TIDMBLTG
RNS Number : 2638K
Blancco Technology Group PLC
20 September 2016
20 September 2016
BLANCCO TECHNOLOGY GROUP PLC
PRELIMINARY RESULTS FOR THE YEARED 30 JUNE 2016
Blancco Technology Group Plc (AIM:BLTG, "Blancco" or the
"Group") is pleased to announce its results for the year ended 30
June 2016.
Financial Highlights
-- Revenue increased by 49% to GBP22.4 million (2015: GBP15.0
million), with organic growth being 35%. On a constant currency
basis revenue increased by 46% to GBP21.9 million
-- Adjusted Operating Profit before corporate costs (as defined
in note 16) increased by 41% to GBP7.6 million (2015: GBP5.4
million), and on a constant currency basis has increased by 37% to
GBP7.4 million. Operating loss is GBP0.4 million (2015: GBP1.6
million)
-- Adjusted operating cash flow (as defined in note 16) of
GBP6.0 million (2015: GBP4.1 million) with cash conversion of 98%
(2015: 103%). Operating cash flow is GBP4.0 million (2015: GBP1.6
million)
-- Adjusted earnings per share (as defined in note 16) from
continuing operations of 5.63p (2015: 2.84p). Basic loss per share
from continuing operations is 3.69p (2015: 3.84p)
-- Net cash at the year-end of GBP1.0 million (2015: GBP7.8
million), reflecting investment in the Software Group to set the
business on the best path for 2017, including the acquisition of
Xcaliber and investment in new greenfield sites and buy out of
minority interests in some of the sales offices
-- Recommended final dividend of 1.34p per share (2015: 3.35p)
rebased for the go-forward Software business. Total dividend for
the year is 2.0p (2015: 5.0p), with the Board intending to adopt a
progressive dividend policy moving forwards
Operating Highlights
-- Growth in Live Environment Erasure invoiced sales, increasing 188% to GBP2.3 million
-- Growth in other Blancco product lines of Mobile (42% to
GBP3.7 million) and IT and other (44% to GBP17.4 million) in
2016
-- Increase in average revenue per client by 17% to GBP51,600.
The number of sales worth in excess of GBP100,000 won in the year
was 32, an increase of 53%
-- Strengthening of the senior team including appointments of
Richard Stiennon as Chief Strategy Officer, and Steve Holton as the
President and Chief Revenue Officer
-- Appointment of a new CFO, Keith Butcher, bringing over five
years of software experience to the Group
-- Acquisition of Tabernus in September 2015, contributing to
North America revenue growth of 146%
-- Acquisition of Xcaliber Technologies (increase in the Group's
stake from 49% to 100%) with the subsequent win of a large mobile
diagnostics contract with AT&T, and roll-out to more than 5,500
stores
-- Disposal of the Repair Services Business for EUR103.5
million, with a return of funds to shareholders via tender offer of
GBP50 million
Matthew Peacock, Non-Executive Chairman of Blancco, said
"Blancco has delivered another strong year of growth against a
backdrop of transformation at the Group level, with the disposal of
the Repair Services Business. We have continued to invest in our
products and our team, both organically and by acquisition, and
have developed a clear strategic plan to achieve a step change in
our penetration of the very large market for data erasure."
Chairman's Statement
I am pleased to introduce Blancco Technology Group's first full
year results, for the year ending 30 June 2016. These results show
strong improvements in revenue, operating result and earnings per
share, which gives the Board confidence in the Group's new focus.
The signature event of 2016 has undoubtedly been the change in the
primary business activity of the Group from electronic repair
services to data erasure and mobile diagnostics software. The
results are reported and explained in Pat Clawson's first Chief
Executive Officer's review below.
Over 2011 to 2016 the Group built its electronic repair services
business, Regenersis, into one of the leading operators in its
sector, with a broad geographical footprint capable of attracting
the largest brands as its clients. The Board determined towards the
end of financial year 2015 that it was the right time to realise
value for these operations and to refocus the Group entirely on its
software business. The optimal route to achieve this was clearly a
disposal of the repair services business to another repair sector
consolidator which saw considerable strategic value in the
transaction. In February, we announced a sale and purchase
agreement with Communications Test Design, Inc., ("CTDI") for a
cash consideration of EUR103.5 million (GBP79.9 million). This
transaction was completed 4 April 2016, and the Regenersis Plc
entity was renamed Blancco Technology Group Plc (LON: BLTG) on 6
April 2016.
The disposal led to a GBP50 million return of capital to
investors in May 2016, and leaves Blancco well resourced to exploit
the opportunities in its sector. Most importantly, shareholders now
have an undiluted exposure to the Software business. Blancco has
demonstrated exceptional margins and revenue growth, attributable
to its outstanding market position and the fast growing markets
which it serves. Year on year revenue growth for the data erasure
business was 29% in 2015 and 44% in 2016. These growth rates
reflect the growing demand for data erasure due to compliance and
security drivers, continued investments in sales and marketing, as
well as complementary "bolt on" type acquisitions.
With the new focus on software has come changes to the
composition of the Board. In October 2015, we welcomed a new
non-executive director, Thomas Skelton. Thomas has deep software
experience - he is currently the CEO of Surescripts, a US
healthcare software business, and was previously a non-executive
director of Micro Focus Plc. Ian Powell has retired from the Board
and from his role as CEO of the Repair Services Business, and I
would like to thank him for his role in the growth and subsequent
disposal of this business. I announced in May 2016 my intention to
become non-executive, retaining my role as Chairman of the Board,
while Pat Clawson becomes the group's CEO. Keith Butcher joined the
Group as CFO on 19 September 2016, taking over from Jog Dhody, who
will resign from the Group following an orderly handover.
The outlook for the Group is positive, with continued strong
demand for our data erasure and mobile diagnostics software, and an
even stronger management team following several senior hires in
2016.
Matthew Peacock
Non-executive Chairman
CEO's Statement
I am pleased to report that Blancco Technology Group delivered
strong results in 2016. Our revenue of GBP22.4 million (2015:
GBP15.0 million), represented an increase of 49%. Adjusted
Operating Profit before corporate costs was GBP7.6 million (2015:
GBP5.4 million) a rise of 41%. Adjusted earnings per share from
continuing operations were 5.63 pence, an increase of 92% on the
2015 earnings per share of 2.84 pence.
Data erasure products contributed GBP21.7 million (2015: GBP15.0
million) and comprised 97% of our revenue. Our mobile diagnostics
business, arising from the acquisition of Xcaliber, generated
GBP0.7 million in additional revenue in the period since it was
consolidated in January. Several contracts were closed at the end
of 2016 that will make mobile diagnostics a larger contributor to
overall revenue in 2017 and beyond.
Further details of these results, including the effect of
discontinued operations and currency movements, are contained in
the Group Review.
In these first annual results as a standalone software business,
we also set out our strategic goals and approach. Our stated goal
is to be the de facto standard in data erasure and mobile
diagnostics globally. Today, we are the clear market leader in data
erasure. However it is equally clear that the vast majority of
occasions in which a data erasure should be performed still pass
without an erasure happening. So, our strategy is about increasing
awareness of data erasure, and increasing the accessibility of data
erasure. As our strategy report sets out, we believe that this
requires a new appetite for partnership: with our large clients;
with the information security consulting industry; and especially
with large enterprise service providers who control workflows in
which erasure is - or should be - a simple tick in a box.
Acquisitions update
In September 2015 we acquired a data erasure competitor,
Tabernus, for $12 million (GBP7.7 million), bringing us market
leadership in the important US market. While Blancco's historic
roots were in Finland and Europe, the US is home to a large
proportion of the global businesses which Blancco serves. Its
software and cloud giants control a vast potential market of data
erasure occasions which we want to access in the future.
In January and March 2016 the Group acquired the remaining 51%
of mobile diagnostics provider Xcaliber Technologies, for $5.2
million (GBP3.6 million), of which $4.7 million (GBP3.3 million) is
contingent on future revenue targets. This acquisition has enabled
Blancco to improve its proposition to the smartphone remarketing
sector, where data erasure and device diagnostics are adjacent
process steps. It has also opened up a new market with the mobile
network operators, who are seeking converged consumer-facing
support and erasure solutions. In addition, Xcaliber maintains
research and development facilities in Pune, India, adding
innovative and low cost development capabilities to the Group, with
a deep expertise in Android and iOS. The expansion of the Group's
R&D function should allow greater product development for both
erasure and diagnostics products in order to drive the business
forward.
The Group continued to invest in its non-fully owned offices,
acquiring a 100% stake in Blancco Australasia in August 2016, and
planned further investments during quarter one and quarter two of
2017. The investments provide greater cross selling opportunities
in these regions as we now have full access to these markets.
Operational update
During 2016, we saw positive momentum in the sales of our Live
Environment Erasure product. The benefit of managing data erasure
continuously in a live storage environment, as opposed to on a
one-off basis at the device decommissioning stage, is very
significant for our clients and therefore for Blancco. The
technology has been in development for over 10 years and is now
starting to gain traction in the market. In 2016, invoiced sales
grew to GBP2.3 million compared to GBP0.8 million in the prior
year. We are now targeting large data center operators, who are
well positioned to promote live environment erasure to their
enterprise clients. Market education over 2017 will be a key
priority.
The Group has grown its mobile erasure invoiced sales by 42% in
2016 to GBP3.7 million (2015: GBP2.6 million), and the acquired
Xcaliber business complemented the mobile erasure product with
sales of an additional GBP0.7 million for the SmartChk diagnostic
products. In May 2016, following a successful pilot, we won a
contract to provide in-store SmartChk diagnostics across AT&T's
retail network in the USA. The roll-out has been successfully
delivered with tablet kiosks deployed to over 5,500 stores in under
six weeks. This contract is a landmark win for the business, being
the first large-scale deployment and reference case for the
technology, and taking the business to positive run-rate
profitability.
Our traditional end of life erasure products, which cover PCs,
Servers and other IT equipment, also generated good growth in
invoiced sales of 44% to GBP17.4 million (2015: GBP12.1
million).
Geographically, growth was strongest in North America, which
expanded sales by 146% to GBP9.6 million (2015: GBP3.9 million).
The organic growth rate was 121%, while additionally we acquired
Tabernus sales in the region of GBP1.0 million. We made management
changes following the buy-out of our minority partner in the US and
the acquisition of Tabernus, which led to improvements in
marketing, sales and service operations generally.
The Asia Pacific (APAC) region also delivered good growth in the
year, up 45% to GBP5.8 million (GBP4.0 million). A large portion of
this growth was generated by mobile erasure sales in Japan, as well
as the first sales of integrated erasure and diagnostics
technology. Further potential has been identified in China and the
Group has opened new locations in this territory to capitalize on
early opportunities.
The European business posed some challenges in 2016, growing at
8% in the year to GBP8.1 million (2015: GBP7.5 million). The region
was weak in the take up of new technologies in the mobile and live
environment spaces. The focus of efforts on the US, as well as the
movement of head office and many senior management roles to the
region, undoubtedly had a negative effect on momentum in this
region in 2016. We are investing in strengthening these sales
operations in 2017.
The Tabernus team has been fully integrated operationally into
the Blancco organisation. Xcaliber's commercial team in the USA has
also been operationally integrated, while the Xcaliber development
operations based in India remain operationally distinct.
Strategy Update
In 2016 we completed an extensive strategic review. This
identified important new initiatives for the business. The most
important insight gained from this review was that we need to lead
the market in driving erasure awareness and in making erasure more
accessible for enterprises to adopt it in a systematic way. If we
achieve this, the market should open up dramatically for us. This
belief is captured in our new strategic mission statement of
becoming the de facto standard in data erasure and mobile
diagnostics.
While continuing to grow our business in the IT Asset
Disposition (ITAD) sector we see the greatest opportunities in the
enterprise, data centre, and mobile network operator verticals. We
already have several large customers that have deployed our
enterprise erasure products throughout their desktop and datacenter
environments. These deployments have led to substantial recurring
revenue. The Group is the only provider of certified data erasure
products supported by services and the market is thinly penetrated
to date.
Building a Partner Business Development Function
Most potential enterprise erasure happens within the workflows
of other enterprise service providers. These include IT Value Added
Resellers (VARs), who provision and manage IT solutions for
enterprises, and Managed Service Providers (MSPs), who deliver
services such as applications, networking, data storage and
security solutions over networks or the Cloud. In a congested IT
security environment, Chief Information Officers prefer to work
with a small number of large, trusted VARs and MSPs. They also
prefer erasure solutions which are integrated into these platforms.
Data centres provide a target market for us, where our live
environment erasure products are particularly relevant.
To date, Blancco has predominantly adopted a direct sales model,
led by local teams, and based on the sale of standalone Blancco
erasure products for license (per erasure) or subscription
payments. This model continues to be a successful one and will
remain a key pillar of our route to market. Partner channel
development will act as a complementary sales route into markets in
which we have not historically secured a strong foothold.
We will also build a robust global partner business development
function which seeks to provide integrated data erasure to
enterprises within the ecosystems of VAR and MSP partners. Steve
Holton, our new President and Chief Revenue Officer, brings
extensive experience of building successful software partnerships
and channel sales.
Thought Leadership, Regulation, and Market Education
In addition to sales training in each region we are executing on
a strategy of market education. As the industry leader it is in
Blancco's interest to establish thought leadership by participating
in industry events, publishing guides and best practices, and
continuing our PR and lobbying efforts with systematic campaigns.
Data erasure is not prioritised by most of the large software and
security analyst firms, often only mentioned as a function of
ITADs. Major regions, including the UK, EU, and US, are active in
legislating new data protection laws but require assistance in
their efforts to understand data erasure requirements. Richard
Stiennon, our new Chief Strategy Officer and a respected thought
leader in the information security space, brings to the Group a new
level of expertise in this area.
Mobile Diagnostics
The market for consumer data erasure is expanding rapidly
through the mobile network operators. They increasingly seek to
provide erasure solutions to their customer base, especially around
the smartphone upgrade occasion. Our recent acquisition of Xcaliber
Technologies and its SmartChk smartphone diagnostics product gives
us a stronger platform in mobile erasure. It is also opening up a
large opportunity in smartphone diagnostics. The synergy with our
data erasure business occurs in at least three areas:
(1) Mobile network operators want self-help consoles in their
stores. These perform smartphone diagnostics and smartphone erasure
in one package (as well as equivalent solutions delivered through
call centre and online support channels);
(2) Smartphone remarketing companies want to perform both
erasure and diagnostics on used devices prior to resale;
(3) Maintaining a deep expertise in the Android and iOS
operating systems in important to both erasure and diagnostics.
Strategically, we have identified the mobile network operators
as a key partnership for us, alongside the enterprise market and
the data center market. Our pipeline of new business in this
vertical is strong.
M&A
The primary source of our growth is organic. However, we will
continue to engage in M&A activity for prospective growth via
acquisition, should the right opportunity arise. Such opportunities
will help enhance the Group's market position and footprint in new
geographies or complementary product offerings.
Technology Update
In March 2016, we were awarded US Patent No. 9286231 for our
Solid State Drive (SSD) erasure method, in addition to the European
patent awarded in July 2015. In our view, this is the only
universal method to reliably erase the broad range of different
brands and models of SSD drive available in the market. SSD drives,
typically used in premium-priced laptops and other IT equipment,
including servers, are rapidly growing their share of the storage
market.
Legislation and regulatory change is driving the need for
digital data destruction globally. The EU Global Data Protection
Regulation (GDPR) and the "Right to be forgotten" is calling for
data erasure in a number of ways and reaches beyond Europe to North
America and APAC. The International Organisation for
Standardisation (ISO) standards ISO 27001, 27018 and 27040 include
specific call-outs for the erasure of digital data for the
protection of customers. We are also seeing spot regulation within
specific industries, including banking and finance, the Payment
Card Industry (PCI), federal government and healthcare.
Building on our recent success with patenting our SSD erasure
technology we have established a programme to cultivate our
technology innovation and increase the number of patents filed.
This strategy protects our market and provides a defensive
portfolio to ward off future challenges to our technology
position.
We are also standardising our product development processes
across regions so that we can stay agile and bring product
enhancements to market quickly.
Blancco Management Console is a product we have developed to
centrally manage licences and reports for secure erasure. A central
management console is critical to growing an enterprise business
strategy. Each data erasure product can integrate with the
management console and Application Programming Interfaces (APIs)
are being developed to enhance integration with third party
products. The product is available as a stand alone software
solution or as a service through Blancco Cloud.
Our product development roadmap also includes new projects
related to integration and API improvements, and to the management
features required to deliver a successful partnering strategy.
In 2016 we have created and are tracking a programme to enhance
our product and process certifications. We already have a wide set
of global certifications including CESG in the UK, ISO 15408 and
NATO. Certifications serve as a barrier to entry for new entrants
in the field, thus they enhance our defensive position. They are
also required by many enterprise prospects so are a required
investment.
Leadership Update
In 2016 we continued to focus on building out our top team, to
bring in the skills and experience required to execute our
strategy.
I am excited by the addition of Steve Holton to our team. As our
President and Chief Revenue Officer (from July 2016) he is
responsible for building and scaling the Group's global sales team
to drive continued revenue growth. Steve is an experienced software
industry veteran and has 20 years of experience selling B2B
software solutions. Most recently, he was SVP of Worldwide Sales
and Customer Success for mobile enterprise security company, Good
Technologies. He grew this from a $200 million organisation into a
highly valued company that was acquired by BlackBerry (NASDAQ:
BBRY) for $425 million in September 2015.
Since joining, Steve has further enhanced his team by bringing
in Matt Sturges, VP of Global Business Development and Channel
Sales who will be responsible for our partner oriented route to
market. Matt brings 11 years of experience in channel and direct
sales roles at Apple, generating substantial revenue growth through
partner channels.
As we focus the Group on growth in the Americas and in
enterprise erasure globally, we look to Richard Stiennon to lead
the company's overall corporate strategy. This includes long-term
strategic planning, product positioning, public affairs, industry
analyst relations, joint ventures and industry partnerships.
Richard is a former VP Research for industry analyst firm Gartner,
Inc. and has held executive positions at Fortinet, and Webroot
Software.
In 2016 Khalid Elibiary, the former president of Tabernus, took
on the role of VP of R&D and Customer Experience. Khalid brings
to the role his considerable expertise in growing a successful data
erasure business and will lead our product teams in technology
innovation as we extend our critical IP assets.
Outlook
The outlook for 2017 is positive. New market regulations
surrounding data management and a very thinly penetrated market for
secure data erasure means that increased marketing and thought
leadership, should lead to continued healthy increases in revenue
while maintaining the favourable gross margins and profits
associated with the pure play software business of the Group.
We have seen no impact of the UK's intended exit from the
European Union on our business. We are confident that the
fundamental drivers of growth in our business are strong.
We remain confident in market expectations for 2017 as we
continue to penetrate the still nascent markets for both data
erasure and mobile device diagnostics.
Pat Clawson
Chief Executive Officer
Enquiries:
Blancco Technology Group Plc +44 (0) 20 3657 7000
Pat Clawson, Chief Executive Officer
Jog Dhody, Chief Financial Officer
Peel Hunt LLP (Nominated Adviser and Broker) +44 (0) 20 7418 8900
Richard Kauffer
Euan Brown
Panmure Gordon (UK) Limited (Joint Broker) +44 (0) 20 7886 2500
Dominic Morley, Corporate Finance
Charles Leigh Pemberton, Corporate Broking
Tulchan Communications +44 (0) 20 7353 4200
Tom Murray
Results
The financial performance of the business is summarised as
follows:
-- Revenue of GBP22.4 million (2015: GBP15.0 million, growth 49%);
-- Adjusted Operating Profit before corporate costs of GBP7.6
million (2015: GBP5.4 million, growth 41%);
-- Adjusted Operating Profit after corporate costs of GBP6.1
million (2015: GBP4.0 million, growth 53%);
-- Adjusted Operating Profit margin of 27% after corporate costs (2015: 27%).
Operating loss was GBP0.4 million (2015: operating loss GBP1.6
million). Reduction in operating loss was due to increased revenues
and the reduction of exceptional M&A costs relative to the
prior year.
Adjusted operating cash flow was GBP6.0 million (2015: GBP4.1
million), with a cash conversion of 98% (2015: 103% conversion)
relative to Adjusted Operating Profit. Net cash at the end of the
period was GBP1.0 million (2015: GBP7.8 million).
Key financials 2016 2015
GBP'm GBP'm
================================== ======= =======
Invoiced Revenue 24.4 15.5
Revenue 22.4 15.0
Adjusted Operating Profit
before corporate costs 7.6 5.4
Adjusted Operating Profit
after corporate costs 6.1 4.0
Operating loss (0.4) (1.6)
===================================== ======= =======
Adjusted Operating
Profit margin % before
corporate costs 33.9% 36.0%
Adjusted Operating Profit margin
% after corporate costs 27.2% 26.7%
Operating margin % (1.8)% (7.1)%
==================================== ======= =======
Segmental Results
Year
Year ended ended
30 June 30 June
2016 2015
GBP'million GBP'million
=============================== ============ ============
Revenue
Erasure 21.7 15.0
Diagnostics 0.7 -
Total 22.4 15.0
================================ ============ ============
Divisional Adjusted Operating
Profit
Erasure 7.6 5.4
Diagnostics - -
Total 7.6 5.4
Corporate costs (continuing
operations) (1.5) (1.4)
================================ ============ ============
Total Adjusted Operating
Profit 6.1 4.0
================================ ============ ============
Discontinued Revenue 151.9 187.6
================================ ============ ============
Discontinued divisional
Adjusted Operating Profit 9.7 15.2
Corporate costs (discontinued
operations) (3.4) (3.8)
================================ ============ ============
Total discontinued Adjusted
Operating Profit 6.3 11.4
================================ ============ ============
Group Review
The continuing business consists of the Erasure and Diagnostics
divisions. The Erasure division includes the Blancco business which
enables customers to test, diagnose, repair and repurpose IT
devices with certified software. The Diagnostics division holds our
SmartChk product, obtained and developed as part of the Xcaliber
acquisition, which provides consistent, accurate and measurable
diagnostics of smartphones and tablets.
The revenues and Adjusted Operating Profit of these divisions
comprise the Group's continuing operations as presented in the
financial statements
The discontinued business comprises the Group's depot repair
facilities and its mobile phone insurance activities. The Repair
Services Business was sold in April 2016, and therefore the above
figures include only 9 months of trading.
An agreement to sell the Digital Care insurance business to
Mazovia Capital was reached on 19 September and therefore the above
figures include the full year results for that business.
The total result for the year, including the impact of the
required accounting for discontinued operations was a loss of
GBP24.2 million (2015: GBP5.1 million profit).
The full results of the discontinued business are presented in
note 7.
Erasure division
The Erasure division includes Blancco, acquired in April 2014,
the global market leader data erasure software, and the bolt-on
acquisitions of SafeIT (acquired September 2014) and Tabernus
(acquired September 2015). Both acquisitions have been fully
integrated onto the Blancco platform.
The Erasure division revenue increased to GBP21.7 million (2015:
GBP15.0 million), of which GBP1.5 million was generated by the
acquisition of Tabernus. The organic growth of 35% was
predominantly driven by the growth in the strategically important
North American region and the LEE product group.
Adjusted Operating Profit before corporate costs was GBP7.6
million, at a margin of 33.9%, compared to a margin of 36.0% in
2015. The Adjusted Operating Profit margin has reduced slightly in
the current period. The decline in margin is a result of investment
in new strategic headcount in order to drive future revenue
growth.
Financial and operational highlights included:
-- Acquisition and integration of Tabernus, which further
enhances the Group's market footprint both geographically, through
its strong position in the US market, and through the addition of
new product lines to the Group's portfolio.
-- Strong growth in the strategically important North American
region, with invoiced sales growing by 146%.
-- A new distribution agreement signed in the United Arab
Emirates, opening new sales channels to the technology centre of
the Middle East.
-- Acquisition of the remaining share capital of Blancco
Australasia which was not already owned, bringing the Group's share
to 100%
-- Expansion into new geographies in India and China, allowing
us to generate new revenue streams from these high growth
economies.
-- Strong growth in the Live Environment Erasure product sales,
which represents a more sophisticated erasure method in customers'
networked storage environments, allowing real time and "live" data
erasure in addition to the end of life erasure offered by the
business' existing product range.
-- Grant of European and US patents for our SSD erasure method
Diagnostics division
The Diagnostics division is made up of Xcaliber Technologies, a
smartphone diagnostics software business. The Group increased its
stake in this business from 49% to 100% during the financial
year.
The Diagnostics division generated revenue for the Group for the
first time this year, having previously been a non-consolidated
associate at 49% ownership. Revenues for the six month period since
acquisition were GBP0.7 million. On a pro-forma basis, Xcaliber
generated revenues of GBP1.3 million in the full year period, which
represents growth from prior year revenues of GBP0.3 million. This
growth has been achieved through the transition of the business
from a start up development proposition to a self-sufficient sales
generative organisation.
The division recorded adjusted operating profit of GBPnil for
the period, compared to a pro-forma loss of GBP1.5 million for the
prior year. The improvement in profitability to break even is led
by the ramp up of new customer contracts in this period.
Financial and operational highlights included:
-- Integration and cross selling of the diagnostics product with
the traditional erasure product giving customers a more
sophisticated all in one data erasure and diagnostics management
tool
-- Commencement of large contract with AT&T which has
resulted in a roll out of the diagnostics tool into over 5,500
stores in the US
Revenue Recognition
The Group monitors its sales performance by tracking Invoiced
Revenue, which is a measure of the level of business won in the
year. This differs from the reported revenue figures as IFRS
revenue recognition requires the business to defer the revenue
earned on software subscriptions - which have a defined term - over
the term of the contract.
This had an adverse impact on revenue in the period in which the
sale was made, as the revenue is held on the balance sheet and
released in future periods as the contract is fulfilled. The impact
is shown below:
2016 2015
GBP'm GBP'm
====================================== ======= =======
Invoiced Revenue 24.4 15.5
Net revenue deferral of subscription
sales (2.0) (0.5)
Reported revenue 22.4 15.0
====================================== ======= =======
The increase in revenue deferral in 2016 is a result of both the
increase in absolute sales generated in comparison to the prior
year, and an increase in the number of corporate deals signed up,
which are typically high value subscription deals over a number of
years.
The total deferred revenue for the continuing Group at 30 June
2016 was GBP4.8 million (2015: GBP2.4 million) which represents
revenue to be recognised in future periods.
Corporate costs
Corporate costs of GBP1.5 million (2015: GBP1.4 million)
increased slightly. The cost base represents the costs associated
with running the central function, and the run rate of these costs
has decreased significantly compared to the previous year as the
disposal of the Repair Services Business has resulted in a
reduction in required resource.
Currency hedging activities and constant currency
One of the risks that the Group faces by doing business in
overseas markets is currency fluctuations. In order to manage the
Group's exposure to this, the CFO conducts a quarterly review of
the Group's currency hedging activities and makes a formal
recommendation for any changes to the Board every half year by
exception.
The Group is well diversified across a number of currencies,
with sterling representing only around 10% of revenues. Over the
course of 2016, sterling has weakened against the main overseas
currencies in which the Group trades, predominantly the Euro
(comprising 20% of revenues), US Dollar (comprising 30%) and
Japanese Yen (comprising 20%). This was compounded in June 2016
following the UK's decision to leave the European Union, at which
point the Euro and US Dollar rates fell by 11% and 8% respectively.
This has generated a foreign exchange benefit as the overseas
earnings are now worth more in sterling terms.
The exchange rates applied at the year end are as follows:
30 June 30 June
2016 2015
================ ======= =======
Euro 1.20 1.41
US Dollar 1.33 1.57
Japanese Yen 136.50 191.97
================ ======= =======
A comparison of actual results to results restated at expected
exchange rates is presented below:
Year ended Year ended
30 June 30 June
2016 2016
Actual Constant
Results Currency
GBP'million GBP'million
================================== ============ ============
Invoiced Revenue 24.4 23.8
Revenue 22.4 21.9
Divisional Adjusted Operating
Profit 7.6 7.4
Group Adjusted Operating Profit 6.1 5.9
----------------------------------- ------------ ------------
Adjusted earnings per share
(pence) 5.63 5.34
Basic earnings per share (pence) (3.69) (3.98)
=================================== ============ ============
The Group implements forward contracts for payments and
receipts, where the amounts are large, are not denominated in the
local country's functional currency, where the timing is known in
advance, and where the amount can be predicted with certainty. In
addition, the Group undertakes natural hedges by structuring and
paying future earn-outs on acquisitions in the acquired company's
local currency.
The Group has a mix of business across 10 main currencies which
provides smoothing of currency movements in any one country through
a portfolio effect. The cash and loan balances held in different
currencies provide a natural hedge.
The Group does not undertake any cash flow or profit hedging
activities to insulate from currency movements in respect of
overseas earnings, specifically the conversion of its largely
non-sterling generated income into the Group's reporting currency,
sterling.
No other hedging activities are undertaken in respect of
tangible and intangible fixed assets, working capital (such as
stock, debtors, or creditors), or other balance sheet items, as
these are generally small in nature in any one individual
country.
Disposal of Repair Services Business
On 4 April 2016, the Group completed the disposal of 100% of the
issued share capital of Regenersis (Depot) Services Limited and its
subsidiaries to CTDI Repair Services Limited for cash consideration
of EUR103.5 million (GBP79.9 million).
The disposal represents the Group's Repair Services Business and
signifies the point at which the Company transitioned to a pure
play software business. The result of this business for the period
was a loss of GBP8.3 million (2015: GBP8.4 million profit) as
detailed in note 7.
On 19 September 2016 the Group reached an agreement to sell the
Digital Care business to Mazovia Capital for initial contingent
consideration of EUR1.2 million (GBP1.0 million) with a further
contingent earn out of EUR3.3 million (GBP2.8 million) payable over
2 to 3 years. These proceeds will be reinvested into the Software
business.
Acquisition of Tabernus
In September 2015, Blancco acquired 100% of the share capital of
Tabernus LLC and Tabernus Europe Limited, a privately owned
provider of software erasure. With the majority of its revenue in
the US, Tabernus is the USA market leader for this business. The
consideration was $12 million (GBP7.7 million) comprising cash
payment of $10 million (GBP6.4 million) funded through the Group
revolving credit facility and $2 million (GBP1.3 million) in
contingent cash consideration payable after three years.
Acquisition of Xcaliber
On 4 January 2016, the Group acquired 27% of the issued share
capital of Xcaliber Technologies LLC for a consideration of $0.5
million (GBP0.3 million), funded through the Group revolving credit
facility, bringing the Group's share of this business to 76%.
At the point of acquisition, the Group was required to present a
disposal of its investment interest in Xcaliber and has
consolidated the results of Xcaliber from this date. At the point
of acquisition, a non-cash loss on disposal of the equity
investment of GBP1.3 million was realised.
On 17 March 2016, the group acquired the remaining share capital
of Xcaliber Technologies LLC which it did not already own for an
initial cash consideration of $0.5 million (GBP0.3 million) and a
further estimated earn out payment of $4.7 million (GBP3.3
million), payable over 3 years depending on the business achieving
certain revenue targets. On completion, an additional $0.4 million
(GBP0.3 million) was used to settle outstanding debts to the
seller.
Acquisition of Non-controlling Interest in Blancco
Australasia
On 17 August 2016, the Group acquired the remaining 49% it did
not already own of the issued share capital of Blancco Australasia
Pty. The consideration of AU$0.1 million (GBP0.1 million) was
funded through the Group's cash reserves.
Exceptional Acquisition and Restructuring Costs
The Group has undertaken acquisitions in the period which have
incurred exceptional acquisition expenses. In addition, the Group
has pursued the buy out of some of the remaining Blancco sales
offices which it does not currently 100% own.
Acquisition costs amounted to GBP1.3 million (2015: GBP2.4
million), predominantly relating to the acquisitions of Tabernus
and Xcaliber.
Exceptional restructuring costs in the continuing business
amounted to GBPnil (2015: GBP0.1 million).
In the discontinued business, the M&A costs totalled GBP9.6
million (2015: GBP0.6 million) and relate to the disposal of the
Repair Services and Digital Care businesses and subsequent tender
process leading to the return of GBP50 million of capital to
shareholders.
The restructuring costs in the discontinued business were GBP1.5
million (2015: GBP0.6 million) and relate to the costs of
restructuring the Group in preparation for sale, as well as
subsequent downsizing of central functions.
Amortisation of internally generated R&D Expenditure
Amortisation of internally generated intangible assets which
have been generated by the Group is presented within Adjusted
Operating Profit. This represents the charge for internal
development costs of the Group's R&D team. The activity of the
R&D team is split between research and administration activity
which is not eligible for capitalisation, and development time
which is required to be capitalised under IFRS.
The charge for the year is GBP0.5 million (2015: GBP0.1 million)
and is increasing over time due to the accumulation of capital
expenditure since the acquisition of Blancco in April 2014. The
Group is continuing to invest greater amounts each year in its
development activities and amortises the expenditure over the
period the product is expected to last, generally four years. The
amortisation is therefore currently lagging behind the development
expenditure capitalised.
Amortisation of Acquired Intangibles
Amortisation of acquired intangible assets acquired as part of
the Group's previous M&A activity was GBP2.5 million (2015:
GBP2.0 million). The cost has increased in the year primarily due
to the acquisition of intangible assets on the Tabernus and
Xcaliber acquisitions.
Share Based Payments
Share based payments charge was GBP1.2 million (2015: GBP0.4
million) and includes both the straight line accounting charge for
the Group's remaining share incentive plans as well as the charge
for the options granted under the Software long term incentive
scheme.
The charge is based on the expected growth in value of the
business at the end of the award vesting period, in comparison to
the valuation on inception. A charge of GBP0.5 million (2015:
GBPnil) is recorded in respect of the scheme representing the
accumulated growth in value for the participants.
Details of these schemes can be found in the Annual Report and
Accounts.
Net Financing Expense
Net financing expense was GBP0.9 million (2015: GBP0.8 million).
Included within the financing costs are:
-- The unwind of the time value of money on the deferred
consideration payable in future periods for the Group's
acquisitions, which represents a non-cash charge of GBP0.3 million
(2015: GBP0.2 million).
-- The impact of revaluation of deferred consideration payable
in non-sterling currencies. The impact of Brexit and subsequent
weakening of sterling resulted in a non-cash charge of GBP0.3
million in the current period.
-- The cost associated with the Group's banking facility of
GBP0.3 million (2015: GBP0.4 million), reduced slightly due to the
lower facility available for the continuing Group.
-- Other interest cash costs of GBPnil (GBP0.2 million).
The finance income represents the interest earned on cash
holdings around the Group.
Taxation
The total tax charge was GBP0.7 million (2015: GBP0.9
million).
Earnings per share
Adjusted earnings per share for the continuing business were
5.63 pence (2015: 2.84 pence). The growth has been driven by the
growth in profits for the continuing business in the year.
Basic loss per share for the continuing business was 3.69 pence
(2015: 3.84 pence). The increased sales and improved profitability
representing cash inflow for the group was offset by the one off
non-cash loss on disposal booked on the Xcaliber acquisition.
Cash and Working Capital
Year Year
ended ended
30 June 30 June
2016 2015
GBP'm GBP'm
==================================== ======== ========
Adjusted operating cash
flow before movement in
working capital and exceptionals 6.9 4.2
Movement in working capital
and exceptionals (0.9) 0.5
Movement in provisions - (0.4)
====================================== ======== ========
Adjusted operating cash
flow 6.0 4.1
Net interest payments (0.2) (0.4)
Tax paid (0.6) (0.6)
M&A payments (1.1) (1.4)
Exceptional payments - (0.1)
====================================== ======== ========
Net cash from operating
activities - continuing
operations 4.1 1.6
Net capital expenditure (2.5) (1.8)
Acquisition of subsidiaries,
associates and other investments,
net of cash acquired (7.8) (4.4)
Net cash flow from sale 18.8 -
of subsidiaries and share
buy backs
Net cash flow from share
issues, option vesting
and dividend payments (3.1) (6.9)
Other movements (1.3) (2.0)
Cash flow on discontinued
operations (15.0) 0.7
====================================== ======== ========
Total cash flow (6.8) (12.8)
Net cash 1.0 7.8
====================================== ======== ========
We closed the year with net cash of GBP1.0 million (2015: GBP7.8
million). This reduction is primarily as a result further
investment in new locations in Asia, Europe and the Middle East as
well as the acquisition of the new Xcaliber Diagnostics business,
all of which should drive growth in 2017.
Discontinued cash flow
The disposal of the repair business generated proceeds of
GBP79.9 million, the majority of which was used to fund the return
of cash to shareholders via the buy back and subsequent
cancellation of shares in May 2016.
The business incurred exceptional costs totalling GBP11.1
million in connection with this disposal and the restructuring of
the Repair Services Business which took place prior to its
disposal. The net cash flow for the discontinued business for the
year, including the sale of the Repair Services business, the
return of funds to shareholders and the trading cash flow was a
GBP3.8 million inflow.
Continuing cash flow
Adjusted operating cash flow of GBP6.0 million (2015: GBP4.1
million) and operating cash inflow of GBP4.1 million (2015: GBP1.6
million) were both higher than in previous periods, primarily
driven by the increase in profit. The cash conversion for the year
was 98% (2015: 103%), which saw an increase in working capital in
the second half of the year. This is driven by four factors:
-- The move in the mix of business towards volume customers and
away from subscription customers; where subscription customers pay
up front for the contract. The mix reduction in these customers
paying cash up front has resulted in lower cash generation relative
to profits.
-- Increasing levels of sales with large corporate customers,
who generally carry larger credit terms.
-- The business recording a significant amount of sales towards
the end of the reporting period, which was 73% higher than the
prior year, therefore the cash flows associated with these sales
were deferred to FY17.
-- For the first time, diagnostics sales, which are generally
with larger corporations over longer credit terms.
Tax paid was GBP0.6 million (2015: GBP0.6 million).
Net interest paid was GBP0.2 million (2015: GBP0.4 million). The
majority of the interest expense recorded in the Income Statement
is non-cash, as it relates to the impact of changes in current
value of future payables.
The Group has continued to invest in the development and
enhancement of its erasure and diagnostics tools. Capital
expenditure and R&D increased to GBP2.5 million (2015: GBP1.8
million).
Expenditure on tangible assets, including leasehold improvements
and technical equipment, and software licences amounted to GBP0.2
million (2015: GBP0.1 million).
Capital development expenditure on R&D activities amounted
to GBP2.3 million (2015: GBP1.7 million). During the year, the
spend comprised software development across the erasure portfolio
of products, customer specific product development, and investment
in new diagnostics.
The spend has included work to bring the product up to the
specification to obtain patents in the UK and US alongside its
worldwide certifications, with further investment in patent
protection remaining a management focus.
Investment was specifically directed towards integrating the
Blancco product onto the new hardware platform acquired with
Tabernus. In addition, we have continued to develop the mobile
product, developing and releasing a new version in 2016 following
the initial product launch in 2015.
We have developed the SmartChk diagnostics product, acquired
with Xcaliber, to integrate this into a Depot repair network for
our existing customers, as well as developing a combined
erasure-diagnostics solution for the market from our existing
portfolio.
These investments have allowed the business to better target
products towards larger customers where the business has already
seen benefit in 2016, and going forward for cloud customers and
data centres who require more complex erasure solutions.
Net Cash
Year end net cash comprised gross borrowings of GBP3.7 million
denominated in sterling (2015: GBP4.6 million in sterling and
euros), cash and cash equivalents of GBP4.8 million (2015: GBP12.1
million) and deferred arrangement fees of GBPnil (2015: GBP0.3
million).
Dividend
In line with our stated dividend policy, the Board is
recommending a final dividend of 1.34 pence per ordinary share to
be paid on 7 December 2016 to shareholders on the register on 4
November 2016. This gives a full year dividend of 2.0 pence per
ordinary share, which has been rebased following the sale of the
repair services business. The Board intends to adopt a progressive
dividend policy which reflects the long term earnings and cash flow
potential of the Group.
Post Year-end Events
On 17 August 2016, the group acquired the remaining 49% of the
share capital of Blancco Australasia Pty Ltd that it did not
already own for a cost of AU$ 0.1 million (GBP0.1 million). The
consideration was funded through the Group's cash reserves.
On 19 September 2016 we reached an agreement to sell the Digital
Care business to Mazovia Capital for initial contingent
consideration of EUR1.2 million (GBP1.0 million) with a further
contingent earn out of EUR3.3 million (GBP2.8 million) payable over
2 to 3 years. These proceeds will be reinvested into the Software
business.
Key Performance Indicators
The Group has a range of performance indicators, both financial
and non-financial, to monitor and manage the business and
ultimately to improve performance. The Group's key performance
indicators ("KPIs") are outlined below:
Year Year Commentary
ended ended
Key financials 30 June 30 June
2016 2015
=======================
Invoiced Sales is
an important KPI for
the Group as it measures
the actual sales closed
and invoiced in the
period, before any
IFRS deferral of revenue.
It is a key metric
for how the salesforce
Invoiced Sales has grown the underlying
(GBP'm) 24.4 15.5 business of the Group
======================== ======== ======== ===========================
Geography (Regional
proportion of
invoiced sales)
======================= ======== ======== ===========================
North America is a
strategically important
location for the Group
and focus is on growing
our presence in this
location. The significant
growth has resulted
from an increased
presence in the market
and investment in
North America 40% 25% sales resources
===========================
Europe 35% 49%
===========================
Asia and ROW 25% 26%
======================== ======== ======== ===========================
100% 100%
======================= ======== ======== ===========================
Product type
(Proportion of
invoiced sales)
======================= ======== ======== ===========================
The Group is expanding
its product range
through the acquisition
and development of
new services, most
notably LEE (through
SafeIT). The Group
has seen growth in
this area in the year
as the product is
further developed
for our customer's
LEE 10% 5% needs.
===========================
Mobile 16% 16%
===========================
IT and Other 74% 79%
======================== ======== ======== ===========================
100% 100%
======================= ======== ======== ===========================
The rate at which
customers are repeating
business is high and
improving demonstrating
the value our products
provide.
Our customers spend
increasing amounts
with us year on year,
showing the additional
Trailing 12 month value our wide product
client retention range holds
rate* 91% 81% .
======================== ======== ======== ===========================
Trailing 12 month
sales repeat
rate* 113% 103%
======================== ======== ======== ===========================
Average annual
spend per customer*
(GBP'000) 51.6 44.1
======================== ======== ======== ===========================
End of year headcount
======================= ======== ======== ===========================
We continue to invest
in headcount, through
R&D development of
our products and our
salesforce to generate
new business. Our
R&D team expanded
following the Xcaliber
acquisition in the
Admin 21 24 year.
===========================
R&D 107 30
===========================
Sales 87 81
======================== ======== ======== ===========================
215 135
======================= ======== ======== ===========================
* for customers spending over EUR10k per year
Consolidated Income Statement
Year ended Year ended
30 June 30 June
2016 2015
Note GBP'000 GBP'000
==================================== ===== =========== ===========
Continuing operations revenue 2 22,387 15,014
Divisional operating profit 2 7,605 5,382
Corporate costs (1,516) (1,359)
Adjusted Operating Profit 2 6,089 4,023
Acquisition costs 3 (1,343) (2,414)
Exceptional restructuring
costs 4 - (67)
Amortisation of intangible
assets (2,494) (2,026)
Share-based payments (1,167) (371)
------------------------------------- ----- ----------- -----------
Group operating profit/(loss) 1,085 (855)
Loss on disposal of Xcaliber
investment following acquisition 8 (1,314) -
Share of results of associates
and jointly controlled
entities (155) (746)
===================================== ===== =========== ===========
Operating loss (384) (1,601)
Finance income 6 68 48
------------------------------------- ----- ----------- -----------
Unwinding of contingent
consideration (292) (171)
Revaluation of contingent (293) -
consideration
Other finance costs (416) (672)
===================================== ===== =========== ===========
Finance costs 6 (1,001) (843)
------------------------------------- ----- ----------- -----------
Loss before tax (1,317) (2,396)
Taxation (649) (869)
===================================== ===== =========== ===========
Loss for the period 5 (1,966) (3,265)
===================================== ===== =========== ===========
Discontinued operations
Post tax results from discontinued
operations 7 (22,198) 8,382
===================================== ===== =========== ===========
(Loss)/profit for the period (24,164) 5,117
===================================== ===== =========== ===========
Attributable to:
Equity holders of the Company (24,838) 5,404
Non-controlling interest 674 (287)
===================================== ===== =========== ===========
(Loss)/profit for the period (24,164) 5,117
===================================== ===== =========== ===========
Earnings per share
Continuing Operations: (3.69 (3.84
Basic 8 p) p)
(3.69 (3.84
Diluted 8 p) p)
Discontinued Operations:
(31.03 10.81
Basic 8 p) p
(31.03 10.81
Diluted 8 p) p
Total Group:
(34.72
Basic 8 p) 6.97 p
(34.72
Diluted 8 p) 6.97 p
Consolidated Statement of Other Comprehensive Income
Year Year
ended ended
30 30
June June
2016 2015
GBP'000 GBP'000
================================= =========== ============
(Loss)/profit for
the period (24,164) 5,117
Other comprehensive
income - amounts that
may be reclassified
to profit or loss
in the future:
Exchange differences
arising on translation
of foreign entities 2,542 (3,786)
=================================== =========== ============
Total comprehensive
(loss)/income for
the period (21,622) 1,331
=================================== =========== ============
Attributable to:
Equity holders of
the Company (22,296) 1,618
Non-controlling interests 674 (287)
=================================== =========== ============
Total comprehensive
(loss)/income for
the period (21,622) 1,331
=================================== =========== ============
Consolidated Balance 30 June
Sheet 2016 30 June
2015
Note GBP'000 GBP'000
============================= ===== ========= ==========
Assets
Non-current assets
Goodwill 42,821 83,157
Other intangible assets 24,071 27,041
Investments in jointly
controlled entities
and associates - 1,850
Other Investments - 61
Property, plant and
equipment 430 6,355
Deferred tax - 622
============================= ===== ========= ==========
67,322 119,086
============================= ===== ========= ==========
Current assets
Inventory 116 9,480
Trade and other receivables 8,901 34,556
Cash 4,769 12,143
Assets held for sale 7 4,804 -
============================= ===== ========= ==========
18,590 56,179
============================= ===== ========= ==========
Total assets 85,912 175,265
============================= ===== ========= ==========
Current liabilities
Trade and other payables (14,237) (40,471)
Contingent consideration (2,213) (1,734)
Current tax liability (2,264) (642)
Provisions (1,569) (372)
Liabilities held for
sale 7 (3,038) -
============================= ===== ========= ==========
(23,321) (43,219)
Non-current liabilities
Borrowings 13 (3,727) (4,357)
Other payables (954) -
Contingent consideration (3,196) (3,994)
Deferred tax (1,844) -
Provisions (3,782) (1,029)
============================= ===== ========= ==========
(13,503) (9,380)
============================= ===== ========= ==========
Total liabilities (36,824) (52,599)
============================= ===== ========= ==========
Net assets 49,088 122,666
============================= ===== ========= ==========
Equity
Ordinary share capital 1,164 1,581
Share premium - 51,737
Merger reserve 4,034 4,034
Capital redemption reserve 417 -
Translation reserve (434) (7,115)
Retained earnings 42,950 72,191
============================= ===== ========= ==========
Total equity attributable
to equity holders of
the Company 48,131 122,428
Non-Controlling interest
reserve 957 238
============================= ===== ========= ==========
Total equity 49,088 122,666
============================= ===== ========= ==========
Pat Clawson Jog Dhody
Chief Executive Officer Chief Financial Officer
Company number: 05113820
Consolidated Statement of Changes to Equity
Non-controlling Capital
Share Share Merger Translation Retained interest redemption
capital premium reserve reserve earnings reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================= ==================== ========== ======== ============ =========== ================= ============ ===========
Balance as at
30 June 2014 1,581 121,737 4,034 (3,329) 5,820 570 130,413
Comprehensive
income:
Profit for the
year - - - - 5,404 (287) - 5,117
Other
comprehensive
income:
Exchange
differences
arising on
translation
of foreign
entities - - - (3,786) - - - (3,786)
Transactions
with
owners recorded
directly in
equity:
Recognition of
share based
payments - - - - 914 - - 914
Dividends paid - - - - (3,381) - - (3,381)
Other
transactions:
Acquisition of
non-controlling
interest
without
a change in
control - - - - (2,938) - - (2,938)
Reserves
transfer
on acquisition
of
non-controlling
interest - - - - 45 (45) - -
Purchase of
Company's
own shares - - - - (3,673) - - (3,673)
Conversion of
share premium
account - (70,000) - - 70,000 - - -
================= ==================== ========== ======== ============ =========== ================= ============ ===========
Balance as at
30 June 2015 1,581 51,737 4,034 (7,115) 72,191 238 - 122,666
================= ==================== ========== ======== ============ =========== ================= ============ ===========
Comprehensive
income:
Loss for the
year - - - - (24,838) 674 - (24,164)
Transfer of
translation
reserve on
disposal
of subsidiary - - - 4,139 - - - 4,139
Other
comprehensive
income:
Exchange
differences
arising on
translation
of foreign
entities - - - 2,542 - - - 2,542
Transactions
with
owners recorded
directly in
equity:
Recognition of
share based
payments - - - - 757 - - 757
Dividends paid - - - - (3,071) - - (3,071)
Other
transactions:
Acquisition of
non-controlling
interest
without
a change in
control - - - - (3,046) - - (3,046)
Conversion of
share premium
account - (51,737) - - 51,737 - - -
On acquisition
of subsidiary - - - - - (43) - (43)
Reserves
transfer
on acquisition
of
non-controlling
interest - - - - (88) 88 -
Repurchase and
cancellation of
Company's own
shares (417) - - - (50,692) - 417 (50,692)
================= ==================== ========== ======== ============ =========== ================= ============ ===========
Balance as at
30 June 2016 1,164 - 4,034 (434) 42,950 957 417 49,088
================= ==================== ========== ======== ============ =========== ================= ============ ===========
Consolidated Cash Flow Statement
Year Year
ended ended
30 June 30 June
2016 2015
Note GBP'000 GBP'000
====================================== ===== ========= =========
(Loss)/profit for the period (24,164) 5,117
====================================== ===== ========= =========
Adjustments for:
Results of discontinued
operations 7 22,198 (8,382)
Net finance charges 933 795
Tax expense 649 869
Depreciation on property,
plant and equipment 113 29
Amortisation of intangible
assets 668 195
Amortisation of acquired
intangible assets 2,494 2,026
Share of losses and disposal
of joint ventures and associates 1,469 746
Share-based payments expense 1,167 371
====================================== ===== ========= =========
Operating cash flow before
movement in working capital 5,527 1,766
-------------------------------------- ----- --------- ---------
Acquisition costs 1,343 2,414
Exceptional restructuring
costs - 67
-------------------------------------- ----- --------- ---------
Operating cash flow before
movement in working capital
and exceptional and acquisition
costs 6,870 4,247
-------------------------------------- ----- --------- ---------
Increase in inventories (41) (19)
Increase in receivables (4,749) (250)
Increase in payables and
accruals 4,169 1,462
Decrease in provisions - (373)
====================================== ===== ========= =========
Cash generated from continuing
operations 4,906 2,586
-------------------------------------- ----- --------- ---------
Acquisition costs payments 1,080 1,436
Exceptional restructuring
payments - 67
-------------------------------------- ----- --------- ---------
Adjusted operating cash
flow 5,986 4,089
-------------------------------------- ----- --------- ---------
Interest received 68 48
Interest paid (309) (424)
Tax paid (629) (569)
====================================== ===== ========= =========
Net cash inflow from operating
activities - continuing
operations 4,036 1,641
Net cash (outflow)/inflow
from operating activities
- discontinued operations 7 (10,890) 5,279
====================================== ===== ========= =========
Net cash (outflow)/inflow
from operating activities
- continuing and discontinued
operations (6,854) 6,920
====================================== ===== ========= =========
Cash flows from investing
activities
Purchase of property, plant
and equipment (236) (145)
Purchase and development
of intangible assets (2,282) (1,651)
Acquisition of investment
in an associate - (1,912)
Acquisition of subsidiaries,
net of cash acquired (7,485) (2,450)
Payments made to acquire (345) -
non-controlling interest
====================================== ===== ========= =========
Net cash used in investing
activities - continuing
operations (10,348) (6,158)
Net cash from/(used in)
investing activities - discontinued
operations 7 65,399 (4,551)
====================================== ===== ========= =========
Net cash from/(used in)
investing activities - continuing
and discontinued operations 55,051 (10,709)
====================================== ===== ========= =========
Cash flows from financing
activities
Dividends paid (3,071) (3,381)
Payment on vesting of share
options - (80)
(Repayment)/drawdown of
borrowings (1,223) 4,066
Repurchase of shares (50,692) (3,550)
====================================== ===== ========= =========
Net cash used in financing
activities (54,986) (2,945)
Net cash used in financing - -
activities - discontinued
operations
====================================== ===== ========= =========
Net cash used in financing
activities - continuing
and discontinued operations (54,986) (2,945)
Net decrease in cash and
cash equivalents (6,789) (6,734)
Other non-cash movements
- exchange rate changes (585) (1,918)
Cash and cash equivalents
at the beginning of period 12,143 20,795
====================================== ===== ========= =========
Cash and cash equivalents
at end of period 4,769 12,143
Bank borrowings (3,727) (4,357)
====================================== ===== ========= =========
Net cash 1,042 7,786
====================================== ===== ========= =========
1. Basis of preparation
The financial information set out in this statement does not
constitute the Group's statutory accounts for the years ended 30
June 2016 or 30 June 2015. The financial information is derived
from those accounts for the year ended 30 June 2015 and from the
draft version of those accounts of the year ended 30 June 2016.
Statutory accounts for the year ended 2015 have been delivered to
the Registrar of Companies and those for 2016 will be delivered in
due course. The audit of the statutory accounts for the year ended
30 June 2016 is not yet complete. The Group's auditors have
reported on the 30 June 2015 accounts; their report was unmodified,
did not draw attention to any matters by way of emphasis without
modifying their report and did not contain statements under s498
(2) or (3) of the Companies Act 2006. Whilst the financial
information included in this announcement has been computed in
accordance with International Financial Reporting Standards
("IFRS") this announcement does not itself contain sufficient
information to comply with IFRS.
2. Segmental reporting
As outlined in the Group Strategic Review, the Group's
management structure is reported in two distinct divisions:
-- The Erasure division focuses on development and delivery of
innovative solutions, and includes:
o Blancco, the global market leader data of erasure
software.
o SafeIT, acquired in September 2014, the leading specialist
cloud and networked data erasure business.
o Tabernus, acquired in September 2015, the US market leader of
software erasure products.
Both SafeIT and Tabernus have been integrated into Blancco.
-- The Diagnostic division includes Xcaliber Technologies, a
smartphone diagnostics software business. The Group held a 49%
stake in this business at the start of the year, this increased to
76% in January 2016 when a further 27% was purchased and increased
again in March to 100% when the Group purchased the final 24%.
-- Aftermarket Services represents the discontinued business and
provided the Group's core repair services and insurance
offering.
Year Year
ended ended
30 June 30 June
2016 2015
Continuing operations GBP'000 GBP'000
========================================= ========= =========
Erasure revenue 21,659 15,014
========================================== ========= =========
Diagnostics revenue 1,017 136
Less: share of jointly controlled
entity (289) (136)
========================================== ========= =========
Diagnostics revenue 728 -
========================================= ========= =========
Software revenue 22,387 15,014
========================================== ========= =========
Erasure 7,592 5,382
Diagnostics 13 -
========================================= ========= =========
Software Divisional Operating
Profit 7,605 5,382
Corporate costs (1,516) (1,359)
========================================== ========= =========
Adjusted Operating Profit 6,089 4,023
Acquisition costs (1,343) (2,414)
Exceptional restructuring costs - (67)
Amortisation of intangible assets (2,494) (2,026)
Share-based payments (1,167) (371)
========================================== ========= =========
Group Operating profit/(loss) 1,085 (855)
Loss on disposal of Xcaliber (1,314) -
investment following acquisition
Share of results of associates
and jointly controlled entities (155) (746)
========================================== ========= =========
Operating loss (384) (1,601)
Finance income 68 48
Unwinding of discount factor
on contingent consideration (292) (171)
Revaluation of contingent consideration (293) -
Other finance costs (416) (672)
========================================== ========= =========
Net finance cost (933) (795)
========================================== ========= =========
Loss before tax (1,317) (2,396)
========================================== ========= =========
Year Year
ended ended
30 June 30 June
2016 2015
Discontinued operations GBP'000 GBP'000
========================================= ========= =========
Aftermarket Services revenue 151,901 187,550
========================================== ========= =========
Aftermarket Services Divisional
Operating Profit 9,711 15,201
Corporate costs (3,438) (3,798)
========================================== ========= =========
Adjusted Operating Profit 6,273 11,403
M&A costs (9,600) (627)
Exceptional restructuring costs (1,542) (611)
Amortisation of intangible assets (425) (1,323)
Share-based payments (714) (160)
========================================== ========= =========
Operating (loss)/profit before
disposal of subsidiaries (6,008) 8,682
Loss on disposal of subsidiaries - (1,456)
========================================== ========= =========
Operating (loss)/profit (6,008) 7,226
Finance income 20 95
Revaluation of contingent consideration - 3,302
Unwinding of discount factor
on contingent consideration (342) (763)
Other finance costs (1,337) (667)
========================================== ========= =========
Net finance (cost)/income (1,659) 1,967
========================================== ========= =========
(Loss)/profit before tax (7,667) 9,193
========================================== ========= =========
3. Acquisition costs
2016 2015
GBP'000 GBP'000
========================== ======== ========
Acquisition costs and
other M&A related costs 1,343 2,414
============================ ======== ========
Acquisition costs relate to the M&A activity within the
year, with the most significant costs relating to the acquisition
of Tabernus and Xcaliber.
Deal costs not included above relate to the disposal of the
Repair Services Business totalling GBP9.6 million for the period
(2015: GBP0.6 million) as they are presented within discontinued
operations.
4. Exceptional restructuring costs
2016 2015
GBP'000 GBP'000
================================ ============= ========
Redundancies and restructuring - 67
================================== =========== ========
- 67
============================================== ========
No exceptional restructuring costs have been recorded in the
current period (2015: GBP0.1 million relating to integration
activities).
Exceptional redundancy and restructuring costs not included
above relate to the restructuring activities for the disposal of
the Repair Services Business totalling GBP1.5 million for the
period (2015: GBP0.6 million), as they are presented within
discontinued operations.
5. (Loss)/profit for the year
Loss for the year (2015: profit) for the Group has been arrived
at after charging/(crediting):
Year ended Year ended
30 June 30 June
2016 2015
GBP'000 GBP'000
==================================== =========== ===========
Depreciation of property,
plant and equipment - owned 523 1,702
(Profit)/loss on disposal
of property, plant and
equipment (33) 114
Amortisation of intangible
assets 4,058 4,452
Cost of inventories recognised
as an expense 81,753 91,372
Staff costs 51,554 60,368
Net foreign exchange loss/(profit) 1,308 (233)
======================================= =========== ===========
The figures for the Group's continuing operations are as
follows:
Year
Year ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
================================ =========== =========
Depreciation of property,
plant and equipment - owned 113 29
Loss on disposal of property, - -
plant and equipment
Amortisation of intangible
assets 3,162 2,221
Cost of inventories recognised
as an expense 309 112
Staff costs 9,954 6,219
Net foreign exchange
loss/(profit) 169 (273)
=================================== =========== =========
6. Finance costs and finance income
2016 2015
Continuing operations GBP'000 GBP'000
========================================= ======== ========
Bank interest receivable
and similar income 68 48
Interest payable on borrowings:
Bank loans and overdrafts (377) (436)
Other finance costs (39) (236)
Revaluation of contingent consideration (293) -
Unwind of discount factor on contingent
consideration (292) (171)
Net finance cost (933) (795)
=========================================== ======== ========
Contingent consideration was revalued following the UK decision
to exit the European Union, which subsequently resulted in a
weakening of the sterling against the US dollar, the currency in
which the contingent consideration is denominated. The impact was
an increase in the present value of the liability in sterling of
GBP0.3 million.
7. Discontinued operations
Year Year
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
================================== === ========= ========
Discontinued operations
revenue 151,901 187,550
Divisional operating profit 9,711 15,160
Head office costs (3,438) (3,757)
Adjusted Operating Profit 6,273 11,403
Acquisition and disposal
costs (9,600) (611)
Exceptional restructuring
costs (1,542) (627)
Amortisation of intangible
assets (425) (1,323)
Share-based payments (714) (160)
----------------------------------- --------- --------
Operating (loss)/profit
before disposal of subsidiaries (6,008) 8,682
Loss on disposal of subsidiaries - (1,456)
=================================== ========= ========
Operating (loss)/profit (6,008) 7,226
----------------------------------- --------- --------
Revaluation of contingent
consideration - 3,302
Other finance income 20 95
=================================== ========= ========
Finance income 20 3,397
----------------------------------- --------- --------
Unwinding of contingent
consideration (342) (763)
Other finance costs (1,337) (667)
=================================== ========= ========
Finance costs (1,679) (1,430)
----------------------------------- --------- --------
Profit/(loss) before tax (7,667) 9,193
Taxation (609) (811)
=================================== ========= ========
Profit/(loss) for the
period (8,276) 8,382
=================================== ========= ========
Post tax loss on disposal (13,922) -
of discontinued business
=================================== ========= ========
Post tax results from
discontinued operations (22,198) 8,382
=================================== ========= ========
The discontinued income statement includes both the Repair
Services Business and the Digital Care Businesses. The loss on
disposal relates solely to the Repair Services Business as the
Digital Care Business was not sold by 30 June 2016. Assets and
Liabilities included in the consolidated balance sheet as held for
sale relate to the Digital Care Business and are as follows:
GBP'000
=============================== ========
Assets
Other intangible assets 1,479
Property, plant and equipment 123
Deferred Taxation 297
Inventory 31
Trade and other receivables 2,874
================================ ========
Total assets held for sale 4,804
================================ ========
Current liabilities
Trade and other payables (3,038)
================================ ========
Total liabilities held
for sale (3,038)
================================ ========
The loss on disposal reconciliation for the disposal of the
Repair Services business and Digital Care Sweden AB is as
follows:
Repair Services Digital Care Total
Business Sweden AB
GBP'000 GBP'000 GBP'000
========================= ================ ============= =========
Proceeds 79,914 - 79,914
========================== ================ ============= =========
Assets
Goodwill 49,816 - 49,816
Other intangible
assets 5,118 68 5,186
Property, plant
and equipment 7,894 - 7,894
Deferred Taxation 2,404 - 2,404
Inventory 9,857 24 9,881
Cash 9,777 619 10,396
Trade and other
receivables 27,572 13 27,585
========================== ================ ============= =========
Total assets
disposed 112,438 724 113,162
========================== ================ ============= =========
Liabilities
Trade and other
payables (20,001) (298) (20,299)
Deferred Consideration (3,166) - (3,166)
========================== ================ ============= =========
Total liabilities
disposed (23,167) (298) (23,465)
========================== ================ ============= =========
Transfer of translation
differences to
Income Statement 3,292 847 4,139
========================== ================ ============= =========
Loss on Disposal (12,649) (1,273) (13,922)
========================== ================ ============= =========
The arrangement for the disposal of Digital Care Sweden were
that no proceeds were received but the new owners took on both the
cash and the expected cost of the required rationalisation and
restructuring subsequent to the acquisition.
On disposal of the Repair Services and Digital Care Sweden
businesses, the Group is required to transfer accumulated foreign
exchange differences from the translation reserve to the Income
Statement. This charge amounted to GBP4.1 million and results
predominantly from the strengthening of the Sterling relative to
overseas currencies in the last 24 months.
The cash flows associated with the discontinued operations are
as follows:
Year Year
ended ended
30 June 30 June
2016 2015
GBP'000 GBP'000
=================================== ======== =======
(Loss)/profit for the period (8,276) 8,382
===================================== ======== =======
Adjustments for:
Net finance charges/(income) 1,659 (1,967)
Tax expense 609 811
Depreciation on property,
plant and equipment 410 1,673
Amortisation of intangible
assets 471 908
Amortisation of acquired
intangible assets 425 1,323
Loss on disposal of subsidiary - 1,456
Loss on disposal of property,
plant and equipment - 114
Share-based payments expense 714 160
===================================== ======== =======
Operating cash flow before
movement in working capital (3,988) 12,860
===================================== ======== =======
Increase in inventories (495) (358)
Decrease in receivables 809 1,333
Decrease in payables and
accruals (6,004) (6,329)
Decrease in provisions (222) (1,451)
===================================== ======== =======
Cash (used in)/ from discontinued
operations (9,900) 6,055
Interest received 20 -
Interest paid (655) (382)
Tax paid (355) (394)
===================================== ======== =======
Net cash (outflow)/inflow
from operating activities
- discontinued operations (10,890) 5,279
===================================== ======== =======
Cash flows from investing
activities
Purchase of property, plant
and equipment (1,549) (2,443)
Purchase and development
of intangible assets (1,575) (3,098)
Proceeds from sale of property,
plant and equipment - 990
Acquisition of subsidiaries
and payment of contingent
consideration (995) -
Disposal of subsidiaries,
net of cash disposed 69,518 -
===================================== ======== =======
Net cash from/(used in)
investing activities -
discontinued operations 65,399 (4,551)
===================================== ======== =======
8. Earnings per share (EPS)
Year ended Year ended
30 June 30 June
2016 2015
Pence Pence
=========================================== =========== ===========
Continuing operations
(3.69 (3.84
Basic earnings per share p) p)
(3.69 (3.84
Diluted earnings per share p) p)
Adjusted earnings per share 5.63 p 2.84 p
Diluted adjusted earnings
per share 5.63 p 2.84 p
============================================ =========== ===========
Discontinued operations
(31.03 10.81
Basic earnings per share p) p
(31.03 10.81
Diluted earnings per share p) p
7.18 p 13.34
Adjusted earnings per share p
Diluted adjusted earnings 7.18 p 13.34
per share p
=========================================== =========== ===========
Total Group
(34.72
Basic earnings per share p) 6.97 p
(34.72
Diluted earnings per share p) 6.97 p
12.82 16.18
Adjusted earnings per share p p
Diluted adjusted earnings 12.82 16.18
per share p p
=========================================== =========== ===========
Year ended Year ended
30 June 30 June
2016 2015
Continuing operations GBP'000 GBP'000
=========================================== =========== ===========
Loss for the period (1,966) (3,265)
(Profit)/loss attributable
to non-controlling interests (674) 287
============================================ =========== ===========
Loss attributable to equity
holders of the parent parpaparentCompany (2,640) (2,978)
============================================ =========== ===========
Reconciliation to adjusted
profit:
Unwinding of contingent
consideration 292 171
Revaluation of contingent 293 -
consideration
Acquisition costs 1,343 2,414
Amortisation of intangible
assets 2,494 2,026
Exceptional restructuring
costs - 67
Exceptional bank charges 17 148
Share based payments 1,167 371
Loss on disposal of Xcaliber 1,314 -
investment following acquisition
Tax impact of above adjustments (251) (14)
============================================ =========== ===========
Adjusted profit for the
period 4,029 2,205
============================================ =========== ===========
Year ended Year ended
30 June
30 June 2016 2015
Discontinued operations GBP'000 GBP'000
================================= ============= ===========
Loss for the period (22,198) 8,382
(Profit)/loss attributable - -
to non-controlling interests
================================= ============= ===========
Loss attributable to equity
holders of the parent
parpaparentCompany (22,198) 8,382
================================== ============= ===========
Reconciliation to adjusted
profit:
Unwinding of contingent
consideration 342 763
Revaluation of deferred
consideration - (3,302)
Acquisition costs 9,600 626
Amortisation of intangible
assets 425 1,323
Exceptional restructuring
costs 1,542 611
Exceptional bank charges 793 482
Share based payments 714 160
Disposal of subsidiary - 1,456
Disposal of discontinued 13,922 -
operations
Tax impact of above adjustments - (155)
================================== ============= ===========
Adjusted profit for the
period 5,140 10,346
================================== ============= ===========
Number of shares '000s '000s
Weighted average number of shares used
to calculate earnings per share
* Basic 71,537 77,550
* Diluted 71,537 77,563
========================================== ======= =======
9. Acquisitions during the year
Acquisition of Tabernus
On 11 September 2015 the Group completed the acquisition of 100%
of the issued share capital of Tabernus LLC and Tabernus Europe
Limited for a headline price of $12 million, consisting of
consideration of $11.7 million (GBP7.7 million) and debt acquired
of $0.3 million (GBP0.2 million), which was funded though the
Group's cash reserves. The debt was immediately settled on
completion.
In the ten months to 30 June 2016, this acquisition has
contributed total revenue of GBP1.5 million.
If the acquisition had been completed on the first day of the
financial year, management estimates that the benefit to
consolidated revenue for the year would have been GBP1.9
million.
The provisional book value and fair value of the assets acquired
and liabilities assumed were as follows:
Book Fair Value Fair
Value adjustments Value
and IFRS
alignment
GBP'000 GBP'000 GBP'000
=============================== ========= ============= =========
Intangible assets arising
on consolidation - 1,548 1,548
Property, plant and equipment 30 (30) -
Deferred tax - 32 32
Overdraft and other short
term borrowings (175) - (175)
Trade and other receivables 257 (42) 215
Trade and other payables (163) (1,677) (1,840)
=============================== ========= ============= =========
Net assets acquired (51) (169) (220)
Goodwill 7,544
=============================== ========= ============= =========
Total consideration 7,324
=============================== ========= ============= =========
Satisfied by:
Cash paid 6,390
Deferred consideration 934
=============================== ========= ============= =========
Total consideration 7,324
=============================== ========= ============= =========
The Directors identified a number of adjustments that were
required to the book values, following a review of all balance
sheet categories. These adjustments include a write off of
property, plant and equipment items (GBP30,000), provision against
doubtful debtors (GBP42,000), provisions against litigations and
claims and other unrecorded liabilities (GBP1,677,000).
Under IFRS 3 "Business Combinations" separately identifiable
intangible assets arising from the acquisition have been
capitalised. These relate to technology of GBP583,000, customer
contracts of GBP695,000 and marketing brand of GBP270,000. The key
assumption used was the discount rate for future cash flows which
was estimated at 12%.
Trade receivables acquired totalled GBP200,000 gross and there
was no bad debt provision. The goodwill of GBP7,544,000 can be
attributed to the anticipated growth of the Group, strategic
benefits and workforce in place. The goodwill represents the
synergies arising on the acquisition.
Contingent cash consideration
The acquisition includes an earn-out based on earnings, to be
paid in September 2018. The estimated cash outflow at the time of
settlement will be $2 million (GBP1.3 million). A deferred
liability of $1.4 million (GBP0.9 million) has been established
which represents the fair value at the acquisition date, using a
discount rate of 12%. At 30 June 2016, the deferred liability was
$1.8 million (GBP1.1 million).
Acquisition of Xcaliber
On 4 January 2016 the Group acquired an additional 27% of the
issued share capital of Xcaliber Technologies LLC for a
consideration of $0.5 million (GBP0.3 million) bringing the Group's
share to 76%. At this point, the Group is required to account for a
disposal of its investments previously held on the balance sheet
and reflect ownership of the business, consolidating the results in
the Income Statement and Balance Sheet from this date.
Xcaliber is a US based software business with a market leading
mobile diagnostics technology which adds to our existing
diagnostics offering in Europe, the US and globally.
In the six months to 30 June 2016, this acquisition has
contributed total revenue of GBP700,000 and Adjusted Operating
Profit of GBPnil.
If the acquisition had been completed on the first day of the
financial year, management estimates that the benefit to
consolidated revenue for the year would have been GBP1.3 million
and the benefit to consolidated Adjusted Operating Profit would
have been GBPnil.
The provisional book value and fair value of the assets acquired
and liabilities assumed at the 4 January 2016 were as follows:
Book Fair Value Fair
Value adjustments Value
and IFRS
alignment
GBP'000 GBP'000 GBP'000
=============================== ========= ============= =========
Intangible assets arising
on consolidation - 1,835 1,835
Property, plant and equipment 31 - 31
Deferred tax 102 (146) (44)
Cash 431 - 431
Trade and other receivables 520 (15) 505
Trade and other payables (1,676) (2,081) (3,757)
=============================== ========= ============= =========
Total net assets (592) (407) (999)
Non-controlling interest 43
=============================== ========= ============= =========
Net assets acquired (956)
=============================== ========= ============= =========
Goodwill 1,936
=============================== ========= ============= =========
Total consideration 980
=============================== ========= ============= =========
Satisfied by:
Cash paid 342
Disposal of 49% associate 638
=============================== ========= ============= =========
Total consideration 980
=============================== ========= ============= =========
A loss of GBP1.3 million was recognised on the disposal of the
49% interest on 4 January 2016 which was required to be accounted
for immediately prior to the accounting for the acquisition.
The Directors identified a number of adjustments that were
required to the book values, following a review of all balance
sheet categories. These adjustments include provisions against
litigations and claims and other unrecorded liabilities (GBP2.1
million).
Under IFRS 3 "Business Combinations" separately identifiable
intangible assets arising from the acquisition have been
capitalised. These relate to technology GBP1,687,000, customer
contracts of GBP38,000 and marketing brand of GBP111,000. The key
assumption used was the discount rate for future cash flows which
was estimated at 14%.
Trade receivables acquired totalled GBP240,000 gross and there
was a GBP1,000 bad debt provision. The goodwill of GBP1,936,000 can
be attributed to the anticipated growth of the Software group,
strategic benefits and workforce in place.
On 17 March 2016 the Group completed the purchase of an
additional 24% of the issued share capital of Xcaliber Technologies
LLC for $0.5 million (GBP0.3 million) bringing the Groups share to
100%. The acquisition was funded through the Group's cash reserves.
On completion, all debts to companies associated with the seller
were settled amounting to an additional cash outflow of $0.4
million (GBP0.3 million).
The second investment was made to obtain the full ownership of
the business from the previous partner, while the first was an
investment to enhance the operations business, and accordingly the
two transactions have been accounted for separately.
This investment represents the buy out of the non-controlling
interest at this date, which does not require a fair value
assessment as this was already completed on 4 January 2016. In
accordance with IFRS 10 "Consolidated Financial Statements", the
purchase price for the acquisition has been taken directly to the
profit and loss reserve.
Contingent consideration
The investment on the 17 March 2016 includes an earn-out to be
paid over various stages of the next 3 years. The estimated cash
outflow at the time of settlement will be $4.7 million (GBP3.3
million). A deferred liability of $3.8 million (GBP2.7 million) has
been established which represents the fair value at the investment
date, using a discount rate of 14%. At 30 June 2016, the deferred
liability was $3.8 million (GBP2.9 million).
10. Cash flow - acquisition of subsidiaries net of cash acquired
Within the consolidated cash flow statement, the cash flow
relating to acquisitions, net of cash acquired is reconciled as per
the table below:
GBP'000
============================================== ========
Tabernus acquisition - initial cash
consideration 6,390
Tabernus acquisition - overdraft 4
Tabernus acquisition - debt 171
Xcaliber acquisition - initial cash
consideration 342
Xcaliber acquisition - cash acquired (431)
Xcaliber acquisition - debt 287
Payment of contingent consideration
on Blancco Sweden acquisition 722
=============================================== ========
Net cash flow - acquisition of subsidiaries,
net of cash acquired 7,485
=============================================== ========
No cash or overdraft was acquired as part of the non-controlling
interest buy outs since the cash balances were consolidated by
virtue of the existing shareholding being a controlling stake.
Cash outflow on the buy out of the Xcaliber non-controlling
interests was GBP0.3 million
11. Investments in Blancco sales offices
The Group's interest in the key Blancco erasure legal entities
is as follows:
Ownership Ownership
percentage percentage
of the of the
Group Group
as at as at
30 June 30 June Country of
Company name 2016 2015 incorporation
====================== ============ ============ ===============
Blancco Oy Limited 100% 100% Finland
England and
Blancco UK Limited 100% 100% Wales
Blancco Italy SRL 100% 100% Italy
Blancco France
SAS 51% 51% France
Software Blancco
S.A. de C.V. Mx 51% 51% Mexico
Blancco US LLC 100% 100% USA
Blancco Central
Europe GmbH 100% 100% Germany
Blancco Canada
Inc 50% 50% Canada
Blancco SEA Sdn
Bhd 100% 100% Malaysia
Blancco Australasia
Pty Limited 100% 100% Australia
Blancco Japan Inc 51% 51% Japan
Blancco Sweden
SFO 100% 100% Sweden
SafeIT Security
Sweden AB 100% 100% Sweden
====================== ============ ============ ===============
12. Dividends
2016 2016 2015 2015
GBP'000 Pence per GBP'000 Pence per
share share
====================== ======== ========== ======== ====================
Previous year
final 2,565 3.35 2,118 2.68
Current year interim
dividend 506 0.66 1,263 1.65
====================== ======== ========== ======== ====================
3,071 4.01 3,381 4.33
====================== ======== ========== ======== ====================
13. Bank borrowings
2016 2015
GBP'000 GBP'000
========================= ======== ========
Due after more than
one year:
Secured bank loan 3,727 4,357
=========================== ======== ========
Repayable:
In the first to second
years inclusive - 4,357
In the third to fifth
years inclusive 3,727 -
=========================== ======== ========
The bank borrowing is secured on the majority of the Group's
assets for the duration of the Revolving Credit Facility. The total
facility available to the Group as at 30 June 2016 totalled GBP11.5
million (2015: GBP39.0 million), of which GBP3.7 million (2015:
GBP4.6 million) had been drawn down in cash, resulting in an
unutilised facility of GBP7.8 million (2015: GBP34.4 million).
Borrowing costs of nil (2015: GBP0.3 million) are set-off against
the amount owing at year end.
In September 2015, the Group extended the term of its banking
facility with HSBC from October 2016 to October 2019, which gives
Blancco clear certainty of funding over the next three years.
In April 2016, following the disposal of the Repair Services
Business, the banking facility was renegotiated for the continuing
software Group in order to provide an appropriate level of
financing for the current profitability, which resulted in the
reduction of the total available facility.
All banking covenants have been satisfied in the year and show
headroom for the foreseeable future.
14. Subsequent Events
On 17 August 2016, the group acquired the remaining 49% of the
share capital of Blancco Australasia Pty Ltd that it did not
already own for a cost of AU$ 0.1 million (GBP0.1 million). The
consideration was funded through the Group's cash reserves.
On 19 September 2016 we reached an agreement to sell the Digital
Care business to Mazovia Capital for initial contingent
consideration of EUR1.2 million (GBP1.0 million) with a further
contingent earn out of EUR3.3 million (GBP2.8 million) payable over
2 to 3 years. These proceeds will be reinvested into the Software
business.
15. Related party transactions
Transactions between Blancco and its 100% subsidiaries, which
are related parties, have been eliminated on
consolidation. No disclosure of these transactions is required under IAS24.
Matthew Peacock, Executive Chairman, and Tom Russell,
Non-executive Director, are associated with Hanover Investors
Management LLP, and a fee is charged for their services as
Executive Directors which is disclosed in the Directors'
Remuneration Report.
They also have an indirect beneficial interest in the shares of
the Group. At 30 June 2016, the combined holding of Hanover
Investors Management LLP and its connected parties is 209,728
(2015: 5,217,651) ordinary shares equating to 0.36% (2015: 6.60%)
of the issued share capital of the Company.
All transactions with Directors are included in the Directors'
Remuneration Report, which is disclosed in the Annual Report and
Accounts.
During the year fees amounting to GBP1,580,200 were paid for
M&A related consultancy services provided by Hanover Investors
Management LLP or its connected parties (2015: GBP540,000). At 30
June 2016 GBPnil was outstanding in relation to these services
(2015: GBP290,000).
These services were for corporate finance advisory and were
fully contingent on the execution of the M&A deal in the year,
including the acquisitions of Tabernus and Xcaliber (the latter in
two stages), and the disposals of the Repair Services business and
the Digital Care division.
These fees were benchmarked against fees paid to our other
advisors, with the Board considering that Hanover offered the best
alternative to any third parties based on the work performed for
the Group on previous acquisitions. The nature of the services
provided by Hanover included the following:
In respect of the acquisitions:
-- Management of deal timetable
-- Negotiation with the third parties and legal advisors
-- Negotiation on terms of the deals
In respect of the disposals Hanover's role was to take ownership
of the execution of the deal in conjunction with our corporate
advisor, William Blair, whose role it was to identify the most
appropriate buyer of the business.
Property lease costs of GBP165,000 (2015: GBP188,000) were
recharged to Hanover Investors Management LLP in the year, of which
GBPnil was outstanding at the year-end (2015: GBPnil).
Management charges totaling GBP423,000 (2015: GBP430,000) were
recharged to Xcaliber during the year of which GBPnil (2015:
GBP730,000) was still owed at the year end. The management charges
in the current year relate to charges up to the acquisition date in
January 2016 only, the prior period figures relate to the period
from 1 July 2014 to 30 June 2015.
16. Definitions
Adjusted Operating Profit: Operating Profit stated before
amortisation or impairment of acquired intangible assets,
acquisition costs, exceptional restructuring costs, share-based
payments and disposal of subsidiaries and associates. This is the
key profit measure used by the Board to assess the underlying
financial performance of the operating divisions and the Group as a
whole.
Adjusted operating cash flow: Operating cash flow excluding
taxation, interest payments and receipts, acquisition costs, and
exceptional restructuring costs. This is the key operating cash
flow measure used by the board to assess the underlying cash flow
of the Group.
Adjusted earnings per share: Basic earnings per share excluding
amortisation or impairment of acquired intangible assets,
amortisation of bank fees, exceptional restructuring costs,
acquisition costs, share-based payments, losses on disposal of
investments and jointly controlled entities, unwinding of the
discounted contingent consideration, adjustments to estimates of
contingent consideration, and tax impacts of the above. 'Adjusted
earnings per share' is the key earnings per share measure used by
the Board.
17. Notice of Annual General Meeting
The Annual General Meeting of the Company will be held at 12
noon on Tuesday 29 November 2016 at Shakespeare Martineau LLP, 60
Gracechurch Street, London EC3V 0HR.
18. Report and Accounts
Copies of the Annual Report and Accounts will be available from
the Company's website - www.blancco.com from 5 October 2016. Copies
will be sent to shareholders in due course and will be available
from the registered office of 60 Gracechurch Street, London
EC3V.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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(END) Dow Jones Newswires
September 20, 2016 02:01 ET (06:01 GMT)