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Osirium Technologies (OSI)

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Wednesday 03 May, 2017

Osirium Technologies

Final Results

RNS Number : 9694D
Osirium Technologies PLC
03 May 2017
 

 

For immediate release

3 May 2017

 

Osirium Technologies plc

 

("Osirium" or "Group")

 

Final Results

 

 

Osirium Technologies plc (AIM: OSI.L), a UK based cyber-security software provider, today announces its final results for the 14 months ended 31 December 2016.

 

Operational highlights

 

·     Significant contract win with leading global asset management company in August 2016

·     Pilot contract signed with a UK based contextual surveillance company in October 2016, fully integrated and operational by December 2016

·     Simon Hember, Founder and Managing Director of Acumin Consulting appointed as a Non-Executive Director in September 2016

·     Having laid the foundations in the period under review, our strategy is clearly showing early signs of success since period end, adding customers, distributors and moving offices to accommodate the growing Osirium business

Post year end

·     Three new customers won in the first few months of 2017: one of the world's largest insurance companies, a critical national infrastructure business and a retail mobile technology provider

·     Senior management team strengthened with the appointments of Stephen Roberts as Marketing Director and Tim Ager as Sales Director in November 2016 and January 2017 respectively

·     Distology signed as UK distribution partner

·     Business Development Director appointed in Middle East

·     Distribution agreement signed with Spectrami as Middle East distributor

·     Footprint extended to APAC with two Business Development Directors appointed to service the region followed shortly afterwards by an agreement signed with distributor CHJ Technologies in Singapore

Financial highlights

 

•      Total Revenue of £477,577 (2015: £290,150), comprising:

SaaS Revenue of £440,582 (2015: £252,430)

Professional Services Revenue of £36,995 (2015: £37,720)

•      Total Bookings of £540,836 (2015: £267,722)

•      Operating loss of £1,822,497 (2015: £847,138), primarily reflecting increased investment in sales and marketing and additional headcount in the R&D and Customer Support teams

•      Balance sheet strengthened - Total Shareholders' Equity of £4,483,922 (2015: £699,499)

•      Cash and cash equivalents at 31 December 2016 of £3,572,794 (2015: £273,486)

David Guyatt, Chief Executive Officer, commented:

"Overall we are pleased with Osirium's performance for the 14 months ended 31 December 2016.  Whilst our revenue growth rate in 2016 was slower than we had originally expected, the Group outperformed the other performance targets set by the Board for the period, both operationally and financially, when compared with the prior period.  We have also been careful to deploy the proceeds from our IPO in a controlled manner.

 

The global cyber-security market continues to grow and, despite an increasingly competitive market, we believe Osirium is well positioned and sufficiently differentiated to take advantage of this opportunity through continued product innovation and marketing.   Our primary investment focus remains on driving growth in our UK and global distribution network and augmenting the team which manages our channel partners and direct customer relationships.

 

2016 has provided a strong foundation for the year ahead.  As evidenced by our recent new customer wins, we are now seeing the signs of significant progress."

 

Ends -

                                                              

For further information:

 

Osirium Technologies plc

Tel: 44 (0) 118 324 2444

David Guyatt, Chief Executive Officer

Rupert Hutton, Chief Financial Officer

www.osirium.com

 


Panmure Gordon (UK) Limited

(Nominated Adviser and Broker)

Tel: +44 (0) 20 7886 2500

Andrew Godber / Peter Steel - Corporate Finance

Charles Leigh-Pemberton - Corporate Broking

 


Yellow Jersey PR

(Financial PR)

Sarah Hollins

Tel: +44 (0) 7764 947137

 

The information communicated in this announcement is inside information for the purposes of Article 7 of Market Abuse Regulation 596/2014 ("MAR").

 

Photography

Photography is available, please contact Sarah Hollins at [email protected]yellowjerseypr.com

 

Notes to Editors

Osirium Technologies plc (AIM: OSI.L), is a UK based cyber-security software provider.  Osirium protects critical IT assets, infrastructures and devices by preventing targeted cyber-attacks from directly accessing Privileged Accounts, removing unnecessary access and powers of Privileged Account users, deterring legitimate Privileged Account users from abusing their roles and containing the effects of a breach if one does happen.

 

Osirium has defined and delivered what the Directors view as the next generation PAM (Privileged Access Management) solution.  The team has developed the concept of Virtual Air Gap to separate users from passwords, with Osirium's Privileged Task Management module further strengthening Privileged Account security and delivering impressive return on investment benefits for customers.

 

Founded in 2008 and with its headquarters in Reading, UK, the Group was admitted to AIM in April 2016.  For further information please visit www.osirium.com

 

CHAIRMAN'S AND CHIEF EXECUTIVE'S STATEMENT

 

We are very pleased to report the final results for the 14 months ended 31 December 2016, the first following the Group's admission to AIM in April 2016.  Since becoming a public company, our corporate profile has increased considerably and the Group has seen growing and positive recognition and a strengthening pipeline, both for direct sales and through our channel partners.

 

The Group has made significant progress during the period.  The focus since our IPO has been to lay the foundations to support our UK and global distribution network and build a team which manages channel partner and direct customer relationships. 

The Board is pleased by the operational and commercial progress achieved during the 2016 period under review.  Activity levels for the 14 months ended 31 December 2016 were in line with the Board's expectations, whilst the Company's administrative costs were lower than previously anticipated.  

Osirium has taken time to find the right team and, as a result, the revenue growth rate in 2016 was slower than the Board originally expected.  With the foundations of the team now firmly in place, the Board will remain disciplined and selective with future recruitment and expansion of the Group's overhead base, and believes that Osirium's strengthened sales, marketing and delivery teams will provide the momentum to accelerate trading in 2017 and beyond. 

 

Results

Osirium's loss before tax for the 14 months to 31 December 2016 was £1,812,843, compared with a loss before tax of £857,052 for the year ended 31 October 2015.  Revenue was £477,577 for the 14 months compared with £290,150 for the prior 12 month period of 2015, however SaaS revenue was up 64% to £441,000 versus the same period in 2015.  The balance of revenue in each period was generated by chargeable professional services.  Invoiced sales (bookings), increased 102% to £540,906 (2015: £267,722) during the period.  As at 31 December 2016, the Group had cash balances of £3,572,794 (2015: £273,486).

 

The Group continued to increase its investment in research and development, with £915,476 capitalised in the period (2015: £404,385), an increase of 126%.  This investment has been focused on refining and further developing our next generation Privileged Access Management solution PXM proposition and working to meet and exceed new and prospective clients' expectations.  The Group expects SaaS revenues to increase further during 2017 and, with the addition of extra consultancy resource, increased service revenues are also being targeted.

 

Strategy and market

The growth in demand for mid-market cyber-security services, predicted by Gartner and other industry analysts, is beginning to emerge resulting in the acceleration of new customer enquiries and partner acquisitions for Osirium.  Privileged accounts remain critical targets for cyber-attacks, and Osirium protects critical IT assets and manages Privileged Account activities, denying intruders a foothold.   As Privileged Access Management moves from being a technology only considered by large corporations to a solution that mid-sized businesses can benefit from, a variety of regulatory compliance standards are helping to drive mainstream and mid-sized business adoption.  Now, companies with 200 to 2,000 employees are looking at Privileged Access Management as a way to protect their internal layers of security, and this presents a significant greenfield opportunity for the Group.

 

Organisations are increasingly realising the importance of identifying, controlling and minimising the risks from within their enterprise, even the common faux pas of authentic system administrators unwittingly performing over privileged tasks without the necessary authority or skills to safely do so.  Osirium has a 100% focus on the Privileged Access Management market, an increasingly important part of the larger identity access management market. 

 

The key demand drivers for Privileged Access Management solutions hitherto are expected to continue into the future:

·     Scale and frequency of cyber-attacks

·     Damage to corporate reputations and erosion of public confidence

·     Cyber-security focused legislation and regulation

·     Outsourcing of IT functions

·     Privileged Accounts will remain critical targets for cyber-attacks

·     Increasing number of internet connected devices  Internet of Things(IOT)

 

 

Market review

The market outlook undertaken by TechNavio (a leading market research company with global coverage) suggests that the Privileged Access Management market is set to grow at a compound annual growth rate of approximately 20%, as organisations' buying habits shift further away from completed projects to secure the perimeter i.e. firewalls, towards those that add internal layers of security. TechNavio also expects that the anticipated growth will be supported by the significant greenfield opportunity in the mid-market.   According to market reference point Gartner, market growth remains robust.  Additionally, the overall Privileged Access Management market is still very much dominated by the sale of on-premises software.  Gartner estimates that the combined revenue of all Privileged Access Management vendors in 2015 was $690 million, representing a 33% growth rate over a 2014 market size of $521 million.   

 

Executing our strategy

One of the purposes of the IPO was to access growth capital.

 

The following strategic priorities have been identified by Osirium's senior leadership team:

 

-      Completing a senior management team with the knowledge and experience of driving successful businesses at a truly international level.

-      Building a robust and growing pipeline of prospects and customers, in the wider mid-market space as well as meeting the more demanding operational requirements of high-end enterprises and the unabating requirements of Managed Service Providers ("MSPs") and Management Security Service Providers ("MSSPs").

-      Changing an "opportunistic" sales team into a group focused on helping the Company deliver its long term strategic objectives, transitioning sales to a 100% channel-led mid-market fulfilment focus, whilst looking to the Group's high-end enterprise and MSSP engagement for driving scale resilience and service-led innovation.

-      Upscaling our marketing team, nurturing and evolving the brand into a confident and assertive world-beating icon, projecting global leadership ambitions that are real and measurable.

-      Transforming the R&D team from a tactical start-up group into a world-class cyber-security IP factory.  Innovative cyber-security vendors need to balance mid-market "reactive" needs with the "upper-registers" of strategic, scalable and resilient functionality demanded by Enterprise-class and MSSP customers.

-      Implementing a Global Technical Support culture and infrastructure that is an equally critical and defining service which will help customers and partners alike decide that Osirium is the right team to work with.

-      The Company has three pending patent applications for inventions related to Osirium's PAM technology.

 

New customer acquisitions in existing and new markets

Osirium's management team has extensive experience in successfully driving mid-market channels and partner programs to scale up demand and fulfilment volumes, and our support services team has worked hard this year to establish an expanding global support infrastructure that is capable of providing 24/7 follow-the-sun support to our customers and partners, wherever they are in the world.  Fully committed to our channels, our solution is designed with simplicity and ease of deployment in mind, allowing our partners to quickly realise meaningful technical progress when deploying at their customer sites. 

 

Using established routes to market will deliver the required footprint for growth, and the Group's recent decision to engage all customers through our channels is expected to have an accelerated effect on customer acquisitions.   Regional partnerships are now in place with proven distribution partners including Distology in the UK and Spectrami covering the MENA region.  As a result, the Group expects that technology resellers will take Osirium's Privileged Access Management solution to their clients as an incremental and valued proposition as they seek additional technologies to drive new revenue opportunities.

 

Another important route to market exists in the MSSP market segment.  The Managed Security Service Provider market size is estimated to grow from USD17 Billion in 2016 to USD34 Billion by 2021, at a Compound Annual Growth Rate (CAGR) of 14.6%.  With a number of MSSP partners already engaged, the Group sees this market opportunity as a key area for new engagements and relationships to develop as many providers as possible and invest in their Security Operations Centres (SOC) and Data Centres to differentiate their service offerings.

 

Building on the Group's reputation with its existing customers, which include blue chip enterprises in the defence and telecommunications industries, MSSPs and the financial services sector, Osirium plans to continue its aggressive sales and marketing strategy and expand into these sectors as well as new industries.  

 

In August 2016, the Group announced a significant contract win with a leading global asset management company within the financial services industry.  With daily conference calls and quarterly senior management review meetings the project is progressing well.   In addition, a pilot contract was signed with a UK based contextual surveillance company in October 2016 which was fully integrated and operational by December 2016. 

 

Osirium has, in recent months, also strengthened its management team with two senior hires.  Stephen Roberts joined Osirium as Marketing Director and Tim Ager as Sales Director in November 2016 and January 2017 respectively.  Both bring a wealth of sector knowledge; Tim has over nineteen years' experience in the IT security market and was formerly European Managing Director and VP of Sales at Celestix Networks, a leading provider of secure remote access and identity management solutions.  Stephen has spent over 20 years working in senior strategic marketing roles and was previously Marketing Director at Wallix, a Privileged Access Management Company.  He is particularly experienced in building brand momentum for emerging cyber technology companies.   

 

In March 2017, the Group announced that its market leading Privileged Access Management (PAM) product is now available in the Asia Pacific region (APAC).  Hugh Sunderland and Mike Stephens were appointed as Business Development partners for the region which was closely followed by an agreement signed with CHJ Technologies in Singapore.  In addition, Distology, a value-added distributor in the IT security field, was appointed to strengthen Osirium's UK channel distribution presence. In February 2017, Duncan Fiskin was appointed Business Development Director for the Middle East North Africa region (MENA) followed shortly by the Group signing a distribution agreement with Spectrami in the region.  Spectrami is a Dubai based value added distributor in the MENA region which is armed with the innovative approach to channel empowerment through knowledge sharing and skill building.

 

The Group has also recently appointed a Business Development Director in Germany to address the opportunity in this significant market.

 

In April 2017, we took the decision to move to larger offices in Theale near Reading, also the location of our current head office, to accommodate our growing team.

 

Finally, we are pleased to announce that the first few months of the current financial year have included three new customer wins - one of the world's largest insurance companies, our first sale into a critical national infrastructure business and a retail mobile technology provider.

 

Growth within the existing client base

Through the delivery of excellent support and thorough account management, Osirium continues to grow its position within existing key accounts.  Customer retention has remained strong over the past trading period with all customers retained and many expanding the use of the Osirium products.

 

Sales and marketing investment

The management team has invested in enhancing the current skills base and technology to scale our sales and marketing processes.  We have the depth of experience to realise the benefits of best practice in driving sales momentum through marketing automation tools.  The Group has invested in technology that efficiently manages prospects through a nurturing and lead scoring process, evolving them through to conversion.

 

Also, through a significant investment in the new Osirium.com website, the goal has been set to attract and drive new prospects to a platform that now reflects the global ambitions of Osirium.  The reach of this new digital offer has also extended to present a truly global presence but delivering a local connection wherever we do business.  The new platform fully integrates into the sales process and complements the attract phase of all engagements. 

 

Delivering on plans at IPO

Following completion of the IPO, we have been able to execute on those critical deliverables stated in the Admission Document, ultimately with a view to establishing Osirium as the dominant cyber-security brand in the UK.  By 2018, the Group fully expects to have built a robust self-sufficient and loyal channel to complement the existing direct sales model.  Although this has meant that initial bookings will be less, due to commissions to the channel, we believe that this route will increase our overall ability to scale and maintain our revenue growth in the medium to long term. The channel approach will allow us to take advantage and accelerate the take-up of Proof of Concepts and deployments so as to meet our growth expectations, and take advantage of this market opportunity as forecast by industry analysts, Gartner and Kuppinger Cole.

 

The Group has also completed the transformation of our R&D and Software Development with a successful recruitment campaign from a single start-up group of seven, to four teams with a total of 23 engineers.

 

Board and employees

In September 2016, the Group strengthened the Board and appointed Simon Hember, Founder and Managing Director of Acumin Consulting, a cyber-security recruitment business, as a Non-Executive Director.  In December 2016, John Townsend stepped down from the Board having served as a Non-Executive Director since 2011.  We are grateful to John for his very significant and valuable contribution to the Company's early development.

 

Osirium, like any organisation, is only as good as its employees.  On behalf of the Board, we would like to thank the whole team for their continued support and hard work.

 

Summary and Outlook

Overall we are pleased with Osirium's performance for the 14 months ended 31 December 2016.  Whilst our revenue growth rate in 2016 was slower than we had originally expected, the Group outperformed the other performance targets set by the Board for the period, both operationally and financially when compared with the prior period. We have also been careful to deploy the proceeds from our IPO in a controlled manner.

 

The global cyber-security market continues to grow and, despite an increasingly competitive market, we believe Osirium is well positioned and sufficiently differentiated to take advantage of this opportunity through continued product innovation and marketing.   Our primary investment focus remains on driving growth in our UK and global distribution network and augmenting the team which manages our channel partners and direct customer relationships.

 

2016 has provided a strong foundation for the year ahead.  As evidenced by our recent new customer wins, we are now seeing the signs of significant progress.

 

 

Simon Lee

Chairman

3 May 2017

 

 

 

 

 

David Guyatt

Chief Executive Officer

3 May 2017

 

 

FINANCIAL REVIEW

 

Overview

For the fourteen month period ended 31 December 2016, revenue was £477,577, an increase of 65% (compared with the 12 months ended 31 October 2015: £290,150).

 

Bookings for the fourteen month period ended 31 December 2016, represented by total invoiced sales, were £540,836, an increase of 102% compared with the twelve months ended 31 October 2015 where bookings were £267,722.  Part of the increase was due to the extension of the accounting period by two months, but the majority due to greater customer engagement.

 

The fourteen month loss before tax for the Group was £1,812,843, an increase from a loss of £857,052 for the twelve month period to 31 October 2015. The losses of the Group have increased following significant investment in increasing headcount and activity levels in our sales, marketing and engineering departments.

 

Our balance sheet strengthened through the IPO with total Shareholders' Equity of £4,483,922 (2015: £699,499).

 

Revenue analysis

Revenue for the fourteen month period ended 31 December 2016 was £477,577 (2015: £290,150). Bookings in the first six months of the period ended 31 December 2016 were £206,000 compared with £334,836 for the second eight month period demonstrating the increasing momentum felt within the business as we add more customers.

 

Our deferred revenues as at 31 December 2016 were £275,650, compared with deferred revenues at the end of October 2015 of £212,392, helping provide a degree of visibility and certainty over our future revenues.

 

Taxation

The Group has benefited from the tax relief given on development expenditure, which has resulted in a research and development tax credit of £290,000 being claimed for the fourteen month period to 31 December 2016, compared with £120,430 for the previous 12 month period to 31 October 2015. This further demonstrates the investment made in the Company's innovative cyber-security products.

 

Loss per share

Loss per share for the fourteen month period on both a basic and fully diluted basis was 13p. In the prior twelve month period the basic and diluted loss per share was 7p.

 

Results and dividend

The Directors are not recommending the payment of a final dividend (2015: £nil).

 

Research and development & capital expenditure

The Group spent £915,476 (2015: £404,385) on direct staff and contractor costs for research and development, of which all was capitalised in both years.

 

This expenditure relates to the development of new and enhanced software offerings. The Group invests in new product development and the continual modification and improvement of its existing products to meet technological advances, customer and new market requirements of the fast paced cyber-security market.

 

Future developments

The Group has embarked upon a strategy which will extend its activities to the provision of cyber-security services into new areas such as financial services, critical national infrastructure and other market sectors as the need for Osirium's software is sector agnostic, in addition to developing its activities outside of the UK.

 

Cash flow

At 31 December 2016 the Group had cash balances of £3,572,794 (2015: cash balances of £273,486). Operating cash outflow for the year was £789,443 (2015: operating cash outflow was £132,631).

 

Key performance indicators

The Group's progress against its strategic objectives is monitored by the Board of Directors by reference to key performance indicators ("KPIs"), as mentioned in the Chairman's and Chief Executive's statement. Progress made is a reflection of the performance of the business since flotation and the Group's achievement against its strategic plans.

 

The Group's major financial KPIs are bookings, revenue, new channel partners signed up, new customer acquisition, retaining and growing customer renewals, the number of proof of concepts and software evaluations installed, increasing at any one time.

 

Bookings are monitored on a monthly basis and reported in detail at board meetings. Bookings have increased by 102% to £540,836 for the 14 month period to 31 December 2016 from £267,722 for the 12 months ended 31 October 2015.  

 

As a result of the increase in booking, the revenue KPI is performing well, with total revenue up 165% to £477,577 (2015: £290,150), for the periods under review.

 

Non-financial KPIs include new channel partners and, with a UK distributor and two overseas distributors signed up to date and a business development director now appointed in Germany, the Board is pleased with this progress.  A further KPI is the retention of existing customers leading to the renewal of sales contracts.   All customers were retained in the period and new customers added, with increasing contract values from our existing customer base.  Proof of concepts have also increased now that the Group has more resources to support this activity, not only in the UK but with our fledgling partners overseas.

 

During the year and after the year end we signed up Distology as a distributor in the UK and Spectrami in MENA and CHJ Technologies in Singapore, for further details please see the Chairman's and Chief Executive's statement. The Group did not lose a customer during the period and each significant renewal was at a higher level than the year before. With the increases in sales and marketing and market awareness, the number of proof of concepts being demanded is increasing, not only in the UK, but also in our identified overseas markets.

 

The Group also measures and monitors brand recognition and momentum increases in the Osirium name as we continue to build a global brand. Brand recognition includes monitoring Osirium's Search Engine Optimisation Position and quarterly growth in qualified sales leads with a quantified 'call to action'. 

 

 

Principal Risks and uncertainties

Apart from the normal commercial and economic risks facing any UK based business looking to not only become the dominant company in its home market, but also expand into overseas territories, the major risks to the Group are the:

•              loss of a major client and supporter;

•              loss of a relationship with a major supplier; and

•              development of new technologies which may adversely impact the Group's proprietary  software.

 

In order to mitigate these risks, the Group:

•              has specific relationship management systems in place for managing both new and existing client and supplier relationships; and

•              undertakes research and development into various technologies on an ongoing basis.

 

Other risks include:

 

Competitor risk

The market for Cyber security software is becoming increasingly competitive. To mitigate against this risk, management is of the view that the years of investment that preceded the recent maturing of the Privileged Access Management market and the continued investment in the product will maintain Osirium's leadership position in this market.

 

Commercial relationships

The Osirium software products are developed and released using open source.  To mitigate against this risk, all elements and components used within the software are kept under constant review. The Group continues to expand the various sales channels and reseller network, so the Group is not dependent on any one partner. 

 

Personnel/key executives

The Group's future performance is substantially dependent on the continued services and performance of its Directors and senior management as well as its ability to attract and retain suitably skilled and experienced personnel in the future.

 

Although certain key executives and personnel have joined Osirium since flotation, there can be no assurance that the Group will retain their services. The loss of any key executives or personnel may have a material adverse effect on the business, operations, relationships and/or prospects of the Group.

 

The Company believes that it has the appropriate incentivisation structures to attract and retain the calibre of employees necessary to ensure the efficient management and development of the Group. However, any difficulties encountered in hiring appropriate employees and the failure to do so may have a detrimental effect on the trading performance of the Group. The ability to attract new employees with the appropriate expertise and skills cannot be guaranteed.

 

Customer attraction, retention and competition

The Group's future success depends on its ability to increase sales of its products to new prospects. The rate at which new and existing end customers purchase products and existing customers renew subscriptions depends on a number of factors, including the efficiency of the Group's products and the development of the Group's new offerings, as well as factors outside of the Group's control, such as end customers' perceived need for security solutions, the introduction of products by the Group's competitors that are perceived to be superior to the Group's products, end customers' IT budgets and general economic conditions. A failure to increase sales due to any of the above could materially adversely affect the Group's financial condition, operating results and prospects. The Group's success depends on its ability to maintain relationships and renew contracts with existing customers and to attract and be awarded contracts with new customers. A substantial portion of the Group's future revenues will be directly or indirectly derived from existing contractual relationships as well as new contracts driven at least in part by the Group's ability to penetrate new partners, verticals and territories. The loss of key contracts and/or an inability to successfully penetrate new verticals or deploy its skill sets into new territories could have a significant impact on the future performance of the Group.

 

Reputation        

The Group's reputation, regarding the service it delivers, the way in which it conducts its business and the financial results which it achieves, are central to the Group's future success.

 

The Group's services and software are complex and may contain undetected defects when first introduced, and problems may be discovered from time to time in existing, new or enhanced product iterations. Undetected errors could damage the Group's reputation, ultimately leading to an increase in the Group's costs or reduction in its revenues.

 

Other issues that may give rise to reputational risk include, but are not limited to, failure to deal appropriately with legal and regulatory requirements in any jurisdiction (including as may result in the issuance of a warning notice or sanction by a regulator or an offence (whether, civil, criminal, regulatory or other) being committed by a member of the Group or any of its employees or directors), money-laundering, bribery and corruption, factually incorrect reporting, staff difficulties, fraud (including on the part of customers), technological delays or malfunctions, the inability to respond to a disaster, privacy, record-keeping, sales and trading practices, the credit, liquidity and market risks inherent in the Group's business.

 

Further reputational risks include failure to meet the expectations of the customers, operators, suppliers, employees and intellectual property and technology.  The Group's technology is primarily comprised of software and other code ("Software"). Some of the Software has been developed internally and is owned by the Group. Also, some of the Software has been developed by third parties that have licensed rights in the Software to the Group or provided access under free and open source licence. However, a significant proportion of the Software has been developed by third parties and is provided to the Group under licence. It is not uncommon for any company's technology, particularly where it is primarily embodied in Software, to comprise both owned and licensed code.  This, nevertheless, means that the Group's continuing right to use such Software is dependent on the relevant licensors continuing to license Software to the Group.  Again, as is usual, such agreements may be terminated by the licensors due to a breach of their terms by the Group. Any failure by the Group to comply with the terms of the licences granted could, therefore, result in such licences being terminated and the Group no longer being entitled to continue to use the Software in question. Also, use outside of the terms of any relevant licence could expose the Group to legal action for infringement of the rights of the licensor(s).

 

Further, and in any event, the Group may not have adequate measures in place to ensure that its use of third party software complies with all terms under which such software has been licensed to the Group.  

 

Operations

The Group's facilities could be disrupted by events beyond its control such as fire and other issues. The Group undertake nightly back ups in 'the cloud' and prepares recovery plans for the most foreseeable situations so that its business operations would be able to continue.

 

This report was approved by the Board on 2 May 2017

 

Rupert Hutton

Chief Financial Officer

3 May 2017



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 








14 month










       Period 
        ended


Year ended

 

 

 

 

 

 

 

  31 Dec 16

31-Oct-15






Notes



                  £


£

CONTINUING OPERATIONS








Revenue







      477,577


290,150

Administrative expenses





(2,300,074)


(1,137,288)











OPERATING LOSS






(1,822,497)


(847,138)

Finance costs






                   -


(9,986)

Finance income






          9,654


72











LOSS BEFORE TAX






(1,812,843)


(857,052)

Income tax credit




2


     453,288


121,046

LOSS FOR THE PERIOD ATTRIBUTABLE TO







THE OWNERS OF OSIRIUM TECHNOLOGIES PLC



(1,359,555)


(736,006)

 

Loss per share from continuing operations:

 

Basic and diluted loss per share                                  3                          (13p)                             (7p)

 



 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 







As at


As at







31-Dec-16


31-Oct-15





Notes


£


£

ASSETS









NON-CURRENT ASSETS







Intangible assets



4


1,134,452


793,256

Property, plant & equipment




44,315


6,439










CURRENT ASSETS








Trade and other receivables




380,891


154,647

Cash and cash equivalents




3,572,794


273,486
















3,953,685


428,133










TOTAL ASSETS





5,132,452


1,227,828










LIABILITIES








CURRENT LIABILITIES







Trade and other payables




648,530


365,041
















648,530


365,041










NON-CURRENT LIABILITIES







Deferred tax






163,288

















163,288










TOTAL LIABILITIES





648,530


528,329










EQUITY









SHAREHOLDERS EQUITY







Called up share capital


5


103,944


65,482

Share premium





5,008,619


Share option reserve




337,559


240,662

Merger reserve





4,008,592


4,008,592

Retained earnings





(4,974,792)


(3,615,237)










TOTAL EQUITY ATTRIBUTABLE TO THE






OWNERS OF OSIRIUM TECHNOLOGIES PLC



4,483,922


699,499










TOTAL EQUITY AND LIABILITIES



5,132,452


1,227,828

 

 

 

 

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 




Called up








Share






share


Retained


Share


Merger


option


Total




capital


earnings


premium


reserve


reserve


equity




£


£


£


£


£


£

Balance at 1 November 2014

65,482


(2,879,231)



2,922,100


184,263


292,614

Changes in Equity













Merger reserve adjustment




1,086,492



1,086,492

Loss for the period


(736,006)





(736,006)

Share option charge






56,399


56,399















Balance at 31 October 2015

65,482


(3,615,237)



4,008,592


240,662


699,499















Changes in Equity













Issue of share capital

38,462



5,961,537




5,999,999

Issue costs




(952,918)




(952,918)

Loss for the period


(1,359,555)





(1,359,555)

Share option charge






96,897


96,897















Balance at 31 December 2016

103,944


(4,974,792)


5,008,619


4,008,592


337,559


4,483,922

 

CONSOLIDATED STATEMENT OF CASHFLOWS

 







14 month









Period ended


Year ended







31-Dec-16


31-Oct-15





  Notes


£


£

Cash flows from operating activities






Cash used in operations

6


(909,873)


(257,217)

Interest paid






(9,986)

Tax received





120,430


134,572










Net cash used in operating activities



(789,443)


(132,631)










Cash flows from investing activities






Purchase of intangible fixed assets



(915,476)


(404,385)

Purchase of tangible fixed assets



(52,508)


(2,944)

Interest received





9,654


72










Net cash used in investing activities



(958,330)


(407,257)










Cash flows from financing activities






Share issue (net of issue costs)



5,047,081


762,753










Net cash from financing activities



5,047,081


762,753



















Increase in cash and cash equivalents


3,299,308


222,865

Cash and cash equivalents at beginning of period


273,486


50,621










Cash and cash equivalents at end of period



3,572,794


273,486

 

 

 

1.   SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The above audited financial information in this announcement does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. The above figures for the period ended 31 December 2016 are an abridged version of the Company's accounts which have been reported on by the Company's auditor but have not been dispatched to shareholders or filed with the Registrar of Companies. These accounts received an audit report which was unqualified and did not include a statement under section 498(2) or section 498(3) of the Companies Act 2006.

 

Merger Accounting

On 6 April 2016 Osirium Technologies plc acquired Osirium Limited. This transaction did not meet the definition of a business combination as set out in IFRS 3. It is noted that such transactions are outside the scope of IFRS 3 and there is no other guidance elsewhere in IFRS covering such transactions. IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, requires that where IFRS does not include guidance for a particular issue, the Directors may also consider the most recent pronouncement of other standard setting bodies that use a similar conceptual framework to develop accounting standards when developing an appropriate accounting policy. In this regard, it is noted that the UK Accounting Standards Board has, in issue, an accounting standard covering business combinations (FRS 102 Section 19) that permits the use of the merger accounting principles for such transactions. The Directors have therefore chosen to adopt these principles and the financial information has been prepared as if Osirium Limited had been owned and controlled by the company throughout the year ended 31 October 2015 and the 14 month period ended 31 December 2016. Accordingly, the assets and liabilities of Osirium Limited have been recognised at their historical carrying amounts, the results for the periods prior to the date the company legally obtained control have been recognised and the financial information and cash flows reflect those of Osirium Limited. The amount recognised in equity is based on the historical carrying amounts recognised by Osirium Limited. However, the share capital balance is adjusted to reflect the equity structure of the outstanding share capital of the Company, and any corresponding differences are reflected as an adjustment to a merger reserve.

 

Internally-generated development intangible assets

An internally-generated development intangible asset arising from Osirium's product development is recognised if, and only if, Osirium can demonstrate all of the following:

·     The technical feasibility of completing the intangible asset so that it will be available for use of sale

·     Its intention to complete the intangible asset and use or sell it

·     Its ability to use or sell the intangible asset

·     How the intangible asset will generate probable future economic benefits

·     The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset

·     Its ability to measure reliably the expenditure attributable to the intangible asset during its development

 

Internally-generated development intangible assets are amortised on a straight-line basis over their useful lives.  Amortisation commences in the financial year of capitalisation. Where no internally-generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. The amortisation cost is recognised as part of administrative expenses in the statement of comprehensive income.

 

Development costs                        -              20% per annum, straight line

 

Impairment of tangible and intangible assets

At each statement of financial position date, Osirium reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where the asset does not generate cash flows that are independent from other assets, Osirium estimates the recoverable amount of the cash-generating unit to which the asset belongs. An intangible asset with an indefinite useful life is tested for impairment at least annually and whenever there is an indication that the asset may be impaired.

 

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

 

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised as an expense immediately, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.

 

Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash- generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

Going concern

As part of their going concern review the Directors have followed the guidelines published by the Financial Reporting Council entitled "Guidance on the Going Concern Basis of Accounting and Reporting on Solvency and Liquidity Risks (2016)".

 

The Directors have prepared detailed financial forecasts and cash flows looking beyond 12 months from the date of these Financial Statements. In developing these forecasts the Directors have made assumptions based upon their view of the current and future economic conditions that will prevail over the forecast period.

 

On the basis of the above projections, the Directors are confident that Osirium has sufficient working capital to honour all of its obligations to creditors as and when they fall due. Accordingly, the Directors continue to adopt the going concern basis in preparing the Financial Statements.

 

 

NOTES TO THE ACCOUNTS

 

2.   INCOME TAX

 

Analysis of tax income











14 month








Period ended


Year ended






31-Dec-16


31-Oct-15






£


£

Current Tax:







Tax





(290,000)


(120,430)

Adjustment for prior year tax












Total current tax




(290,000)


(120,430)

Deferred tax




(163,288)


(616)









Total credit in the statement of


(453,288)


(121,046)

comprehensive income




 

Within the overall tax credit contained in the statement of comprehensive income there has been during the period to 31 December 2016 successful claims made to HM Revenue & Customs in connection with Research and Development tax credits being claimed for the current period.

 

 

 

 

 

 

 

 

 

 

Factors affecting the tax income

Tax on the loss before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to losses of the group as follows:

 






14 month



 






Period ended


Year ended

 






31-Dec-16


31-Oct-15

 






£


£

 









 

Loss before tax




(1,812,843)


(857,052)

 

Loss before tax multiplied by the applicable




 

Rate of corporation tax of 20% (2015: 20%)

(362,569)


(171,410)

 

Expenses not deductible for tax purposes

664


7,287

 

Unrelieved tax losses



361,905


164,123

 

R&D tax credit relief



290,000


120,430

 

Deferred tax


163,288


616









 

Tax credit for the period



453,288


121,046

 

 

 

As at 31 December 2016 the group had unutilised tax losses of £2,359,884 (31 October 2015: £1,194,557) available to offset against future profits. A deferred tax asset has been recognised in respect of tax losses carried forward to the extent that it offsets the deferred tax liabilities in respect of research and development credits and accelerated capital allowances.

 

Factors affecting future tax charges

The UK corporation tax rate has reduced to 19% from 1 April 2017 and the UK Government has indicated that it intends to reduce the main rate of corporation tax to 17% from 1 April 2020.

 

3.   EARNINGS PER SHARE

 







14 month








Period ended

Year ended







31-Dec-16

31-Oct-15









Weighted average no. of shares in issue



10,394,255

10,394,255









Weighted average no. of shares for the purposes of basic earnings per share

10,394,255

10,394,255









Effect of dilutive potential ordinary shares:




Share options





-

-









Weighted average no. of shares for the purposes of diluted earnings per share

10,394,255

10,394,255









Basic losses attributable to equity shareholders


(1,359,555)

(736,006)









Losses for the purposes of diluted earnings per share

(1,359,555)

(736,006)









Basic loss per share




(13p)

(7p)









Diluted loss per share




(13p)

(7p)

 

 

Earnings per share has been calculated using the following methodology:

 

Basic losses per share are calculated by dividing the losses attributable to ordinary shareholder by the number of weighted average ordinary shares during the period.

 

At 31 December 2016, there were 1,723,958 share options outstanding that could potentially dilute basic earnings or losses per share in the future, but are not included in the calculation of diluted losses per share because they are anti-dilutive for the periods presented.

 

4.  INTANGIBLE FIXED ASSETS

 






Development






Costs






£

Cost






At 1 November 2014



1,906,186

Additions



404,385







At 1 November 2015



2,310,571







Additions


915,476







Cost c/f as at 31 December 2016


3,226,047







Amortisation:





At 1 November 2014



1,110,473

Charge for the year



406,842







At 1 November 2015



1,517,315







Charge for the period



574,280







Amortisation as at 31 December 2016


2,091,595







Carrying Amount:





At 31 December 2016



1,134,452







At 31 October 2015




793,256

 

 

All development costs are amortised over their estimated useful lives, which is on average 5 years.

 

Amortisation is charged in full in the financial year of capitalisation.

 

All amortisation has been charged to administrative expenses in the statement of comprehensive income and total comprehensive loss.

 

5.   CALLED UP SHARE CAPITAL

 

The company was incorporated on 3 November 2015 with 100 shares of 1p each. On 6 April 2016 6,548,102 1p shares were issued in consideration for the acquisition of Osirium Limited. On 15 April 2016 3,846,153 1p shares were issued on listing of the company on the AIM exchange at a price of £1.56 per share for a total consideration of £6m.

 

Allotted, issued and fully paid












Nominal Value £0.01 per share

No. of shares


£








On incorporation on 3 November 2015

100


1

Shares issued as consideration for Osirium Limited on 6 April 2016

6,548,102


65,481

Shares issued on listing on AIM Exchange on 15 April 2016

3,846,153


38,462












10,394,355


103,944

 

Voting rights

Shares rank equally for voting purposes. Each member will have one vote per share held.

 

Dividend rights

Each share ranks equally for any dividend declared.

 

 

 

6.  RECONCILIATION OF LOSS BEFORE INCOME TAX TO CASH GENERATED FROM OPERATIONS

 






Group






14 month








Period ended


Year ended






31-Dec-16


31-Oct-15






£


£

Loss before income tax



(1,812,843)


(857,052)

Depreciation charges



14,632


6,026

Amortisation charges



574,280


406,842

Share option charge




96,897


56,399

Finance costs





9,986

Finance income




(9,654)


(72)














(1,136,688)


(377,871)





(Increase)/decrease in trade and other receivables

(56,674)


49,813

Increase/(decrease) in trade and other payables

283,489


70,841









Cash used in operations


(909,873)


(257,217)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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