TIDMNASA
RNS Number : 3117X
Nasstar PLC
29 April 2019
29 April 2019
Nasstar plc
("Nasstar", the "Company" or the "Group")
Results for the year to 31 December 2018
Nasstar plc; (AIM: NASA), the provider of hosted managed and
cloud computing services, is pleased to announce its preliminary
results for the year ended 31 December 2018.
Financial Highlights
-- Revenue up 7% to GBP25.7m (2017 restated: GBP24.1m)
-- 91% of 2018 revenues generated from contracted recurring services (2017: 91%)
-- EBITDA* up 9% to GBP5.2m* (2017 restated: GBP4.8m*)
-- Adjusted EBITDA** up 6% to GBP5.6m** (2017 restated: GBP5.3m**)
-- Adjusted EBITDA** margin 22% (2017 restated: 22%)
-- Adjusted earnings per share up 9% to 0.50p *** (2017 restated: 0.46p***)
-- Statutory Loss Per Share 0.17p (2017 restated: 0.23p)
-- Proposed final dividend of 0.09p per share (2017: 0.06p per
share), a 50% increase on prior year
-- Year-end Net Cash(+) at GBP1.5m (31 December 2017: Net Cash GBP1m)
-- IFRS 9, 15 and 16 adopted as at 1 January 2018, prior year restated for IFRS 15
* Comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets and amortisation.
Refer to Alternative Performance Measures for reconciliation to
GAAP measure.
**Comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets, amortisation, share
based payments and exceptional items (being costs in relation to
reorganisation and data centre closure, share repurchase costs and
provisions). Refer to Alternative Performance Measures for
reconciliation to GAAP measure.
***Adjusted for amortisation of acquired intangibles, share
based payments and exceptional items. Refer to Alternative
Performance Measures for reconciliation to GAAP measure.
(+) reported on a consistent basis with prior periods excluding
IFRS 16 property lease liabilities from debt
Operational Highlights
-- Second year of the "Nasstar 10-19" plan, with further
investment in key strategic areas designed to:
o Secure future long-term growth
o Speed up delivery and recognition of revenues
o Improve efficiencies
o Retain competitive advantage
o Develop sales pipeline of larger opportunities
-- Significant new three year contract win with top 50 UK law firm to deliver a fully managed public/private hybrid cloud solution to 850 users provides clear evidence of the benefit of the "Nasstar 10-19" programme - demonstrating ability to win contracts of increasing complexity and size.
-- The implications of IFRS 15 are that contract setup revenues
are spread over the full term of the customer contract rather than
being recognised at the point of installation. The cost of the
install is recognised as an asset with the cost recognised over the
contract term in line with revenue. Therefore, in order to expedite
short and long-term revenue delivery, the leadership team chose to
invest into additional engineering resource.
-- As a result of revenue recognition in respect of one-off
setup revenues changing on the adoption of IFRS 15 combined with
continuing cost pressure associated with licensing, gross margin
percentages have reduced in 2018. In response to this, towards the
end of 2018 Nasstar initiated further mitigation works designed to
improve margins through a combination of pricing strategies and
licensing cost reductions through driving further technical
consolidation. In addition, the "Nasstar 10-19" programme objective
around automation is designed to help further in this area.
-- Further data centre rationalisation achieved with closure of
the Singapore site. Rationalisation programme expected to complete
in 2019 with the reduction of the UK footprint by a further two
sites; Microsoft Azure ("Azure") being utilised for the certain
workloads.
-- Integration of all teams achieved across the Group under
"Nasstar 10-19" programme; further operational cost savings will
result in 2019 with the end of the London office lease.
-- Development of an innovative talent management programme
designed to help attract and retain the best talent in the face of
an extremely competitive market for technical resource.
-- Further investment into product strategy and increased account management capability.
-- Principal impact of adoption of IFRS 9, 15 and 16 has been to
defer contract set up revenues (and related costs) over the term of
the customer contract, resulting in:
o Mitigating actions taken to counter margin impact, including
pricing strategies and licensing cost reductions
o Additional investment in engineering resource to expedite
short and long-term revenue delivery
o Adjusted EBITDA margin target associated with the "Nasstar
10-19" programme reset to 23% by the end of 2019
-- Nasstar listed in the "1,000 Companies to Inspire Britain" for the third year running.
Nigel Redwood, Chief Executive Officer of Nasstar,
commented:
"Despite the very challenging macroeconomics of the technical
sector, caused by wider economic uncertainties combined with
increasing cost pressures and competition, Nasstar has had a
positive 2018. The "Nasstar 10-19" programme has focused on key
areas to mitigate as much as possible the market pressures seen
across the technical sector whilst structuring the business as a
single entity.
As a result Nasstar is now better positioned than ever to take
advantage of its increased capabilities to deliver larger and more
complex projects and the wider acceptance by larger SMEs of cloud
as the primary solution for their IT requirements. The securing of
the recently announced UK top 50 law firm further demonstrates this
capability.
2018 was the second year of our three-year integration strategy
known as "Nasstar 10-19" and I am excited by the organisation this
strategy has created."
For further information, please contact:
Nasstar plc +44 (0) 1952 225 000
Nigel Redwood, Chief Executive Officer
Niki Redwood, Finance Director
finnCap Limited (Nominated Adviser & Broker) +44 (0) 20 7220 0500
Julian Blunt, James Thompson (Corporate Finance)
Alice Lane (Corporate Broking)
Chairman's Statement
I am pleased to report continued improvements in our key KPI's
with contracted recurring revenues representing 91% of total
revenues demonstrating Nasstar's strong visibility of earnings.
Total revenues increased by 7% for the year, which is a very
positive outcome and slightly ahead of management expectations.
This has been achieved despite the inertia in the wider market
place caused by the uncertainties in the economic climate.
The management team's concentration on the "Nasstar 10-19"
priorities and commitment to delivering the three-year strategic
plan has had a positive effect on EBITDA, which grew at 9%, a
slightly faster rate than sales. Continued refinement of the Group
strategy has been imperative to ensure Nasstar's capabilities are
evolving to maximise the opportunities and mitigate the threats
seen in the technical sector. As a result, I am very pleased to see
the positive impact this has had on our customer relationships and
capability in delivering larger more complex solutions.
Net Cash was in line with management expectations giving me
continued confidence to support our progressive dividend policy
with a final dividend for 2018 being declared of 0.09p per share
(2017: 0.06p), a 50% increase on last year.
The "Nasstar 10-19" strategy has structured the business to be
able to more effectively recognise revenue and cost synergies from
potential acquisitions. As a result, the Board continues to be
alert to further opportunities in this area.
The implications of the decision of the UK to leave the EU are
obviously wide ranging, but the most notable one impacting Nasstar
is the exposure that the Group has to the US Dollar exchange rate,
as previously reported. On a trading front, our target market has
predominately been UK head quartered businesses and therefore any
immediate impacts of the UK leaving the EU are not expected to be
material. We are alert to the fact that the continued delay in the
BREXIT process could cause further delays in decision making which
may slow new business wins, we also recognise that there is an
increased risk of business failure within the customer base. As a
result, the Board monitors the situation closely on a monthly basis
and is prepared to adjust investment plans if necessary.
The continued development of the single leadership team has seen
pleasing advancements in the capabilities of the functional
management team driving further organisational resilience. Finally,
I recognise that what makes Nasstar great is the combined effort of
every member of the team, and I would like to place on record my
thanks and appreciation for the hard work and dedication of every
member of the Group.
Lord Daresbury
Chairman
Chief Executive's Report
Strategy execution during 2018
Continuing our strategic momentum during the second year of the
three-year "Nasstar 10-19" programme, 2018 saw the launch of a
number of projects with specific objectives designed to deliver
continually improving customer service and efficiency in execution.
These comprised:
-- Priority objective: A continuation of the single leadership
team and single team philosophy for each function across the entire
Group with a clear focus on continuing to embed the right
management structure acting on the right management information and
KPI's. Activities against this objective included:-
o Invested in management and team leader training
o Improved the leadership team's business cadence combining
strategy development and tactical execution
o Introduced external management mentoring from an industry and
management expert
o Completed full team integration meaning at the end of the
London office lease in 2019 it is likely that renewal will not be
required, driving further operational cost savings
-- Priority objective: A continuation of the consolidation of
the technical platforms and the development of a new platform based
on the best available hybrid technologies, with the goal of
facilitating full technical consolidation of all customer systems
across the Group. Activities against this objective included: -
o Closure of Singapore data centre migrating remaining workloads
to Azure
o Data centre rationalisation expected to be completed in 2019
with the reduction of the UK footprint by a further two sites;
o Investment into expanding current platform to enable
consolidation
o R&D team established to work on next generation hybrid
design
-- Priority objective: To embed further the Nasstar
security-centric culture, placing "security at the heart" of all
processes and technologies. Activities against this objective
included:-
o Evolved a closer partnership with Nasstar's security
partners
o Introduced mandatory multi factor authentication for all new
clients and rebuilds
o Rolled out an enhanced internal information security programme
training regime
o Employed additional security qualified resource
o Increased investment in intrusion prevention technologies
o Researched and tested intent based and artificial intelligence
driven security technologies with a view to adoption in 2019
-- Priority objective: We recognise that the management of
talent is a significant contributor to the success and health of
the business. The competitive landscape for attracting technical
skills is more challenging than ever and, as a result, further
investment is being made into our training and development
strategy, health and wellbeing strategy, employee engagement
techniques and apprenticeship programmes. All are designed to help
attract and retain the best talent in the industry. Activities
against this objective included:-
o Launched a new health and wellbeing programme
o Invested in additional HR resource focused on talent
management
o Increased training budget across all technologies
o Launched a new online training platform for employees
o Launched an apprenticeship programme and apprentice's
charter
o Launched a school's programme including schools visits,
careers support and work experience placements
-- Priority objective: Investment into product strategy and
service acceptance to ensure that innovation continues to be at the
heart of our service capability, ensuring that our strategic
product direction is well mapped in what is a very fast-moving
sector. Activities against this objective included: -
o Head of Commercial Strategy role established to lead service
acceptance and vendor management
o Creation of dedicated technical pre-sales team for new
services
o Launch of Nasstar's new cloud communications offering based on
Mitel's MiCloud Flex solution
o Refined the public/private cloud offering enabling the
business to deliver larger and more complex integrations
-- Priority objective: Investment in automation and systems
integration continued in 2018 with the on-going roll out of
Cherwell, our new IT Service Management (ITSM) solution, being
pivotal to further integration benefits being recognised.
Activities against this objective included: -
o Recruited a new Head of Internal Systems and allocated a
budget for an increased team dedicated to system automation
o Created a knowledge management function for the increased use
of the proactive knowledge base within Cherwell, designed to
improve customer service and leverage economies of scale
o Rolled out an interim resource management solution whilst
developing a new Group project management tool which will be fully
integrated
o Plans established for 2019 to rationalise the remaining back
office systems onto a centralised and fully integrated best of
breed solution for each function
-- Priority objective: Nasstar will continue to focus on its
vertical markets, defining deeper and more selective criteria upon
which to target customers. In addition, structured account plans
for key customers are designed to ensure our long-term
relationships with clients are maintained. Activities against this
objective included: -
o Invested in desk-based account management team to proactively
manage smaller clients, freeing field-based account managers to
focus on key strategic accounts
o Reallocated customer account managers across the customer base
to better align with the increased size and capability of the
team
o Standardised account management procedures and process across
all customers
-- Priority objective: We will continue to invest in automation
and improved processes and technical capabilities in our delivery
teams in order to further decrease the on boarding time for
clients. Activities against this objective included: -
o A full review of our install processes was completed
o A new Head of PMO (Project Management Office) was employed,
bringing considerable experience of project and process improvement
to a complex technical delivery
o Investment made into resource management tools giving a
central view of all resource and projects
o Increased the size of the project management team to improve
project throughput
-- Priority objective: Resulting from the implementation of new
financial reporting standards, in particular IFRS 15, the main
impact being to defer contract set up revenues (and related costs)
over the term of the customer contract, we took a number of
specific decisions to assist alongside the many initiatives already
implemented under the "10-19" programme, namely:-
o Incremental investment in engineering resource to expedite
short and long-term revenue delivery, with the resulting spend
deferred for subsequent amortisation over contract duration
o Implementation of new pricing strategies towards the end of
the year
o Technical consolidation of all customer systems to drive
licence cost savings
Employees
Nasstar recognise that the recruitment, retention and management
of talent is a significant contributor to the success and health of
the business. As a result, a priority objective of the "Nasstar
10-19" programme focused on developing Nasstar's talent management
techniques, which saw further investments being made into training
and development strategies, a health and wellbeing strategy,
employee engagement techniques and apprenticeship programmes.
The entire team have embraced the opportunities that have
developed as the Group has evolved into one integrated operation
which has created an organisation that has given team members clear
career progression opportunities. Nasstar acknowledge that every
one of its employees make a significant contribution to the success
of the business and we would like to take this opportunity to thank
our loyal and hardworking team of employees.
Outlook
The high quality of earnings and financial security of the Group
is underpinned by the high percentage of revenues that are
generated by contracted recurring services across Nasstar's
customer base (2018: 91%). That said we are by no means complacent
and will continue during 2019 to take steps under the "Nasstar
10-19" programme to focus on strategies to mitigate the competitive
pressure we experience every day in the context of a dynamic market
place.
Our strategic goals for 2019 are well established with delivery
in hand, including the ongoing review of our sales pricing policies
and license cost consolidation through further technical
integration and the continuation of our talent management
scheme.
The continuation of our capabilities to win and deliver larger
and more complex projects will be key for 2019 and will be
evidenced by the implementation of the previously announced 850
user law firm.
The protracted BREXIT process continues to create an uncertain
economic climate, the tangible effect of which for Nasstar has been
the lengthening of the decision-making process seen in some
opportunities in the sales pipeline. The majority of our customers
are UK headquartered so are impacted by the continued climate of
macroeconomic uncertainty. The Board monitors the situation on an
ongoing basis and is prepared to make alterations to strategic
plans and investment decisions as appropriate.
In the meantime, we will continue to work hard to differentiate
Nasstar by focusing on vertical specialisms, whilst investing
heavily in account management capabilities, technical skills and
support processes all designed to deliver first class customer
service.
We believe that solutions delivered on public and private cloud
hybrid technologies will continue to form the basis of a growing
market and I therefore believe Nasstar is well positioned, from
solid foundations to take advantage of the continuing
opportunity.
Nigel Redwood
Chief Executive Officer
Financial review
Key Performance Indicators ('KPIs')
The directors regularly review monthly revenue and operating
costs to ensure that sufficient cash resources are available for
the continued development and support of its service. Primary KPIs
at the year-end were as follows:
12 mths 12 mths
to to
31 Dec 31 Dec
18 17
GBP'000 GBP'000
restated
Total revenue 25,667 24,080
Recurring revenue 23,426 21,879
Recurring % of total reported revenue 91% 91%
Monthly recurring revenue at end of period 1,980 1,889
Operating costs, including cost of sales 22,299 20,740
Gross profit percentage 65% 68%
EBITDA* 5,217 4,802
Adjusted EBITDA** 5,571 5,274
EBITDA* % of revenues 20% 20%
Adjusted EBITDA** % of revenues 22% 22%
Operating Loss (1,196) (1,357)
Loss before tax (1,413) (1,590)
Adjusted Profit before tax*** 3,151 3,107
Current assets (excluding cash) 4,243 3,924
Current liabilities 9,171 8,885
Cash and cash equivalents 3,811 5,101
Loss per share (0.17p) (0.23p)
Adjusted earnings per share*** 0.50p 0.46p
See "Alternative Performance Measures" for descriptions of
performance measures presented above.
Revenue for the year was GBP25.7m representing year on year
growth of 7%. Gross margin reduced to 65% from 68%, primarily due
to increased licence costs and the continued pressure on exchange
rates, therefore the margin on some hosted licences has reduced. An
initiative to mitigate this pressure is being undertaken as part of
the product strategy work started during the period, but is not
expected to bear fruits until next year.
Adjusted EBITDA** margins reflect the "Nasstar 10-19"
consolidation programme leveraging our largest cost, the cost of
people, together with savings from restructuring and closure of one
further data centre, which has allowed investment into other areas
such as internal systems, account management and engineering
resource, designed to secure future long-term growth and continue
to improve efficiencies.
Reported loss before tax was GBP1.4m (2017: GBP1.6m) after
exceptional expenses of GBP265,000 (2017: GBP432,000) which were
largely costs in relation to the closure of one data centre and the
continued data centre rationalisation programme. In addition,
GBP4.2m (2017: GBP4.2m) of amortisation of customer contracts has
been charged to the Consolidated Statement of Profit and Loss and
Other Comprehensive Income in respect of acquired customer contract
intangible assets.
As previously reported capital expenditure during 2018 ran at a
higher level than 2017 as we continued to deliver our "Nasstar
10-19" initiatives. 2018 has also seen the Group, due to its
increased size, move to an alternative VAT payment basis which, as
previously reported, has led to a one-off cash outflow. Despite
this, year-end net cash rose to GBP1.5m (31 December 2017:
GBP1m).
Fixed asset additions for the period were GBP2.7m. This was
primarily servers and storage area network infrastructure to
provide a platform for future growth and technology consolidation,
together with investment needed in fixed assets on the signing of
new customer contracts. Depreciation increased to 8% of sales from
7% in 2017 due to the increased depreciation charge on adoption of
IFRS16.
Monthly recurring revenue at the end of the period is the
revenue recognised in the Consolidated Statement of Profit and Loss
and Other Comprehensive Income in the final month of the reporting
period from the long-term recurring revenue contracts.
Recurring Revenue
Recurring revenue is monthly revenue generated from long term
contracts, initial terms being three to five years in length.
Nasstar's recurring revenue is predominantly generated from complex
managed services where Nasstar deliver a customer's entire
application portfolio and data from a private and/or public cloud
solution. Nasstar generates additional recurring revenues from
these contracts by upselling add on services such as managed
networks, hosted telephony and support services. These additional
services are very rarely sold without the complex managed hosting
element and therefore the vast majority of Nasstar recurring
revenue is generated from its complex managed hosted solutions.
Alternative Performance Measures
Restated
12 mths 12 mths
to to
31 Dec 31 Dec
18 17
GBP'000 GBP'000
Loss before tax (1,413) (1,590)
Amortisation of acquired intangibles 4,210 4,225
Share based payments 89 40
Exceptional items 265 432
---------- ---------
Adjusted Profit before tax*** 3,151 3,107
========== =========
Operating Loss (1,196) (1,357)
Depreciation and amortisation 6,431 6,163
Profit on sale of fixed assets (18) (4)
---------- ---------
EBITDA* 5,217 4,802
Share based payments 89 40
Exceptional items 265 432
---------- ---------
Adjusted EBITDA** 5,571 5,274
========== =========
Cash and cash equivalents 3,811 5,101
Interest bearing liabilities (excluding
IFRS16 lease liability) (2,306) (4,148)
---------- ---------
Net Cash 1,505 953
========== =========
Revenue from managed services - Recurring
revenue 23,426 21,879
Consultancy services 907 1,107
Adhoc sales of hardware, software and other
recharges 1,334 1,094
---------- ---------
Total Revenue 25,667 24,080
========== =========
Adjusted earnings per share were 0.50p*** (2017 restated:
0.46p***) with a statutory loss per share recorded of 0.17p (2017
restated: 0.23p) as a result of the exceptional items and
amortisation charges. Adjusted earnings per share has been
calculated as follows:
12 mths 12 mths
to to
31 Dec 31 Dec
18 17
restated
GBP000 GBP000
Loss for the period (984) (1,344)
Amortisation of acquired intangibles net
of tax impact 3,494 3,507
Share based payments 89 40
Exceptional items 265 432
------------ ------------
Adjusted earnings 2,864 2,635
============ ============
Weighted average number of shares 574,359,318 576,360,096
Adjusted earnings per share 0.50p 0.46p
In order to provide useful information about the Group's
performance and to present information in a way that reflects how
the Directors monitor and measure the performance of the Group, the
Directors believe it is appropriate to present the results of the
Group using selected alternative performance measures.
The following provides an indication of the purpose and
definition of each of the alternative performance measures
presented, together with an appropriate reference to IFRS measures
presented in the IFRS financial statements, where applicable.
Adjusted profit before tax is shown as an alternative
performance measure to present the underlying trading performance.
The calculation excludes the impact of the non-cash items of
amortisation of customer contracts and share based payments as well
as eliminating one off exceptional items from the trading
performance.
Monthly recurring revenue at each month end represents the
monthly revenue contracted to clients under managed service
contracts which reflects revenue contracted but not yet delivered.
Monthly revenue from these contracts is recognised on a
straight-line basis over the life of the contract. Monthly
recurring revenue at the year-end gives an indication of the
revenue likely to be recognised from these contracts in future
months.
Recurring percentage of total reported revenue is the total
revenue recognised in the year from recurring revenue contracts as
a percentage of total revenue.
Net debt is calculated as cash less interest-bearing loans and
borrowings, excluding IFRS 16 lease liabilities for the purposes of
comparison to prior periods.
* Comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets and amortisation.
**Comprising earnings adjusted for interest, taxation,
depreciation, profit on sale of fixed assets, amortisation, share
based payments and exceptional items (being costs in relation to
reorganisation and data centre closure, share repurchase costs and
provisions).
***Adjusted for amortisation of acquired intangibles, share
based payments and exceptional items.
New IFRS implementation
Impact of adoption of IFRS 15 (Revenue from Contracts with
Customers)
IFRS 15 Revenue from Contracts with Customers, is effective for
periods beginning on or after 1 January 2018. The standard has been
adopted by the Group for the first time in the year ended 31
December 2018. The Group has applied IFRS 15 retrospectively to
each prior reporting period and has utilised certain practical
expedients available in IFRS 15.
The adoption of IFRS 15 has not altered the total contract value
or timing of cashflows. The following are the key areas where the
adoption of IFRS 15 has changed historic revenue recognition:
Technical installation, consultancy and set up fees
Under previous accounting policies, revenue from technical
installation, consultancy or other one off set- up fees was
recognised up-front at the point of implementation. Under IFRS 15,
technical installation, consultancy and set-up services that the
Group deliver are not considered to meet the criteria to be a
distinct performance obligation. The fees associated with these
services are therefore combined with other promises in the contract
and recognised over the contract term. This has resulted in a
reduction of initial revenue previously recognised, an increase in
deferred income and an increase in monthly recurring revenue.
In addition, there is a financing component within the set-up
fee on three significant customer contracts. This arises due to
both the size and payment profile of the set-up fee, compared to
the satisfaction of this performance obligation over the life of
the contract. The financing component of the fee has been separated
from the monthly revenue and recognised separately as interest
expense. There has been no change to the net contract value.
Contract fulfilment assets
The costs associated with the design and construction of the
technology platform for each contract have previously been expensed
to the Consolidated Statement of Profit and Loss and Other
Comprehensive Income as incurred. Under IFRS 15, these costs have
been capitalised as contract fulfilment assets, within trade and
other receivables, and amortised over the life of the contract. The
design and construction of the technology platform is undertaken
before the performance obligation is delivered to the customer and
meet the criteria for capitalisation as a contract fulfilment
asset.
Impact of adoption of IFRS 16 (Leases)
IFRS 16 Leases is effective for periods beginning on or after 1
January 2019. IFRS 16 removes the operating and finance lease
classification in IAS 17 Leases and replaces them with the concept
of right-of-use assets and associated financial liabilities. This
change results in the recognition of a liability on the balance
sheet for all leases which convey a right to use the asset for the
period of the contract. The lease liability reflects the present
value of the future rental payments, discounted using either the
effective interest rate or the incremental borrowing rate of the
entity.
Nasstar plc has early adopted IFRS 16 for the year ending 31
December 2018, applying the cumulative catch up transition
approach.
Impact of adoption of IFRS 9 (Financial Instruments)
In adopting IFRS 9, the only changes made from the previous
reporting period is in relation to the impairment of financial
assets. The Group now reviews the amount of credit loss associated
with its trade receivables based on forward looking estimates that
consider current and forecast credit conditions as opposed to
relying on past historical default rates.
Dividend
A final dividend for 2017 of 0.06p per share was paid on 9 July
2018.
It is proposed to pay a final dividend of 0.09p in respect of
2018 on 5th July 2019 to shareholders on the register at the close
of business on 24(th) May 2019, subject to approval at the
Company's Annual General Meeting on 10(th) June 2019. In accordance
with accounting standards, this dividend is not accounted for in
the financial statements for the period under review as it had not
been committed as at 31 December 2018.
The Board has adopted a progressive dividend policy, subject
always to the free cash generation of the Group and the investment
required to deliver sustainable growth in revenues and profits.
Niki Redwood
Finance Director
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
for the year ended 31 December 2018
Note Year ended Year ended
31 December 31 December
2018 2017
Restated
GBP000 GBP000
Revenue 25,667 24,080
Cost of sales (9,063) (7,681)
Gross profit 16,604 16,399
Administrative expenses (17,800) (17,756)
--------------------------------------------- -------- ------------- ------------
Share based payments (89) (40)
Amortisation of customer intangibles (4,210) (4,225)
Other administrative expenses (13,236) (13,059)
------------- ------------
Administrative expenses before exceptional
items (17,535) (17,324)
Operating loss before exceptional items (931) (925)
Exceptional items 4 (265) (432)
--------------------------------------------- -------- ------------- ------------
Operating loss (1,196) (1,357)
Financial income - -
Financial expenses (217) (233)
Loss before tax (1,413) (1,590)
Taxation 429 246
Loss for the period and total comprehensive
income for the
period, attributable to shareholders (984) (1,344)
============= ============
Loss per share: 5
Basic (0.17p) (0.23p)
Diluted (0.17p) (0.23p)
============= ============
Consolidated Statement of Financial Position
at 31 December 2018
Note 2018 2017 1 January
2017
GBP000 GBP000 GBP000
Non-current assets Restated Restated
Goodwill 15,421 15,421 15,421
Intangible assets 5,392 9,455 13,645
Plant and equipment 5,584 5,006 5,235
Right of Use assets 992 - -
Trade and other receivables 575 185 159
27,964 30,067 34,460
------ -------- ---------
Current assets
Inventories 71 68 9
Trade and other receivables 4,172 3,856 4,743
Other financial assets - - 7
Cash and cash equivalents 3,811 5,101 2,969
8,054 9,025 7,728
Total assets 36,018 39,092 42,188
====== ======== =========
Non-current liabilities
Interest-bearing bank loans - 2,539 3,841
Deferred tax liability 600 1,222 1,927
Lease liabilities 793 48 250
Trade and other payables 563 304 194
1,956 4,113 6,212
Current liabilities
Interest-bearing bank loans 2,258 1,355 1,355
Trade and other payables 6,657 7,278 6,107
Lease liabilities 256 206 356
Provisions - 46 -
9,171 8,885 7,818
Total liabilities 11,127 12,998 14,030
====== ======== =========
Net assets 24,891 26,094 28,158
====== ======== =========
Equity attributable to equity
holders of the
parent
Share capital 5,750 5,743 5,795
Other Reserves 19,141 20,351 22,363
Total equity 24,891 26,094 28,158
Statement of Changes in Equity
Group
Other Reserves
Merger Capital
Share Share reserve redemption Retained Total
capital premium reserve deficit equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 January 2017 5,795 22,409 6,016 - (5,981) 28,239
Adjustment on initial
application of IFRS
15 - - - - (81) (81)
Restated balance at
1 January 2017 5,795 22,409 6,016 - (6,062) 28,158
Loss for the period
recognised in profit
and loss - - - - (1,344) (1,344)
-------- -------- -------- ----------- -------- -------
Total comprehensive
income for the period - - - (1,344) (1,344)
Shares cancelled in
the period (52) - - 52 (461) (461)
Share based payment
recognised in equity - - - - 40 40
Dividends paid - - - - (299) (299)
At 31 December 2017 5,743 22,409 6,016 52 (8,126) 26,094
Adjustment on initial
application of IFRS
9 - - - - (27) (27)
Comprehensive income
Loss for the year recognised
in profit and loss - - - - (984) (984)
Total comprehensive
income for the year - - - - (984) (984)
Shares issued in the
year 7 57 - - - 64
Share based payment
recognised in equity - - - - 89 89
Dividends paid - - - - (345) (345)
-------- -------- -------- ----------- -------- -------
At 31 December 2018 5,750 22,466 6,016 52 (9,393) 24,891
======== ======== ======== =========== ======== =======
Statement of Cash Flows
for the year ended 31 December 2018
Group
Year ended Year ended
31 December 31 December
2018 restated
2017
GBP000 GBP000
Cash flows from operating activities
Loss for the period (984) (1,344)
Adjustments for:
Net finance charges 217 233
Taxation (429) (246)
Depreciation and amortisation 6,431 6,163
Profit on sale of fixed assets (18) (4)
Share based payments 89 40
Corporation tax payments (504) (123)
Net cash flow from operating activities
before changes in working capital 4,802 4,719
(Increase)/decrease in inventories (3) (59)
(Increase)/decrease in trade and other
receivables (733) 406
(Decrease)/Increase in trade and other
payables (51) 943
(Decrease)/ Increase in provisions (46) 46
------------ ------------
Net cash from operating activities 3,969 6,055
------------ ------------
Cash flows from investing activities
Acquisition of intangible assets (347) (191)
Acquisition of property, plant and equipment (2,389) (1,583)
Proceeds on sale of fixed assets 31 34
Net cash used in investing activities (2,705) (1,740)
------------ ------------
Cash flows used from financing activities
Issue of ordinary shares 64 -
Repayment of lease liabilities - plant
&machinery (206) (351)
Repayment of lease liabilities - property (214) -
Repayment of bank loan (1,674) (1,355)
Interest paid (179) (178)
Dividend Paid (345) (299)
Net cash from financing activities (2,554) (2,183)
------------ ------------
Net (decrease)/increase in cash and
cash equivalents (1,290) 2,132
Cash and cash equivalents at start of
period 5,101 2,969
Cash and cash equivalents at 31 December 3,811 5,101
============ ============
Notes to the preliminary statement
1. Corporate information
Nasstar plc ("the Company") is a company incorporated in England
and Wales and quoted on the London Stock Exchange's AIM Market
(AIM: NASA). Further copies of these results, and the full
financial statements when published, will be available at the
Company's registered office: Datapoint House, 400 Queensway
Business Park, Queensway, Telford, Shropshire, TF1 7UL or on the
Company website at www.nasstar.com.
2. Basis of preparation
These condensed preliminary financial statements of the Company
and its subsidiaries ("the Group") for the year ended 31 December
2018 have been prepared using accounting policies consistent with
International Financial Reporting Standards (IFRSs). The same
accounting policies, presentation and methods of computation are
followed in both of the preliminary condensed sets of financial
statements as applied in the Company's latest audited financial
statements for the period ended 31 December 2017, where new IFRSs
have been applied the impact has been disclosed.
The information contained within this announcement has been
extracted from the audited financial statements which have been
prepared in accordance with IFRS as adopted by the European Union
('adopted IFRS'), and with those parts of the Companies Act 2006
applicable to companies reporting under adopted IFRS. They have
been prepared using the historical cost convention except where the
measurement of balances at fair value is required.
The financial statements have been prepared on the assumption
that the Group is a going concern. The financial statements show a
loss for the year of GBP984,000. At the date of the financial
statements the Group's ability to continue as a going concern
reflect the net funds available to the Group at the period end, and
the forecast for the following 24 months. On the basis of detailed
working capital projections, in the opinion of the directors, the
financial statements have been properly prepared on the assumption
that the Group is a going concern.
Availability of audited accounts:
Copies of the 2018 audited accounts will be available later
today on the Company's website (www.nasstar.com/investors) for the
purposes of AIM Rule 26 and will be posted to shareholders in due
course.
Forward-looking statements:
This report may contain certain statements about the future
outlook for Nasstar plc. Although the directors believe their
expectations are based on reasonable assumptions, any statements
about future outlook may be influenced by factors that could cause
actual outcomes and results to be materially different.
Initial application of IFRS 15
IFRS 15 Revenue from contracts with customers, has been adopted
by the Group in the current year, with a date of initial
application of 1 January 2018. IFRS 15 requires recognition of
revenue to depict the transfer of promised goods or services to
customers, in an amount that reflects the consideration to which
Nasstar expects to be entitled in exchange for those goods and
services.
The Group has applied IFRS 15 fully retrospectively, restating
the comparatives for year ending 31 December 2017 and adjusting
opening reserves at 1 January 2017. The following practical
expedients have been used on transition to IFRS 15:
-- contracts that were completed at 1 January 2017 have not been restated;
-- contracts which start and end in the same annual reporting
periods have not been restated; and
-- for all reporting periods prior to 2017, the group has chosen
to not disclose the amount of the transaction price allocated to
the remaining performance obligations and an expectation of when it
expects to recognise that revenue.
The impact of adoption of IFRS 15 for each financial statement
line item affected is set out below, along with an explanation of
the key adjustments.
2017 Consolidated Statement of Profit and Loss
As reported 31 Dec 2017 Impact of IFRS 15 Restated year ended 31 Dec 2017
GBP000 GBP000 GBP000
Revenue 24,501 (421) 24,080
Cost of Sale (7,681) - (7,681)
------------------------ ------------------ --------------------------------
Gross profit 16,820 (421) 16,399
Administrative expenses (17,812) 56 (17,756)
------------------------ ------------------ --------------------------------
Operating Loss (992) (365) (1,357)
Financial expenses (231) (2) (233)
------------------------ ------------------ --------------------------------
Loss before tax (1,223) (367) (1,590)
Tax 175 71 246
------------------------ ------------------ --------------------------------
Loss after tax (1,048) (296) (1,344)
Consolidated Statement of Financial Position at 31 December
2017
As reported 31 December 2017 Impact of IFRS 15 Restated year ended 31 December
GBP000 GBP000 2017
GBP000
Non-current assets
Contract assets including
accrued income - 185 185
Current assets
Contract assets including
accrued income - 254 254
Trade and other receivables 3,798 (196) 3,602
Non-current liabilities
Contract liabilities including
deferred income - 304 304
Deferred tax liability 1,312 (90) 1,222
Current liabilities
Contract liabilities including
deferred income - 2,127 2,127
Trade and other payables 6,872 (1,721) 5,151
Net assets 26,471 (377) 26,094
Consolidated Statement of Financial Position at 1 January
2017
As reported 1 January 2017 Impact of IFRS 15 Restated period ended 1 January
GBP000 GBP000 2017
GBP000
Non-current assets
Contract assets including accrued
income - 159 159
Current assets
Contract assets including accrued
income - 240 240
Trade and other receivables 4,715 (212) 4,503
Non-current liabilities
Contract liabilities including
deferred income - 194 194
Deferred tax liability 1,946 (19) 1,927
Current liabilities
Contract liabilities including
deferred income - 1,503 1,503
Trade and other payables 6,014 (1,410) 4,604
Net assets 28,239 (81) 28,158
Consolidated Statement of Changes in Equity
No reconciliation of the restated consolidated statement of
changes in equity has been presented as the only changes to this
primary statement are:
-- Recognition of restated retained earnings at 1 January 2017,
as presented in the restated Consolidated Statement of Financial
Position as at this date.
-- Recognition of the restated profit for the year ending 31
December 2017 as presented in the restated Consolidated Statement
of Profit and Loss and Other Comprehensive Income.
Consolidated Statement of Cash Flows
There has been a change in net cash from operating activities
and cash flow from financial activities, because of the financing
element associated with certain implementation fees.
In addition, there are certain re-classifications in the
components of cash flow movements:
-- Contract assets have been recognised at 1 January 2017 with
amortisation of these assets recorded in the Consolidated Statement
of Profit and Loss and Other Comprehensive Income for the year
ending 31 December 2017.
-- The movements in cash flows from operating activities
reflects the non-cash movement recorded in the Consolidated
Statement of Profit and Loss and Other Comprehensive Income.
-- The Group has restated debtor and creditor balances in the
Statement of Financial Position. The movement in cash flows from
operating activities reflect the relevant cash and non-cash
movements in reclassified line items.
Explanation of significant areas for adjustment
The significant areas of adjustment are in respect of:
-- The spreading of revenue associated with technical
installation and consultancy, which is not a separate performance
obligation under IFRS 15 and is combined with other deliverables in
the contract. This revenue was previously recognised up front under
IAS 18. The recognition of this revenue over the life of the
contract has resulted in a decrease in revenue at the start of the
contract and a corresponding increase in deferred income.
-- The recognition of a financing component for contracts with a
material up-front fee for technical installation and
consultancy.
-- Recognition of contract fulfilment asset in respect of the
costs associated with the design and construction of the technology
platform. These costs are then amortised over the life of the
contract.
-- Reclassification of sales commission from trade and other receivables to contract assets.
Initial application of IFRS 16
IFRS 16 Leases, is effective for periods beginning on or after 1
January 2019. IFRS 16 removes the operating and finance lease
classification in IAS 17 Leases and replaces them with the concept
of right-of-use assets and associated financial liabilities. This
change results in the recognition of a liability on the balance
sheet for all leases which convey a right to use the asset for the
period of the contract. The lease liability reflects the present
value of the future rental payments, discounted using either the
effective interest rate or the incremental borrowing rate of the
entity.
The group has early adopted IFRS 16 for the year ending 31
December 2018, applying the cumulative catch up transition
approach. The adoption of IFRS 16 has resulted in the recognition
of a lease liability and right-of-use asset of GBP1.2m, relating to
property leases, at 1 January 2018, an increase in depreciation of
GBP223,000, interest of GBP49,000 and a decrease in rent charges of
GBP263,000. Adoption of IFRS 16 has not led to any adjustments to
opening reserves.
The weighted average incremental borrowing rate at transition
was 4.44%.
GBP000
2017 operating lease commitments discounted at the incremental
borrowing rate 802
Additional lease term assessment 413
Lease liability recognised at initial application 1,215
Initial application of IFRS 9
IFRS 9 is effective as at 1 January 2018 and has been adopted
from that date. The impact on reserves and increase in receivable
provision at adoption was GBP27,000.
3. Segmental analysis
A segment is a distinguishable component of the Company that is
engaged in providing products or services in a particular business
sector (business segment) or in providing products or services in a
particular economic environment (geographic segment), which is
subject to risks and rewards that are different in those other
segments.
The Group operated in the period in one segment, the provision
of IT services, and in one market, the United Kingdom. The
disclosures required by IFRS 8 relating to profits, losses, assets
and liabilities of the segment are therefore shown by the financial
statements as a whole.
4. Exceptional items
The following items are considered significant by virtue of
their size and nature and therefore have been recognised as
exceptional items during the period.
Year ended Year ended
31 December 31 December
2018 2017
GBP000 GBP000
"Nasstar 10-19" organisational re-structure 49 195
"Nasstar 10-19" data centre consolidation
& office closure 187 137
Share repurchase costs - 13
Provision for onerous lease 29 87
265 432
Reorganisation costs relate to costs incurred following the
acquisitions and subsequent consolidation strategy led by the
"Nasstar 10-19" programme, details of which are set out in both the
Chairman's statement and the Strategic Report.
5. Loss per share
Year ended Year ended
31 December 31 December
2018 2017
Loss per share:
Basic: (0.17p) (0.23p)
Diluted (0.17p) (0.23p)
The calculation of the basic loss per share arising is based
upon the loss after tax attributable to ordinary shareholders of
GBP984,000 (2017: GBP1,344,000) and a weighted average number of
shares in issue for the year of 574,359,318 (2017:
576,360,096).
The diluted loss per share in 2018 and 2017 is the same as the
basic loss per share as losses have an anti-dilutive effect.
6. Dividend
Dividends of GBP345,000 (2017: GBP299,000) were recognised in
the financial statements as distributions to equity shareholders.
The Company is proposing a final dividend of 0.09p in respect of
the year ended 31 December 2018.
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 or visit www.rns.com.
END
FR UNSNRKRASUAR
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