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

ArcontechAnnouncement

14/08/2017 07:07

RNS Number : 8502N
Arcontech Group PLC
14 August 2017
ARCONTECH GROUP PLC 
("Arcontech", the "Company" or the "Group")
Final Results for the year ended 30 June 2017
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 2017.
Financial Highlights:
 Revenue of 2,307,751 (2016:2,141,630)
 Adjusted profit before tax* of 441,996 (2016: 329,260)
 Profit before tax of 373,263 (2016:302,329)
 Cash balance of 2,636,471 (2016:1,633,159)
 Basic earnings per share of 3.79p (2016 3.38p)
 Maiden final dividend of 1 pence per share
*Adjusted for share-based payments
Operational Highlights: 
 Healthy injection of new contracts mainly through additional sales of server-side infrastructure solutions to existing customers, with full benefit to come in 2017/18
 New desktop software solution currently in proof of concept trials at five Tier 1 banks
 Continued investment in sales & marketing with increased sales focus on Asia 
 Increased participation in the fintech community with wider benefits for the group 
 Strong cash generation
Commenting on the results, Richard Last, Chairman of Arcontech said:
"Arcontech is a well-run business where costs, including continued product investment, are well controlled such that increases in revenue materially improve profitability. Our focus is, therefore, on winning new business. Whilst we believe the opportunities for increased sales exist, the sales cycle is unpredictable and remains longer than we would like. Our prospects are positive, albeit they need to be tempered against uncertainties in the investment banking and finance sectors, as a result of the low interest rate environment and issues following Brexit." 
The information communicated in this announcement is inside information for the purposes of Article 7 of Regulation 596/2014.
Enquiries: 
Arcontech Group plc
020 7256 2300
Richard Last, Chairman and Non-Executive Director

Matthew Jeffs, Chief Executive



finnCap Ltd (Nomad & Broker)
020 7220 0500
Carl Holmes/Simon Hicks



To access more information on the Group please visit: www.arcontech.com
Chairman's Statement
Arcontech Group plc ("Arcontech" or the "Company") is pleased to report a profit before share-based payments and taxation for the year ended 30 June 2017 of 441,996 (2016: 329,260), a year-on-year increase of 34.2%. After taking the benefit of the Research and Development tax credit of 96,988 (2016: 105,813) which the Company receives, due to the amount it has invested in qualifying product design and development and the cost of share based payments of 68,733 (2016: 26,931), Arcontech achieved a profit after tax of 470,251 (2016: 408,142) for the year. 
Turnover for the year increased by 7.8% to 2,307,751 (2016: 2,141,630) this was achieved mainly through additional sales of server-side infrastructure solutions to existing customers. The level of new sales has not yet benefitted from the new business expected from our new desktop software solution launched earlier in the year. Expected desktop solution sales in 2018 and the full year effect of the net new sales achieved in the year ended 30 June 2017 is expected to lead to an increase in turnover for the year ending 30 June 2018. 
We have continued to operate tight cost control throughout the year, whilst maintaining investment in product development and enhancement, which we expect to sustain going forward. The sales resource was increased during the year, which, together with marketing, are areas where we expect to see additional investment in 2018. 
Financing 
As at 30 June 2017 Arcontech had net cash balances of 2,636,471 (2016: 1,633,159), reflecting increased profitability and an improved working capital position. The business is well financed for the future and has a robust balance sheet.
Dividend and Share Consolidation
Having completed the cancellation of the share premium account (creating positive distributable reserves) and the share consolidation, I am pleased to announce that subsequent to the year-end we agreed to propose, subject to approval at the Annual General Meeting, to pay a maiden dividend of 1 pence per share for the year ended 30 June 2017, to those shareholders on the register as at the close of business on 25 August 2017, with an ex-dividend date of 24 August 2017.
Employees 
We have a small team of dedicated employees who are the core of our business. I would like to thank them for their hard work and continued support which is greatly appreciated. 
 
Outlook 
Arcontech is a well-run business where costs, including continued product investment, are well controlled such that increases in revenue materially improve profitability. Our focus is, therefore, on winning new business. Whilst we believe the opportunities for increased sales exist, the sales cycle is unpredictable and remains longer than we would like. Our prospects are positive, albeit they need to be tempered against uncertainties in the investment banking and finance sectors, as a result of the low interest rate environment and issues following Brexit. 
Richard Last 
Chairman and Non-Executive Director
Chief Executive's Review
I am pleased to report that during the year our continued attention to costs whilst building out and delivering on the sales pipeline resulted in a profit before tax of 373,263 (2016: 302,329), an increase of 23.5% compared to the previous year.
During the year under review we have further reconfirmed the value of our products and quality of support to the market by increasing the use of our server-side solutions such as our real-time last value cache and symbol mapper with existing clients, and on the desktop with Excelerator, whilst not receiving a single contract cancellation. 
We continue to progress the sales pipeline and improve our product offering by adding functionality to existing products as well as enhancing our new desktop software solution. This software solution continues to be of significant interest to our clients, with one of the trials with Tier 1 clients culminating in a signed agreement for its deployment in New York. It is hoped by both ourselves, and our client, that it will expand from there and be rolled out in additional office locations over coming months. The prospects elsewhere, whilst taking time, continue to develop and are looking promising. 
To increase sales growth, in January 2017 we recruited a sales person in Hong Kong to explore opportunities in this region.
During the year we have also increased our participation in the fintech community, where we believe we can both add and receive value. This includes becoming members of the OpenMAMA steering committee and more recently, the Symphony Foundation. Both these global, open source, not for profit organisations include major Tier 1 clients and non-clients as members, who we are working closely with, whilst providing vendor agnostic solutions to the market data needs of the broader financial community. 
The outlook for the business remains positive and to date unaffected by the wider uncertainties surrounding Brexit. The length of the sales cycle is something that is a constant and the only realistic way to address it is to create more sales opportunities. This is being done by building solutions that increase the addressable market whilst increasing our sales resource. As a result, the sales pipeline is looking healthy.
In order to supplement the Company's growth strategy, we will continue to review prospective complementary acquisition opportunities.
With such a strong foundation, we will keep working to strengthen our position by focusing on increasing revenues. Going forward, sales growth remains our clear priority.
Matthew Jeffs
Chief Executive
Strategic Report
The Directors present the group strategic report for Arcontech Group plc and its subsidiaries for the year ended 30 June 2017.
Principal activities
The principal activities of the Company and its subsidiaries during the year were the development andsale of proprietary software and provision of computer consultancy services. 
Review of the business and prospects
A full review of the operations, financial position and prospects of the Group is given in the Chairman's Statement and Chief Executive's Review above.
Key performance indicators (KPIs)
The Directors monitor the business using management reports and information, reviewed and discussed at monthly Board meetings. Financial and non-financial KPIs used in this report include:
Financial KPIs:
 
Revenue 2,307,751 (2016: 2,141,630; 2015: 2,129,958) 
Measurement:
Revenue from sales made to all customers (excluding intra-group sales which eliminate on consolidation) 
Performance:
Continued growth driven by increased sales of our product offering
Adjusted profit 441,996 (2016: 329,260; 2015: 263,859)
Measurement:
Profit before share based payments and tax  
Performance:
Continued growth reflects increase in revenues whilst continuing to maintain tight cost control
Cash 2,636,471 (2016: 1,633,159; 2015: 1,069,755)
Measurement:
Cash and cash equivalents held at the end of the year
 
Performance:
The Group intends to maintain cash balances at this level subject to any exceptional items or acquisition opportunities that may arise
 
Non-financial KPIs:
Staff retention rate (net) 100% (2016: 93%; 2015: 93%)
Measurement:
Net movement in joiners and leavers as a percentage of the number of staff at the beginning of the year
Performance:
Staff morale from our dedicated employees remains strong, reflected in the net increase
Principal risks and uncertainties
The Group's performance is affected by a number of risks and uncertainties, which the Board monitor on an ongoing basis in order to identify, manage and minimise their possible impact. General risks and uncertainties include changes in economic conditions, interest rate fluctuations and the impact of competition. The Group's principal risk areas and the action taken to mitigate their outcome are shown below:
Risk area
Mitigation


Competition
Ongoing investment in research and development

Responding to the changing needs of clients to remain competitive


Loss of key personnel
Employee share option scheme in place


Approved on behalf of the board on 11 August 2017 by:
Matthew Jeffs
Michael Levy
Chief Executive
Group Finance Director
Group Income Statement and Statement of Comprehensive Income
For the year ended 30 June 2017


2017

2016
as restated










Revenue


2,307,751

2,141,630






Administrative costs


(1,942,430)

(1,849,257)






Operating profit


365,321

292,373
Finance income


7,942

9,956






Profit before taxation 


373,263

302,329






Taxation


96,988

105,813
Profit for the year after tax


470,251

408,142
Total comprehensive income for the year


470,251

408,142
Earnings per share (basic)

3.79p

3.38p
Earnings per share (diluted)

3.68p

3.25p
Comparative figures for the year ended 30 June 2016 have been restated to take into account the share consolidation carried out in September 2016.
All of the results relate to continuing operations.


Statement of Changes in Equity
For the year ended 30 June 2017
Group:

Share
capital
Share
premium
Share option reserve
Retained
earnings
Total
equity

Balance at 30 June 2015
1,536,672
9,430,312
92,761
(9,269,623)
1,790,122






Profit for the year
-
-
-
408,142
408,142
Total comprehensive income for the year 
-
-
-
408,142
408,142






Cancellation of share premium account
-
(9,430,312)
-
9,430,312
-






Issue of shares
5,060
2,024
-
-
7,084






Share-based payments
-
-
26,931
-
26,931
Balance at 30 June 2016
1,541,732
2,024
119,692
568,831
2,232,279






Profit for the year
-
-
-
470,251
470,251
Total comprehensive income for the year
1,541,732
2,024
119,692
1,039,082
2,702,530






Issue of shares
20,944
7,778
-
-
28,722






Share-based payments
-
-
68,733
-
68,733
Balance at 30 June 2017
1,562,676
9,802
188,425
1,039,082
2,799,985
Company:

Share 
capital
Share
premium
Share option reserve
Retained
earnings
Total 
equity

Balance at 30 June 2015
1,536,672
9,430,312
92,761
(7,797,685)
3,262,060






Profit for the year
-
-
-
10,899
10,899
Total comprehensive expense for the year 
-
-
-
10,899
10,899






Cancellation of share premium account
-
(9,430,312)
-
9,430,312
-






Issue of shares
5,060
2,024
-
-
7,084






Share-based payments 
-
-
26,931
-
26,931






Balance at 30 June 2016
1,541,732
2,024
119,692
1,643,526
3,306,974






Profit for the year
-
-
-
1,418,859
1,418,859






Total comprehensive income for the year 
1,541,732
2,024
119,692
3,062,385
4,725,833






Issue of shares
20,944
7,778
-
-
28,722






Share-based payments
-
-
68,733
-
68,733
Balance as at 30 June 2017
1,562,676
9,802
188,425
3,062,385
4,823,288


Balance Sheets
Registered number: 04062416
As at 30 June 2017

Group
2017

Group
2016

Company
2017

Company
2016
Non-current assets















Goodwill
1,715,153

1,715,153

-

-








Property, plant and equipment
33,825

44,785

-

-








Investments in subsidiaries
-

-

2,017,373

2,017,373
Trade and other receivables
141,750

141,750

-

-
Total non-current assets
1,890,728

1,901,688

2,017,373

2,017,373








Current assets















Trade and other receivables
175,496

265,360

1,806,341

206,769








Cash and cash equivalents
2,636,471

1,633,159

1,658,039

1,272,292
Total current assets
2,811,967

1,898,519

3,464,380

1,479,061








Current liabilities















Trade and other payables
(1,902,710)

(1,567,928)

(658,465)

(189,460)
Total current liabilities
(1,902,710)

(1,567,928)

(658,465)

(189,460)








Net current assets
909,257

330,591

2,805,915

1,289,601








Net assets
2,799,985

2,232,279

4,823,288

3,306,974








Equity















Called up share capital
1,562,676

1,541,732

1,562,676

1,541,732








Share premium account
9,802

2,024

 9,802

 2,024








Share option reserve
188,425

119,692

188,425

 119,692








Retained earnings
1,039,082

568,831

3,062,385

1,643,526

 2,799,985

 2,232,279

4,823,288

3,306,974
The profit dealt with in the financial statements of the Parent Company was 1,418,859 (2016: 10,899).
Approved on behalf of the board on 11 August 2017 by:
Matthew Jeffs
Michael Levy
Chief Executive
Group Finance Director


Group Cash Flow Statement
For the year ended 30 June 2017

2017

2016









Net cash generated from operating activities
974,800

567,420

Investing activities









Interest received
7,942

9,956






Purchases of plant and equipment
(8,152)

(21,056)






Net cash invested in investing activities
(210)

(11,100)






Financing activities




Issue of shares
28,722

7,084






Net cash generated from financing activities
28,722

7,084

Net increase in cash and cash equivalents 
1,003,312

563,404






Cash and cash equivalents at beginning of year
1,633,159

1,069,755

Cash and cash equivalents at end of year
2,636,471

1,633,159



Company Cash Flow Statement
For the year ended 30 June 2017

2017

2016




Net cash generated from operating activities
349,506

605,860

Investing activities









Interest received
7,519

9,441






Net cash generated from investing activities
7,519

9,441






Financing activities




Issue of shares
28,722

7,084

Net cash generated from financing activities
28,722

7,084

Net increase in cash and cash equivalents
385,747

622,385






Cash and cash equivalents at beginning of year
1,272,292

649,907

Cash and cash equivalents at end of year
1,658,039

1,272,292

Notes to the Financial Statements For the year ended 30 June 2017
Status of financial information
Arcontech Group plc is a public limited company incorporated in England and Wales whose ordinary shares of 0.125 each are traded on the AIM Market of the London Stock Exchange. The Company's registered office is 1st Floor, 11-21 Paul Street, London, EC2A 4JU.
The Board of Directors approved this preliminary announcement on 11 August 2017. Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union, this announcement does not itself contain sufficient information to comply with all the disclosure requirements of IFRS and does not constitute statutory accounts of the Company for the years ended 30 June 2017 or 30 June 2016.
The financial information set out in this announcement does not comprise the Group's statutory accounts for the years ended 30 June 2017 or 30 June 2016. 
The financial information has been extracted from the statutory accounts of the Company for the years ended 30 June 2017 or 30 June 2016. The auditors reported on those accounts; their reports were unqualified and did not contain a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under either Section 498 (2) or Section 498 (3) of the Companies Act 2006.
The statutory accounts for the year ended 30 June 2016 have been delivered to the Registrar of Companies, whereas those for the year ended 30 June 2017 will be delivered to the Registrar of Companies following the Company's Annual General Meeting.
Operating segments:
TheGroupreports internally to the Chief Operating Decision Maker (CODM), who is considered to be the Board. Intersegment license fees and management charges are not included in the reports reviewed by the CODM during the year but are calculated for statutory reporting purposes and therefore are excluded from the following revenue and operating profit disclosures.


2017

2016





Revenue by segment











Software development and licence fees

2,307,751

2,141,630

External segment revenue

2,307,751

2,141,630







Operating profit by segment











Software development and licence fees

854,981

656,226







Unallocated overheads

(489,660)

(363,853)

Total operating profit

365,321

292,373







Finance income

7,942

9,956

Total profit before tax as reported in the Group income statement

373,263

302,329



2017

2016





Segment total of assets 





Software development and licence fees

3,547,110

4,419,890







Unallocated assets

3,802,083

1,795,400



7,349,193

6,215,290







Less inter company debtors

(2,646,498)

(2,415,083)

Total assets

4,702,695

3,800,207



2017

2016





Segment total liabilities 











Software development and licence fees

3,890,649

3,792,521







Unallocated liabilities

658,560

190,490



4,549,209

3,983,011







Less inter company creditors

(2,646,499)

(2,415,083)

Total liabilities

1,902,710

1,567,928



2017

2016





Additions of property, plant and equipment assets by segment











Software development and licence fees

8,152

21,056

Total additions

8,152

21,056

Disposals of property, plant and equipment assets by segment











Software development and licence fees

2,699

26,462

Total disposals

2,699

26,462



2017

2016





Depreciation of property, plant and equipment assets recognised in the period by segment





Software development and licence fees

19,112

17,140

Total depreciation

19,112

17,140

Non-current assets by country

2017

2016





UK

1,890,728

1,901,688



1,890,728

1,901,688

Geographical information - External revenue 

2017

2016





UK

1,600,027

1,354,976

Europe (excluding UK)

652,894

463,437

North America

27,830

127,459

Asia Pacific

27,000

195,758



2,307,751

2,141,630

During the year there were 3 customers (2016: 1) who accounted for more than 10% of the Group's revenues as follows:

2017

2016


Value of
sales
% of Total

Value of
sales 

% of Total









Customer 1
612,998
27%

601,616

28%

Customer 2
357,327
15%

-

-

Customer 3
309,232
13%

-

-


1,279,557
55%

601,616

28%

These revenues are attributable to the software development and licence fees segment.
Profit per share 


2017

2016




as restated

Earnings





Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity shareholders

470,251

408,142



470,251

408,142



No.

No.

Number of shares





Weighted average number of ordinary shares for the purpose of basic earnings per share

12,396,220

12,297,590







Number of dilutive shares under option

367,595

213,457

Weighted average number of ordinary shares for the purposes of dilutive earnings per share

12,763,815

12,511,047

The number of shares for the year ended 30 June 2017 takes into account the share consolidation of 125:1 carried out in September 2016. The number of shares for the year ended 30 June 2016 has been restated accordingly.
The calculation of diluted earningsper share assumesconversionof all potentiallydilutive ordinary shares, allof which arise fromshareoptions. A calculationisdonetodeterminethenumberofsharesthat couldhavebeen acquired at fair value, based uponthemonetaryvalue ofthesubscription rightsattachedto outstandingshareoptions. 
 Dividends
A final dividend of 1 pence will be proposed at the Annual General Meeting but has not been recognised as it requires approval (2016: Nil).
 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 26 September 2017 at 10.00 a.m. 
 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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