REG - Redcentric PLC - Half Year Results
Redcentric plc
Half year results for the six months ended 30 September 2019 (unaudited)
Redcentric plc ("Redcentric", "the Company", or "the Group") (AIM: RCN), a leading UK IT managed services provider, today announces its unaudited results for the six months to 30 September 2019.
Financial measures
Six months to 30 Sept 2019 (H1-20)1
Six months to 30 Sept 2019 (H1-20) pre-IFRS 161
Six months to 30 Sept 2018 (H1-19)
Change1
Total revenue
£43.2m
£43.2m
£47.5m
-9%
Recurring monthly revenue (RMR) 2
£38.8m
£38.8m
£41.3m
-6%
Adjusted EBITDA2
£10.3m
£8.8m
£8.1m
+8%
Adjusted operating profit2
£5.5m
£5.0m
£4.1m
+23%
Reported operating profit
£1.9m
£1.4m
£0.5m
+219%
Adjusted cash generated from operations2
£10.2m
£8.7m
£9.2m
-6%
Reported cash generated from operations
£9.8m
£8.2m
£8.8m
-6%
Net debt
£(40.0)m
£(16.5)m
£(22.6)m
-27%
Adjusted basic earnings per share2
2.41p
2.48p
1.89p
+31%
Reported basic earnings per share
0.34p
0.41p
(0.38)p
+208%
Interim dividend per share
0.83p
0.83p
0.4p
+108%
1 The results for H1-20 are not directly comparable with the prior year due to the adoption of IFRS 16 Leases. Further details are provided in note 3 to the financial statements, and Appendix 1, which sets out the impact of IFRS 16 Leases on the primary statements. The % change figures reported above relate to H1-20 vs. H1-19 pre any IFRS 16 Leases impact.
2 For an explanation of the alternative performance measures used in this report, please refer to Appendix 2.
Financial Highlights
· Total revenue down by 9% to £43.2m, but good future visibility with £38.8m recurring revenue representing 90% of total revenue (H1-19: 87%).
· Gross margins improved to 64.5% from 59.8%.
· Adjusted (pre-IFRS 16) EBITDA up 8% to £8.8m (H1-19 £8.1m), with margin improving to 20.3% (H1-19 17.1%).
· Adjusted (pre-IFRS 16) operating profit up 23% to £5.0m (H1-19 £4.1m), with margin improving to 11.6% (H1-19 8.6%).
· Continued strong cash flows with £8.7m of adjusted pre-IFRS 16 operating cash flow in the period (99% cash conversion).
· Net debt, excluding the impact of IFRS 16, reduced by £1.1m in the period to £16.5m, with £4.8m capital expenditure and £1.5m of dividends paid in the period.
· Interim dividend increased to 0.83p per share (H1-19 0.4p) , to be paid in January.
Operational Highlights
· Q1-20 recurring revenues were flat on Q4-19 and Q2-20 recurring revenues were up on Q1-20, driven by both new logo wins and effective cross-selling.
· Operating margins continued to improve due the cost measures undertaken in the second half of the last financial year.
· £1.1m invested in our national network and a further £1.5m invested in our infrastructure as a service (IaaS) platform. We now have modern, resilient and scalable platforms and networks from which we can service our current and future customer base.
· Product management and Development teams reorganised, with managed firewall and SD WAN launched in Q3-20 and further enhancement to our Collaboration and Security portfolios to be launched in Q4-20.
· Strategic review of our data centre and network portfolios underway, with the expectation that this will result in annual savings of at least £2.8m in FY21 onwards.
Ian Johnson, Non-Executive Chairman, commented:
"Visibility of future revenues remains strong with recurring revenues reaching 90%. New customers were added in the period which, together with effective cross selling, led to quarter on quarter revenue growth. This revenue growth has been achieved despite the ongoing FCA investigation, which continues to impact the pace at which we win new business.
Management continues to improve the operational efficiency of the business. The strategic data centre and network portfolios review now underway is expected to lead to the realisation of annual savings of at least £2.8m and further improvements in operating margins.
Cash flow remains strong allowing significant investment into our network and a further reduction to net debt in the period. The Board is confident that the business will continue to generate strong cash flows enabling it to return cash to shareholders by way of dividend and further share purchases via the share buy-back programme."
There will be a presentation for analysts held at 09:30hrs on 28 November 2019 at the offices of Tulchan Communications, 85 Fleet Street, EC4 1AE. Please contact redcentric@tulchanCompany.com if you would like to attend.
For further enquiries please contact:
Redcentric plc +44 (0)1423 850 000
Peter Brotherton, Chief Executive Officer
Dean Barber, Chief Financial Officer
Tulchan +44 (0)20 7353 4200
James Macey White / Matt Low / Sophie Duckworth
Numis Securities Limited - Nomad and Joint Broker +44 (0)20 7260 1000
Simon Willis / Oliver Hardy
FinnCap Ltd - Joint Broker +44 (0)20 7220 0500
Stuart Andrews / Rhys Williams
Chief Executive Officer's review
Overview
We have had another productive six months, with progress made across all areas of the business. As well as continuing to extract cost efficiencies, it is particularly pleasing to note that we have stemmed the decline in recurring revenues. Whilst the half year comparatives show a decrease in recurring revenue of 6%, this reflects the opening run rate position. Indeed, our Q1 recurring revenues were flat on Q4 and Q2 recurring revenues were up on Q1. Encouragingly, this was driven by both new logo wins and effective cross-selling.
Non-recurring revenues are less predictable by nature and have been impacted in the period by the industry trend to move away from on-premise to cloud solutions. Additionally, customers have delayed their discretionary spending due to the economic uncertainty surrounding the ongoing Brexit negotiations. This is reflected in the half year numbers with non-recurring revenues down by £1.8m (-29%) on the equivalent period last year.
Profitability and operating margins continue to improve as a result of the cost reduction measures undertaken in the second half of the last financial year. In addition to these measures, we have recently commenced a strategic review of our network and data centre portfolios, vacating third party data centres and rationalising our legacy network connectivity contracts. This will align our infrastructure better with our future strategy and customer requirements. It will also yield significant savings, outlined in more detail below, expected to be at least £2.8m in FY21 onwards. The review will be complete by the time we announce our full year results and full details will be provided at that point.
The cash flows for the 6 months ended 30 September 2019 include an acceleration of capital expenditure with £1.1m invested in our national network which will shortly have a core capacity of 100Gb. A further £1.5m has been invested in our infrastructure as a service (IaaS) platform and £0.9m in our new internal ERP system. With these investments, we now have modern, resilient and scalable platforms and networks from which we can service our current and future customer base. Going forward, we anticipate lower levels of capital expenditure which will further enhance cash flow performance.
Improved profitability and cash generation have enabled us to declare an interim dividend of 0.83p per share (H1-19: 0.4p). In addition to this, we have commenced a share buyback programme with purchases of £0.3m made as at 30 September 2019.
Private sector
The private sector accounts for 85% of our recurring revenues. Our focus on customer service has led to high levels of retention during the period and we continue to receive additional orders from existing customers. As highlighted in last year's Annual Report, we believe that our margins are now reflective of the market and this is evidenced by significantly lower levels of price erosion on contracts renewed during the first half of the year.
Public Sector markets
Overview
Whilst the public sector accounted for just 15% of total recurring revenues, we continue to see significant opportunity for growth and anticipate that these revenues will represent an increasing percentage of future total revenues.
Health and Social Care Networks (HSCN)
In the FY19 Annual Report we listed 7 HSCN contract wins with annualised revenues of £3.1m. Contract variations and additions in H1-20 have increased this figure to £3.4m.
The HSCN programme has added 66 new public sector logos to our customer base and represent a significant opportunity for us to cross sell additional products. In addition to the HSCN revenues, a further £0.3m of annualised revenue from other products has been added to date.
Whilst these wins have been significant, the progress in implementing the contracts has been slower than expected, primarily due to customer resource constraints, resulting in only £178k of revenue being recognised in the first half of the year. As at 30 September 2019, the run rate of installed HSCN contracts amounted to £648k per annum. We are working closely with both our customers and NHS Digital to expedite these network rollouts. Whilst the roll-out of the remaining revenue will continue in to FY21, we expect that the bulk of these contracts will be live by the end of this financial year.
Yorkshire and Humber Public Sector Networks (YHPSN)
YHPSN is the largest of the Public Sector framework contracts won by Redcentric in the past 18 months. After a difficult start to this framework award, we are starting to make some good progress. 70 organisations are part of the YHPSN framework and of these, 44 have placed orders with us.
To date the total value of orders received is £8.0m, which equates to an annualised revenue of £1.6m.
As with the other HSCN orders, progress in installing new circuits has been slower than anticipated but we are confident that the bulk of the current order book will be installed by the end of this financial year.
Our initial sales focus has been on selling HSCN circuits due to the need for health organisations to move off the N3 network which is scheduled to close in August 2020. Going forward we will progress non-health opportunities and look to cross-sell additional products into this new customer base.
Public sector hosting
In last year's Annual Report, we highlighted the significant impact that the loss of public sector hosting contracts has had and will continue to have on the business. In the six months to 30 September 2019, public sector hosting revenues amounted to £1.7m, £0.9m down on the equivalent period last year.
As previously notified, we expect the whole of this revenue to have migrated away from us by the end of the next financial year.
Products, platforms and networks
National network upgrade and efficiencies
Our core network has been upgraded to enable 10Gb connections to terminate on our network and we are in the process of expanding the network to give a 100Gb core.
During the period we completed the decommissioning of a network ring which originated from the historical inTechnology acquisition. The closure of this ring has realised £0.5m annualised savings effective 1 July 2019.
Infrastructure as a Service (IaaS) platform
We have commenced phase II of our IaaS platform upgrade which, once fully implemented, will bring our cloud product offering fully up to date. We expect that this will be live by the end of the financial year.
New product launches
During the period we restructured the product management and development teams yielding immediate results, with new managed firewall and SD WAN products launched in Q3-20, and further enhancement to our Collaboration and Security portfolios to be launched in Q4-20
Data centre and network strategy review
We are now part-way through a strategic review of our network and data centre portfolios. Our aim is to vacate third party data centres and concentrate on our own managed facilities. This will allow us to rationalise legacy network connectivity contracts. The decisions taken to date will result in a £1.8m reduction to the annual cost base in FY21, with £0.4m benefit from this in H2-20. The review is ongoing and is expected to realise further savings of at least £1.0m in FY21, in addition to the £1.8m already being actioned. We expect to incur exceptional contract termination and exit costs of approximately £1.8m in H2-20.
These efficiency measures will not impact the required capacity to support future growth. By the end of the financial year the business will have an upgraded single UK wide network, with all of our customers located in Redcentric managed data centres and third-party facilities only utilised for interconnectivity purposes. No customer losses are expected as a result of this rationalisation programme.
People
PLC Board
On 16 October 2019 Ian Johnson joined the Board as Non-Executive Chairman replacing Chris Cole who resigned from the Board on the same day. Ian Johnson is an experienced PLC chairman and we welcome him to the Company. We thank Chris Cole for his considerable contribution to the Company over a five-year period and wish him well for the future.
Also, on 16 October 2019, Chris Rigg (Non-Executive Director) announced his intention to step down from the Board with effect from 31 December 2019 following his appointment as Chief Executive Officer of Mandata Limited. Chris goes with our thanks and best wishes for the future.
Dean Barber joined the business on 2 September 2019 as Chief Financial Officer. Dean is a chartered accountant and joins us from EMIS Group plc where he was Group Financial Controller.
Operating Board
We have continued to invest in our staff and to strengthen the management teams in both the UK and India. Several key appointments have been made in the first half of the financial year with the Operating Board strengthened as a result. In addition, a new HR Director will be joining the senior management team in December.
The business currently has 465 employees all of whom are key to the success of the business. The Board thanks them for their hard work and loyalty.
FCA
The FCA investigation is still ongoing and continues to deflect management's attention and to restrict the markets into which the Company can sell. The FCA has not communicated how it intends to proceed and what, if any, action it might bring against the Company. The Company continues to cooperate fully with the FCA and would like to bring the matter to a close as soon as possible.
Outlook and key areas of focus
We are cautiously optimistic for the future. The changes we have made over recent periods are beginning to yield results in both the private and public sector.
Whilst we are operating in very competitive markets, we expect modest revenue growth in the second half and beyond.
We have invested significantly in our networks and platforms over the last two years to position the business for the future. Given this level of upfront investment we expect lower levels of capital expenditure over the medium term. This, combined with the cost efficiencies identified through the ongoing review of our data centre and network portfolio, should lead to further strong cash generation.
Our focus in the second half of the financial year will be fivefold:
· To continue to grow revenue both by new customer acquisition and through cross selling of products to existing customers.
· To expedite the delivery of public sector network wins.
· To conclude the data centre and network strategy review
· To enhance our product portfolio with new product launches and further product enhancements.
· To continue to deliver strong cash flows which will be utilised to fund further share buy backs, pay dividends and reduce debt.
We anticipate that our FY20 results will be in line with the Board's expectations.
Financial Review
Overview
Total revenue in the period reduced by 9% to £43.2m (H1-19: £47.5m). Recurring monthly revenue fell by 6% to £38.8m (H1-19: £41.3m), representing 90% (H1-19: 87%) of the total revenue.
On a pre-IFRS 16 basis, both adjusted EBITDA (up £0.7m to £8.8m) and adjusted operating profit (up £0.9m to £5.0m) were higher than prior year, with an improvement to gross profit margin and further reductions to the operating cost base in the period.
On a post-IFRS 16 basis, adjusted EBITDA increased by £2.2m and adjusted operating profit increased by £1.4m. The Company recognised £1.1m of depreciation charges and £0.6m of interest costs in respect of finance leases that would have previously been recognised as a £1.6m operating lease expense. On transition to IFRS 16 the Company recognised a right of use asset of £22.2m and lease liabilities of £24.5m. Further disclosure is presented in note 3 to the financial statements.
Revenue
Revenue is analysed into the following categories:
· Recurring monthly revenue, lower at £38.8m (H1-19: £41.3m), reflecting the closing Q4-19 run-rate position. In the period, Q1-20 revenues were flat on Q4-19 with Q2-20 revenues up on Q1-20.
· Non-recurring product revenue, which was lower at £2.1m (H1-19: £3.3m), impacted by the industry trend to move away from on-premise to cloud solutions and by customers delaying discretionary spending due to the economic uncertainty surrounding the ongoing Brexit negotiations.
· Non-recurring services revenue, which was slightly lower at £2.3m (H1-19: £2.8m).
Gross profit
Gross profit decreased by 2% (£0.5m) reflecting the Company's lower revenue, with an improvement in gross margin to 64.5% (H1-19: 59.8%) driven by continued management of third-party operating costs and the reduction in lower margin product revenues.
Operating costs
The Company's pre-IFRS 16 adjusted operating costs (operating expenditure excluding depreciation, amortisation, exceptional items and share-based payments) are set out in the table below:
H1-20
H1-19
Change
£'000
£'000
£'000
Change %
UK staff costs
9,661
10,480
(819)
-8%
Office and data centre costs
3,704
3,462
242
+7%
Network and equipment costs
3,603
3,708
(105)
-3%
Other sales, general and administration costs
983
1,463
(480)
-33%
Offshore costs
1,123
1,140
(17)
-1%
Total adjusted operating costs, pre-IFRS 16
19,074
20,253
(1,179)
-6%
Adoption of IFRS 16 reduces operating costs by £1,571k to £17,503k. A right of use asset of £21,079k is recognised at 30 September in relation to leases that were previously classified as operating leases, with operating lease expenditure reduced by £1,571k in the period but depreciation and interest expense higher by £1,103k and £597k respectively.
Total adjusted operating costs for H1-20 were 6% (£1.2m) lower than prior year, primarily driven by:
· UK staff costs down £0.8m, driven by lower headcount. The Company employed 318 UK staff at 30 September 2019 with an average headcount over the period of 314 (H1-19: 337).
· Other sales, general and administration costs down £0.5m, with prior year including £0.5m of HSCN bid (consultancy) costs.
Offshore costs were in line with prior year with the Company employing 147 staff in India at 30 September 2019. Average Indian headcount over the period was 150 (H1-19: 146).
Profitability and dividend
Excluding the impact of IFRS 16 adoption, adjusted EBITDA (£8.8m) and adjusted operating profit (£5.0m) were up 8% and 23% respectively, with an EBITDA margin of 20.3% (H1-19: 17.1%) and adjusted operating profit margin of 11.5% (H1-19: 8.6%).
After accounting for exceptional items of £0.2m (H1-19: £0.2m) and share-based payment costs of £0.3m (H1-19: £0.2m), reported operating profit was higher at £1.4m (H1-19: £0.5m). On a post-IFRS 16 basis reported operating profit was £1.9m.
Net finance costs for the period were £1.1m (H1-19: £0.6m), including £0.6m of IFRS 16 finance charges.
The tax charge for the period was £0.4m (H1-19: £0.5m), comprising an income tax charge of £0.5m (H1-19: £nil), a current year deferred tax credit of £0.3m (H1-19: £0.2m), and a deferred tax charge in respect of prior years of £0.2m (H1-19: £0.7m).
Adjusted basic and diluted earnings per share (EPS) increased by 28% and 27% to 2.41p and 2.38p respectively (H1-19: 1.89p and 1.88p respectively). The reported basic and diluted EPS were also higher at 0.34p (H1-19: (0.38)p loss per share).
In accordance with the dividend policy previously announced, an interim dividend of 0.83p per share will be paid on 10 January 2020 to shareholders on the register at the close of business on 6 December 2019.
Cash flow and net debt
The principal movements in pre-IFRS 16 net debt are set out in the table below.
H1-20, pre-IFRS 16
H1-19
FY 2019
£'000
£'000
£'000
Adjusted EBITDA, pre-IFRS 16
8,759
8,115
16,714
Working capital movements
(82)
1,120
4,575
Adjusted cash generated from operations, pre IFRS 16
8,677
9,235
21,289
Cash conversion
99%
114%
127%
Capital expenditure - cash purchases
(2,267)
(2,884)
(5,229)
Capital expenditure - finance lease purchases
(2,484)
(185)
(2,506)
Proceeds from sale and lease back of assets
-
-
1,181
Proceeds from sale of fixed assets
-
-
665
Net capital expenditure
(4,751)
(3,069)
(5,889)
Corporation tax
(248)
(38)
(1,873)
Interest paid
(440)
(545)
(1,044)
Loan arrangement fees / fee amortisation
(4)
(34)
(68)
Effect of exchange rates
18
(32)
(8)
Other movements in net debt
(674)
(649)
(2,993)
Normalised net debt movement
3,252
5,517
12,407
Cash cost of exceptional items
(444)
(431)
(1,668)
Share buy-back
(278)
-
-
Dividends
(1,491)
-
(597)
(2,213)
(431)
(2,265)
Decrease in net debt
1,039
5,086
10,142
Net debt at the beginning of the period, pre-IFRS 16
(17,565)
(27,707)
(27,707)
Net debt at the end of the period, pre-IFRS 16
(16,526)
(22,621)
(17,565)
Net debt (pre-IFRS 16) of £16.5m at the end of the period consists of total borrowings of £12.7m plus finance leases of £6.0m, less cash balances of £2.2m. Pre-IFRS 16 adjusted cash generated from operations was £8.7m (H1-19: £9.2m), with the reduction driven by timing differences in working capital against a strong comparative period. Operating cash conversion was again high at 99% (H1-19: 113.8%).
There was an acceleration of capital expenditure in the period, with net capital expenditure of £4.8m (H1-19: £3.1m), principally relating to investment in our national network and our IaaS platform. £0.3m was spent on the share buy-back programme and £1.5m on dividends. After finance costs, tax, and the cash cost of exceptional items the Company ended the period with net debt, excluding IFRS 16 lease liabilities, of £16.5m (30 September 2018: £22.6m; 31 March 2019: £17.6m). Including IFRS 16 lease liabilities of £26.9m the Company's net debt at 30 September 2019 was £40.0m.
A further £7.5m of unutilised bank facility was cancelled during the period, leaving a total facility at 30 September 2019 of £25.5m, compromising a revolving credit facility (RCF) of £17.5m, an overdraft facility of £2.0m and a £6m asset financing facility. In addition, the Company has access to a £20m accordion facility. At 30 September 2019 £5.0m of the RCF and £2.0m of the overdraft was undrawn.
The current facilities expire on 30 November 2020. Dialogue is underway with lenders to determine the appropriate quantum and facility required beyond this date.
Consolidated statement of comprehensive income for the six months ended 30 September 2019
Six months ended 30 September 2019
Unaudited
Six months ended 30 September 2018
Unaudited
Year ended
31 March
2019
Audited
Note
£'000
£'000
£'000
Revenue
8
43,152
47,452
93,260
Cost of sales
(15,319)
(19,084)
(36,895)
Gross Profit
27,833
28,368
56,365
Operating expenditure
(25,929)
(27,918)
(56,650)
Adjusted EBITDA
10,330
8,115
16,714
Depreciation
(4,274)
(3,493)
(7,330)
Amortisation of intangibles
(3,730)
(3,689)
(7,392)
Exceptional items
9
(169)
(243)
(1,911)
Share-based payments
(253)
(240)
(366)
Operating profit / (loss)
1,904
450
(285)
Finance income
10
-
12
13
Finance costs
10
(1,017)
(584)
(1,091)
Profit / (loss) on ordinary activities before taxation
887
(122)
(1,363)
Income tax expense
11
(381)
(449)
(604)
Profit / (loss) for the period attributable to owners of the parent
506
(571)
(1,967)
Other comprehensive income
Items that may be classified to profit or loss:
Currency translation differences
39
(28)
8
Total comprehensive income / (loss) for the period
545
(599)
(1,959)
Earnings per share
Basic earnings/(loss) per share
12
0.34p
(0.38)p
(1.32)p
Diluted earnings/(loss) per share
12
0.34p
(0.38)p
(1.32)p
Consolidated statement of financial position as at 30 September 2019
30 Sept 2019
Unaudited
30 Sept 2018
Unaudited
31 March 2019
Audited
Note
£'000
£'000
£'000
Non-Current Assets
Intangible assets
72,354
79,436
75,802
Property, plant and equipment
19,438
19,173
18,133
Right-of-use assets
14
21,079
-
-
Deferred tax asset
307
-
142
113,178
98,609
94,077
Current Assets
Inventories
302
443
357
Trade and other receivables
15
19,521
22,510
22,103
Cash and short-term deposits
2,183
6,282
7,206
22,006
29,235
29,666
Total assets
135,184
127,844
123,743
Current Liabilities
Trade and other payables
16
(19,622)
(19,617)
(22,297)
Corporation tax payable
(104)
(836)
-
Lease liabilities
(4,512)
-
-
Borrowings
17
(127)
(3,091)
(3,056)
Provisions
18
(150)
-
(149)
(24,515)
(23,544)
(25,502)
Non-current liabilities
Deferred tax liability
-
(506)
-
Lease liabilities
(25,009)
-
-
Borrowings
17
(12,565)
(25,812)
(21,715)
Provisions
18
(893)
(530)
(881)
(38,467)
(26,848)
(22,596)
Total liabilities
(62,982)
(50,392)
(48,098)
Net assets
72,202
77,452
75,645
Equity
Called up share capital
19
149
149
149
Share premium account
19
65,736
65,588
65,588
Capital redemption reserve
(9,454)
(9,454)
(9,454)
Own shares held in treasury
19
(278)
-
-
Retained earnings
16,049
21,169
19,362
Total Equity
72,202
77,452
76,645
Consolidated cash flow statement for the six months ended 30 September 2019
Six months to 30 Sept 2019
Unaudited
Six months to 30 Sept 2018
Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Operating profit
1,904
450
(285)
Adjustment for non-cash items
Depreciation and amortisation
8,004
7,182
14,722
Exceptional items
169
243
1,911
Share-based payments
253
240
366
Operating cash flow before exceptional items and movements in working capital
10,330
8,115
16,714
Loss on sale of fixed asset
-
-
(42)
Exceptional items and NI on share-based payments
(444)
(431)
(1,668)
Operating cash flow before changes in working capital
9,886
7,684
15,004
Changes in working capital
Decrease in inventories
55
223
309
Decrease in trade and other receivables
2,254
1,364
5,775
Decrease in trade and other payables
(2,391)
(466)
(1,467)
Cash generated from operations
9,804
8,805
19,621
Adjusted cash generated from operations1
10,248
9,236
21,289
Cash costs of exceptional items
(444)
(431)
(1,668)
Cash generated from operations
9,804
8,805
19,621
Tax paid
(248)
(38)
(1,873)
Net cash generated from operating activities
9,556
8,767
17,748
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
-
-
665
Purchase of property, plant and equipment
(2,081)
(2,884)
(4,665)
Purchase of intangible fixed assets
(186)
-
(564)
Net cash used in investing activities
(2,267)
(2,884)
(4,564)
Cash flows from financing activities
Dividends paid
(1,491)
-
(597)
Share buy-back
(278)
-
-
Interest paid
(440)
(545)
(1,044)
Repayment of borrowings / finance leases
(1,550)
(1,613)
(1,918)
Payment of IFRS 16 lease liabilities
(1,571)
-
-
Repayment of revolving credit facility
(7,000)
(3,500)
(8,500)
Net cash used in financing activities
(12,330)
(5,658)
(12,059)
Net increase in cash and cash equivalents
(5,041)
225
1,125
Cash and cash equivalents at beginning of period
7,206
6,089
6,089
Effect of exchange rates
18
(32)
(8)
Cash and cash equivalents at end of the period
2,183
6,282
7,206
Consolidated statement of changes in equity
Share Capital
Share Premium
Capital Redemption Reserve
Own Shares Held in Treasury
Retained Earnings
Total Equity
£'000
£'000
£'000
£'000
£'000
£'000
Balance at 1 April 2018
149
65,588
(9,454)
-
21,565
77,848
Loss for the period
-
-
-
-
(571)
(571)
Transactions with owners
Share-based payments
-
-
-
-
204
204
Other comprehensive income
Currency translation differences
-
-
-
-
(28)
(28)
At 30 September 2018
149
65,588
(9,454)
-
21,170
77,453
Loss for the period
-
-
-
-
(1,396)
(1,396)
Transactions with owners
Share-based payments
-
-
-
-
149
149
Dividends paid
-
-
-
-
(597)
(597)
Other comprehensive income
Currency translation differences
-
-
-
-
36
36
At 31 March 2019
149
65,588
(9,454)
-
19,362
75,645
Adjustment on initial application of IFRS 16
-
-
-
-
(2,429)
(2,429)
Profit for the period
-
-
-
-
506
506
Transactions with owners
Share-based payments
-
-
-
-
62
62
Share buyback
(278)
-
(278)
Issue of new shares
-
148
-
-
-
148
Dividends paid
-
-
-
-
(1,491)
(1,491)
Other comprehensive income
Currency translation differences
-
-
-
-
39
39
At 30 September 2019
149
65,736
(9,454)
(278)
16,049
72,202
Notes to the half year financial statements
1. General information
The financial statements for the six months ended 30 September 2019 and the six months ended 30 September 2018 do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 March 2019 were approved by the Board of Directors on 25 June 2019 and delivered to the Registrar of Companies. The auditor's report on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 (2) or (3) of the Companies Act 2006.
These condensed half year financial statements were approved for issue by the Board of Directors on 27 November 2019.
Redcentric plc ('the Company') is a company domiciled in England and Wales. These condensed half year financial statements comprise the Company and its subsidiaries (together referred to as 'the Company' or 'the Group'). The principal activity of the Company is the supply of IT managed services.
2. Basis of preparation
These condensed half year financial statements for the half year ended 30 September 2019 have been prepared in accordance with the AIM Rules for Companies, comply with IAS 34 Interim Financial Reporting as adopted by the European Union and should be read in conjunction with the annual financial statements for the year ended 31 March 2019, which have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union.
The directors have reviewed a detailed trading and cash flow forecast for a period which covers at least 12 months after the date of approval of these condensed half year financial statements. There is a high and continuing level of recurring revenue and high cash conversion is anticipated for the foreseeable future.
As at 30 September 2019 the Company had committed a revolving credit facility (RCF) of £17.5m, an overdraft facility of £2.0m and a £6m asset financing facility. In addition, the Company has access to a £20m accordion facility. At 30 September 2019 £5.0m of the RCF and £2.0m of the overdraft was undrawn. During the period, the continuing strength of operating cash flows enabled the Company to cancel £7.5m of unused RCF facility. These current facilities expire on 30 November 2020, with dialogue underway with the lenders to determine the appropriate quantum and facility required beyond this date. The Directors are not aware of any facts or circumstances that would prevent this refinancing process from being successful.
After careful enquiry and review of available financial information, the directors have formed the conclusion that the Company has adequate resources to continue to operate for the foreseeable future and that it is therefore appropriate to continue to adopt the going concern basis of accounting in the preparation of these half year financial statements.
The financial information is presented in sterling, which is the functional currency of the Company. All financial information presented has been rounded to the nearest thousand.
3. Accounting policies
Except for the adoption of IFRS 16 Leases, detailed below, the accounting policies applied in these interim financial statements are the same as those applied in the Company's annual report and accounts for the year ended 31 March 2019. Following the adoption of IFRS 16, non-current assets now include the category of right-of-use assets, with depreciation provided on these on a straight-line basis over the shorter of the lease term and its useful life. For property, plant and equipment funded through finance leases, where there is reasonable certainty that the Company obtains ownership by the end of the lease term, depreciation is provided on a straight line basis over the useful life, otherwise it's provided over the shorter of the useful life and the lease term.
IFRS 16 Leases
The Company has adopted IFRS 16 Leases from 1 April 2019, replacing IAS 17, using the modified retrospective approach. The cumulative effect of initial application is recognised in retained earnings at 1 April 2019 and accordingly comparative information presented has not been restated.
IFRS 16 has introduced a single on-balance sheet accounting model for lessees. As a result, the Company, as a lessee, has recognised right-of-use assets representing its rights to use the underlying assets, and lease liabilities representing its obligation to make lease payments. The Company has presented its right-of-use assets and lease liabilities on the face of the balance sheet. The table below summarises the impact on transition, the Company recognising an adjustment of £2,429,000 to opening retained earnings.
1 April 2019
£'000
Right-of-use assets
22,182
Trade and other receivables (deferred lease incentives derecognised)
(132)
Current lease liabilities
(1,989)
Non-current lease liabilities
(22,490)
Retained earnings
(2,429)
In relation to those leases under IFRS 16, the Company now recognises depreciation and interest costs, instead of an operating lease expense. During the six months ended 30 September 2019, this amounted to £1.1m of depreciation charges and £0.6m of interest costs from these leases.
The impact of IFRS 16 on the consolidated income statement, consolidated statement of financial position, and consolidated cash flow statement for the six months ended 30 September 2019 is set out in Appendix 1.
At transition, for leases classified as operating leases under IAS 17, lease liabilities were measured at the present value of the remaining lease payments, discounted at an incremental borrowing rate which reflects the characteristics of the underlying lease, at 1 April 2019. The weighted average incremental borrowing rate applied is 5.1%.
Right-of-use assets are measured at either:
· their carrying amount as if IFRS 16 had been applied since the lease commencement date, discounted by the Company's incremental borrowing rate as at 1 April 2019. The Company has applied this methodology to the majority of its property leases where the required historical information is available; or
· an amount equal to the lease liability, adjusted for prepaid / accrued lease payments. This method has been applied to the small number of non-property leases.
The Company has applied the following practical expedients on transition:
· leases for underlying assets that have a low value (less than £5,000) or where the remaining lease term on transition was less than 12 months have been excluded;
· a single discount rate applied to its small portfolio of car leases; and
· reliance on previous assessments on whether leases are onerous instead of performing impairment reviews under IAS 36
The table below reconciles the Company's operating lease commitment at 31 March 2019, under IAS 17, to the lease liability now being recognised under IFRS 16.
1 April
2019
£'000
Operating lease commitment at 31 March 2019 as disclosed in the Company's consolidated financial statements
32,665
Discounted using the incremental borrowing rate at 1 April 2019
24,513
Recognition exemption for leases of low value assets
(31)
Recognition exemption for leases with less than twelve months of lease term at transition
(3)
Lease liabilities recognised as at 1 April 2019
24,479
4. Critical accounting judgements and key sources of estimation uncertainty
The key source of estimation uncertainty that carries a significant risk of material change to the carrying value of assets liabilities within the next year is with regard to credit note provisioning, where provision is made for the value of credit notes that the Company expects to subsequently issue to correct for estimated inaccurate invoices issued to date. The basis for this estimation is unchanged from the 2019 annual report and accounts.
The Company has adopted IFRS 16 for the first time in these financial statements, with £23.5m of IFRS 16 lease liabilities, principally property leases, recognised at 30 September 2019. Judgement has been applied in determining whether a contract contains a lease and the anticipated tenure length on these leases (whether or not break clauses will be exercised has been determined based on our historical experience and expectations for future trading and capacity requirements). Estimations have been made with regard to discount rates applied.
The FCA investigation is still ongoing and has not yet reached its conclusion. Until such stage as the FCA's intention becomes clearer, the Directors are not able to judge whether a fine will be likely, and accordingly, consistent with the treatment in the 2019 annual report and accounts, no provision has been made.
5. Principal risks and uncertainties
The 2019 annual report and accounts describes the principal risks and uncertainties that could impact the Group's performance. These relate to reliance on key personnel and management, market and economic conditions, technology advancement and security, infrastructure failure, and the ongoing FCA investigation. These remain unchanged since the annual report was published and are not expected to change for the remaining six months of the financial year. Identifying, evaluating and managing the principal risks and uncertainties facing the Group is an integral part of the way Redcentric operates.
It is not anticipated that Brexit will have a material direct effect on the Group as it is not a significant exporter or importer of goods or services. There are potential indirect effects, including exchange rate volatility affecting the value of sterling, and delays in customers discretionary spending, which could have a negative impact on the Group's prospects, but the scale and timing of these is far from certain. The Group will continue to monitor the progress of the negotiations of the terms under which the UK will leave the EU.
6. Forward-looking statements
Certain statements in this half year report are forward-looking. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements.
7. Segmental reporting
IFRS 8 requires operating segments to be identified based on internal financial information reported to the chief operating decision-maker for decision-making purposes. The Group considers that this role is performed by the main Board. The Board believes that the Group continues to comprise a single reporting segment, being the provision of managed services to customers.
8. Revenue analysis
Revenue is analysed as follows:
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Recurring revenue
38,810
41,322
80,544
Product revenue
2,079
3,328
5,810
Services revenue
2,263
2,802
6,906
Total revenue
43,152
47,452
93,260
9. Exceptional items
Six months to 30 Sept 2019
Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Professional fees associated with Financial Conduct Authority investigation
67
243
554
Staff restructuring
102
-
804
Vacant property provisions
-
-
553
169
243
1,911
10. Finance income and costs
Six months to 30 Sept 2019
Unaudited
Six months to 30 Sept 2018
Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Finance income
Other interest receivable
-
12
13
-
12
13
Finance costs
Interest payable on bank loans and overdrafts
(308)
(509)
(947)
Interest payable on finance leases
(666)
(41)
(93)
Amortisation of loan arrangement fees
(43)
(34)
(51)
(1,017)
(584)
(1,091)
For the six months to 30 September 2019 interest payable on finance leases includes £597,000 of IFRS 16 interest expense.
11. Income tax expense
The tax expense recognised reflects management estimates of the tax charge for the period and has been calculated using the estimated average tax rate of UK corporation tax for the financial year of 19.0% (H1-19: 19.0%)
12. Earnings per share (EPS)
The calculation of basic and diluted EPS is based on the following earnings and number of shares.
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019 Audited
Earnings
£'000
£'000
£'000
Statutory earnings
506
(571)
(1,967)
Tax charge
381
449
604
Amortisation of acquired intangibles
3,126
3,126
6,252
Share-based payments
253
240
366
Exceptional items
169
243
1,911
Adjusted earnings before tax
4,435
3,487
7,166
Notional tax charge at standard rate
(843)
(662)
(1,362)
Adjusted earnings
3,592
2,825
5,804
Weighted average number of ordinary shares
Number
'000
Number
'000
Number
'000
Total shares in issue
149,311
149,135
149,135
Shares held in treasury
(327)
-
-
For basic EPS calculations
148,984
149,135
149,135
Effect of potentially dilutive share options
1,915
1,455
1,141
For diluted EPS calculations
150,899
150,590
150,276
EPS
Pence
Pence
Pence
Basic
0.34p
(0.38)p
(1.32)p
Adjusted
2.41p
1.89p
3.89p
Basic diluted
0.34p
(0.38)p
(1.32)p
Adjusted diluted
2.38p
1.88p
3.86p
13. Dividends
In relation to the 2019 financial year an interim dividend of 0.4p was paid on 21 December 2018 amounting to £597,000 followed by a final dividend of 1p on 6 September 2019 amounting to £1,491,000. For the 2020 financial year, the Directors have approved an interim dividend of 0.83p, which will be payable on 10 January 2020, to shareholders on the register at the close of business on 6 December 2019. This interim dividend, which will amount to approximately £1,237,000, has not been recognised as a liability in these financial statements.
14. Right-of-use assets
Leasehold property
£000
Vehicles & computer equipment
£000Total
£000Cost
At 1 April 2018, 30 September 2018 and 31 March 2019
-
-
-
Effect of initial application of IFRS 16
29,423
657
30,080
At 30 September 2019
29,423
657
30,080
Accumulated depreciation
At 1 April 2018, 30 September 2018 and 31 March 2019
-
-
-
Effect of initial application of IFRS 16
7,898
-
7,898
Charged in period
1,005
98
1,103
At 30 September 2019
8,903
98
9,001
Net book value
At 30 September 2019
20,520
559
21,079
At 1 April 2018, 30 September 2018 and 31 March 2019
-
-
-
15. Trade and other receivables
Six months to 30 Sept 2019
Unaudited
Six months to 30 Sept 2018
Unaudited
Year ended 31 March 2019
Audited
£'000
£'000
£'000
Trade Receivables
10,345
11,242
13,112
Less: credit note provision
(1,356)
(1,057)
(1,521)
Trade receivables - net
8,989
10,185
11,591
Other receivables
233
270
194
Prepayments
5,814
8,170
6,133
Commission contract asset
2,438
-
2,040
Accrued income
2,047
3,885
1,949
Corporation tax
-
-
196
Total
19,521
22,510
22,103
Trade debtor days were 40 at 30 September 2019 (30 September 2018: 44). The ageing of trade receivables is shown below:
Six months to 30 Sept 2019
Unaudited
Six months to 30 Sept 2018
Unaudited
Year ended 31 March 2019
Audited
£'000
£'000
£'000
Current
7,484
7,946
9,074
1 to 30 days overdue
1,777
1,112
2,628
31 to 60 days overdue
586
1,150
505
61 to 90 days overdue
217
182
99
91 to 180 days overdue
138
470
390
> 180 days overdue
143
382
416
Gross trade debtors
10,345
11,242
13,112
Credit note provision
(1,356)
(1,057)
(1,521)
Net trade debtors
8,989
10,185
11,591
16. Trade and other payables
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March 2019 Audited
£'000
£'000
£'000
Trade Payables
5,989
6,524
6,603
Other Payables
391
233
275
Taxation and Social Security
2,281
2,142
3,249
Accruals
2,849
2,959
3,028
Deferred Income
8,112
7,759
9,142
Total
19,622
19,617
22,297
Trade creditor days were 44 at 30 September 2019 (30 September 2018: 31).
17. Borrowings
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019 Audited
£'000
£'000
£'000
Current
Finance Leases
-
3,091
2,762
Term Loans
187
-
294
Unamortised loan arrangement fees
(60)
-
-
Total
127
3,091
3,056
Non-current
Bank Loan
12,500
24,500
19,500
Finance leases
-
1,414
2,214
Term loans
69
-
69
Unamortised loan arrangement fees
(4)
(102)
(68)
Total
12,565
25,812
21,715
Following the adoption of IFRS 16, for the six months to 30 September 2019 current finance lease liabilities of £2,554,000, and non-current finance lease liabilities of £3,462,000, have been presented as lease liabilities on the face of the consolidated statement of financial position.
18. Provisions
Dilapidations provision
Vacant property provision
Total provision
£'000
£'000
£'000
At 1 April 2018
376
-
376
Additional provisions created during the period
154
-
154
At 30 September 2018
530
-
530
Additional provisions created during the period
(34)
538
504
Utilised during the period
-
(4)
(4)
At 31 March 2019
496
534
1,030
Additional provisions created during the period
60
-
60
Utilised during the period
-
(47)
(47)
At 30 September 2019
556
487
1,043
Analysed as:
Current
-
150
150
Non-current
556
337
893
556
487
1,043
19. Share capital and share premium
Ordinary shares of 0.1p each
Share premium
Number
£'000
£'000
At 1 April 2018, 30 September 2018 and 31 March 2019
149,135,316
149
65,588
New shares issued
175,397
-
148
At 30 September 2019
149,310,713
149
65,736
During the period the Company purchased, and held in treasury, 326,905 of its ordinary share capital for total proceeds of £278,000. The total shares held in treasury at 30 September 2019 was 326,905 (30 September 2018: Nil; 31 March 2019: Nil)
Appendix 1: Impact of IFRS 16
Consolidated statement of comprehensive income
Six months to 30 Sept 2019 pre IFRS 16
Impact of IFRS 16
Six months to 30 Sept 2019 as reported
Six months to 30 Sept 2018
£'000
£'000
£'000
£'000
Revenue
43,152
-
43,152
47,452
Cost of sales
(15,319)
-
(15,319)
(19,084)
Gross Profit
27,833
-
27,833
28,368
Operating expenditure
(26,397)
468
(25,929)
(27,918)
Adjusted EBITDA
8,759
1,571
10,330
8,115
Depreciation
(3,171)
(1,103)
(4,274)
(3,493)
Amortisation of intangibles
(3,730)
-
(3,730)
(3,689)
Exceptional items
(169)
-
(169)
(243)
Share-based payments
(253)
-
(253)
(240)
Operating profit / (loss)
1,436
468
1,904
450
Finance income
-
-
-
12
Finance costs
(420)
(597)
(1,017)
(584)
Profit / (loss) on ordinary activities before taxation
1,016
(129)
887
(122)
Income tax expense
(406)
25
(381)
(449)
Profit / (loss) for the period attributable to owners of the parent
610
(104)
506
(571)
Other comprehensive income
Items that may be classified to profit or loss:
Currency translation differences
39
-
39
(28)
Total comprehensive income / (loss) for the period
649
(104)
545
(599)
Earnings per share
Basic earnings/(loss) per share
0.41p
(0.07)p
0.34p
(0.38)p
Diluted earnings/(loss) per share
0.40p
(0.06)p
0.34p
(0.38)p
Consolidated statement of financial position
30 Sept 2019
pre IFRS 16
Impact of IFRS 16
30 Sept 2019
as reported
30 September 2018
£'000
£'000
£'000
Non-Current Assets
Intangible assets
72,354
-
72,354
79,436
Property, plant and equipment
19,438
-
19,438
19,173
Right-of-use assets
-
21,079
21,079
-
Deferred tax asset
307
-
307
-
92,099
21,079
113,178
98,609
Current Assets
Inventories
302
-
302
443
Trade and other receivables
19,653
(132)
19,521
22,510
Cash and short-term deposits
2,183
2,183
6,282
22,138
(132)
22,006
29,235
Total assets
114,237
20,947
135,184
127,844
Current Liabilities
Trade and other payables
(19,622)
-
(19,622)
(19,617)
Corporation tax payable
(129)
25
(104)
(836)
Lease liabilities
-
(4,512)
(4,512)
-
Borrowings
(2,681)
2,554
(127)
(3,091)
Provisions
(150)
-
(150)
-
(22,582)
(1,933)
(24,515)
(23,544)
Non-current liabilities
Deferred tax liability
-
-
-
(506)
Lease liabilities
-
(25,009)
(25,009)
-
Borrowings
(16,027)
3,462
(12,565)
(25,812)
Provisions
(893)
-
(893)
(530)
(16,920)
(21,547)
(38,467)
(26,848)
Total liabilities
(39,502)
(23,481)
(62,982)
(50,392)
Net assets
74,735
(2,533)
72,202
77,452
Equity
Called up share capital
149
-
149
149
Share premium account
65,736
-
65,736
65,588
Capital redemption reserve
(9,454)
-
(9,454)
(9,454)
Own shares held in treasury
(278)
-
(278)
Retained earnings
18,582
(2,533)
16,049
21,169
Total Equity
74,735
(2,533)
72,202
77,452
The impact of IFRS 16 on current lease liabilities of £4,512,000 comprises £1,958,000 of lease liabilities arising from the adoption of IFRS 16 and £2,554,000 of existing IAS 17 finance leases re-presented from current borrowings.
The impact of IFRS 16 on non-current lease liabilities of £25,009,000 comprises £21,547,000 of lease liabilities arising from the adoption of IFRS 16 and £3,462,000 of existing IAS 17 finance leases re-presented from non-current borrowings.
Consolidated cash flow statement
Six months to 30 Sept 2019
pre IFRS 16
Impact of IFRS 16
Six months to 30 Sept 2019
as reported
Six months to 30 Sept 2018
£'000
£'000
£'000
Operating profit
1,436
468
1,904
450
Adjustment for non-cash items
Depreciation and amortisation
6,901
1,103
8,004
7,182
Exceptional items
169
-
169
243
Share-based payments
253
-
253
240
Operating cash flow before exceptional items and movements in working capital
8,759
1,571
10,330
8,115
Loss on sale of fixed asset
-
-
-
-
Exceptional items and NI on share-based payments
(444)
-
(444)
(431)
Operating cash flow before changes in working capital
8,315
1,571
9,886
7,684
Changes in working capital
Decrease in inventories
55
-
55
223
Decrease in trade and other receivables
2,254
-
2,254
1,364
Decrease in trade and other payables
(2,391)
-
(2,391)
(466)
Cash generated from operations
8,233
1,571
9,804
8,805
Adjusted cash generated from operations
8,677
1,571
10,248
9,236
Cash costs of exceptional items
(444)
-
(444)
(431)
Cash generated from operations
8,233
1,571
9,804
8,805
Tax paid
(248)
-
(248)
(38)
Net cash generated from operating activities
7,985
1,571
9,556
8,767
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
-
-
-
-
Purchase of property, plant and equipment
(2,081)
-
(2,081)
(2,884)
Purchase of intangible fixed assets
(186)
-
(186)
-
Net cash used in investing activities
(2,267)
-
(2,267)
(2,884)
Cash flows from financing activities
Dividends paid
(1,491)
-
(1,491)
-
Share buy-back
(278)
-
(278)
-
Interest paid
(440)
-
(440)
(545)
Repayment of borrowings / finance leases
(1,550)
-
(1,550)
(1,613)
Payment of IFRS 16 lease liabilities
-
(1,571)
(1,571)
-
Repayment of revolving credit facility
(7,000)
-
(7,000)
(3,500)
Net cash used in financing activities
(10,759)
(1,571)
(12,330)
(5,658)
Net increase in cash and cash equivalents
(5,041)
-
(5,041)
225
Cash and cash equivalents at beginning of period
7,206
-
7,206
6,089
Effect of exchange rates
18
-
18
(32)
Cash and cash equivalents at end of the period
2,183
-
2,183
6,282
Appendix 2: Alternative performance measures (APMs)
This report contains certain financial measures (APMs) that are not defined or recognised under IFRS but are presented to provide readers with additional financial information that is evaluated by management and investors in assessing the performance of the Group.
This additional information presented is not uniformly defined by all companies and may not be comparable with similarly titled measures and disclosures by other companies. These measures are unaudited and should not be viewed in isolation or as an alternative to those measures that are derived in accordance with IFRS.
Recurring monthly revenue
Recurring revenue is the revenue that annually repeats either under contractual arrangement or by predictable customer habit. It highlights how much of the Group's total revenue is secured and anticipated to repeat in future periods, providing a measure of the financial strength of the business. It is a measure that is well understood by the Group's investor and analyst community and is used for internal performance reporting.
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Reported revenue
43,152
47,452
93,260
Non-recurring revenue
(4,342)
(6,130)
(12,716)
Recurring revenue
38,810
41,322
80,544
Adjusted EBITDA and adjusted EBITDA margin
Adjusted EBITDA is EBITDA excluding exceptional items (as set out in note 9) and share-based payments. The same adjustments are also made in determining the adjusted EBITDA margin. Items are only classified as exceptional due to their nature or size, and the Board considers that this metric provides the best measure of assessing underlying trading performance.
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Reported operating profit
1,904
450
(285)
Amortisation of intangible assets arising on business combinations
3,126
3,126
6,252
Amortisation of other intangible assets
604
563
1,140
Depreciation
4,274
3,493
7,330
EBITDA
9,908
7,632
14,437
Exceptional items
169
243
1,911
Share-based payments
253
240
366
Adjusted EBITDA
10,330
8,115
16,714
Adjusted operating profit, adjusted operating profit margin and adjusted earnings per share
Adjusted operating profit is operating profit excluding amortisation on acquired intangibles, exceptional items and share-based payments. The same adjustments are also made in determining the adjusted operating profit margin and in determining adjusted earnings per share (EPS). The Board considers this adjusted measure of operating profit to provide the best metric of assessing underlying performance as it excludes exceptional items and the amortisation of acquired intangibles arising from business combinations which varies year on year dependent on the timing and size of any acquisitions.
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Reported operating profit
1,904
450
(285)
Amortisation of intangible assets arising on business combinations
3,126
3,126
6,252
Exceptional items
169
243
1,911
Share-based payments
253
240
366
Adjusted operating profit
5,452
4,059
8,244
The EPS calculation further adjusts for the tax impact of the operating profit adjustments, presented in note 12.
Adjusted operating costs
Adjusted operating costs are operating costs less depreciation, amortisation, exceptional items and share-based payments.
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Reported operating expenditure
25,929
27,918
56,650
Depreciation
(4,274)
(3,493)
(7,330)
Amortisation of intangibles
(3,730)
(3,689)
(7,392)
Exceptional items
(169)
(243)
(1,911)
Share-based payments
(253)
(240)
(366)
Adjusted operating expenditure
17,503
20,253
39,651
Adjusted cash generated from operations and adjusted operating cash conversion
Adjusted cash generated from operations adjusts for the cash costs of exceptional items, consistent with the adjusted EBITDA and operating profit measures. The same adjustments are also made in determining the adjusted cash conversion percentage.
Six months to 30 Sept 2019 Unaudited
Six months to 30 Sept 2018 Unaudited
Year ended
31 March
2019
Audited
£'000
£'000
£'000
Reported cash generated from operations
9,794
8,805
19,621
Share-based payments
444
431
1,668
Adjusted cash generated from operations
10,238
9,236
21,289
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.ENDIR UBVRRKSAAUUA
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