REG - Aferian PLC - Half-year Report
23/08/2022 07:00
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RNS Number : 8400W Aferian PLC 23 August 2022
23 August 2022
AFERIAN PLC
("Aferian", the "Company" or the "Group")
HALF YEAR RESULTS
Aferian plc (LSE AIM: AFRN), the B2B video streaming solutions company,
announces its unaudited results for the six months ended 31 May 2022 ("H1
2022"), which demonstrate a performance in line with the trading update
announced on 14 June 2022.
Donald McGarva, Chief Executive Officer of Aferian plc said:
"Eighteen months into the execution of our 2025 strategy, I am pleased to see
the steady drumbeat of progress towards our goals showing through in our
performance. Our strategy of driving our business towards higher quality,
increasingly visible revenue streams is galvanising our team, focusing our
efforts and - most importantly - delivering results. We step into the second
half of this year with an Annual Recurring Revenue some 14% higher than this
time last year. This is an achievement of which all our colleagues should be
proud.
"Now, nearly three months into Q3, we continue to have confidence in our
second half prospects. We are seeing improved availability of components in
the second half, unwinding delays seen in H1. With the acquisition of The
Filter now complete we have an even more compelling offering for our
customers. The increasing quality of engagement we are able to have with
current and prospective customers underpins my view that Aferian is well
positioned to not only benefit from global growth in streaming, but also shape
the way this dynamic market evolves for years to come."
Financial Key Figures
Periods ended 31 May
$m unless otherwise stated H1 2022 H1 2021 Change
Revenue 44.5 45.3 (2%)
Exit run rate Annual Recurring Revenue ("ARR") ((1)) 15.8 13.8 14%
Statutory operating (loss)/profit (0.6) 1.9 (132%)
Statutory basic earnings per share (US cents) (1.76) 1.16 -
Adjusted operating profit ((2)) 2.4 5.1 (53%)
Adjusted basic earnings per share (US cents) ((3)) 1.50 5.05 (70%)
Net cash ((4)) 7.8 10.1 (23%)
Interim dividend per share (GBP pence) 1.0 1.0 -%
Notes
1. Exit Annual Recurring Revenue (ARR) is annual run-rate recurring
revenue as at 31 May 2022.
2. Adjusted operating profit is a non-GAAP measure and excludes
amortisation of acquired intangibles, exceptional items, and share-based
payment charges.
3. Adjusted basic earnings per share is a non-GAAP measure and excludes
amortisation of acquired intangibles, exceptional items, share-based payment
charges and non-recurring finance income and expense.
4. Net cash is cash and cash equivalents less loans and bank borrowings.
Financial Highlights
· Further momentum demonstrated in improving the quality and
visibility of Group earnings:
o Higher margin software & services revenue of $12.0m, up 21% in H1 2022
compared to H1 2021.
o Recurring revenue of $8.2m, up 49% in H1 2022 compared to H1 2021.
o Exit run rate ARR of $15.8m, up 14% in H1 2022 compared to H1 2021
(constant currency basis: 26%).
· As previously announced in June 2022 device revenues were
negatively impacted in H1 by delays in product shipments because of
COVID-related supply chain issues, but we are confident that the order book
and improved availability of components will drive higher revenues in H2.
· Adjusted operating profit of $2.4m, down 53% in H1 2022 compared
to H1 2021 due to delay of device revenues into H2.
· Significant increase in adjusted cashflow from operating
activities before tax from $4.0m to $6.7m, an increase of 68%
· A strong balance sheet, providing capacity for organic and
M&A-related investments, and a banking facility of up to $100m in place
and undrawn.
Strategic & Operational Highlights
· Market dynamics continue to support Aferian's growth ambitions
and strategic positioning.
· Customer offering further enhanced by the acquisition and
integration of The Filter:
o Brings new customers, new capabilities for existing customers - and
powered the launch of 24iQ: our new personalisation and content
recommendations service.
· Continued to innovate in product modularity and capability:
o 24i: Relaunched our streaming platform under the name 24i Mod Studio,
alongside launching 24i OTT Studio and 24i Pay TV Studio: two proprietary
off-the-shelf solutions containing all the technology capabilities required to
launch a streaming service in a matter of weeks for Tier 3 and Tier 4
customers.
o Amino: More than 116 customers have now deployed our SaaS device software
management platform, with the number of devices managed growing by 48%
year-on-year.
· Supported customers with critical, innovative rollouts and
deployments:
o 24i: Supported 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.
o Amino: PCCW publicly launched its new generation of Now TV streaming
services powered by Amino software, facilitating the integration of Netflix
and other third-party streaming content alongside its own.
Current Trading and Outlook
Trading since the period-end has reinforced the Board's full year confidence,
as expressed in our 14 June 2022 Trading Update. The Group remains in a strong
position both financially and operationally. With a solid H2 order book,
availability of components much improved since H1, delayed orders from H1 now
shipped and H2 production weighted to Q3 to mitigate any potential, additional
supply chain issues, the Board expects to deliver a much improved second half
performance. Therefore, subject to continuing availability of components and
shipment levels, the Board remains confident in achieving results in line with
its expectations for the year ending 30 November 2022.
For further information please contact:
Aferian plc +44 (0)1223 598197
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 LLP (Financial communications) +44 (0)20 3727 1000
Matt Dixon / Tom Blundell
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 Alternative Investment
Market (AIM: symbol AFRN). Headquartered in Cambridge, UK, the company has
over 350 staff located in 11 offices, including major European cities as
Amsterdam, Helsinki, Copenhagen, and Brno, as well as in San Francisco and
Hong Kong. For more information, please visit www.aferian.com
(http://www.aferian.com/) .
Chief Executive Officer's review
2025 Strategy: moving with - and shaping - our markets
During the first half of this current financial year, we have made further,
meaningful progress towards our goals of delivering improved quality of
earnings from our operations and enhanced visibility of the revenues we seek
to generate.
Our work is helped by the fact that Aferian continues to operate in the
growing video streaming market. This is aligned with our view that consumers
expect to be able to watch the video content they love, anywhere, anytime on
any device. This market remains a growing, dynamic and exciting space with
Aferian well-placed to help Pay TV operators, streaming services and content
owners capture value from these behavioural shifts.
As consumer viewing habits change, video streaming consumption is currently
growing by c.13% per annum*, which is further evidenced in the UK by recent
reports of record usage of the BBC iPlayer streaming service**. At the same
time, audiences watch streaming video services across an ever-increasing range
of devices, enabled by the ongoing growth in global penetration of high-speed
broadband. As this happens, our customers, Pay TV operators and streaming
service providers, are continuing to invest in and adapt their offerings to
meet consumer demand, refreshing and optimising their services in order to
provide the features and functionality that consumers desire. In a market
dictated by consumer choice, new video streaming services are also continually
launching with a long tail of niche content that enables them to capture
additional revenue share.
This is the backdrop against which Aferian operates. More importantly, this is
a market Aferian is helping to shape. Our products & services, augmented
by the continuing service development and M&A enhancements we have
invested in this year, are allowing Pay TV operators, streaming services and
content owners to improve and re-align their own offerings and drive value
from the innovative new services our technologies make possible.
Continued progress towards delivering improved quality of earnings
Supported by these trends, the Group has continued to make strong progress in
the first half of 2022 toward improving the quality and visibility of its
earnings. This progress is particularly encouraging, given it has been made
against a backdrop of challenging conditions in the global supply chain and
currency headwinds caused by the decrease of the value of the Euro against the
US Dollar.
Aferian reported an exit run rate ARR of $15.8m for H1 2022 (H1 2021: $13.8m)
representing 14% growth or 26% on constant currency basis (using exchange
rates as at 31 May 2021). Higher margin software and services revenues were
$12.0m in H1 2022 (H1 2021: $9.9m), representing a half-on-half increase of
21%, or 28% on a constant currency basis.
As reported in our 14 June 2022 trading update, device revenues in the first
half were $32.5m: a decrease of 8% year-on-year. Our ability to supply
streaming devices to customers in the period was impacted by supply chain
challenges, including shipping and production delays, caused principally by
COVID-19 related manufacturing shutdowns in China. However, to mitigate
against further potential delays, second half device production has been
weighted into Q3. The Board expects device revenues to be higher in the second
half of the year, supported by the order book.
Consequently, Group revenue for the first half stood at $44.5m (H1 2021:
$45.3m).
H1 2022 Key Performance Indicators
Our key performance indicators demonstrate continued strategic progress during
the first half, reporting growth in software & services revenue (up 21%)
and exit ARR (up 14%).
H1 2022 H1 2021
$m $m
Software & services revenues 12.0 9.9
Device revenues 32.5 35.4
Total revenue 44.5 45.3
ARR at 31 May ("Exit ARR") 15.8 13.8
Adjusted operating cashflow before tax 6.7 4.0
Net customer revenue retention rate on recurring revenue** 113% 120%
*Source: Boston Consulting Group
**Source:
https://www.csimagazine.com/csi/BBC-iPlayer-streams-off-to-best-start-to-the-year.php
(https://www.csimagazine.com/csi/BBC-iPlayer-streams-off-to-best-start-to-the-year.php)
***on a constant currency basis
M&A
In April 2022, we acquired The Filter, a UK data science specialist business,
for an initial consideration of $1.5m and a deferred consideration payable in
October 2023 of $0.3m. Additional consideration of $1.8m (capped at $3.2m),
is expected to be paid subject to Exit ARR targets being met over a two-year
period. Amid intense competition for viewers in the streaming market, our
customers are increasingly looking to make use of the data collected by their
video streaming applications to help them offer consumers more highly
personalised and engaging experiences. The Filter's advanced machine learning
algorithms and managed services can be sold either as an integrated or
standalone solution to new or existing customers. This represents an excellent
opportunity for us to expand our customer base and is a clear example of how
we are actively shaping and driving the growth markets we operate in.
The acquisition of The Filter immediately added high quality customers to the
Group including BBC Studios-owned UK TV Play, German streaming service Joyn,
and EPIX, a North American Video on Demand service owned by MGM/Amazon. It has
also brought an incredibly talented and engaged new team with it. The rapid
integration of The Filter's complementary technologies into 24i has already
enabled us to launch a new managed personalisation and recommendations service
called 24iQ in May.
Aferian's M&A strategy continues to include the acquisition of emerging
technologies that add value to our customers by solving more of the key
challenges they face in meeting consumer needs. In addition, the Group seeks
further acquisitions that will enable us to scale up and to expand into new
geographies and market verticals.
People and culture
As the majority of our employees return to some degree of normality with the
opportunity for office working and face-to-face meetings and events, ongoing
COVID-19 restrictions have made it a particularly difficult first half for our
team in Hong Kong. Hybrid working, of course, brings its own challenges, but
its many benefits are yet to be fully experienced by our Hong Kong colleagues.
We pay tribute to them for their resilience and determination in dealing with
continuing lockdowns and thank them for their commitment to delivering on the
Group's priorities, despite the significant difficulties affecting their
personal and working lives. We also offer our ongoing support and gratitude to
our small but valued team of developers based in Ukraine who have largely
continued to work uninterrupted under the most extraordinarily difficult
circumstances since the start of the war in February.
Operational review
24i
24i offers a robust technology platform that enables both media and
entertainment companies and Pay TV operators to stream their TV and video
programming to any type of screen and to build audience engagement. 24i has a
13-year market-leading position and works with customers like NPO, Telenor,
Pure Flix and Broadway HD.
In the first half, 24i has seen a period of significant investment in the
future, with the acquisition of The Filter, the rebranding of its core
streaming platform and ongoing product development to drive further growth.
24i continues to focus on building recurring revenues in line the with Group's
overall strategy. At the period end, 24i reported a half-on-half increase of
13% in exit ARR (constant currency: 26%). This growth predominately came
from existing customers with a net retention rate ("NRR") of 117% (H1 2021:
128%) on a constant currency basis.
In December 2021, we relaunched our streaming platform under the new name 24i
Mod Studio. The new identity is designed to reflect the modularity and
flexibility of the 24i offering.
Alongside the name change, we launched pre-packaged, productised solutions for
two of our key target markets - content owners and Pay TV operators. 24i OTT
Studio and 24i Pay TV Studio are off-the-shelf solutions containing all the
technology that a customer in these markets would need to launch a streaming
service in a matter of weeks.
During the period we supported two existing Pay TV customers, Waoo in Denmark
and Telenor Sweden, to rollout new consumer services that include attractive
third-party streaming services alongside their own Pay TV offering on a
single, managed device. This helps the operators to cement their role at the
centre of household viewing and is an emerging trend in the Pay TV market.
We also completed a significant project to fully implement geo-redundancy for
our customer, Delta, in the Netherlands, enabling them to offer a more robust
and resilient service to their growing subscriber base. In addition, our team
implemented KPN's video streaming service in the Netherlands on Amazon Fire TV
devices, adding to our previous work to make the KPN service available on
Smart TVs from Samsung and LG, as well as those TVs that use the Android TV
operating system.
Our teams are now working hard to finalise development of our fully managed
and hosted "TV as a Service" offering which is due to launch to the market in
September 2022. This cloud-based solution will enable Pay TV operators to go
to market more quickly with a fully featured TV offering. 24i has integrated
its solutions with market-leading partners into a fully hosted and managed
end-to-end solution, enabling operators to enjoy a single point of contact for
all elements of their best-of-breed TV streaming infrastructure.
Amino
Amino provides streaming devices powered by its own software that are
integrated into a Pay TV operator's technology ecosystem to enable them to
offer the advanced streaming services demanded by today's consumers. The same
devices and software also enable advertisers and businesses to display their
content on the growing population of different digital video displays in use
in our public spaces. Amino has a 25-year heritage in streaming video with
customers like PCCW, Cincinnati Bell, T-Mobile Netherlands and Entel.
During the period Amino revenues fell by 7% to $35.2m, because of production
delays caused by COVID-19 related lockdowns in China which impacted the
availability of components, device production and the onward supply chain.
This resulted in approximately 10% fewer devices being shipped in H1 2022
compared to H1 2021. However, to mitigate any further impact of delays, we
have weighted second half production of devices into Q3. Therefore, the Group
expects device revenues to be higher in the second half of the year, supported
by the order book. Amino continues to maintain its strong margins and cash
generation, despite increased costs of raw materials.
The launch of the Now TV video streaming service by our customer PCCW in Hong
Kong was an excellent example of how Amino's software makes it easy for Pay TV
operators to add third party streaming offerings, such as Netflix, alongside
their own content to remain competitive. Engage, our leading SaaS device
software management, customer support and analytics solution, continued to
grow strongly. More than 116 customers have now deployed Engage, an increase
of 29% from the end of H1 2021. At the same time the number of active devices
managed by the solution has grown by 48% year-on-year. This solution remains a
significant differentiator for us in a competitive landscape. We also continue
to invest in high levels of customer service and our Net Promotor Score
averaged 88 during the period (FY 2021: 86).
As a result of R&D investment over the past 12 months, during the Period,
we launched our new range of streaming devices, which utilise the Reference
Design Kit (RDK) software stack. RDK is one of the fastest-growing Pay TV
platforms in the world and is already used in millions of devices globally to
power their next-generation of video and broadband services. The rise of RDK
gives Pay TV operators a viable alternative to traditional Linux devices or
the popular Android TV platform as a route to combining their content with
third party streaming services. Shortly after the period end, Amino was
accepted as an RDK "Preferred Plus" member, which evidences our commitment to
helping to enhance the RDK stack through collaboration and contributions which
speed up innovation and customer time to market.
In addition to the Pay TV market, Amino's streaming devices have long been
used by a variety of enterprises to stream video over private networks such as
in hospitals and hotels. Our marketing efforts aim to capitalise further on
the fast-growing Digital Signage market which is worth an estimated $1.6bn
globally according to research conducted by Mordor Intelligence in November
2021.
Environmental, Social and Governance ("ESG")
Today we have published an update to our ESG report. This can be found on our
website at https://aferian.com/esg (https://aferian.com/esg) . Our approach to
ESG uses the Japanese concept of Ikigai meaning "a reason for being"
and which refers to having a meaningful direction or purpose in life. The
ESG report provides an overview of our ongoing progress against our chosen six
of the United Nations Sustainable Development Goals as well as the Sustainable
Accounting Standards Board's ("SASB") Software and IT Services and Hardware
sustainability accounting standards.
Board changes
There have been a number of changes to the Board composition since the
publication of the Annual Report.
We are delighted to welcome Bruce Powell who joined the Group on 3 August 2022
as a Non-Executive Director and Chair of the Aferian Audit committee. Bruce
brings more than 30 years of extensive board-level experience to the Group. He
is currently Chairman of packaging companies Threadless Closures Ltd and
Crateight Ltd, and of Holyport College. His previous roles include 18 years on
the board of Kofax plc and serving as CFO for Imagination Technologies
plc.
On 3 August 2022, Steve Oetegenn was appointed as an Executive Director of the
Group as President of the Americas. Steve has been supporting the Aferian
executive management team in a consultancy capacity since joining the Board as
a Non-executive Director in January 2021. He has now taken on a leadership
role to support the growth of Aferian in this key region. As a result, Steve
has stepped down from his role as Non-Executive Director.
Joachim Bergman stepped down from his role of CEO of 24i in March 2022 and
from the Board of Directors in April 2022. Joachim joined Aferian in September
2017 as SVP Cloud Services and we would like to thank him for the successful
integration and growth achieved by 24i since its acquisition by Aferian in May
2019. As planned, the leadership of 24i successfully transitioned to Dr Neale
Foster who joined 24i as their CEO in March 2022.
Erika Schraner stepped down as a Non-Executive Director and from her role as
Chair of the Aferian Audit Committee on 29th July 2022. Since joining the
Board in 2019, Erika has made a strong contribution to the Group, and we wish
her well in the next phase of her career.
Following these changes, the Board comprises three Non-Executive Directors and
three Executive Directors. The Group remains focussed on improving the
diversity of its Board and carefully considers a broad range of candidates
ahead of any appointment.
Current trading and outlook
Trading since the period-end has reinforced the Board's full year confidence,
as expressed in our 14 June 2022 Trading Update. The Group remains in a strong
position both financially and operationally. With a solid H2 order book,
availability of components much improved since H1, delayed orders from H1 now
shipped and H2 production weighted to Q3 to mitigate any potential, additional
supply chain issues, the Board expects to deliver a much improved second half
performance. Therefore, subject to continuing availability of components and
shipment levels, the Board remains confident in achieving results in line with
its expectations for the year ending 30 November 2022.
Donald McGarva
Chief Executive Officer
22 August 2022
Chief Financial Officer's review
As indicated in the trading update of 14 June 2022, the interim results show
excellent progress in the 24i business. However, first half revenue of the
Amino business has been impacted in the short term by delays in deliveries to
customers because of COVID-related supply chain issues. Overall, the Group's
financial results for the period ended 31 May 2022 demonstrate progress
against the Group's financial objectives: to deliver improved quality of
earnings and enhanced visibility of revenue.
High margin software & services revenues increased by 21% to $12.0m (H1
2021: $9.9m). Excluding the impact of the Nordija acquisition, software
& services revenues increased organically by 7% (constant currency basis:
13%). The visibility of the Group's revenues increased due to higher
software & services revenue and exit run rate ARR increasing to $15.8m (H1
2021: $13.8m), representing growth of 14% (constant currency basis: 26%).
Total Group revenues decreased by 2% to $44.5m (H1 2022: $45.3m). Excluding
the impact of the Nordija acquisition in May 2021, revenue decreased by 5%.
The decrease is due to lower device revenues in the Amino business as set out
in the Chief Executive Officer's review above.
The Group's gross profit margin has been negatively impacted by the increased
price of components. Most, but not all, of these increases have been reflected
in price increases to customers. In addition, the Group has experienced
increased headcount-related costs to retain and attract a skilled workforce
given the current economic conditions with regards to labour costs.
Notwithstanding the pressure on margins from these economic forces, the Group
expects operating profit margins to be broadly in line with the previous year.
The Group continued to generate strong operating cash flows. Adjusted
operating cashflow before tax and exceptional costs was $6.7m (H1 2021: $4.0m)
representing an adjusted EBITDA cash conversion of 116% (H1 2021: 48%). The
business continues to have negative working capital of $7.4m (H1 2021: $3.3m)
and working capital movements can be materially impacted by the timing of cash
flows arising from different payment terms given to larger customers. In
addition, the Group is continuing to invest in inventory to increase the
availability of components and mitigate against potential, additional supply
chain delays. Operating cash flow before tax was $6.2m (H1 2021: $1.8m).
The Group had net cash of $7.8m as at 31 May 2022 (30 November 2021:
$14.2m). Cash outflows during the period include the acquisition of The
Filter, payment of the ordinary dividend and payment of bank facility fees. At
the start of the period, the Group secured a new banking facility with
Barclays Bank plc, Silicon Valley Bank, and Bank of Ireland. This increased
facility of $50m, split evenly across the three-bank club, also includes a
further $50m available by way of an accordion. The new facility has a
three-year term to 23 December 2024 with options to extend by a further one or
two years. The new facility remained undrawn as at 31 May 2022.
Revenue
H1 2022 H1 2021 Change
$m
$m
Software and services
Revenue
Recurring 8.2 5.5 49%
Non-recurring 3.8 4.4 (14%)
Total revenue 12.0 9.9 21%
Devices including integrated software
Revenue
Non-recurring 32.5 35.4 (8%)
Total revenue 32.5 35.4 (8%)
Total
Revenue
Recurring 8.2 5.5 49%
Non-recurring 36.3 39.8 (9%)
Total revenue 44.5 45.3 (2%)
High margin software & services represent 27% of total revenues for the
period (H1 2021: 22%), of which 68% was recurring (H1 2021: 56%).
Revenue and adjusted EBITDA
Revenue Adjusted EBITDA
H1 2022 H1 2021 H1 2022 H1 2021
$m
$m
$m
$m
24i 9.3 7.5 0.6 0.2
Amino 35.2 37.8 6.5 9.3
Central costs - - (1.3) (1.2)
Total 44.5 45.3 5.8 8.3
Adjusted EBITDA for the six months to 31 May 2022 was $5.8m (H1 2021: $8.3m).
Adjusted EBITDA is reconciled below and is calculated as operating profit
before depreciation, interest, tax, amortisation, exceptional items and
employee share-based payment charges. In line with expected higher revenues in
the second half of the year we expect EBITDA margin for the full year to be
broadly in line with the prior year. This is consistent with the way the
financial performance of the Group is presented to the Board and Chief
Operating Decision Maker.
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
H1 2022 H1 2021
$m
$m
Software & services 9.3 7.5
Revenue 9.3 7.5
Adjusted cost of sales (2.6) (1.9)
Adjusted gross profit margin 6.7 5.6
Adjusted gross profit margin % 72% 75%
Adjusted operating costs (6.1) (5.4)
Adjusted EBITDA* 0.6 0.2
Adjusted EBITDA margin % 6% 3%
Capitalised development costs 3.2 2.6
*Adjusted EBITDA is a non-GAAP measure and excludes depreciation,
amortisation, interest, tax, exceptional items and share based payment
charges.
With the increased focus on improving visibility, ARR has grown from $10.0m to
$11.3m in the last 12 months. This represents year-on-year growth of 13%
(constant currency basis: 26%). The revenue increase in the period represents
the inclusion of the results of Nordija A/S, acquired in May 2021. On an
organic basis, revenue has increased by 5% (constant currency basis: 13%).
Amino segment
H1 2022 H1 2021
$m
$m
Software & services 2.7 2.4
Devices including integrated software 32.5 35.4
Revenue 35.2 37.8
Adjusted cost of sales (22.5) (22.8)
Adjusted gross profit 12.7 15.0
Adjusted gross profit margin % 36% 40%
Adjusted operating costs (6.2) (5.7)
Adjusted EBITDA* 6.5 9.3
Adjusted EBITDA margin % 18% 25%
Capitalised development costs 1.0 0.9
*Adjusted EBITDA is a non-GAAP measure and excludes depreciation,
amortisation, interest, tax, exceptional items and share based payment
charges.
Device revenues decreased by 8% to $32.5m (H1 2021: $35.4m) caused by a
reduction in the volumes of devices shipped in the period, which decreased by
c10% year on year. A large proportion of component price increases, but not
all, have been reflected in prices charged to customers. Gross profit margin
has therefore reduced in the period compared to the prior year.
The Group retains a core customer base in respect of device revenues, whereby
repeat orders are placed by the same customer over multiple financial periods.
Taking the last three financial periods, repeat orders from existing customers
over that period has accounted for 91% (H1 2021: 92%) of total device revenue.
It is this loyal customer base, and continued product reliability, that will
help to ensure full year expectations on device revenue are met.
Central costs
H1 2022 H1 2021
$m
$m
Adjusted operating costs and adjusted EBITDA (1.3) (1.2)
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.
Adjusted EBITDA
H1 2022 H1 2021
$m
$m
Revenue 44.5 45.3
Adjusted cost of sales (25.1) (24.7)
Adjusted gross profit 19.4 20.6
Adjusted gross profit margin % 44% 45%
Customer support and professional services (2.9) (2.9)
Research and development expenses (2.9) (2.9)
SG&A (7.8) (6.5)
Total adjusted operating expenses (13.6) (12.3)
Adjusted EBITDA 5.8 8.3
Research & development costs
The Group continues to invest in research and in the development of new
products and spent $7.1m on R&D activities (H1 2021: $6.4m), of which
$4.2m (H1 2021: $3.5m) was capitalised.
H1 2022 % of revenue H1 2021 % of revenue
$m $m
Core engineering expenses 6.4 14% 5.7 13%
Product management 0.3 1% 0.3 1%
R&D senior management 0.4 1% 0.4 1%
Total research and development costs 7.1 16% 6.4 15%
Less Capitalised development costs (4.2) - (3.5) -
Net research and development expense 2.9 - 2.9 -
Selling, general and administrative (SG&A) expenses have increased by
$1.3m in the period to $7.8m (H1 2021: $6.5m). This increase is due to the
acquisition of Nordija and increased headcount-related costs to retain and
attract a skilled workforce given the current economic conditions with regards
to labour costs.
A reconciliation of Adjusted EBITDA to operating (loss)/profit is provided as
follows:
H1 2022 H1 2021
$m $m
Adjusted EBITDA 5.8 8.3
Exceptional items:
· within operating expenses (0.5) (1.4)
Employee share-based payment charge (0.3) (0.4)
Depreciation and amortisation (5.6) (4.6)
Operating (loss)/profit (0.6) 1.9
Exceptional items
Exceptional items for the period comprised:
· $0.3m (H1 2021: $0.3m) 24i post-acquisition integration and
associated restructuring costs;
· $0.2m (H1 2021: $0.8m) one-off costs in respect of acquisitions and
legal costs, which includes costs associated with The Filter and Nordija
acquisitions. The prior period included one-off costs in respect of
acquisitions and legal costs, which includes costs associated with aborted
acquisitions.
· $nil (H1 2021: $0.3m) contingent post-acquisition remuneration in
respect of the acquisition of 24i Unit Media BV.
Depreciation and amortisation
Excluding amortisation of intangibles recognised on acquisition, depreciation
and amortisation was $3.3m (H1 2021: $3.2m).
Amortisation of intangibles recognised on acquisitions was $2.2m (H1 2021:
$1.4m). The increase of $0.8m in the period relates to the acquisition of
Nordija A/S in May 2021 and The Filter in April 2022.
Taxation
The tax charge of $0.7m (H1 2021: $0.8m) comprises:
· $0.7m (H1 2021: $1.1m) current tax charge; and
· $nil (H1 2021: $0.3m) credit relating to the unwinding of deferred
tax assets and liabilities recognised on acquisitions.
(Loss)/profit after tax was $1.5m (H1 2021: $0.7m profit).
Cash flow
A reconciliation of adjusted operating cash flow before tax to cash generated
from operations before tax is provided as follows:
H1 2022 H1 2021
$m
$m
Adjusted operating cashflow before tax 6.7 4.0
Post-acquisition integration and associated restructuring costs (0.3) (0.3)
Acquisition and one-off legal costs (0.2) (0.1)
Aborted acquisition deposit - (1.8)
Cash generated from operations before tax 6.2 1.8
Adjusted cash flow from operations before tax was $6.7m (H1 2021: $4.0m), an
increase of 68% due to a cash inflow of working capital of $0.1m (H1 2021:
outflow of $3.6m).
Cash generated from operations before tax was $6.2m (H1 2021: $1.8m). The
increase in the period of $4.4m can be attributable to the management of
working capital, as noted above, as well as an outgoing of $1.8m in the prior
year in relation to a deposit advanced for an aborted acquisition, that was
subsequently repaid in H2 2021.
Tax payments, principally in respect of UK corporation tax, totalled $1.9m
during the period (H1 2021: $2.8m). The prior period included a final payment
of the previous tax year for the main UK trading subsidiary as that subsidiary
transitioned to advanced tax payments.
During the period, the Group spent $0.1m (H1 2021: $0.1m) on capital
expenditure in respect of tangible fixed assets and capitalised $4.2m of
research and development costs (H1 2021: $3.5m). The increase of $0.7m is due
to the acquisition of Nordija A/S.
Interest paid in the period of $1.5m (H1 2021: $0.6m) includes fees paid
associated with the new bank facility. Deferred consideration payments
totalling $0.5m (H1 2021: $nil) were made in the period in relation to the
acquisition of Nordija A/S in line with the performance criteria which was
satisfied.
The acquisition of The Filter included initial cash consideration of $1.5m.
A final dividend in respect of the year ended 30 November 2021 of $2.3m (H1
2021: $2.0m) was paid during the period.
Financial position
The Group had cash of $7.8m (30 November 2021: $14.2m). At 31 May 2022, the
Group had $50.0m (30 November 2021: $15.0m) undrawn on its committed loan
facility, which expires in December 2024. In addition, the loan facility
includes a further $50m by way of an accordion.
At 31 May 2022, the Group had total equity of $96.3m (30 November 2021:
$104.0m) and net current assets of $0.9m (30 November 2021: $9.2m). 63% of
trade receivables were insured (30 November 2021: 51%) and debtor days were 24
days (30 November 2021: 23 days).
It remains the Group's policy to obtain insurance and where this is not
possible, due to the territory or customer involved, payment in advance is
required to a level that limits exposure to the margin on the sale of devices.
Dividend
The Company's dividend policy is to deliver returns to shareholders via growth
and income and reflecting the Company's growth ambitions. The policy of paying
between 33-50% of adjusted EPS in dividend is expected to provide shareholders
with a growing income stream whilst allowing the Company to invest in growth.
The Board intends to pay an interim dividend of 1.0 GBP pence per share (H1
2021: 1.0 GBP pence). This interim dividend will be payable on 15 September
2022, to shareholders on the register on 26 August 2022, with a corresponding
ex-dividend date of 25 August 2022.
Going concern
In carrying out the going concern assessment, the Directors have considered a
number of scenarios, taking account of the possible impacts of the pandemic,
in relation to revenue forecasts for the next 12 months. 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 Group will be impacted by decisions further
up our supply chain. This could lead to delays in contract negotiations and
deferring or cancelling of anticipated sales, and that sales and settlement of
existing debts are impacted too.
In reaching their going concern assessment, the Directors have considered the
foreseeable future, a period extending at least 12 months from the date of
approval of this interim financial report. This assessment has included
consideration of the forecast performance of the business, as noted above, the
payment of proposed dividends and deferred contingent consideration, and the
cash and financing facilities available to the Group. In light of all of this
analysis, the Directors are satisfied that, even if this downside scenario
were to occur, the Group has sufficient cash resources over the period of at
least 12 months from the date of approval of the interim consolidated
financial statements. As such, the interim consolidated financial statements
have been prepared on a going concern basis.
Principal risks and uncertainties
The principal risks and uncertainties facing the Group remain consistent with
the principal risks and uncertainties reported in Aferian's 2021 Annual
Report. Despite the supply chain challenges seen in H1, the continued impact
of COVID-19 on the Group continues to be less marked than for other
organisations. However, the business continues to place appropriate focus and
real time management on the working practices, health and wellbeing of our
global workforce and the risk of delays to the global supply chain for
components used in Amino branded devices.
The Group is exposed to multiple economies around the world. The Directors
regularly assess the risks associated with the current changing economic
climate and its likely impact on the Group's operations. Despite these risks,
the business continues to operate in a growing global market and remains well
set for the year ahead.
Mark Carlisle
Chief Financial Officer
22 August 2022
Consolidated income statement
For the six months ended 31 May 2022
Six months ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
Notes $000s $000s
Revenue 3 44,517 45,286
Cost of sales (25,106) (24,667)
Gross profit 19,411 20,619
Operating expenses (20,010) (18,763)
Operating (loss)/profit (599) 1,856
Adjusted operating profit 2,378 5,088
Share based payment charge (310) (394)
Exceptional items 5 (516) (1,414)
Amortisation of acquired intangible assets (2,151) (1,424)
Operating (loss)/profit (599) 1,856
Finance expense (223) (561)
Finance income 11 179
Net finance expense (212) (382)
(Loss)/profit before tax (811) 1,474
Tax charge (659) (803)
(Loss)/profit after tax (1,470) 671
(Loss)/profit for the period from continuing operations attributable to equity (1,470) 888
holders
Non-controlling interest - (217)
(Loss)/profit for the period (1,470) 671
Basic earnings per 1p ordinary share 6 (1.76c) 1.16c
Diluted earnings per 1p ordinary share 6 (1.78c) 1.14c
Consolidated statement of comprehensive income
For the six months ended 31 May 2022
Six months ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
(Loss)/profit for the period (1,470) 671
Foreign exchange difference arising on consolidation (4,232) 828
Other comprehensive (loss)/income (4,232) 828
Total comprehensive (loss)/income for the period (5,702) 1,499
Consolidated balance sheet
As at 31 May 2022
Notes As at As at
31 May 30 November
2022 2021*
Unaudited
Assets $000s $000s
Non-current assets
Property, plant and equipment 580 630
Right of use assets 1,655 1,910
Intangible assets 8 97,190 95,864
Other receivables 231 235
99,656 98,639
Current assets
Inventories 3,986 2,557
Trade and other receivables 18,318 21,936
Corporation tax receivable 378 113
Cash and cash equivalents 7,762 14,182
30,444 38,788
Total assets 130,100 137,427
Capital and reserves attributable to equity holders of the business
Called-up share capital 1,484 1,484
Share premium 39,249 39,249
Capital redemption reserve 12 12
Foreign exchange reserves (7,620) (3,388)
Merger reserve 42,750 42,750
Retained earnings 20,376 23,857
Total equity 96,251 103,964
Liabilities
Current liabilities
Trade and other payables 29,249 27,812
Lease liabilities 315 966
Corporation tax payable - 774
29,564 29,552
Consolidated balance sheet (continued)
As at 31 May 2022
As at As at
31 May 2022 30 November
Unaudited 2021*
$000s $000s
Non-current liabilities
Trade and other payables 432 677
Lease liabilities 1,414 1,002
Provisions 1,158 1,163
Deferred tax liability 1,281 1,059
4,285 3,911
Total liabilities 33,849 33,463
Total equity and liabilities 130,100 137,427
*See Note 9, regarding finalisation of FY21 acquisition fair value in
accordance with IFRS 3
Consolidated Cash Flow Statement
For the six months ended 31 May 2022
Six months ended 31 May 2022 Six months ended 31 May 2021
Unaudited Unaudited
Notes $000s $000s
Cash flows from operating activities
Cash generated from operations 7 6,229 1,816
Net corporation tax paid (1,864) (2,823)
Net cash generated from/(used in) operating activities 4,365 (1,007)
Cash flows from investing activities
Expenditure on intangible assets (4,156) (3,504)
Payment of deferred consideration on acquisition (503) -
Purchase of property, plant and equipment (124) (136)
Acquisition of subsidiary, net of cash acquired 9 (1,545) (4,901)
Net cash used in investing activities (6,328) (8,541)
Cash flows from financing activities
Proceeds from exercise of employee share options - 128
Proceeds from issue of new shares (net of expenses) - 12,723
Interest paid (1,531) (51)
Lease liability repayments (629) (640)
Proceeds from borrowings - 6,887
Dividends paid (2,297) (1,969)
Net cash (used in)/generated from financing activities (4,457) 17,078
Net (decrease)/increase in cash and cash equivalents (6,420) 7,530
Cash and cash equivalents at start of the period 14,182 9,476
Effects of exchange rate fluctuations on cash held - 20
Cash and cash equivalents at end of period 7,762 17,026
Notes to the interim condensed consolidated financial information
Six months ended 31 May 2022
1 General information
Aferian plc ('the Company') and its subsidiaries (together 'the Group')
specialise in the delivery of next generation video experiences over IP using
its end-to-end solution. This comprises the 24i online video solution and
Amino video streaming devices and associated operating and device management
software.
The Company is a public limited company which is listed on the AIM market of
the London Stock Exchange and is incorporated and domiciled in England and
Wales.
2 Basis of preparation
These interim consolidated financial statements have been prepared using
accounting policies based on United Kingdom adopted international accounting
standards ('IFRS'). They do not include all disclosures that would otherwise
be required in a complete set of financial statements and should be read in
conjunction with the 30 November 2021 Annual Report. The financial information
for the six months ended 31 May 2022 and 31 May 2021 does not constitute
statutory accounts within the meaning of Section 434 (3) of the Companies Act
2006 and both periods are unaudited.
The annual financial statements of Aferian Plc ('the Group') were prepared in
accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006 ('IFRS'). The statutory Annual Report
and Financial Statements for 2021 have been filed with the Registrar of
Companies. The Independent Auditors' Report on the Annual Report and Financial
Statements for the year ended 30 November 2021 was unmodified, did not draw
attention to any matters by way of emphasis and did not contain a statement
under 498(2) - (3) of the Companies Act 2006.
The Group has applied the same accounting policies and methods of computation
in its interim consolidated financial statements as in its 2021 annual
financial statements.
Going Concern
The interim 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 COVID-19 pandemic continues to impact the Group's supply chain operations,
as well as employees throughout the Group having to continue to work remotely
from home. From the outset, the Group implemented efficient and appropriate
measures to limit the impact of COVID-19 on the results of the business and
its future operations, and the Directors believe that the business continues
to be able to navigate through the impact of COVID-19 due to the strength of
its customer proposition, its balance sheet, its cash position and its
available working capital. Where required, those measures are still in place
today as the Group follows the relevant guidance set by authorities in the
locations in which we operate.
The Group had cash resources of $7.8m as at 31 May 2022 (30 November 2021:
$14.2m) and net current assets of $0.9m as at 31 May 2022 (30 November 2021:
$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 Group will be
impacted by decisions further up its supply chain. This could lead to delays
in contract negotiations and deferring or cancelling of anticipated sales, and
those sales and settlement of existing debts are impacted too. The Group has a
solid pipeline of repeat orders from existing customers and, together with the
growth in exit run rate ARR at 31 May 2022, this provides enhanced visibility
to future revenue forecasts and cash flows. In respect of this going concern
assessment, the Directors have considered a number of scenarios, taking
account of possible further impact from the pandemic on the business, as noted
above. However, even in the material downside scenario, the Directors are
satisfied that the Group has sufficient cash resources over the period and
will be able to operate within its existing working capital facilities and
meet its liabilities as they fall due. On that basis, the Directors therefore
continue to adopt the going concern basis when preparing the
The Board of Directors approved this interim report on 22 August 2022.
3 Revenue
The geographical analysis of revenue from external customers generated by the
identified operating segment is:
Six months ended Six months ended
31 May 2022
31 May 2021
Unaudited
Unaudited
$000s $000s
North America 16,019 16,845
Latin America 6,027 7,077
Netherlands 13,540 15,589
Rest of EMEA 7,829 4,751
EMEA 21,369 20,340
Rest of the World 1,102 1,024
44,517 45,286
The Group's revenue disaggregated by product is as follows:
Six months ended Six months ended
31 May 2022
31 May 2021
Unaudited
Unaudited
$000s $000s
Devices incorporating integrated software and associated accessories 32,457 35,382
Software and services 12,060 9,904
44,517 45,286
4 Segmental analysis
Operating segments are reported in a manner consistent with the internal
reporting provided to the Aferian plc Chief Operating Decision Maker ("CODM")
for the use in strategic decision making and monitoring of performance. The
CODM has been identified as the Group Chief Executive and the Chief Financial
Officer. The CODM reviews the Group's internal reporting in order to assess
performance and allocate resources. Performance of the operating segments is
based on adjusted EBITDA. Information provided to the CODM is measured in a
manner consistent with that in the Financial Statements.
The Group reports three operating segments to the CODM:
· the development and sale of streaming devices and solutions,
including licensing and support services ("Amino");
· development and sale of an end-to-end streaming platform and
associated services. This includes the results of The Filter and Nordija A/S,
acquisitions during the current and prior period respectively ("24i"); and
· central costs which comprise the costs of the Board, including the
executive directors as well as costs associated with the Company's listing on
the London Stock Exchange.
Revenues and costs by segment are shown below.
2022 Amino 24i Central costs Total
$000s
$000s
$000s
$000s
Revenue Software and services 2,723 9,311 - 12,034
Devices * 32,483 - - 32,483
Total 35,206 9,311 - 44,517
% Recurring 7% 62% - 19%
Adjusted cost of sales (22,484) (2,622) - (25,106)
Adjusted gross profit 12,722 6,689 - 19,411
Adjusted operating expenses (6,237) (6,046) (1,346) (13,629)
Adjusted EBITDA 6,485 643 (1,346) 5,782
Exceptional items Operating expenses (516)
Share based payment charge (310)
Depreciation, amortisation, and loss on disposal of fixed assets (5,555)
Operating loss (599)
Net finance expense (212)
Loss before tax (811)
998 3,158 - 4,156
Additions to non-current assets:
Capitalised development costs
* incorporating integrated Amino software and associated accessories.
2021 Amino 24i Central costs Total
$000s
$000s
$000s
$000s
Revenue Software and services 2,433 7,471 - 9,904
Devices * 35,382 - - 35,382
Total 37,815 7,471 - 45,286
% Recurring 5% 47% - 12%
Adjusted cost of sales (22,781) (1,886) - (24,667)
Adjusted gross profit 15,034 5,585 - 20,619
Adjusted operating expenses (5,745) (5,336) (1,225) (12,306)
Adjusted EBITDA 9,289 249 (1,225) 8,313
Exceptional items Operating expenses (1,414)
Share based payment charge (394)
Depreciation, amortisation, and loss on disposal of fixed assets (4,649)
Operating profit 1,856
Net finance expense (382)
Profit before tax 1,474
903 2,601 - 3,504
Additions to non-current assets:
Capitalised development costs
* incorporating integrated Amino software and associated accessories.
5 Exceptional items
Exceptional items included in operating (loss)/profit comprise the following
charges:
Six months ended Six months ended
31 May 2022
31 May 2021
Unaudited Unaudited
$000s $000s
Post-acquisition integration and associated restructuring costs 289 305
Acquisition and one-off legal costs 227 362
Aborted acquisition costs - 465
Expensed contingent post-acquisition remuneration in respect of the - 282
acquisition of 24i Unit Media BV
Subtotal operating expenses 516 1,414
Total exceptional items 516 1,414
Exceptional items within net finance expense comprise the following
charges/(credits):
Six months ended Six months ended
31 May 2022
31 May 2021
Unaudited Unaudited
$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 - 218
of the 24i Group
Subtotal finance expense - 218
Total exceptional items - 39
Exceptional items are items which are material or non-recurring in nature and
which are therefore presented separately from underlying operating expenses
and income. Material costs may include: release of contingent consideration no
longer payable, release of royalty costs recognised in prior years and
subsequent renegotiated, redundancy and associated costs, legal and
professional advisor fees in respect of acquisitions costs, contingent post
acquisition remuneration payable and additions, aborted acquisition costs or
releases to the provision for uncertain tax provisions. Material income
comprises amounts outside the course of normal trading activities.
Furthermore, the Group considers the fair value movement in contingent
consideration and the put option interest charge to be adjusting items within
net finance expenses because they are non-cash and they do not relate to the
day-to-day trading activities of the Group. They are treated as adjusting
items below adjusted operating profit but not presented on the face of the
consolidated income statement.
6 Earnings per share
Six months ended Six months ended
31 May 2022
31 May 2021
Unaudited
Unaudited
$000s $000s
(Loss)/profit attributable to shareholders (1,470) 888
Exceptional items 516 1,414
Share-based payment charges 310 394
Finance income (see note 5) - (179)
Finance expense (see note 5) - 218
Amortisation of acquired intangible assets 2,151 1,424
Tax effect thereon (256) (295)
Profit attributable to shareholders excluding exceptional items, share-based 1,251 3,864
payments and amortisation of acquired intangibles and associated taxation
Number Number
Weighted average number of shares (Basic) 83,439,943 76,590,374
Weighted average number of shares (Diluted) 82,832,009 77,780,937
Basic earnings per share (cents) (1.76) 1.16
Diluted earnings per share (cents) (1.78) 1.14
Adjusted basic earnings per share (cents) 1.50 5.05
Adjusted diluted earnings per share (cents) 1.51 4.97
The calculation of basic earnings per share is based on profit after taxation
and the weighted average number of ordinary shares of 1p each in issue during
the period. The Company holds 1,488,254 (H1 2021: 1,778,725) 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 (H1 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 the exercise price of the Company's ordinary
shares.
7 Cash generated from operations
Six months ended Six months ended
31 May 2022 31 May 2021
Unaudited Unaudited
$000s $000s
(Loss)/profit before tax (811) 1,474
Net finance expense 212 382
Amortisation charge 4,768 3,923
Depreciation of right of use assets 502 596
Depreciation of property, plant & equipment 285 130
Loss on disposal of property, plant & equipment 5 -
Share based payment charge 310 394
Exchange differences 848 304
(Increase)/decrease in inventories (1,429) 84
Decrease/(increase) in trade and other receivables 2,001 (4,207)
(Decrease)/increase in provisions (5) 9
(Decrease)/increase in trade and other payables (457) 481
Aborted acquisition deposit - (1,754)
Cash generated from operations before tax 6,229 1,816
Adjusted operating cash flow before tax was $6.7m (H1 2021: $4.0m) and is
reconciled to cash generated from operations before tax as follows:
Six months ended Six months ended
31 May 2022
31 May 2021
Unaudited Unaudited
$000s $000s
Adjusted operating cashflow before tax 6,745 3,986
Post-acquisition and restructuring costs (289) (312)
Acquisition and one-off legal costs (227) (104)
Aborted acquisition deposit - (1,754)
Cash generated from operations before tax 6,229 1,816
Adjusted cash generated from operations before tax is a non-GAAP measure and
excludes cash from exceptional items.
Six months ended Six months ended
31 May 2022
31 May 2021
Unaudited Unaudited
$000s $000s
Adjusted EBITDA 5,782 8,313
Adjusted operating cashflow conversion % 116% 48%
Exceptional items (516) (1,414)
Share based payment charge (310) (394)
EBITDA 4,956 6,505
Operating cashflow conversion % 126% 28%
Adjusted EBITDA is a non-GAAP measure and is defined as earnings before
interest, taxation, depreciation, loss on disposal of property, plant and
equipment, amortisation, exceptional items and share based payment charges.
8 Intangible assets
Movements in intangible assets comprised:
$000
Intangible assets - as previously presented at 30 November 2021 96,234
Adjustment to initial estimated fair value on acquisition - intangible assets 500
(note 9)
Adjustment to initial estimated fair value on acquisition - goodwill (note 9) (390)
Amortisation charge on above fair value changes for year ended 30 November (480)
2021 (note 9)
Intangible asset - as revised 95,864
Acquisition of subsidiary (note 9) 4,150
Additions 4,156
Amortisation (4,768)
Movement in foreign exchange (2,212)
Intangible assets - as at 31 May 2022 97,190
9 Acquisition of subsidiaries
On 4 April 2022, the Group acquired 100% of the issued share capital of Exabre
Limited (trading as "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 Company's objective to acquire key and
emerging technologies that add value to its platform's capabilities.
The preliminary amounts recognised in respect of the identifiable assets
acquired and liabilities assumed are set out below. A full review of
identifiable assets will be completed and updated in the Group annual report
to 30 November 2022.
Estimated Estimated Estimated
book value fair value adjustment fair value
$000s $000s $000s
Identifiable intangible assets - 2,728 2,728
Right of use assets 72 - 72
Property, plant and equipment 3 - 3
Current assets
· Current trade and other receivables 320 - 320
· Cash and cash equivalent 4 - 4
Liabilities
· Current trade and other payables (259) - (259)
· Lease liability (72) - (72)
· Deferred tax liability - (518) (518)
Total identifiable assets and liabilities 68 2,210 2,278
Goodwill 1,422
Total consideration 3,700
Satisfied by: Fair value
$000
Initial consideration:
· Cash 1,549
Deferred consideration:
· Cash 317
Contingent consideration:
· Cash 1,834
Total consideration transferred 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 $1.4m 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. The estimated value of contingent consideration is $1.8m and has
been based on the latest ARR forecast.
Revenue of $0.1m and a loss of $0.1m between the date of acquisition and the
balance sheet date has been included within the results to 31 May 2022.
Acquisition in the prior period - Nordija A/S
On 27 May 2021, the Group acquired 100% of the issued share capital of Nordija
A/S, 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 shall retrospectively adjust 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 and, if known, would have affected the
measurement of the amounts recognised as of that 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 below table.
Book value Fair value adjustment as previously reported Adjustment to initial estimated fair value Fair value
$000s $000s $'000 $000s
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 (excluding Deferred Revenue) 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
The contract asset of $0.6m is to be 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 should have 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) 704
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 included 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.
The 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.
Following successful completion of the targets to date associated with the
contingent consideration, the Company paid an amount of €0.4m ($0.5m), of
which €0.1m ($0.1m) was settled in cash, during the current period. The
€0.3m ($0.4m) was settled by the issue of 222,430 new ordinary shares of 1p
each in the capital of the Company ("Ordinary Shares") at the price agreed at
the date of the original acquisition of 148 pence per ordinary share. The
remaining €0.1m ($0.2m) of contingent consideration is expected to be
settled by 30 November 2022.
The costs of the acquisition were $0.4m. No revenue or profit between the date
of acquisition and the balance sheet date has been included within the results
to 31 May 2021 as the contribution was deemed to be immaterial. If the
acquisition of Nordija had been completed on the first day of the financial
period, Group revenues for the prior period would have been $47.3m and Group
profit after tax would have been $0.9m.
10 Cautionary statement
This document contains certain forward-looking statements relating to 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.
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