REG - Tialis Essential IT - Interim Results, Related Party Loan, Board Changes
10/09/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240910:nRSJ5020Da&default-theme=true
RNS Number : 5020D Tialis Essential IT PLC 10 September 2024
Tialis Essential IT plc
("Tialis", the "Group" or the "Company")
10 September 2024
Unaudited Interim Results, Related Party Loan and Board Changes
Tialis Essential IT plc, the mid-market IT managed services provider, today
announces its unaudited results for the six months ended 30 June 2024.
Highlights
· Revenue of £10.7 million (H1 2023: £11.6 million).
· Gross profit of £3.0 million (H1 2023: £3.6 million).
· Adjusted EBITDA* profit of £0.9 million (H1 2023: £1.2 million).
· Significant year on year increase in cash generation.
· The revenue drop was largely due to the fall in project revenue of
£1.3m from our largest Partner, together with some run-off contracts we
acquired from Allvotec, which offset new business wins.
· Positive start to 2024 with eight new end-user customer contract
awards, adding four new channel partners, with a current pipeline of £22.9m
across 15 partners, only two of which resulted from the Allvotec acquisition.
However, we have continued to be frustrated by delays in new contract awards.
· Lifecycle revenue in the first six months increased by 37% to
£2.0m. As we pivot from traditional engineering services, this is the
strategic service we provide to the majority of our Partners, and continue to
see significant opportunities in this space, both in end-user devices and
increasingly in mobile.
· We have a cash-generative business and a profitable business at an
adjusted EBITDA level.
· Andy Parker, the Executive Chairman, has stepped down today and
Nicolas Bedford, current Non-Executive Director, has been appointed
Non-Executive Chairman.
Financing
· We are pleased to announce that we have agreed a £4m Revolving
Credit Facility ("RCF") with Santander. The RCF carries an interest rate of
SONIA + 3.75 per cent. and is for a term of 3 years. The RCF will be used for
early repayment of the loan notes of £4.2m which are due for repayment in
January and December 2025.
· In addition to the RCF, MXC Capital ("MXC") has agreed to provide a
convertible loan note of £300k to bridge the small shortfall between the RCF
and the outstanding balance of the loan notes plus associated costs of setting
up the RCF and to provide a small amount of working capital. See further
details below.
Related party loan
The loan with MXC is an unsecured convertible loan for £300,000 which has an
annual compound interest rate of 15%. The convertible is for a term of five
years. However, the Company expects to repay the loan by 31 March 2025. MXC
has the option to convert the loan to new ordinary shares at a fixed price of
40 pence.
MXC is deemed to be a related party of the Company pursuant to the AIM Rules
for Companies (the "AIM Rules") as they are a substantial shareholder and
because Ian Smith, CEO of MXC is Executive Director of Tialis.
Nicolas Bedford and Matt Riley, being the independent directors of Tialis for
these purposes consider, having consulted with the Company's nominated
adviser, Cavendish Capital Markets Limited, that the terms of the related
party transaction are fair and reasonable insofar as the shareholders of the
Company are concerned.
Board changes
Andy Parker, Executive Chairman, has today stepped down following six years
with the Company as both Non-Executive and Executive Chairman. Nicolas
Bedford, current Non-Executive Director replaces Andy as Non-Executive
Chairman.
Ian Smith, Executive Director, commented: "On behalf of the board I thank Andy
for his valuable input. Under his leadership as Chairman the Company has made
considerable progress and I am grateful for the support and guidance he has
given me and the Board over the past six years. Andy leaves the Company with
our best wishes.
The Board are delighted that Nick has accepted the offer to become
Non-Executive Chairman. We look forward to continuing to work with him and
benefitting from his expertise."
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation, impairment charge, non-underlying items, loss on disposal of
fixed assets and share-based payment
For more information, contact:
Tialis Essential IT Plc Tel: +44 (0)344 874 1000
Nick Bedford, Non-Executive Chairman
Cavendish Capital Markets Ltd Tel: +44 (0)20 7220 0500
Nominated Adviser and Broker
Corporate finance: Jonny Franklin-Adams/ Abby Kelly
Corporate Broking: Tim Redfern
Financial Review
Results for the six months to 30 June 2024
Revenue from continuing operations for the six months to 30 June 2024 from
operations was £10.7 million (H1 2023: £11.6 million).
Gross profit from continuing operations for the six months to 30 June 2024 was
£3.0 million (H1 2023: £3.6 million), representing an overall decline in
gross margin of 2 percentage points, compared to the prior period. The change
in gross profit in the six months to 30 June 2024 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 2023: £1.2 million).
Exceptional costs amounted to £0.2 million (H1 2023: £0.4 million) and
related predominantly to an aborted acquisition. Going forward, we expect
exceptional costs to decrease.
Net financial costs were £0.3 million (H1 2023: £0.3 million), which include
£0.25 million of interest on the loan notes issued which is payable at the
end of their term.
The loss after tax for the period was £0.9 million (H1 2023: loss of £0.9
million).
Loss per share was 3.82p (H1 2023: loss per share 0.18p).
Cashflow and Net Debt
The Group's cash generated from operating activities in the period was £1.4
million (H1 2023: £0.2 million), reflecting positive underlying performance
and careful management of working capital. The second half is expected to be
stronger, with further improvements in working capital and a continued
reduction in exceptionals. The Group invested £0.02 million in fixed assets.
There were no new borrowings, but repayment of lease liabilities consumed
£0.1 million (H1 2023: £0.1 million). The net result is that as at 30 June
2024 there were no bank borrowings or overdraft debt and the cash balance was
£0.6 million (H1 2023: £0.5 million). Net debt as at 30 June 2024 was £4.4
million (H1 2023: £4.1 million).
Consolidated Statement of Comprehensive Income
Unaudited Six months Unaudited Six months Audited
Note ended 30 June ended 30 June Year ended
2024 2023 31 December
£000 £000 2023
£000
Continuing Operations
Revenue 2 10,740 11,592 22,412
Cost of sales (7,728) (8,013) (15,762)
Gross profit 3,012 3,579 6,650
Administrative expenses (3,723) (3,976) (7,866)
Operating loss (711) (397) (1,216)
Analysed as:
Adjusted EBITDA* 936 1,203 1,985
Non underlying items 3 (155) (355) (713)
Depreciation (176) (145) (312)
Amortisation and impairment (1,140) (1,032) (2,187)
Loss on the disposal of fixed assets - (1) -
Fair value loss on deferred consideration - (67) 22
Charges for share-based payments (176) - (11)
Net financial costs (280) (256) (556)
Loss before taxation (991) (653) (1,772)
Income tax 63 (292) 227
Loss for the period after taxation (928) (945) (1,545)
Discontinued operations:
Profit on discontinued operations - 9 9
Loss for the period and total comprehensive income attributable to equity
holders of the parent
(928) (936) (1,536)
Basic and diluted loss per share - continuing operations 4
Basic and diluted per share (3.82) p (0.18) p (6.45) p
Basic and diluted loss per share - discontinued operations
Basic and diluted share - - 0.04 p
Total basic and diluted loss per share (3.82) p (0.18) p (6.41) p
* Adjusted EBITDA is defined as earnings before interest, tax, depreciation,
amortisation, impairment charge, non-underlying items, loss on disposal of
fixed assets and share-based payment
Consolidated Statement of Financial Position
Note Unaudited 30 June Unaudited 30 June Audited 31 December
2024 2023 2023
£000 £000 £000
Non-current assets
Property, plant and equipment 839 970 943
Intangible assets 5,957 8,179 7,097
Deferred tax asset 3,398 2,816 3,335
Trade and other receivables 100 100 100
10,294 12,065 11,475
Current assets
Trade and other receivables 4,357 5,468 5,020
Cash and cash equivalents 613 473 274
4,970 5,941 5,294
Total assets 15,264 18,006 16,769
Current liabilities
Trade and other payables 3,100 4,740 4,389
Contract liabilities 845 924 676
Borrowings 5 4,025 210 259
7,970 5,874 5,324
Non-current liabilities
Trade and other payables - 174 -
Borrowings 5 964 4,371 4,561
Convertible loan notes 6 - 149 -
Provisions 406 266 301
1,370 4,960 4,862
Total liabilities 9,340 10,834 10,186
Net assets 5,924 7,172 6,583
Equity attributable to equity holders of the parent
Share capital 12,611 12,610 12,610
Share premium 52,957 52,865 52,865
Equity reserves 58 58 58
Share-based payment reserves 187 - 11
Retained earnings (59,889) (58,361) (58,961)
Total equity 5,924 7,172 6,583
Consolidated Statement of Changes in Equity
Share capital (a) Share premium (b) Equity Reserve (c) Share-based payment reserve (d) Retained earnings (e)
Total
£000 £000 £000 £000 £000 £000
At 31 December 2022 (Audited) 12,586 50,754 58 - (57,425) 5,973
Total comprehensive income for the period
Shares issued for the acquisition of Allvotec and in lieu of bonus to an 24 2,111 - - - 2,315
employee
Loss for the financial year and total comprehensive income - - - - (936) (936)
At 30 June 2023 (unaudited) 12,610 52,865 58 - (58,361) 7,172
Total comprehensive income for the period
Loss for the financial year and total comprehensive income - - - - (600) (600)
Transactions with owners recorded directly in equity
Share-based payments charge - - - 11 - (11)
At 31 December 2023 (Audited) 12,610 52,865 58 11 (58,961) 6,583
At 1 January 2024 12,610 52,865 58 11 (58,961) 6,583
Total comprehensive income for the period
Shares issued in lieu of bonus to an employee 1 92 - - - 93
Loss for the financial year and total comprehensive income - - - - (928) (928)
Transactions with owners recorded directly in equity
Share-based payments charge - - - 176 - 176
At 30 June 2024 (unaudited) 12,611 52,957 58 187 (59,889) 5,924
(a) Share capital represents the nominal value of equity shares and
deferred 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) Share-based payments reserve represents the accumulated costs of the
share options in issue
(e) Retained earnings represents retained profits and accumulated losses
Consolidated Cash Flow Statement
Unaudited Six months Unaudited Six months Audited
ended 30 June ended 30 June Year ended
2024 2023 31 December
2023
£000 £000 £000
Cash flows from operating activities
Loss from continuing operations (991) (653) (1,772)
Loss from discontinuing operations 9 9
-
Total loss before tax for the period (991) (653) (1,763)
Adjustments for:
Depreciation of property, plant and equipment 176 145 312
Amortisation of intangible assets 1,140 1,032 2,187
Fair value loss on deferred consideration - 67 -
Net financial costs 280 256 556
Share based payments 176 - 11
Loss on disposal of fixed assets - 1 -
Decrease / (increase) in trade and other receivables 663 (1,806) (1,359)
(Decrease) / increase in trade and other payables and contract liabilities (129) 1,161 658
Increase in provisions 106 21 56
Net cash flows generated from operating activities 1,421 233 658
Cash flow from investing activities
Acquisition of property, plant and equipment (20) (40) (75)
Net cash used in investing activities (20) (40) (75)
Cash flows from financing activities
Interest received 13 9 19
Interest paid (41) (39) (84)
Supplier finance repaid (900) - (281)
Convertible loan notes repaid - - (152)
Repayment of lease liabilities (134) (105) (225)
Net cash absorbed by financing activities (1,062) (135) (723)
Net increase/ (decrease) in cash and cash equivalents 339 58 (140)
Cash and cash equivalents at beginning of period 274 414 414
Cash and cash equivalents at end of period 613 472 274
Cash and cash equivalents comprise:
Cash at bank 613 472 274
Notes to the half-yearly financial information
1. Basis of preparation
The condensed consolidated interim financial information for the six-month
periods ended 30 June 2024 and 30 June 2023 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 10 September 2024. A copy of this half-yearly
financial report is available on the Company's website at www.tialis.com.
The comparative figures for the financial year ended 31 December 2023 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.
Tialis and its subsidiaries have not applied IAS 34, 'Interim Financial
Reporting' as adopted by the United Kingdom, 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 2024 therefore does not comply with all the requirements
of IAS 34, 'Interim Financial Reporting' as adopted by the United Kingdom. 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 2023, which were prepared in accordance with IFRS as adopted by
the United Kingdom.
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 2023 were approved by
the Board of Directors on 9 May 2024 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 2024 are in
accordance with the recognition and measurement criteria of International
Financial Reporting Standards ("IFRS") as adopted by the United Kingdom and
are consistent with those that will be adopted in the annual statutory
financial statements for the year ended 31 December 2024.
While the financial information included has been prepared in accordance with
the recognition and measurement criteria of IFRS, as adopted by the United
Kingdom, 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 2023.
Non-underlying items
It is the policy of the Group to identify certain costs, which are material
either because of their size or nature, separately on the face of the Income
Statement in order that the underlying profitability of the business can be
clearly understood. These costs are identified as non-underlying items, and
comprise:
a) Professional fees incurred in sourcing and
completing acquisitions and disposals including legal expenses
b) Professional fees incurred in restructuring
and refinancing acquisitions
c) Integration costs which are incurred by the
Group when integrating one trading business into another, including rebranding
of acquired businesses
d) Redundancy costs, including employment related
costs of staff made redundant up to the date of their leaving as a consequence
of integration
e) Property costs such as lease termination
penalties and vacant property provisions and third-party advisor fee
For further details, please refer to note 3.
Going concern
The condensed consolidated interim financial information has been prepared on
a going concern basis.
The Directors have produced detailed trading and cashflow forecasts. In
reaching their conclusion on the going concern basis of accounting, the
Directors note and rely on the improved trading performance, the positive cash
generation that the business is now experiencing and the current signed order
book. A reverse stress test of the model has been run to determine at what
level of shortfall in revenues the Group would run out of cash. Given the
committed orders already obtained and the visibility of future revenues, the
directors do not consider it likely that revenues could drop to such an extent
that the Group would run out of cash.
They have also considered the impact of any delayed customer payments and have
developed plans to mitigate any such delays to ensure that the group can
continue to settle its liabilities as they fall due and operate as a going
concern. The directors therefore have an expectation that the Group and
Company have adequate resources available to them to continue in operational
existence for the foreseeable basis. For this reason, the Directors consider
that the adoption of the going concern basis is appropriate.
2. Segment reporting
The Group has only one operating segment, the Manage Business.
3. Non-underlying costs
In accordance with the Group's policy in respect of non-underlying costs, the
following charges were incurred for the period in relation to continuing
operations:
Unaudited Six months Unaudited Six months Audited
ended 30 June ended 30 June Year ended
2024 2023 31 December
2023
£000 £000 £000
Allvotec acquisition expense - 144 242
Due diligence on potential acquisitions in the period - 25 25
Aborted acquisition costs 101 - -
Employee share option plan set-up expense - - 49
One-off legal fees - - 9
Rebranding as Tialis from IDE Group - 33 35
Restructuring and reorganisation costs 54 153 353
155 355 713
Restructuring and reorganisation costs in the period relate to costs incurred
on the restructure of the Group, predominantly redundancy costs. Other
integration costs relate to the costs incurred in integrating the Allvotec
acquisition. The redundancy costs include employment related costs of staff
made redundant because of restructuring post the Allvotec acquisition.
The legal and rebranding expenses were non-recurring expenses incurred during
the year.
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 Six months Unaudited Six months Audited
ended 30 June ended 30 June Year ended
2024 2023 31 December
£000 £000 2023
£000
Loss for the period after taxation (928) (945) (1,545)
Weighted average number of shares 24,246,744 520,408,748 23,973,027
Diluted weighted average number of shares 24,246,744 520,408,748 23,973,027
Basic loss per share (pence) (3.82) p (0.18) p (6.45) p
Diluted loss per share (pence) (3.82) p (0.18) p (6.45) p
5. Borrowings
Unaudited Six months Audited
ended 30 June Unaudited Six months ended Year ended
2024 30 June 31 December
£000 2023 2023
£000 £000
Non-Current
Lease liabilities 477 660 596
Loan Notes 487 3,711 3,965
964 4,371 4,561
Current
Lease liabilities 295 210 259
Loan Notes 3,730 - -
4,025 210 259
The carrying value is not materially different to the fair value of these
liabilities.
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 secured 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. The security
comprises a debenture over all the assets of the Group.
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%.
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. The Loan Note 2025 was included in the 2 November 2022
conversion. On 2 November 2022 the members meeting at the Annual General
Meeting, and then at the General Meeting that followed, voted to convert
£25.5 million of loan notes (including fees and interest) into share capital.
6. Convertible Loan Notes
Unaudited Six months Audited
ended 30 June Unaudited Six months ended Year ended
2024 30 June 31 December
£000 2023 2023
£000 £000
Balance at the beginning of the period - 143 143
Interest unwound - 6 9
Loan repaid August 2023 - - (152)
Balance at the end of the period - 149 -
The Group had issued £2.55 million of unsecured loan notes, which had a term
of 5 years and a zero per cent coupon ("CLNs").
On 21 August 2023 the CLNs were repaid.
7. Related Party Transactions
MXC has provided an unsecured convertible loan for £300,000, which has an
annual compound interest rate of 15%. The Company expects to repay the loan by
the 31 March 2025, MXC also has the option to convert the Loan to ordinary
shares.
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 (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR EAPNNEFNLEFARecent news on Tialis Essential IT
See all newsREG - Tialis Essential IT - New Subsidiary and Issue of Equity
AnnouncementREG - Tialis Essential IT - Contract Wins and Extensions
AnnouncementREG - Tialis Essential IT - Trading Update
AnnouncementREG - Tialis Essential IT - Holding(s) in Company
AnnouncementREG - Tialis Essential IT - Director/PDMR Shareholding
Announcement