval as a related party transaction COVID-19 could have on the Group, such as: under Euronext Dublin Listing Rules.
› Slow recovery of transaction volumes as the Group emerges During 2021, the Company intends to raise sufficient capital, from COVID-19. The Group expects transaction volumes to net of expenses, for the repayment of the loan facility, including be 56% of 2019 levels in H1 2021, improving to 68% in H2 related interest charges and arrangement fees, and the funding 2021 and 74% in H1 2022; of the Group’s working capital needs. The extension of the › A material reduction in the assumed cash collected from the repayment date on the loan facility will provide the Group with HNA Group subsidiaries, whom have been impacted by the the capability to choose the most optimal time and structure HNA Group restructuring process in China; to raise such capital. Capital fundraising remains the preferred › Except for customers whom have indicated their intention to source of funding for the Group. Mr. Desmond, the Groups migrate away from the Group over the next 12 months, the largest ultimate beneficial shareholder, has informed the Group will retain all customers; Group that he will procure support for the capital raise and the › The extended delay to a large project implementation; participation of IIU Nominees Limited in its pro rata entitlement. › The continued delay to new win opportunities due to the impact of COVID-19 on airlines; The Directors recognise that, there are material uncertainties › Significant reduction across all operating costs of the which may cast significant doubt as to the Group and Parent business; and Company’s ability to continue as a going concern. Nevertheless, › Continued ability to negotiate extended payment terms on the basis of Tireragh Limited’s intention to continue to with some suppliers. support the Group (including Datalex plc), including the availability of the undrawn loan facilities as detailed above, In their sensitivity analysis, the Directors made further the Directors have a reasonable expectation that the Group assumptions to reflect COVID-19 having a more adverse and Parent Company will be able to successfully navigate the impact on the global economy, the aviation industry & Datalex, present uncertainties and as a result, are satisfied that the together with certain actions the Group would take in these financial statements be prepared on a going concern basis. circumstances, such as: 2.6 FOREIGN CURRENCY TRANSLATION › Slower recovery in transaction volumes and post go-live Items included in the financial statements of each of the Group’s services versus forecast; subsidiaries are measured using the currency of the primary › The assumed loss of a small number of customers; economic environment in which the subsidiary operates (‘the › The removal of further anticipated cash collections from functional currency’). The Consolidated financial statements are HNA Group subsidiaries; and presented in US Dollar, which is the presentational currency of › Additional cost saving measures across the business being the Group and the functional currency of the Parent Company. implemented, impacting headcount, contractors and operating costs. Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the Statement of Financial Position date.
124 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Foreign exchange gains and losses resulting from the (B) CATEGORIES OF REVENUE settlement of such transactions and from the translation at The Group considers whether there are various products and year-end exchange rates of monetary assets and liabilities services within a contract with a customer that are deemed denominated in foreign currencies are recognised in the distinct performance obligations to which the transaction statement of profit and loss. price needs to be allocated. In determining the transaction price for the contractual arrangements, the Group considers the effects of variable consideration, transaction-based license 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES revenue, the existence of significant financing components, (CONTINUED) upfront payments, and consideration payable to the customer 2.6 FOREIGN CURRENCY TRANSLATION (CONTINUED) (if any). Accordingly, the Group allocates the transaction price based on the relative stand-alone selling prices of the The results and financial position of all the Group’s entities performance obligations identified within a contract and (none of which has the currency of a hyperinflationary each portion is recognised separately as each performance economy) that have a functional currency different from the obligation is satisfied. presentation currency are translated into the presentation currency as follows: The Group’s revenue is divided into three principal categories, with the following significant elements: I. assets and liabilities for each statement of financial position presented, are translated at the closing exchange rate at the
1. Platform revenue Datalex date of that statement of financial position; II. income and expenses for each statement of profit and loss are (a) License translated at average exchange rates unless this average is not
Customer use of the Datalex software can include (i) air fare • a reasonable approximation of the cumulative effect of the
bookings, (ii) non-air ancillary bookings such as car, hotel and Annual Report 2020 rates prevailing on the transaction dates, in which case income insurance, (iii) air ancillary items such as seat fees or bag fees, and expenses are translated at the date of the transaction; and and (iv) hosting fees when the customer’s software solution is III. all resulting exchange differences are recognised as a hosted by Datalex. separate component of equity. Licenses provide customers with a right to access the Datalex On consolidation, exchange differences arising from the platform over time. Software revenue is recognised over time translation of the net qualifying investment in foreign •
for the contract term determined in accordance with IFRS
operations are taken to shareholders’ equity. Financial Statements 15, commencing when the license is usable by the customer following completion of configuration and installation. 2.7 REVENUE RECOGNITION
(A) GENERAL (b) Bundled performance obligations The Group applies IFRS 15, Revenue from Contracts with License and services are treated as a bundled product offering Customers (“IFRS 15”). where services significantly integrate, customise, or modify the on-premise software or cloud service to which they relate. Revenue is recognised by applying the following five step Where this arises, the license and services are combined into model to the contracts with customers. one distinct bundle of products and services and treated as a single performance obligation. I. Identify the contract with the customer; II. Identify the performance obligations in the contract; A bundled performance obligation is recognised commencing III. Determine the transaction price; on completion of implementation services or the go-live date, IV. Allocate the transaction price; and over the contract term as the license is considered to be the V. Recognise revenue when (or as) a performance primary or dominant component of such bundled performance obligation is satisfied. obligations. Where bundled performance obligations exist, either upon golive or on completion of implementation IFRS 15 requires entities to exercise judgement, taking into services, we commence revenue recognition on the bundled consideration all of the relevant facts and circumstances revenues pertaining to the completed implementation period. when applying each step of the model to contracts with their customers. The standard also specifies the accounting for the incremental costs of obtaining a contract and the costs directly related to fulfilling a contract. In addition, the standard requires extensive disclosures.
125 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Amounts recognised as revenue on terminated contracts 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES include the non-refundable advanced cash payments received (CONTINUED) less revenue recognised to date and deferred fulfilment 2.7 REVENUE RECOGNITION costs not yet expensed to the Statement of Profit and Loss. Additionally, certain contracts allow for Datalex to invoice As the measure of progress for revenue recognition we use an pre-agreed termination fees in the event of early termination output measure, namely project tracking tools that allow both of contractual relationships by the customer. Revenue us and our customer to monitor and measure delivery of the associated with pre-agreed termination fees is only recognised various components underpinning the customised software. upon formal contract termination and when IFRS 15 is no We consider that the use of such a system provides the most longer applicable. faithful depiction of our progress in satisfying the delivery of the bundled license and implementation services. 2. Professional services revenue (c) Managed services/hosting Professional services include implementation services, post go-live services, training and other services. Services such Managed services/hosting facilitates customer use of the as configuration and installation of software are typically Datalex product suite. It is offered to those customers that do considered a distinct performance obligation except where not manage the solution themselves. the services significantly customise, integrate or modify the software to which they relate or the licence and services are As the customer simultaneously receives and consumes the highly interdependent or interrelated, in which case it is treated benefits provided by the entity’s performance as the entity as a bundled performance obligation and reported under performs, revenue from managed services performance Platform Revenue. obligations is recognised over time, on a rateable basis. Revenues from services are recognised over time as the relevant (d) Sale of Code service days are utilised/drawn down by the customer or The Group may sell historic, no longer supported software upon expiry of their usage period for any unused days. Certain code to customers where the customers require the software customer contracts may contain provisions preventing the carry code to maintain their operations but it is no longer economic forward of unused man days into a subsequent year. Where or feasible for Datalex to continue to support or develop the such provisions exist and are applied, unused man days at a software code. The sale of the code could occur via granting period-end date will be recognised upon expiration. Where of a perpetual unsupported licence for the software code or carry forward provisions exist, the recognition of revenue will the transfer of the ownership of the Intellectual Property in its follow the contractual arrangement or as agreed with the entirety to the customer. Revenue is recognised when control of customer based on customary practice. the software is passed to the customer. We typically measure progress of our service arrangements (e) Termination fees using an input method, being labour days akin to percentage completion. Such a method of measuring progress faithfully Customer contract termination fees are recognised when either depicts the transfer of services to the customer. of the following conditions are met:
3. Consultancy revenue 1) there are no further performance obligations to transfer goods or services to the customer and all, or substantially all, Consultancy revenues derive from the Group’s TPF (Transaction of the contractual consideration due from the customer has Processing Facility) specialist consultancy services concentrated been received and is non-refundable, or; on transaction processing facilities. As the customer 2) the contract has been terminated and the contractual simultaneously receives and consumes the benefits provided by consideration received from the costumer is non-refundable. the entity’s performance as the entity performs, revenue from consultancy services performance obligations is recognised over time, on a rateable basis.
126 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Contract term 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) For IFRS 15 purposes, the contract term is the period during which the parties to the contract have present and enforceable 2.7 REVENUE RECOGNITION (CONTINUED) rights and obligations. The contractual term varies across (C) SIGNIFICANT REVENUE JUDGEMENTS AND ESTIMATES customers, with many contracts providing for early termination fees and certain contracts containing auto renewal provisions. All of the judgements and estimates mentioned below can Renewal options will not generally be considered in determining significantly impact the timing and amount of revenue to the contract term, as the renewal is generally not within the be recognised. control of Datalex and so only the initial contract term will be considered. However, we assess renewal options to determine Identification of contract if any provide a material right as defined in IFRS 15. See below We frequently enter into new arrangements with existing for our policy in respect of material rights. We consider the customers. Such arrangements can be either a new contract impact of termination penalties in determining the term of or the modification of prior contracts with the customer. In the contract for IFRS 15 purposes and assessing whether that making this determination, we consider: whether there is a term is equal to the contractual term. Termination provisions connection between the new arrangement and the pre-existing and penalties in the case of non-performance (“for cause”) contracts, whether the products and services under the new or insolvency are disregarded in assessing contractual term. arrangement are highly interrelated with the products and Termination penalties for early termination other than for cause
services sold under prior contracts, and how the products and are considered in determining the contract term for revenue Datalex services under the new arrangement are priced. In particular, we recognition purposes. consider the guidance in IFRS 15 which requires the exercise of
judgement and consideration as to whether: the arrangement Where a contract can be terminated early for other than •
changes transaction price only, new distinct products or “for cause”, we will determine whether there is a termination Annual Report 2020 services are added as a result of the arrangement and whether penalty and whether that termination penalty is substantive. the contract price increases by an amount that represents the If a contract can be terminated early for no compensation standalone selling price for the additional distinct products or then, for IFRS 15 purposes, the contracting parties are unlikely services provided. to have enforceable rights and obligations, regardless of the stated contractual term. Where a contract is terminable early Where we enter into multiple contracts with the same for payment of a penalty and that penalty is substantive, it • customer, we treat for accounting purposes those contracts is likely that the stated/ contractual term is the term for IFRS as one contract if the contracts are entered into at or near the 15 purposes. Judgement is required in determining whether a Financial Statements same time and are economically interrelated. Judgement is termination penalty or provision is substantive, and this requires required in evaluating whether various contracts are interrelated, consideration of the level of any penalty in absolute terms and which includes consideration as to whether: relative to the contractual value.
I. The contracts are negotiated as a package with a single Identification of performance obligations commercial objective; Our customer contracts often include various products and II. The amount of consideration to be paid in one contract services. Typically, the products and services outlined in the depends on the price or performance of the other contract; Categories of Revenue section above qualify as separate or performance obligations and the relevant transaction price III. The products or services promised in the contracts (or some is recognised separately as each performance obligation is products or services promised in each of the contracts) are a satisfied. Judgement is required, however, in determining single performance obligation. whether a good or service is considered a separate performance obligation. In order for a good or service to be considered The existence of one or more of the above factors would distinct, both of the following criteria must be met: support the determination that multiple contracts entered into at or near the same time with the same customer are I. the customer can benefit from the good or service either economically interrelated and require treatment for accounting on its own or together with other resources that are readily purposes as one contract. available to the customer (i.e. the good or service is capable of being distinct); and II. the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e. the promise to transfer the good or service is distinct within the context of the contract).
127 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Determination of transaction price 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) (a) Variable consideration
2.7 REVENUE RECOGNITION (CONTINUED) We apply judgement in determining the amount to which we expect to be entitled in exchange for transferring promised (a) Bundled performance obligations products or services to a customer. This includes estimates Judgement is required to evaluate whether such services as to whether and to what extent subsequent concessions significantly integrate, customise, or modify the on-premises or payments may be granted to customers and whether software or cloud service to which they relate. Non distinct the customer is expected to pay the contractual fees. In this products or services are combined into one distinct bundle judgement, we consider our history both with the respective of products and services and treated as a single performance and comparable customers. Typically for Datalex contracts, obligation. This arises in instances where the extent of variable consideration takes the form of: installation or configuration services significantly modify or customise the underlying software. I. Scorecards (bonus or penalties linked to agreed delivery metrics); Judgment is required in determining if the license is considered II. Hosting downtime credits; to be the primary or dominant component of such bundled III. Hosting increments; performance obligations. Where the licence is considered to IV. Contract penalties/ bonuses; and/ or be the dominant component, the revenue for the bundle is V. Transaction or usage-based revenue. recognised over the contract term. In considering the likelihood of incremental or variable (b) Material rights consideration arising, management has considered the range of potential outcomes and associated probabilities, including Where contracts provide customers with an option to acquire whether incremental billings will or could arise and whether it is additional products or services, typically through a renewal highly probable that any such estimate of variable consideration option, we exercise judgement in considering whether such an could be subject to significant reversal when the uncertainties option provides a material right (as defined by IFRS 15) to the giving rise to the estimate crystallise. customer that they would not receive without entering into that contract. In evaluating whether such an option is a material right Such features, where present, typically arise in long standing we consider whether the option provides the customer with a customer relationships where there is significant accumulated discount that is incremental to the range typically given to that past experience in respect of the expected level of downtime or or similar customers for those products or services. service. Based on this historical experience and current trading patterns with that customer, Datalex is capable of reliably Where a material right exists and the products or services estimating the expected amount of variable consideration are similar to the original products or services in the contract and consequently the expected amount(s) to include in the and are provided in accordance with the terms of the original transaction price. contract rather than separately valuing the option, we avail of a practical alternative in IFRS 15. This practical alternative The amount of variable consideration included in the estimated enables us include within the initial estimate of transaction transaction price is subject to a constraint such that the amount price the estimate of the expected consideration by reference included is limited to amounts for which a significant reversal of to the goods or services expected to be provided and cumulative revenue recognised when the uncertainty associated the corresponding expected consideration. The expected with the variable consideration crystallises is not highly consideration for any renewal period would then be added to probable. In estimating the amount of variable consideration to the performance obligation to which it relates (typically the be included in the transaction price we take account of whether: license) and recognised over the expected term of the contract (initial plus expected renewal period). I. There are factors outside of our control that may impact the amount of variable consideration, such as robotic traffic or data mining tools, that may impact the volume of online traffic; II. We have a history of providing the customer or similar customers with price concessions; and III. Technological developments impacting our platform which may mean that as the platform evolves there is limited available history which may be used to predict or estimate customer behaviours.
128 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
(a) License 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The variability of our customers in terms of scale of operation, breadth of their ancillary revenue offering and further 2.7 REVENUE RECOGNITION (CONTINUED) complexities such as whether the airline is a member of a (b) Transaction-based license revenue global alliance or has code-share arrangements, means that the selling prices for our licenses are highly variable. As such, a In certain of our license transactions, customers pay variable representative standalone selling price is not discernible from fees based on products and services transacted through our past transactions. We have therefore used the residual method platform. An exemption from the requirement to estimate to establish the SSP for licenses sold, estimated by means variable consideration and include it within the transaction of the total transaction price less the sum of the observable price exists for the recognition of sales or usage-based royalties standalone selling prices of other products or services promised promised in exchange for a license of intellectual property. in the contract. This exemption only applies in the case of sales or usage- based revenues arising from a license of intellectual property. In instances where there is an inherent discount in a Revenues arising from such sales or usage-based royalties are contractual arrangement, prior to allocating the discount to the recognised as the sale or usage occurs and are not included performance obligations in the contract, we consider whether it within the initial estimate of the transaction price. relates only to one or more, but not all performance obligations. If so, the discount shall be allocated prior to estimating the In certain of our contracts where variable transaction fees apply,
residual value of the license. Datalex there are also guaranteed annual minimum license fees. Where such guaranteed fees exist, then, for purposes of estimating the (b) Managed services/ hosting transaction price, the contracted minimums only are factored • into the transaction price. Revenues for the variable license Our managed services offering is intended as an enabler of element are recognised in accordance with the sales-based/ the Datalex product suite. It is offered to those customers that Annual Report 2020 royalty-based exemption as the sale or usage occurs. are unable or unwilling to manage the solution themselves. The cost of the service includes any hardware, software, (c) Upfront payments maintenance and uptime management (continuous monitoring). The selling price of our managed services offering In certain instances, contracts with customers may contain is based on the budgeted cost of the estimated activities upfront payments. Upfront fees are evaluated to determine necessary to provide the offering plus a pre-determined margin. • whether the activities related to such fees satisfy a performance
The SSP for our managed services offering is estimated using a Financial Statements obligation. Where those activities do not satisfy a performance “cost plus” basis. obligation, the upfront fees are included in the total transaction price that is allocated to the identified distinct performance (c) Professional services obligations in the contract. For professional services, comprising installation, post-go-live (d) Significant financing services and ad-hoc consulting, we price such offerings based on standard, daily labour rates. The nature of the professional Only very rarely do our contracts include significant financing services in these three work streams is the same. The rates components. We do not account for financing components if at which such services are charged are based on daily rates, the period between when we transfer the promised products or with those rates varying according to a number of factors services to the customer and when the customer pays for those including seniority of personnel involved, complexity of work products or services is one year or less. and geography. As a result, we believe that use of a price range/ matrix reflecting SSP ranges according to differences in Allocation of transaction price customer geography, skill set of personnel and cost base is an The bases for the standalone selling prices (“SSP”s) that we use appropriate basis for establishing the SSP for services. to allocate the transaction price of a customer contract to the performance obligations in the contract are outlined below. Where contractual prices fall outside of the applicable range for We review the estimates used for/ of standalone selling prices those services this will give rise to a discount/ premium against periodically or whenever facts and circumstances change to SSP which will be allocated across the identified performance ensure the most objective input parameters available are used. obligations in that contract.
129 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
(A) RESEARCH AND DEVELOPMENT EXPENDITURE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Research expenditure is recognised as an expense as incurred. Directly attributable costs incurred on development projects 2.7 REVENUE RECOGNITION (CONTINUED) (relating to the design, development and testing of new or Recognition of revenue improved products) are recognised as intangible assets when the following criteria are fulfilled: Judgement is required to determine whether revenue is to be recognised at a point in time or over time. For performance I. it is technically feasible to complete the intangible asset so obligations satisfied over time, we measure progress using the that it will be available for use or sale; method that best reflects our performance in satisfying the II. management intends to complete the intangible asset and specific performance obligation and transferring control of the use or sell it; promised products or services to the customer. Our license is III. there is an ability to use or sell the intangible asset; treated as a right to access, and license revenues are recognised IV. it can be demonstrated how the intangible asset will rateably over time from the point at which the license is generate probable future economic benefits; usable by the customer. For professional services we measure V. adequate technical, financial and other resources to percentage of completion based on labour hours incurred to complete the development and to use or sell the intangible date as a proportion of total hours allocated to the contract. asset are available; and If circumstances arise that may change the original estimates VI. the expenditure attributable to the intangible asset during its of revenues, costs or extent of progress toward completion, development can be reliably measured. estimates are revised. For performance obligations recognised at a point in time, revenues are recognised at the point at which Directly attributable costs that are capitalised include the the customer controls the deliverable and the performance software development employee costs. obligation has been satisfied. Development expenditure that does not meet these criteria Disaggregated revenue disclosures is recognised as an expense as incurred. Development costs Revenue information is analysed by operating segment, previously recognised as an expense are not recognised as an revenue category, geography and by major customer in Note 18. asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point 2.8 SEGMENT REPORTING at which the asset is ready for use on a straight-line basis over its useful life. Where objective evidence is present that the The Group has identified two reportable segments, E-Business life should be less than 3 to 5 years the amortisation period is and TPF Consulting under IFRS 8, Operating Segments. reduced accordingly. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision (B) COMPUTER SOFTWARE maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the Acquired computer software licenses are capitalised on the operating segments, has been identified as the executive basis of the costs incurred to acquire and bring the specific management team. software to use. These costs are amortised over their estimated useful lives of three to five years. Costs associated with 2.9 INTANGIBLE ASSETS maintaining computer software programmes are recognised as an expense as incurred. Intangible assets acquired separately are capitalised at cost. Following initial recognition, intangible assets which have a finite life are carried at cost less any applicable accumulated amortisation and any accumulated impairment losses. Where amortisation is charged on assets with finite lives this expense is taken to the Consolidated Statement of Profit & Loss.
The amortisation of intangible assets is calculated to write off the book value over their useful lives on a straight-line basis on the assumption of zero residual value. Please see below for more detail of the amortisation periods applied.
The Group does not have any indefinite-lived intangible assets.
130 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
An item of property, plant and equipment is derecognised 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES upon disposal (i.e. at the date the recipient obtains control) or (CONTINUED) when no future economic benefits are expected from its use 2.9 INTANGIBLE ASSETS or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal (C) IMPAIRMENT proceeds and the carrying amount of the asset) is included in Assets that are subject to amortisation are reviewed for the Consolidated Statement of Profit & Loss when the asset impairment whenever events or changes in circumstances is derecognised. indicate that the carrying amount may not be recoverable. Assets that are not yet available for use are tested annually In accordance with IAS 36 Impairment of Assets, the carrying for impairment, or more frequently if events or changes in amounts of items of Property, Plant and Equipment are circumstances indicate a potential impairment. An impairment reviewed at each Statement of Financial Position date to loss is recognised for the amount by which the asset’s carrying determine whether there is any indication of impairment. amount exceeds its recoverable amount. The recoverable If an indicator of impairment is identified, an impairment amount is the higher of an asset’s fair value less costs to sell and review is carried out as of the reporting date to determine the value in use. For the purpose of assessing impairment, assets recoverable amount, which is the higher of the fair value less are grouped at the lowest levels for which there are separately cost to sell and/or value in use. An impairment loss is recognised identifiable cash flows (cash-generating units). whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. 2.10 CONTRACT FULFILMENT COSTS Datalex If an indicator of impairment is found but there is no Costs relating directly to the fulfilment of a contract or an impairment charge following review, the depreciation method, anticipated contract, which are expected to be recovered • the life and residual value are reviewed to ensure they are capitalised and are then amortised on a systematic basis Annual Report 2020 remain appropriate. consistent with the pattern of the transfer of the services to which the asset relates, generally the licence term. If an indicator of impairment is found but there is an impairment charge identified following the review the 2.11 CONTRACT ACQUISITION COSTS impairment loss is recognised in the Consolidated Statement The Group recognises an asset for the incremental costs of of Profit & Loss. Following the recognition of an impairment obtaining a contract with a customer if it expects the costs loss, the depreciation charge applicable to the asset of • to be recoverable and has determined that certain sales cash-generating unit is adjusted prospectively in order to Financial Statements incentive programmes meet the requirements to be capitalised. systematically allocate the revised carrying amount, net of any Capitalised contract acquisition costs are amortised consistent residual value, over the remaining useful life. with the pattern of transfer to the customer for the goods and services to which the asset relates. The Group applies 2.13 TAXATION the practical expedient available under IFRS 15 and does The Company is managed and controlled in the Republic of not capitalise incremental costs of obtaining contracts if the Ireland and, consequently, is tax resident in Ireland. amortisation period is one year or less.
2.12 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at historical cost less accumulated depreciation and accumulated impairment losses. Depreciation is provided on all property, plant and equipment at rates calculated to write off the cost, less estimated residual value, of each asset, on a straight-line basis over its expected useful life as follows:
Fixtures and fittings 5 years Computer equipment 3 ‑ 5 years
Leasehold improvements are depreciated over the shorter of their estimated useful lives or the related lease term.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.
131 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Deferred tax is recognised in the Consolidated Statement of 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Other Comprehensive Income or directly in equity, if the tax (CONTINUED) relates to items that are credited or charged, in the same or a 2.13 TAXATION (CONTINUED) different period, in other comprehensive income or directly in equity. Current tax represents the expected tax payable or recoverable on the taxable profit for the year using tax rates enacted or Deferred tax assets are recognised to the extent that it is substantively enacted at the Statement of Financial Position probable that future taxable profit will be available against date and taking into account any adjustments stemming from which the deductible temporary differences and unused tax prior years. The Group’s income tax charge reflects various losses and credits can be utilised. The carrying amounts of allowances and reliefs and planning opportunities available deferred tax assets are reviewed at each Statement of Financial in the tax jurisdictions in which the Group operates. The Position date and are reduced to the extent that it is no longer determination of the Group’s charge for income tax in the probable that sufficient taxable profits would be available to Consolidated Statement of Profit & Loss requires estimates allow all or part of the deferred tax asset to be utilised. to be made, on the basis of professional advice, in relation to certain matters where the ultimate outcome may not be Deferred income tax assets and liabilities are offset when there certain and where an extended period may be required before is a legally enforceable right to offset current tax assets against such matters are determined. The amount shown for current current tax liabilities and when the deferred income taxes assets taxation reflects tax uncertainties and is based on the Directors’ and liabilities relate to income taxes levied by the same taxation estimate of: authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a (i) the most likely amount; or net basis. (ii) the expected value of the probable outflow of economic resources that will be required. 2.14 TRADE AND OTHER RECEIVABLES The estimates for income tax included in the financial The Group applies IFRS 9 Financial Instruments. IFRS 9 sets out statements are considered appropriate but no assurance can be the classification, subsequent measurement and impairment given that the final determination of these matters will not be requirements for all financial assets, including trade receivables. materially different to the estimates included in the financial statements. Whilst it is possible, the Group does not currently Recognition and initial measurement anticipate that any such differences could have a material Financial assets, including trade receivables, are recognised impact on the income tax provision and profit for the period on the Consolidated Statement of Financial Position when, in which such a determination is made nor does it expect any and only when, the Group becomes a party to the contractual significant impact on its financial position in the near term. provisions of the financial instrument. This is based on the Group’s knowledge and experience, as well as the profile of the individual components which have Trade receivables that do not have a significant financing been reflected in the current tax liability, the status of the tax component (as defined in IFRS 15) are initially recognised audits, enquiries and negotiations in progress at each year- at their transaction price. Trade receivables that do have a end, previous claims and any factors specific to the relevant significant financing component (as defined in IFRS 15) are tax environments. initially discounted using the discount rate that would be reflected in a separate financing transaction between the Deferred tax is recognised, using the liability method, on Datalex and the customer at contract inception. When all other all temporary differences at the Statement of Financial financial assets are recognised initially, they are measured at fair Positionsheet date which is defined as the difference between value and in the case of financial assets not at fair value through the tax bases of assets and liabilities and their carrying amounts profit and loss plus directly attributable transaction costs. in the financial statements. Deferred tax assets and liabilities are not subject to discounting and are measured using the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantially enacted by the end of the reporting period.
However, if the deferred tax arises from initial recognition of an asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit and loss, it is not accounted for.
132 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
Impairment 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) The Group assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at 2.14 TRADE AND OTHER RECEIVABLES (CONTINUED) amortised cost. For contract assets, the Group applies the Derecognition simplified approach required by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the A financial asset is derecognised where the contractual right receivables. The Group uses judgement in making assumptions to receive cash flows from the asset has expired or has been around the risk of default and expected loss rates, based on the transferred, and the Group has transferred substantially all risks Group’s past history, existing market conditions and comparable and rewards of ownership. On derecognition of a financial asset information, as well as forward-looking estimates at the end of in its entirety, the difference between the carrying amount each reporting period. and the sum of the consideration received and any cumulative gain or loss that has been recognised directly in equity is Impairment losses on contract assets are presented as net recognised in profit or loss. Where this financial asset is not impairment losses within operating profit. Subsequent an equity instrument designated at fair value through Other recoveries of amounts previously written off are credited Comprehensive Income. against the same line item.
Subsequent measurement 2.16 TRADE AND OTHER PAYABLES
Trade receivables are initially recognised at fair value and Datalex Trade and other payables are recognised initially at their fair subsequently measured at amortised cost using the effective value and subsequently measured at amortised cost using interest method, which approximates to fair value given the the effective interest method, which approximates to fair short-dated nature of these amounts. • value given the short-dated nature of these liabilities. These amounts represent liabilities for goods and services provided Annual Report 2020 For trade receivables which contain and do not contain a to the Group prior to the end of the financial year which are significant financing component, the Group applies the unpaid. The amounts are unsecured. Trade and other payables simplified approach required by IFRS 9, which requires expected are presented as current liabilities unless Datalex has an lifetime losses to be recognised from initial recognition of the unconditional right to defer payment for at least one year as at receivables. The Group uses judgement in making assumptions the reporting period. around the risk of default and expected loss rates, based on the •
Group’s past history, existing market conditions and comparable 2.17 CONTRACT LIABILITIES information, as well as forward-looking estimates at the end of Financial Statements each reporting period. Contract liabilities primarily reflect amounts due or payments received from customers in advance of the performance Impairment losses on trade receivables are presented as obligations being satisfied and revenue recognised. Contract net impairment losses within operating profit. Subsequent liabilities are recognised as revenue when the Group satisfies the recoveries of amounts previously written off are credited contract performance obligations. Contract assets and liabilities against the same line item. are netted if, and only if, they arise under the same customer contractual arrangement. 2.15 CONTRACT ASSETS Contract liabilities are classified as current or non-current Trade receivables are recognised for amounts due in on the basis of when the related revenue is anticipated to respect of performance obligations satisfied in advance of be recognised. receiving consideration where the receipt of consideration is unconditional other than for the passage of time. Where the receipt of consideration is conditional other than for the passage of time, a contract asset shall be recognised. Judgement is required in determining whether the right to consideration is conditional other than for the passage of time.
Contract assets are classified as current or non-current depending on when it is expected that they will be realised.
133 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
(B) SHARE-BASED PAYMENT TRANSACTIONS – SHARE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES OPTION SCHEMES (CONTINUED) The Group and Company operate equity-settled share-based 2.18 BORROWINGS compensation plans. Employees (including Directors) of the Borrowings are initially recognised at fair value, net of Group and Company receive remuneration in the form of transaction costs incurred. Borrowings are subsequently share-based payment transactions, whereby employees render measured at amortised cost. Any difference between the service in exchange for shares or rights over shares. The fair proceeds (net of transaction costs) and the redemption value of the employee services received in exchange for the amount is recognised in profit or loss over the period of the grant of the share options is recognised as an expense in the borrowings using the effective interest method. Fees paid on Consolidated Statement of Profit and Loss. The total amount to the establishment of loan facilities are recognised as transaction be expensed over the vesting period is determined by reference costs of the loan to the extent that it is probable that some or all to the fair value of the options granted, excluding the impact of of the facility will be drawn down. In this case, the fee is deferred any non-market vesting conditions (for example, profitability). until the drawdown occurs. To the extent there is no evidence Non-market vesting conditions, including Adjusted EBITDA and that it is probable that some or all of the facility will be drawn cash, are included in assumptions about the number of options down, the fee is capitalised as a prepayment for liquidity services that are expected to become exercisable. and amortised over the period of the facility to which it relates. At each statement of financial position date, the estimate of Borrowings are removed from the Statement of Financial the number of options that are expected to vest (become Position when the obligation specified in the contract is exercisable) is revised. The impact of the revision of original discharged, cancelled or expired. The difference between estimates, if any, is recognised in the Consolidated Statement the carrying amount of a financial liability that has been of Profit and Loss, with a corresponding adjustment to equity. extinguished or transferred to another party and the The total expense is recognised over the vesting period which consideration paid, including any non-cash assets transferred is the period over which all the specified vesting conditions are or liabilities assumed, is recognised in profit and loss as other to be satisfied. Modifications of the performance conditions income or finance costs. are accounted for as a modification under IFRS 2, Share-based Payment. In particular, where a modification increases the fair Borrowings are classified as current liabilities unless the Group value of the equity instruments granted, the Group includes has an unconditional right to defer settlement of the liability for the incremental fair value granted in the measurement of the at least 12 months after the end of the reporting period. amount recognised for the services received over the remainder of the vesting period. Where the share-based payments give 2.19 EMPLOYEE BENEFITS rise to the issue of new equity share capital, the proceeds received are credited to share capital (nominal value) and share (A) PENSION OBLIGATIONS premium when the options are exercised. Transaction costs for The Group operates defined contribution plans. A defined the share options are recorded against retained earnings. contribution plan is a pension plan under which the Group pays fixed contributions into an independently administrated Where the share-based payments give rise to the reissue of pension fund. shares from treasury shares, the proceeds of the issue are credited to shareholder’s equity. The Group has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay The Group does not operate any cash-settled share-based all employees the benefits relating to employee service in the payments schemes or share-based payment transactions current and prior periods. with cash alternatives in IFRS 2. Share options exercised are accounted for at date of exercise with values attributed to The contributions are recognised as an employee benefit share capital and share premium, based on the share option expense when they are due. Prepaid contributions are exercise price. recognised as an asset to the extent that a cash refund or a reduction in future payments is available. Taxes due by the exercisers are accounted for in accordance with employer tax regulations in the relevant jurisdictions.
134 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
(E) LONG TERM INCENTIVE PLAN (“LTIP”) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) As explained in Note 15, the Group has implemented a long- term incentive plan which operates in a similar way to a long- 2.19 EMPLOYEE BENEFITS (CONTINUED) term cash bonus (the “Long Term Incentive Plan” or “LTIP”). At (C) SHARE-BASED PAYMENT TRANSACTIONS – DEFERRED each statement of financial position date, the related provision SHARE AWARDS is calculated based on the estimated fair value of the obligation resulting from applying a straight-line charge approach to the As disclosed in the Remuneration Report, a member of key estimated final cash obligation over the term of the award management was granted a deferred share award. This is an (three years). Remeasurements are recognised immediately equity-settled scheme. The fair value of the employee services through profit or loss. received in exchange for the grant of this award is recognised as an expense. The total amount to be expensed over the vesting 2.20 LEASES period is determined by reference to the fair value of the award granted, excluding the impact of any non-market vesting The Group recognises a right-of-use asset and a lease liability conditions (for example profitability). Non-market vesting at the date that the lease commences. The right-of-use asset conditions, including Adjusted EBITDA and cash, are included is initially measured at cost and subsequently at cost less any in assumptions about the number of awards that are expected accumulated depreciation and impairment losses, and adjusted to become exercisable. At each statement of financial position for certain remeasurements of the lease liability. Right-of-use date, the estimate of the number of awards that are expected assets are depreciated over the shorter of the lease term and to become exercisable is revised. The impact of the revision useful life of the underlying asset. Datalex of original estimates, if any, is recognised in the Consolidated Statement of Profit & Loss, with a corresponding adjustment The lease liability is initially measured at the present value of • to equity. The total expense is recognised over the vesting the lease payments that are not paid at the commencement period which is the period over which all the specified vesting date, discounted using the interest rate implicit in the lease or, if Annual Report 2020 conditions are satisfied. Modifications of the performance that rate cannot be readily determined, the Group’s incremental conditions are accounted for as a modification under IFRS 2. In borrowing rate. The Group typically uses its incremental particular, where a modification increases the fair value of the borrowing rate as the discount rate. Due to the limited financing equity instruments granted, the Group includes the incremental options available to the Group, the incremental borrowing rates fair value granted in the measurement of the amount for the Group’s leases have been set referencing the interest rate recognised for the services received over the remainder of the on the Tireragh Limited loan facility. •
vesting period. Given that the Group has used treasury shares to Financial Statements set up this award, any related proceeds, net of any transaction The lease liability is subsequently increased by the interest cost cost, will be credited to the treasury shares reserve. on the lease liability and decreased by lease payments made. The lease liability is remeasured when there is a change in future Share options exercised are accounted for at date of exercise lease payments arising from a change in an index or a rate, a with values attributed to share capital and share premium, change in the estimate of the amount expected to be payable based on the share option exercise price. under a residual value guarantee, or as appropriate, changes in the assessment of whether a purchase or extension option is Taxes due by the exercisers are accounted for in accordance reasonably certain to be exercised or a termination option is with employer tax regulations in the relevant jurisdictions. reasonably certain not to be exercised.
(D) COMPANY FINANCIAL STATEMENTS The Group has applied judgement to determine the lease term for some lease contracts that include termination or renewal options. In relation to the Company financial statements, the annual The assessment of whether the Group is reasonably certain to cost corresponding to share-based awards, JSOP awards exercise such options impacts the lease term, which affects the and deferred share awards is recorded as part of the cost of amount of lease liabilities and right-of-use assets recognised. investment in subsidiaries in the Company Statement on Financial Position. The weighted average Incremental Borrowing rate applied during 2020 was 10.55%.
2.21 CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
135 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
2.25 FINANCE INCOME AND COSTS 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Interest income is recognised in the Consolidated Statement of Profit and Loss as it accrues using the effective interest 2.22 EQUITY method. Finance costs comprise interest payable on borrowings SHARE CAPITAL calculated using the effective interest rate method, facility fees and the unwinding of discounts on provisions. The interest Ordinary shares are classified as equity. Incremental costs expense component of lease arrangements is recognised in the directly attributable to the issue of new shares or options are Consolidated Statement of Profit and Loss using the effective shown in equity as a deduction, net of tax from the proceeds. interest rate method.
TREASURY SHARES 2.26 EXCEPTIONAL ITEMS Where the Company issues or purchases equity share capital The Group has adopted a format which seeks to highlight under its Joint Share Ownership Plan or Deferred Share significant items within the Group results for the year. Scheme, which are held in trust by an Employee Benefit Trust, Exceptional items are material non-recurring items that these shares are classified as treasury shares on consolidation derive from events or transactions that fall within the ordinary until such time as the interests vest and the participants acquire activities of the Group and which individually or, if of a similar the shares from the Trust or the interests lapse and the shares type, in aggregate, are separately disclosed by virtue of their are forfeited, disposed of by the Trust or otherwise cancelled size or incidence. Such items may include litigation costs and by the Company. Where such shares are subsequently sold or payments or receipts arising from court case judgements, re-issued, any consideration is included in Total Equity. Treasury or once off costs or income where separate identification is shares have been excluded in the calculation of basic and important to gain an understanding of the financial statements. diluted earnings per share (see Note 25). Judgement is used by the Group in assessing the particular items, which by virtue of their scale and nature should be DIVIDENDS disclosed in the Statement of Profit and Loss and related Dividend distributions to the Company’s shareholders are notes as exceptional items. Exceptional items recorded in recognised as a liability in the Group’s and Company’s financial the year ended 31 December 2020 are presented in Note 23. statements in the period in which the dividends are approved Exceptional items are included within the statement of profit by the Company’s shareholders. Proposed dividends that are and loss captions to which they relate and are disclosed either approved after the Statement of Financial Position date are not on the face of the consolidated statement of profit and loss or recognised as a liability at the Statement of Financial Position in the notes thereto. date but are disclosed in the dividends note (Note 27). 2.27 EARNINGS PER SHARE 2.23 INVESTMENT IN SUBSIDIARIES The Group presents basic and diluted earnings per share (“EPS”) Investments in equity shares in subsidiaries included in the information for its ordinary shares. Basic EPS is determined by Company Statement of Financial Position are stated at cost dividing the consolidated profit or loss attributable to ordinary less allowance for impairment. Such investments are tested shareholders of the Company by the weighted average number for impairment at each statement of financial position date of ordinary shares outstanding during the period. Diluted EPS is or earlier if events or circumstances indicate that the carrying calculated by adjusting the profit or loss attributable to ordinary amount exceeds its recoverable amount. An impairment loss is shareholders and the weighted average number of ordinary recognised in profit or loss as the amount by which the asset’s shares outstanding for the effects of all dilutive potential carrying amount exceeds its recoverable amount. ordinary shares, including share options granted to employees and awards under employee share award schemes. 2.24 CASH ADVANCES FROM CUSTOMERS Cash advances from customers consist of payments received from customers in advance of revenue recognition and are initially measured at fair value and released to the statement of profit and loss at the time the related revenue is earned under the applicable revenue recognition policy as stated in Note 2.7 above.
136 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) The preparation of the Consolidated and Company financial 2.28 ONEROUS CONTRACTS statements in conformity with IFRS requires management to make judgements, estimates and assumptions concerning If the Group has a contract that is onerous, the present the future that affect the application of policies and reported obligation under the contract is recognised and measured as a amounts of assets and liabilities, income and expenses. Actual provision. However, before a separate provision for an onerous results may differ from these judgements and estimates. contract is established, the Group recognises any impairment loss that has occurred on assets dedicated to that contract. Estimates and judgements are evaluated, reviewed and revised on an ongoing basis based on historical experience and An onerous contract is a contract under which the unavoidable other factors, including expectations of future events that are costs (i.e., the costs that the Group cannot avoid because it has believed to be reasonable under the circumstances. Revisions to the contract) of meeting the obligations under the contract accounting estimates are recognised in the period in which the exceed the economic benefits expected to be received under estimates are revised and in any future periods affected. it. The unavoidable costs under a contract reflect the least net cost of exiting from the contract, which is the lower of the cost The estimates and assumptions that have a significant risk of of fulfilling it and any compensation or penalties arising from causing a material adjustment to the carrying amounts of assets failure to fulfil it. and liabilities at 31 December 2020 within the next financial year are discussed below. Datalex 2.29 PROVISIONS A Provision is recognised in the Consolidated Statement of Information about critical judgements and significant estimates • Financial Position when the Group has a present obligation in applying accounting policies that have the most significant (either legal or constructive) as a result of past events, it is impact on the amounts recognised in the financial statements Annual Report 2020 probable that an outflow of resources will be required to settle are set out below: the obligation, and the amount can be reliably estimated. Provisions are measured at the Director’s best estimate of the JUDGEMENTS expenditure required to settle the obligation at the Statement (A) REVENUE RECOGNITION of Financial Position date and are discounted to present value where the effect is material. Our accounting policy for revenue, including significant • judgements is set out in Note 2.7. Significant judgement is Financial Statements A provision for restructuring is recognised when the Group exercised in determining individual performance obligations, has approved a detailed and formal restructuring plan and determining appropriate Standalone Selling Prices, whether after it announced its main provisions which has raised a certain performance obligations should be bundled and the valid expectation in those affected that it will carry out the identification of material rights. restructuring by starting to implement that plan. It was determined that new commercial arrangements entered A contingent liability is not recognised but is disclosed where into with HNA group airlines did not meet the requirements the existence of the obligation will only be confirmed by future of Step 1 of IFRS 15 revenue recognition on the basis that events or where it is not probable that an outflow of resources the collection of the contract consideration was not deemed will be required to settle the obligation or where the amount of probable. As a result, no revenue has been recognised on these the obligation cannot be measured with reasonable reliability. arrangements despite ongoing services being provided during Contingent assets are not recognised but are disclosed where an 2020. A materially different outcome would be recorded in inflow of economic benefits is probable. the 2020 Consolidated Statement of Profit and Loss had the commercial arrangements with the HNA group airlines met 2.30 GOVERNMENT GRANTS the Step 1 requirements of IFRS 15. The application of this judgement has a significant impact on the presentation of Government grants are not recognised until there is reasonable the financial results of the Group. The accounting standards assurance that the Group will comply with the conditions require that revenue recognition be deferred until cash has been attaching to them and that the grants will be received. received from the HNA subsidiary contracts. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. Amounts are recognised as income over the periods necessary to match them with the related costs and are deducted in reporting the related expense.
137 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
structures on the resource time and effort spent on the 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS roadmap items. This was to ensure that management could (CONTINUED) measure reliably the cost of the capabilities during the period. In the prior year, it was determined that the performance obligations were not distinct for a single large customer During 2020, the Group commenced work on a number implementation project. The judgment has been made as a of distinct technology capabilities and platform changes to result of the significant investment required by the Group in the facilitate our customers response to the COVID-19 crisis. These development and enhancement of the Platform capabilities capabilities included Vouchers as a form of payment, our in order for the customer to extract value from the licence to Merchandiser product and our Dynamic offering product. The utilise the Platform. The impact of this judgement resulted Group has capitalised $1.1m (2019: US$0.1m) in respect of these in the Company “Bundling” the associated revenues for the capabilities. Work on US$0.7m of these capabilities remains on Implementation and Services into a new revenue classification, going at the year end. which when recognised will be referred to as “bundled” in the Consolidated Statement of Profit and Loss. No revenue was (C) ACCOUNTING FOR EXCEPTIONAL ITEMS recognised in the 2020 Consolidated Statement of Profit & Exceptional items are material non-recurring items that Loss for the Bundled performance obligation as the software derive from events or transactions that fall within the ordinary had not gone live during the financial year. activities of the Group and which individually or, if of a similar type, in aggregate, are separately disclosed by virtue of their It was expected that commencement of revenue recognition size or incidence. Such items may include litigation costs and on the Bundled performance obligation would occur during payments or receipts arising from court case judgements, 2021, however as a result of COVID-19 the go-live of the or once off costs or income where separate identification is implementation has been delayed. It is anticipated that this important to gain an understanding of the financial statements. revenue recognition will commence in 2022. A materially Judgement is used by the Group in assessing the particular different outcome would be recorded in the 2020 Consolidated items, which by virtue of their scale and nature should be Statement of Profit and Loss had the previous conclusion been disclosed in the Statement of Profit and Loss and related notes reached that the Bundled performance obligations were in fact as exceptional items. separate and distinct. The application of this judgement has a significant impact on the presentation of the financial results of (D) GOING CONCERN the Group. The accounting standards require all revenues and direct costs associated with this Bundled contract to be deferred The Directors have a reasonable expectation that the Group has until such time as the contract deliverables “Go‑Live”. adequate resources to continue operating as a going concern for the foreseeable future. Judgement and estimate is required (B) CAPITALISATION OF DEVELOPMENT COSTS in forecasting cashflow projections incorporating the impact of COVID-19. The details of the going concern scenarios, key Costs incurred on development projects are recognised as assumptions and mitigating actions are outlined in the going intangible assets when all criteria required under IAS 38 are met. concern statement within note 2.5. Judgement is necessary to determine commercial and technical feasibility. These calculations also require the use of estimates, (E) IMPAIRMENT OF INVESTMENTS IN SUBSIDIARIES primarily around the level of directly attributable management (COMPANY) and supervisory time, bug fixing (i.e. rebasing and republishing). Capitalisation ceases and amortisation commences once a Investments in subsidiaries are tested for impairment at each product is available for deployment. statement of financial position date or earlier if events or circumstances indicate that the carrying amount exceeds its During 2019 the Group completed a review of the approach recoverable amount. Such an assessment involves judgement to market and product development activities. As a result of regarding the future financial performance of the subsidiaries. this review, “Strategic Product Roadmap” was developed that aligned the product development activities with the wider Directors previously assessed the recoverable amount of strategies of the Group. This product roadmap outlined the the investment having taken into consideration a range Group’s focus on technology enhancements and developments of assumptions as well as events post the statement of which represent distinct new capabilities, with more targeted financial position date. Following this assessment, a full investment in activities. The items included within the roadmap impairment provision was retained against the carrying value were determined as a result of customer feedback and of the investment arising from the uncertainties as to the developments in the marketplace. The identified capabilities future profitability of the subsidiary. In the current year, the facilitated an increase in the offerings to existing customers and Directors have deemed it appropriate to maintain the full improved the go-to-market options with potential customers. impairment provision recorded in the prior years. The events During 2019, management put in place appropriate governance that gave rise to the provision remain applicable to the 2020 financial statements.
138 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
(B) EXPECTED CREDIT LOSSES 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONTINUED) Financial assets, including trade receivables are subject to IFRS 9, Financial Instruments, which requires management to ESTIMATES estimate the probability of default on an asset at the year end (A) PROVISIONS date. This requires significant estimation and judgement.
Legal and Compliance Costs Management has used a common methodology to calculate In 2019 the Group recognised a provision which related to legal the expected credit loss under IFRS, whereby: Expected credit and compliance costs of ongoing regulatory investigations and loss (ECL) = PD*LGD*EAD the necessary requirements to obtain an end to the suspension order on the trading of the Group’s shares on the Euronext › PD is the probability of default, i.e. the likelihood of a default Dublin exchange. The regulatory investigation and suspension happening over a prescribed period; of trading of the Group’s share arose following the significant › LGD, or loss given default, is the percentage that could be breakdown in internal financial controls as disclosed in the 2018 lost in the event of a default. Datalex assume an LGD of Annual Report. 100%, i.e. an assumption that for the amount that would be calculated as a result of the probability of default, Datalex Management has exercised judgement in arriving at the will lose 100% of this amount; potential provision in respect of these issues. There is significant › EAD is the Exposure at Default. This consists of the asset
estimation uncertainty involved in determining this provision, amount at the period end date for each customer. Datalex and in particular including the extent of economic resources that will need to be deployed by the Group in order to bring Management has utilised a third party consultant to assist in the
the issues to a resolution and therefore the amount of any obtaining and calculation of yield spreads. These yield spreads •
associated liabilities. These could result in material adjustments form part of the inputs to assess the probability of default by Annual Report 2020 to the provision in the future. At this point, information the Group’s customers. usually required by IAS 37 Provisions, Contingent Liabilities and Contingent Assets, is not disclosed on the grounds that (C) EXPECTED CREDIT LOSSES (COMPANY) such disclosure would seriously prejudice the position of the Datalex PLC is also applying IFRS in the stand-alone financial Group in resolving the legal and compliance matters to which statements and is therefore required to calculate expected provision relates. credit losses on all financial assets, including intercompany • loans within the scope of IFRS 9, ‘Financial Instruments’. Certain Management notes that it may take a number of years for the Financial Statements simplifications from IFRS 9’s general 3-stage impairment model Group to conclude on the associated legal issues arising from are available for trade receivables (including intercompany the past events. As a result, the balance included in the financial trade receivables), contract assets or lease receivables, but statements has been discounted to reflect the time value of these do not apply to intercompany balances. The amounts money. The actual future economic outflows may be materially owed to the PLC Company by Group undertakings are interest higher than those provided for. free, unsecured and are repayable on demand. Having had due consideration of the ECL model set out in section (B) above, the Uncertain Tax Positions directors deemed it appropriate, as in the prior year, to record The Group has recognised a provision which relates to certain an ECL provision at 100% of the net intercompany receivable uncertain tax positions as at the reporting date. These balance at the year end.
Management has exercised judgement in arriving at the potential provision in respect of these issues. There is significant estimation uncertainty involved in determining this provision, and in particular including the extent of economic resources that will need to be deployed by the Group in order to bring the issues to a resolution and therefore the amount of any associated liabilities (including interest and penalties etc).
Management and its tax advisors are in discussions with relevant tax authorities in order to seek resolution of these uncertain tax positions. Whilst management is endeavouring to resolve these issues, it is unclear as to whether these matters will be fully resolved during 2021.
139 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
4 PROPERTY, PLANT AND EQUIPMENT This note details the tangible assets utilised by the Group to generate revenues and contribution to profits. The cost of these assets primarily represents the amounts originally paid for them. All assets are depreciated over their estimated useful economic lives.
Group Fixtures & Computer Leasehold fittings equipment improvements Total US$’000 US$’000 US$’000 US$’000
At 1 January 2019 Cost 796 8,704 1,301 10,801 Accumulated depreciation (528) (7,205) (532) (8,265) Closing net book value 268 1,499 769 2,536
Year ended 31 December 2019 Opening net book value 268 1,499 769 2,536 Derecognition of finance lease assets - IFRS 16 Adoption - (1,141) - (1,141) Opening net book amount (revised) 268 358 769 1,395
Cost Opening Cost 796 8,704 1,301 10,801 Derecognition of finance lease assets - IFRS 16 Adoption - (5,425) - (5,425) Additions - 303 - 303 Disposals - (4) - (4) Write-downs (32) (1,333) - (1,365) Closing Cost 764 2,245 1,301 4,310
Accumulated Depreciation Opening Accumulated Depreciation (528) (7,205) (532) (8,265) Derecognition of finance lease assets - IFRS 16 Adoption - 4,284 - 4,284 Depreciation charge (98) (300) (223) (621) Disposals - 4 - 4 Write-downs 32 1,333 - 1,365 Closing Accumulated Depreciation (594) (1,884) (755) (3,233)
Closing net book value 170 361 546 1,077
140 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
4 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Group Fixtures & Computer Leasehold fittings equipment improvements Total US$’000 US$’000 US$’000 US$’000
At 31 December 2019 Cost 764 2,245 1,301 4,310 Accumulated depreciation (594) (1,884) (755) (3,233) Closing net book value 170 361 546 1,077
Year ended 31 December 2020 Cost Opening Cost 764 2,245 1,301 4,310 Additions 4 47 16 67
Transfer of Assets - (123) - (123) Datalex Disposals (260) (996) - (1,256) Closing Cost 508 1,173 1,317 2,998 •
Annual Report 2020 Accumulated Depreciation Opening Accumulated Depreciation (594) (1,884) (755) (3,233) Depreciation charge (105) (177) (225) (507) Disposals 260 991 - 1,251 Closing Accumulated Depreciation (439) (1,070) (980) (2,489) •
Closing net book value 69 103 337 509 Financial Statements At 31 December 2020 Cost 508 1,173 1,317 2,998 Accumulated depreciation (439) (1,070) (980) (2,489) Closing net book value 69 103 337 509
Depreciation of US$0.5m (2019: US$0.6m) has been charged in administration expenses in the statement of profit or loss.
Disposal of US$Nil (2019: US$4k) has been charged in administration expense.
The basis by which depreciation is calculated is stated in Note 2.12.
Details of security provided in respect of Property, Plant and Equipment are disclosed in Note 14 and Note 31.
The gross carrying amount of fully depreciated property, plant and equipment that is still in use as at 31 December 2020 was US$1.9m (2019: US$1.9m).
141 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
5 INTANGIBLE ASSETS This note details the intangible assets utilised by the Group to generate revenues and contribution to recorded results. The cost of software primarily represents the amounts originally paid to bring the software into use. The cost of product development primarily represents the direct labour costs incurred. All intangible assets are amortised over their estimated useful economic lives. Amortisation commences once the asset is available for use.
Product Software development Total US$’000 US$’000 US$’000
At 1 January 2019 Cost 2,299 72,900 75,199 Accumulated amortisation and impairment (2,159) (72,900) (75,059) Closing net book value 140 - 140
Year ended 31 December 2019 Opening net book value 140 - 140 Additions 48 - 48 Work in Progress - 107 107 Amortisation charge (67) - (67) Closing net book value 121 107 228
At 31 December 2019 Cost 188 107 295 Accumulated amortisation and impairment (67) - (67) Closing net book value 121 107 228
Year ended 31 December 2020 Opening net book value 121 107 228 Additions 578 394 972 Work in Progress - 732 732 Disposals (35) - (35) Amortisation charge (72) (27) (99) Closing net book value 592 1,206 1,798
At 31 December 2020 Cost 731 1,233 1,964 Accumulated amortisation (139) (27) (166) Closing net book value 592 1,206 1,798
WORK IN PROGRESS During the latter part of 2019 the Group completed the review of its approach to market and its product development activities. As a result of the review, the management team developed a “Strategic Product Roadmap” that aligned with the strategic object of Product first and Future proofed platform. This roadmap outlines the Group’s focus on technology enhancements and developments which represent distinct new capabilities. Work on these capabilities remains active at the year end date. Once the platform enhancements are made available to the business and are available for use it will be moved out of Work in Progress into Additions.
142 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
5 INTANGIBLE ASSETS (CONTINUED)
ADDITIONS The Group completed a number of new capabilities and enhancements during 2020. These are now available for deployment to our existing customers and any potential new customers. Amortisation of these costs has commenced from the date that they are complete and ready for deployment.
AMORTISATION All intangible assets are amortised over their estimated useful economic lives and commences once the asset is available for use as stated in Note 2.9. Amortisation is recognised as an expense in the Consolidated Statement of Profit and Loss.
IMPAIRMENT During 2020, management considered the external and internal sources of information that may indicate that the impairment loss recognised in previous years may no longer exist or may have decreased. The external indicators considered included whether there had been a significant favourable change in the asset’s value and market conditions. The internal indicators considered included whether there had been any significant favourable change in the asset’s use and performance. As a result of the review of the external and internal indicators, no impairment charge is recorded in 2020 and it was deemed appropriate not to reverse any of the
previously recorded impairment charge on Product Development. Datalex
WRITE-OFF OF DEVELOPMENT EXPENDITURE INCURRED • An amount of US$1.4m (2019: US$1.8m) was incurred by the Group during the year ended 31 December 2020 in respect of development expenditure, of which US$1.1m (2019:US$0.1m) has been capitalised. An amount of US$0.9m (2019: US$0.2m) has Annual Report 2020 been accrued for an R&D tax credit claim in respect of this expenditure at 31 December 2020.
No Intangible Assets are held under lease. Details of security provided in respect of Intangible Assets are disclosed in Note 14 and Note 31. •
Financial Statements
143 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
6 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES This note details the lease disclosures for the Group.
RIGHT-OF-USE ASSETS Right-of-use assets related to leased properties are presented below:
Group Office Computer Motor Buildings Equip Vehicles Total US$’000 US$’000 US$’000 US$’000
At 31 December 2019 Cost 5,889 1,141 54 7,084 Accumulated depreciation (804) (489) (2) (1,295) Net carrying amount 5,085 652 52 5,789
Year ended 31 December 2019 Opening net book value Effect of adopting IFRS 16 5,942 1,141 90 7,173 Translation adjustment (53) - (36) (89) Depreciation charge for year (804) (489) (2) (1,295) Closing net book value 5,085 652 52 5,789
Year ended 31 December 2020 Opening Cost 5,889 1,141 54 7,084
Additions 266 103 4 373 Disposals - (361) (3) (364) Transfer of Assets - 123 - 123 Impairment (260) - - (260) Closing Cost 5,895 1,006 55 6,956
Opening Accumulated Depreciation (804) (489) (2) (1,295) Depreciation charge (815) (566) (27) (1,408) Disposals - 361 - 361 Closing Accumulated Depreciation (1,619) (694) (29) (2,342)
Closing net book value 4,276 312 26 4,614
At 31 December 2020 Cost 5,895 1,006 55 6,956 Accumulated depreciation (1,619) (694) (29) (2,342) Closing net book value 4,276 312 26 4,614
144 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
6 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (CONTINUED)
LEASE LIABILITIES Group Office Computer Motor Buildings Equip Vehicles Total US$’000 US$’000 US$’000 US$’000
At 1 January 2019 (6,400) (1,261) (90) (7,751) Translation adjustment 49 3 1 53 Payments 1,161 746 46 1,953 Discount unwinding (638) (44) (15) (697) Closing Cost (5,828) (556) (58) (6,442)
At 1 January 2020 (5,828) (556) (58) (6,442) Translation adjustment (228) (62) (2) (292)
Additions (171) (64) (3) (238) Datalex Disposals 54 - 4 58 Payments 1,177 238 35 1,450 • Discount unwinding (605) (17) (8) (630) Annual Report 2020 Closing Cost (5,601) (461) (32) (6,094)
The table below shows a maturity analysis of the discounted and undiscounted lease liability arising from the Group’s leasing activities. The projections are based on the foreign exchange rates applying at the end of the relevant financial year and on interest rates (discounted projections only) applicable to the lease portfolio. •
As at 31 December 2020 As at 31 December 2019 Discounted Undiscounted Discounted Undiscounted Financial Statements US$’000 US$’000 US$’000 US$’000
Within one year 1,276 1,660 250 251 Between one and two years 1,009 1,363 14 17 Between two and three years 769 1,100 385 380 Between three and four years 613 916 484 621 Between four and five years 472 746 1,100 1,412 After five years 1,955 3,349 4,209 7,267 Total 6,094 9,134 6,442 9,948
The Group avails of the exemption from capitalising lease costs for short-term leases and low-value assets where the relevant criteria are met. Variable lease payments directly linked to sales or usage are also expensed as incurred. The following lease costs have been charged to the Consolidated Statement of Profit and Loss as incurred:
2020 2019 US$’000 US$’000
Short-term leases 84 19 Leases of low-value assets - 4 Total 84 23
145 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
6 RIGHT-OF-USE ASSETS AND LEASE LIABILITIES (CONTINUED) Lease commitments for short-term leases are similar to the portfolio of short-term leases for which the costs, as above, were expensed to the Consolidated Statement of Profit and Loss. The effect of excluding future cash outflows arising from variable lease payments, termination options, residual value guarantees and leases not yet commenced from lease liabilities was not material for the Group. The potential undiscounted future cash outflows arising from the exercise of renewal options that are not expected to be exercised (and are therefore not included in the lease term) are as follows:
As at 31 As at 31 December 2020 December 2020 Undiscounted Undiscounted US$’000 US$’000
Within one year 48 48 Between one and two years - - Between two and three years - - Between three and four years - - Between four and five years - - After five years - - Total 48 48
7 DEFERRED CONTRACT FULFILMENT COSTS This note details the deferred contract fulfilment costs that arise from customer service contracts and comprise of staff and contractor / outsource partner costs incurred. These costs are being deferred under IFRS 15 and will be recognised as the related performance obligations are fulfilled.
The movements in the contract fulfilment cost asset in the year were as follows:
Group Group 2020 2019 US$’000 US$’000
At 1 January 2,161 11,524 Costs incurred to fulfil terminated customer contract in the year - 2,040 Costs incurred to fulfil the ongoing customer contracts in the year 702 2,161 Costs offset with Contract Liabilities on termination of customer contract (i) - (10,802) Costs invoiced on termination of customer contract (i) - (2,339) Costs written off on termination of customer contract (i) - (154) Costs released upon fulfilment of customer performance obligations - (269) At 31 December 2,863 2,161
146 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
7 DEFERRED CONTRACT FULFILMENT COSTS (CONTINUED)
Group Group 2020 2019 US$’000 US$’000
Current Costs incurred to fulfil customer contract - -
Non-current Costs incurred to fulfil customer contract 2,863 2,161 Total 2,863 2,161
Deferred contract fulfilment costs arise from customer service contracts and comprise of staff and contractor / outsource partner costs incurred up to 31 December 2020. These costs are being deferred under IFRS 15 and will be recognised as the related performance obligations are fulfilled.
At 31 December 2020, the Directors are of the opinion that the contract fulfilment costs of US$2.8m (2019: US$2.2m) will be Datalex recovered through related future revenues and that deferral of such costs continues to be appropriate. The deferred costs relate to an on‑going implementation that was due to go‑live in H1 2020. As a result of COVID‑19, the airline customer paused the • implementation prior to the scheduled go‑live date. At the time the project was on track to meet the go‑live requirements. It is expected the implementation will recommence in 2022. The deferred costs will be amortised on a systematic basis consistent with Annual Report 2020 the pattern of the transfer of the services to which the asset relates, generally the licence term.
(i) In 2019 following the cessation of the implementation project and confirmation that the customer no longer intended to utilise a Datalex platform solution, Deferred Contract Fulfilment Costs incurred were offset against the related Contract Liabilities (advance payment receipts received from the customer). Additionally, the Group invoiced the customer under the terms of the contract, certain costs incurred for which no advanced payment had been received. The amount invoiced in 2019 remains in Trade •
Receivables, Note 10, at the year end. Financial Statements
8 CONTRACT ACQUISITION COSTS This note details the contract acquisition costs incurred by the Group. The balance primarily relates to commission payable to customer relationship managers on obtaining new commercial arrangements with customers. The balance is amortised over the life of the contractual relationship.
Group 2020 US$’000
Net book value At 1 January 190 Additions - Amortisation charge (128) At 31 December 62
At 31 December Cost 977 Accumulated amortisation (915) Closing net book value 62
147 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
8 CONTRACT ACQUISITION COSTS The closing net book value is estimated to be amortised over the following period:
Group Group 2020 2019 US$’000 US$’000
Current Less than one year 62 114 Non-current Greater than one year - 76 Total 62 190
9 INCOME TAX
(A) INCOME TAX
Group Group Total 2020 Total 2019 US$’000 US$’000
Current tax Corporation tax for the year - - Foreign tax for the year (59) 66 Foreign withholding tax - - Total current tax (59) 66
The tax on the Group’s loss before income tax differs from the theoretical amount that would arise using the Irish domestic tax rate applicable to profits and losses of the consolidated companies as follows:
Group Group Total Total 2020 2019 US$’000 US$’000
Loss before income tax (6,536) (11,995) Loss before tax multiplied by the standard rate of tax in the Republic of Ireland of 12.5% (817) (1,499) Expenses not deductible and income not taxable 4 232 Utilisation of previously unrecognised tax losses (127) (105) Difference in effective tax rates on overseas earnings 131 77 Tax losses for which no deferred tax asset was recognised 852 1,409 Other (102) (48) Income tax (credit)/charge (59) 66
148 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
9 INCOME TAX (CONTINUED)
(B) DEFERRED TAX Deferred tax assets have not been recognised in respect of the following:
Group Group 2020 2019 US$’000 US$’000
Unused tax losses 21,310 21,624 R&D credits available 1,756 1,497 Temporary differences 129 314 Total 23,195 23,435
The unrecognised deferred income tax assets in respect of losses relate to unused tax losses in Datalex Solutions (UK) Limited, Datalex Ireland Limited and Datalex USA, Inc. The Directors will continue to evaluate their expectation on realisation of the tax benefit through future taxable profits. Datalex
10 TRADE AND OTHER RECEIVABLES • Trade and other receivables mainly consist of amounts owed to the Group by customers & contract assets, net of an allowance for expected credit losses, together with prepayments, VAT Receivables and R&D tax credits receivable. Annual Report 2020
Group Group Company Company 2020 2019 2020 2019 US$’000 US$’000 US$’000 US$’000 •
Current trade and other receivables
Trade receivables 8,662 10,084 - - Financial Statements Less: allowance for expected credit losses on trade receivables (4,100) (5,506) - - Trade receivables – net 4,562 4,578 - -
Contract assets 931 2,757 - - Less: allowance for expected credit losses on contract assets (78) (196) - - Contract assets – net 853 2,561 - -
Amounts owed by Group undertakings n/a n/a 26,377 18,542 Less: allowance for expected credit losses on amounts owed by Group undertakings n/a n/a (26,377) (18,542) Amounts owed by Group undertakings – net n/a n/a - -
Prepayments 269 531 - - Research and development tax credit 249 499 - - VAT receivable 933 1,588 - - Receivable from related parties 36 46 36 25 Other receivables 378 5 25 - Total other receivables 1,865 2,669 61 25 Total current trade and other receivables and contract assets - net 7,280 9,808 61 25
Non-current trade and other receivables Research and development tax credit 665 255 - - Total non-current trade and other receivables 665 255 - -
Total trade and other receivables and contract assets 7,945 10,063 61 25 149 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
10 TRADE AND OTHER RECEIVABLES (CONTINUED) The fair value of trade receivables and contract assets approximate to the values shown above. The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold collateral as security.
CREDIT RISK AND ALLOWANCE FOR EXPECTED CREDIT LOSSES The Group has applied IFRS 9, Financial Instruments, during the year, which includes the requirements for calculating allowance for expected credit losses on financial assets.
Datalex PLC (Company Only) is also applying IFRS in the stand-alone financial statements and is therefore required to calculate expected credit losses on all financial assets, including intercompany loans within the scope of IFRS 9, ‘Financial Instruments’. Certain simplifications from IFRS 9’s general 3-stage impairment model are available for trade receivables (including intercompany trade receivables), contract assets or lease receivables, but these do not apply to intercompany balances. The amounts owed to the PLC Company by Group undertakings are interest free, unsecured and are repayable on demand. Having had due consideration of the ECL model set out Note 3, the directors deemed it appropriate, as in the prior year, to record an ECL provision at 100% of the net intercompany receivable balance at the year end.
TRADE RECEIVABLES & CONTRACT ASSETS The Group applies the simplified approach to providing for expected credit losses on trade receivables and contract assets as required by IFRS 9, which permits the use of the lifetime expected loss provision for such receivables. The Group uses judgement at the end of each reporting period in making assumptions around the risk of default and expected loss rates. These are based on the Group’s past history, comparable information, existing market conditions (including the use of market observable credit data either for specific customers or for comparable entities, based on industry, size and geographical location), as well as forward looking estimates (which primarily consisted of information specific at the customer level, with the expected loss rate adjusted where appropriate as a result).
As per Notes 7 & 17, included within the Trade Receivables amount is a balance of $2.3m invoiced to a customer upon termination of contract (2019: $2.3m). Following the cessation of the implementation project and confirmation that the customer no longer intends to utilise a Datalex platform solution, Deferred Contract Fulfilment Costs incurred were offset against the related Contract Liabilities (advance payment receipts received from the customer). The Company invoiced the customer under the terms of the contract certain costs incurred for which no advanced payment had been received. Whilst the Directors expect to recover in full the outstanding contractual amounts from the customer, due to the on-going litigation a specific provision has been recorded against this trade receivable as the recovery is dependant on the successful outcome of the litigation proceedings.
The allowance for expected credit losses as at 31 December 2020 is determined as presented below. The expected credit losses also incorporate forward looking information for both trade receivables and contract assets:
31-Dec-20 Trade receivables Days past due Between Between Contract Within 30 31-60 61-90 More than Trade assets Current days days days 90 days receivables Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Expected loss rate * 8.4% 11.0% 11.6% 18.2% 3.1% 79.9% 47.3% 43.6% Gross carrying amount 931 1,118 2,350 680 32 4,482 8,662 9,593 Total balance subject to impairment review 931 1,118 2,350 680 32 4,482 8,662 9,593 Allowance for expected credit losses 78 123 272 124 1 3,580 4,100 4,178
* The expected loss rates have been calculated using the formula described in Note 3(b). Judgment has been applied in determining the appropriate expected loss rates.
150 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
10 TRADE AND OTHER RECEIVABLES (CONTINUED)
31-Dec-19 Trade receivables Days past due Between Contract Within 30 Between days 61- More than Trade assets Current days 31-60) 90 days 90 days receivables Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Expected loss rate 7.12% 16.14% 8.53% 93.29% 71.50% 83.09% 54.60% 44.40% Gross carrying amount 2,757 3,506 959 2,664 714 2,241 10,084 12,841 Total balance subject to impairment review 2,757 3,506 959 2,664 714 2,241 10,084 12,841 Allowance for expected credit losses 196 566 82 2,485 511 1,862 5,506 5,702
The closing allowance for expected credit losses for trade receivables and contract assets as at 31 December 2020 reconciles to the opening allowance for expected credit losses as follows: Datalex
Contract assets Trade receivables Total 2020 2019 2020 2019 2020 2019 • US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 Annual Report 2020 At 1 January 196 115 5,506 778 5,702 893
(Decrease)/Increase in allowance for expected credit losses recognised in profit or loss during the year (118) 81 (1,406) 4,728 (1,524) 4,809 At 31 December 78 196 4,100 5,506 4,178 5,702 • The Group defines a default as when a financial asset becomes more than 90 days past due, which is based on past experience for Financial Statements similar assets. The Group’s policy is to write off a financial asset once it becomes more than 360 days past due, which is also based on past experience.
AMOUNTS RECOGNISED IN PROFIT AND LOSS FOR TRADE RECEIVABLES During the year ended 31 December 2020, the following gains/ (losses) were recognised in profit or loss and presented as net impairment losses in relation to impaired receivables.
2020 2019 US$’000 US$’000 Movement in allowance for expected credit losses (1,524) 4,728 Amounts written off - 26 Net impairment losses on financial and contract assets (1,524) 4,754
Movements on the Group allowance for expected credit losses on trade receivables and contract assets are as follows:
Group Group 2020 2019 US$’000 US$’000 At 1 January 5,702 893 Opening allowance for expected credit losses as at 1 January - - Movement in allowance for expected credit losses (1,524) 4,809 Receivables written off during the year as uncollectible - - At 31 December 4,178 5,702
151 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
10 TRADE AND OTHER RECEIVABLES (CONTINUED) The decrease in the loss allowance in 2020 is due to a decrease in the year end Trade Debtor’s balance and cash reciepts from customers during 2020.
The creation and release of the allowance for expected credit losses has been included in net impairment losses on trade receivables and contract assets on the statement of profit or loss.
OTHER RECEIVABLES As at the end of the current and prior year, the allowance for expected credit losses on other receivables was not deemed to be material to the financial statements, with the carrying amount in the statement of financial position reflecting the maximum exposure to credit risk.
The other classes within trade and other receivables do not contain impaired assets.
The majority of the Group’s customers, primarily representing major corporations, operate within the airline and travel industry. As at 31 December 2020 and 2019, a significant portion of the trade receivables and contract assets of the Group related to a limited number of customers as follows:
Group Group 2020 (1) 2019 (1) Customer A 26% 21% Customer B 26% 21% Customer C 15% 21% Customer D 7% - Customer E 6% 6% Customer F 5% 6% Customer G - 6%
(1) Customers whose trade receivable and contract assets balances represent 5% or more of the total trade receivable and contract assets balance at 31 December 2020 or 31 December 2019 are disclosed in the note above.
The carrying amounts of the Group’s trade receivables and contract assets are denominated in the following currencies:
Group Group 2020 2019 US$’000 US$’000 US dollar 4,670 7,384 Euro 4,923 4,394 Swedish krona - 70 Pound sterling - 898 Chinese renminbi - 95 Total 9,593 12,841
AMOUNTS OWED BY GROUP UNDERTAKINGS Amounts owed by Group undertakings and related parties are interest free, unsecured and are repayable on demand.
152 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
11 CASH AND CASH EQUIVALENTS This note details the liquid cash resources available to the Group. The majority of the Group’s cash is held in current /on demand accounts.
Group Group Company Company 2020 2019 2020 2019 US$’000 US$’000 US$’000 US$’000 Cash at bank and in hand 2,905 2,960 92 86 Short-term bank deposits less than 90 days 120 91 - - Cash and cash equivalents 3,025 3,051 92 86
The effective interest rate on bank deposits is based on the relevant Euribor rate applicable to the term of the deposit.
The short-term bank deposits which are included in cash and cash equivalents have an average maturity of 30 days (2019: 30 days).
The fair values of the deposits less than 90 days which are part of cash and cash equivalents approximate to the values shown above. Datalex
FOREIGN CURRENCY EXPOSURE •
The Group’s currency exposure in respect of cash and cash equivalents relates to balances in currencies other than the US dollar. Annual Report 2020 The balances as at 31 December 2020 and 2019 are set out below.
Non-US$ denominated cash and cash equivalents Group Group Company Company 2020 2019 2020 2019 US$’000 US$’000 US$’000 US$’000 Euro 1,178 1,132 90 85 •
Pound sterling 124 89 2 1 Financial Statements Chinese renminbi 36 153 - - Total 1,338 1,374 92 86
The Group does not have any bank overdrafts at the year end date (2019:US$nil).
12 SHARE CAPITAL The ordinary shareholders of Datalex plc own the Company. This note details how the total number of ordinary shares in issue has changed during the year.
AUTHORISED SHARE CAPITAL - GROUP AND COMPANY 2020 2019 US$’000 US$’000 Equity share capital 100,000,000 ordinary shares of US$0.10 each 10,000 10,000 Other equity share capital 3,000,000 “A” convertible redeemable shares of US$0.10 each 300 300 1,500,000 ”B” convertible redeemable shares of US$0.10 each 150 150 30,000 deferred shares of €1.269738 each 44 44 494 494 Total 10,494 10,494
153 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
12 SHARE CAPITAL (CONTINUED)
ISSUED SHARE CAPITAL – GROUP AND COMPANY Ordinary Ordinary Convertible Convertible shares (“A” and “B”) redeemable redeemable Deferred Deferred No. of shares shares shares shares shares shares No. of shares No. of shares No. of shares ‘000 US$’000 ‘000 US$’000 ‘000 US$’000 At 1 January 2019 78,100 7,810 2,542 254 30 8 Issued during the year 3,859 386 - - - - Employee share option scheme - proceeds from share issues 25 2 - - - - At 31 December 2019 81,984 8,198 2,542 254 30 8
At 1 January 2020 81,984 8,198 2,542 254 30 8 Issued during the year ------Employee share option scheme - proceeds from share issues 170 17 - - - - At 31 December 2020 82,154 8,215 2,542 254 30 8
ORDINARY SHARES The holders of ordinary shares are entitled to receive dividends as declared and are entitled to one vote per share at meetings of the Company. In 2019, the Company announced that it had raised proceeds of c. €3.86 million by way of the Placing of 3.859 million new Ordinary Shares with IIU Nominees Limited (“IIU”), at a price of €1.00 per share, Mr Desmond is the ultimate beneficial owner of this shareholding. The issued shares are presented as share capital.
“A” AND “B” CONVERTIBLE REDEEMABLE SHARES On 1 October 2001, the conversion rights attaching to “A” convertible redeemable shares expired. On 30 March 2007, the conversion rights attaching to the “B” convertible redeemable shares expired. The convertible redeemable shares have no participation rights in relation to profits and surplus in a winding up, no contractual obligations to deliver funds in a winding up and the holders are not entitled to attend or vote at any general meeting of the Company. Following the tenth anniversary of their issue, the Company may, at its discretion, redeem Convertible Shares at their par value.
DEFERRED SHARES All deferred shares issued have no participation rights in relation to profits and surplus in a winding up, and the holders are not entitled to attend or vote at any general meeting of the Company.
TREASURY SHARES As set out in Note 13, The Datalex Employee Benefit Trust has an interest over 590,000 ordinary shares (2019: 590,000). For accounting purposes these shares are treated as treasury shares. These shares do not have an entitlement to receive dividends.
154 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
12 SHARE CAPITAL (CONTINUED)
EMPLOYEE SHARE OPTIONS SCHEME – 2000 SHARE OPTION SCHEMES The Group had operated two employee share option schemes up to their date of expiration in August 2010, together referred to as the “2000 Share Option Schemes”. After this date no new options were granted under these schemes. The two schemes are described below.
Group Share Option Scheme The terms of The Datalex plc Share Option Plan (“Group Share Option Scheme”) allow for vesting over a three-year period, in equal thirds commencing on the first anniversary of the date of grant. Accelerated vesting can take place subject to Board approval. The majority of options issued under this scheme expire ten years after issuance. Employees who leave the Group have 90 days to exercise any vested options after which period the options lapse and become void. Unvested options expire upon leaving the Group. The exercise price of all options granted is equal to the market price of the shares on the date of grant.
UK Share Option Scheme The terms of this scheme allow for vesting over a three-year period, in equal thirds commencing on the first anniversary of the date of grant. Accelerated vesting can take place subject to Board approval. All options issued under this scheme expire ten years after
issuance. Employees who leave the Group have 90 days to exercise any vested options, after which period, the options lapse and Datalex become void. Unvested options expire upon leaving the Group. The exercise price of all options granted is equal to the market price of the shares on the date of grant. •
SUMMARY OF EMPLOYEE SHARE OPTIONS ACTIVITY (NUMBER OF OPTIONS) IN RESPECT OF THE 2000 SHARE Annual Report 2020 OPTION SCHEMES The activity in the Group’s 2000 Share Option Schemes is summarised in the following table:
2020 2020 2019 2019 Weighted Weighted
average average •
exercise price exercise price Financial Statements No. of shares (US$) No. of shares (US$) Outstanding at beginning of year 450,000 0.15 525,000 0.15 Issued during the year - - - - Exercised during the year (1) (150,000) 0.14 (25,000) 0.16 Expired during the year (2) (300,000) 0.14 (50,000) 0.15 Outstanding at end of year - - 450,000 0.15 Exercisable at end of year - - 450,000 0.15
(1) No weighted average market share price existed for the dates of exercise during 2020 (2019: US$1.12). (2) Expired on departure from the Group or on expiration of the share option scheme.
No options were granted during the year (2019: nil) as the scheme had previously expired.
155 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
12 SHARE CAPITAL (CONTINUED)
EMPLOYEE SHARE OPTIONS SCHEME – 2012 SCHEME On 6 February 2012, a share option plan, The Datalex plc Share Option Plan 2012 (the “2012 Group Share Option Scheme” or “2012 Scheme”) was implemented, replacing the original “2000 Share Option Schemes” which expired on their tenth anniversary in August 2010. Under the 2012 Scheme, share options can only vest after the third anniversary of award, and vesting is subject to the achievement of challenging annual performance conditions. At grant date, performance conditions relate to Adjusted EBITDA, cash targets established by the Remuneration Committee and other measures of shareholder value that the Remuneration Committee may consider appropriate.
No options may be granted under the 2012 Scheme which would cause the number of shares issued or issuable in the preceding ten years to exceed 10% of the ordinary share capital of the Company in issue at that time. As a further restriction, no options will ordinarily be granted under the 2012 Scheme which would cause the number of shares issued or issuable in the preceding ten years to exceed 7.5% of the ordinary share capital of the Company in issue at that time, but on the basis that the Remuneration Committee may resolve to grant additional options up to the overall 10% limit if it determines either that the Group’s underlying financial performance and/ or growth in shareholder value would merit such further dilution or that vesting of any additional such options would be subject to exceptional performance. The basis for any such determination by the Remuneration Committee would be described in the Annual Report and financial statements.
The activity in the 2012 Group Share Option Scheme is summarised in the following table:
2020 2020 2019 2019 Weighted average Weighted average No. of shares exercise price (US$) No. of shares exercise price (US$)
Outstanding at beginning of year 1,667,783 1.35 3,079,450 2.00 Issued during the year - - - - Exercised during the year (1) (20,000) 0.42 - - Forfeited during the year (156,333) 1.63 (1,411,667) 2.55 Outstanding at end of year 1,491,450 1.48 1,667,783 1.35
(1) The weighted average market share price on the date of exercise in 2020 was US$0.48.
Share options outstanding at the end of the year have the following exercise price ranges and expiry dates:
Weighted average contractual life Exercise price range remaining Number of options (in months)
US$0.30 to US$0.50 45,000 13 US$0.51 to US$0.70 25,000 8 US$0.71 to US$0.90 55,000 21 Over US$0.90 1,366,450 35 Total 1,491,450 77
156 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
12 SHARE CAPITAL (CONTINUED)
EMPLOYEE SHARE OPTIONS SCHEME – 2020 SCHEME On 2 December 2020, a new share option plan ‘Datalex Long Term Incentive Plan 2020 (the “2020 Plan”)’ was approved by shareholders. Under the 2020 plan, share options can only vest when the Performance Period has been completed and the Final Calculated Award has been determined. Challenging performance conditions were set when initial grants were made under this plan. The Committee may change these Performance Conditions for future Awards provided that the conditions remain no less challenging and are aligned with the interests of the Company’s shareholders.
An Award may not be granted if the result would be that the aggregate number of Shares issued or issuable pursuant to Awards granted under the Plan or under any other employees’ share scheme adopted by the Company (other than any Shares issued or which may be issued by the Company to holders of awards under any share-based incentive plan if such awards were granted prior to the approval of the Plan) would exceed 10% of the Company’s issued ordinary share capital at the Award Date. The Committee shall ensure that appropriate policies regarding flow rates exist in order to ensure that the limit is not exceeded.
The activity in the 2020 Group Share Option Scheme is summarised in the following table:
2020 2020
Weighted average Datalex No. of shares exercise price (US$) • Outstanding at beginning of year - - Annual Report 2020 Issued during the year 2,975,000 0.66 Exercised during the year - - Forfeited during the year - - Outstanding at end of year 2,975,000 0.66
There were 2.975m options granted during 2020. The fair value of the options granted during 2020 was determined using the •
Black Scholes model amounted to US$1,518,478. The weighted average fair value per option granted in 2020 was US$0.51. The Financial Statements significant inputs into the 2020 model were share prices of: €0.55 at the grant date (being the market price of shares at the date of grant), exercise price (which is the same as the share price at the grant date), dividend yield of 0%, risk‑free interest rates of 0.22%, expected option life of three years and the share price volatility of 138%. The volatility measured at the standard deviation of expected share price returns is based on statistical analysis.
Share options outstanding at the end of the year have the following exercise price ranges and expiry dates:
Weighted average contractual life Exercise price range remaining Number of options (in months)
US$0.30 to US$0.50 - - US$0.51 to US$0.70 2,975,000 119 US$0.71 to US$0.90 - - Over US$0.90 - - Total 2,975,000 119
The charge for the year ended 31 December 2020 in relation to share options was US$66,653. (2019: US$82,540).
157 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
12 SHARE CAPITAL (CONTINUED)
JOINT SHARE OWNERSHIP PLAN In January 2012, the Board of Directors approved the establishment of a Joint Share Ownership Plan (“JSOP”). The scheme was intended to incentivise senior management in the Group (excluding Executive Directors) towards the achievement of challenging performance targets for Adjusted EBITDA and cash generation during the years ending 31 December 2013 and 31 December 2014. Under the plan, the participants and an Employee Benefit Trust established by Datalex (Ireland) Limited jointly acquired 1.56m awards of existing stock at the open market price (€0.39 per award). Subject to meeting the performance conditions for Adjusted EBITDA and cash and short-term investments, the awards vested in two equal tranches on 31 December 2013 and 2014, respectively.
2020 2020 2019 2019 Weighted Weighted average average exercise price exercise price No. of shares (US$) No. of shares (US$)
Outstanding at beginning of year 300,000 0.44 460,000 0.42 Issued during the year - - - - Exercised during the year - - - - Forfeited during the year - - (160,000) 0.44 Outstanding at end of year 300,000 0.48 300,000 0.44 Exercisable at end of year 300,000 0.48 300,000 0.44
There was no charge in the years ended 31 December 2020 or 2019 in relation to the JSOP scheme.
No awards were made in 2020 or 2019. All awards have vested due to the related performance and service conditions being achieved at 31 December 2014.
The weighted average contractual life at 31 December 2020 was 0 months (2019: 1 months).
DEFERRED SHARE SCHEME The 130,000 JSOP awards forfeited in 2014, which were returned back to the Employee Benefit Trust, were re-issued in 2015 to a new senior management team member under the Deferred Share Scheme. According to the rules of the scheme, the shares vested in 2018 but the employee left in 2019 and the awards were forfeited and returned to the trust again.
Deferred Share Scheme 2020 2020 2019 2019 Weighted Weighted average average exercise price exercise price No. of shares (US$) No. of shares (US$)
Outstanding at beginning of year - - 130,000 1.83 Issued during the year - - - - Exercised during the year - - - - Forfeited during the year - - (130,000) 1.73 Outstanding at end of year - - - - Exercisable at end of year - - - -
No awards were made in 2020 and 2019. The average contractual life at 31 December 2020 was 0 months (2019: 0 months).
The 2020 charge in relation to the Deferred Share Scheme was US$Nil (2019: US$Nil).
158 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
13 OTHER RESERVES This note details the movement in the Group’s other reserves which are treated as different categories of equity as required by accounting standards.
Other Treasury Share-based Foreign Share capital shares payments Other currency Group premium reserves reserve reserve reserves translation Total US$’000 US$’000 US$’000 (1) US$’000 (2) US$’000 (3) US$’000 (4) US$’000
Balance at 1 January 2019 2,562 134 (274) 4,144 1,011 206 7,783 Share-based payments cost - - - 83 - - 83 Premium on shares issued 4,019 - - - - - 4,019 Currency translation differences - - - - - 7 7 Balance at 31 December 2019 6,581 134 (274) 4,227 1,011 213 11,892
Balance at 1 January 2020 6,581 134 (274) 4,227 1,011 213 11,892
Share-based payments cost - - - 67 - - 67 Datalex Premium on shares issued 13 - - - - - 13 Currency translation differences - - 25 - - (220) (195) •
Balance at 31 December 2020 6,594 134 (249) 4,294 1,011 (7) 11,777 Annual Report 2020
(1) Treasury shares reserves represent the balance of Datalex plc Ordinary Shares held by The Datalex Employee Benefit Trust. At 31 December 2020, treasury shares of 590,000 shares (2019: 590,000 shares) comprised 300,000 shares (2019: 300,000) held in respect of JSOP awards and 290,000 which reverted to The Datalex Employee Trust on forfeiture of entitlements . These shares are treated as treasury shares and consequently have been deducted from equity. (2) The share-based payments reserve comprises amounts expensed in the Consolidated Statement of Profit and Loss in connection with awards • made under the equity-settled share-based plans, being the share option schemes, the JSOP and deferred share awards (see Note 12). Financial Statements (3) Other reserves relate mainly to the proceeds from exercise of collateral on 1.85m Datalex plc shares. In 2002, three former Datalex executives in the USA established a new business called Conducive Technology Corp (“CTC”). Datalex provided this Company with a US$800,000 working capital loan, secured against any future proceeds of sale of 1.85m shares in Datalex held by the founders of CTC. On 25 January 2012, CTC disposed of 1.56m shares, which were acquired at the open market price by The Datalex Employee Benefit Trust, as part of the implementation of the Joint Share Ownership Plan. In October 2012, CTC completed the sale of the remaining 290,000 shares, remitting these proceeds to Datalex plc. Given that the loan had previously been written off through reserves on transition to IFRS, the proceeds recovered were recognised through reserves directly under IAS 32, Financial Instruments: Presentation. (4) The foreign currency translation reserve comprises the cumulative currency translation adjustment in respect of subsidiaries whose functional currencies are not the US dollar. The translation adjustments arise from the retranslation of the profits of such operations from the average exchange rate for the year to the exchange rate at the statement of financial position date as well as the retranslation of those subsidiaries’ applicable assets and liabilities.
159 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
13 OTHER RESERVES (CONTINUED)
Share-based Share payments Company premium reserve Total US$’000 US$’000 US$’000
Balance at 1 January 2019 42,491 4,144 46,635 Share-based payments (Note 12) - 83 83 Premium on shares issued 4,019 - 4,019
Balance at 31 December 2019 46,510 4,227 50,737
Balance at 1 January 2020 46,510 4,227 50,737
Share-based payments (Note 12) - 67 67 Premium on shares issued 13 - 13
Balance at 31 December 2020 46,523 4,294 50,817
14 BORROWINGS Group borrowings are made up of lease liabilities and debt funding. The Group obtained debt funding from a related party to support it’s working capital needs.
Group Group 2020 2019 US$’000 US$’000
Lease liabilities 6,094 6,442 Secured loan 15,733 12,421
Total borrowings 21,827 18,863
Disclosed as Current 17,009 13,376 Non-current 4,818 5,487
Total borrowings 21,827 18,863
160 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
14 BORROWINGS (CONTINUED)
IFRS 16 LEASE LIABILITIES Included in lease liabilities at 31 December 2020 above are the following amounts:
Group Group 2020 2019 US$’000 US$’000
Current 1,276 955 Non-current 4,818 5,487 Total lease liabilities arising from IFRS 16 6,094 6,442
The carrying amounts of the Group’s lease liabilities are denominated in the following currencies:
Group Group 2020 2019
US$’000 US$’000 Datalex
US dollar 870 1,218 • Euro 4,166 4,282 Annual Report 2020 Pound sterling 853 913 Chinese renminbi 205 29 Total 6,094 6,442
Secured loan •
Group & Group & Company Company Financial Statements 2020 2019 US$’000 US$’000
Current 15,733 12,421 Non-current - - Total loan liability 15,733 12,421
161 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
14 BORROWINGS (CONTINUED)
RELATED PARTY SECURED LOAN The Company entered into a €6.141m secured loan facility agreement on 14 March 2019 with Tireragh Limited, a company ultimately beneficially owned by Mr. Desmond (‘Tireragh’), conditional on shareholder approval (the “First Facility”). Shareholder approval for the First Facility was subsequently given at an EGM held on 26 April 2019. Under the terms of the First Facility, Tireragh made available a term loan facility of up to a maximum aggregate amount of €6.141m to be drawn down by the Company by way of one or more advances (but no more than six). The First Facility was secured by a debenture entered into by the Company, creating fixed and floating charges over all of the Company’s assets, undertaking and goodwill as security for the Company’s obligations to Tireragh with respect to the First Facility. The First Facility was guaranteed by Datalex (Ireland) Limited, the Company’s subsidiary, which, by debenture, also created a fixed and floating charge over all of its assets, undertaking and goodwill as security for its and the Company’s obligations to Tireragh with respect to the First Facility. The First Facility was non‑amortising, had a term of 18 months from 1 May 2019 and incurred interest on drawn down balances at the rate of 10% per annum, compounding monthly and rolled up until maturity.
The First Facility was re‑financed in advance of maturing with the remaining interest payable on the First Facility being capitalised at the refinancing date. Under the terms of the secured loan facility with Tireragh which was approved by shareholders on 15 November 2019 (the “Second Facility”), a further €5m in secured debt funding was made available to the Company. The Second Facility was repayable in November 2020. Under the Second Facility there are additional obligations to which the Company needs to comply with in addition to those set out in the First Facility.
The Second Facility required cross guarantees to be provided by the Company and Datalex (Ireland) Limited. Additionally Datalex USA, Inc. and Datalex Solutions (UK) Limited were required to act as additional guarantors of the Second Facility. The obligations of the Company and each of the guarantors to Tireragh, include:
(i) A debenture entered into by the Company creating fixed and floating charges over all of its assets, undertaking and goodwill as security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; (ii) A debenture creating fixed and floating charges over all of Datalex Ireland Limited’s assets, undertaking and goodwill as security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; (iii) Security provided over the shares of Datalex USA Inc. and Datalex Solutions (UK) Limited granted by Datalex (Ireland) Limited; (iv) US law security over such assets, undertaking and goodwill of Datalex USA Inc. as may be permissible as a matter of US law as security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; and (v) A debenture entered into by Datalex Solutions (UK) Limited granting fixed and floating charges over all of its assets, undertaking and goodwill as security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; and (vi) Requirements to adhere to certain financial covenants, as outlined below:
The key financial covenants pertaining to the loan facility with Tireragh Limited are:
› Achievement of Revenue and EBITDA targets, subject to agreed performance criteria, on a six month rolling basis. › Achievement of Cash & Bank balances and Working Capital targets on a monthly basis, subject to agreed performance criteria and testing over two consecutive months.
The Company has achieved the relevant financial covenant targets to date. During 2020, Tireragh Limited waived obligations to provide certain financial information within specified time limits, including delivery of the Group’s 2019 annual report within 120 days of year end (as permitted by the European Securities and Markets Authority and the Central Bank of Ireland) and the time limits within which budget projections and other periodic reporting obligations were provided during the year. Further, Tireragh Limited provided a waiver extending the time to deliver specified security documents in connection with a subsidiary of the Group and provided a waiver permitting the Group flexibility to negotiate extended payment terms with key suppliers in connection with COVID-19 measures taken by the Group.
On the 31st October 2020, the maturity of the Second Facility was extended to 1 November 2021 following Shareholder approval at an EGM on the 24 September 2020. As part of this facility, the Group currently has access to an undrawn facility in the amount of €10m. There have been no additional draw downs on the Tireragh loan facility since December 2019. On 1 April 2021, the Group received written confirmation from Tireragh Limited that it is willing to extend the repayment date of the loan facility to 30 September 2022. The extension of the Tireragh Limited loan facility would be on the same terms as the existing facility arrangement. Please see Note 2.5, Going Concern for addtional information.
162 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
14 BORROWINGS (CONTINUED) At the year end date, the loan balance payable under the loan Facility (which is denominated in euro) was comprised of:
Group & Group & Company Company 2020 2019 US$’000 US$’000
Drawdown* 12,405 12,405 Debt issuance costs (3,465) (469) Debt issuance costs - amortisation 887 166 Interest charges 1,388 148 Loan Facility Fees 3,362 - Foreign exchange 1,156 171 15,733 12,421
* Included in the Drawdown amount is capitalised interest on the First Facility of US$185k which was rolled up into the drawdown on the Second Datalex Facility agreement. •
15 PROVISIONS Annual Report 2020
Group Group 2020 2019 US$’000 US$’000 •
Current Long term incentive Plan - 23 Financial Statements Regulatory Costs Compliance 555 436 Uncertain Tax Positions 359 482 Total Current 914 941
Non-Current Regulatory Costs Compliance 468 598 Uncertain Tax Positions 58 638 Total Non-Current 526 1,236 Total Provisions 1,440 2,177
163 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
15 PROVISIONS (CONTINUED)
A. LONG TERM INCENTIVE PLAN A Long‑Term Incentive Plan (“LTIP”) for key employees was approved by shareholders at the 2015 AGM. The LTIP was intended to retain and reward certain key employees who are central to the achievement of the Group’s growth strategy. The implementation of the scheme commenced in 2016. Grant awards have the characteristics of a long‑term cash bonus with a maximum fixed amount.
This long‑term cash bonus operates under similar terms to the Group’s Share Option Scheme, with vesting of cash bonuses based on the achievement of non‑market performance conditions (Adjusted EBITDA and cash targets) plus a service condition over a three‑year period.
Movements on the LTIP during the year were as follows:
Group Group 2020 2019 US$’000 US$’000
At 1 January 23 651 Credited/paid in the year (23) (401) Additional provision recognised - 84 Unused amounts reversed - (311) At 31 December - 23
The credit has been reflected in the Consolidated Statement of Profit and Loss within payroll costs in line with the Group accounting policy. There was only a single member of the LTIP programme remaining with the Company as at the 31 December 2019 and this balance was paid in 2020.
B. REGULATORY COSTS COMPLIANCE As a result of the events that occured in 2018, the Group is subject to a number of regulatory investigations that are likely to continue into the future.
The Group has estimated the costs associated with responding to and addressing the requirements of the Regulators, including the Director of Corporate Enforcement, the Central Bank of Ireland and the Gardai.
Group & Group & Company Company 2020 2019 US$’000 US$’000
At 1 January 1,049 - Charged to the statement of profit or loss - 1,049 Used in the year (83) - Unwind of discount rate on Provision 57 - At 31 December 1,023 1,049
The unwind of the discount rate on the provision balance has been reflected in exceptional items within the Consolidated Statement of Profit and Loss in line with the original accounting treatment for the provision in the prior year.
164 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
15 PROVISIONS (CONTINUED)
C. UNCERTAIN TAX POSITIONS As a result of a review of tax compliance across the Group, which was performed in consultation with external professional advisors, the Group has provided for its best estimate of taxes, interest and penalties due to various tax authorities. The amount to be settled is subject to on‑going discussion and agreement with the related tax authorities.
Group Group 2020 2019 US$’000 US$’000
At 1 January 1,120 1,264 Charged to the statement of profit or loss 333 247 Paid during the year (130) (352) Reclassified to accruals during the year (387) - Unused amounts reversed (519) (39) At 31 December 417 1,120 Datalex
The accrued interest & penalties are recorded in the Consolidated Statement of Profit and Loss alongside the underlying tax charges. •
16 TRADE AND OTHER PAYABLES Annual Report 2020 The Group’s current trade and other payables mainly consist of amounts owed to our suppliers that have been either invoiced or accrued and are due to be settled within twelve months.
Group Group Company Company 2020 2019 2020 2019 • US$’000 US$’000 US$’000 US$’000 Financial Statements
Current trade and other payables Trade payables 4,220 7,216 414 - Accruals 3,109 2,796 2,302 1,234 Pension contributions 118 128 - - Social security and other taxes 3,374 574 - - VAT payable 35 21 - - Other payables 6 228 - - Total current trade and other payables 10,862 10,963 2,716 1,234
Total non-current trade and other payables - - - -
Total trade and other payables 10,862 10,963 2,716 1,234
The fair values of trade and other payables approximate to the values shown above.
165 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
16 TRADE AND OTHER PAYABLES (CONTINUED) The carrying amounts of the Group’s trade payables are denominated in the following currencies:
Group Group 2020 2019 US$’000 US$’000
US dollar 3,009 4,321 Euro 1,106 2,649 Pound sterling 90 246 Other 15 - Total 4,220 7,216
The carrying amounts of the Company’s trade payables are denominated in the following currencies:
Company Company 2020 2019 US$’000 US$’000
US dollar 42 - Euro 316 - Other 15 - Total 373 -
17 CONTRACT LIABILITIES Contract liabilities represent amounts received from customers in advance of delivery of the contractual performance obligations.
Group Group 2020 2019 US$'000 US$'000
Advances for bundled performance obligations 4,419 3,818 Advances for services performance obligations 101 624 Advances for platform performance obligations 5,665 2,977 Total 10,185 7,419
Current 4,419 3,561 Non-current 5,766 3,858
The amount disclosed in “Advances for bundled performance obligations” in the current year relates to an ongoing delivery contract where the customer is estimated to go live in 2022 . The balance will be unwound over the remaining life of the commercial contract.
The details of revenue recognised in 2020 arising from balances included in Contract Liabilities on 1 January 2020 are included in Note 18.
166 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
18 SEGMENTAL INFORMATION The Group is organised into two operating segments. This section provides information on the financial performance for the year on a segmental basis.
The Group’s reportable operating segments based on the reports reviewed by the chief operating decision marker (“executive management team”) that are used to make strategic decisions. The executive management team assesses the performance of the operating segments based on the Adjusted EBITDA measure.
The executive management team reviews business performance from a product and service perspective. In 2020 and 2019, TPF Consulting (Transaction Processing Facility) did not meet the quantitative thresholds for mandatory disclosure under IFRS 8 Operating Segments (IFRS 8 para 3). However, the executive management team have opted to continue to disclose this segment separately on the basis that TPF Consulting is managed independently and that the executive management team review the performance of the segment separately. The TPF Consulting business has different characteristics and business challenges compared to the E-Business reporting segment. Throughout the year, management considers the performance of E-Business and TPF Consulting on a separate basis.
The reportable operating segments derive their revenue primarily from the sale of products and services associated with the Group’s suite of travel related technology and TPF Consulting revenue. Segment profit is measured using Adjusted EBITDA, which is defined as earnings before interest, tax, depreciation, amortisation (with the exception of deferred commission costs), exceptional costs and Datalex the costs of share options and interests granted to Executive Directors and employees. Sales between segments are carried out at arm’s length. The revenue from external parties reported to the executive management team is measured in a manner consistent • with that in the statement of profit and loss. Annual Report 2020
The E-Business segment consists of the development and sale of a variety of direct distribution software products and solutions to the Airline and Travel travel industry. The TPF consulting segment provides IT consultancy services to a number of major airlines. The segment information provided to the executive management team for the reportable segments for the year ended 31 December 2020 is as follows:
Group 2020 2020 2020 2019 2019 2019 •
TPF TPF Financial Statements E-Business Consulting Total E-Business Consulting Total US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
Revenue from contracts with customers 26,860 1,961 28,821 43,470 2,526 45,996 Inter-segment revenue - (751) (751) - (848) (848) External revenue 26,860 1,210 28,070 43,470 1,678 45,148
Adjusted EBITDA 1,159 183 1,342 561 (66) 495 Share-based payments cost (67) - (67) (83) - (83) EBITDA 1,092 183 1,275 478 (66) 412 Depreciation (1,871) (44) (1,915) (1,053) (52) (1,105) Amortisation (227) - (227) (1,510) - (1,510) Operating (loss)/ profit before exceptional items (1,006) 139 (867) (2,085) (118) (2,203) Exceptional items (Note 23) (2,711) (61) (2,772) (8,293) - (8,293) Operating (loss)/ profit after exceptional items (3,717) 78 (3,639) (10,378) (118) (10,496) Finance costs (2,926) 29 (2,897) (1,424) (79) (1,503) Finance income - - - 4 - 4 (Loss)/ profit before income tax (6,643) 107 (6,536) (11,798) (197) (11,995) Income tax credit/(expense) 59 - 59 (66) - (66) (Loss)/ profit for the year (6,584) 107 (6,477) (11,864) (197) (12,061)
167 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
18 SEGMENTAL INFORMATION (CONTINUED) A reconciliation of adjusted EBITDA and foreign currency adjusted EBITDA to loss before income tax is provided as follows:
Group Group 2020 2019 US$’000 US$’000
Adjusted EBITDA 1,342 495 Depreciation (1,915) (1,105) Amortisation - development costs (27) (841) Amortisation – software (72) (67) Amortisation - contract acquisition costs (128) (602) Finance income - 4 Finance costs (2,897) (1,503) Share-based payments cost (67) (83) Exceptional items (Note 23) (2,772) (8,293) Loss before income tax (6,536) (11,995)
Group Group 2020 2019 US$’000 US$’000
Adjusted EBITDA 1,342 495 Foreign exchange 2,013 198 Foreign Currency Adjusted EBITDA 3,355 693
Foreign Currency Adjusted EBITDA is a new KPI introduced in 2020. Our functional currency is US$. As explained in our debt financing note (Note 14), in 2019 the Company received €11.3m debt financing from Tireragh Limited. This loan funding was denominated in Euro.
We present this measure because we believe that the measure provides useful and necessary information to investors and other interested parties for the following reasons:
› It ensures that the underlying business performance is presented clearly in the accounts and is not adversely or favourably affected by changes in the relative exchange rates which would be outside the control of the business. › It is the metric that is used for internal performance analysis.
The foreign exchange input is arrived at by combining the foreign exchange movements per Note 22 (both realised and unrealised Foreign exchange) and the additional foreign exchange movements on those Euro denominated Trade Debtor balances fully provided at the end of 2019 and reported as an exceptional item per Note 23.
168 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
18 SEGMENTAL INFORMATION (CONTINUED)
Group 2020 2020 2020 2019 2019 2019 TPF TPF E-Business Consulting Total E-Business Consulting Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Reportable segment assets: Intangible assets - Product development 1,206 - 1,206 107 - 107 - Software 592 - 592 120 - 120 Contract acquisition costs 62 - 62 190 - 190 Other assets 16,249 2,626 18,875 21,454 689 22,143 Total reportable segment assets 18,109 2,626 20,735 21,871 689 22,560
Group 2020 2020 2020 2019 2019 2019
TPF TPF Datalex E-Business Consulting Total E-Business Consulting Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 •
Annual Report 2020 Reportable segment liabilities: Current (32,028) (360) (32,388) (28,645) (751) (29,396) Non-current (12,126) - (12,126) (10,161) (125) (10,286) Total reportable segment Liabilities (44,154) (360) (44,514) (38,806) (876) (39,682)
Revenue from external customers is derived from the sales of E-Business products and services associated with the Group’s suite of •
Airline and travel related technology and TPF Consulting services. Financial Statements
Analysis of revenue by category 2020 2020 2020 2019 2019 2019 TPF TPF E-Business Consulting Total E-Business Consulting Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Platform revenue (1) 16,571 - 16,571 26,822 - 26,822 Professional services (2) 10,135 - 10,135 16,397 - 16,397 Consultancy - 1,210 1,210 - 1,677 1,677 Other revenue 154 - 154 252 - 252 Total revenue from contracts with customers 26,860 1,210 28,070 43,471 1,677 45,148
(1) In 2019 US$1.7m was recognised as platform revenue following sale of a legacy historic and no longer supported code base to a customer. (2) In 2019 US$4m was recognised as service revenue following the termination of a contract whereby the customer had made contractual nonrefundable payments that were previously carried on the Statement of Financial Position as a Contract Liability.
169 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
18 SEGMENTAL INFORMATION (CONTINUED)
Group Group 2020 2019 US$’000 US$’000
Americas 13,927 20,866 Asia – Pacific 6,229 11,795 Other European 4,833 6,825 Ireland 2,512 4,492 UK 569 1,170 Total revenue from contracts with customers 28,070 45,148
The entity is domiciled in the Republic of Ireland. Revenue from external customers in the Republic of Ireland is US$2.5m (2019: US$4.5m) and the total revenue from external customers from other countries is US$25.6m (2019: US$40.6m).
The total property, plant and equipment, intangible assets and capitalised contract acquisition costs located in the Republic of Ireland is US$5.4m (2019: US$2.1m), and the total of non-current assets located in other countries is US$1.5m (2019: US$0.7m).
A significant portion of the revenue of the Group was derived from the external customers as below, all of whom relate to the E-business segment:
Group Group 2020 (1) 2019 (1)
Customer A 40% 24% Customer B 15% 10% Customer C 10% 8% Customer D 8% 10% Customer E 8% 12% Customer F 5% 7% Customer G2 5% 7%
(1) Customers whose revenue balance represents 5% or more of the total revenue balance at 31 December 2020 or 31 December 2019 are disclosed in the note above. (2) Following the receipt of the notice of termination Customer G revenue will be US$nil in 2021.
CONTRACT BALANCES Group Group 2020 2019 US$’000 US$’000
Trade receivables (Note 10) 4,562 4,578 Contract assets (Note 10) 853 2,561 Contract liabilities (Note 17) 10,185 7,419
170 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
18 SEGMENTAL INFORMATION (CONTINUED)
TRADE RECEIVABLES Trade receivables are non-interest bearing and are generally on terms of 30 days.
E-Business In 2020, US$4.1m (2019: US$5.5m) was recognised as provision for expected credit losses on trade receivables.
TPF In 2020, US$Nil (2019: US$Nil) was recognised as provision for expected credit losses on trade receivables
CONTRACT ASSETS Contract assets are initially recognised for amounts due in respect of performance obligations satisfied, in advance of receiving consideration where the receipt of consideration is conditional other than for the passage of time. Contract assets are reclassified to trade receivables once invoiced in accordance with the customer contractual terms. Contract assets increased in the year as there were higher unbilled amounts due to the Company finalising new contractual arrangements at the year end with a customer.
E-Business In 2020, US$$0.1m (2019: US$0.2m) was recognised as a provision for expected credit losses on contract assets. Datalex
TPF • In 2020, US$Nil (2019: US$Nil) was recognised as a provision for expected credit losses on contract assets. Annual Report 2020
CONTRACT LIABILITIES Contract liabilities include advances received to deliver licence and implementation services as a result.
E-Business US$3m revenue from contracts with customers was recognised in 2020 (2019: US$6.1m) in respect of amounts included in • contract liabilities at the beginning of the year. Financial Statements TPF US$Nil revenue from contracts with customers was recognised in 2020 (2019: US$Nil) in respect of amounts included in contract liabilities at the beginning of the year.
REMAINING PERFORMANCE OBLIGATIONS E-Business Amounts of our customers’ transaction prices that are allocated to remaining (unsatisfied or partially unsatisfied) performance obligations represent contracted revenues that have not yet been recognised. The total transaction price that has been allocated to performance obligations not satisfied in full at 31 December 2020 was US$30m (2019: US$43m). This total largely comprises obligations to provide professional services to customers and deliver customised or bundled license and service arrangements under contracts that have remaining durations in excess of one year and typically have multiple remaining years.
The decrease year on year is the result of ongoing service delivery.
The estimate of both the amount of transaction price allocated to unsatisfied performance obligations and the expected pattern of recognition is subject to changes arising from, among other things:
› Potential contract modifications; › Changes to the remaining contracted terms; › Customers availing of contract renewal options; › Currency fluctuations, particularly with respect to changes in the Euro and US dollar exchange rates; and › Actual future transaction fees.
TPF As the customer simultaneously receives and consumes the benefits provided by TPF’s performance revenue is recognised over time. As at 31 December 2020, there are no remaining performance obligations.
171 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
19 EXPENSES BY NATURE This note provides additional detail on the nature of the expenses incurred and recorded by the Group.
2020 before 2020 2020 after 2019 before 2019 2019 after exceptional exceptional exceptional exceptional exceptional exceptional items items items items items items (Note 23) (Note 23) US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Employee benefit expense (Note 20) - net of capitalisation 14,169 467 14,636 18,894 2,596 21,490 Consultants and contractors - net of capitalisation 6,058 - 6,058 14,840 - 14,840 Amortisation - development costs (Note 5) 27 - 27 - - - Amortisation - software (Note 5) 72 - 72 67 - 67 Deferred commission amortisation (Note 8) 128 - 128 602 - 602 Establishment costs 672 - 672 836 - 836 Hosting 1,568 - 1,568 1,130 - 1,130 Professional fees 1,831 1,840 3,671 1,732 281 2,013 Travel 183 - 183 695 - 695 Depreciation - PP&E (Note 4) 507 - 507 1,105 - 1,105 Depreciation - Right of Use Assets (Note 6) 1,408 - 1,408 841 - 841 Net impairment losses on financial and contract assets (Note 10) (1,729) 205 (1,524) 1,933 2,876 4,809 Third party services 429 - 429 512 - 512 Impairment - 260 260 - - - Communication 178 - 178 238 - 238 Software maintenance and other online charges 630 - 630 771 - 771 Other 1,591 - 1,591 3,366 2,540 5,906 Total cost of sales, selling and marketing costs, impairment losses on contract and trade receivables, administrative and exceptional expenses 27,723 2,772 30,495 47,562 8,293 55,855 Other losses 1,615 - 1,615 199 - 199 Total operating costs 29,338 2,772 32,110 47,761 8,293 56,054
Disclosed as: Cost of sales 19,234 - 19,234 30,583 2,596 33,179 Selling and marketing costs 1,116 - 1,116 1,654 - 1,654 Administrative expenses 9,102 2,567 11,669 13,392 2,821 16,213 Net impairment losses on financial and contract assets (1,729) 205 (1,524) 1,933 2,876 4,809 Other losses 1,615 - 1,615 199 - 199 Total operating costs 29,338 2,772 32,110 47,761 8,293 56,054
172 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
19 EXPENSES BY NATURE (CONTINUED)
REMUNERATION TO GROUP EXTERNAL AUDITOR During the year the Group obtained the following services from the Group’s auditors:
Company 2020 2019 US$’000 US$’000
Fees payable to the entity's statutory auditors in respect of: (a) the audit of entity financial statements 12 12 (b) other assurance services 675 509 (c) tax advisory services - - (d) other non-audit services - - Total 687 521
Group 2020 2019
US$’000 US$’000 Datalex
Fees payable to the Groups' statutory auditors in respect of: • (a) the audit of Group financial statements 675 509 Annual Report 2020 (b) other assurance services 12 12 (c) tax advisory services - - (d) other non-audit services - - Total 687 521 •
20 EMPLOYEE BENEFIT EXPENSE Financial Statements Group Company Group Company 2020 2020 2019 2019 US$’000 US$’000 US$’000 US$’000
Wages and salaries 13,505 - 18,901 - Social security costs 1,340 - 2,123 - Pension costs – defined contribution schemes 557 - 859 - Employee benefit expense before capitalisation 15,402 - 21,883 - Capitalised labour (699) - (42) - Employee benefit expense after capitalisation 14,703 - 21,841 - Share-based payments credit (Note 13) (67) - (83) - Long term incentive plan granted to Executive Directors and other employees (Note 15) - - (310) -
Total 14,636 - 21,448 -
Total before capitalisation 15,335 - 21,490 - Capitalisation (699) - (42) - Amount charged to Profit or Loss 14,636 - 21,448 -
173 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
20 EMPLOYEE BENEFIT EXPENSE (CONTINUED) The average number of persons employed by the Group (including Executive Directors) during the year analysed by category was as follows:
Group Company Group Company 2020 2020 2019 2019
Product development and delivery 118 - 170 - Sales and marketing 5 - 8 - Administration 25 - 25 - Total 148 - 203 -
The total number of persons employed by the Group (including Executive Directors) at 31 December 2020 was 140 (2019: 164).
No staff were employed by the PLC Company at 31 December 2020 and 2019.
The Group operates a number of defined contribution pension schemes in which the majority of Group employees participate. The assets of these schemes are held separately from those of the Group in independently administrated funds. The pension charge represents contributions payable by the Group to the schemes and amounted to US$557,000 in respect of 2020 (2019: US$859,000), of which US$118,000 was accrued at the year‑end (2019: US$112,000).
Details of Directors’ remuneration can be found in the Remuneration Report (see pages 74 to 91).
21 OTHER INCOME Group Group 2020 2019 US$’000 US$’000
Sundry Income 401 410 Total 401 410
Sundry income primarily consists of customer recharges for content provider costs incurred of US$59k (2019:US$410k) and COVID related government wage subsidy schemes of US$324k (2019:US$Nil).
22 OTHER LOSSES
Group Group Group Group Group Group 2020 2020 2020 2019 2019 2019 Before Exceptional After Before Exceptional After exceptional items (Note exceptional exceptional items (Note exceptional items 23) items items 23) items US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
Net foreign exchange losses (1,615) - (1,615) (199) - (199) Total (1,615) - (1,615) (199) - (199)
174 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
23 EXCEPTIONAL ITEMS The following costs and expenses have been treated as exceptional items in the consolidated statement of profit or loss:
Group Group 2020 2019 US$’000 US$’000
Professional fees in relation to investigations, business transformation programme and litigation procedures 1,783 1,555 Severance pay costs 467 2,596 Provision for costs associated with complying with regulatory investigations 57 1,035 Provision for non recovery of customer receivable balances, which are subject to litigation 205 2,876 Impairment of contract assets - 231 Impairment Atlanta office 260 - Total 2,772 8,293
EXCEPTIONAL ITEMS: Datalex
Professional fees in relation to investigations, business transformation programme and litigation procedures • During 2019, the Group undertook a cost restructuring programme as part of a wider Transformational Change Programme, termed “RESET”. These programmes were designed to reduce costs and address the operational and financial control issues identified from Annual Report 2020 the reviews carried out. Professional fees included legal, accounting and other consultancy services related to: improving internal control procedures to support a relisting of the Company’s shares on Euronext, customer litigation, review of tax compliance, severance programmes, business reorganisation and further costs associated with the financial irregularities identified in respect of 2018.
Severance pay costs •
Charges in relation to a voluntary severance programme carried out in 2019 as part of the cost reduction program. The Group Financial Statements identified 57 roles across the Group which were included in the severance programme. During 2019, 55 employees had departed with US$2.6m being paid out in 2019, with a remaining immaterial balance paid in 2020. A further 14 roles were identified as part the redundancy program in 2020 rising from the need to respond to the COVID-19 impact on the business. This additional severance programme was completed in 2020.
Provision for costs associated with complying with regulatory investigations The Group has recognised a provision which relates to legal and compliance costs of ongoing regulatory investigations and the necessary requirements to obtain an end to the suspension order on the trading of the Group’s shares on the Euronext Dublin exchange. The regulatory investigation and suspension of trading of the Group’s shares arose following the significant breakdown in internal financial controls as disclosed in the 2018 Annual Report.
175 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
23 EXCEPTIONAL ITEMS (CONTINUED)
EXCEPTIONAL ITEMS: (CONTINUED)
Provision for non recovery of customer receivable balances, which are subject to litigation On 4 September 2019, the Group received a termination notice from Lufthansa AG (“Lufthansa”). The Group strongly disputes the legality of this notice and has commenced proceedings against Lufthansa in Landgericht Frankfurt (Regional Court of Frankfurt) in order to achieve resolution of the matter and to recover amounts due and general business damages. On 5 March 2020, the Group issued a notice of dispute and invocation of a contractual arbitration clause to recover amounts owed to the Group by Deutsche Lufthansa AG in connection with services provided to its subsidiary, Swiss International Airlines Limited. At 31 December 2020, the invoiced balances due by Lufthansa and its subsidiary company, Swiss International Airlines Limited, amounted to US$4.3m (2019:US$2.9m). The directors strongly believe that the Group is entitled to recover amounts outstanding, but have recorded a 100% expected credit loss amount in these financial statements against the full value of invoiced amounts, in accordance with IFRS 9. The additional balance in 2020 relates to contractual amounts due from Swiss Airlines invoiced during the year.
Impairment of contract assets During the prior year, following the termination of certain customer contracts due to events outside the Group’s control, the Group assessed the recoverability of the associated contract assets. As a result of the review undertaken, it was deemed appropriate to impair the contract assets.
Impairment of Atlanta office During the year a review of the US real estate was undertaken which concluded that the Atlanta office was no longer required by the Group. The Group subsequently entered into a sub-lease arrangements for this building. The sub-lease rental income is less than the head lease costs, as such the Atlanta Right-of-Use asset was deemed to be impaired. Additional costs were incurred by the Group in exiting the office in preparation or sub-leasing the space.
24 FINANCE INCOME AND FINANCE COSTS This note details the interest income generated by our financial assets and the expense incurred on our financial liabilities.
Group Group 2020 2019 US$’000 US$’000
Interest income on bank deposits with less than 90 days maturity - 4 Early settlement discount - (242) Shareholder's loan interest & amortisation (2,275) (499) Interest on Lease Liabilities (639) (706) Other interest net 17 (56) Net finance cost (2,897) (1,499)
176 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
25 EARNINGS PER SHARE Earnings per share (EPS) is the amount of post tax results attributable to each ordinary share. Basic EPS is the amount of result for the year divided by the weighted average number of shares in issue during the year. Diluted EPS shows what the impact would be if all outstanding and exercisable options were exercised and treated as ordinary shares at year end.
Basic Group Group 2020 2019
Loss attributable to ordinary shareholders (US$’000) (6,477) (12,061) Weighted average number of ordinary shares outstanding 80,014,342 79,923,849 Basic loss per share (in US cents) (8.09) (15.1)
Basic earnings per share is calculated by dividing the loss attributable to the ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased/ issued by the Company and held as treasury shares.
Diluted Group Group 2020 2019 Datalex
Loss attributable to ordinary shareholders (US$’000) (6,477) (12,061) •
Weighted average number of ordinary shares outstanding 80,014,342 79,923,849 Annual Report 2020 Adjustment for share options and share awards Weighted average number of ordinary shares outstanding 80,014,342 79,923,849 Diluted loss per share (in US cents) (8.09) (15.1)
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume • conversion of all dilutive potential ordinary shares. The categories of dilutive potential ordinary shares of the Group are employee share options, JSOP awards and Deferred Share Scheme awards under the schemes as described in Note 12. A calculation is Financial Statements performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market share price of the Company’s shares) based on the monetary value of subscription rights attached to outstanding share options.
No share options have been included in the calculation of diluted earnings per share because they are anti-dilutive for the year ended 31 December 2020 due to the loss recorded by the Group. The share options could potentially dilute basic earnings per share in the future. The weighted average potential dilutive impact of share options at 31 December 2020 amounted to 4,466,449 shares. As the trading in the shares on the Euronext Dublin market was suspended at the 2019 year end date the directors were unable to determine with reasonable certainty the average share price for the reporting period. The average share price for the 2019 reporting period was used to assess which share options are “in the money” and potentially dilutive. The weighted average potential dilutive impact of share options at 31 December 2019 varied based on the average share price for the reporting period, as per Note 12 the potentially dilutive shares could have fallen within the following range based on a share price upon relisting:
Average share price below US$50c: 88,000 potentially dilutive shares Average share price below US$70c: 128,000 potentially dilutive shares Average share price below US$90c: 198,000 potentially dilutive shares Average share price over US$90c: 1,667,783 potentially dilutive shares
No JSOP or Deferred Share Scheme share awards have been included in the calculation of diluted earnings per share for the year ended 31 December 2020 as these are anti‑dilutive due to the loss recorded by the Group. The share awards could potentially dilute basic earnings per share in the future. The weighted average potential dilutive impact of share awards at 31 December 2020 amounted to 609,905 shares (2019: 609,905 treated as dilutive).
177 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
26 CASH GENERATED BY/(USED IN) OPERATIONS This note reconciles how the Group’s loss for the year translates into cash flows generated by/(used in) operating activities.
Group Company 2020 2019 2020 2019 US$’000 US$’000 US$’000 US$’000
Loss before income tax (6,536) (11,995) (4,848) (18,081) Adjustments for: Finance costs – net 2,897 603 2,275 500 Interest on lease liabilities - 652 - - Depreciation 507 1,105 - - Depreciation right-of-use assets 1,408 841 - - Amortisation 99 67 - - Deferred commission amortisation 128 602 - - Impairment 260 231 5,222 18,625 Share-based payments cost 67 83 - - Exchange translation adjustment - 8 1,372 171 Loss on disposal of fixed assets - 4 - - Non cash management charges - - (5,758) (2,249) Provision movement - 627 - 1,034 Changes in working capital: Trade and other receivables 410 469 (77) 198 Contract assets 1,708 (774) - - Contract fulfilment costs (1) 2,762 - - Trade and other payables 538 (4,834) 1,737 89 Contract liabilities 2,766 (6,346) - - Provisions (737) 892 - - Net cash inflow / (outflow) from operations 3,514 (15,003) (77) 287
178 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
27 DIVIDENDS PAID Dividends represent one type of shareholder return and are paid as an amount per ordinary shares held. There was no dividend paid in 2020 (2019: Nil).
The Board of Directors of the Company are not proposing that a final dividend be paid to shareholders in respect of the year ended 31 December 2020 (2019:nil).
UNLAWFUL DISTRIBUTION AND DIVIDEND RECEIVED FROM DATALEX (IRELAND) LIMITED As reported in our 2018 Annual Report, Datalex plc paid a dividend to shareholders of US$3.8m on 5 September 2018. To enable the dividend to be paid, Datalex plc received a dividend of US$4.0m from its subsidiary, Datalex (Ireland) Limited (“Datalex Ireland”) on 30 May 2018. This dividend was US$0.24 per share on the issued ordinary share capital of 16,607,262 shares. The dividend payment by Datalex plc had been approved by shareholders at the AGM on 18 June 2018 and interim financial statements to 31 May 2018 were filed at the Companies Registration Office to support this payment.
Subsequent to the dividend payments, management identified that Datalex Ireland would not have had sufficient retained earnings to support the dividend payment to Datalex plc had there been appropriate recording of revenue, which had been subsequently amended. As such, the 2018 dividend payment by Datalex Ireland to Datalex plc of US$4.0m was an unlawful distribution in
contravention of the provisions of Section 117 of the Companies Act 2014. Datalex
In accordance with applicable legislation, the dividend of US$4.0m paid by Datalex Ireland to Datalex plc is repayable by Datalex
plc. Accordingly, an intercompany payable to Datalex Ireland has been recognised for US$4.0m in the financial statements of •
Datalex plc and the dividend received had been derecognised in the statement of profit or loss of the Company for 2018. The Annual Report 2020 intercompany receivable balance which has been presented net of the provision in the Statement of Financial Position remains outstanding at the 31 December 2020.
28 INVESTMENTS IN SUBSIDARIES This note details of the Company’s principle subsidiary undertakings as well as the carrying value of these subsidiary undertakings. •
Financial Statements Company 2020 2019 US$’000 US$’000
At beginning of year - - Share-based payments cost 67 83 Impairment provision (67) (83) At end of year - -
During 2020, management considered the external and internal sources of information that may indicate that the previously recognised impairment losses may no longer exist or may have decreased. The external indicators considered include whether there has been a significant favourable changes in the asset’s value and market conditions. The internal indicators considered include whether there has been any significant favourable changes in the asset’s use and performance. As a result of the review of the external and internal indicators, it was deemed appropriate not to reverse any of the previously recorded impairment on investments in subsidiary undertakings.
179 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
28 INVESTMENTS IN SUBSIDARIES (CONTINUED) The Company has investments in the following subsidiary undertakings:
COMPANY NAME ORDINARY NATURE OF ACTIVITY REGISTERED OFFICE SHAREHOLDING
Datalex (Ireland) Limited 100% Development and sale of Block U, Eastpoint, Clontarf, computer software Dublin D03 H704, Ireland
Datalex USA, Inc. 100% Delivery of professional 1 Concourse Parkway, services and hosting Suite 650, Atlanta, GA 30328, USA
Datalex Netherlands B.V. 100% TPF consulting Parlevinker 13, 1186 ZA Amstelveen, The Netherlands
Datalex Solutions (UK) Limited 100% Delivery of 8th Floor, 55 Spring Gardens, professional services Manchester, M2 2BY, UK
Datalex Tokenization, Inc. 100% Provision of online 1 Concourse Parkway, payment processing Suite 650, connectivity in line with Atlanta, GA 30328, USA PCI compliance
Datalex Employee Benefit Trust 100% Employee benefit trust 12 Castle Street, St Helier, Jersey JE2 BR2, UK
Datalex Holdings Limited 100% Holding company Block U, Eastpoint, Clontarf, Dublin D03 H704, Ireland
Datalex (China) Limited 100% Development and sale of Room 332 , 3F Hyundai computer software Motor Tower 38 Xiaoyun Road, Chaoyang District, Beijing 100027, P.R. China
Datalex Australasia Pty. Limited 100% In liquidation 58 Gipps Street, Collingwood, Victoria 3066, Australia
29 RELATED PARTY TRANSACTIONS The Group’s principal related parties are the Group’s subsidiaries and key management personnel of the Group.
The following transactions were entered with related parties during the year:
KEY MANAGEMENT PERSONNEL Key management personnel include the two Executive Directors who held office during the year (2019: four Executive Directors), the five Non‑Executive Directors (2019: eight Non‑Executive Directors) and 12 members of the executive leadership team (2019: 15 members).
The remuneration of and transactions with all Directors under the Companies Act 2014 have been disclosed in the Remuneration Report.
180 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
29 RELATED PARTY TRANSACTIONS (CONTINUED)
KEY MANAGEMENT COMPENSATION 2020 2019 US$’000 US$’000
Short term employee benefits (1) 3,185 3,013 Share-based payment charge (2) 81 - Termination benefits - 581 Retirement benefits expense (3) 139 128 Charged to operating profit 3,405 3,722
(1) Balance is made up of salaries, Directors’ fees, and other short-term employee benefits. (2) The benefits included in this category relate to share option awards, JSOP awards, Long Term Incentive Plans and deferred share awards under the schemes described in Note 2.19. This relates to the Long-Term Incentive Plan described in Notes 12 and 15. (3) Retirement benefits are accruing to two Executive Directors and 12 senior management team members (2019: four Executive Directors and 13 members of the senior management team) under a defined contribution scheme. Datalex
Peter Lennon, a Non-Executive Director, is employed by Ronan Daly Jermyn, a law firm. US$14k in expenses were incurred by the Group with Ronan Daly Jermyn during 2020. US$2k was payable to Ronan Daly Jermyn at 31 December 2020 (2019: US$78k). •
Non-Executive Directors’ fees of US$39,000 (2019: US$36,000) were accrued at the year end. Annual Report 2020
The remuneration of and transactions with all Non-Executive Directors is as follows:
2020 2019 US$’000 US$’000 •
Fees 349 324 Financial Statements
COMPANY At 31 December 2020, the Company had a balance net of provision of US$nil (2019: US$nil) due to it from other Group companies.
Amounts owed by Group undertakings are interest free, unsecured and are repayable on demand. In the previous years the Board reviewed these amounts for impairment. Following these reviews, a full provision for impairment was deemed necessary on the balances due from other Group companies as at 31 December 2019, given uncertainties as to future recoverability of these amounts and in light of the significant losses and cash outflows in these other Group companies.
During 2020, the Directors considered the external and internal sources of information that may indicate that the impairment loss recognised in the prior year may no longer exist or may have decreased. The external indicators considered include whether there has been a significant favourable changes in the asset’s value and market conditions. The internal indicators considered include whether there has been any significant favourable changes in the asset’s use and performance. As a result of the review of the external and internal indicators, it was deemed appropriate not to reverse any of the previously recorded impairment.
At 31 December 2020, the Company had a balance of US$34k (2019: US$34k) due from Mr. David Kennedy, a previous related party, in relation to share option exercise costs. At the date of the Annual Report the amount unpaid is US$34k and which is being actively pursued. Mr. Kennedy, a former Executive Director, held the position of Finance Director until 5 December 2018.
As disclosed in Note 27, the 2018 dividend of US$4.0m paid by Datalex Ireland to Datalex plc is repayable by Datalex plc. Accordingly, an intercompany payable to Datalex Ireland has been recognised for US$4.0m in the financial statements of Datalex plc. The amount remains outstanding at the 31 December 2020.
181 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
29 RELATED PARTY TRANSACTIONS (CONTINUED)
GROUP AND COMPANY
TRANSACTIONS WITH TIRERAGH LIMITED AND IIU NOMINEES LIMITED: In March 2019, IIU Nominees Limited subscribed for 3.859 million new ordinary shares in Datalex plc at a price of €1.00 per share (see also Note 12), Mr Desmond is the ultimate beneficial owner of this shareholding.
As more fully explained in Notes 14 & 31, the Group entered into a secured loan facility agreement with Tireragh Limited, a related party ultimately beneficially owned by Mr. Dermot Desmond, during the year ended 31 December 2020.
On 1 April 2021, Tireragh Limited notified the Board of Directors, by way of letter, confirming that it would be willing to extend the Termination date of the loan facility to 30 September 2022 on the basis that all other provisions of the loan facility agreement remain in place.
At 31 December 2020, the total balance payable to Tireragh Limited under this arrangement was US$15.7m including US$3.2m for unpaid debt facility fees). The break down of the principle amount, interest charges, debt issuance costs & foreign exchange charges are included in Note 14.
30 LITIGATION AND DISPUTES This note provides an update on the significant lligitation and disputes which the Group is involved in.
On 4 September 2019, the Group received a termination notice from Lufthansa AG (“Lufthansa”). The Group strongly disputes the legality of this notice and has commenced proceedings against Lufthansa in Landgericht Frankfurt (Regional Court of Frankfurt) in order to achieve resolution of the matter and to recover amounts due and general business damages. In addition the Group has commenced arbitration proceedings against a subsidiary company of Lufthansa, Swiss International Airlines Limited (“Swiss Airlines”) to recover amounts due and owing as a result of the early termination of a contract by Swiss Airlines which have not been paid. The outcome of these processes is currently uncertain and the Group may incur additional legal costs in pursing these claims which may not be recoverable. At 31 December 2020, the invoiced balances due by Lufthansa and its subsidiary company, Swiss International Airlines Limited, amounted to $4.3 million. While the directors believe strongly that the Group is entitled to recovery, this is not guaranteed and a provision has been made in these financial statements against the full value of invoiced amounts, in accordance with IFRS 9.
31 FINANCIAL RISK MANAGEMENT This note details the Group’s treasury management and financial risk management objectives and policies. Information is also provided regarding the Group’s exposure and sensitivity to market rate risk, foreign exchange risk, interest rate risk, price risk, credit risk, liquidity risk, capital risk, cash flow risk and the policies in place to monitor and manage these risks.
FINANCIAL RISK MANAGEMENT The Group and Company’s operations expose it to a variety of financial risks including interest rate, foreign exchange, credit and liquidity risk. The Group has in place a risk management programme that seeks to manage the financial exposure of the Group. The Group may and has used derivative financial instruments to manage certain risk exposures but has not done so in either 2020 or 2019. Given the size of the Group, the Directors have not delegated the responsibility of monitoring financial risk management to a sub‑committee of the Board. The policies are set by the Board of Directors and are implemented by the Group’s finance department.
MARKET RATE RISK Market rate risk refers to the exposure of the Group’s financial position to movements in interest rates, currency rates and general price risk. The principal aim of managing currency risk is to limit the adverse impact of movement in currency rates on shareholders’ equity. The Group has limited exposure to interest rate and price risk.
182 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
31 FINANCIAL RISK MANAGEMENT (CONTINUED)
MARKET RATE RISK (CONTINUED)
(I) FOREIGN EXCHANGE RISK The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures in the normal course of business and primarily with respect to the euro, pound sterling, Swedish Krona and Chinese renminbi. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations. The main exposure at 31 December 2020 relates to euro monetary assets totalling US$6.3m (2019: US$5.5m), pound sterling monetary assets totalling US$0.1m (2019: US$0.1m) and Swedish Krona monetary assets totalling US$nil (2019: US$0.9m). The Group’s main current strategy to manage the foreign exchange risk is, where possible, to match customer contracts with related contractor and employee costs in the same currency. The Group also has bank accounts denominated in its various operating currencies which allow it to maintain available funds in different currencies as a means of minimising the impact of foreign exchange volatility on its operations.
To manage the foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, the Group may avail of forward contracts and has facilities available with its bank. Forward contracts are generally used when it is deemed that there is a potential volatility risk which may negatively impact the certainty in respect of euro‑based operating costs. Given the profile of the overseas operations and the customer base, foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the US dollar. There were no forward foreign exchange Datalex contracts in place as at 31 December 2020 or 2019. • At 31 December 2020, the movement of the Euro against the US dollar with all other variables held constant, the impact on post- tax loss for the year would have been: Annual Report 2020
Euro movement against US Dollar 10% 7.50% 5% 2.50%
USD USD USD USD '000's ‘000’s ‘000’s ‘000’s •
2020 Impact on results 520 390 260 130 Financial Statements 2019 Impact on results 288 216 144 72
A strengthening in the Euro would have result in a reduced loss being recorded, whereas a weakening would have resulted in an increase in the loss recorded .The movement is mainly as a result of foreign exchange gains on translation of euro-denominated trade receivables, trade payables and cash. The 2020 year end Euro to US Dollar rate was US$1.2271 (2019: US$1.1234). The average Euro to US Dollar exchange rate for 2020 was US$1.145 (2019: US$1.119).
(II) INTEREST RATE RISK The principal aim of managing interest rate risk is to limit the adverse impact on cash flows and shareholders’ equity of movements in interest rates. Cash and cash equivalents at variable rates expose the Group to cash flow interest rate risk. Cash and cash equivalents at a fixed rate expose the Group to fair value interest rate risk. The Group’s treasury policy is designed to monitor the funding requirements of the business. Cash requirements are managed centrally and reviewed daily. Excess funds are placed on deposits which typically have a maturity of less than three months. The term of deposit is based on the interest rate offered and cash forecasts as the Group ensures that sufficient cash is available on demand to meet expected operational requirements. The interest rate on floating rate deposits (with maturities less than 90 days) of US$0.1m at 31 December 2020 (2019: US$0.09m) is generally based on the appropriate Euribor or Libor rate.
The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature.
Interest rate sensitivity analysis At 31 December 2020, based on the value of interest‑bearing cash balances held at that date, if interest rates had been 100 basis points higher/ lower and all other variables were held constant, the Group loss after tax for the year would not have been materially impacted (2019: Group loss after tax for the year would not have been materially impacted).
183 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
31 FINANCIAL RISK MANAGEMENT (CONTINUED)
MARKET RATE RISK (CONTINUED)
(III) PRICE RISK The Group is not exposed to material price risk.
CREDIT RISK Credit is managed on a Group basis. Credit risk arises from cash and cash equivalents, short-term investments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding trade receivables, contract assets committed transactions. The Group treasury policy is designed to limit exposure with any one institution and to invest its excess cash in low risk investment accounts with authorised banking counterparties. The Group has not experienced any losses on such accounts.
The Group has implemented policies that require appropriate credit checks on potential customers before sales are made and monitors the exposure to potential credit loss on a regular basis. The utilisation of credit limits is regularly monitored. During the year ended 31 December 2020 a significant portion of the Group’s revenue was derived from a limited number of customers (see Note 18).
The credit quality of cash and cash equivalents can be assessed by reference to long term S&P credit ratings of the counterparties in the following tables:
Cash and cash equivalents Group Group 2020 2019 US$’000 US$’000
A 230 633 A- 503 2,337 BBB+ 28 48 BBB- 2,254 - Not rated - - 3,015 3,018
Cash and cash equivalents are held at amortised cost. The expected credit loses on these balances are immaterial.
LIQUIDITY RISK Prudent liquidity risk management implies maintaining sufficient cash and marketable securities on hand, having additional funding available through an adequate amount of committed credit facilities and maintaining the ability to close out market positions.
It is Group policy to maintain at all times access to sufficient resources to meet all short‑term financial obligations.
The analysis below summarises the Group’s financial liabilities (based on contractual undiscounted cash flows) into relevant maturity group-based on the remaining period as at the reporting date:
TRADE PAYABLES AND BORROWINGS (INCLUDING INTEREST) Group Less than 1 Yr Between Between Over Total 1-2 Yrs 2-5 Yrs 5 Yrs US$’000 US$’000 US$’000 US$’000 US$’000
At 31 December 2020 32,053 1,779 1,804 1,956 36,871 At 31 December 2019 24,346 824 2,030 2,634 29,833
184 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
31 FINANCIAL RISK MANAGEMENT (CONTINUED)
SHAREHOLDER LOAN FACILITY AGREEMENT As discussed in Note 14, the Company entered into a €6.141m secured loan facility agreement on 14 March 2019 with Tireragh Limited, a company ultimately beneficially owned by Mr. Desmond (‘Tireragh’), conditional on shareholder approval (the “First Facility”). Shareholder approval for the First Facility was subsequently given at an EGM held on 26 April 2019. Under the terms of the First Facility, Tireragh made available a term loan facility of up to a maximum aggregate amount of €6.141m to be drawn down by the Company by way of one or more advances (but no more than six). The First Facility was secured by a debenture entered into by the Company, creating fixed and floating charges over all of the Company’s assets, undertaking and goodwill as security for the Company’s obligations to Tireragh with respect to the First Facility. The First Facility was guaranteed by Datalex (Ireland) Limited, the Company’s subsidiary, which, by debenture, also created a fixed and floating charge over all of its assets, undertaking and goodwill as security for its and the Company’s obligations to Tireragh with respect to the First Facility. The First Facility was non‑amortising, had a term of 18 months from 1 May 2019 and incurred interest on drawn down balances at the rate of 10% per annum, compounding monthly and rolled up until maturity.
The First Facility was re‑financed in advance of maturing with the remaining interest payable on the First Facility being capitalised at the refinancing date. Under the terms of the secured loan facility with Tireragh which was approved by shareholders on 15 November 2019 (the “Second Facility”), a further €5m in secured debt funding was made available to the Company. The Second
Facility is repayable in November 2020. Under the Second Facility there are additional obligations to which the Company needs to Datalex comply with in addition to those set out in the First Facility.
The Second Facility required cross guarantees to be provided by the Company and Datalex (Ireland) Limited. Additionally Datalex •
USA, Inc. and Datalex Solutions (UK) Limited were required to act as additional guarantors of the Second Facility. The obligations of Annual Report 2020 the Company and each of the guarantors to Tireragh, include:
(i) A debenture entered into by the Company creating fixed and floating charges over all of its assets, undertaking and goodwill as security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; (ii) A debenture creating fixed and floating charges over all of Datalex Ireland Limited’s assets, undertaking and goodwill as security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; •
(iii) Security provided over the shares of Datalex USA Inc. and Datalex Solutions (UK) Limited granted by Datalex (Ireland) Limited; (iv) US law security over such assets, undertaking and goodwill of Datalex USA Inc. as may be permissible as a matter of US law as Financial Statements security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; and (v) A debenture entered into by Datalex Solutions (UK) Limited granting fixed and floating charges over all of its assets, undertaking and goodwill as security for its and the other guarantors’ obligations to Tireragh with respect to the Second Facility; and (vi) Requirements to adhere to certain financial covenants, as outlined below:
The Company has achieved the relevant financial covenant targets to date. During 2020, Tireragh Limited waived obligations to provide certain financial information within specified time limits, including delivery of the Group’s 2019 annual report within 120 days of year end (as permitted by the European Securities and Markets Authority and the Central Bank of Ireland) and the time limits within which budget projections and other periodic reporting obligations were provided during the year. Further, Tireragh Limited provided a waiver extending the time to deliver specified security documents in connection with a subsidiary of the Group and provided a waiver permitting the Group flexibility to negotiate extended payment terms with key suppliers in connection with COVID-19 measures taken by the Group.
The key financial covenants pertaining to the loan facility with Tireragh Limited are:
› Achievement of Revenue and EBITDA targets, subject to agreed performance criteria, on a six month rolling basis. › Achievement of Cash & Bank balances and Working Capital targets on a monthly basis, subject to agreed performance criteria and testing over two consecutive months.
On the 31st October 2020, the maturity of the Second Facility was extended 1 November 2021 following Shareholder approval at an EGM on the 24 September 2020. On 1 April 2021, the Group received written confirmation from Tireragh Limited that it is willing to extend the repayment date of the loan facility to 30 September 2022. The extension of the Tireragh Limited loan facility would on the same terms as the existing facility arrangement. Please see Note 2.5, Going Concern for addtional information.
185 Notes to the Financial Statements For the year ended 31 December 2020 (continued)
31 FINANCIAL RISK MANAGEMENT (CONTINUED)
CAPITAL MANAGEMENT The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders. The capital comprises mainly of issued capital, reserves and retained earnings as set out in the Consolidated Statement of Changes in Equity on page 114.
CASH FLOW RISK The Group’s income and operating cash flows are substantially independent of changes in market interest rates.
32 SUBSEQUENT EVENTS This note provides details of material events which have occurred between the year end date of 31 December 2020 and the date of approval of the financial statements.
The Directors do not propose a final dividend in respect of the year ended 31 December 2020 (2019: $nil).
Right-of-Use Assets - Buildings
On 31 March 2021, Datalex Ireland gave notice of termination to the landlord on the lease on our global headquarters in Block U, Eastpoint, Dublin, D03 H704, Ireland.
This notice issued to the landlord is part of the Group’s intention to review the existing office requirements to support the continued operations of the Group going forward.
Shareholder Loan Arrangements
On 1 April 2021, Tireragh Limited notified the Board of Directors, by way of letter, confirming that it would be willing to extend the Termination date of the loan facility to 30 September 2022 on the basis that all other provisions of the loan facility agreement remain in place.
The Directors deem the above subsequent events to be non-adjusting events. There have been no other subsequent events that impact on the 2020 consolidated financial statements up to the date of this report.
33 CONTINGENCIES The Group is subject to a number of regulatory investigations including the facts and circumstances of the historic events that gave rise to a illegal intercompany dividend, retracted market guidance and refiling of the 2018 half year financial statements amongst other items. Whilst the Group has provided for the estimate of the direct costs that will be incurred to support these regulatory investigations, no provision has been recorded for any fines that may be levied on the Group. Any fines that may arise are uncertain and are dependent on uncertain future events, i.e. the outcome and conclusions reached by the regulatory authorities. The Directors are therefore unable to determine with reasonable certainty an amount of potential fines. Additionally, the Directors are not certain as to when the regulatory bodies will likely conclude their reviews.
34 GUARANTEES The Group had no guarantees as at 31 December 2020.
186 Supplementary Information Contacts & Other Information
Directors Bankers David Hargaden Bank of Ireland (Non-Executive Chairman) Sutton Cross Dublin 13 Sean Corkery D13 K253 (Chief Executive Officer) Ireland
John Bateson (Non-Executive Director) Solicitors McCann FitzGerald Christine Ourmières-Widener Riverside One (Independent Non-Executive Director) Sir John Rogerson’s Quay Dublin 2 Peter Lennon D02 X576 (Non-Executive Director) Ireland Mike McGearty (Lead Independent Non-Executive Director) Independent Auditor Niall O’Sullivan Deloitte Ireland LLP (Chief Financial Officer) 29 Earlsfort Terrace Dublin 2 D02 AY28 Ireland Company Secretary Neil McLoughlin Shareholder’s Enquiries All administrative enquiries relating to shareholdings (for example, notification of Registered Number change of address, loss of share certificates, dividend payments) should be addressed to 329175 the Company’s registrars:
Computershare Investor Services (Ireland) Ltd 3100 Lake Drive Registered Office Citywest Business Campus Block U EastPoint Dublin 24 Clontarf D24 AK82 Dublin 3 Ireland D03 H704 Ireland Broker: Goodbody 2 Ballsbridge Park Ballsbridge Dublin 4 D04 YW83 Ireland
188 Datalex plc Global Headquarters Block U EastPoint Dublin D03 H704 Ireland
Call: +353 1 806 3500 Fax: +353 1 806 3501 Email: [email protected] www.datalex.com