TIDMRCN
RNS Number : 9170U
Redcentric PLC
28 November 2019
Redcentric plc
Half year results for the six months ended 30 September 2019
(unaudited)
Redcentric plc ("Redcentric", "the Company", or "the Group")
(AIM: RCN), a leading UK IT managed services provider, today
announces its unaudited results for the six months to 30 September
2019.
Financial measures Six months
to 30 Sept
Six months 2019 (H1-20) Six months
to 30 Sept pre-IFRS to 30 Sept
2019 (H1-20)(1) 16(1) 2018 (H1-19) Change(1)
-------------------------------------------- ----------------- -------------- --------------
Total revenue GBP43.2m GBP43.2m GBP47.5m -9%
Recurring monthly revenue (RMR) (2) GBP38.8m GBP38.8m GBP41.3m -6%
Adjusted EBITDA(2) GBP10.3m GBP8.8m GBP8.1m +8%
Adjusted operating profit(2) GBP5.5m GBP5.0m GBP4.1m +23%
Reported operating profit GBP1.9m GBP1.4m GBP0.5m +219%
Adjusted cash generated from operations(2) GBP10.2m GBP8.7m GBP9.2m -6%
Reported cash generated from operations GBP9.8m GBP8.2m GBP8.8m -6%
Net debt GBP(40.0)m GBP(16.5)m GBP(22.6)m -27%
Adjusted basic earnings per share(2) 2.41p 2.48p 1.89p +31%
Reported basic earnings per share 0.34p 0.41p (0.38)p +208%
Interim dividend per share 0.83p 0.83p 0.4p +108%
-------------- -------------- ----------
(1) The results for H1-20 are not directly comparable with the
prior year due to the adoption of IFRS 16 Leases. Further details
are provided in note 3 to the financial statements, and Appendix 1,
which sets out the impact of IFRS 16 Leases on the primary
statements. The % change figures reported above relate to H1-20 vs.
H1-19 pre any IFRS 16 Leases impact.
(2) For an explanation of the alternative performance measures
used in this report, please refer to Appendix 2.
Financial Highlights
-- Total revenue down by 9% to GBP43.2m, but good future
visibility with GBP38.8m recurring revenue representing 90% of
total revenue (H1-19: 87%).
-- Gross margins improved to 64.5% from 59.8%.
-- Adjusted (pre-IFRS 16) EBITDA up 8% to GBP8.8m (H1-19
GBP8.1m), with margin improving to 20.3% (H1-19 17.1%).
-- Adjusted (pre-IFRS 16) operating profit up 23% to GBP5.0m
(H1-19 GBP4.1m), with margin improving to 11.6% (H1-19 8.6%).
-- Continued strong cash flows with GBP8.7m of adjusted pre-IFRS
16 operating cash flow in the period (99% cash conversion).
-- Net debt, excluding the impact of IFRS 16, reduced by GBP1.1m
in the period to GBP16.5m, with GBP4.8m capital expenditure and
GBP1.5m of dividends paid in the period.
-- Interim dividend increased to 0.83p per share (H1-19 0.4p) , to be paid in January.
Operational Highlights
-- Q1-20 recurring revenues were flat on Q4-19 and Q2-20
recurring revenues were up on Q1-20, driven by both new logo wins
and effective cross-selling.
-- Operating margins continued to improve due the cost measures
undertaken in the second half of the last financial year.
-- GBP1.1m invested in our national network and a further
GBP1.5m invested in our infrastructure as a service (IaaS)
platform. We now have modern, resilient and scalable platforms and
networks from which we can service our current and future customer
base.
-- Product management and Development teams reorganised, with
managed firewall and SD WAN launched in Q3-20 and further
enhancement to our Collaboration and Security portfolios to be
launched in Q4-20.
-- Strategic review of our data centre and network portfolios
underway, with the expectation that this will result in annual
savings of at least GBP2.8m in FY21 onwards.
Ian Johnson, Non-Executive Chairman, commented:
"Visibility of future revenues remains strong with recurring
revenues reaching 90%. New customers were added in the period
which, together with effective cross selling, led to quarter on
quarter revenue growth. This revenue growth has been achieved
despite the ongoing FCA investigation, which continues to impact
the pace at which we win new business.
Management continues to improve the operational efficiency of
the business. The strategic data centre and network portfolios
review now underway is expected to lead to the realisation of
annual savings of at least GBP2.8m and further improvements in
operating margins.
Cash flow remains strong allowing significant investment into
our network and a further reduction to net debt in the period. The
Board is confident that the business will continue to generate
strong cash flows enabling it to return cash to shareholders by way
of dividend and further share purchases via the share buy-back
programme."
There will be a presentation for analysts held at 09:30hrs on 28
November 2019 at the offices of Tulchan Communications, 85 Fleet
Street, EC4 1AE. Please contact redcentric@tulchanCompany.com if
you would like to attend.
For further enquiries please contact:
Redcentric plc +44 (0)1423 850 000
Peter Brotherton, Chief Executive Officer
Dean Barber, Chief Financial Officer
Tulchan +44 (0)20 7353 4200
James Macey White / Matt Low / Sophie Duckworth
Numis Securities Limited - Nomad and Joint Broker +44 (0)20 7260 1000
Simon Willis / Oliver Hardy
FinnCap Ltd - Joint Broker +44 (0)20 7220 0500
Stuart Andrews / Rhys Williams
Chief Executive Officer's review
Overview
We have had another productive six months, with progress made
across all areas of the business. As well as continuing to extract
cost efficiencies, it is particularly pleasing to note that we have
stemmed the decline in recurring revenues. Whilst the half year
comparatives show a decrease in recurring revenue of 6%, this
reflects the opening run rate position. Indeed, our Q1 recurring
revenues were flat on Q4 and Q2 recurring revenues were up on Q1.
Encouragingly, this was driven by both new logo wins and effective
cross-selling.
Non-recurring revenues are less predictable by nature and have
been impacted in the period by the industry trend to move away from
on-premise to cloud solutions. Additionally, customers have delayed
their discretionary spending due to the economic uncertainty
surrounding the ongoing Brexit negotiations. This is reflected in
the half year numbers with non-recurring revenues down by GBP1.8m
(-29%) on the equivalent period last year.
Profitability and operating margins continue to improve as a
result of the cost reduction measures undertaken in the second half
of the last financial year. In addition to these measures, we have
recently commenced a strategic review of our network and data
centre portfolios, vacating third party data centres and
rationalising our legacy network connectivity contracts. This will
align our infrastructure better with our future strategy and
customer requirements. It will also yield significant savings,
outlined in more detail below, expected to be at least GBP2.8m in
FY21 onwards. The review will be complete by the time we announce
our full year results and full details will be provided at that
point.
The cash flows for the 6 months ended 30 September 2019 include
an acceleration of capital expenditure with GBP1.1m invested in our
national network which will shortly have a core capacity of 100Gb.
A further GBP1.5m has been invested in our infrastructure as a
service (IaaS) platform and GBP0.9m in our new internal ERP system.
With these investments, we now have modern, resilient and scalable
platforms and networks from which we can service our current and
future customer base. Going forward, we anticipate lower levels of
capital expenditure which will further enhance cash flow
performance.
Improved profitability and cash generation have enabled us to
declare an interim dividend of 0.83p per share (H1-19: 0.4p). In
addition to this, we have commenced a share buyback programme with
purchases of GBP0.3m made as at 30 September 2019.
Private sector
The private sector accounts for 85% of our recurring revenues.
Our focus on customer service has led to high levels of retention
during the period and we continue to receive additional orders from
existing customers. As highlighted in last year's Annual Report, we
believe that our margins are now reflective of the market and this
is evidenced by significantly lower levels of price erosion on
contracts renewed during the first half of the year.
Public Sector markets
Overview
Whilst the public sector accounted for just 15% of total
recurring revenues, we continue to see significant opportunity for
growth and anticipate that these revenues will represent an
increasing percentage of future total revenues.
Health and Social Care Networks (HSCN)
In the FY19 Annual Report we listed 7 HSCN contract wins with
annualised revenues of GBP3.1m. Contract variations and additions
in H1-20 have increased this figure to GBP3.4m.
The HSCN programme has added 66 new public sector logos to our
customer base and represent a significant opportunity for us to
cross sell additional products. In addition to the HSCN revenues, a
further GBP0.3m of annualised revenue from other products has been
added to date.
Whilst these wins have been significant, the progress in
implementing the contracts has been slower than expected, primarily
due to customer resource constraints, resulting in only GBP178k of
revenue being recognised in the first half of the year. As at 30
September 2019, the run rate of installed HSCN contracts amounted
to GBP648k per annum. We are working closely with both our
customers and NHS Digital to expedite these network rollouts.
Whilst the roll-out of the remaining revenue will continue in to
FY21, we expect that the bulk of these contracts will be live by
the end of this financial year.
Yorkshire and Humber Public Sector Networks (YHPSN)
YHPSN is the largest of the Public Sector framework contracts
won by Redcentric in the past 18 months. After a difficult start to
this framework award, we are starting to make some good progress.
70 organisations are part of the YHPSN framework and of these, 44
have placed orders with us.
To date the total value of orders received is GBP8.0m, which
equates to an annualised revenue of GBP1.6m.
As with the other HSCN orders, progress in installing new
circuits has been slower than anticipated but we are confident that
the bulk of the current order book will be installed by the end of
this financial year.
Our initial sales focus has been on selling HSCN circuits due to
the need for health organisations to move off the N3 network which
is scheduled to close in August 2020. Going forward we will
progress non-health opportunities and look to cross-sell additional
products into this new customer base.
Public sector hosting
In last year's Annual Report, we highlighted the significant
impact that the loss of public sector hosting contracts has had and
will continue to have on the business. In the six months to 30
September 2019, public sector hosting revenues amounted to GBP1.7m,
GBP0.9m down on the equivalent period last year.
As previously notified, we expect the whole of this revenue to
have migrated away from us by the end of the next financial
year.
Products, platforms and networks
National network upgrade and efficiencies
Our core network has been upgraded to enable 10Gb connections to
terminate on our network and we are in the process of expanding the
network to give a 100Gb core.
During the period we completed the decommissioning of a network
ring which originated from the historical inTechnology acquisition.
The closure of this ring has realised GBP0.5m annualised savings
effective 1 July 2019.
Infrastructure as a Service (IaaS) platform
We have commenced phase II of our IaaS platform upgrade which,
once fully implemented, will bring our cloud product offering fully
up to date. We expect that this will be live by the end of the
financial year.
New product launches
During the period we restructured the product management and
development teams yielding immediate results, with new managed
firewall and SD WAN products launched in Q3-20, and further
enhancement to our Collaboration and Security portfolios to be
launched in Q4-20
Data centre and network strategy review
We are now part-way through a strategic review of our network
and data centre portfolios. Our aim is to vacate third party data
centres and concentrate on our own managed facilities. This will
allow us to rationalise legacy network connectivity contracts. The
decisions taken to date will result in a GBP1.8m reduction to the
annual cost base in FY21, with GBP0.4m benefit from this in H2-20.
The review is ongoing and is expected to realise further savings of
at least GBP1.0m in FY21, in addition to the GBP1.8m already being
actioned. We expect to incur exceptional contract termination and
exit costs of approximately GBP1.8m in H2-20.
These efficiency measures will not impact the required capacity
to support future growth. By the end of the financial year the
business will have an upgraded single UK wide network, with all of
our customers located in Redcentric managed data centres and
third-party facilities only utilised for interconnectivity
purposes. No customer losses are expected as a result of this
rationalisation programme.
People
PLC Board
On 16 October 2019 Ian Johnson joined the Board as Non-Executive
Chairman replacing Chris Cole who resigned from the Board on the
same day. Ian Johnson is an experienced PLC chairman and we welcome
him to the Company. We thank Chris Cole for his considerable
contribution to the Company over a five-year period and wish him
well for the future.
Also, on 16 October 2019, Chris Rigg (Non-Executive Director)
announced his intention to step down from the Board with effect
from 31 December 2019 following his appointment as Chief Executive
Officer of Mandata Limited. Chris goes with our thanks and best
wishes for the future.
Dean Barber joined the business on 2 September 2019 as Chief
Financial Officer. Dean is a chartered accountant and joins us from
EMIS Group plc where he was Group Financial Controller.
Operating Board
We have continued to invest in our staff and to strengthen the
management teams in both the UK and India. Several key appointments
have been made in the first half of the financial year with the
Operating Board strengthened as a result. In addition, a new HR
Director will be joining the senior management team in
December.
The business currently has 465 employees all of whom are key to
the success of the business. The Board thanks them for their hard
work and loyalty.
FCA
The FCA investigation is still ongoing and continues to deflect
management's attention and to restrict the markets into which the
Company can sell. The FCA has not communicated how it intends to
proceed and what, if any, action it might bring against the
Company. The Company continues to cooperate fully with the FCA and
would like to bring the matter to a close as soon as possible.
Outlook and key areas of focus
We are cautiously optimistic for the future. The changes we have
made over recent periods are beginning to yield results in both the
private and public sector.
Whilst we are operating in very competitive markets, we expect
modest revenue growth in the second half and beyond.
We have invested significantly in our networks and platforms
over the last two years to position the business for the future.
Given this level of upfront investment we expect lower levels of
capital expenditure over the medium term. This, combined with the
cost efficiencies identified through the ongoing review of our data
centre and network portfolio, should lead to further strong cash
generation.
Our focus in the second half of the financial year will be
fivefold:
-- To continue to grow revenue both by new customer acquisition
and through cross selling of products to existing customers.
-- To expedite the delivery of public sector network wins.
-- To conclude the data centre and network strategy review
-- To enhance our product portfolio with new product launches
and further product enhancements.
-- To continue to deliver strong cash flows which will be
utilised to fund further share buy backs, pay dividends and reduce
debt.
We anticipate that our FY20 results will be in line with the
Board's expectations.
Financial Review
Overview
Total revenue in the period reduced by 9% to GBP43.2m (H1-19:
GBP47.5m). Recurring monthly revenue fell by 6% to GBP38.8m (H1-19:
GBP41.3m), representing 90% (H1-19: 87%) of the total revenue.
On a pre-IFRS 16 basis, both adjusted EBITDA (up GBP0.7m to
GBP8.8m) and adjusted operating profit (up GBP0.9m to GBP5.0m) were
higher than prior year, with an improvement to gross profit margin
and further reductions to the operating cost base in the
period.
On a post-IFRS 16 basis, adjusted EBITDA increased by GBP2.2m
and adjusted operating profit increased by GBP1.4m. The Company
recognised GBP1.1m of depreciation charges and GBP0.6m of interest
costs in respect of finance leases that would have previously been
recognised as a GBP1.6m operating lease expense. On transition to
IFRS 16 the Company recognised a right of use asset of GBP22.2m and
lease liabilities of GBP24.5m. Further disclosure is presented in
note 3 to the financial statements.
Revenue
Revenue is analysed into the following categories:
-- Recurring monthly revenue, lower at GBP38.8m (H1-19:
GBP41.3m), reflecting the closing Q4-19 run-rate position. In the
period, Q1-20 revenues were flat on Q4-19 with Q2-20 revenues up on
Q1-20.
-- Non-recurring product revenue, which was lower at GBP2.1m
(H1-19: GBP3.3m), impacted by the industry trend to move away from
on-premise to cloud solutions and by customers delaying
discretionary spending due to the economic uncertainty surrounding
the ongoing Brexit negotiations.
-- Non-recurring services revenue, which was slightly lower at GBP2.3m (H1-19: GBP2.8m).
Gross profit
Gross profit decreased by 2% (GBP0.5m) reflecting the Company's
lower revenue, with an improvement in gross margin to 64.5% (H1-19:
59.8%) driven by continued management of third-party operating
costs and the reduction in lower margin product revenues.
Operating costs
The Company's pre-IFRS 16 adjusted operating costs (operating
expenditure excluding depreciation, amortisation, exceptional items
and share-based payments) are set out in the table below:
H1-20 H1-19 Change
GBP'000 GBP'000 GBP'000 Change
%
------------------------------------------ -------- -------- -------- -------
UK staff costs 9,661 10,480 (819) -8%
Office and data centre costs 3,704 3,462 242 +7%
Network and equipment costs 3,603 3,708 (105) -3%
Other sales, general and administration
costs 983 1,463 (480) -33%
Offshore costs 1,123 1,140 (17) -1%
------------------------------------------ -------- -------- -------- -------
Total adjusted operating costs, pre-IFRS
16 19,074 20,253 (1,179) -6%
------------------------------------------ -------- -------- -------- -------
Adoption of IFRS 16 reduces operating costs by GBP1,571k to
GBP17,503k. A right of use asset of GBP21,079k is recognised at 30
September in relation to leases that were previously classified as
operating leases, with operating lease expenditure reduced by
GBP1,571k in the period but depreciation and interest expense
higher by GBP1,103k and GBP597k respectively.
Total adjusted operating costs for H1-20 were 6% (GBP1.2m) lower
than prior year, primarily driven by:
-- UK staff costs down GBP0.8m, driven by lower headcount. The
Company employed 318 UK staff at 30 September 2019 with an average
headcount over the period of 314 (H1-19: 337).
-- Other sales, general and administration costs down GBP0.5m,
with prior year including GBP0.5m of HSCN bid (consultancy)
costs.
Offshore costs were in line with prior year with the Company
employing 147 staff in India at 30 September 2019. Average Indian
headcount over the period was 150 (H1-19: 146).
Profitability and dividend
Excluding the impact of IFRS 16 adoption, adjusted EBITDA
(GBP8.8m) and adjusted operating profit (GBP5.0m) were up 8% and
23% respectively, with an EBITDA margin of 20.3% (H1-19: 17.1%) and
adjusted operating profit margin of 11.5% (H1-19: 8.6%).
After accounting for exceptional items of GBP0.2m (H1-19:
GBP0.2m) and share-based payment costs of GBP0.3m (H1-19: GBP0.2m),
reported operating profit was higher at GBP1.4m (H1-19: GBP0.5m).
On a post-IFRS 16 basis reported operating profit was GBP1.9m.
Net finance costs for the period were GBP1.1m (H1-19: GBP0.6m),
including GBP0.6m of IFRS 16 finance charges.
The tax charge for the period was GBP0.4m (H1-19: GBP0.5m),
comprising an income tax charge of GBP0.5m (H1-19: GBPnil), a
current year deferred tax credit of GBP0.3m (H1-19: GBP0.2m), and a
deferred tax charge in respect of prior years of GBP0.2m (H1-19:
GBP0.7m).
Adjusted basic and diluted earnings per share (EPS) increased by
28% and 27% to 2.41p and 2.38p respectively (H1-19: 1.89p and 1.88p
respectively). The reported basic and diluted EPS were also higher
at 0.34p (H1-19: (0.38)p loss per share).
In accordance with the dividend policy previously announced, an
interim dividend of 0.83p per share will be paid on 10 January 2020
to shareholders on the register at the close of business on 6
December 2019.
Cash flow and net debt
The principal movements in pre-IFRS 16 net debt are set out in
the table below.
H1-20, H1-19 FY 2019
pre-IFRS
16
GBP'000 GBP'000 GBP'000
----------------------------------------------- ---------- --------- ---------
Adjusted EBITDA, pre-IFRS 16 8,759 8,115 16,714
Working capital movements (82) 1,120 4,575
----------------------------------------------- ---------- --------- ---------
Adjusted cash generated from operations,
pre IFRS 16 8,677 9,235 21,289
Cash conversion 99% 114% 127%
Capital expenditure - cash purchases (2,267) (2,884) (5,229)
Capital expenditure - finance lease purchases (2,484) (185) (2,506)
Proceeds from sale and lease back of assets - - 1,181
Proceeds from sale of fixed assets - - 665
----------------------------------------------- ---------- --------- ---------
Net capital expenditure (4,751) (3,069) (5,889)
Corporation tax (248) (38) (1,873)
Interest paid (440) (545) (1,044)
Loan arrangement fees / fee amortisation (4) (34) (68)
Effect of exchange rates 18 (32) (8)
----------------------------------------------- ---------- --------- ---------
Other movements in net debt (674) (649) (2,993)
Normalised net debt movement 3,252 5,517 12,407
----------------------------------------------- ---------- --------- ---------
Cash cost of exceptional items (444) (431) (1,668)
Share buy-back (278) - -
Dividends (1,491) - (597)
(2,213) (431) (2,265)
Decrease in net debt 1,039 5,086 10,142
Net debt at the beginning of the period,
pre-IFRS 16 (17,565) (27,707) (27,707)
----------------------------------------------- ---------- --------- ---------
Net debt at the end of the period, pre-IFRS
16 (16,526) (22,621) (17,565)
----------------------------------------------- ---------- --------- ---------
Net debt (pre-IFRS 16) of GBP16.5m at the end of the period
consists of total borrowings of GBP12.7m plus finance leases of
GBP6.0m, less cash balances of GBP2.2m. Pre-IFRS 16 adjusted cash
generated from operations was GBP8.7m (H1-19: GBP9.2m), with the
reduction driven by timing differences in working capital against a
strong comparative period. Operating cash conversion was again high
at 99% (H1-19: 113.8%).
There was an acceleration of capital expenditure in the period,
with net capital expenditure of GBP4.8m (H1-19: GBP3.1m),
principally relating to investment in our national network and our
IaaS platform. GBP0.3m was spent on the share buy-back programme
and GBP1.5m on dividends. After finance costs, tax, and the cash
cost of exceptional items the Company ended the period with net
debt, excluding IFRS 16 lease liabilities, of GBP16.5m (30
September 2018: GBP22.6m; 31 March 2019: GBP17.6m). Including IFRS
16 lease liabilities of GBP26.9m the Company's net debt at 30
September 2019 was GBP40.0m.
A further GBP7.5m of unutilised bank facility was cancelled
during the period, leaving a total facility at 30 September 2019 of
GBP25.5m, compromising a revolving credit facility (RCF) of
GBP17.5m, an overdraft facility of GBP2.0m and a GBP6m asset
financing facility. In addition, the Company has access to a GBP20m
accordion facility. At 30 September 2019 GBP5.0m of the RCF and
GBP2.0m of the overdraft was undrawn.
The current facilities expire on 30 November 2020. Dialogue is
underway with lenders to determine the appropriate quantum and
facility required beyond this date.
Consolidated statement of comprehensive income for the six
months ended 30 September 2019
Six months Six months
ended 30 ended Year ended
September 30 September 31 March
2019 2018 2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ----- ----------- -------------- -------------
Revenue 8 43,152 47,452 93,260
Cost of sales (15,319) (19,084) (36,895)
--------------------------------------------- ----- ----------- -------------- -------------
Gross Profit 27,833 28,368 56,365
Operating expenditure (25,929) (27,918) (56,650)
--------------------------------------------- ----- ----------- -------------- -------------
Adjusted EBITDA 10,330 8,115 16,714
Depreciation (4,274) (3,493) (7,330)
Amortisation of intangibles (3,730) (3,689) (7,392)
Exceptional items 9 (169) (243) (1,911)
Share-based payments (253) (240) (366)
Operating profit / (loss) 1,904 450 (285)
Finance income 10 - 12 13
Finance costs 10 (1,017) (584) (1,091)
--------------------------------------------- ----- ----------- -------------- -------------
Profit / (loss) on ordinary activities
before taxation 887 (122) (1,363)
Income tax expense 11 (381) (449) (604)
--------------------------------------------- ----- ----------- -------------- -------------
Profit / (loss) for the period attributable
to owners of the parent 506 (571) (1,967)
--------------------------------------------- ----- ----------- -------------- -------------
Other comprehensive income
Items that may be classified to profit
or loss:
Currency translation differences 39 (28) 8
--------------------------------------------- ----- ----------- -------------- -------------
Total comprehensive income / (loss)
for the period 545 (599) (1,959)
--------------------------------------------- ----- ----------- -------------- -------------
Earnings per share
Basic earnings/(loss) per share 12 0.34p (0.38)p (1.32)p
Diluted earnings/(loss) per share 12 0.34p (0.38)p (1.32)p
--------------------------------------------- ----- ----------- -------------- -------------
Consolidated statement of financial position as at 30 September
2019
30 Sept 30 Sept 31 March
2019 2018 2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ----------- ----------- ---------
Non-Current Assets
Intangible assets 72,354 79,436 75,802
Property, plant and equipment 19,438 19,173 18,133
Right-of-use assets 14 21,079 - -
Deferred tax asset 307 - 142
113,178 98,609 94,077
------------------------------- ----- ----------- ----------- ---------
Current Assets
Inventories 302 443 357
Trade and other receivables 15 19,521 22,510 22,103
Cash and short-term deposits 2,183 6,282 7,206
------------------------------- ----- ----------- ----------- ---------
22,006 29,235 29,666
------------------------------- ----- ----------- ----------- ---------
Total assets 135,184 127,844 123,743
------------------------------- ----- ----------- ----------- ---------
Current Liabilities
Trade and other payables 16 (19,622) (19,617) (22,297)
Corporation tax payable (104) (836) -
Lease liabilities (4,512) - -
Borrowings 17 (127) (3,091) (3,056)
Provisions 18 (150) - (149)
------------------------------- ----- ----------- ----------- ---------
(24,515) (23,544) (25,502)
------------------------------- ----- ----------- ----------- ---------
Non-current liabilities
Deferred tax liability - (506) -
Lease liabilities (25,009) - -
Borrowings 17 (12,565) (25,812) (21,715)
Provisions 18 (893) (530) (881)
------------------------------- ----- ----------- ----------- ---------
(38,467) (26,848) (22,596)
------------------------------- ----- ----------- ----------- ---------
Total liabilities (62,982) (50,392) (48,098)
------------------------------- ----- ----------- ----------- ---------
Net assets 72,202 77,452 75,645
------------------------------- ----- ----------- ----------- ---------
Equity
Called up share capital 19 149 149 149
Share premium account 19 65,736 65,588 65,588
Capital redemption reserve (9,454) (9,454) (9,454)
Own shares held in treasury 19 (278) - -
Retained earnings 16,049 21,169 19,362
Total Equity 72,202 77,452 76,645
------------------------------- ----- ----------- ----------- ---------
Consolidated cash flow statement for the six months ended 30
September 2019
Six months Six months Year ended
to 30 Sept to 30 31 March
2019 Sept 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ------------ ----------- -----------
Operating profit 1,904 450 (285)
Adjustment for non-cash items
Depreciation and amortisation 8,004 7,182 14,722
Exceptional items 169 243 1,911
Share-based payments 253 240 366
----------------------------------------------- ------------ ----------- -----------
Operating cash flow before exceptional
items and movements in working capital 10,330 8,115 16,714
Loss on sale of fixed asset - - (42)
Exceptional items and NI on share-based
payments (444) (431) (1,668)
----------------------------------------------- ------------ ----------- -----------
Operating cash flow before changes in working
capital 9,886 7,684 15,004
Changes in working capital
Decrease in inventories 55 223 309
Decrease in trade and other receivables 2,254 1,364 5,775
Decrease in trade and other payables (2,391) (466) (1,467)
----------------------------------------------- ------------ ----------- -----------
Cash generated from operations 9,804 8,805 19,621
----------------------------------------------- ------------ ----------- -----------
Adjusted cash generated from operations(1) 10,248 9,236 21,289
Cash costs of exceptional items (444) (431) (1,668)
----------------------------------------------- ------------ ----------- -----------
Cash generated from operations 9,804 8,805 19,621
Tax paid (248) (38) (1,873)
----------------------------------------------- ------------ ----------- -----------
Net cash generated from operating activities 9,556 8,767 17,748
----------------------------------------------- ------------ ----------- -----------
Cash flows from investing activities
Proceeds from sale of property, plant and
equipment - - 665
Purchase of property, plant and equipment (2,081) (2,884) (4,665)
Purchase of intangible fixed assets (186) - (564)
----------------------------------------------- ------------ ----------- -----------
Net cash used in investing activities (2,267) (2,884) (4,564)
----------------------------------------------- ------------ ----------- -----------
Cash flows from financing activities
Dividends paid (1,491) - (597)
Share buy-back (278) - -
Interest paid (440) (545) (1,044)
Repayment of borrowings / finance leases (1,550) (1,613) (1,918)
Payment of IFRS 16 lease liabilities (1,571) - -
Repayment of revolving credit facility (7,000) (3,500) (8,500)
Net cash used in financing activities (12,330) (5,658) (12,059)
----------------------------------------------- ------------ ----------- -----------
Net increase in cash and cash equivalents (5,041) 225 1,125
Cash and cash equivalents at beginning
of period 7,206 6,089 6,089
Effect of exchange rates 18 (32) (8)
Cash and cash equivalents at end of the
period 2,183 6,282 7,206
----------------------------------------------- ------------ ----------- -----------
Consolidated statement of changes in equity
Share Capital Share Capital Own Shares Retained Total
Premium Redemption Held in Earnings Equity
Reserve Treasury
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------------- -------------- --------- ------------ ----------- ---------- --------
Balance at 1 April 2018 149 65,588 (9,454) - 21,565 77,848
Loss for the period - - - - (571) (571)
Transactions with owners
Share-based payments - - - - 204 204
Other comprehensive income
Currency translation
differences - - - - (28) (28)
At 30 September 2018 149 65,588 (9,454) - 21,170 77,453
Loss for the period - - - - (1,396) (1,396)
Transactions with owners
Share-based payments - - - - 149 149
Dividends paid - - - - (597) (597)
Other comprehensive income
Currency translation
differences - - - - 36 36
---------------------------- -------------- --------- ------------ ----------- ---------- --------
At 31 March 2019 149 65,588 (9,454) - 19,362 75,645
Adjustment on initial
application of IFRS 16 - - - - (2,429) (2,429)
Profit for the period - - - - 506 506
Transactions with owners
Share-based payments - - - - 62 62
Share buyback (278) - (278)
Issue of new shares - 148 - - - 148
Dividends paid - - - - (1,491) (1,491)
Other comprehensive income
Currency translation
differences - - - - 39 39
---------------------------- -------------- --------- ------------ ----------- ---------- --------
At 30 September 2019 149 65,736 (9,454) (278) 16,049 72,202
---------------------------- -------------- --------- ------------ ----------- ---------- --------
Notes to the half year financial statements
1. General information
The financial statements for the six months ended 30 September
2019 and the six months ended 30 September 2018 do not constitute
statutory accounts within the meaning of Section 434 of the
Companies Act 2006. Statutory accounts for the year ended 31 March
2019 were approved by the Board of Directors on 25 June 2019 and
delivered to the Registrar of Companies. The auditor's report on
those accounts was unqualified, did not contain an emphasis of
matter paragraph and did not contain any statement under Section
498 (2) or (3) of the Companies Act 2006.
These condensed half year financial statements were approved for
issue by the Board of Directors on 27 November 2019.
Redcentric plc ('the Company') is a company domiciled in England
and Wales. These condensed half year financial statements comprise
the Company and its subsidiaries (together referred to as 'the
Company' or 'the Group'). The principal activity of the Company is
the supply of IT managed services.
2. Basis of preparation
These condensed half year financial statements for the half year
ended 30 September 2019 have been prepared in accordance with the
AIM Rules for Companies, comply with IAS 34 Interim Financial
Reporting as adopted by the European Union and should be read in
conjunction with the annual financial statements for the year ended
31 March 2019, which have been prepared in accordance with
International Financial Reporting Standards (IFRS) as adopted by
the European Union.
The directors have reviewed a detailed trading and cash flow
forecast for a period which covers at least 12 months after the
date of approval of these condensed half year financial statements.
There is a high and continuing level of recurring revenue and high
cash conversion is anticipated for the foreseeable future.
As at 30 September 2019 the Company had committed a revolving
credit facility (RCF) of GBP17.5m, an overdraft facility of GBP2.0m
and a GBP6m asset financing facility. In addition, the Company has
access to a GBP20m accordion facility. At 30 September 2019 GBP5.0m
of the RCF and GBP2.0m of the overdraft was undrawn. During the
period, the continuing strength of operating cash flows enabled the
Company to cancel GBP7.5m of unused RCF facility. These current
facilities expire on 30 November 2020, with dialogue underway with
the lenders to determine the appropriate quantum and facility
required beyond this date. The Directors are not aware of any facts
or circumstances that would prevent this refinancing process from
being successful.
After careful enquiry and review of available financial
information, the directors have formed the conclusion that the
Company has adequate resources to continue to operate for the
foreseeable future and that it is therefore appropriate to continue
to adopt the going concern basis of accounting in the preparation
of these half year financial statements.
The financial information is presented in sterling, which is the
functional currency of the Company. All financial information
presented has been rounded to the nearest thousand.
3. Accounting policies
Except for the adoption of IFRS 16 Leases, detailed below, the
accounting policies applied in these interim financial statements
are the same as those applied in the Company's annual report and
accounts for the year ended 31 March 2019. Following the adoption
of IFRS 16, non-current assets now include the category of
right-of-use assets, with depreciation provided on these on a
straight-line basis over the shorter of the lease term and its
useful life. For property, plant and equipment funded through
finance leases, where there is reasonable certainty that the
Company obtains ownership by the end of the lease term,
depreciation is provided on a straight line basis over the useful
life, otherwise it's provided over the shorter of the useful life
and the lease term.
IFRS 16 Leases
The Company has adopted IFRS 16 Leases from 1 April 2019,
replacing IAS 17, using the modified retrospective approach. The
cumulative effect of initial application is recognised in retained
earnings at 1 April 2019 and accordingly comparative information
presented has not been restated.
IFRS 16 has introduced a single on-balance sheet accounting
model for lessees. As a result, the Company, as a lessee, has
recognised right-of-use assets representing its rights to use the
underlying assets, and lease liabilities representing its
obligation to make lease payments. The Company has presented its
right-of-use assets and lease liabilities on the face of the
balance sheet. The table below summarises the impact on transition,
the Company recognising an adjustment of GBP2,429,000 to opening
retained earnings.
1 April
2019
GBP'000
---------------------------------------------------------------------- ---------
Right-of-use assets 22,182
Trade and other receivables (deferred lease incentives derecognised) (132)
Current lease liabilities (1,989)
Non-current lease liabilities (22,490)
Retained earnings (2,429)
---------------------------------------------------------------------- ---------
In relation to those leases under IFRS 16, the Company now
recognises depreciation and interest costs, instead of an operating
lease expense. During the six months ended 30 September 2019, this
amounted to GBP1.1m of depreciation charges and GBP0.6m of interest
costs from these leases.
The impact of IFRS 16 on the consolidated income statement,
consolidated statement of financial position, and consolidated cash
flow statement for the six months ended 30 September 2019 is set
out in Appendix 1.
At transition, for leases classified as operating leases under
IAS 17, lease liabilities were measured at the present value of the
remaining lease payments, discounted at an incremental borrowing
rate which reflects the characteristics of the underlying lease, at
1 April 2019. The weighted average incremental borrowing rate
applied is 5.1%.
Right-of-use assets are measured at either:
-- their carrying amount as if IFRS 16 had been applied since
the lease commencement date, discounted by the Company's
incremental borrowing rate as at 1 April 2019. The Company has
applied this methodology to the majority of its property leases
where the required historical information is available; or
-- an amount equal to the lease liability, adjusted for prepaid
/ accrued lease payments. This method has been applied to the small
number of non-property leases.
The Company has applied the following practical expedients on
transition:
-- leases for underlying assets that have a low value (less than
GBP5,000) or where the remaining lease term on transition was less
than 12 months have been excluded;
-- a single discount rate applied to its small portfolio of car leases; and
-- reliance on previous assessments on whether leases are
onerous instead of performing impairment reviews under IAS 36
The table below reconciles the Company's operating lease
commitment at 31 March 2019, under IAS 17, to the lease liability
now being recognised under IFRS 16.
1 April
2019
GBP'000
--------------------------------------------------------- -------
Operating lease commitment at 31 March 2019 as disclosed
in the Company's consolidated financial statements 32,665
Discounted using the incremental borrowing rate at
1 April 2019 24,513
Recognition exemption for leases of low value assets (31)
Recognition exemption for leases with less than twelve
months of lease term at transition (3)
Lease liabilities recognised as at 1 April 2019 24,479
--------------------------------------------------------- -------
4. Critical accounting judgements and key sources of estimation uncertainty
The key source of estimation uncertainty that carries a
significant risk of material change to the carrying value of assets
liabilities within the next year is with regard to credit note
provisioning, where provision is made for the value of credit notes
that the Company expects to subsequently issue to correct for
estimated inaccurate invoices issued to date. The basis for this
estimation is unchanged from the 2019 annual report and
accounts.
The Company has adopted IFRS 16 for the first time in these
financial statements, with GBP23.5m of IFRS 16 lease liabilities,
principally property leases, recognised at 30 September 2019.
Judgement has been applied in determining whether a contract
contains a lease and the anticipated tenure length on these leases
(whether or not break clauses will be exercised has been determined
based on our historical experience and expectations for future
trading and capacity requirements). Estimations have been made with
regard to discount rates applied.
The FCA investigation is still ongoing and has not yet reached
its conclusion. Until such stage as the FCA's intention becomes
clearer, the Directors are not able to judge whether a fine will be
likely, and accordingly, consistent with the treatment in the 2019
annual report and accounts, no provision has been made.
5. Principal risks and uncertainties
The 2019 annual report and accounts describes the principal
risks and uncertainties that could impact the Group's performance.
These relate to reliance on key personnel and management, market
and economic conditions, technology advancement and security,
infrastructure failure, and the ongoing FCA investigation. These
remain unchanged since the annual report was published and are not
expected to change for the remaining six months of the financial
year. Identifying, evaluating and managing the principal risks and
uncertainties facing the Group is an integral part of the way
Redcentric operates.
It is not anticipated that Brexit will have a material direct
effect on the Group as it is not a significant exporter or importer
of goods or services. There are potential indirect effects,
including exchange rate volatility affecting the value of sterling,
and delays in customers discretionary spending, which could have a
negative impact on the Group's prospects, but the scale and timing
of these is far from certain. The Group will continue to monitor
the progress of the negotiations of the terms under which the UK
will leave the EU.
6. Forward-looking statements
Certain statements in this half year report are forward-looking.
Although the Company believes that the expectations reflected in
these forward-looking statements are reasonable, it can give no
assurance that these expectations will prove to have been correct.
Because these statements involve risks and uncertainties, actual
results may differ materially from those expressed or implied by
these forward-looking statements.
7. Segmental reporting
IFRS 8 requires operating segments to be identified based on
internal financial information reported to the chief operating
decision-maker for decision-making purposes. The Group considers
that this role is performed by the main Board. The Board believes
that the Group continues to comprise a single reporting segment,
being the provision of managed services to customers.
8. Revenue analysis
Revenue is analysed as follows:
Year ended
Six months Six months 31 March
to 30 Sept to 30 Sept 2019
2019 Unaudited 2018 Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------- ---------------- ---------------- -----------
Recurring revenue 38,810 41,322 80,544
Product revenue 2,079 3,328 5,810
Services revenue 2,263 2,802 6,906
Total revenue 43,152 47,452 93,260
------------------- ---------------- ---------------- -----------
9. Exceptional items
Six months Six months Year ended
to 30 to 30 31 March
Sept 2019 Sept 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------------------- ----------- ----------- -----------
Professional fees associated with Financial
Conduct Authority investigation 67 243 554
Staff restructuring 102 - 804
Vacant property provisions - - 553
169 243 1,911
--------------------------------------------- ----------- ----------- -----------
10. Finance income and costs
Six months Six months Year ended
to 30 to 30 31 March
Sept 2019 Sept 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------------- ----------- ----------- -----------
Finance income
Other interest receivable - 12 13
- 12 13
----------------------------------------------- ----------- ----------- -----------
Finance costs
Interest payable on bank loans and overdrafts (308) (509) (947)
Interest payable on finance leases (666) (41) (93)
Amortisation of loan arrangement fees (43) (34) (51)
----------------------------------------------- ----------- ----------- -----------
(1,017) (584) (1,091)
----------------------------------------------- ----------- ----------- -----------
For the six months to 30 September 2019 interest payable on
finance leases includes GBP597,000 of IFRS 16 interest expense.
11. Income tax expense
The tax expense recognised reflects management estimates of the
tax charge for the period and has been calculated using the
estimated average tax rate of UK corporation tax for the financial
year of 19.0% (H1-19: 19.0%)
12. Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the
following earnings and number of shares.
Six months Six months Year ended
to 30 Sept to 30 Sept 31 March
2019 Unaudited 2018 Unaudited 2019 Audited
Earnings GBP'000 GBP'000 GBP'000
--------------------------------------- ---------------- ---------------- --------------
Statutory earnings 506 (571) (1,967)
Tax charge 381 449 604
Amortisation of acquired intangibles 3,126 3,126 6,252
Share-based payments 253 240 366
Exceptional items 169 243 1,911
Adjusted earnings before tax 4,435 3,487 7,166
Notional tax charge at standard rate (843) (662) (1,362)
--------------------------------------- ---------------- ---------------- --------------
Adjusted earnings 3,592 2,825 5,804
--------------------------------------- ---------------- ---------------- --------------
Weighted average number of ordinary Number Number Number
shares '000 '000 '000
--------------------------------------- ---------------- ---------------- --------------
Total shares in issue 149,311 149,135 149,135
Shares held in treasury (327) - -
--------------------------------------- ---------------- ---------------- --------------
For basic EPS calculations 148,984 149,135 149,135
Effect of potentially dilutive share
options 1,915 1,455 1,141
--------------------------------------- ---------------- ---------------- --------------
For diluted EPS calculations 150,899 150,590 150,276
--------------------------------------- ---------------- ---------------- --------------
EPS Pence Pence Pence
--------------------------------------- ---------------- ---------------- --------------
Basic 0.34p (0.38)p (1.32)p
Adjusted 2.41p 1.89p 3.89p
Basic diluted 0.34p (0.38)p (1.32)p
Adjusted diluted 2.38p 1.88p 3.86p
--------------------------------------- ---------------- ---------------- --------------
13. Dividends
In relation to the 2019 financial year an interim dividend of
0.4p was paid on 21 December 2018 amounting to GBP597,000 followed
by a final dividend of 1p on 6 September 2019 amounting to
GBP1,491,000. For the 2020 financial year, the Directors have
approved an interim dividend of 0.83p, which will be payable on 10
January 2020, to shareholders on the register at the close of
business on 6 December 2019. This interim dividend, which will
amount to approximately GBP1,237,000, has not been recognised as a
liability in these financial statements.
14. Right-of-use assets
Vehicles
Leasehold & computer
property equipment Total
GBP000 GBP000 GBP000
---------------------------------------- ------------ ------------ --------
Cost
At 1 April 2018, 30 September 2018 and - - -
31 March 2019
Effect of initial application of IFRS
16 29,423 657 30,080
At 30 September 2019 29,423 657 30,080
---------------------------------------- ------------ ------------ --------
Accumulated depreciation
At 1 April 2018, 30 September 2018 and - - -
31 March 2019
Effect of initial application of IFRS
16 7,898 - 7,898
Charged in period 1,005 98 1,103
---------------------------------------- ------------ ------------ --------
At 30 September 2019 8,903 98 9,001
---------------------------------------- ------------ ------------ --------
Net book value
At 30 September 2019 20,520 559 21,079
At 1 April 2018, 30 September 2018 and - - -
31 March 2019
---------------------------------------- ------------ ------------ --------
15. Trade and other receivables
Six months Six months Year ended
to 30 to 30 31 March
Sept 2019 Sept 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------- ----------- ----------- -----------
Trade Receivables 10,345 11,242 13,112
Less: credit note provision (1,356) (1,057) (1,521)
----------------------------- ----------- ----------- -----------
Trade receivables - net 8,989 10,185 11,591
Other receivables 233 270 194
Prepayments 5,814 8,170 6,133
Commission contract asset 2,438 - 2,040
Accrued income 2,047 3,885 1,949
Corporation tax - - 196
----------------------------- ----------- ----------- -----------
Total 19,521 22,510 22,103
----------------------------- ----------- ----------- -----------
Trade debtor days were 40 at 30 September 2019 (30 September
2018: 44). The ageing of trade receivables is shown below:
Six months Six months Year ended
to 30 to 30 31 March
Sept 2019 Sept 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------ ----------- ----------- -----------
Current 7,484 7,946 9,074
1 to 30 days overdue 1,777 1,112 2,628
31 to 60 days overdue 586 1,150 505
61 to 90 days overdue 217 182 99
91 to 180 days overdue 138 470 390
> 180 days overdue 143 382 416
------------------------ ----------- ----------- -----------
Gross trade debtors 10,345 11,242 13,112
Credit note provision (1,356) (1,057) (1,521)
Net trade debtors 8,989 10,185 11,591
------------------------ ----------- ----------- -----------
16. Trade and other payables
Six months Six months Year ended
to 30 to 30 31 March
Sept 2019 Sept 2018 2019 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
------------------------------ ----------- ----------- --------------
Trade Payables 5,989 6,524 6,603
Other Payables 391 233 275
Taxation and Social Security 2,281 2,142 3,249
Accruals 2,849 2,959 3,028
Deferred Income 8,112 7,759 9,142
Total 19,622 19,617 22,297
------------------------------ ----------- ----------- --------------
Trade creditor days were 44 at 30 September 2019 (30 September
2018: 31).
17. Borrowings
Six months Six months Year ended
to 30 to 30 31 March
Sept 2019 Sept 2018 2019 Audited
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
----------------------------------- ----------- ----------- --------------
Current
Finance Leases - 3,091 2,762
Term Loans 187 - 294
Unamortised loan arrangement fees (60) - -
----------------------------------- ----------- ----------- --------------
Total 127 3,091 3,056
----------------------------------- ----------- ----------- --------------
Non-current
Bank Loan 12,500 24,500 19,500
Finance leases - 1,414 2,214
Term loans 69 - 69
Unamortised loan arrangement fees (4) (102) (68)
----------------------------------- ----------- ----------- --------------
Total 12,565 25,812 21,715
----------------------------------- ----------- ----------- --------------
Following the adoption of IFRS 16, for the six months to 30
September 2019 current finance lease liabilities of GBP2,554,000,
and non-current finance lease liabilities of GBP3,462,000, have
been presented as lease liabilities on the face of the consolidated
statement of financial position.
18. Provisions
Vacant
Dilapidations property
provision provision Total provision
GBP'000 GBP'000 GBP'000
------------------------------------------ ---------------- ----------- ------------------
At 1 April 2018 376 - 376
Additional provisions created during the
period 154 - 154
At 30 September 2018 530 - 530
Additional provisions created during the
period (34) 538 504
Utilised during the period - (4) (4)
------------------------------------------ ---------------- ----------- ------------------
At 31 March 2019 496 534 1,030
Additional provisions created during the
period 60 - 60
Utilised during the period - (47) (47)
------------------------------------------ ---------------- ----------- ------------------
At 30 September 2019 556 487 1,043
------------------------------------------ ---------------- ----------- ------------------
Analysed as:
Current - 150 150
Non-current 556 337 893
------------------------------------------ ---------------- ----------- ------------------
556 487 1,043
19. Share capital and share premium
Ordinary shares
of 0.1p each Share premium
----------------------
Number GBP'000 GBP'000
---------------------------------------- ------------ -------- --------------
At 1 April 2018, 30 September 2018 and
31 March 2019 149,135,316 149 65,588
New shares issued 175,397 - 148
---------------------------------------- ------------ -------- --------------
At 30 September 2019 149,310,713 149 65,736
During the period the Company purchased, and held in treasury,
326,905 of its ordinary share capital for total proceeds of
GBP278,000. The total shares held in treasury at 30 September 2019
was 326,905 (30 September 2018: Nil; 31 March 2019: Nil)
Appendix 1: Impact of IFRS 16
Consolidated statement of comprehensive income
Six months Six months
to 30 Sept Impact to 30 Sept Six months
2019 pre of IFRS 2019 as to 30
IFRS 16 16 reported Sept 2018
GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------ --------- ------------ -----------
Revenue 43,152 - 43,152 47,452
Cost of sales (15,319) - (15,319) (19,084)
--------------------------------------------- ------------ --------- ------------ -----------
Gross Profit 27,833 - 27,833 28,368
Operating expenditure (26,397) 468 (25,929) (27,918)
Adjusted EBITDA 8,759 1,571 10,330 8,115
Depreciation (3,171) (1,103) (4,274) (3,493)
Amortisation of intangibles (3,730) - (3,730) (3,689)
Exceptional items (169) - (169) (243)
Share-based payments (253) - (253) (240)
--------------------------------------------- ------------ --------- ------------ -----------
Operating profit / (loss) 1,436 468 1,904 450
Finance income - - - 12
Finance costs (420) (597) (1,017) (584)
--------------------------------------------- ------------ --------- ------------ -----------
Profit / (loss) on ordinary activities
before taxation 1,016 (129) 887 (122)
Income tax expense (406) 25 (381) (449)
--------------------------------------------- ------------ --------- ------------ -----------
Profit / (loss) for the period attributable
to owners of the parent 610 (104) 506 (571)
--------------------------------------------- ------------ --------- ------------ -----------
Other comprehensive income
Items that may be classified to
profit or loss:
Currency translation differences 39 - 39 (28)
--------------------------------------------- ------------ --------- ------------ -----------
Total comprehensive income / (loss)
for the period 649 (104) 545 (599)
--------------------------------------------- ------------ --------- ------------ -----------
Earnings per share
Basic earnings/(loss) per share 0.41p (0.07)p 0.34p (0.38)p
Diluted earnings/(loss) per share 0.40p (0.06)p 0.34p (0.38)p
--------------------------------------------- ------------ --------- ------------ -----------
Consolidated statement of financial position
30 Sept
2019 Impact 30 Sept
pre IFRS of IFRS 2019 30 September
16 16 as reported 2018
GBP'000 GBP'000 GBP'000
------------------------------- ---------- --------- ------------- -------------
Non-Current Assets
Intangible assets 72,354 - 72,354 79,436
Property, plant and equipment 19,438 - 19,438 19,173
Right-of-use assets - 21,079 21,079 -
Deferred tax asset 307 - 307 -
92,099 21,079 113,178 98,609
------------------------------- ---------- --------- ------------- -------------
Current Assets
Inventories 302 - 302 443
Trade and other receivables 19,653 (132) 19,521 22,510
Cash and short-term deposits 2,183 2,183 6,282
------------------------------- ---------- --------- ------------- -------------
22,138 (132) 22,006 29,235
------------------------------- ---------- --------- ------------- -------------
Total assets 114,237 20,947 135,184 127,844
------------------------------- ---------- --------- ------------- -------------
Current Liabilities
Trade and other payables (19,622) - (19,622) (19,617)
Corporation tax payable (129) 25 (104) (836)
Lease liabilities - (4,512) (4,512) -
Borrowings (2,681) 2,554 (127) (3,091)
Provisions (150) - (150) -
------------------------------- ---------- --------- ------------- -------------
(22,582) (1,933) (24,515) (23,544)
------------------------------- ---------- --------- ------------- -------------
Non-current liabilities
Deferred tax liability - - - (506)
Lease liabilities - (25,009) (25,009) -
Borrowings (16,027) 3,462 (12,565) (25,812)
Provisions (893) - (893) (530)
------------------------------- ---------- --------- ------------- -------------
(16,920) (21,547) (38,467) (26,848)
------------------------------- ---------- --------- ------------- -------------
Total liabilities (39,502) (23,481) (62,982) (50,392)
------------------------------- ---------- --------- ------------- -------------
Net assets 74,735 (2,533) 72,202 77,452
------------------------------- ---------- --------- ------------- -------------
Equity
Called up share capital 149 - 149 149
Share premium account 65,736 - 65,736 65,588
Capital redemption reserve (9,454) - (9,454) (9,454)
Own shares held in treasury (278) - (278)
Retained earnings 18,582 (2,533) 16,049 21,169
Total Equity 74,735 (2,533) 72,202 77,452
------------------------------- ---------- --------- ------------- -------------
The impact of IFRS 16 on current lease liabilities of
GBP4,512,000 comprises GBP1,958,000 of lease liabilities arising
from the adoption of IFRS 16 and GBP2,554,000 of existing IAS 17
finance leases re-presented from current borrowings.
The impact of IFRS 16 on non-current lease liabilities of
GBP25,009,000 comprises GBP21,547,000 of lease liabilities arising
from the adoption of IFRS 16 and GBP3,462,000 of existing IAS 17
finance leases re-presented from non-current borrowings.
Consolidated cash flow statement
Six months
to 30 Sept Six months
2019 to 30 Sept Six months
pre IFRS Impact of 2019 to 30 Sept
16 IFRS 16 as reported 2018
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------ ---------- ------------- ------------
Operating profit 1,436 468 1,904 450
Adjustment for non-cash items
Depreciation and amortisation 6,901 1,103 8,004 7,182
Exceptional items 169 - 169 243
Share-based payments 253 - 253 240
----------------------------------------- ------------ ---------- ------------- ------------
Operating cash flow before exceptional
items and movements in working
capital 8,759 1,571 10,330 8,115
Loss on sale of fixed asset - - - -
Exceptional items and NI on share-based
payments (444) - (444) (431)
----------------------------------------- ------------ ---------- ------------- ------------
Operating cash flow before changes
in working capital 8,315 1,571 9,886 7,684
Changes in working capital
Decrease in inventories 55 - 55 223
Decrease in trade and other receivables 2,254 - 2,254 1,364
Decrease in trade and other payables (2,391) - (2,391) (466)
----------------------------------------- ------------ ---------- ------------- ------------
Cash generated from operations 8,233 1,571 9,804 8,805
----------------------------------------- ------------ ---------- ------------- ------------
Adjusted cash generated from
operations 8,677 1,571 10,248 9,236
Cash costs of exceptional items (444) - (444) (431)
----------------------------------------- ------------ ---------- ------------- ------------
Cash generated from operations 8,233 1,571 9,804 8,805
Tax paid (248) - (248) (38)
----------------------------------------- ------------ ---------- ------------- ------------
Net cash generated from operating
activities 7,985 1,571 9,556 8,767
----------------------------------------- ------------ ---------- ------------- ------------
Cash flows from investing activities
Proceeds from sale of property, - - - -
plant and equipment
Purchase of property, plant and
equipment (2,081) - (2,081) (2,884)
Purchase of intangible fixed
assets (186) - (186) -
----------------------------------------- ------------ ---------- ------------- ------------
Net cash used in investing activities (2,267) - (2,267) (2,884)
----------------------------------------- ------------ ---------- ------------- ------------
Cash flows from financing activities
Dividends paid (1,491) - (1,491) -
Share buy-back (278) - (278) -
Interest paid (440) - (440) (545)
Repayment of borrowings / finance
leases (1,550) - (1,550) (1,613)
Payment of IFRS 16 lease liabilities - (1,571) (1,571) -
Repayment of revolving credit
facility (7,000) - (7,000) (3,500)
Net cash used in financing activities (10,759) (1,571) (12,330) (5,658)
----------------------------------------- ------------ ---------- ------------- ------------
Net increase in cash and cash
equivalents (5,041) - (5,041) 225
Cash and cash equivalents at
beginning of period 7,206 - 7,206 6,089
Effect of exchange rates 18 - 18 (32)
Cash and cash equivalents at
end of the period 2,183 - 2,183 6,282
----------------------------------------- ------------ ---------- ------------- ------------
Appendix 2: Alternative performance measures (APMs)
This report contains certain financial measures (APMs) that are
not defined or recognised under IFRS but are presented to provide
readers with additional financial information that is evaluated by
management and investors in assessing the performance of the
Group.
This additional information presented is not uniformly defined
by all companies and may not be comparable with similarly titled
measures and disclosures by other companies. These measures are
unaudited and should not be viewed in isolation or as an
alternative to those measures that are derived in accordance with
IFRS.
Recurring monthly revenue
Recurring revenue is the revenue that annually repeats either
under contractual arrangement or by predictable customer habit. It
highlights how much of the Group's total revenue is secured and
anticipated to repeat in future periods, providing a measure of the
financial strength of the business. It is a measure that is well
understood by the Group's investor and analyst community and is
used for internal performance reporting.
Year ended
Six months Six months 31 March
to 30 Sept to 30 Sept 2019
2019 Unaudited 2018 Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------- ---------------- ---------------- -----------
Reported revenue 43,152 47,452 93,260
Non-recurring revenue (4,342) (6,130) (12,716)
----------------------- ---------------- ---------------- -----------
Recurring revenue 38,810 41,322 80,544
----------------------- ---------------- ---------------- -----------
Adjusted EBITDA and adjusted EBITDA margin
Adjusted EBITDA is EBITDA excluding exceptional items (as set
out in note 9) and share-based payments. The same adjustments are
also made in determining the adjusted EBITDA margin. Items are only
classified as exceptional due to their nature or size, and the
Board considers that this metric provides the best measure of
assessing underlying trading performance.
Year ended
Six months Six months 31 March
to 30 Sept to 30 Sept 2019
2019 Unaudited 2018 Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------- ---------------- ---------------- -----------
Reported operating profit 1,904 450 (285)
Amortisation of intangible assets arising
on business combinations 3,126 3,126 6,252
Amortisation of other intangible assets 604 563 1,140
Depreciation 4,274 3,493 7,330
EBITDA 9,908 7,632 14,437
Exceptional items 169 243 1,911
Share-based payments 253 240 366
------------------------------------------- ---------------- ---------------- -----------
Adjusted EBITDA 10,330 8,115 16,714
------------------------------------------- ---------------- ---------------- -----------
Adjusted operating profit, adjusted operating profit margin and
adjusted earnings per share
Adjusted operating profit is operating profit excluding
amortisation on acquired intangibles, exceptional items and
share-based payments. The same adjustments are also made in
determining the adjusted operating profit margin and in determining
adjusted earnings per share (EPS). The Board considers this
adjusted measure of operating profit to provide the best metric of
assessing underlying performance as it excludes exceptional items
and the amortisation of acquired intangibles arising from business
combinations which varies year on year dependent on the timing and
size of any acquisitions.
Year ended
Six months Six months 31 March
to 30 Sept to 30 Sept 2019
2019 Unaudited 2018 Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------------- ---------------- ---------------- -----------
Reported operating profit 1,904 450 (285)
Amortisation of intangible assets arising
on business combinations 3,126 3,126 6,252
Exceptional items 169 243 1,911
Share-based payments 253 240 366
Adjusted operating profit 5,452 4,059 8,244
------------------------------------------- ---------------- ---------------- -----------
The EPS calculation further adjusts for the tax impact of the
operating profit adjustments, presented in note 12.
Adjusted operating costs
Adjusted operating costs are operating costs less depreciation,
amortisation, exceptional items and share-based payments.
Year ended
Six months Six months 31 March
to 30 Sept to 30 Sept 2019
2019 Unaudited 2018 Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------- ---------------- ---------------- -----------
Reported operating expenditure 25,929 27,918 56,650
Depreciation (4,274) (3,493) (7,330)
Amortisation of intangibles (3,730) (3,689) (7,392)
Exceptional items (169) (243) (1,911)
Share-based payments (253) (240) (366)
Adjusted operating expenditure 17,503 20,253 39,651
-------------------------------- ---------------- ---------------- -----------
Adjusted cash generated from operations and adjusted operating
cash conversion
Adjusted cash generated from operations adjusts for the cash
costs of exceptional items, consistent with the adjusted EBITDA and
operating profit measures. The same adjustments are also made in
determining the adjusted cash conversion percentage.
Year ended
Six months Six months 31 March
to 30 Sept to 30 Sept 2019
2019 Unaudited 2018 Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------------- ---------------- ---------------- -----------
Reported cash generated from operations 9,794 8,805 19,621
Share-based payments 444 431 1,668
Adjusted cash generated from operations 10,238 9,236 21,289
----------------------------------------- ---------------- ---------------- -----------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR UBVRRKSAAUUA
(END) Dow Jones Newswires
November 28, 2019 02:00 ET (07:00 GMT)
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