REG - Arcontech Group PLC - Final Results <Origin Href="QuoteRef">ARC.L</Origin>

ArcontechAnnouncement

05/08/2015 07:01

RNS Number : 1140V
Arcontech Group PLC
05 August 2015
ARCONTECH GROUP PLC
("Arcontech", the "Company" or the "Group")
Final Results for the Year Ended 30 June 2015
Arcontech (AIM: ARC), the provider of products and services for real-time financial market data processing and trading, is pleased to announce its final audited results for the year ended 30 June 2015.
Financial highlights
 Revenue increased 8% to 2.13m (2014: 1.98m)
 Profit before tax of 243,660 (2014: loss of 35,565)
 Cash balance of 1.07m (2014: 733,676)
 Basic earnings per share of 0.023p (2014: 0.004p)
Operational highlights
 Expanded customer base with a new business from a U.S based international investment bank and a regional German bank
 Growth in revenues from existing clients by building new solutions and improving some existing ones
 Continued investment in R&D to develop new solutions for existing and new clients
Commenting on the results, Richard Last, Chairman of Arcontech said: "Arcontech has a healthy pipeline of qualified prospects and although the lead time to a sale continues to be unpredictable, once a sale is completed we invariably have a long and positive relationship supported by annual recurring licence fees. Despite the challenges presented in the year under review, with a broadening product range and customer base, we are both positive and confident as to Arcontech's prospects."
Enquiries:
Arcontech Group plc
Richard Last, Chairman and Non-Executive Director
07713 214484
Matthew Jeffs, Chief Executive
020 7256 2300
finnCap Ltd (Nomad & Broker)
Carl Holmes/Simon Hicks
020 7220 0500
To access more information on the Group please visit:www.arcontech.com


Chairman's Statement
I am pleased to report that Arcontech Group plc ("Arcontech") has moved into profit for the year ended 30 June 2015, reporting a profit before taxation of 243,660 compared to a loss before taxation of 35,565 for the year ended 30 June 2014. After taking the benefit of the Research and Development tax credit of 109,378 (2014: 100,251) which the company receives due to the amount it has invested in qualifying product design and development, Arcontech achieved a profit after tax of 353,038 (2014: 64,686).
Turnover for the year increased by 8% to 2,129,958 (2014: 1,981,375) largely reflecting new business from existing customers. Recently the customer base was expanded, with new business from a U.S. based international investment bank and a regional German bank. The termination of a material product agreement with an Asia focused bank (as announced on 4 June 2015) was disappointing, but it is encouraging that we are continuing to provide solutions to this group. 
Staff changes during the year resulted in cost savings which contributed to the improvement in profit. Although we do not expect the same uplift from cost savings in the current year, we will continue to keep a tight rein on costs whilst we invest in our products and sales capability.
Arcontech has not been able to declare a dividend due to its negative distributable reserves. It is our intention to seek court approval to re-designate our reserves and thereby enable the company to pay dividends.
Financing
As at 30 June 2015 Arcontech had no debt and cash balances of 1,069,755 (2014: 733,676), reflecting increased profitability and additional contract wins, bearing in mind that the majority of our agreements are recurring in nature and paid annually in advance. The company, therefore, remains capable of funding, from its own resources, any demands for additional product development and sales and marketing.
Employees
Once again I would like to thank our employees who are the core of the business. They have continued to respond positively to the challenges presented by the competitive market place in which we operate to produce this excellent result.
Outlook
Arcontech has a healthy pipeline of qualified prospects and although the lead time to a sale continues to be unpredictable, once a sale is completed we invariably have a long and positive relationship supported by annual recurring licence fees. Despite the challenges presented in the year under review, with a broadening product range and customer base, we are both positive and confident as to Arcontech's prospects.
Richard Last
Chairman
Chief Executive's Review
I am happy to report that during the year, our continued focus on streamlining costs whilst bringing the sales pipeline forward, has led to Arcontech moving firmly into profit.
We achieved revenue growth similar to that of last year at 8% which, along with a reduction in costs of 5%, had a significant and positive impact to our bottom line to generate a profit before tax of 243,660.
To build on this profitability we are now fully targeted on growing our business with existing clients and acquiring new ones. In the period under review we secured both a major U.S. investment bank and a regional German bank as new clients. Both these clients performed extensive due diligence and testing on our solutions and I am pleased to say we were appointed notwithstanding the competition.
We also managed to grow revenues with our existing clients by both expanding the use of existing solutions and deploying additional ones. We did this by adjusting or building out solutions to better meet their requirements.
In consultation with several existing clients we have also been working on the development of new product offerings to meet identified market needs. We hope to roll these out initially with those same clients and then to a wider client base during the coming year.
The year, however, was not without its challenges. We successfully maintained momentum through some staff changes, negotiated and resolved an issue with a major client and successfully moved to new office premises which are a significant improvement over the previous location.
With the initial milestone of moving into solid profitability accomplished, our goal is to continue to increase the rate of revenue growth organically and, if a suitable opportunity is identified, through focused acquisitions.
Matthew Jeffs
Chief Executive


Group Income Statement and Statement of Comprehensive Income
For the year ended 30 June 2015
2015
2014
Revenue
2,129,958
1,981,375
Distribution costs
-
(31,439)
Administrative costs
(1,890,242)
(1,989,156)
Operating profit/(loss)
 239,716
(39,220)
Finance income
3,944
3,655
Profit/(loss) before taxation
243,660
(35,565)
Taxation
109,378
100,251
Profit for the year after tax
353,038
64,686
Total comprehensive income for the year
353,038
64,686
Profit per share (basic)
0.023p
0.004p
Profit per share (diluted)
0.023p
0.004p
All of the results relate to continuing operations.


Statement of Changes in Equity
For the year ended 30 June 2015
Group:
Share
capital
Share
premium
Share option reserve
Retained
earnings
Total
equity
Balance at 30 June 2013
1,531,315
9,428,169
253,234
(9,886,696)
1,326,022
Profit for the year
-
-
-
64,686
64,686
Total comprehensive income for the year
-
-
-
64,686
64,686
Issue of shares
5,357
2,143
-
-
7,500
Share-based payments
-
-
18,677
-
18,677
Share-based payments reserve released
-
-
(199,349)
199,349
-
Balance at 30 June 2014
1,536,672
9,430,312
72,562
(9,622,661)
1,416,885
Profit for the year
-
-
-
353,038
353,038
Total comprehensive income for the year
-
-
-
353,038
353,038
Share-based payments
-
-
20,199
-
20,199
Balance at 30 June 2015
1,536,672
9,430,312
92,761
(9,269,623)
1,790,122
Company:
Share
capital
Share
premium
Share option reserve
Retained
earnings
Total
equity
Balance at 30 June 2013
1,531,315
9,428,169
253,234
(7,755,508)
3,457,210
Profit for the year
-
-
-
23,186
23,186
Total comprehensive income for the year
-
-
-
23,186
23,186
Issue of shares
5,357
2,143
-
- 
7,500
Share-based payments
-
-
18,677
-
18,677
Share-based payments reserve released
-
-
(199,349)
53,091
(146,258)
Balance at 30 June 2014
1,536,672
9,430,312
72,562
(7,679,231)
3,360,315
Loss for the year
-
-
-
(118,454)
(118,454)
Total comprehensive expense for the year
-
-
-
(118,454)
(118,454)
Share-based payments
-
-
20,199
-
20,199
Balance as at 30 June 2015
1,536,672
9,430,312
92,761
(7,787,685)
3,262,060


Balance Sheets
As at 30 June 2015
Group
2015
Group
2014
Company
2015
Company
2014
Non-current assets
Goodwill
1,715,153
1,715,153
-
-
Property, plant and equipment
41,605
19,112
-
-
Investments in subsidiaries
-
-
2,017,373
2,017,373
Trade and other receivables
141,750
-
-
-
Total non-current assets
1,898,508
1,734,265
2,017,373
2,017,373
Current assets
Trade and other receivables
478,402
361,016
806,382
1,510,725
Cash and cash equivalents
1,069,755
733,676
649,907
37,854
Total current assets
1,548,157
1,094,692
1,456,289
1,548,579
Current liabilities















Trade and other payables
(1,656,543)

(1,412,072)

(211,602)

(205,637)
Total current liabilities
(1,656,543)

(1,412,072)

(211,602)

(205,637)

Net current (liabilities)/assets
(108,386)
(317,380)
1,244,687
1,342,942

Net assets
1,790,122
1,416,885
3,262,060
3,360,315
Equity
Called up share capital
1,536,672
1,536,672
1,536,672
1,536,672
Share premium account
9,430,312
9,430,312
9,430,312
9,430,312
Share option reserve
92,761
72,562
 92,761
 72,562
Retained earnings
(9,269,623)
(9,622,661)
(7,797,685)
(7,679,231)
1,790,122

 1,416,885
3,262,060
3,360,315
Group Cash Flow Statement
For the year ended 30 June 2015
2015
2014
Net cash generated from/(used in) operating activities
369,982
(151,013)
Investing activities
Interest received
3,944
3,655
Purchases of plant and equipment
(38,014)
(5,270)
Sales of plant and equipment
167
-
Net cash invested ininvesting activities
(33,903)
(1,615)
Financing activities
Issue of shares
-
7,500
Net cash generated fromfinancing activities
-
7,500
Net increase/(decrease) in cash and cash equivalents
336,079
(145,128)
Cash and cash equivalents at beginning of year
733,676
878,804
Cash and cash equivalents at end of year
1,069,755
733,676
Company Cash Flow Statement
For the year ended 30 June 2015
2015
2014
Net cash generated from/(used in) operating activities
609,347
(24,652)
Investing activities
Interest received
2,706
189
Net cash generated frominvesting activities
2,706
7,689
Financing activities
Issue of shares
-
7,500
Net cash generated fromfinancing activities
-
7,500
Net increase/(decrease) in cash and cash equivalents
612,053
(16,963)
Cash and cash equivalents at beginning of year
37,854
54,817
Cash and cash equivalents at end of year
649,907
37,854


Notes to the Financial Statements
For the year ended 30 June 2015
1. Accounting policies
The principal accounting policies are summarised below. They have all been applied consistently throughout the period covered by these financial statements.
Reporting entity
Arcontech Group PLC ("the Company") is a company incorporated in the United Kingdom. The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries (together referred to as "the Group").
Basis ofpreparation
These financial statements havebeenpreparedinaccordancewithInternationalFinancial Reporting Standards ("IFRS") endorsed by the European Union and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.
On the basis of current projections, confidence of future profitability and cash balances held, the Directors have adopted the going concern basis in the preparation of the financialstatements.
Thefinancialstatementshavebeenpreparedunderthehistorical costconvention.
Accounting standards and interpretations adopted during the period
IFRS 10: Revision to accounting for groups to provide additional guidance on when and how to consolidate group interests and related disclosures and IFRS 12: Disclosure of interests in other entities were adopted in the year but have only had a presentation and disclosure impact on these financial statements.
Other than this, there have only been minor improvements to existing International Financial Reporting Standards and interpretations that are effective for the first time in the current financial year that have been adopted by the Group. These have had no impact on its consolidated results or financial position.
Standards, amendments and interpretations that are expected to be effective for periods beginning on or after 1 July 2015 for standards, amendments subject to EU endorsement:
Standards, interpretations and amendments to existing standards that have been published, and are mandatory to accounting periods beginning on or after 1 July 2015 or later periods and that have not been early adopted by the Group or the Company include the following:
Effective date (periods beginning on or after)
EU adopted
IFRS 9 Financial Instruments
1 January 2018
No
IFRS 15 Revenue from Contracts with Customers
1 January 2018
No
Annual Improvements to IFRSs 2012-2014 Cycle
1 January 2016
No
A number of other interpretations and amendments to existing standards have been made by the IASB and IFRIC but are not considered relevant to the Group's operations.
The directors are considering the impact of the above new standards and amendments on the reported results of the Group and Company.
Basis ofconsolidation
The Group financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries) prepared to 30 June 2015. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.
Wherenecessary,adjustmentsare made to thefinancialstatementsofsubsidiariesto bring the accounting policiesused intoline with those used by the Group.
All intra-grouptransactions, balances,incomeandexpensesare eliminatedon consolidation.
Business combinations andgoodwill
On acquisition, the assets and liabilities and contingent liabilities of subsidiaries are measured at their fair value at the date of acquisition. Any excess of cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition) is credited to the income statement in the period of acquisition. Goodwill arising on consolidation is recognised as an asset and reviewed for impairment at least annually. Any impairment is recognised immediately in the income statement and is not subsequently reversed.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts, VAT and other sales related taxes.
Revenuearisingfromtheprovisionof servicesisrecognised when andtotheextent thattheGroupobtains therighttoconsiderationinexchangefortheperformanceofits contractual obligationsasfollows:
Software development and licence fee income - recognised evenly over the contracted licence period.
Taxation
The tax charge/(credit) represents the sum of the tax payable/(receivable) and any deferred tax.
The tax payable/(receivable) is based on the taxable result for the year. The taxable result differs from the net result as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantially enacted by the balance sheet date.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.
Share-basedpayments
The cost of share-based employee compensation arrangements, whereby employees receive remuneration in the form of shares or share options, is recognised as an employee benefit expense in the income statement.
The total expense to be apportioned over the vesting period of the benefit is determined by reference to the fair value (excluding the effect of non market-based vesting conditions) at the date of grant. Fair value is measured by the use of the Black-Scholes model. The expected life used in the model has been adjusted, based on management's best estimate, for the effects of the non-transferability, exercise restrictions and behavioural considerations. A cancellation of a share award by the Group or an employee is treated consistently, resulting in an acceleration of the remaining charge within the consolidated income statement in the year of cancellation.
Impairment of tangible and intangible assets
The carrying amounts of the Group's and Company's tangible and intangible assets are reviewed at each year end date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated.
For goodwill the recoverable amount is estimated at each year end date, based on value in use. The recoverable amount of other assets is the greater of their net selling price and value in use.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generating unit to which the asset belongs.
An impairment loss is recognised in the income statement whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units and then to reduce the carrying amount of the other assets in the unit on a pro rata basis.
A cash generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Property, plantandequipment
Property, plant and equipment are stated at costless accumulated depreciation andany recognised impairmentloss.
Depreciation ischargedsoas towrite offthe costofassets,over theirestimated useful lives,on thefollowing bases:
Leasehold property
- over the period of the lease
Computer equipment
- 33% - 40% on cost
Office furniture and equipment
- 20% - 25% on cost or reducing balance
Investmentsinsubsidiaries
Investmentsin subsidiariesare stated atcostlessanyprovisionforimpairment.
Financialinstruments
Financial assets and financial liabilities are recognised on the balance sheet when the Group becomes a party to the contractual provisions of the instrument.
Financial liabilities and equity instruments issued by the Group are classified in accordance with the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument.
An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
Trade and other receivables
Trade and other receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The movement on any provision is recognised in the income statement.
Trade and other payables
Trade and other payables are initially measuredatfairvalue,andare subsequently measured atamortised cost,using the effectiveinterestratemethod.
Cash and cash equivalents
Cash and cash equivalentscomprise cashheld bythe Group and short-term bank depositswith an originalmaturityofthreemonthsorless.
Leasing commitments
Rentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease.
Research and development
Research costs are charged to the income statement in the year incurred. Development expenditure is capitalised to the extent that it meets all of the criteria required by IAS 38, otherwise it is charged to the income statement in the year incurred.
Pension costs and other post-retirement benefits
The Group makes payments to employees' personal pension schemes. Contributions payable for the year are charged in the income statement.
Foreign currencies
Transactions denominated in foreign currencies are translated into sterling at the exchange rate ruling when the transaction was entered into. Foreign currency monetary assets and liabilities are translated into sterling at the exchange rate ruling at the balance sheet date. Exchange gains or losses are included in operating profit.
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker as required by IFRS 8 "Operating Segments". The chief operating decision-maker responsible for allocating resources and assessing performance of the operating segments has been identified as the Board of Directors. The accounting policies of the reportable segments are consistent with the accounting policies of the group as a whole. Segment profit/(loss) represents the profit/(loss) earned by each segment without allocation of foreign exchange gains or losses, gains or losses on the disposal of available-for sale investments, investment income, interest payable and tax. This is the measure of profit that is reported to the Board of Directors for the purpose of resource allocation and the assessment of segment performance. When assessing segment performance and considering the allocation of resources, the Board of Directors review information about segment assets and liabilities. For this purpose, all assets and liabilities are allocated to reportable segments with the exception of cash and cash equivalents, available-for-sale financial assets and current and deferred tax assets and liabilities.
2. Revenue
An analysis of the Group's revenue is as follows:
2015
2014
Software development and licence fees
2,129,958
1,981,375
All of the Group's revenue relates to continuing activities.
3. Operating profit/(loss) for the year is stated after charging:
2015
2014
Depreciation of plant and equipment
8,682
10,736
Loss on disposal of fixed assets
6,673
465
Staff costs (see note 7)
1,352,295
1,476,944
Operating lease rentals - land and buildings (see note 21)
88,789
79,000
Research and development
592,185
736,867
4. Profit per share 
2015
2014
Earnings
Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity shareholders
353,038
64,686
353,038
64,686
No.
No.
Number of shares
Weighted average number of ordinary shares for the purpose of basic earnings per share
1,536,672,013
1,531,505,672
Number of dilutive shares under option
15,602,384
13,314,419
Weighted average number of ordinary shares for the purposes of dilutive earnings per share
1,552,274,847
1,544,820,092
The calculation of diluted earnings per share assumes conversion of all potentially dilutive ordinary shares, all of which arise from share options. A calculation is done to determine the number of shares that could have been acquired at fair value, based upon the monetary value of the subscription rights attached to outstanding share options.
5. Dividends
There were no dividends paid or proposed during the period (2014: Nil).
6. Annual General Meeting
The Annual general meeting of Arcontech Group PLC will be held at the Company's offices, 1st Floor, 11-21 Paul Street, London EC2A 4JU on 29 September 2015 at 10 a.m.
7. Annual report and accounts
Copies of the annual report and accounts will be sent to shareholders shortly and will be available from the Company Secretary at the Company's registered office at 1st Floor, 11-21 Paul Street, London, EC2A 4JU or from the Company's website at www.arcontech.com

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