26 May 2017

21^st Century Technology plc

("21^st Century" or "the Group")

Final Results for the year ended 31 December 2016

21^st Century Technology plc (AIM: C21), the specialist provider of tailored solutions to the transport community, solving complex operational requirements both on and off vehicle, announces its final results for the year ended 31 December 2016.

Financial Headlines

·     Revenue £11.6m (2015: £12.2m)

·     Underlying loss £1.4m before tax (2015: underlying profit £0.05m)

·     Loss per share 2.47p (2015: 5.17p)

·     Cash at year end £0.5m (2015: £1.0m)

·     £0.3m debt financing raised and £0.4m invoice discounting facility opened to support working capital requirements

·     Cost base restructured to generate annualised savings of £1.4m

Operational Headlines

·     Five-year renewal of First UK Bus framework to 2021

·     Framework with Arriva UK Bus extended for two years with an optional third year

·     Secured first airport contract combining Fleet and Passenger segments of the business

·     Ongoing investment in R&D extends our own IP in new technologies and software

•              Customer trials of innovative low-power, solar and E-ink information systems

•              Journeo Remote Condition Monitoring

·     Unified businesses under a single 21^st Century brand identity

·     Relocated sales, service and central support functions to new Ashby-de-la-Zouch head office

·     All ISO accreditations for Fleet and Passenger segments renewed via audit

Russ Singleton, CEO of 21^st Century Technology plc, said: "We made real strides last year with major framework renewals, organisational restructuring and innovative new sales.  However the financial performance in H2 was poor as rail and passenger orders anticipated earlier in the year did not materialise. We raised finance in order to support working capital requirements going forward, significantly reduced our cost base and are starting to see our strategy working. We have created a strong platform for growth and are pleased to be looking to the future with confidence."

Enquiries:

The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.

Notes to editors:

'Connected Systems for Connected Journeys'

21^st Century Technology is the specialist provider of tailored solutions to the transport community, solving complex operational requirements both on and off the vehicle. Comprised of a Fleet Systems division and a Passenger Systems division, 21^st Century Technology provides integrated solutions both on and off the vehicle to deliver 'connected systems for connected journeys'.

Fleet Systems: include CCTV video surveillance; to improve passenger & driver safety, vehicle & driver performance monitoring, real-time on-board IT subsystems management and automatic passenger counting.

Passenger Systems: include the design & manufacture of all the necessary hardware and software for electronic passenger information systems, off-vehicle smart ticketing and way-finding.

With over 20 years' experience in the transport industry, 21^st Century Technology specialises in providing innovative, cost-effective technology lead solutions to improve the passenger experience and provide operational benefits to fleet and network operators.

Further information on the company is available on www.21stplc.com or search for 21^st Century Technology on LinkedIn and @21stCenturyLtd on Twitter.

Chairman's statement

The Company made significant progress in a number of areas during what turned out to be an otherwise challenging year.

The main highlights came through towards the latter part of the year. Our Fleet Systems segment secured long-term framework renewals with two major customers: First UK Bus for 5 years and Arriva UK Bus for 2 years with a customer option to extend for a further year. In addition there were important contract wins:  a project of c. £1m to upgrade CCTV and associated equipment for a large Antipodean bus operation; and a landmark development for OFJ Connections Gatwick Airport to provide integrated real-time passenger information and connected bus systems with a value of another c. £1m, including ongoing support.

The Gatwick contract is important because it is the first example of 21^st Century combining its Fleet Systems and Passenger Systems expertise to design an innovative solution that drives real benefits to our customers as they in turn enhance the travel experience for their passengers.

As reported in the Interim Results the Board anticipated that the Group's full year revenue would be lower than last year resulting in a significant loss for the full year ending 31 December 2016.

In summary we identified two areas of concern:

·     The level of new business in Passenger Systems had fallen below our expectations and that the broadly acceptable H1 performance was being achieved at the cost of depleting its order book.

·     Whilst invoicing in H1 for the Rail section of Fleet Systems was acceptable, the order book was eroding to a level where H2 success was reliant on winning and delivering one of the major projects being bid.

The actions we undertook to mitigate these areas of concern are set out in our Strategic Report.

Trading results

Group results for the year ended 31 December 2016 show an underlying loss before tax of £1,397,000 (2015: underlying profit of £52,000). This is mainly attributable to sales volumes being lower than management expectations in both segments, leading to a £0.6m reduction in Passenger Systems margins in H2 and a £0.7m reduction in Rail margins across the year in Fleet Systems. This was at the higher end of expectations and is explained in detail in the trading results analysis section of the Strategic Report. Significant cost base and organisational changes have taken place to ensure the business returns to a cash generative and profitable operation.  

The effect of share-based payments, one-off legal costs and reorganisation costs resulted in a loss before tax of £2.3m (2015: loss of £4.8m after also charging acquisition and one-off legal costs). The basic loss per share is 2.47p (2015: 5.17p). 

The cost base reduction and restructuring is now nearing completion, generating savings of c. £1.4m on an annualised basis. The programme accelerated the consolidation of our operations and was completed whilst ensuring that the changes did not impact our ability to maintain the high level 24/7 service and support required by our customers.

To support the businesses working capital requirements, the Company raised £300k of debt financing and opened a £400k invoice discounting facility. The debt financing was provided by Directors, senior management and shareholders, and as a further commitment to ensuring the success of the business, a number of Directors and senior management significantly reduced their remuneration.

People

We remain fortunate to have many talented and loyal staff in the 21^st Century Group and it has been particularly commendable how everybody has dealt with the large-scale changes across 2016. They have embraced the centralisation of shared services for logistics, purchasing and finance and managed the associated building moves: downsizing to serviced offices in Croydon, expanding in Coventry to handle all Group inventory and the new head office in Ashby-de-la-Zouch.

Our technically agile development teams have taken a major leap forward under the leadership and guidance of Dr Andy Houghton, our Group CTO, who was appointed in January 2016. 

We welcome Nick Lowe to the Board as CFO and look forward to working with him. I would like to take this opportunity to thank Glenn Robinson for the contribution and support he has made in the three and a half years on the Board in that role.

I would like to pass on my sincere thanks and that of the Board to everybody involved as we build a more capable and successful business.

Outlook

We are continuing to transform 21^st Century from a business that provides standalone, on-vehicle CCTV and IT sub-systems integration towards one that provides fully connected systems on and off vehicles in towns and cities and in the transport network's bus and rail stations.

We are diversifying our customer base, accessing new markets and delivering innovative solutions based on our own technologies, software and applications. Our first in-house developed product, marketed under the Journeo brand name, is entering fleet service this year, combining diagnostic and communications management software into a cloud-based web service.

We now have the platform and capabilities needed to build sales into our main customer segments and extend into related or adjacent markets over the coming years. Management expect that this will lead the Group to a return to profitability. Performance in the first quarter of 2017 was in line with management expectations.

Following the Group's Annual General Meeting, the CEO, Russ Singleton, will review these areas in more detail and a copy of his presentation will be added to our website.

Mark Elliott

Non-executive Chairman

25 May 2017

Strategic Report

We continued to make progress on our strategy implementation and the goals set out in last year's report:

·     improve customer service;

·     increase technical capability;

·     empower management;

·     secure positive outcomes from contract negotiations and renewals;

·     develop new lines of business and diversify client base; and

·     preserve cash.

The performance and progress on the first four points has been good, as evidenced in our operational headlines.  Establishing new lines of business and preserving cash remain priorities.

We have strengthened our sales and marketing functions, consolidated many operations into a single location in Ashby-de-la-Zouch, unified the brand under the 21^st Century banner and currently operate through two segments: Passenger Systems and Fleet Systems.

Principal activities

The Group's principal activities are being a specialist provider of tailored solutions to the transport community, solving complex operational requirements both on and off the vehicle.

Fleet Systems solutions include video surveillance to improve passenger and driver safety, vehicle and driver performance monitoring and automatic passenger counting.

Passenger Systems information solutions include the necessary hardware and software for electronic passenger information systems, off-vehicle smart ticketing and wayfinding.

Business model

The business model is to compete in the market as an open provider of technology solutions, working with global-scale product companies and local specialists to deliver highly reliable and cost-effective solutions for the transport community over the lifecycle of the systems. The service offering includes design, tailoring, installation, on-site support and back-office systems.

We compete by striving to offer better integrated solutions at reduced costs to our customers. We carefully select niche markets where we can generate significant market share to generate the economies of scale needed. Our customers in the transport community include fleet operators, vehicle manufacturers, local authorities and Passenger Transport Executives (PTE).

Key performance indicators

The Group uses a number of key performance indicators (KPIs) to monitor progress against its objectives. The key KPIs are:

In addition, operational performance measures are monitored at a major account level with exceptions raised to the Board. The underlying loss is reconciled to the IFRS operating loss within the business review and results section below.

Fleet Systems

In the bus sector we continue to support Arriva, First UK Bus, Keolis, Translink and Nobina, our major fleet asset clients. We were delighted that First UK Bus renewed its framework agreement for 5 years in August 2016 and this was followed later in the year with a 2 year extension to the Arriva framework agreement with a customer option of an additional year extension through to February 2019. These commitments are tangible endorsements of the value we deliver to our major fleet customers.

Major projects completed in the year included:

·     vehicle power systems upgrade to 1,800 vehicles for a large bus fleet customer;

·    fleet-wide deployment of IP and cloud-based bus CCTV and Wi-Fi solution; and

·     the design and supply of 130 ruggedised digital video recorders for one of London's light rail services to satisfy an urgent operational requirement.

Our development initiative to enter the market for small and medium-sized vehicle operators had some success in specialist niche applications towards the end of the year and this is where we plan to concentrate in future. Notable contract wins included:

·     c. £1m contract to upgrade CCTV and associated equipment for an Antipodean bus operation; and 

·     a landmark project for OFJ Connections Gatwick Airport to provide integrated real-time passenger information and connected bus systems, with ongoing support, at c. £1m.

I am particularly pleased with the Gatwick order as it is the first example of 21^st Century combining its Fleet and Passenger Systems' design capabilities. A major rationale for our acquisition of the Passenger Systems business was the potential to enter new markets.  In this case we were able to offer an innovative and cost-effective solution which delivers real operational benefits to our operator customer and in turn enhances the passenger travel experience for its customers.

Our core strength in rail is mainly in CCTV technology and engineering where we have market leading solutions for both forward-facing and in-carriage systems in freight and passenger rail, with associated support and maintenance.  The year started well with the London light rail project mentioned above as well as winning the first major design contract for Abbey Wood, a Crossrail station. Whilst this design has been a success, anticipated follow on orders were slower to come through than expected and due to our capital constraints we took the decision to refocus on multimodal customers and their fleets. The withdrawal from design works has allowed us to move to a much lower cost base for our rail activities.

At an operational level we secured renewals of ISO 9001, ISO 18001 and RISQS approvals across 2016.

Passenger Systems

The acquisition strategy for the division remains sound, as it allows us to broaden our customer base into the much larger PTE and local authority customer base where we can offer hardware and software design capabilities. While we continue to work with many local authorities, in our Interim Report we highlighted that the performance in the Passenger Systems business was well below expectations. This was the result of a shortfall in order intake that resulted from a combination of delayed or reduced spending by local authorities and the rebuilding of the sales and marketing functions following the acquisition.

In order to ensure that the lower sales levels would no longer produce a loss we took immediate action to adjust the cost base and accelerated the integration of the Passenger Systems business into the wider Group. In the meantime, a new sales team was recruited, supported by an experienced interim Sales Director with a focus on building sales, exhibitions, trade PR and customer relations.

We identified maintenance of real-time information estates and associated data processing as clear areas for growth. With the introduction of our national service team we were pleased to see a 6% increase in maintenance revenues when annualised against the previous year.  PTEs and local authorities continue to look to improve the travel information provided to the public and it is essential that the investment they have made in the hardware is supported by a robust service both on the street and in the cloud.

The business continues to drive innovation with a number of newly developed solutions designed to deliver long-term cost efficiencies and reduced carbon footprints. Active trials of solar-powered passenger information systems and working examples of E-ink displays are being viewed with encouraging initial feedback from our customer base.

Our developments in smart ticketing solutions have started to gain market traction following the installation of our first fully integrated system, iPoint, in Weston-super-Mare and ticket vending machines in Blackburn and Accrington bus stations, both of which have been positively received. We now have a platform to further develop and display our capabilities to the industry and have secured a further contract in 2017 for multiple systems.

We now have a growing pipeline of opportunities, greater technical capabilities, a lower cost base and a more appropriate structure on which to grow.

Central services

We began the year comprising two separate businesses: Fleet Systems, our original bus and rail CCTV business, and Passenger Systems, following the acquisition of RSL the year before. Our plan to migrate the two businesses in a programme covering 18 months was accelerated due to the performance issues across 2016.

In order to reduce the cost base it was clear that we needed to centralise the majority of operations and remove any duplicated staffing costs.  A key part was negotiating an early exit from the 25,000 sq ft Croydon facility enabling us to centralise into a new and more affordable head office in the Midlands at Ashby-de-la-Zouch. 

This has been a major reorganisation involving the merger and relocation of operations. Our new Ashby head office serves as the centre of our activities and is the base for all our sales, service and central support functions.  We maintain a serviced office in Croydon to provide a local service to our important London customers and as a base for key staff. Our Coventry centre has been expanded to serve as our national production and logistics centre and we maintain offices in Stockholm to service our Scandinavian customers.

Business review and results

The performance of the Group was affected by challenging marketing conditions leading to an underlying loss of £1,397k (2015: profit of £52k). These results were at the higher end of management expectations due to lower than expected order intake in H2, particularly in the Rail element of our Fleet Systems segment and in Passenger Systems.

Total revenue fell in the year by 6% despite the additional four months of Passenger Systems sales in its first full year where turnover increased 30% to £4,715k (2015: 8 months £3,631k).

Basic loss per share is 2.47p (2015: loss per share of 5.17p).

The results include the first full year trading of our Passenger Systems operating segment (2015: eight months) and the segmental results are:

Fleet Systems sales overall were down 20%, with the varying reductions in the elements of the segment being Bus 11%, International 23% and Rail 38%. Bus and International sales recovered in H2 after a poor H1 but Rail H2 sales were down £586k on H1 as no major on-board project sales were won in the year.

In H2 Passenger Systems sales slowed markedly and the small underlying loss in H1 of £41k finished the year at £460k loss. The business was right-sized across H2 with significant cost-cutting, but the H2 drop in gross profit of £601k could not be offset.

Overall gross profit fell 14% in the year but again Passenger Systems increased 27% with the full year effect. Fleet gross profit was down 36% and again this was across all elements of the segment: Bus 19%, International 37% and Rail 64%. The bulk of the fall in Bus and International was due to the reduction in sales but also there was a reduction in gross profit margins. The magnitude of the margin fall in Rail was £686k, which came from the reduced sales and a margin fall from 53% in 2015 to 31% in the current year. The margin fall came about from particular lower margin projects and the move to design works with greater outsourced content and lower margins.

Underlying administrative costs increased by 15%, which is mainly the effect of the full year of Passenger Systems. The overall underlying loss of £1,397k (2015: profit of £52k) is mainly attributable to the £601k margin reduction in H2 in Passenger Systems and the £686k reduction in Rail margins in Fleet Systems.

The underlying operating profit reconciles to the IFRS operating loss as follows:

The operating loss before impairment was £2,298k (2015: £486k).

Technology report

The particular challenge of this last year has been to bring previously disparate parts of 21^st Century together into a single entity. While this has been accomplished in part through relocation, the potential synergy that exists is best realised by creating a technological bridge too.

Between them, Fleet and Passenger Systems span a broad spectrum of technologies ranging from managing and maintaining the systems that acquire vehicle information, at one end, through to displaying elements of that information on real-time passenger signage, at the other. In the middle there exists a raft of underlying technologies, necessary to turn raw information into something both useable and useful.

Through greater ownership of this technological pathway, bringing key components in-house, we have been able to target more elements of available projects and, significantly, have greater control over the quality and services that can be offered to them. We no longer have to make do with how things have been done historically; we can innovate and shape solutions of the future.

Creating and acquiring these technological stepping stones has necessitated an elevation of our in-house capabilities. Being able to produce both hardware and software solutions allows us to hit the customised sweet spot that lies between commoditised, off-the-shelf,  components and completely bespoke solutions. While this may be accomplished in part through outsourcing, investing in core in-house IP is seen as a key and foundational part of making a truly agile business that can respond quickly to the diverse challenges that an evolving passenger-centric transportation infrastructure engenders.

There is no intention to re-invent the wheel.  Where global solutions exist to problems or local ones adequately address a niche we are happy to act as integrator.  However, where this is not the case and we have customer-driven sales opportunities or the possibility of improving systems through technology evolution, we will invest our resources for the benefit of our customers.

The first examples of the change to our capabilities can be seen in three particular development projects in Q4 of 2016:

·     Gatwick Airport;

·     Journeo remote condition monitoring; and

·     data broking - the extension of our software to serve more user types

Our challenge for 2017 is to do more of these projects whilst ensuring our technology platform is fully scalable and modular to maximise our ability to respond to customer needs.

Principal risks and uncertainties

The management of the business and the execution of the Group's strategy are subject to a number of risks. Risks are formally reviewed by the Board and, where possible, appropriate processes are put in place to monitor and mitigate them. If more than one event occurred, it is possible that the overall effect of such events would compound the possible adverse effects on the Group. The key business risks affecting the Company are set out below:

Future developments

The current trading and outlook is covered in the Chairman's Statement and a more detailed shareholder presentation will be made immediately following the Group's Annual General Meeting (AGM) in June 2017.

Signed on behalf of the Board

Russ Singleton

Chief Executive

25 May 2017

Consolidated statement of comprehensive income

for the year ended 31 December 2016

Consolidated statement of changes in equity

for the year ended 31 December 2016

Consolidated statement of financial position

at 31 December 2016

Consolidated statement of cash flows

for the year ended 31 December 2016

Notes to the consolidated financial information

for the year ended 31 December 2016

1. Basis of preparation

The Group financial statements are prepared in accordance with International Financial Reporting Standards and IFRIC interpretations issued and effective (or adopted early) and endorsed by the European Union at the time of preparing these financial statements and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements have been prepared under the historical cost convention.

The financial information contained in this announcement does not constitute statutory accounts for the year ended 31 December 2016 or 31 December 2015. The financial information for the years ended 31 December 2016 and 31 December 2015 is derived from the statutory accounts for those periods which include audit reports which are unqualified, do not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and do not include references to any matters to which the auditor drew attention by way of emphasis. The statutory accounts for the year ended 31 December 2015 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 31 December 2016 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.

Going concern

The Group's business activities, together with factors likely to affect its future development, performance and position, are set out in the Strategic Report along with the principal risks and uncertainties.

The Group's net underlying loss for the year was £1,397k (2015: underlying profit £52k). As at 31 December 2016 the Group had net current liabilities of £392k (2015: net current assets £1,362k) and net cash reserves of £511k (2015: £1,010k).

In 2016 the Directors identified a need to raise finance to cover liquidity issues pending the anticipated return of the Group to profitability and raised £300,000 from the issue of loan notes in December 2016 and arranged a £400,000 invoice discounting facility. Current trading is in line with management forecasts and restructuring efforts are substantially complete.

The Directors have prepared Group cash flow projections for the period to 30 June 2018 based on latest forecasts that show that the Group will be able to operate within the Group current funding resources. It is important that we achieve sales forecasts and the profile of cash receipts.

As with all businesses there are particular times of the year where our working capital requirements are at their peak. However the Group is well placed to manage business risk effectively and the Board reviews the Group's performance against budgets and forecasts on a regular basis to ensure action is taken when needed.

These projections indicate that the Group will operate within available facilities throughout the projection period and therefore based on these projections, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and for at least twelve months from the date of these financial statements.  The Directors therefore continue to adopt the going concern basis in preparing the financial statements.

2. Revenue

The revenue split between goods and services is:

3. Segmental reporting

IFRS 8 requires operating segments to be determined on the basis of those segments whose operating results are regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to make strategic decisions.

Last year, with the acquisition of RSL Group, we moved to two strategic operating segments: Fleet Systems and Passenger Systems. In addition, there are central functions that provide services to the two strategic operating segments.

As the Board of Directors reviews revenue, gross profit and operating loss on the same basis as set out in the consolidated statement of comprehensive income, no further reconciliation is considered to be necessary.

Revenue and gross profit

Major customers

In the year, two customers within the Fleet Systems segment accounted for over 10% of the Group revenue at 18% and 13%. In the prior year there were three Fleet Systems customers that each accounted for over 10% of revenue at 19%, 18% and 11%. There were no major customers within the Passenger Systems segment

Underlying (loss)/profit

Reconciling to loss before interest and tax

Net assets attributed to each business segment represent the net external operating assets of that segment, excluding goodwill, bank balances and borrowings which are shown as unallocated amounts, together with central assets and liabilities.

Net assets

Geographical segments

Assets and liabilities by location

All non-current assets are located within the United Kingdom.

4. Taxation

(a) Analysis of (credit)/charge in year:

(b) Factors affecting the total tax (credit)/charge for the year

The tax assessed for the year differs from the standard rate of corporation tax in the UK at 20% (2015: 20.25%).
The differences are explained below:

(c) Deferred tax asset/(liability)

The unrecognised and recognised deferred tax assets/(liability) comprise the following:

The Group has £3,372,000 of unutilised tax losses (2015: £1,009,000) which may be carried forward indefinitely.

5. Loss per Ordinary Share

Basic earnings per share (EPS) is calculated by dividing the earnings attributable to Ordinary Shareholders by the weighted average number of Ordinary Shares in issue during the year.

For diluted earnings, the weighted average number of Ordinary Shares in issue is adjusted to assume conversion of all dilutive potential Ordinary Shares.

Details of the weighted average number of Ordinary Shares used as the denominator in calculating the earnings per Ordinary Share are given below:

6. Goodwill

Goodwill acquired in a business combination is allocated at acquisition to the cash generating unit (CGU) that is expected to benefit from that business combination. The Group has two CGUs which are its two operating segments, Fleet Systems and Passenger Systems. The carrying amount of goodwill has been allocated to the CGUs as follows:

The Group tests goodwill annually for impairment as at 31 December, or more frequently if there are indications that goodwill might be impaired.

The recoverable amounts of the CGUs are determined based on a value-in-use calculation which uses cash flow projections based on financial budgets and business plans approved by the Directors covering a five-year period. Cash flows beyond that period have been extrapolated in perpetuity assuming no growth, which the Directors consider to be a conservative approach.

The goodwill in relation to the Fleet Systems CGU became fully impaired in the year to 31 December 2015, based on forecasts that suggested a broadly neutral cash flow.

The key assumptions for the value-in-use calculations are those regarding discount rates and sales forecasts.

The discount rates needed to equate the net present value from these cash flows to the carrying value of goodwill are compared to the required rate of return from the CGU based upon an assessment of the time value of money, prevailing interest rates and the risks specific to the CGU. If this discount rate is in excess of the required rate of return then it is assumed that no impairment has occurred to the carrying value of goodwill.

The discount rates are as follows:

The discount rates used are based on the Board's judgement considering macroeconomic factors and reflecting specific risks in each segment such as the nature of the market served, the concentration of customers, cost profiles and barriers to entry.

Passenger Systems also has intangible assets, see Note 11, which are considered in the same value-in-use calculations as goodwill.

The Passenger Systems cash flow projections used to determine value in use are based upon assumptions of sales, margins and cost bases. Of these assumptions the value in use is most sensitive to the level of sales. Margins are fixed in the forecast based upon past experience; the cost base is similarly based upon past experience but also takes into account savings from restructuring and will vary depending upon the level of sales. In accordance with the requirements of IAS 36 our value-in-use calculations do not include cash flows from restructurings to which the Group is not yet committed.

The level of sales is the key assumption used in the cash flow forecast. Sales have been determined by management using estimates based upon past experience and future performance with reference to market position and the sales pipeline. Due to the difficult macroeconomic environment there has been a reduction in the availability of contracts, which has in turn resulted in pressure on margins. This has been reflected in the sales forecasts. Furthermore, the 2017 forecast reflects a major restructuring to a level reflecting current order intake and the near-term sales pipeline. The 2018 forecast predicts growth of 22%. The remaining three years are based upon compound sales growth of 5%.

The value-in-use calculation supports the carrying value of the CGU with headroom of £116k. A sensitivity analysis has been performed on the impairment test. The Directors consider that an absolute change in the key sales assumption is possible and a reduction of 5% points in the growth rate in 2018 to 17% would result in an impairment charge being recognised for the current carrying value of goodwill in relation to Passenger Systems of £713k. If sales forecasts were down 10% across the whole period and overheads were partially scaled back by 5% then the impairment charge would be £1,072k.

Based on the review the discount rate applied to equate the net present value of the forecast cash flows to the carrying value of goodwill and the intangible assets was 14.9%, whereas the required rate of return of the CGU is 14%.

In view of this, the Directors consider that no impairment of goodwill or intangible assets is required.

7. Reconciliation of operating loss to net cash outflow from operating activities

8. Reorganisation costs

Current Year reorganisation costs relate to restructuring programmes arising during the year, the disposal of the Group's leased premises in Croydon, and the December 2016 agreed restructuring programme. All exceptional items relate to administrative expenses.

9. Availability of audited accounts:

Copies of the 2016 audited accounts will be made available following the announcement of the date of our AGM. They will also be available on the Company's website (www.21stplc.com) for the purposes of AIM Rule 26 and will be posted to shareholders in due course.