REG - RedstoneConnect PLC - Final Results <Origin Href="QuoteRef">REDS.L</Origin> - Part 2

Smartspace SoftwareAnnouncement

25/04/2017 07:08

- Part 2: For the preceding part double click  ID:nRSY1835Da 

growth. In addition, both companies create significant synergies for the
enlarged group in terms of potential new clients for RedstoneConnect and
additional products that can be sold across Redstone's existing customer
base. 
 
The book value of Connect and Commensus net assets acquired and their fair
values are summarised below: 
 
                                                Connect IB Limited  Commensus Plc           Combined             
                                                Book Value          Fair Value Adjustments  Fair Value to Group  Book Value  Fair Value Adjustments  Fair Value to Group  Fair Value to Group  
                                                £000                £000                    £000                 £000        £000                    £000                 £000                 
 Intangible assets                              -                   1,236                   1,236                135         1,554                   1,689                2,925                
 Property, plant and equipment                  19                  -                       19                   398         (79)                    319                  338                  
 Trade receivables                              258                 (26)                    232                  307         -                       307                  539                  
 Other current assets                           146                 (123)                   23                   346         (240)                   106                  129                  
 Cash                                           50                  -                       50                   90          -                       90                   140                  
 Loans                                          (126)               -                       (126)                -           -                       -                    (126)                
 Trade payables                                 (166)               -                       (166)                (219)       -                       (219)                (385)                
 Other current liabilities                      (149)               (379)                   (528)                (900)       (182)                   (1,082)              (1,610)              
 Deferred tax liability                         -                   (247)                   (247)                -           (338)                   (338)                (585)                
                                                32                  461                     493                  157         715                     872                  1,365                
                                                                                                                                                                                               
 Fair value of net assets acquired                                                          493                                                      872                  1,365                
 Goodwill                                                                                   835                                                      1,528                2,363                
 Total consideration                                                                        1,328                                                    2,400                3,728                
                                                                                                                                                                                               
 Shares issued at market value                                                              250                                                      148                  398                  
 Cash                                                                                       1,028                                                    2,252                3,280                
 Contingent equity consideration                                                            50                                                       -                    50                   
                                                                                            1,328                                                    2,400                3,728                
                                                                                                                                                                                               
 Cash                                                                                       1,028                                                    2,252                3,280                
 Less: cash acquired                                                                        (50)                                                     (90)                 (140)                
 Total cash consideration net of cash acquired                                              978                                                      2,162                3,140                
 
 
The fair value of the financial assets include trade receivables with a fair
value and gross contractual value of £539,000. The best estimate at
acquisition date of the contractual cash flows to be collected was £539,000. 
 
The goodwill arising from the acquisitions is not deductible for income tax
purposes. 
 
Since acquisition date Connect IB Limited contributed £1,600,000 in revenue
and £83,000 to the Group's profit before taxation in the year, whilst
Commensus Plc contributed £516,000 in revenue and £48,000 to the Group's
profit before taxation. Had both acquisitions occurred at the beginning of the
year, the Group's revenue would have been £44,000,000 and the Group's profit
before taxation would have been £1,300,000 for the year. 
 
The identifiable intangible assets and related deferred tax liability are as
follows: 
 
                         Connect IB Limited   Commensus Plc       Combined                  
                         Fair Value to Group  Fair Valueto Group  Fair Valueto Group        
                                              £000                £000                £000    
                                                                                                              
 Customer contracts                                               606                         1,689  2,295    
 IP                                                               630                         -      630      
 Deferred tax liability                                           (247)                       (338)  (585)    
 Total                                                            989                         1,351  2,340    
 
 
The Group has applied the 'Income Approach' valuation method to identify the
above acquired intangible assets. 
 
The Income Approach focuses on the income-producing capability of the subject
asset. The underlying premise of this approach is that the value of an asset
can be measured by the present worth of the net economic benefit (cash
receipts less cash outlays) to be received over the life of the subject
asset. 
 
The steps followed in applying this approach include estimating the expected
after-tax cash flows or profits attributable to the asset over its life and
converting these after-tax cash flows to present value. This has been
calculated using the Discounted Cashflow Methodology ("DCF"). 
 
The discounting process uses a rate of return, which accounts for both the
time value of money and investment risk factors. Finally, the present value of
the after-tax cashflows over the life of the asset is totalled to arrive at an
indication of Fair Value of the asset. 
 
For the Customer relationships we have approached this by way of ascertaining
the post-tax annual value of these contracts after applying an attrition rate
based on historical trends. 
 
4 Earnings per share 
 
Earnings per share data is based on the Group profit/(loss) for the year and
the weighted average number of ordinary shares in issue. 
 
                                                                                                       2017                                                  2016                              
                                                                                 Continued operations  Discontinued operations  Total  Continued operations  Discontinued operations  Total    
 Basic earnings/(loss) per share                                                 0.11p                 0.02p                    0.13p  (0.06p)               (0.12p)                  (0.18p)  
 Diluted earnings/(loss) per share                                               0.10p                 0.02p                    0.12p  (0.06p)               (0.12p)                  (0.18p)  
 Profit/(loss) for the year attributable to owners of the parent company (£000)  1,789                 316                      2,105  (696)                 (1,487)                  (2,183)  
 
 
                                                                                                         2017    2016  
                                                                                                                       
 Number of shares                                                                                        No.     No.   
 Weighted average number of ordinary shares in issue                       1,606,896,215  1,232,295,941  
 Weighted average number of potentially dilutive ordinary shares in issue  1,768,526,952  1,232,295,941  
 
 
Warrants and employee share options are non-dilutive in loss making periods. 
 
5 Annual General Meeting 
 
The Annual General Meeting will be held at the offices of RedstoneConnect plc,
40 Holborn Viaduct, London, EC1N 2PB, the date and time of which will be
confirmed in due course. 
 
This information is provided by RNS
The company news service from the London Stock Exchange