TIDMCROS
RNS Number : 0702S
Crossrider plc
15 March 2016
Crossrider plc
("Crossrider," the "Company" or the "Group")
Final results for the year ended 31 December 2015
A progressive year with strong organic growth in mobile
Crossrider (AIM:CROS) the creator of digital advertising
platforms specialising in monetising web and mobile media through
the use of big data, announces its audited results for the year
ended 31 December 2015.
Financial highlights
-- Revenue up $13.5 million to $84.6 million, (2014: $71.1 million)
-- Adjusted EBITDA (1) down $2.2 million to $10.1 million, (2014: $13.3 million)
-- Adjusted cash from operations (1) down $7.7 million to $6.9 million, (2014: $14.6 million)
-- Adjusted basic EPS(2) 4.8 $ cents per share, (2014: 9.5 $ cents per share)
-- Strong balance sheet with no debt and $71 million of cash
balances at the period end (equivalent to 34.8 pence per share as
at 14 March 2016)
(1) EBITDA, Adjusted EBITDA and Adjusted cash flow from
operations are non GAAP measures. Adjusted EBITDA and adjusted cash
flow from operations are company specific measures which exclude
certain expenses which are considered to be one off and
non-recurring in nature. (See reconciliation in the Chief Financial
Officer's report on page 4)
(2) Adjusted basic EPS excludes the after tax impact of
amortisation of acquired intangibles, and other operating income
and expenses which are considered to be one off and non-recurring
in nature.
Operational highlights
-- 99 per cent organic revenue growth from Mobile
-- Decline in revenue from Web apps platform offset by strong
performance of App distribution platform
-- Integration of technology across web and mobile and resulting mobile margin improvement
-- Investment of $0.9m in programmatic video technology company Clearvelvet
Commenting on the results, Don Elgie, Executive Chairman of
Crossrider, said:
"Whilst not without its challenges, primarily at the wider
industry level, 2015 was a progressive year for Crossrider in which
it successfully focussed resources on mobile platforms and
delivered strong margins in line with expectations. The investments
made during the year in mobile and video reflect Crossrider's
strengths as a technology company and the Board looks forward to
the future with confidence. We continue to search for accretive
acquisitions and are evaluating a number of opportunities."
Outlook
Crossrider looks to 2016 with confidence and excitement. The
Directors expect the current strength of the App distribution
business and continued investment in new technology to offset the
decline in revenue from the Web apps platform and Group EBITDA in
2016 to be in line with 2015. The balance sheet remains strong and
the Board is confident in the Group's ability to execute accretive
acquisitions. The Board looks forward to welcoming a new Chief
Executive in due course.
- Ends -
For further information contact:
Crossrider plc +44 (0) 20 3772 2496
Don Elgie, Executive Chairman via Bell Pottinger
Mark Carlisle, Chief Financial Officer
Bell Pottinger
David Rydell
Sam Cartwright +44 (0) 20 3772 2496
Shore Capital
Bidhi Bhoma
Toby Gibbs +44 (0) 20 7408 4090
About Crossrider
Crossrider is a creator of digital advertising platforms
specialising in monetising web and mobile media through the use of
big data. The Company's web and mobile platforms power ad networks,
agencies and direct publishers and enable the delivery of relevant
digital advertising through the analysis of big data: making online
marketing significantly more efficient and cost effective.
The Group operates web and mobile platforms which generate big
data, enabling the development of a proprietary ad serving
algorithm and engine that can extract value from this data to
deliver relevant advertising to targeted users.
Crossrider's vision is to become the de facto standard platform
for delivering relevant web and mobile adverts to billions of
people, powering the next generation of digital advertising.
www.crossrider.com
Executive Chairman's review
Overview
The past year has been a year of maturity and progress for
Crossrider as the Board readies the Group for its next chapter of
growth. The year has been characterised by Crossrider's proven
prudent financial management and operational discipline. The Board
oversaw the continued refocusing of the business model by investing
in the growth of mobile revenue to deliver organic growth. In
addition, Crossrider continues to remain methodical in its
acquisition strategy with investment in new technology. The
deployment of capital remained high on the Board's agenda in 2015
as the share buy-back programme, announced in November 2015 and
completed in January 2016 returned $6.1 million to shareholders
($5.1 million in the year to 31 December 2015).
In 2015 Crossrider's revenues increased by 19 per cent to $84.6
million. Adjusted EBITDA decreased by 28 per cent to $10.1 million
and was in line with management's expectations reflecting the
Group's strategy to invest for future growth whilst continuing to
generate adjusted EBITDA and operating cash-flow. Adjusted
operating cash-flow was $6.9 million representing 69 per cent of
Adjusted EBITDA.
As previously communicated the Group has continued to focus more
of its resources on its mobile growth strategy. As a result of a
significant scaling back of the investment in our Web apps
development platform following a review of this business and its
prospects, the second half of the year saw an expected decline in
the number of Web apps distributed and this is reflected in the key
performance indicators monitored by the Group. During December
2015, Crossrider delivered ads to 130 million users, 70 million
fewer than in December 2014. The number of daily available ad
spaces on Crossrider's platforms increased to 7.0 billion in
December 2015, most of which were in mobile, from 5.3 billion in
December 2014.
Within the web and desktop division, the decline in revenue from
monetising Web apps through advertising has been offset by the
success of the Desktop apps distribution business and significant
growth in the number of Desktop apps distributed in 2015. However,
our current forecasts indicate revenue decline from the Web apps
development platform will continue more rapidly in 2016 than
initially anticipated. As a result, the Group has recognised an
impairment charge of $9.1 million against the carrying value of the
assets on the balance sheet associated with the Web apps
platform.
In the second half of 2015, the Group made further progress in
executing its acquisitive growth strategy by investing in early
stage programmatic video technology.
I close the year as Executive Chairman following the
announcement of the resignation of Chief Executive Officer Koby
Menachemi who will leave at the end of March 2016. The Board would
like to take this opportunity to reiterate its thanks to Koby for
his tenure. The recruitment process for the Chief Executive
required to lead Crossrider into its next stage of growth is well
underway.
Strategy
Organic growth strategy
The Group's organic growth strategy has continued to focus on
mobile, where the Board considers the greatest growth opportunity
lies and where it believes Crossrider has the greatest competitive
advantage. Crossrider's revenue from mobile grew organically by 99
per cent in 2015 and now represents 26 per cent of total revenue up
from 12 per cent in 2014.
Crossrider's technology platforms
Crossrider's development team continues to seek opportunities to
enhance the Group's organic growth from its existing technology
platforms. These primarily arise from the Group's expertise in
media buying analytics, insights and real time optimization in
addition to campaign monitoring, planning and forecasting.
In July, Crossrider launched its new mobile affiliate network,
Adooya. This will drive additional data across Crossrider's
platforms as well as benefit from significant revenue synergies
with its existing mobile Ad Network DefinitiMedia.
Acquisition strategy
Crossrider continues to evaluate a number of potential and
significant acquisitions that meet its stated acquisition
criteria:
-- Relevant and unique or disruptive technologies that can be
leveraged via Crossrider's existing data and platforms across
ad-tech, e-commerce and marketing technology;
-- Demonstrable track record of sustainable growth and profitability; and
-- High quality teams.
In order to drive value in investment in new technology, the
Group invested in September 2015 in early stage programmatic video
technology with a $0.9 million investment for 16.67 per cent of
Clearvelvet Trading Ltd ("Clearvelvet").
Mobile
The mobile division was acquired by the Group in May 2014. It
generated revenues of $22.2 million in 2015, which represents
growth of 163 per cent over 2014, including organic growth of 99
per cent. In 2015 Mobile revenues represented 26 per cent of total
revenues.
Crossrider's mobile division operates its own white label Mobile
media management platform (Ajillion) and its own Mobile Ad Network
(DefinitiMedia).
During the period, Crossrider has focussed on enhancing the
performance and expanding the reach of its "built for mobile"
Ajillion platform and ad exchange which in December 2015 received
over 6 billion ad requests daily, compared with 4 billion at
December 2014.
Crossrider has also driven the efficient scaling of its
DefinitiMedia Ad-Network through the integration of its technology
across the web and mobile, increasing through automation the number
of campaigns that can be run by an individual account manager.
Crossrider's new affiliate network, launched in July 2015, will
build on its existing mobile offering and expand into new
verticals.
Web and desktop
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Crossrider's Web and desktop division comprises its Web apps
development and Desktop apps distribution platforms. These
platforms use Crossrider's data analysis technology and Business
Intelligence dashboards to allow publishers and advertisers to
easily view and understand their traffic sources. Data analysis of
KPIs, such as installation success rate, number of active users,
and type of browser can be used to model potential revenue over a
specific campaign period.
This has been a year of consolidation for the Web and desktop
operations. In 2015 this division generated revenues of $62.4
million, a decrease of 1 per cent compared to 2014.
As a result of increased competition in the industry the number
of daily new installations generated by Crossrider's proprietary
Web apps development platform decreased to 0.4 million in December
2015 compared to 1.6 million daily new installations in December
2014. Crossrider expects revenue from Web apps to continue to
decline significantly in 2016 as the Group continues to focus on
utilising the underlying technology and intellectual property by
integrating the expertise across Crossrider's other businesses,
particularly mobile. The $9.1 million impairment charge against the
assets associated with the Web apps platform, announced today, also
reflects the Group's increased focus on mobile and the impact this
is anticipated to have on the Web app business.
The Desktop apps distribution platform continued its momentum
from its strong performance in 2014 driven by the strong
performance of the Group's PC repair utility provider, Reimage.
Reimage uses a repository of software "spare parts" by replacing
faulty files with new versions. In 2015, Reimage software was
installed on over 44 million devices (2014: over 16 million),
repairing over 1.3 million PCs, reflecting the high quality of this
product. On average, 58,000 subscriptions were sold per month in
2015 (2014: 33,000).
The strategy for the Web and desktop division is to continue to
drive growth in the number of apps distributed on the Desktop app
distribution platform and to increase ROI through the use of better
data analysis as well as the addition of innovative and
complementary new products.
People
On behalf of our management team I would like to thank all our
people for their dedication and hard work during the past year. As
a result of the hard work done to integrate Crossrider's technology
and teams across platforms the Group will move forward on a much
stronger footing.
Outlook
Crossrider looks to 2016 with confidence and excitement. The
Directors expect the current strength of the App distribution
business and continued investment in new technology to offset the
decline in revenue from the Web apps platform and Group EBITDA in
2016 to be in line with 2015. The balance sheet remains strong and
the Board is confident in the Group's ability to execute accretive
acquisitions. I look forward to welcoming a new Chief Executive and
will be proud to hand over the reins of a Company in a
strategically strong position.
Don Elgie
Chairman
14 March 2016
(1) Group adjusted EBITDA is calculated as operating loss before
depreciation, amortisation, other operating income, exceptional and
non-recurring costs and employee share-based payment charges and
impairment of intangible assets. The Directors believe that this
provides a better understanding of the underlying trading
performance of the business. A reconciliation from Group operating
profit to Group adjusted EBITDA is included in the Chief Financial
Officers' review below.
Chief Financial Officer's review
Revenue for the year was $84.6 million, (2014: $71.1 million).
Adjusted EBITDA was $10.1 million, (2014: $13.3 million). Cash
generated from operations for the year was $5.9 million, (2014:
$9.3 million); after adjusting for one-off and non-recurring items
adjusted cash flow from operations (as set out in the cash flow
section below) was $6.9 million, (2014: $14.6 million). The Group
has a strong balance sheet with cash of $71.3 million at 31
December 2015 (31 December 2014 $76.0 million) and is debt
free.
Revenue
2015 2014
$'000 $'000
Web and Desktop 62,409 62,647
Mobile 22,226 8,459
------ ------
Revenue 84,635 71,106
====== ======
Web and desktop revenue decreased by $0.2 million (1 per cent)
to $62.4 million in 2015 driven by the decline Web Apps monetised
by advertising and offset by the increase in revenue derived from
the number of Desktop Apps distributed.
Revenue from Mobile activities in 2015 totalled $22.2 million
and was generated by the Ajillion and DefinitiMedia businesses that
were acquired in May 2014. Organic revenue growth from Mobile was
$11.1 million (99 per cent) in 2015.
Segment result
The Group operates two reportable segments: Web and Desktop, and
Mobile. The division between the two segments is based upon the
channel of delivery of product or service. Segment result has been
calculated using revenue less costs directly attributable to that
segment. Cost of sales comprises commissions paid to publishers and
payment processing fees. Direct sales and marketing costs comprise
traffic acquisition costs.
2015 2014
Web and desktop $'000 $'000
Revenue 62,409 62,647
Cost of sales (7,388) (13,178)
Direct sales and marketing
costs (33,796) (25,609)
-------- --------
Segment result 21,225 23,860
-------- --------
Segment margin % 34% 38%
As a result of the change in the revenue mix of products sold
within the Web and Desktop segment towards lower margin Desktop
Apps and a decrease in the volume of advertising sold on the higher
margin Web Apps development platform, traffic acquisition costs
have increased resulting in a decrease in the overall Web and
Desktop segment margin.
2015 2014
Mobile $'000 $'000
Revenue 22,226 8,459
Direct sales and marketing
costs (16,927) (7,203)
-------- -------
Segment result 5,299 1,256
-------- -------
Segment margin % 24% 15%
Mobile margins have increased as a result of the increased scale
of the business and are expected to remain at their current
levels.
Adjusted EBITDA
Adjusted EBITDA for the year ended 31 December 2015 was $10.1
million (2014: $13.3 million). Adjusted EBITDA is a non-GAAP
company specific measure which is considered to be a key
performance indicator for the Group's financial performance. It
excludes other operating income, share based payment charges and
expenses which are considered to be one-off and non-recurring in
nature. Adjusted EBITDA is calculated as follows:
2015 2014
$'000 $'000
Operating loss (13,802) (7,497)
Depreciation and amortisation 9,370 8,917
Other operating income - (294)
Employee share-based payment
charge 3,407 6,787
Exceptional and non-recurring
costs 1,957 5,431
Impairment of intangible
assets 9,132 -
-------- -------
Adjusted EBITDA 10,064 13,344
======== =======
Other operating income relates to the net income, (gross income
recharged less related expenses) earned from services terminated in
2014.
Exceptional and non-recurring costs in 2015 comprise
non-recurring staff costs of $0.1 million, (2014 $0.4m) and
payments of contingent consideration treated as remuneration in
respect of the Ajillion and DefinitiMedia acquisitions expensed
through the income statement of $1.9 million (2014: $0.9
million).
Impairment of intangible assets
The revenues of the Groups' Web and desktop segment are driven
by Crossrider's Desktop App distribution platform and its Web Apps
development platform which are considered to be separate cash
generating units ("CGU's") for the purpose of assessing the
carrying values of the intangible assets of the Group. During 2015,
competition within the Web Apps industry increased significantly.
In addition, the Group's development and account management
resources were shifted away from its Web Apps development platform
to its mobile platforms to focus on achieving the Groups' strategy
of growing revenue from mobile. This resulted in a significant
decrease in the number of Web App installations in Q4 2015.
Consequently, management now forecasts a significant reduction in
advertising volumes from Web Apps in 2016. The carrying value of
the intangible assets of the Web Apps development platform CGU has
therefore been re-assessed resulting in an impairment charge of
$9.1 million being recognised in the year (2014: $nil).
Loss before tax
Loss before tax was $14.7 million (2014: $11.7 million).
Loss after tax
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Loss after tax was $17.6 million (2014: $11.8 million). The
Group continues to recognise a deferred tax asset of $0.7 million
(2014: $0.5 million) in respect of tax losses accumulated in
previous years. The tax charge of $2.9m includes the recognition of
a $2.2 million tax charge arising as a result of the change in
previously established corporation tax guidance in Israel relating
to tax positions taken in respect of the 2013 and 2014 financial
years. Of the $2.2 million charge $1.2 million has been agreed and
settled in relation to profits generated in Israel in 2013, which
have subsequently been deemed to be taxable as a result of recently
revised OECD guidance and application. The remaining $1.0 million
has arisen from a retrospective change to the cost plus transfer
pricing methodology (which was established and ratified by Israeli
case law in 2015) on share option charges incurred by subsidiaries
in Israel in 2014.
Cash flow
2015 2014
$'000 $'000
Cash flows from operations 5,910 9,314
Exceptional and non-recurring
costs 995 5,020
Other operating income - 253
Adjusted cash flows from
operations 6,905 14,587
----- ------
% of Adjusted EBITDA 69% 109%
===== ======
Cash flows from operations was strong at $5.9 million (2014: 9.3
million). Adjusted cash flows from operations was $6.9 million
($14.6 million) and this represented 69 per cent of adjusted EBITDA
as a result of investment in working capital during the year (2014:
109 per cent).
Tax paid in the year was $1.8 million (2014: $0.9 million) which
includes a one off payment of $1.6 million in respect of the
finalisation of the $2.2 million exceptional tax charge set out
above.
During the year the Group invested $0.2m in consolidating office
locations in Israel, and capitalised development costs of $1.6m.
Payments of deferred consideration in respect of the Crossrider,
Ajillion and Definiti Media acquisitions totalled $0.9 million. The
Group paid $0.5m in respect of its 16.67 per cent investment video
technology through Clearvelvet Trading Ltd. As a result, net cash
outflow from investing activities was $3.2 million (2014: $11.3
million).
The share buy-back programme, announced in November 2015,
returned $5.1 million to shareholders in the year to 31 December
2015. This was completed in January 2016, returning a total of $6.1
million.
Financial position
At 31 December 2015, the Group had cash of $71.3 million and net
assets of $91.8 million. The Group is debt free. At 31 December
2015 trade receivables were $13.0 million, (2014: $12.4 million)
which represented 52 days outstanding, (2014: 34 days).
Key performance indicators
The Group's key performance indicators ("KPIs"), which are
reviewed by management on a regular basis are set out below:
2015 2014
Financial $'000 $'000
Revenue 84,635 71,106
Adjusted EBITDA 10,064 13,344
Cash flows from operations 5,910 9,314
Adjusted cash flows from
operations 6,905 14,587
Net assets 91,510 110,812
Non-financial Number Number
Headcount 93 132
Average unique monthly
users 130 million 200 million
Directors' responsibility statement
We confirm to the best of our knowledge:
1. The Group and Company financial statements, prepared in
accordance with IFRSs as adopted by the European Union give a true
and fair view of the assets, liabilities, financial position and
profit of the Group and Company; and
2. The business review, which is incorporated into the
Directors' Report, includes a fair review of the development and
performance of the business and the position of the Group and
Company, together with a description of the principal risks and
uncertainties they face.
The Directors of Crossrider plc are listed in the Group's Annual
Report and Accounts for the year ended 31 December 2015. A list of
current directors is maintained on Crossrider's website,
www.crossrider.com.
By order of the Board,
Don Elgie Mark Carlisle
Executive Chairman Chief Financial Officer
14 March 2016 14 March 2016
Consolidated statement of comprehensive income
For the year ended 31 December 2015
2015 2014
Note $'000 $'000
Revenue 2 84,635 71,106
Cost of sales (7,388) (13,178)
-------- --------
Gross profit 77,247 57,928
Selling and marketing costs (54,146) (35,894)
Research and development
costs (3,500) (6,118)
Management, general and administrative
costs (14,901) (14,790)
Depreciation and amortisation (9,370) (8,917)
Impairment of intangible
assets (9,132) -
-------- --------
Total operating costs (91,049) (65,719)
Other operating income (*) - 294
Operating loss 3 (13,802) (7,497)
Adjusted EBITDA (*) 10,064 13,344
-------- --------
Other operating income - 294
Employee share-based payment
charge 6 (3,407) (6,787)
Exceptional and non-recurring
costs 3 (1,957) (5,431)
Depreciation and amortisation (9,370) (8,917)
Impairment of intangible
assets 10 (9,132) -
-------- --------
Operating loss 3 (13,802) (7,497)
--------------------------------------- ---- -------- --------
Share of results of equity (38) -
accounted associates
Finance income 15 49
Finance costs (870) (4,277)
-------- --------
Loss before taxation (14,695) (11,725)
Exceptional tax charge 4 (2,200) -
Tax charge 4 (702) (43)
-------- --------
Loss for the year (17,597) (11,768)
Other comprehensive income:
Foreign exchange differences
on translation of foreign
operations 1 2
-------- --------
Total comprehensive income
for the year - attributable
to owners of the parent (17,596) (11,766)
======== ========
Basic earnings per share
(cents) 7 (11.9) (10.5)
Diluted earnings per share
(cents) 7 (11.9) (10.5)
-------- --------
(*)Adjusted EBITDA is a non GAAP measure. Adjusted EBITDA is a
company specific measure which is calculated as operating loss
before depreciation, amortisation, other operating income,
exceptional and non-recurring costs, employee share-based payment
charges and impairment of intangible assets which are considered to
be one off and non-recurring in nature.
Consolidated statement of financial position
As at 31 December 2015
2015 2014
Note $'000 $'000
Non-current assets
Intangible assets 10 19,254 35,767
Property, plant and equipment 1,003 1,178
Investments in equity accounted
associates 812 -
Deferred tax asset 4 716 567
21,785 37,512
-------- --------
Current assets
Trade and other receivables 16,280 14,100
Cash and cash equivalents 71,336 76,041
87,616 90,141
Total assets 109,401 127,653
======== ========
Equity
Share capital 5 14 15
Additional paid in capital 131,287 136,399
Retained earnings (39,791) (25,602)
Equity attributable to equity
holders of the parent 91,510 110,812
-------- --------
Non-current liabilities
Deferred tax liabilities 4 986 1,283
Deferred consideration for
the acquisition of subsidiary 8 184 877
1,170 2,160
-------- --------
Current liabilities
Trade and other payables 15,316 13,538
Deferred consideration for
the acquisition of subsidiary 8 1,405 1,143
16,721 14,681
-------- --------
Total equity and liabilities 109,401 127,653
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======== ========
The financial statements were approved by the Board and
authorised for issue on 14 March 2016.
Don Elgie Mark Carlisle
Executive Chairman Chief Financial Officer
Consolidated statement of changes in equity
For the year ended 31 December 2015
Share Additional Retained Total
capital paid in capital earnings
$'000 $'000 $'000 $'000
At 1 January 2014 10 11,088 (13,121) (2,023)
Loss for the year - - (11,768) (11,768)
Other comprehensive income:
Foreign exchange differences
on translation of foreign
operations - - 2 2
-------- ---------------- --------- --------
Total comprehensive income
for the year - - (11,766) (11,766)
Transactions with owners:
Share based payments - - 6,787 6,787
Issue of equity share capital 5 125,311 (7,502) 117,814
-------- ---------------- --------- --------
At 31 December 2014 15 136,399 (25,602) 110,812
======== ================ ========= ========
At 1 January 2015 15 136,399 (25,602) 110,812
======== ================ ========= ========
Loss for the year (17,597) (17,597)
Other comprehensive income:
Foreign exchange differences
on translation of foreign
operations - - 1 1
-------- ---------------- --------- --------
Total comprehensive income
for the year - - (17,596) (17,596)
Transactions with owners:
Share based payments - - 3,407 3,407
Exercise of employee options
(note 16) - 18 - 18
Purchase of own shares
(note 16) (1) (5,130) - (5,131)
-------- ---------------- --------- --------
At 31 December 2015 14 131,287 (39,791) 91,510
======== ================ ========= ========
Consolidated statement of cash flows
For the year ended 31 December 2015
2015 2014
Note $'000 $'000
Cash flow from operating activities
Loss for the year after taxation (17,597) (11,768)
Adjustments for:
Amortisation of intangible assets 8,974 8,678
Impairment of intangible assets 10 9,132 -
Depreciation of property, plant and
equipment 396 239
Tax charge 4 2,902 43
Interest income (15) (49)
Interest expenses 210 2,825
Share based payment charge 6 3,407 6,787
Share of results of associates 4 38 -
Unrealised foreign exchange differences 660 1,452
Operating cash flow before movement
in working capital 8,107 8,207
Increase in trade and other receivables (2,529) (8,035)
(Decrease)/increase in trade and other
payables (631) 8,978
Increase in other current liabilities 963 164
-------- --------
Cash flow from operations 5,910 9,314
Tax paid net of refunds (1,826) (936)
-------- --------
Cash generated from operations 4,084 8,378
Cash flow from investing activities
Purchases of property, plant and equipment (220) (950)
Net cash paid on business combination 8 (902) (9,799)
Net cash paid on Investment in associates (500) -
Capitalisation of development costs (1,593) (597)
-------- --------
Net cash used in investing activities (3,215) (11,346)
Cash flow from financing activities
Net proceeds on issue of shares - 71,419
Net payment for purchase of own shares (5,131) -
Proceeds from borrowings - 6,615
-------- --------
Net cash generated from financing activities (5,131) 78,034
-------- --------
Net (decrease)/increase in cash and
cash equivalents (4,262) 75,066
Revaluation of cash due to changes
in foreign exchange rates (443) (1,177)
Cash and cash equivalents at beginning
of year 76,041 2,152
-------- --------
Cash and cash equivalents at end of
year 71,336 76,041
======== ========
1. General information
The financial information set out in this document is for
Crossrider plc ("The Company") and its subsidiary undertakings
(together the "Group") in respect of the financial years ended 31
December 2014 and 2015.
Crossrider is a creator of digital advertising platforms
specialising in monetising web and mobile media through the use of
big data. The Company's web and mobile platforms power ad networks,
agencies and direct publishers and enable the delivery of relevant
digital advertising through the analysis of big data: making online
marketing significantly more efficient and cost effective.
Basis of preparation
The directors consider that the Group has adequate resources to
continue in operational existence for the foreseeable future and
that it is therefore appropriate to adopt the going concern basis
in preparing its financial statements.
The financial information set out in this document does not
constitute the Group's statutory financial statements for the year
ended 31 December 2015 or 31 December 2014. The annual report and
financial statements for the year ended 31 December 2015 were
approved by the Board of Directors on 14 March 2016 along with this
preliminary announcement. The financial statements for the year
ended 31 December 2015 have been reported on by the Independent
Auditor. The Independent Auditor's report on the financial
statements for 2015 was unqualified and did not draw attention to
any matters by way of emphasis.
The financial information set out in these preliminary results
has been prepared using International Financial Reporting Standards
(IFRSs) as adopted by the EU. The accounting policies adopted in
these preliminary results have been consistently applied to all the
years presented and are consistent with the policies used in the
preparation of the financial statements for the year ended 31
December 2014. The principal accounting policies adopted are
unchanged from those used in the preparation of the statutory
accounts for the period ended 31 December 2015. New standards,
amendments and interpretations to existing standards, which have
been adopted by the Group, have not been listed since they have no
material impact on the financial statements.
2. Segmental information
Segment revenues and results
Based on the management reporting system, the Group operates two
reportable segments: Web and Desktop, and Mobile. Division between
the two segments is based upon the channel of delivery of product
or service.
Web and Desktop Mobile Total
2015 2015 2015
$'000 $'000 $'000
Revenue 62,409 22,226 84,635
Cost of sales (7,388) - (7,388)
Direct sales and marketing
costs (33,796) (16,927) (50,723)
--------------- -------- --------
Segment result 21,225 5,299 26,524
Central operating costs (16,460)
--------
Adjusted EBITDA(1) 10,064
Depreciation and amortisation (9,370)
Impairment of intangible
assets (9,132)
Employee share-based payment
charge (3,407)
Exceptional and non-recurring
costs (1,957)
Operating loss (13,802)
Share of results of associates (38)
Finance income 15
Finance costs (870)
--------
Loss before tax (14,695)
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Taxation (2,902)
--------
Profit after taxation (17,597)
--------
The impairment of intangible assets charge of $9,132,000 relates
to the Web and Desktop segment. After allocating this charge to the
Web and Desktop segment, segment result is $12,093,000.
2 Segmental information (continued)
Web and Desktop
2014 Mobile Total
2014 2014
$'000 $'000 $'000
Revenue 62,647 8,459 71,106
Cost of sales (13,178) - (13,178)
Direct sales and marketing
costs (25,609) (7,203) (32,812)
--------------- -------- --------
Segment result 23,860 1,256 25,116
Central operating costs (11,772)
--------
Adjusted EBITDA(1) 13,344
Depreciation and amortisation (8,917)
Other operating income 294
Employee share-based payment
charge (6,787)
Exceptional and non-recurring
costs (5,431)
Operating loss (7,497)
Finance income 49
Finance costs (4,277)
--------
Profit before tax (11,725)
Taxation (43)
--------
Profit after taxation (11,768)
--------
(1) Adjusted EBITDA is a company specific measure which is
calculated as operating loss before depreciation, amortisation,
other operating income, exceptional and non-recurring costs,
employee share-based payment charges and impairment of intangible
assets which are considered to be one off and non-recurring in
nature as set out in note 6. The Directors believe that this
provides a better understanding of the underlying trading
performance of the business.
Information about major customers
In 2015 there were no customers contributing more than 10 per
cent of total revenue of the Group. In 2014 there was one customer
contributing more than 10 per cent of total revenue of the Group.
Revenue from this customer was $9,346,000.
Geographical analysis of revenue
Revenue by origin
2015 2014
$'000 $'000
Europe 3,641 7,910
British Virgin Islands 68,300 56,686
Asia 12,694 6,510
------ ------
84,635 71,106
====== ======
Geographical analysis of non-current assets
2015 2014
$'000 $'000
Europe 10,245 25,742
British Virgin Islands 87 69
Asia 9,925 11,134
------ ------
Total intangible assets and property,
plant and equipment 20,257 36,945
====== ======
3. Operating loss
Operating loss has been arrived at after charging:
2015 2014
$'000 $'000
Exceptional and non-recurring
costs
Non-recurring staff costs 95 371
Initial Public Offering costs - 758
Expensed contingent payments
arising from business combinations
(note 8) 1,862 4,302
------ ------
1,957 5,431
------ ------
Recurring staff costs 13,322 7,983
Auditor's remuneration:
Audit 97 92
Other services 20 201
Other operating income, net - 294
Amortisation of intangible
assets 8,974 8,678
Depreciation 395 239
Impairment of intangible
assets (note 10) 9,132 -
Employee share-based payment
charge (note 6) 3,407 6,787
Rent payable under operating
leases 294 459
====== ======
Operating costs
Operating costs are further analysed as follows:
2015 2015 2014 2014
Adjusted Total Adjusted Total
$'000 $'000 $'000 $'000
Direct sales and marketing
costs 50,722 50,722 32,812 32,812
Indirect sales and marketing
costs 3,016 3,424 1,728 3,082
--------- -------- --------- --------
Selling and marketing
costs 53,738 54,146 34,540 35,894
------------------------------- --------- -------- --------- --------
Research and development
costs 2,539 3,500 3,211 6,118
Management, general and
administrative cost 10,906 14,901 6,833 14,790
Depreciation and amortisation 1,048 9,370 364 8,917
Impairment of intangible
assets - 9,132 - -
--------- -------- --------- --------
Total operating costs 68,231 91,049 44,948 65,719
========= ======== ========= ========
Adjusted operating costs exclude share based payment charges,
exceptional and non-recurring costs, amortisation of acquired
intangible assets and impairment of intangible assets.
4. Taxation
The parent company is domiciled, for tax purposes, in both the
Isle of Man and the UK. The final tax charge shown below arises
partially from the difference in tax rates applied in the
difference jurisdictions in which the subsidiaries'
jurisdictions.
The tax charge in the period of $2,902,000 includes an
exceptional tax charge of $2,200,000 arising as a result of the
change in previously established corporation tax guidance in Israel
relating to tax positions taken in respect of the 2014 and 2014
financial years. Of the $2,200,000 charge $1,200,000 has been
agreed and settled in relation to profits in Israel in 2013, which
have subsequently been deemed to be taxable as a result of revised
OECD guidance and application. The remaining $1,000,000 has arisen
from a retrospective change to the cost plus transfer pricing
methodology (which was established and ratified by Israeli case law
in 2015) on share option charges incurred by subsidiaries in Israel
in 2014. The Group continues to recognise a deferred tax asset of
$716,000 (2014: $567,000) in respect of tax losses accumulated in
previous years.
The total tax charge can be reconciled to the overall tax charge
as follows:
2015 2014
$'000 $'000
Loss before taxation (14,695) (11,725)
-------- --------
Tax at the applicable tax
rate of 20% (2014: 21%) (2,939) (2,463)
Tax effect of
Differences in overseas rates 2,233 1,178
Exceptional tax charge 2,200 -
Expenses not deductible for tax purposes 1,408 1,259
Deferred tax not recognised on losses carried
forward - 68
Tax charge for the year 2,902 43
======== ========
Analysed as:
Deferred taxation in respect
of the current year (463) (388)
Current tax charge 3,365 431
-------- --------
Tax charge for the year 2,902 43
======== ========
4 Taxation (continued)
The group has maximum corporation tax losses carried forward at
each period end as set out below:
2015 2014
$'000 $'000
Corporate tax losses carried
forward 19,322 14,744
====== ======
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Details of the deferred tax asset recognised (arising in respect
of losses) is set out below:
2015 2014
$'000 $'000
At the beginning of the year 567 444
Recognised in the year due
to temporary differences 166 191
Foreign exchange revaluation (17) (68)
----- -----
At the end of the year 716 567
===== =====
Details of the deferred tax liability recognised (arising from
timing differences on intangible valuations on business
combinations) is set out below:
2015 2014
$'000 $'000
At the beginning of the year 1,283 -
Arising from business combinations - 1,480
Movement in the year due
to temporary differences (297) (197)
----- -----
At the end of the year 986 1,283
===== =====
In addition, the Group has an unrecognised deferred tax asset in
respect of the following:
2015 2014
$'000 $'000
Tax losses carried forward 10,729 12,798
------ ------
5. Shareholder's equity
2015 2014
Number of Number of
Shares Shares
Issued and paid up ordinary shares of $0.0001 148,496,073 148,463,039
The issued share capital of the Company on incorporation was
10,000 ordinary share of $1.00 par value.
During the year a total of 33,034 of new ordinary shares of
$0.0001 par value were issued for cash in relation to share option
schemes resulting in cash consideration of $18,000.
During the year a total of 6,201,423 of ordinary shares of
$0.0001 par value were purchased by the Company for a total cash
consideration of $5,130,920 and are held in treasury at the
reporting date (2014: nil).
The following describes the nature and purpose of each reserve
within owner's equity:
Reserve Description and purpose
Additional paid in Share premium (i.e. amount subscribed or
capital share capital in excess of nominal value)
Retained earnings Cumulative net gains and losses recognised
in the consolidated statement of comprehensive
income
6. Employee share based payments
Options have been granted under the Group's share option scheme
to subscribe for ordinary shares of the Company. At 31 December
2015 the following options were outstanding (2014: 13,859,357):
Group Grant date Number of shares under option Subscription price per share
Group 1 1 May 2014 3,899,927 $0.001
Group 2 29 May 2014 2,795,690 $0.449
Group 3 29 May 2014 3,805,419 $0.538
Group 4 17 June 2014 19,240 $0.538
Group 5 5 July 2014 70,562 $0.538
Group 7 30 September 2014 2,564,820 $1.662
Group 8 21 April 2015 1,125,500 $1.523
Group 9 18 November 2015 200,000 $0.820
------------------------------
Total 14,481,158
==============================
Vesting conditions
Group 1 - Vested following the Initial Public Offering.
Group 2 - 50% at the end of the first year following the grant
date. 12.5% on a quarterly basis during 12 quarters period
thereafter.
Groups 3-9 - 25% at the end of the first year following the
grant date. 6.25% on a quarterly basis during 12 quarters period
thereafter.
The total number of shares exercisable as of 31 December 2015
was 8,312,028 (2014: 3,889,927).
6. Employee share based payments (continued)
The weighted average fair value of options granted in the year
using the Cox, Ross and Rubinstein's Binomial Model (the "Binomial
Model") was $1.67. The inputs into the Binomial model are as
follows:
2015 2014
$'000 $'000
Early exercise factor 100%-150% 150%-310%
Fair value of Group's stock $0.75-$1.51 $1.157-$1.662
Expected Volatility 60% 60%
Risk free interest rate 0.5-1.93% 0.1-2.66%
Dividend yield - -
Forfeiture rate 4-13% 4-14%
Expected volatility was determined based on the historical
volatility of comparable companies.
Forfeiture rate is assumed to be 4-6% for senior management and
13% for other employees.
The risk-free interest rate was estimated based on average
yields of UK Government Bonds.
The Group recognised total share based payments relating to
equity-settled share based payment transactions as follows:
2015 2014
$'000 $'000
Share-based payment charge 3,407 6,787
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows:
2015 2014
--------------------- ---------------------
Weighted Number Weighted Number
average of average of
exercise options exercise options
price price
At the beginning
of the year $0.577 13,869,357 - -
Granted $1.42 1,325,500 $0.577 13,991,477
Lapsed $0.538 (680,665) $0.538 (122,120)
Exercised $0.538 (33,034) - -
--------- ---------- --------- ----------
At the end of
the year $0.66 14,481,158 $0.577 13,869,357
========= ========== ========= ==========
The options outstanding at 31 December 2015 had a weighted
average remaining contractual life of 8.5 years (2014: 9.5
years).
7. Earnings per share
Basic loss/earnings per share is calculated by dividing the loss
/earnings attributable to ordinary shareholders by the weighted
average number of ordinary shares outstanding during the year.
2015 2014
cents cents
Basic and diluted (11.9) (10.5)
Adjusted basic 4.8 9.5
Adjusted diluted 4.6 9.1
Adjusted earnings per share is a non-GAAP measure and therefore
the approach may differ between companies. Adjusted earnings have
been calculated as follows:
2015 2014
$'000 $'000
Loss for the year (17,597) (11,768)
Post tax adjustments:
Other operating income - (221)
Employee share-based payment
charge 3,343 6,656
Exceptional and non-recurring
costs 1,941 5,414
Amortisation on acquired
intangible assets 8,025 7,812
Impairment of intangible
assets 9,132 -
Related party loan interest
expense - 2,825
Exceptional tax charge 2,200 -
Adjusted profit for the year 7,044 10,718
======== ========
Number Number
Denominator - basic:
Weighted average number of
equity shares for the purpose
of earnings per share 147,779,641 112,422,910
Denominator - diluted
Weighted average number of
equity shares for the purpose
of diluted earnings per share 152,107,062 117,889,377
The diluted denominator has not been used where this has
anti-dilutive effect. Basic and diluted loss per share are
therefore the same for reporting purposes.
The difference between weighted average number of Ordinary
shares used for basic earnings per share and the diluted earnings
per share is 4,327,421 being the effect of all potentially dilutive
Ordinary shares derived from the number of share options granted to
employees
8 Deferred consideration
(a) Acquisition of Definiti Media Limited
The consideration for the acquisition of Definiti Media Ltd in
May 2014 included $2,489,000 deferred consideration. Of this,
$845,000 was repaid during the year ending 31 December 2014 and
$746,000 was repaid during the year ending 31 December 2015. The
remaining will be repaid during the year ending 31 December
2016.
In addition, $1,427,000, included as part of the acquisition
arrangements, has been recognised directly in the income statement
during the year ending 31 December 2015 (2014: $713,000) as set out
in note 3.
(b) Acquisition of AjillionMax
The consideration for the acquisition of certain assets of
AjilionMAX Limited in May 2014 included $654,000 deferred
consideration. Of this $104,000 was repaid during the year ending
31 December 2014 and $156,000 was repaid during the year ending 31
December 2015. $189,000 will be repaid during the year ending 31
December 2016 and the remaining will be repaid during the year
ending 31 December 2017.
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