IDE Group Holdings - Interim Results
30/09/2022 15:47
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RNS Number : 4114B IDE Group Holdings PLC 30 September 2022
IDE Group Holdings Plc
("IDE", the "Group" or the "Company")
Unaudited Interim Results
IDE Group Holdings plc, the mid-market IT managed services provider, today
announces its unaudited results for the six months ended 30 June 2022.
Highlights
· Revenue of £6.7 million (H1 2021*: £7.6 million)
· Gross profit* of £2.4 million (H1 2021: £3.6 million)
representing a lower margin of 36% (H1 2021 46%)
· Adjusted EBITDA* profit of £0.9 million (H1 2021: 2.1 million)
· Year two of the £22.5m contract previously announced progressing
to plan
· The restructuring and the closing down of six non-trading
subsidiaries, simplifying the Group structure
* from continuing operations, excluding the results relating to IDE Group
Connect Limited and Nimoveri Limited in 2021.
Contacts:
IDE Group Holdings Plc Tel: +44 (0)344 874 1000
Andy Parker, Non-Executive Chairman
finnCap Limited Tel: +44 (0)20 7220 0500
Nominated Adviser and Broker
Corporate finance: Jonny Franklin-Adams/ Abby Kelly
ECM: Tim Redfern
Non-Executive Chairman's Statement
The first six months of the year has been a period of laying the foundations
for future growth, following the disposal of the Connect Division. The Group
has taken advantage of this period to continue to restructure the operational
side of the business and focus on expanding our network of partners.
The profile of business this year is weighted differently to 2021, with a
number of projects running in the second half of the year, resulting in
revenue being down slightly from H1 2021. The product mix have also changed,
with less Lifecycle projects, which has meant a decrease in the Gross margin.
Furthermore a number of contracts that were won have had a delayed start an
example of which is a contract scheduled for commencement in May now expected
for November 1(st).
Management expect results for FY22 full year to be in line with FY21 full
year, on a like for like basis.
All our colleagues in Manage deserve a hearty thank you for the outstanding
work delivered and service excellence enjoyed by our partners.
Summary and Outlook
The board continues to be pleased with the trading as we build for a
profitable cash generative year. We continue to build our base of customers
and revenue. The company has latter stage engagement with new partners that
would deliver a meaningful uplift and deeper spread of revenues for 2023 and
beyond.
It has taken over three years to turn the Company around, but I am truly
delighted to say that at last, with the sale of Connect last October, we have
a profitable Company with excellent prospects. The Company is generating
positive cashflow over and above the repayment of onerous contracts (which end
this year), with the cash bank balance sitting above £1m at the date these
results are posted.
The efforts of all staff involved in this turnaround cannot be underestimated.
Some incredibly tough decisions have been made along the way, which has seen
good people leave the business because the company neither had the scale or
resources to keep them.
At both a trading and post central and PLC costs, we have a profitable
business. Our focus is now entirely on growth, continued organic growth and
the possibility of acquisitions. We have an exciting future ahead of us.
It is the intention of the Group, following the release of these interim
results, to call a General Meeting in order to allow a share capital
reorganisation, and to convert the majority of the outstanding loan notes into
equity, allowing the Group to reduce the indebtedness of the to an appropriate
level.
We can confidently look forward to a positive and rewarding future for IDE
shareholders.
Andy Parker
Non-Executive Chairman
Financial Review
Results for the six months to 30 June 2022
Revenue from continuing operations for the six months to 30 June 2022 from
operations was £ 6.7 million (H1 2021 continuing operations: £7.6 million).
Gross profit from continuing operations for the six months to 30 June 2022 was
£2.4 million (H1 2021: £3.6 million), representing an overall decline in
gross margin of 10.0 percentage points compared to the prior period. The
change in gross profit in the six months to 30 June 2022 was due to a change
in product mix with less Lifecycle project work.
At an Adjusted EBITDA* level for continuing operations the Group generated a
profit of £0.9 million (H1 2021: £2 million).
Exceptional costs amounted to £0.04 million (H1 2021: £0.1 million) and
related predominantly to legacy redundancy costs as a result of the reduction
in headcount in the previous financial year. Going forward, we expect
exceptional costs to continue to decrease.
Net financial costs were £1.4 million (H1 2021: £0.8 million), which include
£1.0 million of interest on the loan notes issued which is payable at the end
of their term. In addition, the costs include £6,000 of notional interest in
relation to the convertible loan notes.
The loss after tax for the period was £1.2 million (H1 2021: loss of £1.3
million).
Loss per share was 0.27p (H1 2021: loss per share 0.31p).
Cashflow and Net Debt
The Group's cash generated from operating activities in the period was £0.7
million (H1 2021 inflow of £0.1 million), reflecting positive underlying
performance and careful management of working capital. The Group invested
£0.03 million in fixed assets. There were no new borrowings, but repayment of
lease liabilities consumed £0.1 million (H1 2021: £0.1 million). The net
result is that as at 30 June 2022 there were no bank borrowings or overdraft
debt and the cash balance was £0.4 million (H1 2021: £0.5 million). Net
debt as at 30 June 2022 was £24.0 million (31 December 2021: £24.2 million).
Consolidated Statement of Comprehensive Income
Unaudited Unaudited Audited
Continuing Operations Six months Six months Year
ended ended ended
30 June 30 June 31 December 2021
2022 2021 £000
Note £000 £000
Revenue 2 6,741 7,557 14,456
Cost of (4,317) (3,998) (8,185)
sales
Gross profit 2,424 3,559 6,271
Other operating income - 27 40
Administrative expenses excluding impairment (2,210) (2,933) (5,151)
Impairment charge on intangibles - - (1,833)
Impairment charge on trade receivables - - 139
Operating profit/(loss) 214 653 (534)
Analysed as:
Adjusted EBITDA* 942 2,061 3,099
Non underlying items 3 (36) (91) (433)
Depreciation (98) (288) (321)
Amortisation (585) (1,029) (1,169)
Impairment of goodwill and intangibles - - (1,833)
Impairment credit on trade receivables - - 139
Profit/(Loss) on the sale of assets (9) - -
Charges for share-based payments - - (16)
Net financial costs (1,440) (773) (2,453)
Loss before taxation (1,226) (120) (2,987)
Income tax 513 (260) 1.204
Loss for the period after taxation (713) (380) (1,783)
Discontinued operations:
(Loss)/profit attributed to discontinued operations - (885) (193)
Loss for the period and total comprehensive income attributable to equity (713) (1,265) (1,976)
holders of the parent
Basic and diluted loss per share - continuing operations 4
Basic and diluted (pence per share) (0.14) (0.09) (0.39)
Basic and diluted loss per share - discontinued operations
Basic and Diluted (pence per share) - (0.22) (0.04)
Total basic and diluted profit/(loss) (pence per share) (0.14) (0.31) (0.43)
* Earnings from continuing operations before net finance costs, tax,
depreciation, amortisation, impairment charges, share based payments and
exceptional costs
Consolidated Statement of Financial Position
Unaudited Unaudited Audited
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Non-current assets
Intangible assets 7,647 9,788 8,231
Goodwill - 196 -
Property, plant and equipment 748 705 813
Deferred tax asset 2,778 - 2,265
Financial and other assets - 2,284 313
11,173 12,973 11,622
Current assets
Trade and other receivables 3,530 5,736 3,969
Deferred tax asset - 3,439 -
Cash and cash equivalents 798 615 349
4,328 9,790 4,318
Total assets 15,501 22,763 15,940
Current liabilities
Borrowings 5 - 100 100
Trade and other payables 4,300 11,278 5,318
Contract liabilities - 1,581 49
Taxation - - -
Finance lease obligations 162 620 146
Provisions 113 115 157
4,575 13,694 5,770
Non-current liabilities
Trade and other payables 900 - 730
Contract liabilities - 15 -
Borrowings 5 18,422 14,656 17,027
Convertible loan notes 6 137 - 131
Finance lease obligations 629 545 710
Deferred tax liabilities - 1,547 -
Provisions 181 91 202
20,269 16,854 18,800
Total liabilities 24,844 30.548 24,570
Net (liabilities)/assets (9,343) (7,785) (8,630)
Equity attributable to equity holders of the parent
Called up share capital 12,418 12,417 12,418
Share premium account 35,882 35,439 35,882
Other reserves 58 502 (92)
Retained earnings (57,701) (56,143) (56,838)
Total equity (9,343) (7,785) (8,630)
Consolidated Statement of Changes in Equity
Share capital (a) Share premium (b) Equity Reserve (c) Retained earnings (d) Foreign currency translation reserve (e)
Total
£000 £000 £000 £000 £000 £000
At 1 January 2021 10,020 35,439 967 (54,878) (150) (8,602)
Total comprehensive income for the period
Loss for the financial year and total comprehensive income - - - (1,265) - (1,265)
Shares issued on the redemption of convertible loan notes 2,397 - (315) - - 2,082
At 30 June 2021 (unaudited) 12,417 35,439 652 (56,143) (150) (7,785)
Total comprehensive income for the period
Adjustment to shares issued on redemption of convertible loan notes 1 443 (594) - (150)
Loss for the financial year and total comprehensive income - - - (711) - (711)
Transactions with owners recorded directly in equity
Share based payments - - - 16 - 16
At 31 December 2021 (Audited) 12,418 35,882 58 (56,838) (150) (8.630)
At 1 January 2022 12,418 35,882 58 (56,838) (150) (8,630)
Total comprehensive income for the period
Loss for the financial year and total comprehensive income - - - (713) - (1,226)
Loss on FX realised - - - (150) 150 -
At 30 June 2022 (unaudited) 12,418 35,882 58 (57,701) - (9,856)
(a) Share capital represents the nominal value of equity shares
(b) Share premium represents the excess over nominal value of the fair
value of consideration received for equity shares; net of expenses of the
share issue;
(c) The equity reserve consists of the equity component of convertible
loan notes that were issued as part of the fundraising in August 2018 less the
equity component of instruments converted or settled.
The fair value of the equity component of convertible loan notes issued is the
residual value after deduction of the fair value of the debt component of the
instrument from the face value of the loan note.
(d) Retained earnings represents retained profits and accumulated losses
(e) On consolidation, the balance sheets of the Group's foreign
subsidiaries are translated into sterling at the rates of exchange ruling at
the balance sheet date. Exchange gains or losses arising from the
consolidation of these foreign subsidiaries are recognised in the foreign
currency translation reserve. As the foreign subsidiaries are being liquidated
the balance on the reserve has been recognised in Retained earnings.
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Loss from continuing operations (1,226) (120) (2,987)
Loss from discontinuing operations - (1,385) (193)
Loss before tax for the period (1,226) (1,505) (3,180)
Adjustments for:
Depreciation of property, plant and equipment 98 545 321
Amortisation of intangible assets 585 1,445 1,169
Profit on disposal of discontinued operations - - (1,286)
Loss on discontinued operations - - -
Impairment charge on goodwill and intangibles - - 1,833
Impairment charge on property, plant and equipment - - -
Impairment credit on trade receivables - - (139)
Net financial costs 1,440 783 2,453
Equity settled share-based payment expenses - - 16
Profit/Loss on sale of fixed assets 9 (4) -
906 1,264 1,187
Decrease in trade and other receivables 750 (2,477) (133)
Decrease in trade and other payables (897) 1,420 (513)
Increase/(decrease) in provisions (65) (105) 47
694 102 588
Net corporation tax recovered/ (paid) - - -
Net cash acquired from operating activities 694 102 588
Cash flow from investing activities:
Disposal of subsidiaries - - (586)
Acquisition of property, plant and equipment (30) (43) (28)
Proceeds from sale of fixed assets - 4 -
Net cash used in investing activities (30) (39) (614)
Cash flows from financing activities:
Repayment of lease liabilities (77) (126) (434)
New loans and borrowings, net of expenses - - 1,000
Repayments of loans and borrowings, net of expenses (100) - -
Interest paid (38) (15) (334)
Supplier finance repaid - - (550)
Net cash absorbed by financing activities (215) (141) (318)
Net increase/ (decrease) in cash and cash equivalents 449 (78) (344)
Cash and cash equivalents at beginning of period 349 693 693
Cash and cash equivalents at end of period 798 615 349
Being:
Cash and cash equivalents 798 615 349
798 615 349
Notes to the half-yearly financial information
1. Basis of preparation
The condensed consolidated interim financial information for the six-month
period ended 30 June 2022 and 30 June 2021 is unaudited. This statement has
not been reviewed by the Company's auditor. This condensed consolidated
interim financial information was approved by the Board of Directors and
authorised for issue on 30(th) September 2022. A copy of this half-yearly
financial report is available on the Company's website at www.idegroup.com
(http://www.idegroup.com) .
The comparative figures for the financial year ended 31 December 2021 are
extracted from but do not comprise the Group's consolidated financial
statements for that year.
The Company is a public limited liability company incorporated and domiciled
in Scotland. The address of its registered office is 24 Dublin Street,
Edinburgh EH1 3PP. The Company is listed on the AIM market of the London
Stock Exchange.
IDE and its subsidiaries have not applied IAS 34, 'Interim Financial
Reporting' as adopted by the European Union, which is not mandatory for UK AIM
listed companies, in the preparation of this half-yearly financial report.
This condensed consolidated interim financial information for the six-month
period ended 30 June 2022 therefore does not comply with all the requirements
of IAS 34, 'Interim Financial Reporting' as adopted by the European Union.
The consolidated interim financial information should be read in conjunction
with the annual financial statements of the Company as at and for the year
ended 31 December 2021, which were prepared in accordance with IFRS as adopted
by the European Union.
This condensed consolidated interim financial information does not comprise
statutory accounts within the meaning of section 434 of the Companies Act
2006. Statutory accounts for the year ended 31 December 2021 were approved
by the Board of Directors on 29 September 2022 and delivered to the Registrar
of Companies. The report of the auditor was unqualified, did not contain an
emphasis of matter paragraph and did not contain a statement under section 498
(2) or (3) of the Companies Act 2006.
Accounting policies
The accounting policies used in the preparation of the condensed consolidated
interim financial information for the six months ended 30 June 2022 are in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") as adopted by the European Union and
are consistent with those that will be adopted in the annual statutory
financial statements for the year ended 31 December 2022.
While the financial information included has been prepared in accordance with
the recognition and measurement criteria of IFRS, as adopted by the European
Union, these financial statements do not contain sufficient information to
comply with IFRSs. The accounting policies adopted in the interim financial
statements are consistent with those adopted in the financial statements for
the year ended 31 December 2021.
Exceptional items and other non-recurring items
Items which are material because of their size or nature, and which are
non-recurring are highlighted separately on the face of the income
statement. The separate reporting of exceptional items helps provide a
better picture of the Company's underlying performance. Items which may be
included within the exceptional category include:
· spend on major restructuring programmes;
· significant goodwill or other asset impairments; and
· other particularly significant or unusual items.
Exceptional items are excluded from the headline profit measures used by the
Group and are highlighted separately in the income statement as management
believe that they need to be considered separately to gain an understanding
the underlying profitability of the trading businesses.
For further details, please refer to note 3.
Going concern
The condensed consolidated interim financial information has been prepared on
a going concern basis.
Taking into account the support of certain of the Company's significant
shareholders, of which the largest is represented on the Board, the Directors
have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For this reason,
the Directors consider that the adoption of the going concern basis is
appropriate.
2. Segment reporting
Following the sale of the Connect business on 19 October 2021 there is only
one segment remaining, the IDE Group Manage business.
Unaudited for the six-month period ended 30 June 2021
IDE Group Manage IDE Group Connect Nimoveri Limited Central & inter-segment Total
£000 £000 £000 £000 £000
Revenue 7,807 6,313 39 (250) 13,909
Cost of Sales (4,248) (5,843) (9) 250 (9,850)
Gross profit 3,559 470 30 - 4,059
Other operating income 27 82 - - 109
Administrative expenses (1,564) (1,943) (14) (1,369) (4,890)
Operating profit/ (loss) 2,022 (1,391) 16 (1,369) (722)
Analysed as:
Adjusted EBITDA* 2,398 (616) 16 (337) 1,453
Depreciation (288) (257) - - (545)
Amortisation of intangible assets - (416) - (1,029) (1,445)
Exceptional costs (88) (98) - (3) (189)
Profit on sale of assets - 4 - - 4
Net financial costs (4) (10) - (769) (783)
Profit/(Loss) before taxation 2,018 (1,401) 16 (2,138) (1,505)
Tax on loss on ordinary activities (260) 500 - - 240
Profit/(Loss) for the period after taxation 1,758 (901) 16 (2,138) (1,265)
* Earnings from continuing operations before net finance costs, tax,
depreciation, amortisation, goodwill impairment, share based payments and
exceptional costs
Administrative expenses are not allocated against operating segments in the
Group's internal reporting. The statement of financial position is not
allocated between the operating segments in the Group's internal reporting.
3. Exceptional costs
In accordance with the Group's policy in respect of exceptional costs, the
following charges were incurred in relation to continuing operations:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2022 2021 2021
£000 £000 £000
Restructuring and reorganisation costs 36 189
433
4. Earnings per share from continuing operations
The calculation of basic and diluted loss per share is based on results from
continuing operations attributable to ordinary shareholders divided by the
weighted average number of ordinary shares in issue during the year. The
weighted average number of shares for the purpose of calculating the basic and
diluted measures in the reporting periods is the same. This is because the
outstanding options would have the effect of reducing the loss per ordinary
share and therefore would be anti-dilutive under the terms of IAS 33. Basic
and diluted unaudited loss per share from continuing operations are calculated
as follows:
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December 2021
2022 2021 £000
£000 £000
Loss attributable to shareholders (713) (1,265) (1,976)
Weighted average number of shares 496,702,792 413,413,639 461,185,527
Diluted weighted average number of shares 496,702,792 413,413,639 461,185,527
Basic loss per share (pence) (0.14) (0.31) (0.43)
Diluted loss per share (pence) (0.14) (0.31) (0.43)
5. Borrowings
In January 2019 the Company issued £5.3 million of secured loan notes with a
six-year term and a 12% coupon which is compounded, rolled up and payable at
the end of the term ("Loan Notes"). In February and March 2019, a further
£4.7 million in total of Loan Notes were issued. The Loan Notes carry an
arrangement fee of 2.5 per cent., payable at the end of the term, and an exit
fee of 2.5 per cent., also payable at the end of the term.
In December 2019 the Company issued an additional £1.5 million of Loan Notes
(with the same terms as those issued in the first quarter of the year).
The Loan Notes are held at amortised cost using the effective interest rate
method. The effective interest rate for the Loan Notes has been calculated to
be 18%.
On 1 June 2020, Group completed the acquisition of Nimoveri Holdings Limited,
a small cloud and IT services business, for a total consideration of £0.2
million; £0.1 million paid in cash on completion and the issue of £0.1
million 0% Loan Notes by IDE Group Limited, a Group company (the "Nimoveri
Loan Notes"). The Nimoveri Loan Notes are secured over the assets of
Nimoveri Holdings Limited and redeemable on 31 December 2021.
The Company issued a further loan note ("Loan Note 2025") net of expenses for
proceeds of £1m on 1 December 2021. The terms of the loan were that the rate
of interest is 1.5% per month if repaid by 31 January 2022. 2.5% per month if
repaid by 28 February 2022 and 3% per month if repaid by 31 March 2022. If not
repaid by 31 March 2022 the amount due at that date including fees (£1.1875m)
is then subject to interest at 20.4% per annum compound. The maturity date is
23 December 2025. At the year-end management intended to settle the loan notes
before 31 March 2022 and accordingly, they are classified as current
liabilities.
Unaudited Audited
Six months Unaudited Year
ended Six months ended ended
30 June 30 June 31 December 2021
2022 2021 £000
£000 £000
Non-Current
Loan Notes 18,422 14,656 17,027
Current
Loan Notes - 100 100
6. Convertible Loan Notes
On 21 August 2018, as part of a wider fundraising, the Company issued £2.55
million of unsecured loan notes, which have a term of 5 years and a zero per
cent coupon ("CLNs"). The CLNs can be converted into new ordinary shares in
the capital of IDE at a price of 2.5 pence per share. Conversion is at the
option of the holder at any time during the 5-year term. At the end of the
term, if the holder has not chosen to convert the CLNs, the CLNs will be
settled with a cash repayment. At issue, the CLNs had a fair value of £2.54
million, split into an equity component (£0.96 million) and a debt component
(£1.58 million).
*On 7 June 2021 £2,397,519 of the unsecured convertible loan notes issued in
August 2018 were converted into 95,900,760 Ordinary shares of 2.5p each, at a
conversion price of 2.5p per share. £2.1 million has been posted against the
Consolidated Loan Notes debt component in June 2021 and the balance of £0.3
million set off against the Equity reserve.
Unaudited Audited
Six months Unaudited Year
ended Six months ended ended
30 June 30 June 31 December 2021
2022 2021 £000
£000 £000
Balance at beginning of period 131 1,983 1,983
Issue of new shares* - (2,082) (1,932)
Interest unwound 6 99 80
Total 137 - 131
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