ENABLES IT GROUP PLC 17 June 2014
Enables IT Group Plc ("Enables IT", "the Company" or "the Group") Unaudited interim results for the six months ended 31 March 2014Enables IT, a leading provider of cloud computing, managed and professional services, is pleased to announce its interim results for the six months ended 31 March 2014.
Financial Highlights: Revenue for the six months at £3.6 million (H1 2013: £2.7 million)
Recurring revenues remain in excess of 50%
EBITDA before exceptionals - loss of £373,000 (H1 2013: £118,000 profit)
Cash in bank of £682,000 providing sufficient funding for the Group's immediate strategic plans.
Operational highlights: Delivery in all key performance areas allowed for the early completion of the acquisition of The Support
Force Group at a discount of over 10%, an acquisition that enhanced the service offering of the Group
Acquisition and successful integration of the business and assets of Know Technology LLC (total consideration of $1.4 million), an acquisition that strengthened operations in the UK and a key territory in the US
Continued expansion of the customer base, with new wins in new sectors such as Legal Services
Recent short term sales issues in 14 May 2014 announcement successfully addressed, recruitment is under way and mitigating cost savings identified
Commenting on the results, Michael Walliss, CEO of Enables IT said:"After an encouraging six months to 31 March, a period in which we have successfully completed two integrations, as well as achieving early completion on The Support Force Group. We were disappointed to announce the sales pipeline setback. This represents a short term issue and, accordingly, the Board quickly identified and implemented a number of operational changes, the effect of which we expect to be a marginally positive EBITDA for the next six months.
We remain encouraged by the long term market dynamics and shift to cloud-based IT Services in both the US and UK. In a fragmented market, we have demonstrated our ability to deliver on our buy-and-build strategy and believe further opportunities exist in this area. The business model remains sound, with recurring revenue representing more than 50% of Group total, and we are confident of capitalising on the significant long term market opportunity before us."
FURTHER ENQUIRIES Enables IT Group plcMichael Walliss Tel: 01372 455 970
Cenkos Securities plc (Nominated Adviser and Broker)Max Hartley / Andy Roberts Tel: 020 7397 8900
Redleaf Polhill LimitedDwight Burden / Rebecca Sanders-Hewitt / David Ison Tel: 020 7382 4730 enablesit@redleafpr.com
About EnablesITEnables IT Group plc is a leading provider of cloud computing, managed and professional services in the UK and North America. From on-premise private cloud networks, our IAAS/SAAS platform HAVEN within both our US and UK Data centres, to backend core network and wireless solutions, Enables IT specialises in the delivery and management of mission-critical services, enabling customers to reduce the costs, complexity and risks associated with their IT infrastructure.
CEO Statement: OverviewDuring the first half the Company managed to successfully complete two integrations and secure wins in new sectors such as Legal Services. As described in the trading statement on 14 May 2014 the Group conducted a detailed review of the sales pipeline and order book in the UK and as a result has taken a more prudent view in relation to conversion and deliverability. A reorganisation was instigated by the Board as a consequence of this review which included several staff changes and ongoing the Group is benefitting from the related cost savings. Selected recruitment of sales personnel has commenced.
Trading
As previously announced in the trading statement, revenue for the six months to 31 March 2014 was marginally ahead of expectations at approximately £3.6 million and the six months to September broadly similar, but will also benefit from a full period of contribution from Know Technology (KTL). We continue to expect EBITDA to be marginally negative.
During the six months to 31 March 2014, the Company completed the successful acquisition of KTL in the US and is pleased with the progress made in the integration with our existing business there. Enables IT now has an established platform for growth in the US with data centre capacity, established offices and a sales & marketing team. The opportunities in the US are encouraging and we are actively seeking ways to increase the Group's exposure in this strong market.
In the period, the Group secured contract wins with new clients and in new sectors such as Legal Services, and anticipates that the spread of customers and sectors will continue to grow going forward.
The Group continues to see significant opportunities in the fragmented market place as corporates look to cloud - based solutions. Growing acceptance of hosted solutions and a shift of expenditure from capex to opex mean the market trend continues to be positive. With its platform and product, Enables IT remains well placed to capture the opportunity, and has continued to make significant investment in the Group's infrastructure including both the UK and US data centres to manage the growth potential.
The Group's financial position remains strong with sufficient cash for current business operation and immediate
strategic plans.
3,578 2,702 7,131
Cost of sales (2,540) (1,691) (4,695)
Operating expenses (1,516) (953) (2,249)
Operating (loss)'profit before exceptional items (478) 58 187 Exceptional items
Restructuring and redundancy costs (201) (31) (108) Impairment of intangible assets (109) (315) (379) Amortisation of intangible assets (66) (42) (76)
Finance costs (4) (18) (35)
Taxation 40 - 107
Basic (3.30)p (4.42)p (2.07)p
Diluted (3.30)p (4.42)p (2.07)p
Tangible fixed assets 868 637 713
Intangible assets 656 396 581
Goodwill 1,997 185 1,390
3,521 1,218 2,684
Trade and other receivables 1,728 1,106 884
Cash and cash equivalents 682 476 440
2,410 1,582 1,324
Trade and other payables 1,134 1,245 1,097
Deferred income 699 480 459
Loans and other borrowings 30 - 47
Corporation tax 41 29 51
Obligations under finance leases 8 30 21
Deferred consideration 425 - 513
2,337 1,784 2,188
Trade and other payables 42 - 23
Loans and other borrowings - 255 - Deferred tax 161 - 136
Obligations under finance leases - 8 -
203 263 159
Share capital 3,171 3,069 3,095
Share premium 8,465 5,129 5,991
Merger reserve 1,002 1,002 1,002
Reverse acquisition reserve (8,977) (8,977) (8,977) Other reserves 861 887 863
Retained earnings (1,131) (357) (313)
Loss from operations (858) (348) (411)
Adjustments for:
Interest paid 4 18 33
Depreciation 106 60 132
Impairment of intangible assets 109 315 379
Amortisation of intangible assets 66 42 76
Other non-cash items - - 6
Currency exchange adjustment (2) (25) (1) (575) 62 214
Share option costs - - 2
Decrease in inventories - 1 1 (Increase)/Decrease in receivables (834) (162) 109
Increase/(Decrease) in liabilities 287 210 (288)
Cash (used in)/generated from operations (1,122) 111 38
Interest paid (4) (18) (33) Tax paid (11) - (33)
(1,137) 93 (28)
Acquisition of subsidiaries (9) - (280) Purchase of goodwill and assets of business (578) - - Cash acquired with acquired subsidiaries under reverse
acquisition - - 446
Purchases of property, plant and equipment (240) (350) (500)
Net cash used in investing activities (827) (350) (334)
Proceeds from issue of share capital 68 - 25
Premium on issue 2,392 - 885
Costs relating to share issues (225) (72) Decrease in borrowings (17) (100) (409) Finance lease payments (12) (17) (31)
Net cash generated from/(used in) financing activities 2,206 (117) 398
Cash and cash equivalents at beginning of period 440 850 404
Cash and cash equivalents at end of period 682 476 440
As at 1 January restated) Profit for the period | 2012 | (as | 2 - | - 111 - 60 | - - - 113 - - - 60 |
Dividend paid | - | - (180) | - - - (180) | ||
As at 30 September 2012 | 2 | - (9) | - - - (7) | ||
Loss and total comprehensive income for the six months ended 31 March 2013 | - | - (348) | - - - (348) |
2 - (357) - - - (355)
Shares issued by legal parent
prior to reverse acquisition 2,950 5,129 - - - - 8,079
Legal parent reserves prior to
reverse acquisition - - - - - 898 898
Shares issued by the legal parent
on reverse acquisition 119 - - 1,002 - - 1,121
Reverse acquisition adjustment (2) - - (8,990) - (8,992) Other movements - - - - - 2 2
As at 31 March 2013 3,069 5,129 (357) 1,002 (8,990) 900 753
As at 1 October 2012 (as
restated) 2 - (9) - - - (7) Loss and total comprehensive
loss for the year - - (304) - - - (304) Shares issued by legal parent
prior to reverse acquisition 2,950 5,129 - - - - 8,079
Legal parent reserves prior to
reverse acquisition - - - - - 898 898
Currency exchange adjustment - - - - - 2 2
Shares issued by the legal parent on reverse acquisition
119 - - 1,002 - - 1,121
Shares issued 26 934 - - - - 960
Share issue expenses - (72) - - - - (72) Repayment of convertible loan
notes - - - - - (39) (39) Reverse acquisition adjustment (2) - - (8,977) - (8,979) Share based payment charge - - - - - 2 2
As at 30 September 2013 3,095 5,991 (313) 1,002 (8,977) 863 1,661
Loss and total comprehensive
loss for the period - - (818) - - - (818) Movement in the period - - - - - (2) (2) Shares issued during the period 76 2,699 - - - - 2,775
Share issue expenses - (225) - - - - (225) As at 31 March 2014 3,171 8,465 (1,131) 1,002 (8,977) 861 3,391
The Interim Results for the six months ended 31 March 2014 have been prepared and presented in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. They have been prepared on a going concern basis with reference to the accounting policies and methods of computation and presentation set out in the Group's consolidated financial statements for the year ended 30 September 2013, except as stated below. The half yearly financial statements should be read in conjunction with the Group's audited financial statements for the year ended 30 September 2013, which have been prepared in accordance with IFRS as adopted by the European Union.
The information in this announcement does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. The Group's accounts for the year ended 30 September 2013 have been reported on by the Group's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not draw attention to any matters by way of emphasis. It contained no statement under section 498(2) or (3) of the Companies Act 2006.
The financial information for the six months ended 31 March 2014 is unaudited.
The services the group provides are in regard to one activity. Accordingly the primary segmental disclosure is based on geographical location.
UK US Eliminations Total £'000 £'000 £'000 £'000 6 months ended 31 March 2014Segmental revenue - continuing 2,479 1,099 - 3,578
Segmental operating profit/(loss) (492) 14 - (478) Year ended 30 September 2013Segmental revenue - continuing 4,703 2,467 (39) 7,131
Segmental operating profit/(loss) 214 (27) - 187 6 months ended 31 March 2013Segmental revenue - continuing 1,796 945 (39) 2,702
Segmental operating profit 14 44 - 58 3. Business Combinations
On 2 December 2013, Enables Inc., a subsidiary of Enables IT Group plc, acquired the business and assets of
Know Technology LLC, a corporation trading in the USA, for a total consideration of $1,430,000 (£891,540).
Fixed assets 20
Purchased goodwill 631
Intangible assets (customer list) 241
Cash consideration 578
Issue of shares (738,757 consideration shares) *
314
* The fair value of the consideration shares issued as part of the above business combination was based on the published price for the instruments existing at the date of the exchange.
Goodwill and other intangibles relate to the reverse acquisition of Enables IT Limited, the acquisition of The
Support Force Group Limited and the acquisition of the business and assets of Know Technology LLC.
Impairment testing has been performed over the total balance of intangible assets which were allocated to the one cash generating unit (CGU) of the Group, that of the sale of IT managed services and technologies. The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill may be impaired.
The carrying value of intangible assets and goodwill has been assessed for impairment by reference to the value in use. Value in use was determined by discounting the future cash flows generated from the continuing use of the unit.
Based on the testing, an impairment charge of £109,000 was recognised at 31 March 2014 against the carrying value of certain customers at Enables IT (UK) Limited and Enables IT Inc. which were considered to have no future value to the business.
Amortisation and impairment charges are recorded within exceptional items.
On 31 March 2014, the Group agreed an early settlement discount in excess of 10% of the remaining consideration on the acquisition of The Support Force Group.
The settlement of the deferred consideration (originally due post-June 2014) will be satisfied by a cash element of £144,244, and shares to the value of £289,611 at the end of June 2014 in accordance with the original agreement. This represents a discount of £78,819 on the original purchase price.
The loss per share is based on the net loss for the period attributable to ordinary equity holders divided by the weighted average number of ordinary shares outstanding during the period.
The basic loss per share has been calculated by dividing the retained loss for the period of £817,991 (2013: loss of £303,839) by the weighted average number of ordinary shares of 24,771,764 (2013: 14,650,436) in issue during the period.
No dividend is proposed for the six months ended 31 March 2014.
8. Copies of Interim ResultsCopies of the Interim Results will be available on the Enables IT website, Investor Section - www.enablesit.com
|
distributed by
|
