Final Results
7 November 2017
BLANCCO TECHNOLOGY GROUP PLC
FINAL RESULTS FOR THE YEAR ENDED 30 JUNE 2017
Blancco Technology Group Plc (AIM:BLTG, "Blancco" or the "Group") is pleased to announce its final results for the year ended 30 June 2017.
Financial Highlights
· Restatement of prior year results, following Board review, to reflect the removal of £1.2 million of revenue previously recognised in the year to 30 June 2016.
· Revenue increased by 31% to £27.7 million (2016 restated: £21.2 million), with organic growth being 19%. On a constant currency basis revenue increased by 17% to £24.7 million.
· Adjusted Operating Profit (as defined in note 15) of £3.4 million (2016 restated: £4.6 million), and on a constant currency basis, £3.2 million. Operating losses are £2.5 million (2016 restated: £1.9 million).
· Adjusted Operating Cash Flow (as defined in note 15) of £2.8 million (2016: £6.0 million) with cash conversion of 80% (2016 restated: 130%). Operating cash outflow is £0.7 million (2016: £4.0 million inflow) after payments for administrative expenses associated with buying out shares of minority interests.
· Net cash at the year end of £1.7 million (2016: £1.0 million). Net proceeds from the share placing of £9.3 million in May were used to fund capital expenditure in ongoing product development and investment in the minority interest buy outs.
· Adjusted continuing earnings per share (as defined in note 15) of 3.02p (2016 restated: 4.16p). Basic continuing loss per share is 5.20p (2016 restated: 5.17p).
· Given the position of the business and the need to invest for growth, the Board has decided not to pay a final dividend.
Operating Highlights
· Erasure revenue grew 15% (3% in constant currency), with strong growth in Mobile offset by the impact of a number of non-recurring larger deals booked during 2016.
· A number of new contracts were won during the year in our diagnostics business, helping to grow this income stream. The integration and rollout across 6,000 retail stores for a US customer is complete and we are supporting over 100,000 diagnostics events per week for this single client.
· Increase in average revenue per client by 27% to £61,300. The number of customers with invoiced revenue in excess of £0.1 million in the year was 45 (35 in 2016).
· Disposal of Digital Care, the legacy Mobile Insurance business, representing the final disposal of the Repair Services businesses.
Outlook
The business is targeting revenue growth for the 2018 financial year between 6% and 16% with an adjusted operating profit margin between 8% and 12%; this range does not include possible one-off non-recurring deals, which may or may not occur during the year and of which the market will be updated during the year should such deals materially impact results.
Rob Woodward, Chairman of Blancco, said:
"Following a short period of significant change to the management team and control environment, the team has worked extremely hard to put the business in a robust position to welcome a new CEO who will drive forward Blancco's unrivalled product portfolio to deliver sustainable growth and build shareholder value.
"In the near-term, management is focused on a number of immediate priorities: cashflow and cost management; maintaining sustainable revenue growth; focusing marketing on near-term revenue generation; selectively investing in targeted product development; and embedding greater scrutiny and tighter financial controls across the business."
Enquiries:
Blancco Technology Group Plc +44 (0) 20 3657 7000
Simon Herrick, Interim Chief Executive Officer & Chief Financial Officer
Peel Hunt LLP (Nominated Adviser and Broker) +44 (0) 20 7418 8900
Edward Knight
Panmure Gordon (UK) Limited (Joint Broker) +44 (0) 20 7886 2500
Dominic Morley, Corporate Finance
Charles Leigh Pemberton, Corporate Broking
Tulchan Communications +44 (0) 20 7353 4200
Tom Murray
About Blancco
Blancco Technology Group is a leading global provider of mobile device diagnostics and secure data erasure solutions. For more information, please visit www.blancco.com
Chairman's Statement
Overview
2017 has been a year of substantial challenges for the Group, with the business performing far below our expectations. However, the underlying strengths of Blancco remain in place and I am confident that these, together with the significant number of remedial actions we are taking, will restore a sustainable growth trajectory and build long-term shareholder value.
This is the Group's first full year as a pure-play software business focused on mobile device diagnostics and secure data erasure solutions. The final stages of Blancco's transformation during the year, now substantially complete, have focused on integrating a number of strategic acquisitions, the disposal of the Digital Care insurance business, restructuring and buying-out minority interests in various of the Group's subsidiary sales offices. While the Board is in no doubt of the strategic logic of these actions, their associated costs in a relatively short period has had a significant adverse impact on the Group's financial position.
The Group's customer base has evolved during the period, with a focus on winning business from larger enterprise clients. While the size of these contracts makes them highly attractive, their longer sales cycles and longer term payment structures, plus the impact of non-collection of revenue incorrectly recognised in 2016, for which the Group has restated prior year results, have put additional pressure on the Company's net cash.
In March, Simon Herrick was appointed interim Chief Financial Officer and he oversaw a forensic review of the Group's cash flow and funding requirements. This culminated in a share placing which raised a net £9.3 million, which successfully addressed the Company's near-term funding requirements and provided additional headroom.
As part of the closing process for the 2017 financial year, the Board took the decision to reverse revenues that had previously been booked in the second half relating to two contracts, as well as reversing and restating the revenues associated with a transaction booked in the previous financial year after performing a retrospective investigation into the substance of that transaction. Further information on the restated prior year revenues are included in the Chief Executive Officer's statement and within note 2.
Board and employees
Patrick Clawson, Chief Executive Officer, has stepped down from the Board and has left the Company and a process to appoint his successor is ongoing. Meanwhile, Simon Herrick has agreed to become our Chief Executive Officer on an interim basis. In addition, as part of our rebuilding programme, other senior members of the executive team have also left the Company. Having announced my intention to step down as Chairman, the Board is of the view that it is in the best interests of the Company for me to stay in place. I remain absolutely focused on bringing increased stability to the business, overseeing an orderly leadership transition and putting the Company back onto a sustainable growth path.
I would like to express my thanks to all our employees. Their hard work and dedication to our customers have remained undiminished during a difficult year.
Dividend
Given the position of the business and the need to invest for growth, the Board has decided not to pay a final dividend.
Outlook
Despite recent challenges, Blancco remains a business with real strengths and exciting growth opportunities. Our products are highly effective and, together with the investments we continue to make in progressing our technology and enhancing our intellectual property, support our leading position in a highly attractive global market; our team has deep experience, covering both product and sales; and our customer base continues to grow and diversify. I am confident that the Group will put its recent issues behind it and move on to deliver sustainable growth and generate value for our shareholders.
Rob Woodward
Chairman
Chief Executive's Statement
Summary of 2017 performance
Revenue for the year was £27.7 million (2016 restated: £21.2 million), up 31%. Revenue grew 17% in constant currency. Our Erasure division contributed £23.5 million (2016 restated: £20.5 million), while the Diagnostics division contributed £4.2 million (2016: £0.7 million).
Adjusted operating profit was £3.4 million (2016 restated: £4.6 million), reflecting higher selling, general and administrative costs, partly offset by reductions in balance sheet provisions. Adjusted EBITDA was £5.2 million (2016 restated: £5.4 million). Adjusted EPS was 3.02p (2016 restated: 4.16p). Further details of these results are contained in the Group Financial Review.
Statutory continuing operations basic loss per share was 5.20p (2016 restated: 5.17p).
Statutory losses after tax were £4.3 million (2016 restated: £25.7 million) reflecting a series of one-off (exceptional) items including discontinued operating costs.
2017 was the first full year of fully consolidated results from the Diagnostics business. A number of new contracts were won in the year, adding to those secured in the second half of 2016. The rollout of our solution across 6,000 customer stores in the US is complete and we are supporting over 100,000 diagnostics events per week using our product. Following this successful first contract of its type, we rolled out similar solutions to customers in Europe and Asia.
North America invoiced revenue (being amounts billed to customers before IFRS deferrals of revenue) were £11.4 million (2016 restated: £8.7 million). The business won a number of key enterprise contracts with large customers in this territory. Europe's performance improved, with invoiced revenue of £10.0 million (2016: £8.1 million), as the region's new leadership and fully resourced sales force took effect. Asia and the Rest of the World (ROW) invoiced revenue were £7.9 million (2016: £5.8 million) following some significant growth in the mobile market.
The Group continued to buy-out minority interests in several of its subsidiaries during the year to position it for future growth. In 2017, the Group increased its ownership of its businesses in France, Australia and Canada to 100%. Ownership of the businesses in South East Asia (SEA) (Malaysia) and Mexico increased from 51% to 70%, including the establishment of a new 70% owned business based in Singapore. These offices, in addition to Japan (51%) and China (56%), are the only sales offices with minority stakes remaining, and there are no new investments planned.
The Group fully disposed of Digital Care, its legacy Mobile Insurance business, in September 2016.
Restatement of 2016 results
I was appointed as interim Chief Financial Officer in March 2017. During April the Group undertook a review of cash flow forecasts and identified anticipated pressure on the cash position of the Group. This pressure was caused by the non-collection of £3.5 million of outstanding receivables relating to a sale booked in June 2016 and a sale booked in December 2016, and costs associated with past acquisition activity, including earn-outs and M&A advisory fees. On 6 July 2017, the Company announced that it had taken a charge of £2.2 million to provide against the £3.5 million of receivables (net of deferred revenue and taxes).
On 4 September 2017 the Group announced the reversal of two contracts totalling £2.9 million booked as revenue during June 2017, following a number of matters being brought to the Board's attention. I was also appointed interim Chief Executive Officer on this date.
The Board undertook a review of the circumstances surrounding these contracts and further work was performed to assess revenue recorded in the year to 30 June 2017. Of the total revenue reported, 97% had been received in cash by 30 September 2017. Further work has also been undertaken, including reviewing material contracts in respect of revenue reported and collected in cash and individual significant debtors which remained outstanding at 30 September 2017 (covering 88% of these debtors) to provide confidence that revenue has been appropriately recorded.
The review work identified other adjustments to revenue for the year ended 30 June 2017, where some contracted revenues have been deferred into future periods in line with the expected contract fulfilment, and a prior year adjustment. In respect of the latter, the results for the year ended 30 June 2016, as well as the consolidated balance sheet position as at 30 June 2016, have been restated.
This prior year adjustment relates to the recognition of £1.2 million of revenue booked during June 2016 (and prepaid costs relating to revenue expected to be booked in the 2017 financial year), which was subsequently fully provisioned (as announced on 6 July 2017). This transaction has now been removed, as a prior year adjustment because the Board's review identified new evidence which indicated that, at the time of signing the accounts on 30 September 2016, no contractual agreement was in existence with the customer which adequately supported the criteria for recognition of revenue under the Group's accounting policies.
The full impact on the financial statements is disclosed in note 2.
We continue to discuss opportunities with the customer; any future sales will be subject to additional scrutiny by the Board, including assessment of likelihood of cash collections, before revenue is recognised.
Our proposition and strategy
In 2017 we extended our strategy of building both our erasure and diagnostics businesses. We continued to drive market awareness for the need to erase legacy data for security and compliance purposes with a 56% measured share of voice (SoV) (2016: 41%) and 5,393 press mentions (2016: 3,425). In addition to publishing studies, reports and white papers to drive awareness and draw press, we launched a new initiative, the International Data Sanitisation Consortium (IDSC). This industry consortium is comprised of partners, academics and other associations who aim to develop standards in taxonomy and nomenclature as well as policies and practices within the field of data erasure and sanitisation. The goal is to encourage policymakers and regulators to use appropriate terminology and requirements for secure data erasure and create future requirements for data sanitisation. A case in point is the EU General Data Protection Regulation, which provides for the "right to erasure" but fails to define what it means to erase a data subject's personal information.
This, combined with additional activities, such as the quarterly State of Mobile Device Health Report, raises awareness of Blancco and facilitates the initiation of a de facto standard in data erasure.
We continue to grow our business in the reverse logistics, IT Asset Disposition (ITAD), and carrier warehouse operations sectors with a high customer retention and renewal rate. 2017 also saw new opportunities with the enterprise, data centre, and mobile network operators. Large enterprises can use our data erasure products on devices, servers, data centres and the cloud. The Group is the only provider of such complete data erasure products in a relatively thinly-penetrated market.
Building a partner business development function
Enterprise erasure occasions predominantly derive from two sources: workflows controlled by existing large software companies and within the workflows of enterprise service providers, such as Value Added Resellers (VARs), who provision and manage IT solutions for enterprises; and Managed Service Providers (MSPs), who deliver services such as applications, networking, data storage and security solutions over networks and in the cloud, and generally help to manage the data life cycle of creation, storage, mining - and finally erasure. Also in this category are the large System Integrators (SIs) who source and deliver complete solutions to data centres and the enterprise. In a congested IT security environment, CIOs prefer to work with a small number of large, trusted VARs, MSPs, and SIs. They will prefer erasure solutions which are integrated into these platforms. We see data centres, which have a need for erasing storage in situ, as a key opportunity for our Active Erasure products.
Prior to 2017, Blancco had predominantly relied on a direct sales model, led by local teams, and based on the sale of stand-alone Blancco erasure products for licence (per erasure) or subscription payments. This model continues to be successful and remains a key pillar of our route to market. But, to accelerate our revenue growth while minimising our sales expenses, we launched a concerted business development effort in early 2017 to leverage these routes to market.
We have also identified opportunities to work with Original Equipment Manufacturers (OEMs) to embed Blancco directly into their products. The OEMs are beginning to recognise customer demand for end-of-data-life erasure and that they need to turn to Blancco which has invested decades and millions of pounds in creating robust, patent protected products, certified by 18 bodies around the world.
Thought leadership, regulation, and market education
Executing on our strategy has involved new sales training and a complete rebranding achieved in January, which included normalising our product names.
Based on Gartner research, there are trillions of gigabytes of data that should be erased. The market is beginning to recognise the need to have effective end-of-data-life strategies. As the only vendor able to execute on a complete data erasure policy we have an opportunity to further educate the market and thus drive our business growth. To that end, we created the IDSC (mentioned above) to be an independent proponent of data sanitisation best practices. The launch, which coincided with the UK announcement of plans for a new Data Protection Regulation that will incorporate many of the requirements of the EU GDPR, drew positive attention from the press.
Mobile Diagnostics
The market for consumer data erasure is expanding rapidly through mobile network operators, who increasingly seek to provide erasure solutions to their customer base, especially around the smartphone upgrade occasion. 2017 saw the first substantial contribution to our top line from our diagnostics business with revenue of £4.2 million (2016: £0.7 million). The synergy with our data erasure business occurs in at least three areas:
(1) Mobile network operators want self-help consoles in their stores which perform smartphone diagnostics and smartphone erasure in one package (as well as equivalent solutions delivered through call centre and online support channels)
(2) The smartphone remarketing eco system wants to perform both Erasure and Diagnostics on used devices prior to resale
(3) Efficient processes and an easy-to-use interface are paramount
Strategically, we have identified the mobile network operators as a key vertical for us, alongside the enterprise market and the data centre market. The business has acknowledged its position in this relatively underdeveloped market but with more competition than our erasure offering, and this will be an area of investment focus in 2018.
Technology update
We are constantly pursuing ways to innovate and protect our technology by the use of patents globally. In 2017, we made good progress in consolidating our code base and cross-pollinating our two development arms in Finland and India with consistent product management. We introduced multiple enhanced product revisions across the entire line, on time and within budget.
Building on our recent success with patenting our Solid State Drive (SSD) erasure technology we have established a programme to cultivate technology innovation and increase the number of patents filed. This strategy protects our market share and provides a defensive portfolio to ward off future challenges to our position.
We have also continued to push ahead on several fronts to maintain certifications for our products across multiple regions.
Blancco Management Console (MC) is a product we have developed to centrally manage licences and reports for secure erasure. A central management console is critical to growing an enterprise business strategy. Each data erasure product can integrate with MC, and Application Programming Interfaces (APIs) are being developed to enhance integration with third-party products. MC is available as a standalone software solution or as a service through Blancco Cloud.
We have demonstrated an integration of our mobile diagnostics platform with the backend big data platform of a major carrier. The rapid development of an accessible API demonstrates to this customer that they have selected the correct partner for all their in-store diagnostics and shows the wider market that we can deliver a successful and rapid development partnering strategy.
Throughout 2017 we have pursued a consistent path and have seen positive results from the route to market and maturing of our message, product development, and sales strategy.
Team
Following some turbulence during 2017, our focus will be to continue to develop the suite of products, efficiency of delivery and to ensure our development teams' skills and experience are brought to bear directly in growing the Group.
During my tenure as interim Chief Executive Officer my aim is to maintain a leadership team that sets the Group agenda and works closely with the regional teams to support them in growing their businesses locally.
Given the recent number of changes to the team, we do not anticipate any material alteration to the business activity or direction, so that a new CEO will be able to transition and formulate their own strategy drawing on the experience of the Blancco team.
Outlook
The outlook for the data erasure and diagnostic markets in 2018 is positive. New market regulations surrounding data management combined with a very thinly-penetrated market for secure data erasure and the growth in penetration of diagnostic tools in the mobile market should lead to continued healthy increases in demand for our products.
We will stay focused on managing our cost base and cash flow to enable us to continue to invest in product development and to capitalise fully on the expansion of our target markets.
We remain confident that the fundamental drivers of growth in our business are strong.
Simon Herrick
Interim Chief Executive Officer
Results
The financial performance of the business, as compared to the restated 2016 results, is summarised as follows:
Revenue of £27.7 million (2016 restated: £21.2 million, growth 31%, 17% in constant currency terms) with divisional operating profit of £5.1 million (2016 restated: £6.1 million). Adjusted operating profit after corporate costs was £3.4 million (2016 restated: £4.6 million). Operating loss was £2.5 million (2016 restated: £1.9 million).
Organic revenue, excluding the acquired revenues from customers of Xcaliber at January 2016 was £24.3 million (growth 19%). Organic revenue grew to £21.8 million when expressed in constant currency terms (growth 6%).
The organic and acquired revenues are shown in the table below:
|
|
|
|
|
|
£'million |
Actual |
Constant Currency |
Prior Year Restated |
|
Organic revenue |
24.3 |
21.8 |
20.5 |
|
Acquired revenue |
3.4 |
2.9 |
0.7 |
|
Revenue |
27.7 |
24.7 |
21.2 |
|
|
|
|
|
Included within the operating profit are provision releases totalling £1.2 million (2016: £nil) arising from the release of acquisition provisions on contingent liabilities for which the business has made steps to eliminate the risk and which are therefore no longer required.
The increase in statutory operating loss is largely a result of the reduction in divisional adjusted operating profit which has been partially offset by a lower share-based payment charge and the non-recurrence of the Xcaliber investment disposal accounting in the prior year. The Group's continuing M&A activity was greater in 2017 versus the prior year, yielding a higher charge.
Adjusted operating cash flow was £2.8 million (2016: £6.0 million), with a cash conversion of 80% (2016 restated: 130%) relative to AOP. Operating cash outflow from continuing operations was £0.7 million (2016: £4.0 million inflow) which includes payments associated with M&A activity and exceptional one-off payments totalling £2.4 million (2016: £1.1 million) and interest and tax payments which were similar to the previous year.
Significant other cash outflows include capital expenditure (£3.4 million), capital cost of acquisitions (£1.1 million) and dividends (£1.4 million). A share placing in May which raised £9.3 million of net proceeds resulted in net cash at the end of the period of £1.7 million (2016: £1.0 million).
Tax payments were comparable year on year, however cash tax payments due of £0.8 million were paid in July 2017.
|
Key financials |
|
|
|
2017 |
2016 Restated |
|
|
|
|
|
£'million |
£'million |
|
Invoiced revenue |
|
|
|
29.3 |
22.6 |
|
Revenue |
|
|
|
27.7 |
21.2 |
|
Divisional operating profit |
|
|
5.1 |
6.1 |
|
|
Adjusted operating profit |
|
|
3.4 |
4.6 |
|
|
Operating loss |
|
|
|
(2.5) |
(1.9) |
|
|
|
|
|
|
|
|
Divisional operating profit margin % |
|
|
|
18.4% |
28.8% |
|
Adjusted operating profit margin % |
|
12.4% |
21.7% |
||
|
Operating profit margin % |
|
(9.0%) |
(8.8%) |
||
A reconciliation between adjusted operating profit and operating loss is given on the face of the income statement.
Segmental results
|
|
|
Year ended |
Year ended |
|
|
|
30 June 2017 |
30 June 2016 Restated |
|
|
|
£'million |
£'million |
|
Revenue |
|
|
|
|
Erasure |
|
23.5 |
20.5 |
|
Diagnostics |
|
4.2 |
0.7 |
|
Total |
|
27.7 |
21.2 |
|
|
|
|
|
|
Divisional operating profit |
|
|
|
|
Erasure |
|
4.6 |
6.1 |
|
Diagnostics |
|
0.5 |
- |
|
Total |
|
5.1 |
6.1 |
|
|
|
|
|
|
Corporate costs (continuing operations) |
|
(1.7) |
(1.5) |
|
Total adjusted operating profit |
|
3.4 |
4.6 |
Group review
The Erasure division enables customers to erase and repurpose IT devices with certified software. The Diagnostics division provides consistent, accurate and measurable diagnostics of smartphones and tablets, as well as a new diagnostics tool developed internally following the acquisition of the SmartChk product in the Xcaliber transaction. The Group has seen a significant increase in the number of customers contracting both erasure and diagnostics technology. The revenues have been allocated to the appropriate segments according to the respective portion of licences sold.
The revenues and adjusted operating profit of these divisions comprise the Group's continuing operations as presented in the financial statements, while discontinued revenues are comprised of the Digital Care insurance business which was disposed of in September 2016 and, additionally in the prior year, revenues associated with the Depot Repair business prior to the disposal of that business in April 2016.
The total result for the year, including the impact of the required accounting for discontinued operations was a loss of £4.3 million (2016 restated: £25.7 million).
The full results of the discontinued business are presented in note 7.
Erasure division
The Erasure division revenue increased to £23.5 million (2016 restated: £20.5 million), with the business acquiring a number of new customers in the year.
Adjusted operating profit was £4.6 million, at an adjusted operating profit margin of 19%, compared to an adjusted operating profit margin of 30% in 2016. The margin reduction is primarily due to the large investment in the sales force in the year which is expected to generate a benefit to revenue in subsequent financial years.
Diagnostics division
The Diagnostics division generated revenues of £4.2 million, comprising the multi-year contract with our large US mobile carrier (won in May 2016 and representing £3.2 million of revenue) as well as significant contract wins with additional carriers in Asia and Europe during 2017. This represents growth from the prior year revenues of £0.7 million (consolidated from January 2016, £1.3 million on a pro forma full year 2016 basis).
The division recorded adjusted operating profit for the first time in 2017, of £0.5 million (2016: £nil) owing to growth in new contracts, net of investment in the development and sales teams of the product in the first full year under Group control.
Revenue recognition
The Group monitors its sales performance by tracking invoiced revenue, which is a measure of the level of business won in the year. This differs from the reported revenue figures because IFRS revenue recognition requires the business to defer the revenue earned on software subscriptions - which have a defined term - over the term of the contract.
This generally has an adverse impact on revenue in the period in which the invoiced sale was made, because the revenue is held on the balance sheet and released in future periods as the contract is fulfilled. The impact is shown below:
|
|
2017 |
2016 Restated |
|
|
£'million |
£'million |
|
Invoiced revenue |
29.3 |
22.6 |
|
Net revenue deferral of subscription sales |
(1.4) |
(1.4) |
|
IFRS revenue discount |
(0.2) |
- |
|
Reported revenue |
27.7 |
21.2 |
|
|
|
|
An accounting adjustment for discounts has been recorded against revenue with the corresponding entry being recorded through reserves until the discount is claimed by the customer.
The total deferred revenue for the continuing Group at 30 June 2017 was £5.9 million (2016 restated: £4.2 million) which comprises revenue to be recognised in future periods. Of the balance at 30 June 2017, £4.5 million of deferred revenue is due to be recognised during 2018.
Of the £5.9 million deferred revenue balance, £3.2 million represents cash already collected from customers and £2.7 million is within trade receivables at the year end.
Corporate costs
Corporate costs of £1.7 million (2016: £1.5 million) have increased slightly. This cost comprises the costs associated with running the Plc function. The cost of Directors has increased in 2017 in comparison to 2016, as well as some small inflationary increases for services procured by the Plc such as listing and broker fees.
Currency hedging activities and constant currency
One of the risks that the Group faces by carrying out business in overseas markets is currency fluctuations. In order to manage the Group's exposure to this, the CFO conducts a quarterly review of the Group's currency hedging activities and makes a formal recommendation for any changes to the Board as required.
The Group is well diversified across ten main currencies with Sterling representing only around 10% of revenues. The Group has a policy of hedging cash balances across countries to minimise individual exposures in any one currency, however with the majority of revenues and costs in non-Sterling, there is exposure in translating of overseas results back into Sterling when that currency strengthens or weakens.
Following the UK's decision to leave the European Union in June 2016, Sterling weakened against all overseas currencies in which the Group trades. This has resulted in an overall foreign exchange benefit for the Group as the translation of revenues generated in foreign currencies is now worth more in Sterling terms.
The average exchange rates applied are as follows:
|
|
|
Average FY17 rate |
Average FY16 rate |
Variance |
% of FY17 Group sales |
|||
|
Euro |
|
1.166 |
1.329 |
(13%) |
18% |
|||
|
US Dollar |
|
1.271 |
1.473 |
(14%) |
47% |
|||
|
Japanese Yen |
|
139.187 |
171.83 |
(19%) |
18% |
|||
|
|
|
|
|
|
|
|||
The sales percentage represents amounts billed in that currency and is not directly comparable to the sales generated in any one jurisdiction.
A comparison of actual results, to results restated at constant currency is presented below:
|
|
|
Year ended 30 June 2017 |
Year ended 30 June 2017 |
|
|
|
Actual |
Constant |
|
|
|
Results
|
Currency |
|
|
|
£'million |
£'million |
|
Invoiced revenue |
|
29.3 |
25.9 |
|
Revenue |
|
27.7 |
24.7 |
|
Divisional operating profit |
|
5.1 |
4.9 |
|
Group adjusted operating profit |
|
3.4 |
3.2 |
|
Operating loss |
|
(2.5) |
(2.7) |
|
Adjusted earnings per share (pence) |
|
3.02 |
2.66 |
|
Basic earnings per share (pence) |
|
(5.20) |
(5.56) |
At a revenue level, the impact of the weakening of Sterling has been £3.0 million, representing 15 percentage points of the Group's year-on-year growth. The impact is less severe at profit level since the Group matches its revenues and costs generated in overseas currencies, creating a natural hedge.
The Group implements forward contracts for payments and receipts, where the amounts are large, are not denominated in the local country's functional currency, where the timing is known in advance, and where the amount can be predicted with certainty. In addition, the Group undertakes natural hedges by structuring and paying future earn-outs on acquisitions in the acquired Company's local currency.
The Group does not undertake any cash flow or profit hedging activities to insulate from currency movements in respect of overseas earnings, specifically the conversion of its largely non-Sterling generated income into the Group's reporting currency, Sterling.
No other hedging activities are undertaken in respect of tangible and intangible fixed assets, working capital (such as stock, debtors, or creditors), or other balance sheet items, as these are generally small in nature in any one individual country.
Acquisition of non-controlling interests
In the period, the Group has continued to invest further in its minority offices and has increased stakes in the following offices:
On 18 August 2016, the Group acquired the remaining 49% it did not already own of the issued share capital of Blancco Australasia Pty. The consideration of AUD$0.1 million (£0.1 million) was funded through the Group's cash reserves.
On 30 September 2016, the Group acquired an additional 19% stake in Blancco SEA Bhd Sdn, bringing its ownership to 70%. The consideration of USD$0.3 million (£0.3 million) was funded through the Group's cash reserves.
On 11 October 2016, the Group acquired the remaining 49% it did not already own of the issued share capital of Blancco France SAS for an initial consideration of €0.1 million (£0.1 million) and a contingent consideration of €0.1 million (£0.1 million). The deferred consideration is payable in or around December 2017. At 30 June 2017, the business had achieved the required sales target in order to earn a full pay out, and therefore the full contingent consideration will be settled.
On 9 February 2017, the Group increased its stake in the issued share capital of Software Blancco S.A. de CV (in Mexico) from 51% to 70% for a deferred consideration of USD$1.2 million (£1.0 million). The terms of the share purchase agreement were for the first 50% payment to be made six months after completion and the remaining 50%, twelve months after completion. However, in light of the matters associated with the Mexican contract from the year ended June 2016, the cash phasing has been renegotiated such that USD$0.4 million (£0.3 million) was settled in August 2017 and the remaining USD$0.8 million (£0.6 million) will be settled on a pro rata basis only in line with any cash collections.
On 13 February 2017, the Group acquired the remaining 50% it did not already own of the issued share capital of Blancco Canada Inc. The consideration of CAD$0.2 million (£0.2 million), was funded through the Group's cash reserves.
Dividends paid to non-controlling interests
On 27 September 2016, a dividend was declared and paid by Blancco Japan Inc. The total dividend of ¥57.0 million (£0.4 million) was paid, of which ¥27.9 million (£0.2 million) was paid to the minority shareholder. This resulted in a cash outflow for the Group of £0.2 million and a corresponding reduction in the non-controlling interest reserve held on the balance sheet. A similar transaction occurred with Blancco Australia at a cash cost of £0.1 million prior to the buyout of the 49% minority interest.
Disposal of Mobile Insurance business
The discontinued operations generated a profit for the period of £nil on a total revenue of £1.7 million (2016: £151.9 million revenue and £7.7 million loss). The result for the period represents the Mobile Insurance business only, compared to the combined Repair Services business (to March 2016) and Mobile Insurance business in the prior year.
The result includes £1.5 million of disposal provision released for which no claim was paid out, covering working capital adjustments and warranties. Further provisions remain in the June 2017 balance sheet, predominantly covering tax liabilities that could realise a cash outflow for up to seven years following the disposal dates.
Disposal costs, over and above those incurred in the disposal of the Repair Services business in April 2016, are presented within deal fees in the income statement and total £0.6 million, plus some small reorganisation costs incurred totalling £0.2 million.
On 30 September 2016, the Group sold the Mobile Insurance business to Mazovia Capital for contingent consideration payable over two to three years. The consideration is contingent on meeting certain performance measures with the first payment not falling due until 2018. Latest forecasts estimate that no consideration will be receivable and accordingly no contingent asset has been recorded.
Exceptional acquisition and restructuring costs
The Group has undertaken acquisitions of non-controlling interests in the period which have incurred acquisition expenses amounting to £1.7 million (2016: £1.3 million), and are inclusive of Hanover corporate advisory fees of £0.4 million (2016: £0.7 million relating to continuing operations).
Exceptional costs in the continuing business amounted to £1.0 million (2016: £nil) which predominantly relate to redundancy costs and legal fees associated with the Group's patent defence.
Amortisation of internally generated R&D expenditure
Amortisation of internally generated intangible assets which have been generated by the Group is presented within adjusted operating profit. The activity of the R&D team is split between research and administration activity which is not eligible for capitalisation, and development time which is required to be capitalised under IFRS. During 2017, the Group has capitalised R&D costs amounting to £2.6 million (2016: £2.3 million), and amortised previously capitalised R&D costs of £1.2 million (2016: £0.5 million).
The charge is increasing over time due to the accumulation of capital expenditure since the acquisition of Blancco in April 2014. The Group is continuing to invest greater amounts each year in its development activities and amortises the expenditure over the period the product is expected to last, generally four years from the point of release of the product. The amortisation is therefore currently lagging behind the development expenditure capitalised.
Amortisation of acquired intangibles
Amortisation of intangible assets acquired as part of the Group's previous M&A activity was £2.5 million (2016: £2.5 million) and is in line with the prior year since no acquisitions which have resulted in a change in control (nor recognition of newly acquired assets) have taken place during 2017.
Share-based payments
The share-based payments charge was £0.7 million (2016: £1.2 million) and represents the charge for the options granted under the software long term incentive plan.
The charge is lower than the previous year due to the decline in the share price over the last 12 months, and therefore a reduction in the accrued value of the awards currently vested.
During the year, two exercises took place under the plan, with values totalling £0.4 million. These were settled by transferring shares from the Company's Employee Benefit Trust (EBT) to the beneficiaries. Accordingly, a credit to reserves has been recorded representing the value generated from disposing of the EBT shares, with a corresponding reduction in the liabilities carried for the plan.
Net financing income
Net financing income was £0.8 million (2016: £0.9 million expense). Included within the financing income are:
· The unwind of the time value of money on the deferred consideration payable in future periods for the Group's acquisitions, which represents a non-cash charge of £0.5 million (2016: £0.3 million).
· The impact of revaluation of deferred consideration, due to both foreign exchange movements and future forecasts on which the contingent consideration is earned. A non-cash net credit of £1.6 million (2016: non-cash charge of £0.3 million) is principally due to a reduction in value of the Xcaliber earn-out due to a reduction in forecast qualifying revenues and to a reduction in value of the Blancco Sweden earn out due to matters associated with collection of debt from the active erasure sales which comprise part of the earn out value.
· The cost associated with the Group's banking facility of £0.3 million (2016: £0.4 million), reduced slightly due to the lower facility available for the continuing Group.
· Interest received from cash held on deposit of £nil (2016: £0.1 million)
Taxation
The total tax charge was £0.7 million (2016: £0.6 million). This comprises a corporation tax charge of £0.1 million and a deferred tax charge of £0.6 million. The Group is seeing a higher proportion of revenues generated in overseas territories, particularly in Japan where the tax rate is higher than the historic Group average.
Additionally, the deferred tax charge has increased year-on-year due to the deferred tax charge associated with provision releases.
Earnings per share
Adjusted earnings per share for the continuing business were 3.02p (2016 restated: 4.16p).
Basic loss per share for the continuing business was 5.20p (2016 restated: 5.17p), also driven by the change in share base.
Cash and working capital
|
|
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
30 June 2017 |
30 June 2016 Restated |
||
|
|
|
|
£'m |
£'m |
|
Adjusted operating cash flow before movement in working capital and exceptional and acquisition costs |
|
|
5.2 |
5.4 |
|
Movement in working capital and exceptionals |
|
|
(1.7) |
0.6 |
|
Movement in provisions |
|
|
(0.7) |
- |
|
Adjusted operating cash flow |
|
|
2.8 |
6.0 |
|
|
|
|
|
|
|
Net interest and tax payments |
|
|
(1.1) |
(0.9) |
|
M&A payments |
|
|
(1.5) |
(1.1) |
|
Exceptional payments |
|
|
(0.9) |
- |
|
Net cash from operating activities - continuing operations |
|
|
(0.7) |
4.0 |
|
|
|
|
|
|
|
Net capital expenditure |
|
|
(3.4) |
(2.5) |
|
Acquisition of subsidiaries, associates and other investments, net of cash acquired |
|
|
(1.0) |
(7.8) |
|
Net cash flow from share placing |
|
|
9.5 |
- |
|
Net cash flow from sale of subsidiaries and share buy backs |
|
|
- |
18.8 |
|
Dividend payments |
|
|
(1.4) |
(3.1) |
|
Other movements |
|
|
(0.1) |
(1.3) |
|
Cash flow on discontinued operations |
|
|
(2.2) |
(14.9) |
|
Total cash flow |
|
|
0.7 |
(6.8) |
|
Net cash |
|
|
1.7 |
1.0 |
The cash flows of the discontinued operations have been removed from the individual captions in the cash flow statement and are presented separately.
We closed the year with net cash of £1.7 million (2016: £1.0 million). The overall cash position has improved since 30 June 2016 due to a share placing which raised £9.5 million (fees totalling £0.2 million were paid subsequent to the year end).
Cash reserves have been utilised as follows:
· The continued investment in our operating locations of £2.8 million, representing:
o Costs of acquisition of non-controlling interests in Australia, France, South East Asia, Canada and Mexico
o Expansion into new territories: China, Singapore and Latin America.
· Exceptional costs including redundancies and engagement in patent defence to protect the market- leading position of the business, totalling £0.9 million.
· Cash flows associated with the discontinued business and disposal of the Mobile Insurance business of £2.2 million, representing:
o The budgeted final deal fees associated with the Repair Services business of £0.8 million
o Lower than expected sales activity in the Mobile Insurance business in the period as customers deferred spend during the disposal process, resulting in an adverse result of £0.7 million
o Deal costs associated with the disposal of £0.7 million.
Operating cash conversion is 80% and the absolute cash flow has reduced year-on-year by 54%.
The Group has seen a shift in the level of subscription business closed, for which cash is generally collected in advance of recognition of revenue.
Growth into new territories and associated up-front costs have also resulted in a cash outflow for which the working capital cycle should improve once the sales teams in these locations are fully ramped up.
Tax and interest paid are in line with prior periods, although a significant tax payment of £0.8 million was made in July 2017.
Capital expenditure and R&D qualifying for capitalisation was £3.4 million (2016: £2.5 million). Of this capital expenditure, £2.6 million (2016: £2.3 million) was incurred in the ongoing development of the Blancco product range. The remaining expenditure relates to purchase of property, plant and equipment and investment in the Group's operating systems.
Dividend paid of £1.4 million represents both the dividend paid to shareholders of the Group of £1.1 million and dividends paid to minority shareholders of the Group's subsidiaries of £0.3 million, which includes the dividend paid to the Japanese minority shareholder and former Australian minority shareholder, the latter as part of the purchase of the 49% share capital previously owned by the minority shareholder.
Other movements of £0.1 million outflow (2016: £1.3 million outflow) include changes in the value of overseas cash held on deposit when translated back into Sterling at the exchange rates prevailing at the end of the period.
Year end net cash comprised gross borrowings of £9.9 million denominated in Sterling (2016: £3.7 million in Sterling), cash and cash equivalents of £11.6 million (2016: £4.8 million) and deferred arrangement fees of £nil (2016: £nil).
Dividend
Given the position of the business and the need to invest for growth, the Board has decided not to pay a final dividend.
Post Year end events
In August 2017, the terms of the earn-out relating to Blancco Sweden were renegotiated (previously £1.1 million due for payment in March 2017). As a consequence of this renegotiation €0.2 million (£0.2 million) was settled in August 2017 and the remaining deferred contingent consideration will be settled following collection of cash from the Mexican contracts which comprised part of the earn-out value. At 30 June 2017, the fair value of the deferred contingent consideration that has not been settled in August 2017 has been measured at £nil.
Also, in August 2017, the terms of the contingent consideration on the acquisition of 19% of the issued share capital of Software Blancco S.A. de CV, were renegotiated. In light of the matters associated with the Mexican contract from June 2016, the cash phasing has been renegotiated such that $0.4 million (£0.3 million) was settled in August 2017 and the remaining $0.8 million (£0.6 million) will be settled on a pro rata basis only in line with collections from the associated customer. At 30 June 2017, the fair value of the deferred contingent consideration that has not been settled in August 2017 has been measured at £nil.
Key performance indicators
The Group has a range of performance indicators, both financial and non-financial, to monitor and manage the business and ultimately to improve performance. The Group's key performance indicators (KPIs) are outlined below:
|
|
|
Year ended |
Year ended |
Commentary |
|
Key financials |
|
30 June 2017
|
30 June 2016 Restated |
|
|
|
|
|
|
|
|
Invoiced Revenue (£'millions) |
|
29.3 |
22.6 |
Invoiced Revenue is an important KPI for the Group as it measures the actual sales closed and invoiced in the period, before any IFRS deferral of revenue. It is a key metric for how the sales force has grown the underlying business of the Group. |
|
Geography (Regional proportion of invoiced revenue) |
|
|
|
|
|
North America |
|
39% |
38% |
The profile is consistent year on year with our strategically important North America region benefiting from revenues from large new contracts. The move into new territories in Asia has marginally improved revenue share in this region. |
|
Europe |
|
34% |
36% |
|
|
Asia and ROW |
|
27% |
26% |
|
|
|
|
100% |
100% |
|
|
Market type (proportion of invoiced revenue) |
|
|
|
|
|
Active Erasure |
|
4% |
6% |
The strong growth in Mobile is an encouraging trend as sales in our Asian region have increased significantly year-on-year. Active Erasure performance is down due to non-recurrence of some prior year deals; this product continues to be a focus for growth. |
|
Mobile |
|
27% |
17% |
|
|
IT and Other |
|
69% |
77% |
|
|
|
|
100% |
100% |
|
|
Average annual spend per customer* (£'000) |
|
61.3 |
48.2 |
Our customers spend increasing amounts with us, showing the additional value our wide product range holds. |
|
End of year headcount |
|
|
|
|
|
Admin |
|
42 |
33 |
We continue to invest in headcount, through R&D development of our products and our sales force to generate new business. The business saw a significant increase in sales headcount in order to cover a greater number of territories and sales channels. |
|
R&D |
|
106 |
117 |
|
|
Sales |
|
125 |
101 |
|
|
|
|
273 |
251 |
|
* for customers spending over €10k per year
|
Consolidated Income Statement For the year ended 30 June 2017 |
|
|
Year ended |
Year ended |
|
|
30 June 2017 |
30 June 2016 Restated* |
||
|
|
|
Note |
£'000 |
£'000 |
|
Continuing operations revenue |
|
3 |
27,683 |
21,196 |
|
|
|
|
|
|
|
Divisional operating profit |
|
3 |
5,105 |
6,114 |
|
Corporate costs |
|
|
(1,665) |
(1,516) |
|
Adjusted operating profit |
|
3 |
3,440 |
4,598 |
|
Acquisition costs |
|
4 |
(1,736) |
(1,343) |
|
Exceptional restructuring costs |
|
5 |
(1,024) |
- |
|
Amortisation of acquired intangible assets |
|
|
(2,494) |
(2,494) |
|
Share-based payments |
|
|
(675) |
(1,167) |
|
|
|
|
|
|
|
Group operating loss |
|
|
(2,489) |
(406) |
|
Loss on disposal of Xcaliber investment following acquisition |
|
|
- |
(1,314) |
|
Share of results of associates and jointly controlled entities |
|
|
- |
(155) |
|
Operating loss |
|
|
(2,489) |
(1,875) |
|
Revaluation of deferred consideration |
|
|
1,686 |
- |
|
Other finance income |
|
|
2 |
68 |
|
Finance income |
|
6 |
1,688 |
68 |
|
Unwinding of contingent consideration |
|
|
(523) |
(292) |
|
Revaluation of deferred consideration |
|
|
(84) |
(293) |
|
Other finance costs |
|
|
(321) |
(416) |
|
Finance costs |
|
6 |
(928) |
(1,001) |
|
Loss before tax |
|
|
(1,729) |
(2,808) |
|
Taxation |
|
|
(666) |
(649) |
|
Loss for the year |
|
|
(2,395) |
(3,457) |
|
Discontinued operations |
|
|
|
|
|
Post tax results from discontinued operations |
|
7 |
(1,917) |
(22,198) |
|
Loss for the year |
|
|
(4,312) |
(25,655) |
|
Attributable to: Equity holders of the Company |
|
|
(4,866) |
(25,893) |
|
Non-controlling interest |
|
|
554 |
238 |
|
Loss for the year |
|
|
(4,312) |
(25,655) |
*See note 2
|
Earnings per share |
|
|
|
|
|
Continuing operations: Basic |
8 |
|
(5.20 p) |
(5.17 p) |
|
Diluted |
8 |
|
(5.20 p) |
(5.17 p) |
|
Discontinued operations: |
|
|
|
|
|
Basic |
8 |
|
(3.38 p) |
(31.03 p) |
|
Diluted |
8 |
|
(3.38 p) |
(31.03 p) |
|
Total Group: |
|
|
|
|
|
Basic |
8 |
|
(8.58 p) |
(36.20 p) |
|
Diluted |
8 |
|
(8.58 p) |
(36.20 p) |
|
|
|
|
|
|
|
Consolidated Statement of Comprehensive Income For the year ended 30 June 2017 |
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
30 June 2017 |
30 June 2016 Restated* |
||
|
|
|
|
£'000 |
£'000 |
|
Loss for the year |
|
|
(4,312) |
(25,655) |
|
Other comprehensive income - amounts that may be reclassified to profit or loss in the future: |
|
|
|
|
|
Exchange differences arising on translation of foreign entities |
|
|
(347) |
2,542 |
|
Total comprehensive loss for the year |
|
|
(4,659) |
(23,113) |
|
Attributable to: |
|
|
|
|
|
Equity holders of the Company |
|
|
(5,234) |
(23,351) |
|
Non-controlling interests |
|
|
575 |
238 |
|
Total comprehensive loss for the year |
|
|
(4,659) |
(23,113) |
*see note 2
|
Consolidated Balance Sheet As at 30 June 2017 |
|
|
|
|
|
|
|
|
30 June 2017 |
30 June 2016 Restated* |
|
|
Note |
|
£'000 |
£'000 |
|
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Goodwill |
|
|
42,821 |
42,821 |
|
Other intangible assets |
|
|
23,330 |
24,071 |
|
Property, plant and equipment |
|
|
446 |
430 |
|
|
|
|
66,597 |
67,322 |
|
Current assets |
|
|
|
|
|
Inventory |
|
|
142 |
116 |
|
Trade and other receivables |
|
|
8,438 |
6,551 |
|
Cash |
|
|
11,648 |
4,769 |
|
Assets held for sale |
7 |
|
- |
4,804 |
|
|
|
|
20,228 |
16,240 |
|
Total assets |
|
|
86,825 |
83,562 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
|
(13,958) |
(13,378) |
|
Contingent consideration |
|
|
(1,726) |
(2,213) |
|
Current tax liability |
|
|
(1,450) |
(2,264) |
|
Provisions |
|
|
(386) |
(1,569) |
|
Liabilities held for sale |
7 |
|
- |
(3,038) |
|
|
|
|
(17,520) |
(22,462) |
|
Non-current liabilities |
|
|
|
|
|
Borrowings |
12 |
|
(9,916) |
(3,727) |
|
Other payables |
|
|
(1,681) |
(954) |
|
Contingent consideration |
|
|
(2,418) |
(3,196) |
|
Deferred tax |
|
|
(2,611) |
(1,844) |
|
Provisions |
|
|
(2,035) |
(3,782) |
|
|
|
|
(18,661) |
(13,503) |
|
Total liabilities |
|
|
(36,181) |
(35,965) |
|
|
|
|
|
|
|
Net assets |
|
|
50,644 |
47,597 |
|
Equity |
|
|
|
|
|
Ordinary share capital |
|
|
1,280 |
1,164 |
|
Share premium |
|
|
9,152 |
- |
|
Merger reserve |
|
|
4,034 |
4,034 |
|
Capital redemption reserve |
|
|
417 |
417 |
|
Translation reserve |
|
|
(984) |
(434) |
|
Retained earnings |
|
|
35,703 |
41,895 |
|
Total equity attributable to equity holders of the Company |
|
|
49,602 |
47,076 |
|
Non-controlling interest reserve |
|
|
1,042 |
521 |
|
Total equity |
|
|
50,644 |
47,597 |
* see note 2
|
Consolidated Statement of Changes in Equity For the year ended 30 June 2017 |
|
|
|
|
||||||
|
|
Share capital |
Share premium |
Merger reserve |
Translation reserve |
Retained earnings |
Non-controlling interest reserve |
Capital redemption reserve |
Total |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
|
|
|
|
|
|
|
|
||
|
Balance as at 30th June 2015 |
1,581 |
51,737 |
4,034 |
(7,115) |
72,191 |
238 |
- |
122,666 |
||
|
Comprehensive income: |
|
|
|
|
|
|
|
|
||
|
Loss for the year* |
- |
- |
- |
- |
(25,893) |
238 |
- |
(25,655) |
||
|
Transfer of translation reserve on disposal of subsidiary |
- |
- |
- |
4,139 |
- |
- |
- |
4,139 |
||
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
||
|
Exchange differences arising on translation of foreign entities |
- |
- |
- |
2,542 |
- |
- |
- |
2,542 |
||
|
Transactions with owners recorded directly in equity: |
|
|
|
|
|
|
|
|
||
|
Recognition of share-based payments |
- |
- |
- |
- |
757 |
- |
- |
757 |
||
|
Dividends paid |
- |
- |
- |
- |
(3,071) |
- |
- |
(3,071) |
||
|
Other transactions: |
|
|
|
|
|
|
|
|
||
|
Acquisition of non-controlling interest without a change in control |
- |
- |
- |
- |
(3,046) |
- |
- |
(3,046) |
||
|
Conversion of share premium account |
- |
(51,737) |
- |
- |
51,737 |
- |
- |
- |
||
|
On acquisition of subsidiary |
- |
- |
- |
- |
- |
(43) |
- |
(43) |
||
|
Reserves transfer on acquisition of non-controlling interest |
- |
- |
- |
- |
(88) |
88 |
- |
- |
||
|
Repurchase and cancellation of Company's own shares |
(417) |
- |
- |
- |
(50,692) |
- |
417 |
(50,692) |
||
|
Balance as at 30 June 2016* |
1,164 |
- |
4,034 |
(434) |
41,895 |
521 |
417 |
47,597 |
||
|
Comprehensive income: |
|
|
|
|
|
|
|
|
||
|
(Loss)/profit for the year |
- |
- |
- |
- |
(4,866) |
554 |
- |
(4,312) |
||
|
Reserves transfer on disposal of subsidiary |
- |
- |
- |
(182) |
- |
- |
- |
(182) |
||
|
Transactions with owners recorded directly in equity: |
|
|
|
|
|
|
|
|
||
|
Recognition of share-based payments |
- |
- |
- |
- |
343 |
- |
- |
343 |
||
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
||
|
Exchange differences arising on translation of foreign entities |
- |
- |
- |
(368) |
- |
21 |
- |
(347) |
||
|
Dividends paid |
- |
- |
- |
- |
(1,139) |
(278) |
- |
(1,417) |
||
|
Share placing |
116 |
9,152 |
- |
- |
- |
- |
- |
9,268 |
||
|
Share options exercised |
- |
- |
- |
- |
407 |
- |
- |
407 |
||
|
Vesting of options to sell shares in subsidiary |
- |
- |
- |
- |
165 |
- |
- |
165 |
||
|
Other transactions: |
|
|
|
|
|
|
|
|
||
|
Acquisition of non-controlling interest without a change in control |
- |
- |
- |
- |
(1,041) |
- |
- |
(1,041) |
||
|
Issue of shares to non-controlling interest |
- |
- |
- |
- |
- |
163 |
- |
163 |
||
|
Reserves transfer on acquisition of non-controlling interest |
- |
- |
- |
- |
(61) |
61 |
- |
- |
||
|
Balance as at 30 June 2017 |
1,280 |
9,152 |
4,034 |
(984) |
35,703 |
1,042 |
417 |
50,644 |
||
|
*restated see note 2 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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|
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* see note 2
1. Basis of Preparation
The financial information set out in this statement does not constitute the Group's statutory accounts for the years ended 30 June 2017 or 30 June 2016. The financial information is derived from those accounts for the year ended 30 June 2016 and from the draft version of those accounts of the year ended 30 June 2017. Statutory accounts for the year ended 2016 have been delivered to the Registrar of Companies and those for 2017 will be delivered in due course. The audit of the statutory accounts for the year ended 30 June 2017 is not yet complete. The Group's auditors have reported on the 30 June 2016 accounts; their report was unmodified, did not draw attention to any matters by way of emphasis without modifying their report and did not contain statements under s498 (2) or (3) of the Companies Act 2006. Whilst the financial information included in this announcement has been computed in accordance with International Financial Reporting Standards ("IFRS") this announcement does not itself contain sufficient information to comply with IFRS.
2. Prior Year Adjustment
A prior year adjustment has been made, relating to the recognition of £1.2 million of revenue that was previously booked in the year ended 30 June 2016 (and prepaid costs relating to revenue expected to be booked in the 2017 year end). The Board review performed from August 2017 identified new evidence which indicated that at the time of signing the accounts on 30 September 2016, although certain licences had been delivered to the customer, no contractual agreement was in existence with the customer which adequately supported the criteria for recognition of revenue under the Group's accounting policies at that time. As a result, invoiced trade receivables of £2.1 million as at 30 June 2016 have been reversed, together with the prepayment of £0.3 million of costs associated with the undelivered portion of the contract, which has now been written off in the year to 30 June 2016. Deferred revenue of £0.6 million and sales tax of £0.3 million is similarly reversed, together with revenue recognised of £1.2 million.
A summary of the impact of the prior year adjustment on the consolidated income statement and consolidated statement of cash flows for the year ended 30 June 2016, as well as the consolidated balance sheet as at 30 June 2016 arising from the restatements, are as follows:
Consolidated Income Statement for the Year Ended 30 June 2016
|
Continuing Operations |
|
As reported £'000 |
Overstatement of revenue and trade and other receivables |
Restated £'000 |
|
Revenue |
|
22,387 |
(1,191) |
21,196 |
|
Divisional adjusted operating profit |
|
7,605 |
(1,491) |
6,114 |
|
Adjusted operating profit |
|
6,089 |
(1,491) |
4,598 |
|
Operating loss |
|
(384) |
(1,491) |
(1,875) |
|
Loss before tax |
|
(1,317) |
(1,491) |
(2,808) |
|
Tax |
|
(649) |
- |
(649) |
|
Loss for the period |
|
(1,966) |
(1,491) |
(3,457) |
|
Loss from discontinued operations |
|
(22,198) |
- |
(22,198) |
|
Loss for the year |
|
(24,164) |
(1,491) |
(25,655) |
No adjustment to the tax charge for the previous year has been made since an invoice had been raised in respect of this contract and, while unpaid, there is a likelihood that the tax could be demanded from the Mexican government as a result.
There is no change to the previously reported cash outflow from operating activities, cash used in investing activities and cash used in financing activities. The cash conversion has been restated to 130%, previously 96% following the reduction in adjusted operating profit.
There is no impact on the balance sheet or retained profits at 30 June 2015. Retained profits at 30 June 2016 are reduced by £1.5 million.
Consolidated Balance Sheet as at 30 June 2016
|
|
As reported |
Overstatement of revenue and trade and other receivables
|
Restated |
|
|
£'000 |
£'000 |
£'000 |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
42,821 |
- |
42,821 |
|
Other intangible assets |
24,071 |
- |
24,071 |
|
Property, plant and equipment |
430 |
- |
430 |
|
|
67,322 |
- |
67,322 |
|
Current assets |
|
|
|
|
Inventory |
116 |
- |
116 |
|
Trade and other receivables |
8,901 |
(2,350) |
6,551 |
|
Cash |
4,769 |
- |
4,769 |
|
Assets held for sale |
4,804 |
- |
4,804 |
|
|
18,590 |
(2,350) |
16,240 |
|
Total assets |
85,912 |
(2,350) |
83,562 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
(14,237) |
859 |
(13,378) |
|
Contingent consideration |
(2,213) |
- |
(2,213) |
|
Current tax liability |
(2,264) |
- |
(2,264) |
|
Provisions |
(1,569) |
- |
(1,569) |
|
Liabilities held for sale |
(3,038) |
- |
(3,038) |
|
|
(23,321) |
859 |
(22,462) |
|
Non-current liabilities |
|
|
|
|
Borrowings |
(3,727) |
- |
(3,727) |
|
Other payables |
(1,674) |
- |
(954) |
|
Contingent consideration |
(3,196) |
- |
(3,196) |
|
Deferred tax |
(1,844) |
- |
(1,844) |
|
Provisions |
(3,062) |
- |
(3,782) |
|
|
(13,503) |
- |
(13,503) |
|
Total liabilities |
(36,824) |
859 |
(35,965) |
|
|
|
|
|
|
Net assets |
49,088 |
(1,491) |
47,597 |
3. Segmental Reporting
The Group's management structure is reported in two distinct divisions, comprising the continuing operations:
Erasure Division
The Erasure division enables customers to erase and repurpose IT devices with certified software.
Diagnostics Division
The Diagnostics division provides consistent, accurate and measurable diagnostics of smartphones and tablets, as well as a new diagnostics tool developed internally following the acquisition of the SmartChk product in the Xcaliber transaction.
Discontinued Operations
Discontinued revenues are comprised of the Digital Care insurance business which was disposed in September 2016 and additionally, in the prior year revenues associated with the Depot Repair business prior to the disposal date in April 2016.
|
|
|
Year ended 30 June 2017
|
Year ended 30 June 2016 Restated |
|||
|
Continuing operations |
|
£'000 |
£'000 |
|||
|
Erasure revenue |
|
23,520 |
20,468 |
|||
|
Diagnostics revenue |
|
4,163 |
1,017 |
|||
|
Less: share of jointly controlled entity |
|
- |
(289) |
|||
|
Diagnostics revenue |
|
4,163 |
728 |
|||
|
Software revenue |
|
27,683 |
21,196 |
|||
|
Erasure |
|
4,557 |
6,101 |
|||
|
Diagnostics |
|
548 |
13 |
|||
|
Divisional operating profit |
|
5,105 |
6,114 |
|||
|
Corporate costs |
|
(1,665) |
(1,516) |
|||
|
Adjusted operating profit |
|
3,440 |
4,598 |
|||
|
Acquisition costs |
|
(1,736) |
(1,343) |
|||
|
Exceptional restructuring costs |
|
(1,024) |
- |
|||
|
Amortisation of intangible assets |
|
(2,494) |
(2,494) |
|||
|
Share-based payments |
|
(675) |
(1,167) |
|||
|
Group operating loss |
|
(2,489) |
(406) |
|||
|
Loss on disposal of Xcaliber investment following acquisition |
|
- |
(1,314) |
|||
|
Share of results of associates and jointly controlled entities |
|
- |
(155) |
|||
|
Operating loss |
|
(2,489) |
(1,875) |
|||
|
Revaluation of contingent consideration |
|
1,686 |
- |
|||
|
Other finance income |
|
2 |
68 |
|||
|
Finance income |
|
1,688 |
68 |
|||
|
Unwinding of discount factor on contingent consideration |
|
(523) |
(292) |
|||
|
Revaluation of contingent consideration |
|
(84) |
(293) |
|||
|
Other finance costs |
|
(321) |
(416) |
|||
|
Finance costs |
|
(928) |
(1,001) |
|||
|
Loss before tax |
|
(1,729) |
(2,808) |
|||
|
|
|
|
|
|||
|
|
|
Year ended 30 June 2017
|
Year ended 30 June 2016
|
|||
|
Discontinued operations |
|
£'000 |
£'000 |
|||
|
Revenue |
|
1,740 |
151,901 |
|||
|
Divisional operating (loss)/profit |
|
(346) |
9,711 |
|||
|
Corporate costs |
|
(415) |
(3,438) |
|||
|
Adjusted operating (loss)/profit |
|
(761) |
6,273 |
|||
|
Acquisition and disposal costs |
|
(595) |
(9,600) |
|||
|
Exceptional restructuring costs |
|
(165) |
(1,542) |
|||
|
Other exceptional income |
|
1,478 |
- |
|||
|
Amortisation of intangible assets |
|
- |
(425) |
|||
|
Share-based payments |
|
- |
(714) |
|||
|
Operating loss |
|
(43) |
(6,008) |
|||
|
Finance income |
|
- |
20 |
|||
|
Unwinding of discount factor on contingent consideration |
|
- |
(342) |
|||
|
Other finance costs |
|
- |
(1,337) |
|||
|
Net finance cost |
|
- |
(1,659) |
|||
|
Loss before tax |
|
(43) |
(7,667) |
|||
4. Acquisition Costs
|
|
|
|
2017 |
2016 |
|
|
|
|
£'000 |
£'000 |
|
Acquisition costs and other M&A related costs |
|
|
1,736 |
1,343 |
|
|
|
|
1,736 |
1,343 |
Acquisition costs relate to the M&A activity within the year with the most significant costs in both years relating to the buyouts of minority interest stakes in sales offices.
Deal costs not included above relate to the disposal of the Repair Services and Mobile Insurance Business totalling £0.6 million (2016: £9.6 million) and are presented within discontinued operations.
5. Exceptional Restructuring Costs
|
|
|
|
2017 |
2016 |
|
|
|
|
£'000 |
£'000 |
|
Redundancies and restructuring |
|
|
846 |
- |
|
Patent defence litigation |
|
|
178 |
- |
|
|
|
|
1,024 |
- |
£1.0 million of exceptional restructuring costs have been recorded in the current period (2016: £nil) relating to personnel restructuring and litigation regarding patent infringement.
Exceptional redundancy and restructuring costs not included above relate to the restructuring activities for the disposal of the Repair Services and Mobile Insurance Business totalling £0.2 million (2016: £1.5 million), and are presented within discontinued operations.
6. Finance Costs and Finance Income
|
|
|
|
2017 |
2016 |
|
Continuing operations |
|
|
£'000 |
£'000 |
|
Bank interest receivable and similar income |
|
|
2 |
68 |
|
Interest payable on borrowings: |
|
|
- |
- |
|
Bank loans and overdrafts |
|
|
(307) |
(377) |
|
Other finance costs |
|
|
(14) |
(39) |
|
Revaluation of contingent consideration |
1,602 |
(293) |
||
|
Unwind of discount factor on contingent consideration |
(523) |
(292) |
||
|
Net finance income/(cost) |
|
|
760 |
(933) |
Contingent consideration was revalued in respect of movements in foreign exchange rates in the year and a reforecast of contingent consideration payable in relation to the Xcaliber and Blancco Sweden acquisitions which is based on the performance of the business and revenue and associated cash collection targets. The impact was a decrease in the present value of the liability in Sterling of £1.6 million.
7. Discontinued Operations
|
|
|
|
Year ended30 June2017 |
Year ended30 June 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
£'000 |
£'000 |
|
|
Discontinued operations revenue |
|
|
1,740 |
151,901 |
|
|
|
|
|
|
|
|
|
Divisional operating (loss)/profit |
|
|
(346) |
9,711 |
|
|
Corporate costs |
|
|
(415) |
(3,438) |
|
|
Adjusted operating (loss)/profit |
|
|
(761) |
6,273 |
|
|
Acquisition and disposal costs |
|
|
(595) |
(9,600) |
|
|
Exceptional restructuring costs |
|
|
(165) |
(1,542) |
|
|
Other exceptional Income |
|
|
1,478 |
- |
|
|
Amortisation of intangible assets |
|
|
- |
(425) |
|
|
Share-based payments |
|
|
- |
(714) |
|
|
|
|
|
|
|
|
|
Group Operating loss |
|
|
(43) |
(6,008) |
|
|
Other finance income |
|
|
- |
20 |
|
|
Finance income |
|
|
- |
20 |
|
|
Unwinding of contingent consideration |
|
|
- |
(342) |
|
|
Other finance costs |
|
|
- |
(1,337) |
|
|
Finance costs |
|
|
- |
(1,679) |
|
|
Loss before tax |
|
|
(43) |
(7,667) |
|
|
Taxation |
|
|
(318) |
(609) |
|
|
Loss for the period |
|
|
(361) |
(8,276) |
|
|
Post tax loss on disposal of discontinued business |
|
|
(1,556) |
(13,922) |
|
The loss on disposal reconciliation for the disposal of the Mobile Insurance business is as below. In the prior year the loss on disposal related to the Repair Services business and Digital Care Sweden AB.
|
|
|
Year ended |
Year ended |
|
30 June |
30 June |
||
|
2017 |
2016 |
||
|
|
|
£'000 |
£'000 |
|
Proceeds |
|
- |
79,914 |
|
Assets |
|
|
|
|
Goodwill |
|
|
49,816 |
|
Other intangible assets |
|
1,472 |
5,186 |
|
Property, plant and equipment |
|
125 |
7,894 |
|
Deferred taxation |
|
298 |
2,404 |
|
Cash |
|
154 |
10,396 |
|
Inventory |
|
42 |
9,881 |
|
Trade and other receivables |
|
2,441 |
27,585 |
|
Total assets disposed |
|
4,532 |
113,162 |
|
Liabilities |
|
|
|
|
Trade and other payables |
|
(2,794) |
(20,299) |
|
Deferred consideration |
|
- |
(3,166) |
|
Total liabilities disposed |
|
(2,794) |
(23,465) |
|
Total net assets disposed |
|
1,738 |
89,697 |
|
Transfer of translation differences to Consolidated Income Statement |
|
(182) |
4,139 |
|
Loss on disposal |
|
(1,556) |
(13,922) |
On disposal of the Mobile Insurance business, the Group is required to transfer accumulated foreign exchange differences from the translation reserve to the Income Statement. This charge amounted to £0.2 million (2016: £4.1 million).
On 19th September 2017, the Group reached an agreement to sell the Mobile Insurance business to Mazova Capital for an initial contingent consideration of €1.2 million (£1.0 million) with a further contingent earn-out of €3.3 million (£2.8 million) payable over two to three years. The consideration is contingent on meeting certain performance measures with the first payment will not become due until 2018. Latest forecasts estimate that no consideration will be receivable and accordingly no contingent asset has been recorded.
The cash flows associated with the discontinued operations are as follows:
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8. Earnings Per Share (EPS)
|
|
|
Year Ended |
Year ended |
|
|
|
|
30 June 2017
|
30 June 2016 Restated |
|
|
|
|
Pence |
Pence |
|
|
Continuing operations |
|
|
|
|
|
Basic earnings per share |
|
(5.20 p) |
(5.17 p) |
|
|
Diluted earnings per share |
|
(5.20 p) |
(5.17 p) |
|
|
Adjusted earnings per share |
|
3.02 p |
4.16 p |
|
|
Diluted adjusted earnings per share |
|
3.02 p |
4.16 p |
|
|
Discontinued operations |
|
|
|
|
|
Basic earnings per share |
|
(3.38 p) |
(31.03 p) |
|
|
Diluted earnings per share |
|
(3.38 p) |
(31.03 p) |
|
|
Adjusted earnings per share |
|
(1.90 p) |
7.18 p |
|
|
Diluted adjusted earnings per share |
|
(1.90 p) |
7.18 p |
|
|
Total Group |
|
|
|
|
|
Basic earnings per share |
|
(8.58 p) |
(36.20 p) |
|
|
Diluted earnings per share |
|
(8.58 p) |
(36.20 p) |
|
|
Adjusted earnings per share |
|
1.12 p |
11.34 p |
|
|
Diluted adjusted earnings per share |
|
1.12 p |
11.34 p |
|
|
|
|
|
|
|
|
|
|
Year ended |
Year ended |
|
|
|
|
30 June 2017 |
30 June 2016 |
|
|
|
|
|
Restated |
|
|
Continuing operations |
|
£'000 |
£'000 |
|
|
Loss for the period |
|
(2,395) |
(3,457) |
|
|
Profit attributable to non-controlling interests |
|
(554) |
(238) |
|
|
Loss attributable to equity holders of the Parent parpaparentCompany |
|
(2,949) |
(3,695) |
|
|
|
|
|
|
|
|
Reconciliation to adjusted profit: |
|
|
|
|
|
Unwinding of contingent consideration |
|
523 |
292 |
|
|
Revaluation of contingent consideration |
|
(1,602) |
293 |
|
|
Acquisition costs |
|
1,736 |
1,343 |
|
|
Amortisation of acquired intangible assets |
|
2,494 |
2,494 |
|
|
Exceptional restructuring costs |
|
1,024 |
- |
|
|
Exceptional bank charges |
|
14 |
17 |
|
|
Share-based payments |
|
675 |
1,167 |
|
|
Loss on disposal of Xcaliber investment following acquisition |
|
- |
1,314 |
|
|
Tax impact of above adjustments |
|
(205) |
(251) |
|
|
Adjusted profit for the period |
|
1,710 |
2,974 |
|
|
|
Year ended |
Year ended |
|
|
|
|
30 June 2017 |
30 June 2016 |
|
|
|
|
|
|
|
|
Discontinued operations |
|
£'000 |
£'000 |
|
|
Loss attributable to equity holders of the Parent Company |
|
(1,917) |
(22,198) |
|
|
|
|
|
|
|
|
Reconciliation to adjusted profit: |
|
|
|
|
|
Unwinding of contingent consideration |
|
- |
342 |
|
|
Acquisition costs |
|
595 |
9,600 |
|
|
Amortisation of intangible assets |
|
- |
425 |
|
|
Exceptional restructuring costs |
|
165 |
1,542 |
|
|
Exceptional bank charges |
|
- |
793 |
|
|
Share-based payments
|
|
- |
714 |
|
|
Provision release |
|
(1,478) |
- |
|
|
Disposal of discontinued operations |
|
1,556 |
13,922 |
|
|
Adjusted (loss)/profit for the period |
|
(1,079) |
5,140 |
|
Number of shares |
|
|
'000s |
'000s |
|
Weighted average number of shares used to calculate earnings per share |
|
|
||
|
- Basic |
|
|
56,668 |
71,537 |
|
- Diluted |
|
|
56,668 |
71,537 |
The ordinary share capital at 30 June 2017 was 63,989,266 shares (2016: 58,189,266) following a share repurchase and cancellation of 20,833,333 shares on 6 May 2016 and share placing of 5,800,000 ordinary shares on 9 May 2017.
9. Acquisitions
Acquisitions of Non-controlling Interests
On 18 August 2016, the Group acquired the remaining 49% of the share capital of Blancco Australasia Pty which it did not already own, for a cost of AUD$0.1 million (£0.1 million). There is no earn-out.
On 30 September 2016, the Group acquired 19% of the share capital of Blancco SEA Sdn Bhd, taking ownership to 70% for a cost of $0.3 million (£0.3 million). There is no earn-out.
On 11 October 2016, the Group acquired the remaining 49% it did not already own, of the issued share capital of Blancco France SAS for an initial consideration of €0.1 million (£0.1 million) and a contingent consideration of €0.1 million (£0.1 million). The deferred consideration is payable in December 2017. At 30 June 2017, the business had achieved the required sales target in order to earn a full pay out, and therefore the full contingent consideration will be settled in H1 2018.
On 9 February 2017, the Group acquired a further 19% of the issued share capital of Software Blancco S.A. de CV, bringing the Group's stake to 70%. The consideration of USD$1.2 million (£1.0 million) was due to be payable in two tranches, the first 50% due six months after completion and the remaining 50% due twelve months after completion. However, in light of the matters associated with the Mexican contract from the year ended June 2016, the cash phasing has been renegotiated such that $0.4 million (£0.3 million) was settled in August 2017 and the remaining $0.8 million (£0.6 million) will be settled on a pro rata basis only in line with any collections. At 30 June 2017, the fair value of the deferred contingent consideration that has not been settled in August 2017 has been measured at £nil.
On 13 February 2017, the Group acquired the remaining 49% it did not already own of the issued share capital of Blancco Canada Inc. The consideration of CAD$0.2 million (£0.2 million) was funded through the Group's cash reserves. There is no earn-out.
The buyouts of non-controlling interests do not require a fair value assessment as they were already under control of the Group when the initial Blancco acquisition was completed on 16 April 2014.
In accordance with IFRS10, "Consolidated Financial Statements", the purchase prices for each acquisition have been taken directly to the Retained Earnings reserve, in addition to the non-controlling interest in the balance sheet attributable to each acquisition as at the respective acquisition dates.
10. Cash Flows Associated with Acquisitions and Disposals
Within the consolidated cash flow statement, the cash flow relating to acquisitions of subsidiaries, net of cash acquired relates to payment of contingent consideration on Xcaliber of £0.7 million.
Within the consolidated cash flow statement, the payments made to acquire non-controlling interest is as follows:
|
|
|
£'000 |
|
Acquisition of minority interest of Blancco France SAS |
|
73 |
|
Acquisition of minority interest of Blancco SEA |
|
146 |
|
Acquisition of minority interest of Blancco Australia Pty |
|
106 |
|
Acquisition of minority interest of Blancco Canada Inc |
|
137 |
|
Net cash flow - payments made to acquire non-controlling interests |
|
462 |
No cash or overdraft was acquired as part of the non-controlling interest buy-outs since the cash balances were consolidated by virtue of the existing shareholding being a controlling stake.
The Group received cash consideration of $0.2 million (£0.1 million) in respect of the 30% of share capital subscribed by minority interests in Blancco APAC Pte Ltd.
11. Dividends
|
|
2017 |
2017 |
2016 |
2016 |
|
|
£'000 |
Pence per share |
£'000 |
Pence per share |
|
Previous year final |
747 |
1.34 |
2,565 |
3.35 |
|
Current year interim dividend |
392 |
0.70 |
506 |
0.66 |
|
|
1,139 |
2.04 |
3,071 |
4.01 |
12. Bank Borrowings
|
|
|
|
2017 |
2016 |
|
|
|
|
£'000 |
£'000 |
|
Due after more than one year: |
|
|
|
|
|
Secured bank loan |
|
|
9,916 |
3,727 |
|
Repayable: In the first to second years inclusive |
|
|
- |
- |
|
In the third to fifth years inclusive |
|
|
9,916 |
3,727 |
The bank borrowing is secured on the majority of the Group's assets for the duration of the Revolving Credit Facility. The total facility available to the Group as at 30 June 2017 totalled £12.4 million (2016: £11.5 million), of which £9.9 million (2016: £3.7 million) had been drawn down in cash, resulting in an unutilised facility of £2.5 million (2016: £7.8 million). Borrowing costs of £nil (2016: £nil) are set off against the amount owing at year end.
The facility is available until October 2019, which gives Blancco clear certainty of funding over the next two years.
All banking covenants have been satisfied in the year and show headroom for the foreseeable future.
13. Subsequent Events
In August 2017, the terms of the earn-out relating to Blancco Sweden were renegotiated (previously £1.1 million due for payment in March 2017). As a consequence of this renegotiation €0.2 million (£0.2 million) was settled in August 2017 and the remaining deferred contingent consideration will be settled following collection of cash from the Mexican contracts which comprised part of the earn-out value. At 30 June 2017, the fair value of the deferred contingent consideration that has not been settled in August 2017 has been measured at £nil.
Also, in August 2017, the terms of the contingent consideration on the acquisition of 19% of the issued share capital of Software Blancco S.A. de CV, were renegotiated. In light of the matters associated with the Mexican contract from June 2016, the cash phasing has been renegotiated such that $0.4 million (£0.3 million) was settled in August 2017 and the remaining $0.8 million (£0.6 million) will be settled on a pro rata basis only in line with collections from the associated customer. At 30 June 2017, the fair value of the deferred contingent consideration that has not been settled in August 2017 has been measured at £nil.
14. Related Party Transactions
Transactions between Blancco and its 100% subsidiaries, which are related parties, have been eliminated on consolidation. No disclosure of these transactions is required under IAS24.
Matthew Peacock, Non-executive Chairman (until 14 March 2017) is associated with Hanover Investors Management LLP. A fee is charged for his services as a Non-executive Director which is disclosed in the Directors' Remuneration Report.
Hanover Investors previously had an indirect beneficial interest in the shares of the Group until 3 October 2016 when Hanover Investors Management LLP sold its remaining shares in the Company. The combined holding of Hanover Investors Management LLP and its connected parties on 30 June 2016 was 209,728 ordinary shares equating to 0.36% of the issued share capital of the Company.
During the year, fees amounting to £400,000 were incurred for M&A related consultancy services provided by Hanover Investors Management LLP or its connected parties (2016: £1,580,200). At 30 June 2017, Hanover were no longer a related party (2016: £nil outstanding in relation to these services).
These services were for corporate finance advisory and services related to the minority interest buy-outs that have taken place in the year ended 30 June 2017.
These fees were benchmarked against fees paid to our other advisors, with the Board considering that Hanover offered the best alternative to any third parties based on the work performed for the Group on previous acquisitions.
Property lease costs of £96,000 (2016: £165,000) were recharged to Hanover Investors Management LLP in the year, of which £nil was outstanding at the year-end (2016: £nil).
15. Definitions
Adjusted Earnings Per Share: Adjusted earnings are stated before amortisation or impairment of acquired intangible assets and development costs capitalised, amortisation of bank fees, exceptional restructuring costs, acquisition costs, share-based payments, losses on disposals of investments and jointly controlled entities, unwinding of the discounted contingent consideration, adjustments to estimates of contingent consideration, and tax impacts of the above. Adjusted earnings per share is the key earnings per share measure used by the Board.
Adjusted Operating Cash Flow or AOCF: Operating cash flow excluding taxation, interest payments and receipts, acquisition costs, and exceptional restructuring costs. This measure excludes capital expenditure. This is the key operating cash flow measure used by the Board to assess the underlying cash flow of the Group.
Adjusted Operating Profit or AOP: Operating Profit stated before acquisition costs (because these are one-off in nature), exceptional restructuring costs (because these are not considered to reflect the underlying performance of the Group's operating business), share-based payment charges (because these represent a non-cash accounting charge for long term incentives to senior management rather than the underlying operations of the Group's business), amortisation or impairment of acquired intangible assets (because these are non-cash charges arising as a result of the application of acquisition accounting, rather than core operations), the non-cash amortisation charge of development expenditure capitalised (because this does not reflect an ongoing cash outflow of the Group), and disposal of subsidiaries (because these represent a one-off non-cash charge to the consolidated income statement).
16. Notice of Annual General Meeting
The Annual General Meeting of the Company will be held at 4.00pm on Tuesday 19 December 2017 at Shakespeare Martineau LLP, 60 Gracechurch Street, London EC3V 0HR.
17. Report and Accounts
Copies of the Annual Report and Accounts will be available from the Company's website - www.blancco.com on or before 30 November 2017. Copies will be sent to shareholders in due course and will be available from the registered office of 60 Gracechurch Street, London EC3V 0HR.
This information is provided by RNS
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