Final Results
28/09/2022 07:00
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RNS Number : 9106A Blancco Technology Group PLC 28 September 2022
28 September 2022
Blancco Technology Group plc
Final results for the year ended 30 June 2022
Continued growth & strategic progress supported by ever-increasing
structural tailwinds of Sustainability & Governance incl. new legislative
proposals
Blancco Technology Group plc (AIM: BLTG, "Blancco", the "Company" or the
"Group"), the industry standard in data erasure and mobile lifecycle
solutions, is pleased to announce its final results for the year ended 30
June 2022 (the "Period").
FINANCIAL HIGHLIGHTS
£m unless otherwise stated FY22 FY21 Change
Revenue 39.8 36.5 +9%
Gross profit 38.5 33.7 +14%
Adjusted EBITDA* 11.5 10.2 +13%
Adjusted operating profit* 6.5 5.3 +23%
Operating profit 1.9 1.8 +6%
Profit before tax 1.7 1.5 +14%
Adjusted operating cash flow** 10.8 10.8
Cash generated from continuing operations 9.9 10.3 -3%
Diluted earnings per share 2.64p 2.21p +19%
Net funds 6.2 10.1
· Robust organic revenue growth of 8%, 11% when adjusted for
constant exchange rates ("CER"). Revenue increased by 9% (CER +12%) when
revenue of £0.5 million from the recently acquired WipeDrive Inc
("WipeDrive") business is included:
· IT Asset Disposition ("ITAD") revenue increased organically by
19% (CER +23%) to £13.7 million (FY 2021: £11.5 million). Inclusive of the
acquired WipeDrive business, revenues rose to £13.8 million.
· Enterprise revenue increased organically by 6% (CER +7%) to
£15.0 million (FY 2021: £14.1 million). Inclusive of the acquired WipeDrive
business, revenues rose to £15.4 million.
· Mobile revenue fell slightly by 2% (CER +2%) to £10.6 million
(FY 2021: £10.9 million) as ongoing component shortages and supply chain
issues slowed the market for new smartphones, particularly in APAC.
· Organic constant currency growth in each of our three
geographies:
· North America revenue increased by 8% (CER +7%) to £12.1 million
(FY 2021: £11.2 million)
· EMEA revenue increased by 16% (CER +20%) to £15.6 million (FY
2021: £13.4 million)
· APAC revenue fell slightly by 2% (CER +4%) to £11.6 million (FY
2021: £11.9 million), reflecting the slower sales recovery in Mobile
· Net funds balance of £6.2 million (30 June 2021: £10.1
million), despite a £7.2 million outflow relating to the immediately earnings
enhancing acquisition of WipeDrive announced on 8 June 2022
· Gross margins increased to 97% (FY 2021: 92%) driven by
internal product development which has decreased our requirement for a
significant number of third-party licences
· Adjusted operating margin of 16% (FY 2021: 14%), led to an
increase in Adjusted Operating Profit to £6.5 million (FY2021: £5.2
million). Operating Profit grew to £1.9 million (FY 2021: £1.8 million)
· Adjusted EBITDA increased to £11.5 million (FY 2021: £10.2
million). EBITDA grew to £6.9 million (FY 2021: £6.7 million)
OPERATIONAL HIGHLIGHTS
· Acquisition of US-based erasure specialist WipeDrive completed in
June 2022 for initial consideration of US$8.5 million with up to US$1.5
million contingent consideration to be paid twelve months following the
acquisition dependent on achieving certain customer retention targets
· Sales strategy evolved further with revenue generated from
channel partners continuing to grow strongly with channel revenue growing by
23% to £8.0 million (FY 2021: £6.5 million) and now representing 52% (FY
2021: 45%) of Enterprise revenue
· High customer retention levels of 100% (FY 2021: 98.4%) of
largest clients (£100k+) in the Period
· Increasing sustainability and governance pressures on companies
continue to drive growth in both Enterprise and ITAD revenues, particularly
benefitting from the Group's strategic acquisitions, product suite innovation
and 'go to market' strategy
· Carbon neutrality status achieved for the 2021 calendar year
CURRENT TRADING AND OUTLOOK
· Pipeline and Q1 sales activity provide confidence for
continued growth in FY23, in line with the Board's expectations
· Investment and innovation in our product suite continuing to
deliver strategic benefits
· Management of the sales team strengthened with recent
appointments of a new President of Global Sales and a Vice President of
Americas Sales, implementing new initiatives around channel and pricing in
FY23
· New regulations emerging from the EU through the Circular
Economy Action Plan ("CEAP"), designed to extend the life of IT assets, to be
implemented in 2023, are positive for Blancco and further support our growth
expectations
· WipeDrive team fully integrated and work underway on combined
"best of breed" product to be released towards the end of the 2022 calendar
year
Matt Jones, Chief Executive of Blancco, said:
"We're pleased with a further year of robust growth in revenue and profit, and
ongoing strong cash generation from operations at Blancco. We believe we are
well positioned to accelerate our progress into future years, particularly as
a result of the recent strategic progress within the Group.
"Our acquisition of WipeDrive in June 2022 has further strengthened our
technology and market position, particularly given its blue-chip customer base
and Government contracts in the US. We are also at the early stage of seeing a
range of regulations being implemented, primarily in the EU, which will drive
companies to extend the life of IT assets and reduce waste. These initiatives
play very well to Blancco's product set and our reputation as a market leader
for sustainable asset disposal solutions.
"Furthermore, I am delighted with the senior hires we have made into our sales
organisation and we are starting the new financial year with experienced,
highly successful salespeople heading both our International (APAC & EMEA)
& Americas sales teams. All of these developments give me great confidence
that the strong growth we have experienced in the last financial year will
continue."
*Adjusted profit measures are stated after excluding expenses relating to
share option schemes, exceptional costs & incomes and the amortisation of
acquired intangible assets
** Adjusted operating cash flow is operating cash flow excluding taxation,
payments relating to share option schemes, interest payments & receipts
and exceptional payments
Presentation and webcast:
A virtual results briefing for analysts will be held today, 28 September 2022
at 09.30am BST, via a live webcast and conference call facility.
If you would like to join the webcast or conference call, please contact
Buchanan at blancco@buchanan.uk.com (mailto:blancco@buchanan.uk.com)
ENDS
For further information:
Blancco Technology Group plc Via Buchanan
Matt Jones, Chief Executive Officer
Adam Moloney, Chief Financial Officer
Peel Hunt (Nominated Advisor & Joint
Broker)
+44 (0) 20 7418 8900
Paul Gillam / James Smith
Investec Bank plc (Joint Broker) +44 (0) 20 7597 5970
Patrick Robb / Nick Prowting
Buchanan Communications Limited +44 (0) 20 7466 5000
Chris Lane / Stephanie Whitmore / Jack Devoy
blancco@buchanan.uk.com (mailto:blancco@buchanan.uk.com)
About Blancco
Blancco Technology Group plc is a leading global provider of mobile lifecycle
solutions and secure data erasure solutions. For more information, please
visit www.blancco.com (http://www.blancco.com) .
CHIEF EXECUTIVE'S REPORT
Business overview
Against a backdrop of macro-economic challenges over recent years arising from
Brexit, a pandemic and now very high levels of inflation in all of the major
economies, Blancco has been consistent in delivering year-on-year increases in
revenue and profitability and maintaining strong underlying cash generation.
The most recent year ended 30 June 2022 is further evidence of this trend. The
Group's financial and operational progress is supported by Environmental,
Social and Governance ("ESG") initiatives that are driving changes in
behaviours from all organisations and data privacy concerns that are affecting
decision making at a Board level across the globe. Measures taken by the
management team in the last year, particularly in relation to the Group's 'go
to market' strategy, product suite innovation and the recent acquisition of
WipeDrive, position Blancco strongly to take further advantage of these strong
and enduring trends.
Enterprise
We continue to believe that the greatest growth opportunity for the Company
lies within the Enterprise market. We have stated for several years that
channel partners would represent an increasingly large proportion of
Enterprise revenues. Channel partners are a key part of Blancco's growth
strategy as they provide access to large blue-chip organisations that would
typically be more difficult for a company of Blancco's size to sell to. In
FY18, the period when we set out Blancco's growth strategy, Enterprise was the
smallest of the three markets that Blancco served, with revenue of £8.6
million representing 32% of overall group revenue. In FY22, Enterprise has
become the largest of our three markets, generating revenue of £15.4m (38% of
total FY22 revenue), representing growth of £1.3 million versus FY21. The
acquisition of WipeDrive will further enhance our reach in the market, with
the business already contributing £0.4 million to FY22 revenues. In FY18,
channel revenue in Enterprise was £3.6 million, representing 38% of
Enterprise revenues. In FY22, Enterprise revenue from channel partners grew to
£8.0 million, being 52% of Enterprise revenues. We remain committed to a
channel first approach in Enterprise and anticipate this proportion of
revenues continuing to increase over the coming years.
The largest companies in the world are most affected by regulation around
sustainability and data protection. It has never been acceptable for sensitive
data held by companies to be compromised and this is now accompanied by
significant financial penalties arising from the various data protection
regulations that are in place around the world. For example, it was reported
by DLA Piper that the total value of fines under the EU General Data
Protection Regulation ("GDPR") in 2021 was US$1.23 billion (2020: US$0.179
billion), including a record fine imposed on Amazon of US$887 million. One
option to deal with this issue has been for companies to destroy any assets
holding data by shredding, incineration or similar destruction methods and
indeed the vast majority of assets used by organisations globally continue to
be managed in this way. The new raft of incoming sustainability regulations
will lead to the physical destruction of assets becoming increasingly less
acceptable and assets will need to be more durable without compromising data
security. Data erasure is the most secure way of achieving that aim for
electronically held data.
This growing opportunity has been recognised by the Company and the expanded
sales team described below will be increasingly focussed on the Enterprise
opportunity and in particular extending the network of channel partners who
will be able to assist Blancco in accelerating its growth in future years
IT Asset Disposition ("ITAD")
Blancco's ITAD customers operate as experts in the disposal of end-of-life IT
assets, primarily for companies which are smaller than those which purchase
licences directly from Blancco in the Enterprise market. These customers saw a
period of very strong growth in FY22 as companies physically reopened offices
following the pandemic. There was a backlog of equipment which reached the end
of its life during the pandemic but that couldn't be disposed of until teams
had returned to their offices. We also saw a reconfiguration of office space
which is accelerating the move to flexible working and the increasing
obsolescence of the desktop PC and monitor set up which doesn't lend itself
well to flexible working.
Blancco's core ITAD revenue grew by 19% (23% adjusting for currency movements)
to £13.7 million (FY 2021: £11.5 million) during the year, with WipeDrive
adding a further £0.1 million of sales since acquisition in June 2022. Whilst
growth is expected to slow modestly in the coming year as backlogs are
cleared, this will be offset by the trend for smaller companies as well as
larger ones to adopt more sustainable IT asset lifecycles.
Mobile
The second quarter of the 2022 calendar year was the fourth successive quarter
that had seen a reduction in new smartphone sales according to the IDC. This
is believed to be due to issues relating to the pandemic which delayed product
launches and saw disruption in component availability and supply chain issues.
Any slowing of the market for new handsets leads to fewer phones being traded
in to offset the new handset cost. This reduces the volumes of handsets being
processed by Blancco customers with many reporting a 10%+ reduction in volumes
processed in comparison to the previous financial year. As a result, revenue
in Mobile fell by 2% to £10.6 million (FY 2021: £10.9 million) although this
was a 2% increase when movements in currency are adjusted for.
Approximately 50% of Blancco's sales in the APAC region are derived from
Mobile, and therefore the slower recovery in Mobile has affected this region
in particular.
Looking forward, there are a number of trends that are expected to support
further growth:
· Incoming EU regulation has a range of initiatives designed to
lengthen the life of mobile phones and tablets which will fuel growth in the
secondary market
· Macro-economic conditions and the increasing cost of new
smartphones is likely to prompt increasing numbers of consumers to purchase
phones in the secondary market
We therefore continue to have confidence that the Mobile market will prove to
be a good growth market over the medium term.
Acquisition of WipeDrive
We announced on 8 June 2022 that Blancco had completed the acquisition of
WipeDrive Inc for an initial consideration of US$8.5 million and further
contingent consideration of up to US$1.5 million to be paid in cash in June
2023 subject to the retention of its largest customers over the twelve-month
period following the acquisition. WipeDrive was previously known as White
Canyon Software Inc. before changing its name in 2021. WipeDrive has a suite
of similar software tools to Blancco and over 500 government and private
sector customers in the ITAD and Enterprise markets within North America and
EMEA.
WipeDrive has been fully integrated into Blancco, with most employees being
given new roles within the enlarged group. Our intention is to complete
migration of all customers to a single Blancco branded solution over the
coming months. The acquisition has led to a strengthened market position for
Blancco along with some proprietary technologies that will be integrated with
the Blancco solution to create an improved 'best of breed' solution in
Enterprise and ITAD. The acquisition was immediately earnings enhancing and we
have already seen WipeDrive's largest customer renew for a further
twelve-month period since the acquisition took place.
Sales Team Reorganised and Strengthened
In March 2022, our President of Global Sales & Marketing, Alan Bentley,
announced his intention to retire at the end of June 2022. Alan has led the
Sales organisation through a period of prolonged growth and has left the
Company in very good shape for his successor. We were delighted to announce
Jon Mellon, who started in June 2022, as Alan's replacement. Jon has a long
track record of success working at technology companies and was most recently
the Chief Revenue Officer at Sonatype. Prior to his time at Sonatype, Jon held
a number of senior sales leadership roles during a twelve-year tenure at
NetApp. His most recent position at NetApp was VP and General Manager of
Americas Commercial Sales in which he spearheaded the development and
execution of a strategy focussing on sales, system engineering, and business
development across a third of the Americas operation and highest growth
segment in the company. During his tenure, NetApp doubled in size, a major
feat given the scale and complexity of a multi-billion dollar enterprise.
One of Jon's first tasks for Blancco was to recruit a new VP of Sales in the
North America region, a role which has been filled by Maurice Uenuma. Maurice
has held a variety of roles in corporate strategy, business intelligence and
strategic sales at Perot Systems and Dell and delved into cybersecurity
through thought leadership and program management roles at the Council on
Cybersecurity and the Center for Internet Security.
With both Jon and Maurice being based in the US, it was decided to reconsider
the structure of the other regions. As a result, Fredrik Forslund has been
appointed as VP of Sales in the International region, covering both APAC and
EMEA. Fredrik was a co-founder and owner of SafeIT which was acquired by
Blancco in 2014. Fredrik has been an advocate of data erasure solutions for
over 20 years and is very well known and respected within the industry.
This reorganisation and strengthening of the Sales organisation has brought a
new energy and expertise to the sales function which will be well placed to
take advantage of the market tailwinds described above and lead to further
periods of growth in the coming years.
Positive environmental impact
As detailed in our ESG report, the use of Blancco's solutions has resulted in
the erasure of data from millions of devices during the year which meant that
there was no requirement to destroy these devices to protect data. This
directly contributes to a reduction in the generation of e-waste. Also, the
recycling of IT assets enables hardware manufacturers to make significant
carbon savings from manufacturing the next generation of IT assets. We are
seeing manufacturers increase efforts in this field, demonstrated by Apple's
commitment to becoming carbon neutral across its supply chain and products by
2030.
I am proud to say that Blancco has been even more proactive in this field and
has achieved carbon neutrality for 2021. We are now in the process of
implementing a decarbonisation plan to reduce our footprint and improve each
of our intensity measures on an annual basis. As other organisations seek to
achieve carbon neutrality, they will be analysing their supply chains to
ensure that their suppliers have the lowest possible carbon footprint. The
management of their IT assets will be a key aspect of that analysis.
We are also at the early stages of seeing regulation introduced in this area.
As we saw with data protection regulation, this is being led by the European
Union (EU), and in March 2022 a package of legislative measures was proposed
in the CEAP. The legislative package aims to make almost all physical goods in
the EU market more durable and therefore more environmentally friendly,
sustainable and energy-efficient throughout their whole lifecycle, from the
design phase to daily use, repurposing and end-of-life.
Social initiatives
The reality is that while Blancco has a solution which negates the need to
destroy IT assets, a concerning majority of all IT equipment still ends up
going to landfill. Blancco is proud to support a number of charitable
initiatives which focus on redistributing assets to groups which can still
obtain significant value from such assets, despite them being no longer
considered of use by companies. An example of this comes from our work with
the Turing Trust, which approached us earlier in the year to work with them,
as they were facing challenges in obtaining donated IT assets from companies
due to security concerns. They felt that being able to demonstrate that any
donated devices would be fully erased using Blancco software would give
donating companies confidence that the data stored on those devices could not
be compromised. Since launching with Blancco, there has indeed been an
increase in devices being donated which are subsequently sent to schools in
Africa. We work with other charities to support underprivileged groups in the
UK, Vietnam & Australia.
All organisations seeking to improve their social impact can locate groups
where donated IT equipment would be gratefully received and the use of
Blancco's data erasure solutions enables such donations to be made without
fear of data being compromised.
Governance (i)
The introduction of GDPR within the EU in 2018 has in turn led to greater
regulation of data around the world. Gartner forecasts that by the end of
2023, 75% of the world's population will have its personal data covered by
modern privacy regulations. As a result, companies are spending increasing
amounts on data protection with Gartner forecasting that this outlay will
reach US$15 billion in 2024. Blancco's solutions ensure that any data stored
on IT assets is permanently erased and cannot be breached when that asset is
no longer in the possession of the company that previously owned it. There are
also two particularly relevant pieces of legislation coming through in the US,
which we believe will assist in driving further revenue:
· California Privacy Rights Act (CPRA) - CPRA significantly expands
and amends the California Consumer Privacy Act (CCPA) which took effect on 1
January 2020. CPRA will come into effect from 1 January 2023 and is considered
to be the model that many other US states will follow in due course. The
amendments introduced by CPRA will bring data privacy regulation much closer
to GDPR.
· Cybersecurity Maturity Model Certification (CMMC) - is an
assessment framework and assessor certification program designed to increase
the trust in measures of compliance to a variety of standards published by the
National Institute of Standards and Technology (NIST). The regulation applies
to all contractors to the United States Department of Defense and will in many
cases require those contractors to ensure that data is fully erased to NIST
standards before any media or equipment leaves the possession of a contractor.
This must be certified by an assessor and will mean that offsite physical
destruction is no longer adequate. These regulations are expected to be
implemented in mid 2023.
Governance: EU regulation (ii)
In recent years we have seen the implementation of GDPR which was enforceable
from May 2018. This has been followed by similar regulation in most other
parts of the world. We are now seeing the EU lead the way again with
environmental regulation arising from the CEAP. There are a number of
initiatives in this regulation which we anticipate will drive demand for
Blancco solutions:
· The upcoming Ecodesign Working Plan will set out regulatory
measures for electronics and IT including mobile phones, tablets and laptops
under the Ecodesign Directive so that devices are designed for energy
efficiency and durability, reparability, upgradability, maintenance, reuse and
recycling;
· Focus on electronics and ICT as a priority sector for
implementing the 'right to repair', including a right to update obsolete
software;
· Regulatory measures on chargers for mobile phones and similar
devices, including the introduction of a common charger, improving the
durability of charging cables, and incentives to decouple the purchase of
chargers from the purchase of new devices;
· Exploring options for an EU-wide take back scheme to return or
sell back old mobile phones, tablets and chargers;
· Review of EU rules on restrictions of hazardous substances in
electrical and electronic equipment and provision of guidance to improve
coherence with relevant legislation, including REACH 24 and Ecodesign.
All of these initiatives are designed to extend the life of IT assets and
reduce e-waste for the benefit of the environment. Alongside this is the draft
Corporate Sustainability Reporting Directive (CSRD) which is expected to come
into force in 2023 with reporting in 2024. This Directive is likely to require
large EU companies, or EU subsidiaries of large companies (namely entities
meeting two of the following three criteria: net turnover of €40m; balance
sheet assets greater than €20m; and more than 250 employees), and certain
small enterprises, to report against their environmental and social impact.
It isn't unusual, as we saw with GDPR, that the EU leads the way with regard
to regulation and it is anticipated that many other parts of the world will
follow suit as pressure increases on all organisations globally to operate in
a more sustainable manner.
Summary and Outlook
While FY22 has been a further period of strong growth in revenue and profit,
and strong underlying cash generation we believe there are a number of reasons
to expect continued strong growth in future periods, across all measures:
· Regulation is increasingly being implemented to motivate
companies to operate more sustainably and produce less waste;
· The acquisition of WipeDrive further improves the market position
of Blancco and breadth of our solutions; and
· The newly strengthened Sales management team is expected to have
an immediately positive impact with a particular focus on Channel sales
growth.
With a strong pipeline of opportunities as we enter the new financial year,
the Board remains confident of delivering further periods of increased value
for shareholders.
Matt Jones
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REPORT
Revenue
Organic revenue growth in FY22 was 11% excluding the impact of foreign
exchange movements, corresponding to full year revenues of £39.3 million. The
acquisition of WipeDrive on 8 June 2022 generated an additional £0.5 million
of revenue in the period, with the consolidated Group generating revenues of
£39.8 million, 9% growth including foreign exchange movements. This
represents a strong end to the year for WipeDrive following the renewal of its
largest customer in June 2022.
Year ended Growth rate Organic growth rate CER Growth
30 June 2022 30 June 2021
Revenue (£ millions) 39.8 36.5 +9% +8% +12%
Revenue by geography
North America 12.6 11.2 +12% +8% +11%
EMEA 15.6 13.4 +16% +16% +20%
Asia and ROW 11.6 11.9 -2% -2% +4%
Revenue by market type
Enterprise 15.4 14.1 +8% +6% +10%
ITAD 13.8 11.5 +20% +19% +23%
Mobile 10.6 10.9 -2% -2% +2%
Growth in ITAD revenue was particularly strong in the year with companies and
economies opening up following the pandemic and catching up on a backlog of
assets that reached end of life during lockdown periods. Much of this increase
in ITAD activity was seen in the EMEA region leading to a particularly strong
period of revenue growth in this territory.
Profitability Measures
Gross profit margin increased from 92% to 97% due to the elimination of costs
relating to third party mobile diagnostics software which, for some customers,
is bundled alongside the core Blancco technology. The Group has developed its
own solution to perform these diagnostics, and as such these costs have
reduced significantly versus the prior year. Cost of sales is now largely
comprised of hardware, where the customer's use case may require a physical
platform on which to perform the diagnostics and erasures of their equipment
and media. However, this revenue stream continues to represent a minority of
the Group's overall sales volume.
Our customer retention has been excellent, with 100% of all customers of
£100k and above renewing contracts from 2021 to 2022. Across all customers
spending over £5k in 2021, the average contract value, representing revenues
both recognised in the year and contracted in future years, increased by 14%.
Adjusted operating profit for the period increased by 23% to £6.5 million (FY
2021: £5.3 million). Operating profit for the period was £1.9 million (FY
2021: £1.8 million). Adjusted operating margins grew from 14% in the prior
year to 16% in FY 2022. This was achieved through improvement in revenue gross
margins as noted above. This was offset by an increase in travel costs
following the easing of the pandemic restrictions and some wage inflation,
particularly among our software development team.
Year ended 30 June Year ended 30 June
2022 2021
£'000 £'000
Operating profit 1,882 1,774
Acquisition costs 542 -
Exceptional income - (837)
Amortisation of acquired intangible assets 2,683 2,859
Share-based payments charge 1,387 1,490
Adjusted operating profit 6,494 5,286
Adjusted EBITDA for the period grew by 13% to £11.5 million (FY 2021: £10.2
million), giving an adjusted EBITDA margin of 29% (FY 2021: 28%).
Cash Flow
Operating cash flow reduced from £10.3 million to £9.9 million which was
impacted by a strong billing period leading up to year end resulting in a
large receivables balance at year end compared to the prior year. The
majority of this debt has already been collected in Q1 2023 with the Group
continuing to be exposed to low credit risk.
Adjusted operating cash flow remained flat at £10.8 million, corresponding to
a cash conversion on adjusted EBITDA of 94% (2021: 106%).
Balance Sheet
Net funds fell to £6.2 million (30 June 2021: £10.1 million). This reduction
was caused by two major cash outflows:
· £7.2 million from the consideration and costs of the acquisition
of WipeDrive in June 2022
· £1.5 million to purchase Blancco shares for the Employee Benefit
Trust in December 2021
A liability of £1.3 million has been provided for in the balance sheet in
respect of the contingent consideration of up to US$1.5 million that could
potentially become due to the vendors of WipeDrive in June 2023, plus a small
amount relating to a working capital adjustment paid in August 2022.
R&D Expenditure
The Group continues to invest a significant amount in research and development
("R&D"), with expensed R&D costs totalling £1.1 million (2021: £1.2
million) and capitalised development costs totalling £4.1 million (2021:
£4.2 million).
The R&D team has grown over the last 24 months both organically through
ongoing investment and as a result of acquisitions of businesses, resulting in
new development centres in Ireland and the US, albeit at a smaller scale than
our existing footprint in Finland and India. They continue to focus on
appraising and transitioning the technology associated with the WipeDrive
product, as well as its patent portfolio, to determine where there are various
product and platform enhancements that will further augment the core Blancco
product offering.
WipeDrive
The acquisition of WipeDrive has been immediately earnings enhancing,
contributing revenues of £0.5 million and adjusted operating profit of £0.4
million in the period between acquisition and year end. The integration of the
business into Blancco has been positive with the employees working on roles
spanning our combined North American operation. As the business has operated
mainly in the ITAD and Enterprise markets, the pooling of the WipeDrive and
Blancco resources has happened naturally and quickly, and many customers are
now renewing contracts on Blancco products.
Adam Moloney
Chief Financial Officer
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2022
Year ended Year ended
30 June 30
Jun
2022 e
202
1
Continuing operations £'000 £'000
Revenue 39,799 36,506
Cost of sales (1,290) (2,807)
Gross profit 38,509 33,699
Administrative expenses (including depreciation and amortisation) (36,627) (31,925)
Operating profit 1,882 1,774
Acquisition costs 542 -
Exceptional income - (837)
Amortisation of acquired intangible assets 2,683 2,859
Share-based payments charge 1,387 1,490
Adjusted administrative expenses (32,015) (28,413)
Adjusted operating profit 6,494 5,286
Finance income 6 121
Finance costs (201) (420)
Profit before tax 1,687 1,475
Taxation 364 (95)
Profit for the year from continuing operations 2,051 1,380
Discontinued operations
Post tax profit from discontinued operations - 331
Profit for the year 2,051 1,711
Attributable to:
Equity holders of the Company 2,024 1,697
Non-controlling interests 27 14
Profit for the year 2,051 1,711
Earnings per share Year ended Year ended
30 June 30 June
2022 2021
Continuing operations: 2.71 p
Basic 1.84 p
Diluted 2.64 p 1.78 p
Discontinued operations:
Basic 0.00 p 0.45 p
Diluted 0.00 p 0.43 p
Total Group:
Basic 2.71 p 2.29 p
Diluted 2.64 p 2.21 p
Year Year
ended Ended
30 June 30 June
2022 2021
£'000 £'000
Profit for the year 2,051 1,711
Other comprehensive income/(expense) - amounts that may be reclassified to
profit or loss in the future:
Exchange differences arising on translation of foreign entities 1,632
(5,862)
Total comprehensive profit/(loss) for the year 3,683 (4,151)
Attributable to:
Equity holders of the Company 3,691 (4,049)
Non-controlling interests (8) (102)
Total comprehensive profit/(loss) for the year 3,683 (4,151)
Consolidated Balance Sheet
As at 30 June 2022
30 June 30 June
2022 2021
£'000 £'000
Assets
Non-current assets
Goodwill 56,040 48,199
Other intangible assets 19,928 19,369
Property, plant and equipment 2,970 2,249
Deferred tax assets 107 119
79,045 69,936
Current assets
Inventory 216 110
Trade and other receivables 8,954 6,204
Current tax asset 641 469
Cash and cash equivalents 8,195 10,071
18,006 16,854
Total assets 97,051 86,790
Current liabilities
Trade and other payables (9,433) (7,767)
Contingent consideration (1,347) -
Current tax liability (291) (336)
(11,071) (8,103)
Non-current liabilities
Borrowings (2,000) -
Other payables (2,265) (1,131)
Deferred tax liabilities (3,971) (2,655)
(8,236) (3,786)
Total liabilities (19,307) (11,889)
Net assets 77,744 74,901
Equity
Called up share capital 1,513 1,512
Share premium account 21,103 21,103
Merger reserve 5,861 5,861
Capital redemption reserve 417 417
Translation reserve 1,857 190
Retained earnings 46,438 45,255
Total equity attributable to equity holders of the Company 77,189 74,338
Non-controlling interest reserve 555 563
Total equity 77,744 74,901
Consolidated Statement of Changes in Equity
For the year ended 30 June 2022
Called up share capital Share premium account Merger reserve Translation reserve Retained earnings Non-controlling interest reserve Total
Capital redemption reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance as at 1 July 2020 1,507 21,103 5,861 5,936 41,861 665 417 77,350
Comprehensive income:
Profit for the year - - - - 1,697 14 - 1,711
Other comprehensive expense
Exchange differences arising on translation of foreign entities - - - (5,746) - (116) - (5,862)
Total comprehensive loss - - - (5,746) 1,697 (102) - (4,151)
Transactions with owners recorded directly in equity:
Issue of shares 5 - - - (5) - - -
Share based payment charge inclusive of deferred tax charge -
- - - 1,702 - - 1,702
Balance as at 30 June 2021 1,512 21,103 5,861 190 45,255 563 417 74,901
Comprehensive income:
Profit for the year - - - - 2,024 27 - 2,051
Other comprehensive income
Exchange differences arising on translation of foreign entities - - - 1,667 - (35) - 1,632
Total comprehensive profit - - - 1,667 2,024 (8) - 3,683
Transactions with owners recorded directly in equity:
Issue of shares 1 - - - - - - 1
Purchase of Company's own shares - - - - (1,546) - - (1,546)
Share based payment charge inclusive of deferred tax credit - - - - 705 - - 705
Balance as at 30 June 2022 1,513 21,103 5,861 1,857 46,438 555 417 77,744
Consolidated Cash Flow Statement
For the year ended 30 June 2022
Year Year
ended ended
30 June 2022 30 June 2021
£'000 £'000
Profit for the year 2,051 1,711
Adjustments for:
Profit from discontinued operations - (331)
Net finance costs 195 299
Taxation (364) 95
Loss on disposal of intangible assets - 66
Profit on disposal of property, plant and equipment - (6)
Depreciation of property, plant and equipment 1,119 1,129
Amortisation of intangible assets 3,923 3,753
Amortisation of acquired intangible assets 2,683 2,859
Share-based payments expense 1,387 1,490
Operating cash flow before movement in working capital 10,994 11,065
Acquisition costs 542 -
Exceptional income - (837)
Adjusted EBITDA 11,536 10,228
Increase in inventories (69) (19)
(Increase)/decrease in receivables (2,092) 588
(Increase)/decrease in payables and accruals 1,496 (1,249)
Cash generated from continuing operations 10,329 10,385
Acquisition costs payments 355 252
Share based payments 143 155
Adjusted operating cash flow 10,827 10,792
Interest paid on lease liabilities (110) (95)
Other bank charges paid (25) (242)
Tax (paid)/received (261) 228
Net cash generated from operating activities - continuing operations 9,933 10,276
Net cash generated from operating activities - continuing and discontinued 9,933 10,276
operations
Cash flows from investing activities
Purchase of property, plant and equipment (157) (235)
Purchase and development of intangible assets (4,453) (4,876)
Acquisition of subsidiaries, net of cash acquired (6,873) (319)
Net cash used in investing activities - continuing operations (11,483) (5,430)
Net cash used in investing activities - continuing and discontinued operations (11,483) (5,430)
Cash flows from financing activities
Payment of the principal portion of lease liabilities (784) (927)
Purchase of Company's own shares (1,546) -
Share issue, net of fees 1 -
Interest refunded* 73 54
Interest paid* (58) (18)
Drawdown of borrowings 3,000 -
Repayment of borrowings (1,000) -
Net cash used in financing activities - continuing operations (314) (891)
Net cash used in financing activities - continuing and discontinued operations (314) (891)
Net (decrease)/increase in cash and cash equivalents (1,864) 3,955
Other non-cash movements - exchange rate changes (12) (603)
Cash and cash equivalents at beginning of year 10,071 6,719
Cash and cash equivalents at end of year 8,195 10,071
Borrowings (2,000) -
Net funds 6,195 10,071
*Interest refunded and interest paid has been reclassified from operating
activities to financing activities to better reflect the nature of the
cashflows.
Notes to the Accounts
For the year ended 30 June 2022
1. Basis of Preparation
The financial information does not constitute statutory accounts within the
meaning of Sections 434 to 436 of the Companies Act 2006, but is derived from
those accounts. Statutory accounts for the financial year ended 30 June 2021
have been filed with the Registrar of Companies and those for the financial
year ended 30 June 2022 were approved by the Board of directors on 27
September 2022 and will be delivered in due course. The auditor has reported
on those accounts, their report was unqualified and did not contain statements
under Section 498 (2) or (3) of the Companies Act 2006. Whilst the financial
information included in this announcement has been prepared in accordance with
UK-adopted International Accounting Standards and with the requirements of the
Companies Act 2006 as applicable to companies reporting under those standards,
this announcement does not itself contain sufficient information to comply
with IFRS.
Going concern
The Group meets its day-to-day working capital through its cash reserves and a
revolving credit facility, which expires in January 2024.
After making enquiries, the Board has a reasonable expectation that the
Company and the Group have adequate resources to continue in operational
existence for a period of at least 12 months from the date of these financial
statements. Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
2. Earnings per share (EPS)
Year Ended Year ended
30 June 2022 30 June 2021
Pence Pence
Continuing operations
Basic earnings per share 2.71 p 1.84 p
Diluted earnings per share 2.64 p 1.78 p
Adjusted earnings per share 7.81 p 5.77 p
Diluted adjusted earnings per share 7.62 p 5.58 p
Discontinued operations
Basic earnings per share 0.00 p 0.45 p
Diluted earnings per share 0.00 p 0.43 p
Adjusted earnings per share 0.00 p 0.45 p
Diluted adjusted earnings per share 0.00 p 0.43 p
Total Group
Basic earnings per share 2.71 p 2.29 p
Diluted earnings per share 2.64 p 2.21 p
Adjusted earnings per share 7.81 p 6.22 p
Diluted adjusted earnings per share 7.62 p 6.01 p
Year ended Year ended
30 June 2022 30 June 2021
Continuing operations £'000 £'000
Profit for the year 2,051 1,380
Profit attributable to non-controlling interests (27) (14)
Profit attributable to equity holders of the parent company 2,024 1,366
Reconciliation to adjusted profit:
Revaluation of contingent consideration - 62
Acquisition costs 542 -
Amortisation of acquired intangible assets 2,683 2,859
Exceptional income - (837)
Amortisation of bank fees 8 3
Share-based payments charge 1,387 1,490
Tax impact of above adjustments (800) (667)
Adjusted profit for the year 5,844 4,276
The weighted average number of shares and reconciliation between basic and
diluted measures is presented below:
Year ended Year ended
30 June 2022 30 June 2021
Number of shares '000s '000s
Weighted average number of shares (excluding bonus element and treasury 74,776 73,964
shares)
Bonus element from share placing in July 2019 - 140
Basic 74,776 74,104
Impact of dilutive share options 1,877 2,573
Diluted 76,653 76,677
The bonus element increasing the basic number of shares used in the prior year
earnings per share calculation arose from the placing of 8,000,000 shares in
July 2019 and represents the number of shares effectively issued without
consideration, due to the issue price of 125 pence being at a discount on the
market price of 127.5 pence prior to the placing.
The dilutive share options are in respect of the shares awarded under the
Blancco Performance Share Plan and Sharesave plan.
3. Profit for the year
Profit for the year for the Group has been arrived at after
charging/(crediting):
Year ended Year ended
30 June 30 June 2021
2022
£'000 £'000
Depreciation of property, plant and equipment - owned 250 247
Depreciation of property, plant and equipment - right of use asset 869 882
Loss on disposal of intangible assets - 66
Profit on disposal of property, plant and equipment - (6)
Amortisation of intangible assets 6,606 6,612
Expense relating to leases of low-value assets 27 25
Cost of inventories recognised as an expense 429 377
Research & Development expense 1,191 1,131
Staff costs recognised as an expense, excluding share-based payments 19,777 17,507
Net foreign exchange loss/(gain) 220 (316)
4. Exceptional and acquisition (income)/costs
2022 2021
£'000 £'000
Provision releases - (478)
COVID-19 support income - (359)
Acquisition and deal costs 542 -
542 (837)
Acquisition costs relate to the acquisition of WipeDrive Inc that was
completed on 7 June 2022.
Exceptional income in the prior year arose from the release of provisions
recognised on historical acquisitions that the business deemed to no longer to
be required. These covered items that were exceptional in nature and did not
relate to the underlying operating expenses of the acquired business and
accordingly the releases were recorded through exceptional income.
Furthermore, in the prior year, a gain of £0.4 million arose from the
forgiveness of US Payment Protection Program loans granted at the start of the
COVID-19 pandemic.
5. Acquisitions
Acquisition of WipeDrive Inc.
On 7 June 2022 the Group completed the acquisition of 100% of the issued share
capital of WipeDrive Inc for headline consideration of $10 million of which
$8.5 million was satisfied in cash and further contingent consideration of up
to $1.5 million to be paid in cash 12 months following completion subject to
certain performance criteria. The consideration was also subject to a working
capital adjustment which resulted in a further $0.1 million paid in August
2022.
In the year ended 30 June 2022, the acquisition has contributed revenue of
£0.5 million and adjusted operating profit of £0.4 million. Had the
acquisition completed on the first day of the financial year, it is estimated
it would have contributed revenue of £2.7 million and adjusted operating
profit of £1.1 million.
The provisional book value and fair value of the assets acquired, and
liabilities assumed, were as follows:
Fair value adjustments and IFRS alignment
£'000
Book value Fair value
£'000 £'000
Intangible assets arising on consolidation 584 2,055 2,639
Property, plant and equipment 31 458 489
Deferred tax - (1,080) (1,080)
Cash and cash equivalents 167 (1) 166
Inventory 31 (14) 17
Trade and other receivables 363 (8) 355
Trade and other payables (94) (566) (660)
Contract liabilities (1,516) 1,516 -
Net assets acquired (434) 2,360 1,926
Goodwill 6,460
Total consideration 8,386
Satisfied by:
Cash 7,039
Contingent consideration 1,347
Total consideration 8,386
The Directors identified a number of adjustments that were required to the
book values, following a review of all balance sheet categories. These
adjustments include the recognition of previously deferred revenue in
accordance with IFRS 15 (£1,516,000), and the recognition of the associated
deferred tax thereon. There were also employee related accruals totalling
£93,000.
Under IFRS3 Business Combinations, separately identifiable intangible assets
arising from the acquisition have been capitalised. These relate to technology
of £1,964,000, customer contracts of £459,000 and marketing brand of
£216,000. A deferred tax liability of £686,000 was recognised against these
assets.
A right-of-use asset and associated liability of £458,000 was recognised with
respect to a property lease held.
The goodwill of £6,460,000 was attributed to the anticipated growth of the
combined Group, strategic benefits, synergies and workforces in place.
Contingent consideration
The acquisition includes deferred consideration to be paid in two instalments,
relating to a working capital adjustment settled in August 2022 and a
contingent payment up to $1.5 million which is due to be settled in June 2023.
The estimated total cash outflow is $1.6 million (£1.3 million), for which a
current liability has been established on the balance sheet as at 30 June
2022.
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