REG - Digital Barriers plc - Final Results <Origin Href="QuoteRef">DGB.L</Origin> - Part 2
16/07/2015 12:08
- Part 2: For the preceding part double click ID:nRSW8915Qa
Total equity 38,841 49,894
Non-current liabilities
Deferred tax liabilities 116 194
Provisions 134 161
250 355
Current liabilities
Trade and other payables 6 5,261 5,608
Financial liabilities 163 163
Provisions 28 420
5,452 6,191
Total liabilities 5,702 6,546
Total equity and liabilities 44,543 56,440
DIGITAL BARRIERS PLC
Consolidated statement of changes in equity
for the year ended 31 March 2015
Share capital Share premium account £'000 Capital redemption reserve £'000 Merger reserve £'000 Translation reserve £'000 Other reserves £'000 Profit and loss reserve £'000 Total equity £'000
£'000
At 31 March 2013 510 57,989 4,735 454 (221) (307) (17,267) 45,893
Loss for the year - - - - - - (14,609) (14,609)
Other comprehensive loss - - - - 9 - - 9
Total comprehensive loss - - - - 9 - (14,609) (14,600)
Share placement 133 18,567 - - - - - 18,700
Share issue costs - (677) - - - - - (677)
Incentive share conversion 3 - 51 - - - - 54
Share based payment credit - - - - - - 524 524
At 31 March 2014 646 75,879 4,786 454 (212) (307) (31,352) 49,894
Loss for the year - - - - - - (17,912) (17,912)
Other comprehensive loss - - - - (656) - - (656)
Total comprehensive loss - - - - (656) - (17,912) (18,568)
Share placement 199 7,151 - - - - - 7,350
Share issue costs - (273) - - - - - (273)
Share based payment credit - - - - - - 438 438
At 31 March 2015 845 82,757 4,786 454 (868) (307) (48,826) 38,841
DIGITAL BARRIERS PLC
Consolidated statement of cash flows
for the year ended 31 March 2015
Year ended 31 March 2015 Year ended 31 March 2014
£'000 £'000
Operating activities
Loss before tax (18,697) (15,067)
Non-cash adjustment to reconcile loss before tax to net cash flows
Depreciation of property, plant and equipment 630 739
Amortisation of intangible assets 1,971 1,819
Impairment of goodwill 6,250 -
Impairment of intangible assets - 160
Share-based payment transaction expense 438 524
Unrealised (gains) / loss on foreign exchange (95) -
Release of deferred consideration - (494)
Reassessment of deferred consideration - (212)
Disposal of fixed assets 56 178
Finance income (45) (32)
Finance costs - 27
Working capital adjustments:
(Increase) / decrease in trade and other receivables (1,262) 5,353
Increase in inventories (604) (2,116)
Decrease in trade and other payables (62) (919)
(Decrease) / increase in deferred revenue (285) 704
(Decrease) / increase in provisions (419) 581
Cash utilised in operations (12,124) (8,755)
Tax received 3 220
Net cash flow from operating activities (12,121) (8,535)
Investing activities
Purchase of property, plant and equipment (532) (624)
Expenditure on intangible assets (3) (8)
Payment of deferred consideration - (188)
Interest received 45 32
Net cash flow utilised in investing activities (490) (788)
Financing activities
Proceeds from issue of shares 7,350 18,700
Share issue costs (273) (677)
Net cash flow from financing activities 7,077 18,023
Net (decrease)/ increase in cash and cash equivalents (5,534) 8,700
Cash and cash equivalents at beginning of year 14,246 5,544
Effect of foreign exchange rate changes on cash and cash equivalents (11) 2
Cash and cash equivalents at end of year 8,701 14,246
Notes to the financial information
1. Accounting policies
Basis of preparation
The Annual Financial Report announcement was approved by the Board of
Directors on 22 June 2015.
The financial information set out in this Annual Report results announcement
for the year ended 31 March 2015 does not constitute the Group's statutory
accounts as defined by s435 of the Companies Act but has been extracted from
the 2015 statutory accounts on which an unqualified audit report has been made
by the auditors, and which did not contain an emphasis of matter paragraph nor
a statement under section 498(2) or (3) of CA 2006. The financial information
included in the Annual Report announcement for the prior year ended 31 March
2014 has been extracted from the 2014 statutory accounts on which an
unqualified audit report has been made by the auditors, and which did not
contain an emphasis of matter paragraph nor a statement under section 237(2)
or (3) of CA 1985.
The Group's consolidated financial statements have been prepared in accordance
with International Financial Reporting Standards ("IFRS") as adopted by the
European Union ("EU"). The accounting policies have been consistently applied
to all periods presented and are consistent with those presented in the 2015
statutory accounts.
The audited financial statements for the year ended 31 March 2014 have been
delivered to the Registrar of Companies. The Annual Report for the year ended
31 March 2015 will be mailed to shareholders at the end of July 2015 and will
be delivered to the Registrar of Companies following the Annual General
Meeting which will be held in September 2015 at the Company's office at Cargo
Works, 1-2 Hatfields, London SE1 9PG.
Going concern
The Group's net loss for the year was £17.9 million (2014: £14.6 million). As
at 31 March 2015 the Group had net current assets of £18.1 million (2014:
£20.5 million) and cash reserves of £8.7 million (2014: £14.2 million).
In April 2015 an agreement was signed with HSBC Bank plc for a £5.0 million
secured working capital facility to provide pre and post-shipment finance in
relation to export activities across the Group. The facility is partially
guaranteed by the UK Export Finance Guarantees Department. The interest rate
for any borrowings under this facility is 3% over the bank's sterling base
rate. The facility will be reviewed on an annual basis as part of our wider
banking facilities with HSBC Bank Plc in September each year. There are no
indications that the facility (along with our wider banking facilities) will
not be renewed in September and as a result this facility has been factored in
to cash flow projections for the Group. Should the facility not be renewed in
September, mitigating actions can be taken to manage our cash flows.
The Board has reviewed these cash flow forecasts for the period up to and
including 30 September 2016. These forecasts and projections take into account
reasonably possible changes in trading performance and show that the Group
will be able to operate within the level of current funding resources. The
Directors therefore believe there is sufficient cash available to the Group to
manage through these requirements.
As with all businesses, there are particular times of the year where the
Group's working capital requirements are at their peak. However, the Group is
well placed to manage business risk effectively and the Board reviews the
Group's performance against budgets and forecasts on a regular basis to ensure
action is taken where needed.
The Directors therefore are satisfied that the Group has adequate resources to
continue operating for the foreseeable future. For this reason they have
adopted the going concern basis in preparing the financial statements.
2. Segmental information
The Group is organised into the 'Services' and 'Products' Divisions for
internal management, reporting and decision-making, based on the nature of the
products and services of the Group's businesses. Managers have been appointed
within Services and Products, who report to members of the Board. These are
the reportable operating segments in accordance with IFRS 8 'Operating
Segments'.
Services Products Central Total
2015 2015 2015 2015
£'000 £'000 £'000 £'000
Total segment revenue 7,460 12,272 - 19,732
Inter-segment revenue - (330) - (330)
Revenue 7,460 11,942 - 19,402
Depreciation 55 575 - 630
Segment adjusted operating profit/(loss) 538 (7,046) (4,016) (10,524)
Amortisation of intangibles initially recognised on acquisition (430) (1,435) - (1,865)
Loss on disposal of businesses - (103) - (103)
Impairment of goodwill - (6,250) - (6,250)
Segment operating profit/(loss) 108 (14,834) (4,016) (18,742)
Finance income 45
Loss before tax (18,697)
Income tax credit 785
Loss for the year (17,912)
Services Products Central Total
2014 2014 2014 2014
£'000 £'000 £'000 £'000
Total segment revenue 4,527 14,696 - 19,223
Inter-segment revenue - (181) - (181)
Revenue 4,527 14,515 - 19,042
Depreciation 70 669 - 739
Segment adjusted operating loss (97) (7,257) (4,671) (12,025)
Amortisation of intangibles initially recognised on acquisition (432) (1,301) - (1,733)
Adjustments to deferred consideration - 706 - 706
Impairment of intangible assets - (160) - (160)
Reorganisation costs - - (1,860) (1,860)
Segment operating loss (529) (8,012) (6,531) (15,072)
Finance income 32
Finance costs (27)
Loss before tax (15,067)
Income tax credit 458
Loss for the year (14,609)
3. Adjusted loss before tax
An adjusted loss before tax measure has been presented as the Directors
believe that this is a more relevant measure of the Group's underlying
performance. Adjusted loss is not defined under IFRS and has been shown as the
Directors consider this to be helpful for a better understanding of the
performance of the Group's underlying business. It may not be comparable with
similarly titled measurements reported by other companies and is not intended
to be a substitute for, or superior to, IFRS measures of profit.
The net adjustments to loss before tax are summarised below:
2015 2014
£'000 £'000
Amortisation of intangibles initially recognised on acquisition 1,865 1,733
Loss on disposal of businesses (i) 103 -
Adjustments to deferred consideration (ii) - (679)
Reorganisation costs - 1,860
Impairment of goodwill and intangibles (note 7) (iii) 6,250 160
Total adjustments 8,218 3,074
(i) During the year ended 31 March 2015 Margaux Matrix Limited and
Visimetrics (UK) Limited, two wholly owned subsidiaries, were each disposed of
for £1 consideration
(ii) Adjustments to deferred consideration in the prior year comprise
releases of £494,000 and reassessments of £212,000 partly offset by the unwind
of discount on deferred consideration balances of £27,000.
(iii) A £6.25m non-cash impairment charge has been recorded against the
carrying value of goodwill within the Products division and has been
separately disclosed within Other Costs in the Consolidated Income Statement.
This impairment reflects a period of product development, which has delayed
the Group's ability to leverage value from the integrated businesses in the
expected timeframes, along with delays in sales cycles as reported to the
market by the Group on 11 August 2014. Further detail is given in note 7.
In the prior year a restructuring programme resulted in an impairment, within
the products operating segment, of certain customer relationships and
intellectual property in relation to the LMW and Visimetrics acquired
businesses. The total impairment of £160,000 was separately disclosed within
Other Costs in the Consolidated Income Statement. As a result the intangible
assets of each entity have been impaired by £67,000 and £93,000 respectively,
the carrying value of these assets is now nil.
4. Loss per share
Unadjusted loss per share
Loss after taxation 2015 Weighted average number of shares 2015 No. Loss per share 2015 Pence Loss after taxation 2014 Weighted average number of shares 2014 No. Loss per share 2014 Pence
£'000 £'000
Basic loss per share (17,912) 69,305,105 (25.85) (14,609) 56,472,084 (25.87)
Diluted loss per share (17,912) 69,305,105 (25.85) (14,609) 56,472,084 (25.87)
Adjusted loss per share
Loss after taxation 2015 Weighted average number of shares 2015 Loss per share 2015 Pence Loss after taxation 2014 Weighted average number of shares 2014 Loss per share 2014 Pence
£'000 No. £'000 No.
Loss attributable to ordinary shareholders (17,912) 69,305,105 (25.85) (14,609) 56,472,084 (25.87)
Add back:
Amortisation of acquired intangible assets, net of tax 1,771 - 2.56 1,559 - 2.76
Disposal of businesses 103 - 0.15 - - -
Adjustments to deferred consideration - - - (679) - (1.20)
Reorganisation costs - - - 1,432 - 2.54
Impairment of goodwill 6,250 - 9.02 - - -
Impairment of acquired intangibles - - - 160 - 0.28
Basic adjusted loss per share (9,788) 69,305,105 (14.12) (12,137) 56,472,084 (21.49)
Diluted adjusted loss per share (9,788) 69,305,105 (14.12) (12,137) 56,472,084 (21.49)
The Directors consider that adjusted loss per share better reflects the
underlying performance of the Group.
The inclusion of potential Ordinary Shares arising from LTIPs and Incentive
Shares would be anti-dilutive. Basic and diluted loss per share has therefore
been calculated using the same weighted number of shares. If the Incentive
Shares had become convertible on 31 March 2015 and based on the share price of
£0.385 (2014: £0.875) on that day, no (2014: no) Ordinary Shares would have
been issued in respect of the Incentive Share conversion. Full details of the
basis of calculation is given in the Admission Document available on the
Company's website. The Incentive Shares will immediately vest on change of
control of the Company.
5. Trade and other receivables
Gross carrying amounts Provision for impairment Net carrying amounts Gross carrying amounts Provision for impairment Net carrying amounts
2015 2015 2015 2014 2014 2014
£'000 £'000 £'000 £'000 £'000 £'000
Trade receivables 9,112 (1,208) 7,904 6,562 (499) 6,063
Prepayments 439 - 439 430 - 430
Accrued income 350 - 350 119 - 119
Amounts recoverable on contracts - - - 692 - 692
Other receivables 176 - 176 402 - 402
10,077 (1,208) 8,869 8,205 (499) 7,706
The Group has experienced credit risk which reflects its early stage of
development into international markets, as reflected in the provision for
doubtful debts. As the Group further establishes itself and its products into
new and existing geographies, so its exposure to credit risk is expected to
reduce.
6. Trade and other payables
2015 2014
£'000 £'000
Current
Trade payables 3,100 3,096
Accruals 1,296 1,173
Deferred income 419 704
Social security and other taxes 279 520
Other payables 167 115
5,261 5,608
7. Goodwill
Goodwill
£'000
At 31 March 2013 and 31 March 2014 24,802
Impairment of goodwill (6,250)
Exchange movements (366)
At 31 March 2015 18,186
Carrying amount of goodwill allocated to operating segments
2015 2014
£'000 £'000
Services 3,582 3,582
Products 14,604 21,220
18,186 24,802
Goodwill acquired through business combinations has been allocated for
impairment testing purposes to two groups of cash-generating Units ('CGUs').
These groups of CGUs are its two operating segments 'Services' and 'Products'
as the goodwill relates to synergies at this level. The Group conducts annual
impairment tests on the carrying value of the CGUs in the statement of
financial position. Although required to perform annual impairment tests,
these do not have to take place at 31 March but the test should be
consistently carried out at the same time annually. The Group carries out its
annual impairment testing as at 28 February each year. Impairment testing is
only re-performed if an impairment triggering event occurs in the intervening
period. As announced on 11 August 2014, the Group's original forecasts for the
year ended 31 March 2015 were revised downwards. As a result the Group
conducted an impairment test on the carrying value of the Product division as
at 30 September 2014.
Value in use calculations were used to determine the recoverable amount of the
Product cash-generating unit at that time. The key assumptions for the value
in use calculations were the forecast revenue growth of the CGU, cost
allocations, the discount rate applied and the long-term growth rate of the
net operating cash flows. In determining the key assumptions, management took
into consideration the nature of the markets in which it operates, the ability
of the CGU to exploit those opportunities and the current economic climate,
the resulting impact on expected growth, cost base and pre-tax discount rates,
and the pressure this placed on impairment calculations.
The Group prepared cash flow forecasts for the cash-generating unit based on
the most recent two and a half year detailed financial forecasts at that time.
These forecasts had been revisited in light of the announcement on 11 August
2014 and progression of the business through its phases of development. The
cash flow forecasts were based on an internal assessment of the strength of
the CGU in the markets in which it operates, the costs attributable to the CGU
and the expected growth in revenue and margins, reflecting the size and
opportunities in its core strategic markets. Revenue growth in years two and
three was forecast at 40% and 20% per annum respectively based on lowered
forecast, with revenue growth of 2.5% assumed from year four onwards, being an
external estimate of the UK's long-term growth rate. A discount rate of 11.6%
was applied. Based on these assumptions the recoverable amount was determined
to be £24.5 million and an impairment charge of £6.25 million arose.
A further impairment test has been performed on both the Product and Services
divisions as at 28 February 2015 consistent with annual review cycles.
Value in use calculations are again used to determine the recoverable amount
of cash-generating units. The key assumptions for the value in use
calculations remain the forecast revenue growth of each CGU, the discount rate
applied and the long-term growth rate of the net operating cash flows, along
with the gross margin for Products. In determining the key assumptions,
management have taken into consideration the expected growth of the markets in
which it operates, the ability of the CGU to exploit those opportunities and
the current economic climate, the resulting impact on expected growth and
pre-tax discount rates, and the pressure this places on impairment
calculations. The cost base of the company has stabilised following the
restructuring programme undertaken by the Group in the prior year and as a
result the cost base is not considered to be a key assumption.
The Group prepares cash flow forecasts for these cash-generating units based
on the most recent three-year detailed financial forecasts. The table below
sets out the key assumptions included in these forecasts:
Products Services
2015 2014 2015 2014
Revenue growth compound from FY15 to FY18 (years one to three)(1) 46% 40% 0% 20%
Revenue growth from FY19 onwards (year four onwards) (2) 2.5% 2.5% 2.5% 2.5%
Gross margin improvement compound from FY15 to FY18 (years one to three) (3) 8% 0% 0% 16%
Discount rate (4) 10.6% 11.6% 10.0% 10.9%
(1) Forecasts are based on an internal assessment of the strength of the CGU
in the markets in which it operates with the expected growth reflecting the
opportunities in its core strategic markets, sales pipeline and relationships
being developed.
(2) Revenue growth of 2.5% is an external estimate of the UK's long-term
growth rate.
(3) Product gross margin is forecast to improve against FY15 as the product
mix evolves through the next three years to include a greater proportion of
software and standard solution sales. The forecast gross margin is in line
with gross margins achieved by the Products segment in the recent past.
(4) Discount rate is based on the weighted cost of capital applying to
businesses in the same sector, and reflects the current market assessments of
the time value of money and of the risks specific to the cash generating
units.
As a result of these assumptions, no impairment losses have been recognised to
date for Services. No further impairment loss arises for Products based on
these base assumptions and a full three-year detailed forecast, compared to a
two and a half year detailed forecast as at 30 September 2014.
The Directors consider that an absolute change in the key assumptions set out
below is reasonably possible.
Products Services
Reduction in forecast revenue growth compound from FY15 to FY18 (years one to three) -5% -2%
Reduction in forecast revenue growth FY19 onwards (year four onwards) -2.5% -2.5%
Reduction in gross margin improvement compound from FY15 to FY18 (years one to three) -3% n/a
Increase in discount rate (4) 2.5% 2.5%
If these assumptions were to change in isolation, they would not result in an
impairment charge of goodwill within either Services or Products. The value in
use calculations are most sensitive to changes in assumptions around forecast
revenue growth and gross margin improvement. An absolute reduction in the
forecast revenue growth of 7% (compound over years one to three) or a 4%
reduction in gross margin improvement (compound over years one to three) would
result in the recoverable amount of Products goodwill being equal to the
carrying amount (a reduction in the headroom from £14.4 million to £nil).
If all key assumptions were to change in combination, a further impairment
charge would be recognised for the current carrying value of goodwill in
relation to the Products segment. There would be no impairment charge within
Services.
8. Share capital
Number £'000
Authorised, allotted, called-up and fully paid
Ordinary Shares of 1 pence each
At 31 March 2013 50,959,590 510
Shares issued in the year 13,665,026 136
At 31 March 2014 64,624,616 646
Shares issued in the year 19,864,865 199
At 31 March 2015 84,489,481 845
On 5 January 2015 19,864,865 Ordinary Shares were issued at 37 pence per share
for a total cash consideration of £7,350,000.
This information is provided by RNS
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