Final Results

RNS Number : 0677Z

Coms PLC

24 May 2016

 

24 May 2016

COMS PLC

("Coms," the "Company" or the "Group")

Audited final results for the year ended 31 January 2016

Coms (AIM: COMS), a leading provider of technology and services for smart buildings and commercial spaces, is pleased to announce its final audited results for the year ended 31 January 2016.

Financial Highlights:

·      EBITDA from continued operations ahead of management expectations at £1.3 million (2015: LBITDA £0.7 million) - increase of 274%

·      Operating profit from continued operations before integration and transactional items £0.7 million (2015: loss of £1.3 million)

·      Earnings per share from continued operations before integration and transactional items of 0.06 pence (2015: loss of 0.16 pence)

·      Gross profit from continued operations up 35% to £7.0 million (2015: £5.2 million)

·      Revenues from continued operations up 36% to £40.1 million (2015: £29.5 million)

·      Positive net cash at year-end of £1.0 million (2015: overdraft £0.4 million)

·      Disposed of the loss making Telephony Services division for £2.5 million in cash

·      Disposed of the loss making Darkside Studios, Media division for a nominal consideration

·      Successfully raised £2.1 million in new equity

·      Successfully reduced costs associated with Group occupancy estate by £360k annually

Operational Highlights:

·      Appointment of new experienced Executive Board

·      The Group is now refocused around its remaining trading entity, Redstone, one of the UK's leading IT network and smart buildings systems integrators

·      Key growth strategy going forward closely aligned to the provision of smart technologies

·      Redstone secured a number of significant projects from within the financial services and media sectors during the year

·      Successfully launched two new products - OneSpace, an occupancy management software platform and Distributed Antenna System ('DAS'), an in-building cellular technology

·      Strong order book and new business pipeline from both new and existing customers in current financial year to 31 January 2017

Post year-end:

·      Announced strategic contract wins for first material DAS contract for £0.8 million

·      Acquired Connect IB, a smart buildings application software business for £1.3 million in March 2016

·      Successfully raised £3.1 million in new equity to support the acquisition of Connect IB Limited and provide working capital to further develop the application software business

·      Group to be rebranded to properly reflect its refocused strategy and direction

Mark Braund, Chief Executive Officer of Coms, commented:

"I am pleased to report our full year results for the year to 31 January.  This was a transformational period for Coms, which saw the Company radically refocus its efforts in order to capitalise on the strong market position of our core Redstone operations which facilitate greater engagement between buildings and commercial spaces and the people who use them. We have now successfully exited our non-core businesses and, more recently, completed the acquisition of Connect IB, which further enhances our smart technology capabilities. The Company is providing enterprise-wide solutions to blue chip clients and, increasingly, achieving recurring and annuity revenues.

"We have made a strong start to 2016, underpinned by our outstanding team at Redstone, and are seeing opportunities from combining and leveraging the Redstone and Connect IB brands across the existing customer base and with potential new clients.  The market opportunity for smart technology for buildings and commercial spaces continues to grow at pace giving us tremendous confidence in the Group's future trading prospects."

For further information, please contact:

Coms plc Mark Braund (CEO) Spencer Dredge (CFO)	[phone]
Panmure Gordon (UK) Limited (Nominated Adviser and Joint Broker) Karri Vuori / Adam James / James Greenwood	[phone]
Whitman Howard Limited (Joint Broker) Nick Lovering	[phone]
Vigo Communications (Financial Public Relations) Jeremy Garcia / Ben Simons / Fiona Henson [e-mail]	[phone]

Chairman's statement

I am pleased to report results for the year ended 31 January 2016. This is, I am proud to say, a very different company to that which it was a year ago; and one with materially improved prospects.

2015 was a year of management change and operational restructuring, paving the way to reposition our business to focus on a defined strategy to use technology and innovation to make buildings and commercial spaces smarter; to offer end-to-end solutions to create more intelligent environments to work in, to shop in, to park in or even to be entertained in. By facilitating a greater connection between companies and their employees or retailers and their customers, our suite of solutions makes real estate more efficient and businesses more effective.

Shareholders will see that there is a resolution which will be proposed at the forthcoming AGM to change the Company's name to RedstoneConnect Plc. A rebranding exercise to communicate our refocused business will be completed in the coming months. 

In order to push forward with this strategy, we needed to dispose of the loss making Telephony Services division, which we were successful in doing in May 2015 for £2.5 million in cash. The Group no longer has exposure to the losses from this division and no trade remains.

Continuing the restructuring, the Group also disposed of its Media division, Darkside Studios, in December 2015 for a nominal consideration. At the year-end, as a result of these two divestments, the Group consisted of only the Redstone infrastructure and smart buildings business - the foundation on which the Group's new strategy is being built around.

The results for the period from the continuing Redstone business have been strong, delivering revenue in the year of £40.1 million, an increase of 36% contributing to the Groups EBITDA from continued activities of £1.3 million representing an increase of 274% over the prior year.

The team at Redstone has secured a number of significant projects from within the financial services and media sectors over the last 12 months and we continue to see a steady pipeline of opportunities developing in the current financial year. Redstone has a long standing reputation for service excellence within its core infrastructure, smart buildings and services divisions. I believe this ongoing success and market expansion will serve as a key platform from which to broaden our operational footprint.

The combined continued and discontinued results for the year support the Board's decision to focus on the Redstone operations.  Results from continuing activities have shown growth on the prior year and strong performance both in revenue and profitability.  However, the results from the discontinued businesses provide clear evidence of the failed strategy, lacking both scale and quality of revenues and related cash flows.

Board matters

A number of changes were made to the Board which I believe position the Group with the optimum blend of skills and experience to drive growth both organically and through selective acquisitions.

Dave Breith resigned as CEO on 1 March 2015 and on 29 May 2015 the Board announced that Stephen Foster had also resigned as Non-Executive Director.

In March 2015 we appointed Guy van Zwanenberg and Mark Braund as Non-Executive Directors.

In March 2015, Spencer Dredge joined the Group as Interim Finance Director and, in July 2015, we were pleased to confirm his appointment as Chief Financial Officer. Spencer has extensive turnaround experience, particularly with businesses in the telecoms, IT services and software sectors, a strong background in M&A and is an outstanding addition to the executive team.

On 1 January 2016, I was pleased to confirm that Mark Braund became Chief Executive Officer of the Group. Mark offered very relevant and valuable experience to the Group during the short time in which he was a Non-Executive Director; and I believe we will continue to benefit from his operational and strategic guidance now that Mark is permanently installed as CEO.

We now have an excellent Board to steer the Group through what we believe will be an exciting period of growth.

Fundraising

The Group raised £2.1 million in June 2015 by way of an equity placing and open offer. The placing and open offer, both at a price of 0.5 pence, raised £1.0 million and £1.1 million respectively. The proceeds were used to bolster working capital, stabilising the Group following a period of losses, culminating in the disposal of the Telephony Services businesses. The open offer was more than 50% oversubscribed which, I believe, demonstrates the continued support from investors for our underlying business, which had for too long been masked by other underperforming businesses within the Group. I would like to take this opportunity to thank shareholders for their continued support throughout what was a very turbulent time. 

Subsequent events - Acquisition of Connect IB and further fundraising

It is most pleasing to report that, following this year of significant change and restructuring, the Group recently successfully executed an acquisition which is directly in line with our new focused strategy. In particular, we are working to identify acquisitions that will deliver valuable intellectual property, the opportunity for cross-selling of services, and which increase the Group's recurring revenue base, including those derived from the provision of managed services.  Our expectation is that a shift in emphasis will result in higher margin business for the Group as well as providing even greater visibility of revenues.

In March 2016, the Group announced the acquisition of Connect IB for £1.328 million, which we believe will help us achieve these key strategic goals. The consideration comprised £1.028 million of cash and the issue of £0.3 million worth of new shares at 1.62 pence per share.

The cash element of the consideration was funded by the raising of £3.125 million (before expenses) through a placing of new ordinary shares at a price of 1.4 pence per share. In addition to satisfying the cash element of the acquisition of Connect IB, the placing provides further working capital to support its integration into the Group and for the continued strategic development of the whole business.

Connect IB is a software applications business that has developed and deployed a number of applications including those that address mapping and wayfinding of smart buildings and smart spaces. The acquisition of Connect IB offers a unique opportunity to integrate Redstone's OneSpace occupancy management product into the software framework that Connect IB has developed. The combination of this technology is, I believe, a compelling opportunity.

Connect IB brings a number of long-term blue chip customers including GlaxoSmithKline, Meyer Bergman and Westfield Corporation. In addition to the range of exciting software products which it delivers, Connect IB also brings to the Group a hugely talented team of software developers and product specialists, coupled with its managing director, Keith Jump, who has become Chief Technical Officer of the Group.

Outlook

With the divestment of non-core businesses now firmly behind us, the Group is focusing rigorously on its core, profitable Redstone operations, which have been enhanced through the acquisition of Connect IB.

Redstone's performance continues to improve, with strong demand seen in its core markets. The acquisition of Connect IB, combined with Redstone's OneSpace product means the Group now has an impressive suite of owned IP based products to service the growing demand for intelligent solutions for smart spaces.

The Group's prospects for leveraging organic growth opportunities from our core business have improved considerably. Through better management systems, ongoing product and systems innovation and proactive cross-selling of services, we are now in a far stronger position to maximise our newly expanded operational base. These prospects, coupled with a strategy to grow further through selective bolt-on acquisitions, make me very excited about the future for our company.

I believe we have the assets and the experience in place to deliver value to our shareholders and I look forward to updating you on this and other progress in due course.

Frank Beechinor

Chairman

23 May 2016

Operational review

Introduction

As highlighted in the Chairman's statement, the year ended 31 January 2016 has proved to be a significant period of operational restructuring and strategic progress for the Group.

Following the disposal of both the Group's loss-making Telephony Services and Media divisions during the year, the only remaining trading division at the reporting date was Redstone, one of the UK's leading IT network and 'Smart Building' systems integrators.  The performance of Redstone over the last 12 months, coupled with the reduced Group overheads, highlights the progress made during the year in developing our core business.

With a new management team in place and the Group's strategic acquisition of Connect IB post year end now fully integrated, the Board is fully focused on delivering a much improved financial performance for shareholders.

Business summary

The Group's remaining operating division, Redstone, delivered solid financial results for the year, capitalising on the demand for a more sophisticated 'Smart Building' environment. As a result, revenue increased 36% compared to the prior year, driven by strong levels of demand for Redstone's products and services.

Redstone continues to build on its growing reputation as the leading provider of technology and services for 'Smart Buildings' and commercial spaces which is clearly evidenced by a strong pipeline of new business delivered in the financial year to January 2016 and the interest we are seeing to date in the current financial year.

Redstone has been successful in delivering a number of new business wins that delivered both scale and breadth to the scope of our client engagement. Listed below are some of examples of our recent success which highlights our progress in growing, in particular, Redstone's blue chip financial services customer base:

·      £5.4 million contract with a major global financial services client delivering a 'Smart Building', ICT infrastructure and IT Networking project

·      £0.9 million contract with a leading international financial services client providing a Storage Area Network infrastructure and ICT refresh

·      £0.4 million contract to deliver a IT Networking project with one of the world's leading providers of audit, tax and advisory services

·      £1.2 million contract to deliver a complete IT Networking office fit out and relocation of up to 4,000 London staff with a multinational professional services firm

·      £1.7 million contract to design and deliver an off-site data centre for a leading international financial services client

·      £0.9 million contract to deliver a European data centre for a multinational technology company specialising in Internet-related services and products

·      £0.5 million contract to design and deliver fibre connectivity to a major international financial services clients data centre

·      £0.4 million contract with a major international financial services client to deliver a Storage Area Network refresh

·      £1.1m million contract with a major international financial services client delivering an integrated building refurbishment providing access to state-of-the-art communications technology and equipment

Alongside Redstone's existing organic growth strategy, management have continued to develop and launch a number of new products into the market. Two recent examples of this strategic focus are the launch of the Redstone branded desk utilisation and power management system, OneSpace, and our Distributed Antenna System ('DAS'), an in-building cellular solution. 

OneSpace, a key feature of our IP-led growth strategy, is an occupancy management software platform that has both operational functionality and provides 'big-data' analytics.  Redstone has seen a growing audience for this product and over the coming months there is an expectation that this interest will crystallise into new sales momentum.

Our DAS platform creates an area of cellular wireless coverage where previously such connectivity was unavailable.  The system was launched in 2015 and the team was delighted to secure our first contract into a London landmark location worth £750,000 in February 2016.

Redstone remains well positioned for growth and continues to see good levels of new business enquiries from both new and existing customers.

Management remains focused on broadening both products and services in order to leverage a number of cross selling opportunities.  We see significant opportunities with both OneSpace and DAS and believe the newly acquired expertise of Connect IB will further accelerate our growth.

Acquisition of Connect IB

On the 16 March 2016, the Group announced the acquisition of Connect IB Limited for £1.3 million. Connect IB is a software applications business.

The acquisition brings significant strategic benefits to Coms, namely;

·      Connect IB's products are highly complementary to those offered by Redstone

·      It enables Coms to own and control high quality intellectual property within one software business unit within the enlarged Group

·      Connect IB brings a number of long-term blue chip customer relationships including GlaxoSmithKline, Meyer Bergman Limited and Westfield Corporation, further demonstrating the demand for the development of 'Smart Buildings' and business applications across high quality companies in a number of sectors

·      It creates an ability to upsell Connect IB products to existing Redstone customers and brings leading edge application development capability to enhance the OneSpace brand

·      It enables Coms to further develop its annuity based recurring revenue model, to sell higher margin software-based solutions and to enhance the development of its own intellectual property assets.

Outlook

The Group is now fully focused on its core, profitable Redstone operations, which have been enhanced through the recent acquisition of Connect IB, where we see significant market opportunities and synergies with the existing offering.

The Group's prospects for leveraging organic growth opportunities from our core business are stronger than ever and will be complemented by further selective acquisitions.

The Group now comprises some of the most talented people in our industry. We continue to invest in them as we develop.  Their role and contribution is highly valued and to them we say a heartfelt 'thank you'.

The Board is pleased with the solid operational and financial progress made to date and very confident in the Group's future trading prospects.

Mark Braund

Chief Executive Officer

23 May 2016

Financial review

The trading results for the year include both the continued and discontinued operations. At the year-end Redstone was the only trading business remaining in the Group. The discontinued operations include both the Telephony Services and Media divisional results.

Following the disposal of the trade and assets of both the Telephony Services and Media divisions, the Group has commenced a rationalisation of its corporate structure.  As none of the legal entities relating to the disposals were acquired as a result of the transactions, and following a period where the retained balance sheet balances were successfully unwound to cash, a voluntary process has been started to liquidate the various companies. 

Revenue and Gross Profit

The revenue and gross profit generated by the Group's three principal activities was as follows:

		2016		2015
	%	£000	%	£000
Revenue
Redstone		40,098		29,468
Darkside Studios		1,082		1,099
Telephony Services		4,261		15,387
		45,441		45,954
Gross Profit
Redstone	17.3	6,950	17.5	5,158
Darkside Studios	40.0	433	42.1	463
Telephony Services	15.2	646	21.4	3,300
	17.7	8,029	19.4	8,921

Trading results - Continued operations

The results for the year from continued operations, which includes the trade from Redstone and the central cost of supporting the Group, report a significant uplift from the prior year.  Revenues of £40.1 million have increased by 36% from £29.5 million and related gross profit of £7.0 million is up 35% from the £5.2 million in 2015.  EBITDA of £1.3 million against a prior year LBITDA of £0.7 million represents an improvement of 274%.  The operating loss of £0.7 million (2015: loss of £1.3 million) includes one-of integration and transactional costs of £1.4 million. Excluding these one-off costs, the continued operations performance would in fact have resulted in an operating profit of £0.7 million compared to the prior year loss of £1.3 million.

Redstone

Redstone has enjoyed a strong year, it has grown both in terms of revenue and profitability.  Revenues of £40.1 million have increased 36% from £29.5 million in 2015 and with gross margins remaining broadly flat year on year, have resulted in a gross profit of £7.0 million compared to £5.2 million in 2015.  Operating profit of £1.7 million reflects an increase of 466% on last year at £0.3 million and is primarily a result of the increased gross profit from increased revenues.

The increase in revenues during the year by £10.6 million is as a result of increased sales activity in all three Redstone revenue components; IT Networking installation, Smart Building solutions and Managed Services.  Revenue performance from Smart Building solutions rose to £6.8 million from £1.7 million, an increase during the year of £5.1 million.  Revenues from Managed Services of £16.3 million also impressed, up £2.9 million on the prior year of £13.4 million.  IT Networking generated revenues of £17.1 million and also reported increased activity, up £2.7 million from the prior year of £14.4 million.

As a result of the strong revenue performance, gross profits increased during the year by £1.8 million.  Increased gross profits were as follows; IT Networking increased by £1.2 million, Smart Buildings by £0.2 million and Managed Services by £0.4 million.

The order-book for Redstone continues to support the confidence in the Group and with the addition of new technologies such as our recently launched 'DAS' product offering, it, highlights the increased technology that is being deployed into buildings which Redstone is well positioned to exploit.  'DAS' is a technology, which whilst not necessarily new, has been subject to wide market adoption in the USA and Australia and is an area in which we expect growth. We have in a short space of time seen increased interest in these products and services, evidenced by the £0.8 million contract win for a 'DAS' Solution announced post year-end on 23 February 2016.

Central/Group overhead

The Group reduced central costs to £0.9 million (2015: £1.7 million) which highlights the Board's focus on cost control during the year.

Included in the central overhead for part of the year in 2016 and beyond will be the costs associated with the Stokenchurch office, which was leased on a 4.75-year term in December 2013.  The strategy at that time was to acquire a number of Telephony Services related assets and Stokenchurch alongside the Brentwood office were to be the preferred locations for these businesses.  Unfortunately, the Stokenchurch office at over 21,000 square feet was excessive in terms of size compared to the required office space.  Our focus over the past year has been to sublet the excess space.  Whilst the Group continues to use the Stokenchurch office on a limited basis with the cost now recorded in the continued operations within the Group central overhead, a provision has been recorded for 75% of the office space, aligned to the current usage.

The Brentwood office lease with 9 years remaining was successfully exited in September 2015 at a nil exit cost to the Group and recorded in the Telephony Services division accounts during the year.

Trading results - Discontinued operations

Telephony Services

Following the disposal of the Telephony Services division to Timico on 31 May 2015 the results are recorded as discontinued activities. 

The trade and certain assets from the division's various businesses were sold to Timico for £2.5 million in cash with up to a further £1.0 million consideration contingent on an earn-out with defined levels of billed revenues in the quarter ended 30 November 2015.  Unfortunately, the earn-out was not achieved due to a rapid deterioration of the customer base, which again supports the decision to exit this business. 

The division's trading for the four months prior to the disposal continued to disappoint.  Revenues of £4.3 million (2015: £15.4 million) continued to decline prior to disposal.  Gross profit of £0.6 million re representing a margin of 15.2% providing further evidence of a decline in performance against a prior year of £3.3 million at 21.4%. As a result of reducing revenues and related gross profit, the division recorded a LBITDA of £1.5 million providing evidence that the overheads of the division were unsustainable and the synergies from the various separate Telephony Services businesses never materialised to the extent required to reach profitability.  As a result of the poor performance, the division was sold as it became clear that it was not commercially viable and lacked both scale and quality of earnings.

Darkside Studios

The results for the Media division are recorded as discontinued operations as the division was sold to the management team for a consideration of £100,000 cash on a deferred basis.  The consideration is not contingent on performance and is payable in equal instalments of £50,000 in December 2016 and December 2017.

The disposal, effective from the 8th December 2015, completes the Group's disposal program following the failed strategy executed by the Group's previous management team.

The Media division's result for the period up to disposal reported revenues of £1.1 million (2015: £1.1 million) with gross profits of £0.4 million (2015: £0.5 million).  However, the overheads of £0.6 million (2015: £0.3 million) resulted in a LBITDA of £0.2 million compared to an EBITDA in the prior year of £0.1 million. 

As a result of the disposal of Darkside Studios, goodwill associated with the acquisition of both Darkside Animation Limited and Click Media Studios Limited of £350,000 was written off in the year and recorded as an integration and transactional cost.

Disputes and potential litigation

Further to the information in last year's Annual Report and Accounts, we can report that the various issues with the previous Group CEO Dave Breith have now been fully resolved.

Depreciation and amortisation

A depreciation charge of £0.4 million (2015: £0.4 million) was recorded during the year, this primarily related to capital investments made in prior years in Redstone in relation to the London office.

An amortisation charge of £0.1 million (2015: £0.1 million) was recorded during the year, resulting from investments made in software and OneSpace.

Integration costs and transactional items

Recorded in the Group income statement for the year was a credit of £0.8 million (2015: charge £1.3 million). This is made up of a charge in the continued operations of £1.4 million (2015: £nil) and a credit in the discontinued operations of £2.2 million (2015: charge £1.3 million). 

The charge in continued operations relates to integration costs of £1.1 million, primarily a provision recorded for 75% of the Stokenchurch office.

The credit that is recorded in discontinued operations is in relation to integration costs of £0.8 million, and transaction items of £1.4 million.

	Continued	Discontinued	Combined
Integration and transactional items	£000	£000	£000
Integration costs	1,148	(790)	358
Transactional items	291	(1,479)	(1,188)
Total	1,439	(2,269)	(830)

Impairment charges

Within discontinued operations there is an impairment charge of £2.2 million (2015: £8.7 million).  This charge relates to impairments made on intangible assets of £1.3 million (2015: £1.4 million) and goodwill of £0.6 million (2015: £6.9 million) previously recorded in the Telephony Services division and £0.3 million (2015: £nil) of goodwill relating to Darkside Studios.  These impairment charges are as a result of the disposal of both the Telephony Services and Media divisions and represent the full write down of these investments.

Taxation

As a result of the losses prior to disposal in both the Telephony Services and Media divisions, there is no corporation tax payable on the profits made in Redstone. 

The tax credit recorded in the income statement in continued activities is due to R&D tax credits.  The discontinued tax credit is a write off of a deferred tax liability related to the recognition of intangible assets from the acquisition of the Actimax companies in February 2014.

Cash flow statement

Cash at the year-end of £1.0 million (2015: overdraft of £0.4 million) increased during the year by £1.4 million.

The principal cash flows during the year were the cash used in operations of £2.7 million (2015: £3.4 million), cash received from investing activities of £2.1 million, with £2.5 million resulting from the disposal of the Telephony Services division net of the cash invested in capital expenditure (fixed and intangible assets) of £0.4 million (2015: £5.9 million outflow) and cash inflow from financing activities of £2.0 million net of expenses by way of the placing an open offer in June 2015 (2015: £8.0 million). 

Since the year end cash of £1.0 million has been utilised in the acquisition of Connect IB following an equity raise of £3.1 million (see post balance sheet event for further detail).

Borrowings and bank facility

The Group did not have any borrowings during the year outside of the facility.

The Group has a floating facility of up to £2.0 million with Barclays Bank.  The facility is for working capital purposes with a covenant requirement of three times debtor cover. 

Equity

In June 2015 the Group raised £2.1 million (before expenses) by way of a placing and open offer.  The placing consisted of the issued of 200,000,000 new ordinary shares of 0.1 pence each at a price of 0.5 pence per share, raising £1.0 million.  The open consisted of the issue of 216,278,646 new ordinary shares of 0.1 pence each at a price of 0.5 pence per share, raising £1.1 million.

Total equity at 31 January 2016 was £8.9 million (2015: £9.0 million).

Post balance sheet events

On the 16th March 2016 the Group announced the acquisition of the entire share capital of Connect IB Limited.  Connect IB is a software applications business and was acquired for a total consideration of £1.3 million.  The consideration comprises cash of £1.0 million, with the remaining £0.3 million being satisfied through the issue of new ordinary shares.  The £0.3 million equity consideration was satisfied by the issue of 15,422,579 ordinary shares at 1.62 pence, an average price over the five business days to 11 March 2016 and a further 3,084,515 ordinary shares at 1.62 pence contingent on achieving certain annuity sales targets.

The cash component of the acquisition was funded by a placing of 223,214,286 new ordinary shares of 0.1 pence each in the Company at a price of 1.4 pence per share rising £3.125 million before expenses. The placing also provided further funding for working capital.

Spencer Dredge

Chief Financial Officer

23 May 2016

Consolidated income statement

For the year ended 31 January 2016

		2016	2015
		£000	£000
Revenue		40,098	29,468
Cost of sales		(33,148)	(24,310)
Gross profit		6,950	5,158
Administrative expenses		(5,662)	(5,897)
Adjusted EBITDA/(LBITDA)*		1,288	(739)
		1,
Integration and transactional costs included within administrative expenses		(1,439)	47
Depreciation		(370)	(412)
Amortisation		(128)	(58)
Share based payment charge		(47)	(54)
Impairment charge		-	(71)
Operating loss		(696)	(1,287)
Net finance costs		(63)	(238)
Loss before tax		(759)	(1,525)
Taxation		63	-
Loss for the year after tax		(696)	(1,525)
Discontinued operations		(1,487)	(13,545)
Loss for the year		(2,183)	(15,070)
Total comprehensive loss for the year attributable to equity holders		(2,183)	(15,070)
Basic and diluted loss per share
Continuing operations		(0.06p)	(0.16p)
Discontinued operations		(0.12p)	(1.41p)
Total		(0.18p)	(1.57p)

* Result for the year from continuing operations before net finance costs, depreciation, amortisation, integration and transactional items, impairment charges and share based payment charge.

Consolidated statement of financial position

As at 31 January 2016

		2016	2015
		£000	£000
ASSETS
Non-current assets
Goodwill		8,724	9,651
Other Intangible assets		309	1,718
Property, plant and equipment		637	1,798
		9,670	13,167
Current assets
Inventories		181	305
Trade and other receivables		7,982	10,658
Cash and cash equivalents		2,430	492
		10,593	11,455
Total assets		20,263	24,622
EQUITY and LIABILITIES
Capital and reserves attributable to equity shareholders
Share capital		3,436	3,015
Share premium		29,463	27,816
Merger reserve		1,911	1,911
Reverse acquisition reserve		(4,236)	(4,236)
Accumulated deficit		(21,664)	(19,528)
Total equity		8,910	8,978
Current liabilities
Overdraft		1,383	878
Trade and other payables		8,503	13,603
Provisions		676	878
		10,562	15,359
Non-current liabilities
Provisions		791	-
Deferred tax		-	285
		791	285
Total liabilities		11,353	15,644
Total equity and liabilities		20,263	24,622

The financial statements were approved by the Board of Directors and authorised for issue on 23 May 2016.

They were signed on its behalf by:

Spencer Dredge

Chief financial Officer

23 May 2016

Consolidated statement of cash flows

For the year ended 31 January 2016

		2016	2015
		£000	£000
Cash flows from operating activities
Loss for the year		(2,183)	(15,070)
Depreciation		531	820
Amortisation		218	373
Share based payment charge		47	54
Release of deferred consideration		-	(1,294)
Net finance costs		63	245
Taxation		(482)	172
Intangible asset impairment		-	1,360
Property, plant and equipment impairment		-	416
Goodwill impairment		-	6,907
Movement in provisions		589	878
Loss on sale of fixed assets		24	21
Loss on sale of discontinued operations, net of tax		576	-
Operating cash flows before movements in working capital		(617)	(5,118)
Decrease in inventories		32	101
Decrease/(Increase) in receivables		2,394	(325)
(Decrease)/Increase in payables		(4,543)	1,944
Operating cash flows after movements in working capital		(2,734)	(3,398)
Tax paid		49	-
Net cash used in operation activities		(2,685)	(3,398)
Cash flows from investing activities
Disposal of assets		2,500	-
Acquisition of subsidiaries (net of cash acquired)		-	(3,770)
Acquisition of intangible assets		(355)	(15)
Proceeds from sale of property, plant and equipment		23	54
Acquisition of property, plant and equipment		(56)	(2,206)
Net cash used in investing activities		2,112	(5,937)
Cash flows from financing activities
Proceeds from issues of share capital (net of issue costs)		2,069	8,003
Net finance costs		(63)	(53)
Net cash from financing activities		2,006	7,950
Net increase/(decrease) in cash and cash equivalents		1,433	(1,385)
Cash and cash equivalents at start of year		(386)	999
Cash and cash equivalents at end of year		1,047	(386)

Cash and cash equivalents comprise cash at bank and other short-term highly liquid investments with maturity of three months or less, as adjusted for any bank overdrafts.

Consolidated statement of changes in equity

Attributable to equity holders of the Company

			Share	Reverse
		Share	premium/	acquisition	Accumulated
		capital	merger reserve	reserve	deficit	Total
		£000	£000	£000	£000	£000
At 1 February 2014		2,864	21,875	(4,236)	(4,512)	15,991
Loss for the year		-	-	-	(15,070)	(15,070)
Total comprehensive loss for the year		-	-	-	(15,070)	(15,070)
Transactions with the owners:
Proceeds from shares issued		151	8,267	-	-	8,418
Share issue costs		-	(415)	-		(415)
Share based payment charge		-	-	-	54	54
At 31 January 2015		3,015	29,727	(4,236)	(19,528)	8,978
At 1 February 2015		3,015	29,727	(4,236)	(19,528)	8,978
Loss for the year		-	-	-	(2,183)	(2,183)
Total comprehensive loss for the year		-	-	-	(2,183)	(2,183)
Transactions with the owners:
Proceeds from shares issued		421	1,697	-	-	2,118
Share issue costs		-	(50)	-		(50)
Share based payment charge		-	-	-	47	47
At 31 January 2016		3,436	31,374	(4,236)	(21,664)	8,910

1.  General information

Coms plc is a company incorporated in England and Wales under the Companies Act 2006 and listed on the AIM market. These financial statements are presented in pounds sterling as that is the currency of the primary economic environment in which the Group operates.

Going concern

As detailed in the Directors' report, the Directors consider that the Company and the Group have adequate resources to continue in existence for the foreseeable future. In assessing the outlook for the Company and Group, the Board took account of the Group's £2.0m overdraft facility and certain events after the balance sheet date which have materially strengthened the financial position:

·      The Placing in March 2016 which raised £3.125 million (before costs), net of the cash used in the acquisition of Connect IB of £1.0 million.

·      The increasing appetite from institutional investors who are keen to take part in any future funding event.

The Directors have assessed the Group's current forecasts, taking into account reasonable changes in trading performance. The assessment considered stress tests and mitigating actions available to the Group. On the basis of this review, the Directors believe that the Group will continue to operate within the resources currently available to it. The Directors accordingly continue to adopt the going concern basis in preparing these financial statements.

Basis of preparation

The consolidated financial statements of Coms plc have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS's as adopted by the EU), IFRS Interpretations Committee and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention.

2.  Segmental reporting

In the opinion of the Directors the Group's activities comprise three material business segments which reflect the profiles of the risks, rewards and internal reporting structures within the Group.

These are as follows:

·      Redstone

·      Darkside Studios - discontinued

·      Telephony Services - discontinued

All activities were conducted within the United Kingdom and it is the opinion of the Directors that this represents one geographical segment.

Continued Operations Revenue		2016		2015
		£000		£000
IT Networking		17,055		14,353
Smart Buildings		6,768		1,683
Managed Services		16,275		13,432
		40,098		29,468

Revenue		2016		2015
		£000		£000
Redstone		40,098		29,468
Discontinued operations		5,343		16,486
		45,441		45,954
(Loss)/profit for the year		2016		2015
		£000		£000
Redstone		1,760		246
Central administration costs		(2,456)		(1,771)
Continued operations		(696)		(1,525)
Discontinued operations		(1,487)		(13,545)
		(2,183)		(15,070)
Balance Sheet analysis by segment		2016	2015
	Assets	Liabilities	Assets	Liabilities
	£000	£000	£000	£000
Redstone	19,530	(6,703)	17,458	(8,259)
Central administration costs	347	(3,956)	297	(436)
Discontinued operations	386	(694)	6,867	(6,949)
	20,263	(11,353)	24,622	(15,644)

Included in the above table are non-current assets of £9,669,000 (2015: £9,781,000) for Redstone, £nil (2015: £655,000) for Darkside Studios, and £nil (2015: £2,731,000) for Telephony Services.

3.  Earnings per share

Earnings per share data is based on the Group (loss)/profit for the year and the weighted average number of ordinary shares in issue.

		2016			2015
	Continued operations	Discontinued operations	Total	Continued operations	Discontinued operations	Total
Basic and diluted (loss)/profit per share	(0.06p)	(0.12p)	(0.18p)	(0.16p)	(1.41p)	(1.57p)
(Loss)/profit for the year attributable to owners of the parent company (£000)	(696)	(1,487)	(2,183)	(1,525)	(13,545)	(15,070)

			2016		2015
Number of shares			No.		No.
Weighted average number of ordinary shares in issue		1,232,295,941		957,474,129
Weighted average number of potentially dilutive ordinary shares in issue		1,232,295,941		957,474,129

Warrants and employee share options are non-dilutive in loss making periods.

4.  Post balance sheet events

On the 16th March 2016 the Group announced the acquisition of 100% of the issued share capital of Connect IB limited.  Connect IB is a software applications business and was acquired for a total consideration of £1.328 million.  The consideration comprises cash of £1.028 million, with the remaining £0.3 million being satisfied through the issue of new equity shares.  The £0.3 million equity consideration was satisfied by 15,422,579 ordinary shares at 1.62 pence, an average price over the five business days to 11 March and a further 3,084,515 ordinary shares at 1.62 pence contingent on achieving certain annuity sales targets.

The acquisition was funded by a Placing of 223,214,286 new ordinary shares of 0.1 pence each in the Company at a price of 1.4 pence per share rising £3.125 million before expenses. The Placing financed the cash element of the acquisition and provided further funding for working capital.

A review of the Connect IB acquired balance sheet along with any fair value adjustments is underway and the final adjusted balance sheet will result in both the disclosure of the business combination and recording of the related goodwill.

5. Availability of Annual Report and Accounts

Copies of the Annual Report and Accounts for the year ended 31 January 2016 will be available to view on the Company's website later today at www.comsplc.com.

 

END

 

 

FR UOVRRNSAVUUR