REG - Tialis Essential IT - Unaudited Interim Results
07/08/2023 07:00
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RNS Number : 4207I Tialis Essential IT PLC 07 August 2023
Tialis Essential IT plc
("Tialis", the "Group" or the "Company")
7 August 2023
Unaudited Interim Results
Tialis Essential IT plc, the mid-market IT managed services provider, today
announces its unaudited results for the six months ended 30 June 2023.
Financial Highlights
· Revenue of £11.6 million (H1 2022: £6.7 million)
· Gross profit of £3.6 million (H1 2022: £2.4 million)
· Adjusted EBITDA* profit of £1.2 million (H1 2022: 0.9 million)
· Year two of the £22.5m contract previously announced is
progressing to plan.
Allvotec acquisition:
· Completion of acquisition of profitable partner contracts from
Allvotec, a division of Daisy Group
· The acquisition has brought three new channel partners to Tialis,
supporting the diversification of Tialis' partner base
· Four Allvotec contracts have now been extended beyond the original
end date.
Organic Growth
· Six new lifecycle contracts have recently commenced or are starting
imminently
· National WiFi rollout won with a UK water company with expected
value of £1m over 24 months
· Started new media company contract which will rise to an annualised
value in excess of £1 million from 1st July 2023 for up to seven years
· Awarded new million pound plus support contract for national power
supplier
· Started an all Lifecycle contract with major car rental company
· Significant new channel partnership in the final stages of
agreement for Lifecycle services
· Very healthy pipeline of new prospects
Andy Parker, Executive Chairman, commented:
"The start to this year hasn't been without its challenges, with some major
contracts having a delayed start but that aside we have delivered a strong
first half with real momentum being felt in sales activity and conversion into
new customers. We will now see the benefit of the delayed contracts in H2
which fills us with confidence for the full year outturn to deliver against
board expectations. Furthermore, the board notes the continued decline in the
Company's share price and is considering whether or not to use its authorities
to buy back shares on the market if it deems it to be the best use of capital
and accretive to shareholders."
* Earnings from continuing operations before net finance costs, tax,
depreciation, amortisation, impairment charges, share based payments and
exceptional costs
Executive Chairman's Statement
On 1 February 2023, Tialis Essential IT Manage Limited, the trading subsidiary
of Tialis Essential IT PLC, acquired the profitable partner contracts from
Allvotec Limited, a division of Daisy Group, for an initial consideration of
£2.042 million. An estimated £0.2 million of deferred consideration will be
paid in shares, subject to certain performance conditions being met by
February 2025, also at an effective price of 89.2 pence per ordinary share.
The acquisition has brought three new channel partners to Tialis, supporting
the diversification of Tialis' partner base and will build on the existing
relationship that Tialis has with its largest channel partner.
The first six months of the year have been a period of integration with
Allvotec and strong financial and operational performance.
The business profile is like last year, with a stronger second half
anticipated.
Management expect revenue for FY23 full year to show significant growth on
FY22 full year.
In the first six months, the Company appointed two non-executive directors,
Nick Bedford and Matthew Riley, broadening the skillset and independence of
the board.
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 of revenues for 2023 and beyond.
We have a cash generative business and at an adjusted EBITDA level, we have a
profitable business. Our plan is to continue with our organic initiatives that
will continue to demonstrate growth. We intend to expand our partner network
and are also looking to expansion into Europe. The Group will also consider
growth through further acquisition and would consider synergistic targets that
would expand and deepen our service offerings.
We can confidently look forward to a positive and rewarding future for Tialis
shareholders.
Andy Parker
Executive Chairman
Financial Review
Results for the six months to 30 June 2023
Revenue from continuing operations for the six months to 30 June 2023 from
operations was £11.6 million (H1 2022: £6.7 million).
Gross profit from continuing operations for the six months to 30 June 2023 was
£3.6 million (H1 2022: £2.4 million), representing an overall decline in
gross margin of 5 percent, compared to the prior period. The change in gross
profit in the six months to 30 June 2023 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 £1.2 million (H1 2022: £0.9 million).
Exceptional costs amounted to £0.4 million (H1 2022: £0.04 million) and
related predominantly to acquisition redundancy costs as a result of the
synergies achieved. Going forward, we expect exceptional costs to decrease.
Net financial costs were £0.3 million (H1 2022: £1.4 million), which include
£0.2 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 £0.9 million (H1 2022: loss of £0.7
million).
Loss per share was 0.18p (H1 2022: loss per share 0.14p).
Cashflow and Net Debt
The Group's cash generated from operating activities in the period was £0.2
million (H1 2022 inflow of £0.7 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 exceptions. The Group invested £0.04 million in
fixed assets. There were no new borrowings, but repayment of lease liabilities
consumed £0.1 million (H1 2022: £0.1 million). The net result is that as at
30 June 2023 there were no bank borrowings or overdraft debt and the cash
balance was £0.5 million (H1 2022: £0.8 million). Net debt as at 30 June
2023 was £4.7 million (H1 2022: £19.3 million).
Consolidated Statement of Comprehensive Income
Unaudited Six months Unaudited Six months Audited
Continuing Operations Note ended 30 June ended 30 June Year ended
2023 2022 31 December
£000 £000 2022
£000
Revenue 2 11,592 6,741 14,463
Cost of sales (8,013) (4,317) (9,408)
Gross profit 3,579 2,424 5,055
Other operating income - - -
Administrative expenses excluding impairment (3,976) (2,210) (4.011)
Operating profit/(loss) (397) 214 1,044
Analysed as:
Adjusted EBITDA* 1,203 942 1,950
Non underlying items 3 (355) (36) (421)
Depreciation (145) (98) (208)
Amortisation (1,032) (585) (1,169)
Gain on the conversion of secured loan note - - 892
Profit/(Loss) on the sale of assets (1) (9) -
Fair value loss on deferred consideration (67) - -
Net financial costs (256) (1,440) (2,324)
Loss before taxation (653) (1,226) (1,280)
Income tax (292) 513 843
Loss for the period after taxation (945) (713) (437)
Discontinued operations:
Profit on discontinued operations 9 - -
Derecognition of foreign currency reserve - - (150)
Loss for the period and total comprehensive income attributable to equity
holders of the parent
(936) (713) (587)
Basic and diluted loss per share - continuing operations 4
Basic and diluted (pence per share) (0.18) (0.14) (0.10)
Basic and diluted loss per share - discontinued operations
Basic and Diluted (pence per share) - - (0.04)
Total basic and diluted profit/(loss) (pence per share) (0.18) (0.14) (0.14)
* Earnings from continuing operations before net finance costs, tax,
depreciation, amortisation, impairment charges, share based payments and
exceptional costs
Consolidated Statement of Financial Position
Note Unaudited 30 June Unaudited 30 June Audited 31 December
2023 2022 2022
£000 £000 £000
Non-current assets
Intangible assets 8,179 7,647 7,062
Property, plant and equipment 970 748 1,076
Deferred tax asset 2,816 2,778 3,108
Financial and other assets 100 - 100
12,065 11,173 11,346
Current assets
Trade and other receivables 5,468 3,530 3,661
Cash and cash equivalents 473 798 414
5,941 4,328 4,075
Total assets 18,006 15,501 15,421
Current liabilities
Borrowings 5 - - -
Trade and other payables 4,740 4,300 4,544
Contract liabilities 924 - 51
Finance lease obligations 210 162 210
Provisions - 113 -
5,874 4,575 4,805
Non-current liabilities
Trade and other payables 174 900 -
Borrowings 5 3,711 18,422 3,490
Convertible loan notes 6 149 137 143
Finance lease obligations 660 629 765
Provisions 266 181 245
4,960 20,269 4,643
Total liabilities 10,834 24,844 9,448
Net assets / (liabilities) 7,172 (9,343) 5,973
Equity attributable to equity holders of the parent
Called up share capital 12,610 12,418 12,586
Share premium account 52,865 35,882 50,754
Other reserves 58 58 58
Retained earnings (58,361) (57,701) (57,425)
Total equity 7,172 (9,343) 5,973
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 31 December 2021 (Audited) 12,418 35,882 58 (56,838) (150) (8,630)
Total comprehensive income for the period
Loss for the financial year and total - - - (713) - (713)
comprehensive income
Loss on FX realised - - - (150) 150 -
At 30 June 2022 (unaudited) 12,418 35,882 58 (57,701) - (9,343)
Total comprehensive income for the period
Shares issued for the conversion of secured loan notes and in lieu of bonus to 168 14,872 - - 15,040
an employee
Loss for the financial year and total comprehensive income - - - 276 - 276
Transactions with owners recorded directly in equity
At 31 December 2022 (Audited) 12,586 50,754 58 (57,425) - 5,973
At 1 January 2023 12,586 50,754 58 (57,425) - 5,973
Total comprehensive income for the period
Shares issued for the acquisition and in lieu of bonus to an employee 24 2,111 - - - 2,315
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
(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 Six months Unaudited Six months Audited
ended 30 June ended 30 June Year ended
2023 2022 31 December
2022
£000 £000 £000
Loss from continuing operations (653) (1226) (1,280)
Loss from discontinuing operations - -
-
Loss before tax for the period (653) (1,226) (1,280)
Adjustments for:
Depreciation of property, plant and equipment 145 98 208
Amortisation of intangible assets 1,032 585 1,169
Profit on discontinued operations 9 - -
Fair value loss on deferred consideration 67 - -
Net financial costs 256 1,440 2,324
Gain on conversion of secured loan notes - - (892)
Profit/Loss on sale of fixed assets 1 9 -
857 906 1,529
(Increase) / decrease in trade and other receivables (1,806) 750 521
Increase / (decrease) in trade and other payables 1,161 (897) (461)
Increase/(decrease) in provisions 21 (65) (114)
233 694 1,475
Net corporation tax recovered/ (paid) - - -
Net cash acquired from operating activities 233 694 1,475
Cash flow from investing activities:
Acquisition of property, plant and equipment (40) (30) (208)
Proceeds from sale of fixed assets - - -
Net cash used in investing activities (40) (30) (208)
Cash flows from financing activities:
Repayment of lease liabilities (105) (77) (286)
Nimoveri loan note repaid - - (100)
Repayments of loans and borrowings, net of expenses - (100) -
Share issue, net of expenses - - -
Interest received 9 - (10)
Interest paid (39) (38) (268)
Supplier finance repaid - - (558)
Net cash absorbed by financing activities (135) (215) (1,202)
Net increase/ (decrease) in cash and cash equivalents 58 449 65
Cash and cash equivalents at beginning of period 414 349 349
Cash and cash equivalents at end of period 472 798 414
Being:
Cash and cash equivalents 472 798 414
472 798 414
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 2023 and 30 June 2022 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 September 2023. 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 2022 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 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 2023 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 2022, 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 2022 were approved by
the Board of Directors on 5 May 2023 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 2023 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 2023.
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 2022.
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
There is only one segment remaining, the Tialis Essential IT Manage Limited
business.
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 Six months Unaudited Six months Audited
ended 30 June ended 30 June Year ended
2023 2022 31 December
2022
£000 £000 £000
Restructuring and reorganisation costs 355 36 421
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
2023 2022 31 December
£000 £000 2022
£000
Loss attributable to shareholders (936) (713) (437)
Weighted average number of shares 520,408,748 496,702,702 418,575,630
Diluted weighted average number of shares 520,408,748 496,702,792 418,575,630
Basic loss per share (pence) (0.18) (0.14) (0.10)
Diluted loss per share (pence) (0.18) (0.14) (0.10)
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%.
The Company issued a further loan note ("Loan Note 2025") net of expenses for
proceeds of £1m on 1 December 2022. The loan is 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 December 2023 and
accordingly, they are classified as current liabilities.
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.
Unaudited Six months Audited
ended 30 June Unaudited Six months ended Year ended
2023 30 June 31 December
£000 2022 2022
£000 £000
Non-Current
Loan Notes 3,711 18,422 3,490
Current
Loan Notes - - -
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 Tialis 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 2022 and the balance of £0.3
million set off against the Equity reserve.
Unaudited Six months Audited
ended 30 June Unaudited Six months ended Year ended
2023 30 June 31 December
£000 2022 2022
£000 £000
Balance at beginning of period 143 131 131
Issue of new shares* Interest unwound - 6 -
6 12
Total 149 137 143
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