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Blancco Tech Grp PLC (BLTG)

  Print          Annual reports

Tuesday 29 September, 2020

Blancco Tech Grp PLC

Final results for the year ended 30 June 2020

RNS Number : 3646A
Blancco Technology Group PLC
29 September 2020
 

29 September 2020 

 

Blancco Technology Group plc

Final results for the year ended 30 June 2020

Positive momentum across the business as data security and sustainability support continued growth 

Blancco Technology Group plc (AIM: BLTG, "Blancco", the "Company" or the "Group"), the industry standard in data erasure and mobile device diagnostics, is pleased to announce its audited final results for the year ended 30 June 2020.

FINANCIAL AND OPERATIONAL HIGHLIGHTS

£m unless otherwise stated

FY20

FY19*

Change

Revenue

33.4

30.5

+9%

Gross Profit

31.6

29.0

+9%

Adjusted EBITDA**

8.1

7.0

+17%

Adjusted Operating Profit**

4.0

3.5

+14%

Operating Profit

0.0

0.1


Loss before taxation (continuing operations)

(0.2)

(0.4)

+52%

Adjusted Operating Cash Flow***

7.3

9.1

-20%

Cash generated from continuing operations

6.5

9.1

-29%

Diluted Earnings per share

1.54p

0.95p

+62%

Net Cash

6.7

0.1


 

· Revenue growth of 9% (constant exchange rates ('CER') +7%) across all market segments:

Enterprise revenue increased by 13% (CER +11%) to £11.7 million (FY 2019: £10.3 million)

Mobile revenue increased by 8% (CER +5%) to £10.8 million (FY 2019: £10.0 million)

IT Asset Disposition ("ITAD") revenue increased by 7% (CER +6%) to £10.9 million (FY 2019: £10.2 million)

· Adjusted Operating Cash Flow returning to normalised level of 90% (FY 2019: 131%) of Adjusted EBITDA following exceptional cash generation in the prior year

· Full integration of Inhance Technology with additional mobile diagnostics capability driving new business generation, particularly in the mobile phone insurance sector

· Achieved "Advanced Technology Partner" status with Amazon Web Services ("AWS") in December 2019 and launched services on the AWS marketplace in June 2020

· Secured a key distribution partnership with Deloitte India

· Master Services Agreement secured with Aon to open new revenue stream in mobile insurance

· Continuing investment in R&D: protected IP position strengthened further with nine new patents filed in the period, entirely relating to the mobile product

· One of the first companies to be awarded the London Stock Exchange Green Economy Mark accreditation in recognition of over 50 per cent revenue generation from contribution to the sustainable economy

 

CURRENT TRADING AND OUTLOOK

· Trading started positively in Q1 FY 2021, with particularly high levels of activity in the Enterprise segment and progress made with a number of blue-chip distributors further strengthening the pipeline

· The Mobile segment is experiencing a gradual return to normal trading although the Board believes the impact of COVID-19 on sales cycles will affect financial performance in H1 FY 2021

· The Board is cognisant of the potential for further disruption due to the COVID-19 pandemic, but remains confident in the medium term revenue and earnings growth, given the high quality, resilient business model and strong tailwinds as data security and ESG considerations become a key focus for businesses across the globe

*Prior year results have been restated following the implementation of new accounting standard, IFRS16. See note 1.1 for details.

**Adjusted profit measures are stated after excluding expenses relating to share option schemes, exceptional costs & incomes and the amortisation of acquired intangible assets

*** Adjusted operating cash flow is operating cash flow excluding taxation, interest payments & receipts and exceptional payments

Matt Jones, Chief Executive said:

"Whilst the lockdown conditions experienced globally lengthened sales cycles in the second half of the year and slowed the revenue growth seen in prior periods, the resilience of the Blancco business model and high levels of repeat business from customers resulted in a financial performance in line with the market expectations set at this stage last year.

"Recent months have seen a significant increase in the volume of IT hardware products being purchased to enable employees to work from home while there has been an increased focus on data security as companies assess how to manage a remote workforce. We also continue to see organisations seeking to improve the environmental impact of their operations and particularly the level of e-waste they are generating. We believe that all of these factors will be medium term growth drivers for Blancco.

"Whilst the ongoing uncertainty introduced by COVID-19 is anticipated to be disruptive in the first half of the new financial year, the Board is pleased with the resilience shown by the business during the most challenging months of the pandemic. With a model that has continued to generate financial growth and cash, and a debt free balance sheet, the Board is confident that Blancco is well placed to deliver sustained levels of growth going forwards."

 

ENDS

For further information:

Blancco Technology Group plc

Via Buchanan

Matt Jones, Chief Executive Officer

Adam Moloney, Chief Financial Officer



 

Peel Hunt (Nominated Advisor & Joint Broker)  

 

+44 (0) 20 7418 8900

Edward Knight / Nick Prowting / Edward Allsopp

 



Investec Bank plc (Joint Broker)

 

+44 (0) 20 7597 5970

Patrick Robb / Sara Hale / Virginia Bull 

 

 



Buchanan Communications Limited

 

+44 (0) 20 7466 5000

Chris Lane / Stephanie Watson / Charlotte Slater

[email protected]

 

 

Presentation and webcast:

A virtual results briefing for analysts will be held today, 29 September 2020 at 03.00pm, via a live webcast and conference call facility.

If you would like to join the conference call, please contact Buchanan at [email protected] .

A live webcast of the presentation will also be available via the following link: https:// webcast ing.buchanan.uk.com/broadcast/5f5f872483507b593b467258

 

CHIEF EXECUTIVE'S REPORT

Business overview

I am pleased to be able to report another year of good financial and operational performance despite the challenging conditions seen since the onset of the COVID-19 pandemic in the second half of the year. The fundamental growth drivers in the business have continued to gain momentum over the course of the year;

· Sustainability - the alternative to using data sanitisation software on IT assets is the physical destruction of those assets which will ultimately end up in landfill sites and cause harm to the environment. The Executive management teams that are leading organisations, from multinational blue chip companies to SMEs, are becoming increasingly aware of the sustainability impact of their operations which is driving greater awareness and use of Blancco's solutions.

· Governance - all organisations have an obligation to ensure that the data held on their assets is not accessed by unauthorised persons. This has become a greater challenge in recent months as employees are increasingly working from remote locations and the volume of IT assets in circulation has increased sharply to allow employees to work remotely.

These drivers continue to give us great confidence in the continued and increasing adoption of Blancco's solutions and the outlook for the continued financial growth of the business in the medium term.

Enterprise

 

Blancco continued to see good momentum in the year as revenue grew by 13% to £11.7m (FY 2019: £10.3m). Revenue from channel partners grew by 3% to £5.1m (FY 2019: £4.9m) and this is expected to accelerate as new channel relationships develop. The relatively low levels of market penetration of the use of data sanitisation coupled with our strong proposition give us confidence that the revenue growth opportunity in the Enterprise market is significant as companies become increasingly aware that there is an alternative to the physical destruction of assets.

 

All organisations continue to be challenged with how to manage obsolete data or assets which contain data and now need to be repurposed. The challenge has been exacerbated in recent months with many employees being required to work from home. Companies are understandably reluctant to ask employees to use personal devices to process company data so many companies have had to buy additional devices for issue to these employees. The revenue opportunity for Blancco can be directly linked to the number of IT assets that are being used for work purposes. As these employees return to work, they will either continue to use the new asset rendering their previous desktop PC redundant or they will return the device to the IT team who will need to sanitise the asset before it can be reused.

 

In either scenario, the employer will need to make sure that the device doesn't store data which can be accessed by unauthorised persons before it can be repurposed, recycled or resold. Data Sanitisation solutions such as those provided by Blancco are the only way of making sure that data can be permanently erased before an asset is repurposed, recycled or resold. Blancco has over twenty years' experience in providing data erasure solutions, supported by a long list of third-party security accreditations and IP portfolio that has led to a market leading position.

 

According to the World Economic Forum and the UN E-Waste Coalition, 50 million metric tons of e-waste are produced each year. The physical destruction of assets has long been viewed as the most secure method of IT asset disposition. However, the physical destruction of assets often requires companies to allow third parties to remove assets from their sites before data is erased meaning there is no way of knowing whether the assets have been destroyed. Data Erasure software can resolve this problem by performing a full erasure at the premises of the company which owns the asset before it leaves their IT environment, producing an audit certificate detailing the serial number of the asset and date and time that the erasure took place. The physical destruction of assets cannot generate a similar audit trail. Blancco's ability to enable organisations to recycle equipment led to Blancco being awarded the London Stock Exchange Green Economy Mark in October 2019. This accreditation recognises companies and investment funds on all segments of the Main Market and AIM that derive 50% or more of their total annual revenues from products and services that contribute to the global green economy.

 

Gartner reports that Data Sanitisation is at the early stages of mainstream adoption and Blancco believes that the best way to accelerate demand is through the development of a channel network of resellers. Over the course of the year Blancco has looked to develop significant new channel partnership opportunities. We were able to achieve Advanced Technology Partner status with Amazon Web Services ("AWS") Partner Network ("APN") in December 2019. The critical phase of developing that relationship was to enable customers to acquire Blancco's solutions through the use of the AWS marketplace platform, increasing visibility of our solutions and making it a simple process to complete a transaction. The solution offered to AWS customers will enable them to permanently remove data from legacy assets once there has been a migration of data to the AWS cloud.

 

We continue to develop additional relationships with blue chip organisations on both a global and regional basis. The most recent example was our announcement of a Reseller Agreement with Deloitte India. The agreement allows Deloitte to add data erasure to their cybersecurity advisory expertise at a time when COVID-19 has hastened Indian public cloud adoption as organisations have transitioned to work from home processes.

 

Mobile

 

The financial year commenced with the acquisition of Inhance Technology which has been fully integrated within the Group and has been renamed Blancco Technology Group Ireland ("Blancco Ireland"). The Blancco Ireland R&D team has worked alongside our existing R&D team and has made a big contribution to the filing of nine new patents in the financial year, all of which related to the Mobile proposition. The Company now holds a portfolio of 36 patents across its three market segments which are either granted or pending.

 

The market for used smartphones continues to grow strongly with a January 2020 report from IDC stating that 206.7 million used handsets were sold globally in 2019, up 17.6% on the 2018 data. The forecast is for growth to continue at a rate of 13.6% CAGR resulting in an estimated 332.9 million used handsets to be sold in 2023. The global growth in this market is attributed to the difficulty that OEMs face in being able to produce new models that strike a balance between desirable new features and a price that is seen as reasonable. IDC also believe that the introduction of 5G will encourage smartphone owners to trade in 4G devices to offset the cost of a new 5G device. The used handset market will be looking for increasing levels of technology such as those produced by Blancco to support trade in programs and enable devices to be resold securely.

 

Blancco Ireland was acquired for its solution that allows diagnostic tests to be run on a mobile handset through the use of an easily downloadable mobile app. This initiative allows retailers to offer their customers the capability to run tests on their devices without the need to visit a store as well as the ability to offer customers a trade-in value for their handset in the event that they wish to upgrade it.

 

In our interim results in February 2020, we disclosed that the ability to run diagnostic tests through the use of a mobile app would also open an opportunity to develop a new revenue stream in the mobile insurance market. An important step in this initiative was the announcement in June 2020 of the Master Services Agreement secured with leading global professional services firm, Aon. Aon is now able to offer the Blancco Ireland capability as part of its insurance platform, allowing diagnostic tests to be run on prospective policyholders' phones thus detecting any defects on the phone prior to the insurance policy being taken out. This eliminates fraudulent claims for phones that are already damaged before the policy is taken out, thereby reducing claim rates and policy premiums. Aon is now actively selling the platform into mobile carriers and retailers with the first implementations now having been secured in Asia & Europe.

 

Revenue in the mobile segment grew by 8% to £10.8m (FY 2019: £10.0m) in the year. On an organic basis, adjusting for £1.2m of revenue from the newly acquired Blancco Ireland subsidiary, revenue in the mobile market segment shrank by 4%.

 

Organic Growth rates were affected by;

· The change in contractual terms with a mobile retailer, as disclosed in the interim results in February, who has changed from a model of providing diagnostic services in store to providing these services in third party warehouses. While Blancco continues to provide these services to the third party warehouses, the value of the contracts is significantly less.

· New mobile processor contracts announced in the interim results have had implementations delayed by COVID-19.  These are now fully operational.

 

Mobile market segment revenue growth in the new financial year will be depressed in the first half while the change in the above contractual arrangements with the major retailer works through the comparator period but it is fully expected that growth rates will accelerate from the second half and beyond.

 

IT Asset Disposition ("ITAD")

 

Our ITAD customers expect similar growth trends to those in the Enterprise market segment. ITADs are third parties who manage the IT assets of companies who don't have sufficient IT resources to manage assets in-house. Many ITADs have been prevented from accessing company sites during the COVID-19 pandemic. However, the growth drivers around sustainability and governance that apply in the Enterprise market segment apply equally here. ITADs have seen their customers purchase increasing amounts of IT equipment in recent months and expect an increase in disposition activity once the disruption caused by COVID-19 passes.

 

Despite a modest slowing of growth in the second half of the year, ITAD revenue grew by 7% to £10.9m (FY 2019: £10.2m).

 

 

Summary and Outlook

 

While the impact of COVID-19 has undoubtedly been disruptive and slowed growth, the business model has proven to be extremely resilient with financial performance in line with the market expectations originally set twelve months ago, pre COVID-19.

 

As global lockdown measures have gradually eased in recent months, trading is in the process of returning to pre COVID-19 levels and we are confid ent in the future prospects for growth as the environmental and governance aspects of the solutions provided by Blancco become increasingly attractive for prospective customers.

 

The increase in the volume of IT hardware assets purchased in recent months along with the move to remote working will increase the use cases for Data Sanitisation and will lead to growth in the value of customer contracts. We also believe that the ongoing development of channel partnerships such as those with AWS, Deloitte and Aon will start to generate revenue in the current financial year.

 

In the Mobile market segment, significant growth in the number of handsets being sold in the second hand mobile market continues to be forecast and Blancco has a market leading proposition in this area. This will be supplemented by the new revenue stream opportunity presented by the Blancco Ireland solution in the insurance market.

 

Overall, we remain cautious while there is global uncertainty around the COVID-19 pandemic and particularly in the first half of the financial year when the comparator period was unaffected by COVID-19. However, with a strong balance sheet, no debt and a business which has continued to generate cash through the most challenging months of the pandemic, we are confident that the Company remains very well placed to deliver returns to shareholders in the medium term and beyond.

 

Matt Jones

Chief Executive Officer



 

CHIEF FINANCIAL OFFICER'S REPORT

Revenue

 

For the second successive year we have seen revenue growth in all three market segments in which we operate resulting in an increase in Group revenue of 9% to £33.4m (FY 2019: £30.5m, 7% increase on a constant currency basis). Excluding the impact of revenues coming from the acquired Inhance business, revenue growth in the period was 3% on a constant currency basis.

 

Growth has been particularly strong in APAC although this was offset by a modest reduction in revenue in North America arising from the mobile retailer contract, commented on in the mobile market segment report, reducing in value from the end of December 2019. Excluding the impact of this one contract, revenue growth in North America would have been 9%.

 

Revenue breakdown


Year

Ended

Year

Ended

Growth rate


30 June 2020

 

30 June

2019

 

 




Revenue (£'millions)

33.4

30.5

9%

Revenue by Geography




North America

10.1

10.7

(6%)

Europe

12.5

11.4

9%

Asia and ROW

10.8

8.4

 

28%

Revenue by Market Segment




Enterprise

11.7

10.3

13%

ITAD

10.9

10.2

7%

Mobile

10.8

10.0

8%

 

Profitability Measures

 

Adjusted Operating Profit for the period has increased by 14% to £4.0m (FY 2019: £3.5m). Operating loss for the period was £nil (2019: profit of £0.1m).

 




Year ended 30 June

2020

Year ended 30 June 2019

(restated*)




£'000

£'000

Operating (loss)/profit



(31)

141

Acquisition costs



575

486

Exceptional income



(875)

(630)

Amortisation of acquired intangible assets



2,921

2,605

Share-based payments charge



1,447

935

Adjusted administrative expenses



(27,584)

(25,449)

Adjusted operating profit



4,037

3,537

The Acquisition costs primarily relate to expenses incurred in respect of the acquisition of Blancco Ireland announced in July 2019. The Exceptional income relates to the release of provisions no longer required in respect of acquisitions made in previous years.

 

The new accounting standard, IFRS16, on leases has been applied in the period. The standard requires that leases are recognised as both an asset and a liability on the balance sheet and are depreciated over time rather than expensed when incurred. Adjusted EBITDA for the year ended 30 June 2019 has been restated to £7.0m (previously reported as £6.1m). Adjusted EBITDA for the year ended 30 June 2020 increased by 17% to £8.1m.

 

Group loss from continuing operations before tax narrowed to £0.2m (FY 2019: £0.4m). A profit in the year of £1.1m (FY 2019: £1.3m) was made from discontinued operations, largely relating to the release of provisions which are no longer required. This resulted in an overall profit for the year of £1.1m (FY 2019: £0.9m).

 

Balance Sheet

 

The Group ended the period with net cash of £6.7m (30 June 2019: £0.1m). This increase in cash was primarily driven by the equity fundraise of £10.0m announced in July 2019 in connection with the acquisition of Blancco Ireland, supplemented by a strong period of cash generation through the second half of the financial year. Whilst cash generated from operations of £6.5m (FY 2019: £9.1m) has reduced from the prior year, this is a function of an exceptional comparator period and in particular the payment for a large three year contract worth in excess of £1.0m being paid in full in the prior year. The rate of cash conversion seen in FY 2020 is expected to be at a level that will be maintained into future periods. The gross debt position, which stood at £6.5m at the end of the previous financial year, has now been completely cleared.

 

 

Adam Moloney

Chief Financial Officer

 

 



 

Consolidated Statement of Comprehensive Income for the year ended 30 June 2020

 




Year ended

*Year ended


30 June

2020

30 June

2019



Note

£'000

£'000

Revenue



33,382

30,519

 






 

Cost of sales



(1,761)

(1,533)

 

Gross profit



31,621

28,986

 






 

Administrative expenses and depreciation



(31,652)

(28,845)

 

Operating (loss)/profit



(31)

141

 

Acquisition costs



575

486

 

Exceptional income



(875)

(630)

 

Amortisation of acquired intangible assets



2,921

2,605

 

Share-based payments charge



1,447

935

 

Adjusted administrative expenses



(27,584)

(25,449)

 

Adjusted operating profit



4,037

3,537

 






 

Finance income



3

71

 

Finance costs



(151)

(587)

 

Loss before tax



(179)

(375)

 

Taxation



169

33

 

Loss for the year



(10)

(342)

 

Discontinued operations





 

Post tax profit from discontinued operations



1,126

1,252

 

Profit for the year



1,116

910

 

 

Attributable to:

Equity holders of the Company



 

 

1,153

 

 

623

 

Non-controlling interests



(37)

287

 

Profit for the year



1,116

910

 

*restated - see note 1.1

 

 



 

Earnings per share



Year ended

30 June

2020

Year ended

30 June

2019

Continuing operations:

Basic



0.04 p

 

(1.01 p)

Diluted



0.04 p

(1.01 p)

Discontinued operations:





Basic



1.56 p

2.00 p

Diluted



1.50 p

1.96 p

Total Group:





Basic



1.60 p

0.99 p

Diluted



1.54 p

  0.95 p






*restated - see note 1.1









Year

ended

*Year

Ended


30 June

2020

30 June

2019




£'000

£'000

Profit for the year



1,116

910

Other comprehensive income - amounts that may be reclassified to profit or loss in the future:





Exchange differences arising on translation of foreign entities



1,330

 

1,238

Total comprehensive profit for the year



2,446

2,148

Attributable to:





Equity holders of the Company



2,491

1,771

Non-controlling interests

 


(45)

377

Total comprehensive profit for the year



2,446

2,148

 



 

Consolidated Balance Sheet as at 30 June 2020

 








 

30 June

2020

 

*30 June

2019

 

*30 June

2018



£'000

£'000

£'000

Assets





Non-current assets





Goodwill


51,881

47,262

46,348

Other intangible assets


22,798

21,722

22,313

Property, plant and equipment


1,765

2,079

1,752

Deferred tax assets


433

626

670



76,877

71,689

71,083

Current assets





Inventory


102

91

99

Trade and other receivables


7,254

7,360

6,967

Current tax asset


603

-

101

Cash and cash equivalents


6,719

6,636

6,220



14,678

14,087

13,387

Total assets


91,555

85,776

84,470

 

 





Current liabilities





Trade and other payables


(8,813)

(9,927)

(8,008)

Contingent consideration


(288)

(278)

(2,044)

Current tax liability


(269)

(155)

-

Provisions


(227)

(787)

(63)



(9,597)

(11,147)

(10,115)

Non-current liabilities





Borrowings


-

(6,494)

(8,930)

Other payables


(987)

(1,960)

(1,137)

Contingent consideration


-

-

(156)

Deferred tax liabilities


(3,516)

(3,639)

(4,040)

Provisions


(105)

(332)

(1,981)



(4,608)

(12,425)

(16,244)

Total liabilities


(14,205)

(23,572)

(26,359)






Net assets


77,350

62,204

58,111


 

 

Equity





Called up share capital


1,507

1,304

1,280

Share premium account


21,103

10,397

9,152

Merger reserve


5,861

4,034

4,034

Capital redemption reserve


417

417

417

Translation reserve


5,936

4,598

3,450

Retained earnings


41,861

40,248

38,763

Total equity attributable to equity holders of the Company


76,685

60,998

57,096

Non-controlling interest reserve


665

1,206

1,015

Total equity


77,350

62,204

58,111

*Restated - see note 1.1

 



 

 

Consolidated Statement of Changes in Equity for the year ended 30 June 2020


Called up share capital

Share premium account

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 30 June 2018 as previously reported

1,280

9,152

4,034

3,450

38,840

1,015

417

58,188

Adjustment on initial application of IFRS16

-

-

-

-

(77)

-

-

(77)

Restated balance as at 30 June 2018

1,280

9,152

4,034

3,450

38,763

1,015

417

58,111

Comprehensive income:









Profit for the year

-

-

-

-

623

287

-

910

Other comprehensive income:









Exchange differences arising on translation of foreign entities

-

-

-

1,148

-

90

-

1,238

Total comprehensive profit

-

-

-

1,148

623

377

-

2,148

Transactions with owners recorded directly in equity:









Dividends paid to non-controlling interest

-

-

-

-

-

(190)

-

(190)

Reclassification of deferred consideration to equity instrument

-

-

-

-

1,317

-

-

1,317

Issue of shares

24

1,245

-

-

(1,269)

-

-

-

Acquisition of non-controlling interest without a change in control

-

-

-

-

(28)

-

-

(28)

Reserves transfer on acquisition of non-controlling interest

-

-

-

-

(4)

4

-

-

Share based payment charge

-

 

-

 

-

 

-

 

846

 

-

 

-

 

846

Balance as at 30 June 2019*

1,304

10,397

4,034

4,598

40,248

1,206

417

62,204

Comprehensive income:









Profit/(loss) for the year

-

-

-

-

1,153

(37)

-

1,116

Other comprehensive income/(expense):









Exchange differences arising on translation of foreign entities

-

-

-

1,338

-

(8)

-

1,330

 

Total comprehensive profit/(loss)

-

-

-

1,338

1,153

(45)

-

2,446

Transactions with owners recorded directly in equity:









Issue of shares

203

10,706

1,827

-

-

-

-

12,736

Acquisition of non-controlling interest without a change in control

-

-

-

-

(1,370)

-

-

(1,370)

Reserves transfer on acquisition of non-controlling interest

-

-

-

-

496

(496)

-

-

Share based payment charge

-

-

-

-

1,334

-

-

1,334

Balance as at 30 June 2020

1,507

21,103

5,861

5,936

41,861

665

417

77,350

*Restated - see note 1.1













 

Consolidated Cash Flow Statement





For the year ended 30 June 2020








Year

ended

*Year

ended


30 June 2020

30 June 2019




£'000

£'000

Profit for the year



1,116

910

Adjustments for:





Profit from discontinued operations



(1,126)

(1,252)

Net finance expense



148

516

Tax income



(169)

(33)

(Profit)/loss on disposal of property, plant and equipment



(1)

3

Depreciation on property, plant and equipment



1,100

905

Amortisation of intangible assets



2,991

2,508

Amortisation of acquired intangible assets



2,921

2,605

Share-based payments expense



1,447

935

Operating cash flow before movement in working capital



8,427

7,097

Acquisition costs



575

486

Exceptional income



(875)

(630)

Adjusted EBITDA



8,127

6,953

(Increase)/decrease in inventories



(8)

11

Decrease/(increase) in receivables



417

(325)

(Decrease)/increase in payables and accruals



(2,373)

2,371

Decrease in provisions



-

(63)

Cash generated from continuing operations



6,463

9,091

Acquisition costs payments



830

-

Exceptional payments



-

46

Adjusted operating cash flow



7,293

9,137

Interest received



3

1

Interest paid



(146)

(374)

Tax paid



(613)

(356)

Net cash generated from operating activities - continuing operations



5,707

8,362

Net cash (used in)/generated from operating activities - discontinued operations



(15)

346

Net cash generated from operating activities - continuing and discontinued operations



5,692

8,708






Cash flows from investing activities





Purchase of property, plant and equipment



(401)

(196)

Purchase and development of intangible assets



(4,722)

(4,166)

Acquisition of subsidiaries, net of cash acquired



(2,721)

(796)

Net cash used in investing activities - continuing operations



(7,844)

(5,158)

Net cash generated from investing activities - discontinued operations



-

102

Net cash used in investing activities - continuing and discontinued operations



(7,844)

(5,056)

Cash flows from financing activities





Dividends paid to non-controlling interests



-

(190)

Payment of the principal portion of lease liabilities



(820)

(751)

Payment made to acquire non-controlling interest



(28)

-

Share issue, net of fees



9,577

-

Repayment of borrowings



(6,500)

(2,450)

Payments made to acquire non-controlling interests



-

-

Net cash generated from/(used in) financing activities



2,229

(3,391)

Net cash generated from financing activities - discontinued operations



-

-

Net cash generated from/(used in) financing activities - continuing and discontinued operations



2,229

(3,391)

Net increase in cash and cash equivalents



77

261

Other non-cash movements - exchange rate changes



6

155

Cash and cash equivalents at beginning of period



6,636

6,220

Cash and cash equivalents at end of period



6,719

6,636

Bank borrowings



-

(6,494)

Net cash



6,719

142

*Restated - see note 1.1





 

 



 

Notes to the Accounts

For the year ended 30 June 2020

 

1.  Basis of Preparation

The financial information does not constitute statutory accounts within the meaning of Sections 434 to 436 of the Companies Act 2006, but is derived from those accounts. Statutory accounts for the financial year ended 30 June 2019 have been filed with the Registrar of Companies and those for the financial year ended 30 June 2020 were approved by the Board of directors on 28 September 2020 and will be delivered in due course. The auditor has reported on those accounts, their report was unqualified and did not contain statements under Section 498 (2) or (3) of the Companies Act 2006.  Whilst the financial information included in this announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the EU, this announcement does not itself contain sufficient information to comply with IFRS.

Going concern

The Group meets its day-to-day working capital through its cash reserves and overdraft facility. The Group has a Revolving Credit Facility which expires in October 2020, however forecasts indicate current cash reserves are sufficient to meet the Group's day to day operating obligations, including under assessment of reasonably possible downside scenarios. Sensitivities (primarily around revenue growth) representing severe but plausible downside scenarios, including the potential ongoing impacts of COVID-19, also indicate that the Group reasonably expects to operate within its cash reserves.

After making enquiries, the Board has a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for a period of at least 12 months from the date of these financial statements.  Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and Accounts.

 

 

1.1 Prior Period Adjustment

 

This is the first set of the Group's financial statements in which IFRS16 Leases has been applied. The standard, replacing IAS 17 Leases, sets out the requirements for recognising lease contracts in place as right-to-use assets and lease liabilities on the balance sheet. The standard covers the Group's leased office property and cars.

 

The Group has retrospectively applied this standard and the accounts for the financial year ended 30 June 2019, including opening balances, have been restated.

 

The standard has materially impacted the financial statements of the Group as a result of the number of property leases held. Overall, assets and liabilities on the balance sheet have increased by £1.4 million and £1.5 million respectively upon restatement of the opening balances for the year ended 30 June 2019, and are disclosed as right-to-use assets and lease liabilities. Whilst the movement resulting from the transition to the new standard on the profit after tax is not material, there is a significant movement in EBITDA, with lease costs now recognised within depreciation rather than in operating expenses. On an annualised basis, the net impact to EBITDA at the point of transition is an increase of £0.8 million.

 

The implementation of IFRS16 has not resulted in a restatement to the reported cash balance. However, the presentation of the Cash Flow Statement has changed due to the payment of lease liabilities (net of interest) now being classified as a financing activity rather than stated through operating activities as a rental payment. There is no significant restatement of working capital impact, nor a significant interest expense generated upon transition and therefore the quantum of this re-presentation is consistent with the movement in EBITDA of £0.8 million annualised.

 

There has been an immaterial impact of 0.01p to earnings per share for the year ended 30 June 2019.

 

A summary of the impact of the prior period adjustments on the consolidated income statement and the consolidated statement of cash flows for the year ended 30 June 2019, as well as the consolidated balance sheets as at 30 June 2019 and 30 June 2018 are as follows:

 

 

Consolidated Income Statement

Year ended 30 June 2019

As reported

IFRS16 application

 

 

 

Year ended 30 June 2019

As restated


£'000

£'000

£'000

Revenue

30,519

-

30,519

Adjusted operating profit

3,458

79

3,537

Operating profit

62

79

141

Finance income

71

-

71

Finance costs

(508)

(79)

(587)

Loss before tax

(375)

-

(375)

Taxation

33

-

33

Loss for the period

(342)

-

(342)

Profit from discontinued operations

1,252

-

1,252

Profit for the year

910

-

910


 

Consolidated Cash Flow Statement

for the year ended 30 June 2019





As Reported

IFRS16 application

 

As Restated

 


£'000

£'000

£'000

 

Profit for the period

910

-

910

 

Adjustments for:




 

Profit from discontinued operations

(1,252)

-

(1,252)

 

Net finance income

437

79

516

 

Tax income

(33)

-

(33)

 

Loss on disposal of property, plant and equipment

3

-

3

 

Depreciation on property, plant and equipment

180

725

905

 

Amortisation of intangible assets

2,508

-

2,508

 

Amortisation of acquired intangible assets

2,605

-

2,605

 

Share-based payments expense

935

-

935

 

Operating cash flow before movement in working capital

6,293

804

7,097

 

Acquisition costs

486

-

486

 

Exceptional income

(630)

-

(630)

 

Adjusted EBITDA

6,149

804

6,953

 

Decrease in inventories

11

-

11

 

Increase in receivables

(325)

-

(325)

 

Increase in payables and accruals

2,337

34

2,371

 

Decrease in provisions

(63)

-

(63)

 

Cash generated from continuing operations

8,253

838

9,091

 

Exceptional payments

46

-

46

 

Adjusted operating cash flow

8,299

838

9,137

 

Interest received

1

-

1

 

Interest paid

(295)

(79)

(374)

 

Tax paid

(356)

-

(356)

 

Net cash generated from operating activities - continuing operations

7,603

759

8,362

 

Net cash generated from operating activities - discontinued operations

346

-

346

 

Net cash generated from operating activities - continuing and discontinued operations

7,949

759

8,708

 





 

Cash flows from investing activities




 

Net cash used in investing activities - continuing and discontinued operations

(5,056)

-

(5,056)

 

 

Cash flows from financing activities




 

Dividends paid to non-controlling interests

(190)

-

(190)

 

Payment of the principal portion of lease liabilities

-

(751)

(751)

 

Repayment of borrowings

(2,450)

-

(2,450)

 

Net cash used in financing activities - continuing and discontinued operations

(2,640)

(751)

(3,391)

 

Net increase in cash and cash equivalents

253

8

261

 

Other non-cash movements - exchange rate changes

163

(8)

155

 

Cash and cash equivalents at the beginning of period

6,220

-

6,220

 

Cash and cash equivalents at end of period

6,636

-

6,636

 

Bank borrowings

(6,494)

-

(6,494)

 

Net cash

142

-

142

 

 

 

Consolidated Balance Sheet as at 30 June 2019


As reported

IFRS16 application

As restated


£'000

£'000

£'000

Assets




Property, plant and equipment

382

1,697

2,079

Other non-current assets

69,610

-

69,610


69,992

1,697

71,689





Trade and other receivables

7,397

(37)

7,360

Other current assets

6,727

-

6,727


14,124

(37)

14,087

Total assets

84,116

1,660

85,776





Current liabilities




Trade and other payables

(9,163)

(764)

(9,927)

Other current liabilities

(1,220)

-

(1,220)


(10,383)

(764)

(11,147)

Non-current liabilities




Other payables

(979)

(981)

(1,960)

Other non-current liabilities

(10,465)

-

(10,465)


(11,444)

(981)

(12,425)

Total liabilities

(21,827)

(1,745)

(23,572)





Net assets

62,289

(85)

62,204





Equity




Ordinary share capital

1,304

-

1,304

Share premium

10,397

-

10,397

Merger reserve

4,034

-

4,034

Capital redemption reserve

417

-

417

Translation reserve

4,606

(8)

4,598

Retained earnings

40,316

(68)

40,248

Total equity attributable to equity holders of the company

61,074

(76)

60,998

Non-controlling interest

1,215

(9)

1,206

Total equity

62,289

(85)

62,204

 

Consolidated Balance Sheet as at 30 June 2018


As reported

IFRS16 application

As restated


£'000

£'000

£'000

Assets




Property, plant and equipment

371

1,381

1,752

Other non-current assets

69,331

-

69,331


69,702

1,381

71,083





Current assets

13,387

-

13,387

Total assets

83,089

1,381

84,470





Current liabilities




Trade and other payables

(7,406)

(602)

(8,008)

Other current liabilities

(2,107)

-

(2,107)


(9,513)

(602)

(10,115)

Non-current liabilities




Other payables

(281)

(856)

(1,137)

Other non-current liabilities

(15,107)

-

(15,107)


(15,388)

(856)

(16,244)

Total liabilities

(24,901)

(1,458)

(26,359)





Net assets

58,188

(77)

58,111





Equity




Ordinary share capital

1,280

-

1,280

Share premium

9,152

-

9,152

Merger reserve

4,034

-

4,034

Capital redemption reserve

417

-

417

Translation reserve

3,450

-

3,450

Retained earnings

38,840

(77)

38,763

Total equity attributable to equity holders of the company

57,173

(77)

57,096

Non-controlling interest

1,015

-

1,015

Total equity

58,188

(77)

58,111



 

2.  Earnings per share (EPS)

 

 

 

Year Ended

Year ended

 

 

30 June 2020

 

30 June 2019

 

 

 

Pence

Pence

Continuing operations

 


 

Basic earnings per share


0.04 p

(1.01 p)

Diluted earnings per share


0.04 p

(1.01 p)

Adjusted earnings per share


4.70 p

3.56 p

Diluted adjusted earnings per share


4.52 p

3.48 p

Discontinued operations




Basic earnings per share


1.56 p

2.00 p

Diluted earnings per share


1.50 p

1.96 p

Adjusted earnings per share


1.56 p

2.00 p

Diluted adjusted earnings per share


1.50 p

1.96 p

Total Group




Basic earnings per share


1.60 p

0.99 p

Diluted earnings per share


1.54 p

0.95 p

Adjusted earnings per share


6.26 p

5.56 p

Diluted adjusted earnings per share


6.02 p

5.44 p

 




 

 

Year ended

Year ended

 

 

30 June 2020

30 June 2019

 

 



Continuing operations

 

£'000

£'000

Loss for the year

 

(10)

(342)

Loss/(profit) attributable to non-controlling interests

 

37

(287)

Profit/(loss) attributable to equity holders of the Parent Company

 

27

 (629)

 

 



 

Reconciliation to adjusted profit:

 



Unwinding of contingent consideration

 

-

82

Revaluation of contingent consideration

 

-

46

Acquisition costs

 

575

486

Amortisation of acquired intangible assets

 

2,921

2,605

Exceptional income

 

(875)

(630)

Amortisation of bank fees

 

6

14

Share-based payments charge

 

1,447

935

Tax impact of above adjustments

 

(699)

(688)

Adjusted profit for the year


3,402

2,221

 



 

 

The weighted average number of shares and reconciliation between basic and diluted measures is presented below:

 

 

 

 

Year ended

Year ended

 

 

 

30 June 2020

30 June 2019

Number of shares

 

 

'000s

'000s

Weighted average number of shares

 

 

72,187

62,310

Bonus element from share placing in July 2019

 

 

140

140

Basic

 

 

72,327

62,450

Impact of dilutive share options

 

 

2,938

1,428

Diluted

 

 

75,265

63,878

 

The bonus element increasing the basic number of shares used in the earnings per share calculation arises from the placing of 8,000,000 shares in July 2019 and represents the number of shares effectively issued without consideration, due to the issue price of 125 pence being at a discount to the market price of 127.5 pence prior to the placing. In accordance with IAS 33, the impact of the bonus element is allocated to all reporting periods prior to that in which the placing took place.

The dilutive share options are in respect of the shares awarded under the Blancco Performance Share Plan.

3.  Profit for the year

 

Profit for the year for the Group has been arrived at after charging/(crediting):

 

 

 

 

 

Year ended

30 June

2020

Year ended

30 June 2019

 

 

 

 

£'000

£'000

Depreciation of property, plant and equipment - owned

 

 

273

180

Depreciation of property, plant and equipment - right of use asset

 

 

827

725

(Profit)/loss on disposal of property, plant and equipment

 

 

 

(1)

3

Amortisation of intangible assets

 

 

 

5,912

5,113

Expense relating to leases of low-value assets

 

 

 

24

31

Cost of inventories recognised as an expense

 

 

 

347

252

Research & Development expense

 

 

 

1,121

869

Staff costs recognised as an expense, excluding share based payments

 

 

 

16,230

14,816

Net foreign exchange loss

 

 

 

101

158

 

 

Included within operating profit are profits totalling £0.3 million (2019: £0.3 million) arising from the release of provisions recognised on acquisition of contingent liabilities for which the business has made steps to eliminate the risk and deems to no longer be required. These liabilities cover provisions relating to the underlying operating expenses of the acquired business and accordingly the releases are recorded within adjusted operating profit.



 

 

4.  Exceptional and acquisition (income)/costs

 

 

 

2020

2019

 

 

 

£'000

£'000

Provision releases

 

 

(875)

(630)

Acquisition and deal costs

 

 

575

486

 

 

 

(300)

(144)

 

Exceptional income arises from the release of provisions recognised on the acquisition of Xcaliber (in the prior year: Tabernus) that the business deems no longer to be required. These cover items that are exceptional in nature and do not relate to the underlying operating expenses of the acquired business and accordingly the releases are recorded through exceptional income.

 

Acquisition costs relate to the acquisition of YouGetItBack Limited, trading as Inhance Technology, that was completed on 11 July 2019, and the buyouts of minority interest stakes in Japan and Singapore. Acquisition costs in the prior period also relate to the acquisition of YouGetItBack Limited.

5.  Discontinued Operations

 

The post-tax result from discontinued operations in the year was a profit of £1.1 million (2019: £1.3 million). This arose from the reassessment of provisions over time that were created upon the disposal of the Repair Services business in the year ended 30 June 2016 (£0.8 million (2019: £0.9 million)) and the release of provisions no longer required in respect of a number of VAT liabilities arising from a  VAT investigation in the prior year  of £0.4 million (2019: £0.4 million).


 

 

 

 

 

 

 

Year

ended

Year

ended

 

30 June

2020

30 June

2019



 

£'000

£'000

Profit for the year


 

1,126

1,252

Operating cash flow before movement in working capital

 

 

1,126

1,252

Decrease in payables and accruals

 

 

(354)

(44)

Decrease in provisions

 

 

(787)

(862)

Net cash (used in)/generated from operating activities - discontinued operations

 

 

(15)

346

Cash flows from investing activities

 

 



Disposal of subsidiaries, net of cash disposed

 

 

-

102

Net cash generated from investing activities - discontinued operations

 

 

-

102

 

There were no cash flows from financing activities.

6.  Acquisitions

 

Acquisition of YouGetItBack Limited, trading as Inhance Technology ("Inhance")

On 11 July 2019 the Group completed the acquisition of 100% of the issued share capital of YouGetItBack Limited, trading as Inhance Technology ("Inhance") for a consideration of €5.25 million, of which €3.25 million was satisfied in cash and €2 million of which was satisfied through the issue of 1,311,264 new ordinary shares in the Company.

In the year ended 30 June 2020, the acquisition has contributed total revenue of £1.2 million, and adjusted operating profit of £0.3 million.

 

The book value and fair value of the assets acquired and liabilities assumed were as follows:

 


 

 

Book value

£'000

Fair value adjustments and IFRS alignment

£'000

 

 

Fair value

£'000

Intangible assets arising on consolidation

-

1,649

1,649

Property, plant and equipment

18

65

83

Deferred tax

-

(177)

(177)

Cash and cash equivalents

327

-

327

Trade and other receivables

194

-

194

Trade and other payables

(181)

(539)

(720)

Net assets acquired

358

998

1,356

Goodwill



3,481

Total consideration



4,837





Satisfied by:




Cash



3,048

Shares issued



1,789

Total consideration



4,837

 

The Directors identified a number of adjustments that were required to the book values, following a review of all balance sheet categories. These adjustments included provisions against potential claims and other unrecorded liabilities (£473,000).

Under IFRS3 Business Combinations separately identifiable intangible assets arising from the acquisition have been capitalised. These relate to technology of £1,281,000, customer contracts of £312,000 and marketing brand of £56,000. The key assumption used was the discount rate for future cash flows estimated at 10.5%.

 

Trade receivables acquired totalled £194,000 gross and there was no expected loss provision. The goodwill of £3,481,000 was attributed to the anticipated growth of the combined Group, strategic benefits, synergies and workforce in place.

Acquisitions of non-controlling interests

On 12 December 2019, the Group acquired 29% of the issued share capital in Blancco Japan Inc from its joint venture partner, Aucnet, taking its shareholding from 51% to 80%. The consideration was settled through the issue of 813,253 ordinary shares.

On the same date the Group acquired the 30% that it did not already own of the issued share capital of Blancco APAC Pte. Limited, being 15% from each of the minority shareholders, Aucnet and Alan Puah, an individual. The consideration payable to Aucnet was US$1 in cash and to Alan Puah was settled by the issue of 41,686 ordinary shares.

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 IFRS 10, "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.

 

 

 

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