REG - Aferian PLC - Final Results
16/05/2023 07:00
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RNS Number : 5063Z Aferian PLC 16 May 2023
16 May 2023
AFERIAN PLC
("Aferian", the "Company" or the "Group")
FULL YEAR RESULTS FOR THE YEAR ENDED 30 NOVEMBER 2022
- Progress on software-led strategy with record software revenues and
improving quality and visibility of earnings
- Structural industry shift towards convergence of video streaming
services and traditional pay TV supports strategic positioning and growth
ambitions
- Continued 24i new business momentum in H1 in line with expectations
with recovery in Amino expected later in the financial year
Aferian plc (LSE AIM: AFRN), the B2B video streaming solutions company,
announces its results for the year ended 30 November 2022.
Donald McGarva, Chief Executive Officer of Aferian plc, said:
"Aferian delivered record software revenues up 8% to $24.1m in 2022 against a
challenging macroeconomic environment. We have continued to invest in
innovation across the Group, strengthening our data-centric product offering
and are seeing increasing quality of engagement with current and prospective
customers.
"The wider macroeconomic environment during the year led some customers to
review their capital expenditure and delay new orders, with particular impact
on Amino device revenues and Group cash flow. While Amino continues to have a
strong sales pipeline for the second half of 2023, this customer trend has
continued longer than we expected into the first half of this year.
Conversely, 24i has continued its strong new business momentum into the first
half of 2023. Aligned to our goals, the quality and visibility of our earnings
has continued to improve as we entered the new financial year with Annual
Recurring Revenue (ARR) 23% higher than last year.
"Post period end, we have taken several actions to reduce the Group's
operating cost base and capital R&D spend in order to streamline the way
we do business and position us for future growth. Video streaming is
everywhere, all the time and Aferian is well-positioned to benefit from the
continued convergence of streaming and pay TV across our industry."
Financial Key Figures
US$m unless otherwise stated 2022 2021 Change %
Revenue 91.1 92.9 (2%)
Exit run rate Annual Recurring Revenue (ARR) ((2)) 18.7 15.2 23%
Statutory operating (loss)/profit (16.6) 5.2 N/A
Statutory operating cash flow before tax 6.4 14.1 (55%)
Statutory basic (loss)/earnings per share (US cents) (20.5) 7.0 N/A
Adjusted operating profit ((3)) 7.5 11.8 (36%)
Adjusted operating cash flow before tax ((4)) 8.9 16.7 (46%)
Adjusted basic earnings per share (US cents) ((5)) 6.6 11.5 N/A
Net cash 4.0 14.2 (72%)
Dividend per share (pence) 1.0 3.1 (68%)
Notes
(1) Constant currency basis calculated using the closing FX rate for FY21 in both years.
(2) Exit run rate ARR is annual run-rate recurring revenue as at 30 November 2022.
(3) Adjusted operating profit is a non-GAAP measure and excludes amortisation of acquired intangibles, impairment of goodwill exceptional items and share-based payment charges
(4) Adjusted operating cash flow before tax is a non-GAAP measure and excludes exceptional items and impairment of goodwill.
(5) Adjusted basic earnings per share is a non-GAAP measure and excludes amortisation of acquired intangibles, impairment of goodwill, exceptional items and share-based payment charges.
Financial Highlights
· Progress in the Group's transformation to a software-led
business:
o Record higher-margin software and services revenue of $24.1m, up 8%
year-on-year.
· Further momentum demonstrated in improving the quality and
visibility of Group earnings:
o Recurring revenue of $16.1m, up 25% year-on-year.
o Exit run rate ARR of $18.7m, up 23% year-on-year.
· The wider macroeconomic environment led to some customers temporarily
reducing capital expenditure and delaying new orders, resulting in a decline
in revenues in the Amino device business and a weaker operating cash flow
performance.
o Device revenues were down 5% year-on-year, leading to reported revenue of
$91.1m for 2022 (2021: $92.9m).
o Adjusted EBITDA of $14.6m, down 21% year-on-year, due to the decline in
Amino device revenues.
o $12.5m non-cash impairment loss recognized on goodwill which was included in
the statutory operating loss
· Good operating cash flow generation despite significant investment
in inventory to mitigate global supply chain disruption during the period.
o Adjusted cashflow from operating activities before tax was $8.9m (2021:
$16.7m) representing an adjusted EBITDA cash conversion of 61% (2021:91%)
· No final dividend payment (2021: 2.09 pence / 2.87 US cents),
resulting in a total dividend for the year of 1.0 pence (1.26 US cents) (2021:
3.09 pence / 4.26 US cents)
Strategic and Operational Highlights
· Strengthened our data-centric product portfolio
o Acquisition of The Filter, now fully integrated with 24i, is attracting new
customers and offering new capabilities for existing customers.
o Launched 24iQ: the Group's personalisation and content recommendation
service, shortlisted for four separate innovation awards in the USA and
Europe.
· Continued innovation in consumer experience and product
capability:
o 24i: Strong market response to launch of 24i Mod Studio as the new identity
and go to market name for 24i's video streaming platform, highlighting its
flexibility and modularity. Launched new fully managed, cloud-hosted TV as a
Service solution, FokusOnTV.
o Amino: Launched new version of the device management platform targeting the
$1.6bn global digital signage market, with encouraging initial traction. Over
120 customers have now deployed our SaaS device software management platform.
· Supported customers with critical, innovative rollouts and
deployments:
o 24i: Supported KAN, the Israeli Public Broadcasting Corporation, enhancing
the experience for its viewers on multiple Smart TV devices to watch the FIFA
World Cup. FokusOnTV launch led to new partnership with Swisscom Broadcast and
the addition of three new customers.
o Amino: Device management platform enabled Vodafone Iceland to upcycle its
deployed base of video streaming devices with enhanced video streaming
services. Supported PCCW to publicly launch its new generation of Now TV
streaming services, facilitating the integration of Netflix and other
third-party streaming content alongside its own.
Post period end update
· Actions to identify and deliver efficiencies in the Group's cost base have
reduced the Group's annualized cost base by c.$5m, underpinned by efficiencies
identified in the operations and research & development teams of both our
24i and Amino divisions.
· As of 25 April 2023, Donald McGarva stepped-in to the role of 24i CEO,
alongside his existing duties as CEO of parent company, the Aferian group.
He will lead 24i for the foreseeable future.
· Board Changes:
o Max Royde appointed Non-Executive Director on 4 April 2023 and was
subsequently appointed Chair of the Remuneration Committee.
o Steve Vaughan stepped down as Non-Executive Director and Chair of the
Remuneration Committee on 27 April 2023.
· At the date of this announcement, the Group is in compliance with its banking
covenants and is in discussions with its banks regarding its current facility
arrangements.
Current trading and outlook
We expect to report growth in the 24i division (which focusses on streaming
video experiences) in H1 FY23 over H1 FY22, reflecting the Group's position in
the fast-growing video streaming market.
For the Amino division (which connects Pay TV to streaming services), as
previously announced on 10 March 2023, the impact of the wider macro-economic
situation has continued for longer than we expected. Therefore, device sales
in H1 FY23 have been materially lower than initially anticipated. While Amino
continues to have a strong medium-term sales pipeline, we expect Amino's full
year revenue for FY23 to be significantly lower than delivered in FY22. The
FY23 outcome for Amino remains heavily dependent on the receipt of expected
orders that have, to date, been deferred or delayed. However, we have been
encouraged by the recent receipt of the first material order in seven months
from one of our US distributors.
In light of the Amino performance, we have taken appropriate steps to identify
and deliver significant efficiencies in the Group's cost base during the first
quarter of 2023 to improve margins and cash generation.
Following the investment made in inventory within the Amino business, the
Group currently has a net debt position, and expects this to continue
throughout the current financial year. As previously announced on 10 March
2023, we expect Group revenue and adjusted EBITDA for FY23 to be significantly
below FY22, albeit that the Group is expected to generate a material positive
EBITDA.
For further information please contact:
Aferian plc +44 (0)1954 234100
Mark Wells, Chairman
Donald McGarva, Chief Executive Officer
Mark Carlisle, Chief Financial Officer
Investec plc (NOMAD and Broker) +44 (0)20 7597 5970
David Anderson / Patrick Robb / Nick Prowting / Cameron MacRitchie
FTI Consulting (Financial communications) +44 (0)20 3727 1000
Matt Dixon / Emma Hall / Tom Blundell / Aisha Hamilton
About Aferian plc
Aferian plc (AIM: AFRN) is a B2B video streaming solutions company. Our
end-to-end solutions bring live and on-demand video to every kind of screen.
We create the forward-thinking solutions that our customers need to drive
subscriber engagement, audience satisfaction, and revenue growth.
It is our belief that successful media companies and services will be those
that are most consumer-centric, data driven and flexible to change. We focus
on innovating technologies that enable our customers stay ahead of evolving
viewer demand by providing smarter, more cost-effective ways of delivering
end-to-end modern TV and video experiences to consumers. By anticipating
technological and behavioural audience trends, our software solutions empower
our customers to heighten viewer enjoyment, drive growth in audience share and
ultimately their profitability.
Aferian plc has two operating companies: 24i, which focusses on streaming
video experiences, and Amino, which connects Pay TV to streaming services. Our
two complementary companies combine their products and services to create
solutions which ensure that people can consume TV and video how and when they
want it. Our solutions deliver modern TV and video experiences every day to
millions of viewers globally, via our growing global customer base of over 500
service providers.
Aferian plc is traded on the London Stock Exchange's AIM stock market (AIM:
symbol AFRN). Headquartered in Cambridge, UK, the Company has over 350 staff
located in offices in San Francisco, Amsterdam, Helsinki, Copenhagen, Madrid,
Porto, Brno, Buenos Aires, and Hong Kong. For more information, please
visit www.aferian.com (http://www.aferian.com/) .
Chairman's statement:
In 2022, Aferian made good progress with its key ambition of becoming a
software-led company. During the year, Aferian increased its higher margin
software and services revenues by 8% to $24.1m and has grown exit annualised
run rate recurring revenue (ARR) by 23% to $18.7m. However, challenging
macro-economic conditions in the second half of the year negatively impacted
device revenues, meaning that total Group revenues declined by $1.8m to
$91.1m.
In my report last year, I explained that the Group is at the heart of a
structural industry shift towards convergence of video streaming services and
traditional pay TV. Today, video streaming is omnipresent. While Aferian
doesn't address the household-name streaming giants like Netflix, and you
won't see our name on screen, we are very much part of this booming market
behind the scenes. Our B2B solutions power the tier 1 to tier 4 companies who
distribute video to consumers.
Aferian's portfolio of video streaming products and services combine the cost
savings and fast time-to-market of white label solutions with an advanced
level of configurability. This allows our customers to create unique and
attractive consumer experiences. This focus on building a configurable,
integrated video streaming platform differentiates Aferian from its
competitors.
On a divisional level, the Board is confident that investments made in 2022 in
enhancing the 24i video streaming platform will ensure 24i continues to
deliver double digit percentage revenue and ARR growth in 2023. The launch of
24i's fully managed TV as a service platform in September 2022 illustrates
that the Group is continuing to expand its product roadmap with a focus on
continual improvement of the consumer experience whilst decreasing costs and
operational complexity for its customers.
Macro-economic conditions for the Amino video streaming device business in the
second half of 2022 were challenging and negatively impacted revenues and
operating cash flow. As indicated in our March 2023, trading update, this has
worsened in the first half of 2023. That said, this business has historically
maintained strong gross profit margins and in 2022 the Group invested in
expanding its product line into digital signage, additional software-led
device management tools as well as inventory to de-risk the well-publicised,
industry-wide hardware supply chain challenges. The Board is, therefore,
confident that this division is well placed to capitalise on the growth
opportunities it sees in the video streaming market in the second half of the
year and beyond.
The acquisition of The Filter in April 2022 strengthened the Group's
data-centric product portfolio by adding its advanced video streaming
analytics, recommendations and personalisation service. Personalisation is
becoming a key consumer pre-requisite and we are now able to deliver this.
Unfortunately, as previously disclosed, due to adverse factors the Group was
unable to complete a material and transformational acquisition that had been
planned for the second half of 2022. While M&A growth remains a core part
of our strategy, our focus in 2023 will be on driving organic growth and
profitability to deliver strong levels of cash generation until markets
normalise.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
We have continued to make excellent progress on our ESG commitments. This
year, the Board set ESG targets for the Executives for the first time. I am
pleased to report these targets were met in full, including the removal of all
non-recyclable packaging from the Group's supply chain. We will continue this
focus on ESG in the coming year with both internal and external initiatives on
sustainability, equality and diversity.
BOARD CHANGES
2022 has seen several changes to the Group's Board of Directors. Erika
Schraner stood down in July 2022 after three years as a Non-Executive
Director. Joachim Bergman also left the Board in April 2022 after stepping
down as 24i CEO. Steve Vaughan, non-executive director of Aferian since March
2019 and chair of the Remuneration Committee during the year, resigned from
the Board on 27 April 2023. I thank them all for their valuable contribution
to the success of the Group during their tenure. I was pleased to welcome
Bruce Powell MBE to the board as a Non-Executive Director and Chair of the
Board's Audit Committee in August 2022. At the same time, Steve Oetegenn
transitioned from Non-Executive Director to a new Executive Director role as
Group President of the Americas. On 4th April 2023, Max Royde was also
appointed to the Board as a Non-Executive Director. Following the resignation
of Steve Vaughan, Max Royde took up the position of Chair of the Board's
Remuneration Committee on 27 April 2023. Max is a managing partner at Kestrel
Partners, an investment management company specialising in business-critical
software companies, which has a beneficial holding in Aferian. At the time of
his appointment, this holding amounted to 22,781,891 shares or 26.12% of the
issued share capital of the Company.
We are keenly aware of the need for both diversity and a balance between
Executive and Non-Executive Directors on the Board. We are currently reviewing
the composition of the Board and expect to improve the diversity of its
membership in the coming 12 months.
DIVIDEND
In August 2022, the Company paid an interim dividend of 1.0 GBP pence (1.26 US
cents*) per share in respect of the year ended 30 November 2022. The Board is
not proposing a final dividend (2021: 2.09 pence / 2.87 US cents). This
represents a total dividend for the year of 1.00 GBP pence (1.26 US cents) per
share (2021: 3.09 pence / 4.26 US cents) and is 19% of adjusted earnings per
share. This is lower than the Group's stated policy of 33-50% of adjusted
earnings per share and reflects the short-term impact on the Group of the
challenging macro-economic environment in the first half of 2023.
SUMMARY
Aferian addresses the fast-growing video streaming market with
forward-thinking technology solutions. The 24i division's performance has been
robust and it is expected to continue to grow during FY23, which leads the
Board to remain positive about prospects for the Group.
As announced on 10 March 2023, the challenging macro-economic environment and,
in particular, the impact of lower shipping and production lead times have
resulted in both our US distributors and their clients wishing to reduce
inventory levels. This has resulted in significantly decreased sales within
the Amino division in the first half of FY23. The management team therefore
took appropriate steps to identify and deliver significant operating cost
efficiencies during the first quarter of 2023, to improve margins and cash
generation over the remainder of the year.
Whilst the speed of recovery in sales within the Amino division remains
uncertain, the Board is encouraged by its strong medium-term sales pipeline.
The Board is confident that the steps taken to reduce the Group's cost base
have not compromised its core strengths in software, or the ability of the
Amino division to recover as the market for streaming devices normalises.
Mark Wells
Chairman
15 May 2023
*Average FX rate for the year was £1 : $1.26 (2021: £1 : $1.38).
Chief Executive Officer's Review
INTRODUCTION
Aferian's transition to a software-led business has continued to make progress
in 2022 and, aided by both organic growth and the acquisition of The Filter in
April 2022, software revenues grew to a record $24.1m in the year.
Management's focus in 2022 was to continue to grow recurring revenues whilst
also accelerating the transformation of the Aferian Group to a software-led
business by investing in accretive acquisitions. Recurring revenue growth was
achieved as exit annualised run rate revenues ("ARR") increased by 23% to
$18.7m. Whilst we completed one small acquisition in April 2022,
unfortunately, we were forced to abort a transformational acquisition in
October 2022 having invested a significant amount of time and effort on the
process.
As previously communicated, the wider macro-economic situation also resulted
in a decline in revenues within the Amino device business. Rising interest
rates have understandably led to our customers looking more carefully at their
investment in working capital and seeking to defer capital expenditure. As a
result, we have seen some customers delaying their orders of new streaming
devices, preferring to run down their existing inventory rather than
maintaining stock levels at this time.
We, therefore, report revenue for 2022 of $91.1m (2021: $92.9m), which
includes a $3.5m decrease in device revenues compared to 2021.
Whilst we have experienced device revenues being negatively impacted by
current economic headwinds in the first half of 2023, we have confidence in
the medium and long-term growth drivers of the video streaming market as well
as Aferian's ability to address that market. In February 2023, we completed a
restructuring programme to improve the efficiencies of the Group's operations
during which we took the difficult but necessary decision to reduce the
Group's operating cost base by c.$2.9m and capital research and development
spend by c.$1.8m.
These cost reductions were underpinned by efficiencies identified in the
operations and research and development teams of both our 24i and Amino
divisions. In our 24i video streaming platform division, cost savings were
identified as the culmination of synergies generated by merging the operations
and management of 24i, Nordija and The Filter. Despite these cost reductions,
we continue to expect 24i to deliver double digit percentage growth in both
revenue and ARR in 2023. In addition, cost reductions in the Amino business
were made, whilst retaining the core talent who are delivering new
opportunities which we expect to drive growth in the second half of the year.
At the date of the approval of this document, the Group remains in compliance
with its banking covenants and, as we disclosed on 10 March 2023, discussions
are ongoing regarding its current facility arrangements. Further details are
provided in the CFO report and note 2 to the condensed consolidated financial
statements below.
MARKET GROWTH
Aferian's video streaming platforms serve a fast-growing market that continues
to be driven by the consumer-led transition from traditional linear TV to
video streamed over the internet anytime and anywhere. The global video
streaming market continues to grow and is fast becoming the most popular way
to consume video. For example, in July 2022 monthly Nielsen data showed that,
for the first time, video streaming accounted for a larger audience share
(34.8%) in the US than either cable TV (34.4%) or broadcast TV (21.6%). In
addition, average global video viewing time (minutes consumed per day) is
predicted to continue to increase at around 10% 1 until at least 20262 .
Growth in Aferian's 24i video streaming platform revenue is expected to be
driven by the launch of new video streaming services using Aferian's platforms
and the continued growth in those streaming services as a result of the above
trends. In addition, all video service providers, including our Pay TV,
broadcast and content owner customers are investing in upgrading their
streaming infrastructure and operations to keep pace with the latest features
offered by market leaders such as Netflix and Disney+.
For Pay TV operators, it's not just about keeping up with these giants of the
streaming industry, they also need to partner with those giants - offering
consumers a way to access the widest-possible range of content from a single
device. This cannot be done using traditional linear satellite and cable
technology; hence operators need to continue investing in next-generation,
content-aggregating, managed streaming devices.
Media headlines that focus on churn rates for the leading video streaming
services naturally miss a great deal of the nuance in this dynamic market. In
March 2022, a quarter of US consumers were found to have cancelled a streaming
video service in the past 12 months only to re-subscribe to the same service.
In the United Kingdom, Germany, Brazil, and Japan, the figure for this "churn
and return" behaviour is around 22% overall, and globally it's the younger
generations of subscribers who are most likely to come back3.
Although cost-of-living pressures will inevitably make our customers look
harder at their cost base and the prices they charge their consumers, we
believe this presents an opportunity for the Group. Our cost-effective,
off-the-shelf solutions and managed services represent an excellent
alternative for video service providers who want to continue delivering great
consumer experiences but are re-assessing the value of their current
custom-built solutions and the cost of employing in-house expertise.
1 Boston Consulting Group, 2021
2 Deloitte, 2009 State of the Media Democracy survey
3 Deloitte, 2022 Digital Media Trends survey
2022 KEY PERFORMANCE INDICATORS
The Group reported a decrease in revenue of 2% driven by lower video streaming
device sales. Importantly, however, software and services revenue has
increased by 8% and exit run rate ARR by 23% (32% on a constant currency
basis). Adjusted gross profit margin was 2 percentage points lower than the
prior year. The Group also continues to generate good operating cash flows,
albeit reduced by the strategic impact of the investment in inventory made in
the year to mitigate against supply chain disruptions. The Group reports a net
customer revenue retention rate4 of 107% (2021: 117%). This is due to growth
in the subscriber base of our existing customers during the year, in addition
to a very low customer churn rate.
2022 2021 Change
$m $m %
Total revenue 91.1 92.9 (2%)
Software & services revenue 24.1 22.4 8%
Annual run rate recurring revenue ("ARR") at 30 November 18.7 15.2 23%
Adjusted operating cash flow before tax 8.9 16.7 (55%)
Net customer revenue retention rate on recurring revenue* 107% 117% (16%)
*Net customer revenue retention rate on recurring revenue based on constant
currency basis.
In 2022, the Group invested heavily in 24i sales and marketing as well as
research and development to successfully drive growth in recurring revenue,
although negatively impacting both cash flow and profit margins. In addition,
in order to mitigate against potential supply chain delays in the second half,
Amino invested in inventory of streaming devices which required further
investment in working capital. In 2023, the management team will focus on
reducing inventory and improving cash flows whilst also improving the returns
generated by the investments already made in 24i.
4 Net revenue retention rate is calculated by reference to recurring revenue
from existing customers, including upsells, less recurring revenue lost from
customer churn during the year
OPERATIONAL REVIEW
The Group has two operating divisions: 24i and Amino.
24i
24i offers a robust video streaming platform that supports all the key use
cases a video content owner must address in order to prepare and stream TV and
video content to the full range of consumer connected devices. Operating since
2009, 24i serves Pay TV operators, broadcasters and content owners in Europe,
North America, Latin America and the Middle East.
The market has responded well to the December 2021 launch of 24i Mod Studio as
the new identity and go to market name for 24i's video streaming platform.
This was designed to highlight the flexibility and modularity of the platform
as well as 24i's turnkey solutions for different verticals. In September 2022,
Mod Studio was named "Best TV Everywhere or Multi-screen Video" solution in
the CSI Awards, a leading industry barometer of streaming technology.
New customer wins in the period have included KAN, the Israeli Public
Broadcasting Corporation, and SEGI.TV in North America. In addition, in
September 2022, 24i launched its new fully managed, cloud-hosted TV as a
Service solution, FokusOnTV. This is based on the technologies of Nordija,
which it acquired in May 2021, and has resulted in a new partnership with
Swisscom Broadcast and the addition of three new customers to this service.
The acquisition of The Filter in April 2022 led to the launch of 24iQ, a new
data-driven, fully managed personalisation service in May 2022. 24iQ is
offered as an integrated solution or a standalone service. Work to integrate
the 24iQ technology and expertise into 24i Mod Studio is complete and the
solution is being deployed to the first Mod Studio customers. Since its
launch, 24iQ has been shortlisted for four separate innovation awards in the
USA and Europe.
24i continues to grow recurring revenue and has reported a significant
year-on-year increase of 29% in exit run rate ARR (40% increase year-on-year
on a constant currency basis). This growth is as a result of low customer
churn and subscriber growth in our customers' video streaming services which
has led to increased use of recurring software licenses. Growth has also
resulted from the use of an increased range of 24i solutions. For example, we
have supported existing customers Waoo in Denmark and Telenor Sweden with
their rollouts of advanced new streaming services based on devices using
Google's popular Android TV operating system.
Notwithstanding this excellent performance, I believe further performance
enhancements can be made. For this reason, in April 2023, I decided to step-in
as CEO of the 24i division. Investments made in sales and marketing in 2022
have resulted in an increase in the rate of new business wins. For 2023, the
24i management team and I are focused on growing revenue and ARR at double
digit percentages, whilst also increasing profit margins. In addition,
investment in research and development will be reduced in 2023 now that the
initial phase of the 24i video platform development has been completed.
Amino
Amino's managed video streaming devices enable Pay TV operators to bring their
live and on-demand content to every connected household with the quality of
service and level of support that consumers demand for their big-screen
viewing experience. Amino has recently celebrated its 25th anniversary as a
force for innovation and growth in the video streaming market.
Our SaaS device management platform remains a key differentiator for Amino in
the Pay TV market. During the year, we added a new dashboard that better
visualises customer service KPIs. This enables more proactive customer
support, helping our customers to keep their video services running smoothly.
120 customers have now deployed the SaaS platform solution, leading to a 5%
year-on-year growth in the number of end-user devices managed. Combined with
Amino's streaming device operating system, this device management platform
enabled Vodafone Iceland to upcycle their deployed base of video streaming
devices with enhanced video streaming services. This project was completed in
partnership with 24i whose software is also part of the Vodafone Iceland
device ecosystem. In addition, this platform was also deployed at PCCW in Hong
Kong which launched its Now TV video service using Amino's software to
integrate Netflix alongside PCCW's own selection of live and on-demand
content.
In May, we launched a new version of this device management platform
specifically targeting at the needs of the $1.6bn global digital signage
market. We have seen encouraging developments in the growing digital signage
market, including new business in 2022 with a leading UK-based audio-visual
provider to supply video streaming devices that deliver high-quality live
video content to a leading chain of betting shops around the UK and
Ireland.
In the first half of 2022, our device revenues were impacted by global supply
chain challenges including shipping and production delays, caused principally
by COVID-19 related manufacturing shutdowns in China. Second half device
production was, therefore, weighted into the third quarter of the year in
order to mitigate any further potential delays. Following this,
well-documented global economic headwinds, which have resulted in increased
interest rates, led some customers to delay device orders as they seek to
temporarily reduce working capital and defer capital expenditure. As a result,
device revenues were down 5% year-on-year and inventory levels increased,
negatively impacting operating cash flows.
These economic headwinds continue to negatively impact device sales in the
first half of 2023. Management had forecast a decrease in device sales for a
share of FY23 due to shortened supply chain lead times. Consequently, the
assumptions used in the review of the carrying value of Goodwill relating to
the Amino business have been revised, which reflect the expected, based on a
probability expected basis, negative impact of both the current macro-economic
uncertainty as well as a more conservative view of long-term performance and
growth rates of streaming devices. Following these revisions an impairment to
the carrying value of this goodwill of $12.5m has been recorded.
Despite these near-term headwinds, in the second half of 2023 we expect a
return to growth in streaming devices and device management software having
invested in both new product lines such as digital signage as well as sales
and marketing in new geographic markets in 2022.
The focus of the Amino management team in 2023 will be to reduce inventory
levels and improve working capital as well as to drive additional orders as
anticipated growth returns in the second half of the year.
M&A
In April 2022, we completed the next step in our targeted M&A programme
with the acquisition of The Filter, a UK-headquartered, AI-powered video
recommendation service for an initial consideration of £1.2m ($1.5m). An
additional consideration of up to £2.5m ($3.2m) for this acquisition is
payable on achievement of certain ARR growth over the first two years.
The Filter's managed services combine cutting-edge data science, analysis and
machine learning technologies to help consumers find and watch more of the
video content they love. This technology has now been fully integrated into
24i and has been launched as 24iQ, a standalone managed service which combines
the Filter's enhanced analytics, recommendations and personalisation with
24i's existing data analytics services.
More and more of our customers are looking for innovative ways to personalise
their services for individual consumers, improving the speed at which each
user can find content that's appealing to them on the device of their choice.
Harnessing the power of the data available in video streaming services to
optimise the user experience in this way is an essential strategic step to
drive customer satisfaction and retention to counteract churn and protect
revenue.
A further, significant acquisition opportunity which would have been
transformational for the Group was aborted at an advanced stage in October
2022, resulting in a one-off charge of approximately $5.1m. Whilst M&A
remains a core part of our medium-term software-led strategy to grow the
business, the management team's focus in 2023 will be on organic growth and
cash generation.
ENVIRONMENT, SOCIAL AND GOVERNANCE ("ESG")
Aferian has continued to focus on ESG in 2022 and we published a detailed
update to our ESG report in August 2022. For the first time, the Executive
Team were given specific ESG targets by the board, all of which were achieved
before year end. Examples of our achievements in this area include:
· All our Tier 1 hardware suppliers operate under our Code of Conduct, which
aligns with the Responsible Business Alliance (RBA) Code of Conduct and the UN
Global Compact. In 2022 we completed the audit of these Tier 1 hardware
suppliers using RBA recognised auditors to enhance and complement our existing
facility audit programmes.
· This year we completed a project to eliminate all non-recyclable packaging
from our product supply chain. Plastic packaging and cable ties have now been
replaced with paper-based products that can be recycled in most households. We
also upcycled more than 2 metric tonnes of Amino streaming devices.
· In October 2022 we launched an internal initiative called "Do The Right Thing"
that is designed to highlight the importance of ESG topics to Aferian's staff
and to inspire them to get involved in making a difference both in their local
communities and to Aferian's overall ESG performance. We are pleased to see
the enthusiastic way in which staff have embraced the campaign, already
suggesting creative ways in which the Group can advance make greater progress
towards sustainability and its target of making all Group offices Carbon
Neutral by 2025.
· Our global #FutureIsBright graduate programme has admitted its second cohort
of trainees, including the first graduate of our partnership with the
pioneering non-profit organisation Czechitas which trains women in the Czech
Republic for jobs in IT. This year we have increased our involvement with
Czechitas, providing mentors for trainees as well as sponsorship, industry
talks and office tours.
It is important that we pay tribute to the continued dedication and commitment
of Aferian's people around the world who have once again delivered a sterling
performance in the face of ongoing supply chain challenges as well as economic
factors beyond their control. While most of the world has enjoyed a growing
sense of post-pandemic normality this year, our team in Hong Kong has still
faced significant disruption to their personal and working lives as a result
of COVID-19 restrictions. We are proud of the resilience and fortitude with
which they have borne this enduring situation and thank them for their
continued hard work and good humour in the most difficult of circumstances.
At the same time, our small but valued team of developers based in Ukraine has
continued to work as normally as possible under the most extraordinarily
difficult circumstances since the start of the conflict in February 2022. I
wish to personally thank all our staff for their contribution to our
performance during 2022.
CURRENT TRADING AND OUTLOOK
We expect to report growth in the 24i division (which focusses on streaming
video experiences) in H1 FY23 over H1 FY22, reflecting the Group's position in
the fast-growing video streaming market.
For the Amino division (which connects Pay TV to streaming services), as
previously announced on 10 March 2023, the impact of the wider macro-economic
situation has continued for longer than we expected. Therefore, device sales
in H1 FY23 have been materially lower than initially anticipated. While Amino
continues to have a strong medium-term sales pipeline, we expect Amino's full
year revenue for FY23 to be significantly lower than delivered in FY22. The
FY23 outcome for Amino remains heavily dependent on the receipt of expected
orders that have, to date, been deferred or delayed. However, we have been
encouraged by the recent receipt of the first material order in seven months
from one of our US distributors.
In light of the Amino performance, we have taken appropriate steps to identify
and deliver significant efficiencies in the Group's cost base during the first
quarter of 2023 to improve margins and cash generation.
The Group is currently trading, and expects to finish the current financial
year, in a net debt position. As previously announced on 10 March 2023, we
expect Group revenue and adjusted EBITDA for FY23 to be significantly below
FY22, albeit that the Group is expected to generate a material positive
EBITDA.
Donald McGarva
Chief Executive Officer
15 May 2023
Chief Financial Officer's Review
OVERVIEW
Whilst showing a decline in total revenue, the Group's financial results for
the year ended 30 November 2022 demonstrate continued progress against the
Group's primary financial objectives: to grow high margin software &
services revenue, with a focus on recurring revenue.
High margin software & services revenue increased by 8% to $24.1m (2021:
$22.4m). Software & services adjusted gross profit represented 45% of
total adjusted gross profit in the year, an increase from 42% in 2021.
Adjusted gross margin has remained broadly consistent with the prior year at
46% (2021: 48%). In addition, the visibility of the Group's revenues increased
as exit run rate Annual Recurring Revenues (ARR) increased to $18.7m (2021:
$15.2m), representing growth of 23%. On a constant currency basis, exit run
rate ARR increased by 32%.
However, device revenues decreased by $3.5m year-on-year and, as a result,
total revenue decreased by 2% to $91.1m (2021: $92.9m).
The Group continued to generate good operating cash flows albeit reduced due
to the additional $6.7m strategic investment in inventory made during the
year. Adjusted operating cash flow before exceptional costs was $8.9m (2021:
$16.7m) representing an adjusted EBITDA cash conversion of 61% (2021: 91%).
Operating cash flow was $6.4m (2021: $14.1m).
The Group had net cash of $4.0m at 30 November 2022 (2021: $14.2m). The Group
has a banking facility with Barclays Bank plc, Silicon Valley Bank, and Bank
of Ireland of which the Group had drawn $7.5m at 30 November 2022 (2021:
$nil). This facility of $50m, split evenly across the new three bank club,
also includes up to a further $50m available by way of an accordion. On 30
December 2022, the Group executed an amendment letter to update the covenant
definition in the existing banking facility which has a committed term to 23
December 2024 with options to extend by a further one or two years. As part of
the amended covenant definition, the amount of available facility is subject
to a cap of 2.5 times the amount of 12 month rolling Adjusted Lender EBITDA,
tested on a monthly basis. We have prepared a base case cash flow forecast
covering a period of at least 12 months from the date of approval of the
financial statements and various sensitivity analyses. If the base case
forecast is achieved, the Group and parent company will be able to operate
within the monthly liquidity covenant test. However, the recovery of the Amino
division revenues, continued growth in 24i division revenues and cash
conversion expected in H2 2023 are key assumptions. Failure to achieve the
base case view of forecast sales pipeline conversion assumed in the base case
forecast could result in the Group failing to comply with financial covenants
associated with its existing banking facility, potentially resulting in the
facilities being withdrawn. We are currently in further active discussions
with the Group's existing loan facility providers to negotiate a further
covenant definition revision taking account of current management forecasts
however there is currently no certainty as to the outcome of these discussions
with the lender as referred to in Note 1 of the financial statements.
REVENUE AND ADJUSTED GROSS PROFIT
2022 2021 Change
$m $m
Software & services
Revenue
Recurring 16.1 12.9 25%
Non-recurring 8.0 9.5 (16%)
Total revenue 24.1 22.4 8%
Adjusted gross profit 19.0 18.4 4%
Adjusted gross profit margin % 79% 83% (4%)
Devices including integrated software
Revenue
Non-recurring 67.0 70.5 (5%)
Total revenue 67.0 70.5 (5%)
Adjusted gross profit 23.0 26.3 (13%)
Adjusted gross profit margin % 34% 37% (3%)
Total
Revenue
Recurring 16.1 12.9 25%
Non-recurring 75.0 80.0 (6%)
Total revenue 91.1 92.9 (2%)
Adjusted gross profit 42.0 44.7 (6%)
Adjusted gross profit margin % 46% 48% (2%)
Devices revenue (which includes integrated software) decreased by 5%
year-on-year. In the second half of the year global economic headwinds which
have resulted in increased interest rates led some customers to delay device
orders as they seek to temporarily manage their working capital and capital
expenditure.
Software & services revenue increased by 8% year-on-year. Software &
services revenues as a proportion of total revenues for the year increased
slightly to 26% (2021: 24%). However, the Group continues to focus on growing
recurring revenues that increased by 25% from $12.9m to $16.1m. Overall,
recurring software & services revenue accounts for 67% of total software
& services revenue (2021: 58%). At 30 November 2022, exit run rate ARR
increased to $18.7m (2021: $15.2m). On a constant currency basis exit run rate
ARR at 30 November 2022 would have been $20.0m.
The software and services gross profit margin has reduced by 4bps compared to
the prior year. This decline was due to a difference in the revenue mix of
the 24i business and investment made in additional resources for
customer-onboarding.
The increase in exit run rate ARR provides enhanced revenue visibility as the
Group moves forward. In addition, we report a net customer revenue retention
rate, based on recurring revenue at constant currency, for the Group of 107%
(2021: 117%). The net revenue retention rate is calculated by reference to
recurring revenue from existing customers, including upsells, less recurring
revenue lost from customer churn during the year. Whilst the retention rate is
still above 100%, which is positive as our customer subscriber base continues
to grow, it is lower than the prior year due to less upsell revenue from
existing customers.
REVENUE AND ADJUSTED EBITDA
Revenue Adjusted EBITDA
2022 2021 2022 2021
$m $m $m $m
24i 19.1 17.8 0.7 1.2
Amino 72.0 75.1 15.8 19.7
Central costs - - (1.9) (2.5)
Total 91.1 92.9 14.6 18.4
Adjusted EBITDA for the year ended 30 November 2022 was $14.6m (2021: $18.4m).
Adjusted EBITDA is reconciled below, and is calculated as operating profit
before depreciation, interest, tax, amortisation, impairment of goodwill,
exceptional items and employee share-based payment charges. This is consistent
with the way the financial performance of the Group is presented to the
Board. The Directors believe that this provides a more meaningful comparison
of how the business is managed and measured on a day-to-day basis.
24I SEGMENT
2022 2021
$m $m
Software & services 19.1 17.4
Devices including integrated software - 0.4
Revenue 19.1 17.8
Adjusted cost of sales (5.1) (3.8)
Adjusted gross margin 14.0 14.0
Adjusted gross margin % 73% 79%
Adjusted operating costs (13.4) (12.8)
Adjusted EBITDA 0.7 1.2
Adjusted EBITDA % 3% 7%
Capitalised development costs 5.8 5.8
Revenue in the 24i segment increased by 7% to $19.1m (2021: $17.8m). This is
due to a shift in focus during the year towards driving recurring software
revenue. This change has resulted in the growth of exit run rate ARR from
$11.1m to $14.3m, which represents 29% year-on-year growth (40% on a constant
currency basis). The increased focus on exit run rate ARR aligns with the
Group's software-led strategy.
The gross profit margin for the 24i segment has reduced by 6% compared to the
prior year. This was, in part, due to the completion in 2021 of a significant
high-margin project. In addition, gross profit margin for 2022 was impacted
by investment made in additional resources for customer-onboarding. We expect
that the gross margin will improve in 2023 as the 24i business increases in
scale.
Furthermore, adjusted operating costs increased by $0.6m during the period.
The majority of this increase results from the cost of running the Nordija
business for a full year following the acquisition in May 2021. As a result,
adjusted EBITDA has reduced from $1.2m in 2021 to $0.7m in 2022. Following
the cost reduction actions taken in February 2023 as outlined in the CEO
report we expect EBITDA margin to improve in 2023.
AMINO SEGMENT
2022 2021
$m $m
Software & services 5.0 5.0
Devices including integrated software 67.0 70.1
Revenue 72.0 75.1
Adjusted cost of sales (44.1) (44.4)
Adjusted gross margin 27.9 30.7
Adjusted gross margin % 39% 41%
Adjusted operating costs (12.1) (11.0)
Adjusted EBITDA 15.8 19.7
Adjusted EBITDA % 22% 26%
Capitalised development costs 2.0 2.3
Device revenues decreased by 4% during the year to $67.0m (2021: $70.1m). In
the first half, volumes shipped were negatively impacted by delays in the
supply chain caused by significantly increased lead times, lack of
availability of components, and scarcity of shipping capacity caused by the
COVID-19 pandemic. In the second half, the key driver behind the overall 4%
decline in device revenues has come from decreased order volumes as a result
of global economic headwinds resulting in increased interest rates which have
led some customers to delay device orders as they seek to temporarily reduce
working capital and capital expenditure.
The Group has a core customer base in respect of device revenues, whereby
repeat orders are placed by the same customers over multiple financial years.
Taking the last three financial years, repeat orders from existing customers
over that period has accounted for 93% (2021: 94%) of total device revenue.
Management had forecast a decrease in device sales for FY23 due to shortened
supply chain lead times. Consequently, the assumptions used in the review of
the carrying value of Goodwill relating to the Amino business have been
revised which reflect, on a probability expected basis, negative impact of
both the current macro-economic uncertainty as well as a more conservative
view of long-term performance and growth rates of streaming devices. Following
these revisions an impairment to the carrying value of this goodwill of $12.5m
has been recorded.
CENTRAL COSTS
2022 2021
$m $m
Operating costs (1.9) (2.5)
Central costs comprise the costs of the Board, including executive directors,
as well as costs associated with the Company's listing on the London Stock
Exchange. The decrease of $0.6m during the year is primarily in respect of a
reduction to bonuses.
ADJUSTED EBITDA
2022 2021
$m $m
Revenue 91.1 92.9
Adjusted cost of sales (49.1) (48.2)
Adjusted gross margin 42.0 44.7
Adjusted gross margin % 46% 48%
Customer support and professional services (5.3) (6.0)
Research and development (6.0) (5.0)
SG&A (16.1) (15.3)
Total adjusted operating expenses (27.4) (26.3)
Adjusted EBITDA 14.6 18.4
RESEARCH & DEVELOPMENT COSTS
The Group continues to invest in research and in the development of new
products and spent $13.8m on R&D activities (2021: $13.0m) of which $7.8m
was capitalised (2021: $8.0m).
2022 % of revenue 2021 % of revenue
$m $m
Core engineering expenses 12.2 13% 11.9 13%
Product management 0.7 1% 0.6 1%
R&D senior management 0.9 1% 0.5 1%
Total research and development expenses 13.8 15% 13.0 14%
Capitalised development costs (7.8) (8.0) -
Net research and development costs 6.0 5.0 -
The Group's spend on core engineering activities has increased by $0.3m in the
year to $12.2m (2020: $11.9m). The increase of $0.3m reflects a combination of
an increased workforce and salary inflation, the latter being driven by the
Group's continued investment in software development and related products.
Specifically, the Group has invested in the products that have been driving
ARR such as 24i's video streaming platforms and Amino's SaaS device management
platform.
Selling, general and administrative (SGA) expenses have increased by 5% in the
year to $16.1m (2021: $15.3m).
A reconciliation of adjusted EBITDA to operating profit is provided as
follows:
2022 2021*
$m $m
Adjusted EBITDA 14.6 18.4
Exceptional items:
· Within cost of sales 0.0 0.2
· Within operating expenses (6.7) (1.7)
· Impairment of goodwill (12.5) -
Employee share-based payment charge (0.4) (1.1)
Depreciation and amortisation (11.6) (10.6)
Operating profit (16.6) 5.2
EXCEPTIONAL ITEMS
Exceptional items within cost of sales in 2022 comprised a $0.05m credit
(2021: $0.2m credit) in respect of royalty costs recognised in prior years
which have subsequently been renegotiated.
Exceptional items included within operating expenses in 2022 comprised:
· $5.2m (2021: $0.4m) one off costs relating to diligence costs in
respect of the aborted material acquisition
· $0.4m (2021: $0.6m) one-off costs in respect of acquisitions and
legal costs; and
· $1.1m (2021: $0.3m) post-acquisition integrations and associated
restructuring costs
· $12.5m (2021: $nil) goodwill impairment charge
DEPRECIATION AND AMORTISATION
Excluding amortisation of intangibles recognised on acquisition, depreciation
and amortisation was $7.0m (2021: $6.7m).
Amortisation of intangibles recognised on acquisition was $4.6m (2021: $4.0m),
which represents an increase of $0.6m. The increase of $0.6m in the year
primarily relates to the amortisation of the acquired intangibles from the
Nordija acquisition during the prior year and The Filter during the current
year.
TAXATION
The tax charge of $0.5m (2021: $0.6m credit) comprised:
· $2.0m (2021: $2.8m) current tax charge; offset by
· $0.8m release (2021: $0.1m) of an uncertain tax provision held in
respect of the use of tax losses in the USA; and
· $0.7m (2021: $3.4m) credit relating to the unwind of deferred tax
assets and liabilities recognised on acquisitions in the current and prior
years.
Loss after tax was $17.4m (2021: $5.4m profit).
CASH FLOW
A reconciliation of adjusted operating cash flow before tax to cash generated
from operations before tax is provided as follows:
2022 2021
$m $m
Adjusted operating cash flow before tax 8.9 16.7
Post-acquisition remuneration in respect of the acquisition of 24i Unit Media - (1.3)
BV
Post-acquisition integration and associated restructuring costs (1.5) (0.3)
Acquisition and one-off legal costs(1) (1.0) (1.0)
Cash generated from operations before tax 6.4 14.1
Adjusted cash flow from operations was $8.9m (2021: $16.7m) and represented
61% of adjusted EBITDA (2021: 91%). The reduction in adjusted cash flow from
operations and the conversion from adjusted EBITDA was due to a cash outflow
from working capital(1) of $5.6m (2021: $2.4m cash outflow). Whilst the Group
continues to generate good operating cash flows, navigating the well-known
supply chain issues in the year was challenging and resulted in an additional
$6.7m investment in inventory in the year to mitigate potential supply chain
delays.
Exceptional cash flows in 2022 comprised one-off costs of $2.5m (2021: $2.6m)
including $1.0m (2021: $0.3m) post-acquisition integrations and associated
restructuring costs, and $1.0m one off costs associated with the aborted
material acquisition paid by the Group(1). Including these exceptional cash
outflows cash generated from operations before tax was $6.4m (2021: $14.1m).
During the year the Group spent $0.2m (2021: $0.3m) on capital expenditure in
respect of tangible fixed assets and capitalised $7.8m (2021: $8.0m) of
research and development costs and software licenses. The acquisition of The
Filter included initial cash consideration of $1.5m.
The Group paid dividends of $3.3m (2021: $3.1m) during the financial year,
relating to 2021 ($2.3m) and 2022 interim ($1.0m).
Notes
(1) Cash outflow from working capital excludes the impact of a $4.1m increase in payables for the aborted acquisition costs to be settled in Q1 FY23.
The Group generated adjusted free cash outflow of $3.0m (2021: $3.8m cash
inflow) in the year and a reconciliation is provided below:
2022 2021
$m $m
Adjusted operating cash flow before tax 8.9 16.7
Corporation tax paid (2.4) (3.2)
Purchases of intangible assets (7.6) (8.0)
Purchase of property, plant and equipment (0.2) (0.3)
Net interest paid (0.7) (0.1)
Lease payments (1.1) (1.3)
Adjusted free cash flow (3.0) 3.8
The decrease in the year of $6.8m can be attributable to the increase of $6.7m
relating to the investment in inventory in the year to mitigate potential
supply chain delays, that has been described above.
FINANCIAL POSITION
The Group had net cash of $4.0m at 30 November 2022 (2021: $14.2m). The Group
has a banking facility with Barclays Bank plc, Silicon Valley Bank, and Bank
of Ireland of which the Group had drawn $7.5m at 30 November 2022. This
facility of $50m, split evenly across the new three bank club, also includes a
further up to $50m available by way of an accordion which is designated for
M&A activity. The facility has a committed term to 23 December 2024 with
options to extend by a further one or two years. The facility includes
financial covenants whereby the banking facility may be restricted as a result
of not meeting certain financial metrics.
At 30 November 2022 the Group had equity of $78.9m (2021: $104.0m) and net
current liabilities of $1.4m (2021: net current assets of $9.2m).
Goodwill has reduced by $13.2m to $56.3m (2021: $69.5m), reflecting the $12.5m
impairment charge on Amino software and devices CGU (formerly Entone, Inc)
together with foreign exchange translation movements. Management had
forecast a decrease in device sales for part of FY23 due to shortened supply
chain lead times. Consequently, the assumptions used in the review of the
carrying value of Goodwill relating to the Amino business have been revised,
which reflect the expected, based on a probability expected basis, negative
impact of both the current macro-economic uncertainty as well as a more
conservative view of long-term performance and growth rates of streaming
devices.
GOING CONCERN
These financial statements have been prepared on the going concern basis.
The Directors have reviewed the Group's going concern position taking account
of its current business activities and their future forecast performance. The
factors likely to affect its expected future financial performance is set out
in this document and include the Group's objectives, policies and processes
for managing its capital, its financial risk management objectives and its
exposure to credit and liquidity risks.
The directors have prepared a base case cash flow forecast covering a period
of at least 12 months from the date of approval of the financial statements.
In addition, they have prepared various sensitised analyses. These reflect a
variety of possible cash flow scenarios where the Group achieves further
reduced revenues, reduction in gross margins and combinations of both,
together, if required, with the timely deployment of cost containment and
reduction measures that are aligned with the anticipated levels of
performance. Overall, if the base case forecast is achieved, the Group and
parent company will be able to operate within its existing working capital
facilities. However, the recovery of the Amino division revenues, continued
growth in 24i division revenues and cash conversion expected in H2 2023 are
key assumptions. Failure to achieve the base case view of forecast sales
pipeline conversion assumed in the base case forecast could result in the
Group failing to comply with financial covenants associated with its existing
banking facility, potentially resulting in the facilities being withdrawn.
We are currently in active discussions with the Group's existing loan facility
providers to seek solutions in order to increase the safety headroom based on
the current covenant definitions. Should those not be successful we may need
to seek additional funding through a placement of shares or other sources of
funding which have not yet been secured. The Group has a history of
successfully negotiating covenant revision, and raising financing.
Taking account of these matters, the Directors have concluded that the
circumstances set forth above indicates the existence of material uncertainty
that may cast significant doubt on the Group's ability to continue as a going
concern. However, given the Group's current performance, the Directors have
considered it is appropriate to prepare the financial statements on a going
concern basis and the financial statements do not include the adjustments that
would be required if the Group were unable to continue as a going concern.
DIVIDEND
In August 2022, the Company paid an interim dividend of 1.0 pence (1.26 US
cents*) per share in respect of the year ended 30 November 2022. The Board is
not proposing a final dividend (2021: 2.09 pence / 2.87 US cents*). This would
represent a total dividend for the year of 1.00 GBP pence (1.26 US cents) per
share (2021: 3.09 pence / 4.26 US cents) and is 19% of adjusted earnings per
share.
* Average FX rate for the year was £1 : $1.26 (2021: £1 : $1.38).
Mark Carlisle
Chief Financial Officer
15 May 2023
Aferian plc
Consolidated income statement
For the year ended 30 November 2022
Notes Year to 30 November 2022 Year to 30 November 2021*
$000s
$000s
Revenue 3 91,127 92,890
Cost of sales
(49,121)
(47,996)
Gross profit 42,006 44,894
Operating expenses (58,603) (39,714)
Operating (loss)/profit (16,597) 5,180
Adjusted operating profit 7,522 11,759
Share-based payment charge (407) (1,079)
Impairment of goodwill
(12,488)
-
Exceptional items 4
(6,662)
(1,505)
Amortisation of acquired intangible assets
(4,562)
(3,995)
Operating (loss)/profit (16,597) 5,180
Finance expense (313) (688)
Finance income
-
290
Net finance expense (313) (398)
(Loss)/profit before tax (16,910) 4,782
Tax (charge)/credit (512) 582
(Loss)/profit after tax (17,422) 5,364
(Loss)/profit for the year from continuing operations attributable to equity (17,422) 5,652
holders
Non-controlling interest - (288)
(Loss)/profit for the year (17,422) 5,364
Earnings per share 5
Basic earnings per 1p ordinary share (20.48c) 7.03c
Diluted earnings per 1p ordinary share 5 (20.48c) 6.89c
* See Note 9 regarding finalisation of the 2022 acquisition fair value in
accordance with IFRS 3.
All amounts relate to continuing activities.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Aferian plc
Consolidated statement of comprehensive income
For the year ended 30 November 2022
Notes Year to 30 November 2022 Year to 30 November 2021*
$000s
$000s
(Loss)/profit for the financial year (17,422) 5,364
Items that may be reclassified subsequently to profit or loss: (5,334)
(3,112)
Net foreign exchange (loss) arising on consolidation
Other comprehensive (expense) (5,334) (3,112)
Total comprehensive (expenses)/ income for the year (22,756) 2,252
Non-controlling interest - 288
Total comprehensive (expenses)/ income for the financial year attributable to (22,756) 2,540
equity holders
* See Note 9 regarding finalisation of the 2022 acquisition fair value in
accordance with IFRS 3.
Aferian plc
Consolidated statement of financial position as at 30 November 2022
Assets Notes As at 30 November As at 30 November 2021*
2022
$000s
$000s
Non-current assets 6 496 630
7
2,276
1,910
Property, plant and equipment
81,021
95,864
Right of use assets
183
235
Intangible assets
Trade and other receivables
83,976 98,639
Current assets 7 9,222 2,557
19,846
21,936
Inventories
654
113
Trade and other receivables
11,524
14,182
Corporation tax receivable
Cash and cash equivalents
41,246 38,788
Total assets 125,222 137,427
Capital and reserves attributable to equity holders of the Company 1,488 1,484
39,768
39,249
Called-up share capital
12
12
Share premium
(8,722)
(3,388)
Capital redemption reserve
42,750
42,750
Foreign exchange reserve
3,587
23,857
Merger reserve
Retained earnings
Equity attributable to owners of the parent 78,883 103,964
Liabilities 8
Current liabilities 33,534 27,777
Trade and other payables
1,121
1,002
Lease liabilities
505
774
Corporation tax payable
7,531
35
Loans and borrowings
42,691 29,588
Non-current liabilities 8 1,070 677
1,177
966
Trade and other payables
288
1,163
Lease liabilities
1,113
1,069
Provisions
Deferred tax liabilities
3,648 3,875
Total liabilities 46,339 33,463
Total equity and liabilities 125,222 137,427
* See Note 9 regarding finalisation of the 2022 acquisition fair value in
accordance with IFRS 3.
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Aferian plc
Consolidated statement of cash flows
For the year ended 30 November 2021
Notes Year to 30 November 2022 Year to 30 November 2021
$000s
$000s
Cash flows from operating activities
Cash generated from operations 10 6,389 14,113
Corporation tax paid
(3,241)
(2,360)
Net cash generated from operating activities 4,029 10,872
Cash flows from investing activities 9 (7,635) (8,035)
(172) (329)
Purchases of intangible assets
-
-
Purchases of property, plant and equipment
-
(1,180)
Interest received
(1,545)
(4,749)
Purchase of non-controlling interest
Acquisition of subsidiaries net of cash acquired
Net cash used in investing activities (9,352) (14,293)
Cash flows from financing activities - 206
Proceeds from exercise of employee share options
523
12,723
Proceeds from issue of new shares
(1,104)
(1,341)
Lease payments
(3,256)
(3,118)
Dividends paid
(677)
(131)
Interest paid
-
(6,887)
Repayment of borrowings
7,500
6,887
Proceeds borrowings
Net cash generated from financing activities 2,986 8,339
Net (decrease)/increase in cash and cash equivalents (2,336) 4,918
Cash and cash equivalents at beginning of year
14,182
9,476
Effects of exchange rate fluctuations on cash held
(322)
(212)
Cash and cash equivalents at end of year 11,524 14,182
The accompanying notes are an integral part of these condensed consolidated
financial statements.
Aferian plc
Consolidated statement of changes in equity
For the year ended 30 November 2022
Notes Share Share premium $000s Merger reserve $000s Other Foreign Capital redemption Profit Total attributable Non-controlling interest Total
capital
reserve
exchange reserve
reserve
and loss
to owners of parent
$000s
Equity
$000s
$000s
$000s
$000s
$000s
$000s
$000s
Shareholders' equity at 30 November 2020 1,367 35,907 30,122 (2,794) (276) 12 23,475 87,813 195 88,008
Profit for the year* - - - - - - 5,652 5,652 (288) 5,364
Other comprehensive expense
-
-
-
-
(3,112)
-
-
(3,112)
-
(3,112)
Total comprehensive income for the year* attributable to equity holders - - - - (3,112) - 5,652 2,540 (288) 2,252
Share based payment charge - - - - - - 529 529 - 529
Exercise of employee share options
-
-
-
-
-
206
206
-
206
Dividends paid -
-
-
-
-
-
(3,118)
(3,118)
-
(3,118)
Transfer of non-controlling interest & put option reserve on acquisition
-
-
-
2,794
-
-
(2,887)
(93)
93
-
Issue of share capital, net of issue costs
-
3,342
12,628
-
-
-
-
16,087
-
16,087
117
Total transactions with owners 117 3,342 12,628 2,794 - - (5,270) 13,611 93 13,704
Total movement in shareholders' equity 117 3,342 12,628 2,794 (3,112) - 382 16,151 (195) 15,956
Shareholders' equity at 30 November 2021* 1,484 39,249 42,750 - (3,388) 12 23,857 103,964 - 103,964
(Loss) for the year - - - - - - (17,422) (17,422) - (17,422)
Other comprehensive expense
-
-
-
-
(5,334)
-
-
(5,334)
-
(5,334)
Total comprehensive (expenses) for the year attributable to equity holders - - - - (5,334) - (17,422) (22,756) - (22,756)
Share based payment charge - - - - - - 408 408 - 408
Dividends paid
-
-
-
-
-
(3,256)
(3,256)
-
(3,256)
Issue of share capital, net of issue costs -
519
-
-
-
-
-
523
-
523
-
4
Total transactions with owners 4 519 - - - - (2,848) (2,325) - (2,325)
Total movement in shareholders' equity 4 519 - - (5,334) - (20,270) (25,081) - (25,081)
Shareholders' equity at 30 November 2022 1,488 39,768 42,750 - (8,722) 12 3,587 78,883 - 78,883
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
1 Basis of preparation
The financial information set out in this document does not constitute the Group's Annual Report (which includes the statutory financial statements) for the years ended 30 November 2021 or 2020. The Annual Report (which includes the statutory financial statements) for the years ended 30 November 2021 ('2021') and 30 November 2022 ('2022'), which were approved by the directors on 15 May 2023, have been reported on by the Independent Auditors. The Independent Auditors' Reports on the statutory financial statements for each of 2021 and 2022 were unqualified, did for 2022 draw attention to a matter by way of emphasis, being going concern (but for 2021, did not draw attention to any matters by way of emphasis), and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
The Group's Annual Report (which includes the statutory financial statements) for the year ended 30 November 2021 have been filed with the Registrar of Companies. The Annual Report (which includes the statutory financial statements) for the year ended 30 November 2022 will be delivered to the Registrar in due course, and will be available from the Parent Company's registered office at Botanic House, 100 Hills Road, Cambridge, England, CB2 1PH and on the Group's website https://aferian.com/investors/
The financial information set out in these results has been prepared using the
recognition and measurement principles of and in accordance with UK adopted
International Accounting Standards ('IFRS'). The accounting policies adopted
in these results have been consistently applied to all the years presented and
are consistent with the policies used in the preparation of the financial
statements for the year ended 30 November 2021, except for those that relate
to new standards and interpretations effective for the first time for periods
beginning on (or after) 1 January 2021. There are deemed to be no new
standards, amendments, and interpretations to existing standards, which have
been adopted by the Group that have had a material impact on the financial
statements.
2 Going Concern
The consolidated financial statements have been prepared on a going concern
basis. The ability of the Group to continue as a going concern is contingent
of the ongoing working capital facilities and wider viability of the Group.
The Group meets its day-to-day working capital requirements through its cash
balances, working capital facilities and wider working capital management.
The Group had cash resources of $11.5m as at 30 November 2022 (2021: $14.2m)
and a multicurrency working capital facility of $50.0m, of which $7.5m was
drawn at 30 November 2022 (2021: $nil). On 30 December 2022 the Group
executed an amendment letter to update the covenant definition in the existing
banking facility with Barclays Bank plc, Silicon Valley Bank, and Bank of
Ireland secured on 23 December 2021. As part of the amended covenant
definition, the amount of available facility is subject to a cap of 2.5 times
the amount of 12 months rolling Adjusted Lender EBITDA, tested on a monthly
basis. The facility has a committed term to 23 December 2024 with options to
extend by a further one or two years. The Group had net current liabilities of
$1.2m as at 30 November 2022 (2021: net current assets of $9.2m).
The current global economic conditions continue to create uncertainty, and
specific to the Group, recognising the strength and flexibility of the Group's
software-led strategy, there are potential risks that the Amino division
revenue continues to experience a negative impact from the current
macroeconomic environment. In respect of this going concern assessment, The
Directors have considered the following principal risks and uncertainties that
could potentially impact the Group's ability to fund its future activities,
meet its liabilities as they fall due and adhere to its future banking
covenants, including:
• A decline in market conditions resulting in lower than forecast sales; and
• Higher working capital requirement
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
2 Going Concern (continued)
The directors have prepared a base case cash flow forecast covering a period
of at least 12 months from the date of approval of the financial statements.
In addition, they have prepared various sensitised analyses. These reflect a
variety of possible cash flow scenarios where the Group achieves further
reduced revenues, reduction in gross margins and combinations of both,
together, if required, with the timely deployment of cost containment and
reduction measures that are aligned with the anticipated levels of
performance. Overall, if the base case forecast is achieved, the Group and
parent company will be able to operate within its existing working capital
facilities. However, the recovery of the Amino division revenues, continued
growth in 24i division revenues and cash conversion expected in H2 2023 are
key. Failure to achieve the base case view of forecast sales pipeline
conversion assumed in the base case forecast could result in the Group failing
to comply with financial covenants associated with its existing banking
facility, potentially resulting in the facilities being withdrawn.
We are currently in active discussions with the Group's existing loan facility
providers to seek solutions in order to increase the safety headroom based on
the current covenant definitions. Should those not be successful we may need
to seek additional funding through a placement of shares or other sources of
funding which have not yet been secured. The Group has a history of
successfully negotiating covenant revision, and raising financing.
Taking account of these matters, the Directors have concluded that the
circumstances set forth above indicates the existence of material uncertainty
that may cast significant doubt on the Group's ability to continue as a going
concern. However, given the Group's current performance, the Directors have
considered it is appropriate to prepare the financial statements on a going
concern basis and the financial statements do not include the adjustments that
would be required if the Group were unable to continue as a going concern.
3 Geographical external customer revenue analysis
For this disclosure revenue is determined by the location of the customer.
Year to 30 November 2022 Year to 30 November 2021
Amino 24i Total Amino 24i Total
$000s
$000s
$000s
$000s
$000s
$000s
USA 29,389 5,809 35,198 34,584 5,225 39,809
Latin America 6,217 1,254 7,471 8,117 986 9,103
Netherlands 23,354 6,502 29,856 21,167 6,879 28,046
Rest of EMEA 10,462 5,542 16,005 8,432 4,708 13,140
EMEA 33,816 12,044 45,860 29,599 11,587 41,186
Rest of the World 2,598 2,598 2,792 - 2,792
72,020 19,107 91,127 75,092 17,798 92,890
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
4 Exceptional items
Exceptional items within cost of sales and operating costs comprise the
following charges/(credits):
Year to Year to
30 November 2022
30 November 2021
$000s
$000s
Credit relating to royalty costs recognised in prior years and subsequently (48) (163)
renegotiated
Subtotal cost of sales (48) (163)
Expensed contingent post-acquisition remuneration in respect of the - 347
acquisition of 24i Unit Media BV
1,072
304
Redundancy and associated costs
432
638
Acquisition and one-off legal costs
5,206
379
Aborted acquisition costs
Subtotal operating expenses 6,710 1,668
Total exceptional items 6,662 1,505
Other exceptional items
Goodwill impairment charge 12,488 -
Exceptional items within net finance expense comprise the following
(credits)/charges:
Year to Year to
30 November 2022
30 November 2021
$000s
$000s
Credit in relation to movement in contingent consideration - (179)
Subtotal finance income - (179)
Unwinding discount on put option liability regarding non-controlling interest 532
of the 24i Group
Unwinding discount on contingent consideration regarding FokusOnTV (formerly - 79
Nordija) acquisition
(403)
Subtotal finance expense (403) 611
Total net finance (income)/expense - exceptional items (403) 432
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
5 Earnings per share
Year to Year to
30 November 2022
30 November 2021
$000s
$000s
(Loss)/profit attributable to ordinary shareholders (17,422) 5,652
Exceptional items 6,662 1,505
Impairment of goodwill 12,488 -
Share-based payment charges
407
1,079
Finance income
(403)
(179)
Finance expense
-
611
Amortisation of acquired intangible assets
3,995
Deferred tax credit on acquired intangibles 4,562
(734)
Deferred tax credit on tax losses recognised
(682)
(2,721)
-
(Loss)/ profit attributable to ordinary shareholders excluding adjusting items 5,612 9,208
Weighted average number of shares (Basic) 85,070,688 80,385,687
Dilutive share options outstanding 1,545,606 1,613,485
Weighted average number of shares (Diluted) 86,616,294 81,999,172
Basic earnings per ordinary share of 1p (20.48)c 7.03c
Diluted earnings per ordinary share of 1p (20.48)c 6.89c
Adjusted basic earnings per ordinary share of 1p 6.6c 11.45c
Adjusted diluted earnings per ordinary share of 1p 6.48c 11.23c
The calculation of basic earnings per share is based on profit after taxation
and the weighted average of ordinary shares of 1p each in issue during the
year. The Company holds 1,482,502 (2021: 1,531,458) of its own shares in
treasury and these are excluded from the weighted average above. The basic
weighted average number of shares also excludes 242 (2021: 242) being the
weighted average shares held by the EBT in the year.
The number of dilutive share options above represents the share options where
the market price is greater than exercise price of the Company's ordinary
shares.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
6 Intangible assets
Goodwill* Customer relationships Trade names Intellectual Property Software licences Development costs Acquired platforms Total
$000s
$000s
$000s
$000s
$000s
$000s $000s $000s
Cost
At 30 November 2020 68,237 20,810 2,557 390 1,639 41,194 13,917 148,744
Additions - - - - - 8,035 - 8,035
Acquisition of subsidiary
2,950
1,000
-
-
-
-
3,888
7,838
Foreign exchange adjustment
(1,660)
(686)
(69)
-
2
(458)
(650)
(3,521)
At 30 November 2021 69,527 21,124 2,488 390 1,641 48,771 17,155 161,096
Additions - - - - - 7,636 - 7,636
Acquisition of subsidiary Impairment 1,586 119 - - - - 2,609 4,314
(12,488)
-
-
-
-
-
-
(12,488)
Foreign exchange adjustment
(2,333) (931) (94) - (160) (1,220) (1,123) (5,861)
At 30 November 2022 56,292 20,312 2,394 390 1,481 55,187 18,641 154,697
Amortisation
At 30 November 2020 - 7,711 1,776 390 1,606 34,429 10,765 56,677
Charge for the year - 2,403 89 - 31 5,036 1,503 9,062
Foreign exchange adjustment
-
(48)
(22)
-
1
(142)
(296)
(507)
At 30 November 2021 - 10,066 1,843 390 1,638 39,323 11,972 65,232
Charge for the year - 2,011 80 - 3 5,363 2,471 9,928
Foreign exchange adjustment
- (217) (43) - (160) (510) (554) (1,484)
At 30 November 2022 - 11,860 1,880 390 1,481 44,176 13,889 73,676
Net book amount 56,292 8,452 514 - - 11,011 4,752 81,021
At 30 November 2022
At 30 November 2021 69,527 11,008 645 - 3 9,448 5,233 95,864
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
7 Trade and other receivables
As at As at
30 November 2022
30 November 2021
$000s
$000s
Current assets:
Trade receivables 17,273 19,575
Less: provision against trade receivables
(646) (306)
Trade receivables (net) 16,627 19,269
Contract assets
1,191
1,527
Total financial assets other than cash and cash equivalents classified as 17,818 20,796
amortised cost
Other receivables 400 601
Prepayments
1,628
539
Total trade and other receivables 19,846 21,936
Corporation tax receivable 654 113
Current assets: due within one year 20,500 22,049
Non-current assets:
Other receivables 183 235
Other receivables due in more than one year comprise rent deposits. The
carrying value of trade and other receivables classified at amortised cost
approximates fair value. The Group does not hold any collateral as security.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
8 Trade and other payables
As at As at
30 November 2022
30 November 2021
$000s
$000s
Current liabilities
Trade payables 23,268 14,420
Other payables
111
233
Accruals
6,759
7,909
Total current financial liabilities, excluding loans and borrowings, 30,138 22,562
classified as financial liabilities measured at amortised cost
Contingent consideration
809
1,117
Total current financial liabilities measured at fair value 809 1,117
Social security and other taxes 301 1,837
Contract liabilities
2,286
2,261
Total trade and other payables 33,534 27,777
Lease liabilities 1,121 966
Corporation tax payable
505
774
35,160 29,517
Non-current liabilities
Other payables 1,070 677
Lease liabilities
1,177
1.002
2,247 1,679
The carrying value of trade and other payables classified as financial
liabilities measured at amortised cost approximates fair value.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary
On 4 April 2022, the Group acquired 100% of the issued share capital of Exabre
Limited (trading as 24iQ (formerly the Filter)), a UK-headquartered AI-powered
video recommendation service for consideration up to £4.0m ($5.2m).
The Filter's technology will significantly accelerate the roadmap of 24i's
video streaming platform by adding enhanced analytics, recommendations and
personalisation to its existing data analytics services. 24i will also market
The Filter's managed service solution to its existing OTT and Pay TV customers
and prospects as a standalone service.
The acquisition represents a further supportive step along the Group's 2025
strategy which addresses the convergence of streaming services and traditional
Pay TV. It is also in line with the Group's objective to acquire key and
emerging technologies that add value to its platform's capabilities. The
acquisition was completed in British Pound.
The preliminary amounts recognised in respect of the identifiable assets
acquired and liabilities assumed are set out in the table below.
Book value Fair value adjustment Fair value
$000
$000
$000
Identifiable intangible assets - 2,728 2,728
Right of use assets 69 - 69
Property, plant and equipment 3 - 3
Current assets
· Current trade and other receivables 320 - 320
· Cash and cash equivalents 4 - 4
Liabilities
· Current trade and other payables (259) - (259)
· Lease liability (69) - (69)
· Deferred tax liability - (682) (682)
Total identifiable assets and liabilities 68 2,046 2,114
Goodwill 1,586
Total consideration 3,700
Total gross consideration 4,206
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary (continued)
Satisfied by: Fair value
$000
Initial consideration:
· Cash 1,549
Deferred consideration:
· Cash 327
Contingent consideration:
· Payable in cash 2,330
Total gross consideration 4,206
Impact of discounting deferred and contingent consideration (506)
Total consideration 3,700
Net cash outflow arising on acquisition
Cash consideration 1,549
Less: cash and cash equivalent balances acquired (4)
Net cash outflow on acquisition 1,545
The estimated goodwill of $0.5m arising from the acquisition consists of
expected growth in the provision of user personalisation managed services.
None of the goodwill is expected to be deductible for income tax purposes.
Total consideration transferred includes £0.3m ($0.3m) of deferred cash
consideration, payable in October 2023. Contingent consideration is payable up
to £2.5m ($3.2m), subject to achieving certain annual recurring revenue
("ARR") growth. The contingent consideration will be settled in cash and
payable in two tranches, at the first and second anniversaries of the
acquisition. At the acquisition date, the estimated fair value of the
contingent consideration was $1.8m based on the ARR forecasts. Management
has re-assessed the fair value of the contingent consideration as at the
balance sheet to be $1.3m. The reduction in the liability of $0.5m has been
recognised in the consolidated income statement as finance income.
The costs of the acquisition were $0.2m. 24iQ (formerly the Filter)
contributed $0.4m to revenue and $0.2m loss to the Group's operating profit
for the year since the acquisition date. If the acquisition of 24iQ
(formerly the Filter) had been completed on the first day of the financial
year, Group revenues for the year would have been $91.3m and operating loss
would have been $4.0m.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary (continued)
Acquisition in the prior period - FokusOnTV (formerly Nordija)
On 27 May 2021, the Group acquired 100% of the issued share capital of
FokusOnTV (formerly Nordija, a Danish incorporated entity whose principal
activities are as a streaming and Pay TV platform specialist, for €5.3m
($6.5m).
During the current period, and within the measurement period (which shall not
exceed one year from the acquisition date, an additional intangible asset was
identified which adjusted the provisional amounts recognised for this business
combination. An intangible asset of $0.6m in relation to a contract asset has
subsequently been recognised. This has resulted in the following
remeasurements to the initial provisional estimated fair value adjustments:
· Increase to fair value of identifiable intangibles assets of $0.5m ($0.6m in
relation to the contract asset, less $0.1m reduction to other identifiable
intangible assets previously recognised);
· Increase to deferred tax liability of $0.1m in relation to the above
adjustment; and
· Decrease to goodwill of $0.4m (previously reported goodwill of $3.3m)
During the measurement period, the Group has retrospectively adjusted the
provisional amounts recognised at the acquisition date to reflect new
information obtained, as noted above, about facts and circumstances that
existed as of the acquisition date. These changes were identified within 12
months of the acquisition date. The updated fair value of identifiable assets
and liabilities at the acquisition date is disclosed in the table below.
Book value Fair value adjustment as previously reported Adjustment to initial estimated fair value Fair value
$000
$000
$000
$000
Identifiable intangible assets 2,523 1,865 500 4,888
Right of use assets 468 - - 468
Property, plant and equipment 115 - - 115
Non-current trade and other receivables 41 - - 41
Current assets
· Current trade and other receivables 787 (90) - 697
· Cash and cash equivalents 269 - - 269
Liabilities
· Current trade and other payables (1,781) (66) - (1,847)
· Lease liability (468) - - (468)
· Deferred tax liability (252) (410) (110) (772)
Total identifiable assets and liabilities 1,702 1,299 390 3,391
Goodwill 2,950
Total consideration 6,341
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
9 Acquisition of subsidiary (continued)
The contract asset of $0.6m has been amortised in line with the associated
customer contract revenue recognition. Accordingly, $0.5m should have been
recognised in the consolidated income statement for the year ended 30 November
2021 as amortisation on acquired intangibles. Furthermore, $0.1m of the
incremental deferred tax liability recognised in relation to the contract
asset has been released in the consolidated income statement for the year
ended 30 November 2021.
Satisfied by: Fair value
$000
Initial consideration:
· Cash 5,018
· Equity instruments (315,511 ordinary shares of Aferian plc) 659
Contingent consideration:
· Cash 144
· Equity instruments (292,030 ordinary shares of Aferian plc) 610
Total consideration before discounting 6,431
Fair value adjustment in relation to discounting contingent consideration (90)
Total consideration transferred 6,341
Net cash outflow arising on acquisition
Cash consideration 5,018
Less: cash and cash equivalent balances acquired (269)
Net cash outflow on acquisition 4,749
The fair value of the financial assets includes trade receivables with a fair
value of $0.5m and a gross contractual value of $0.6m. The best estimate at
acquisition date of the contract cash flows not to be collected is $0.1m.
Goodwill of $3.0m arising from the acquisition consists of expected growth in
the sale of online video apps and solutions. None of the goodwill is
expected to be deductible for income tax purposes.
Contingent consideration
During the year, all targets associated with the contingent consideration
payment were successfully satisfied in full. Accordingly, the following
payments and issue of equity were made during the year:
· On 31 March 2022, the Group paid an amount of €0.5m ($0.6m), of
which €0.1m ($0.1m) was settled in cash and the remaining €0.4m ($0.5m)
through the issue of 222,430 new ordinary shares of 1p each in the capital of
the Company.
· On 17 October 2022, the Group paid the remaining amount due of €0.1m
($0.1m), of which €0.03m ($0.03m) was settled in cash and the remaining
€0.07m ($0.07m) through the issue of 52,769 new ordinary shares of 1p each
in the capital of the Company.
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
10 Cash generated from operations
Cash generated from operations Year to Year to
30 November 2022
30 November 2021
$000s
$000s
(Loss)/profit for the year (17,422) 5,364
Tax charge/(credit)
512
(582)
Net finance costs
313
398
Amortisation charge*
9,928
9,062
Depreciation charge
1,684
1,611
Goodwill impairment charge
12,488
Loss on disposal of property, plant and equipment
4 -
Share based payment charge
407
9
Exchange differences
(1,451)
1,079
(Increase)/decrease in inventories
(6,665)
(249)
Decrease/(increase) in trade and other receivables
2,283
399
Decrease in provisions
(10)
(6,795)
(Decrease)/increase in trade and other payables
246
(64)
Increase in payables for aborted acquisition costs
4,072
3,881
-
Cash generated from operations 6,389 14,113
Year to Year to
30 November 2022
30 November 2021
$000s
$000s
(Loss)/profit for the year (17,422) 5,364
Tax charge/(credit)
512
(582)
Net finance costs
313
398
Amortisation charge*
9,928
9,062
Depreciation charge
1,684
1,611
Goodwill impairment charge
12,488
Loss on disposal of property, plant and equipment
4 -
Share based payment charge
407
9
Exchange differences
(1,451)
1,079
(Increase)/decrease in inventories
(6,665)
(249)
Decrease/(increase) in trade and other receivables
2,283
399
Decrease in provisions
(10)
(6,795)
(Decrease)/increase in trade and other payables
246
(64)
Increase in payables for aborted acquisition costs
4,072
3,881
-
Cash generated from operations 6,389 14,113
Adjusted operating cash flow before exceptional cash outflows was $8,937,000
(2021: $16,672,000).
Year to Year to
30 November 2022
30 November 2021
$000s $000s
Adjusted operating cashflow 8,937 16,672
Post-acquisition remuneration in respect of the acquisition of 24i Unit Media
-
(1,270)
BV
Redundancy and associated costs
(1,072)
(304)
Acquisition and one-off legal costs
(432)
(606)
Aborted acquisition costs
(1,044)
(379)
Cash generated from operations 6,389 14,113
Aferian plc
Notes to the condensed consolidated financial statements
For the year ended 30 November 2022
11 Cautionary Statement
This document contains certain forward-looking statements relating to Aferian
plc (the "Group"). The Group considers any statements that are not historical
facts as "forward-looking statements". They relate to events and trends that
are subject to risk and uncertainty that may cause actual results and the
financial performance of the Group to differ materially from those contained
in any forward-looking statement. These statements are made by the Directors
in good faith based on information available to them and such statements
should be treated with caution due to the inherent uncertainties, including
both economic and business risk factors, underlying any such forward-looking
information.
12 AGM / Annual Report
Pursuant to AIM Rule 20, the Annual Report and Accounts for the financial year
ended 30 November 2022 ("Annual Report") is available to view on the Group's
website: www.aferian.com and will be posted to shareholders shortly. Aferian
will hold its AGM on 31 May 2023 with a further general meeting on meeting on
13 June 2023 where the Annual Report and accounts will be received with
related resolutions to be considered.
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. END FR FIFFIEVIRLIVRecent news on Aferian
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