TIDMEIT
RNS Number : 7444J
Enables IT Group PLC
17 June 2014
17 June 2014
Enables IT Group Plc
("Enables IT", "the Company" or "the Group")
Unaudited interim results for the six months ended 31 March
2014
Enables IT, a leading provider of cloud computing, managed and
professional services, is pleased to announce its interim results
for the six months ended 31 March 2014.
Financial Highlights:
-- Revenue for the six months at GBP3.6 million (H1 2013: GBP2.7 million)
-- Recurring revenues remain in excess of 50%
-- EBITDA before exceptionals - loss of GBP373,000 (H1 2013: GBP118,000 profit)
-- Cash in bank of GBP682,000 providing sufficient funding for
the Group's immediate strategic plans.
Operational highlights:
-- Delivery in all key performance areas allowed for the early
completion of the acquisition of The Support Force Group at a
discount of over 10%, an acquisition that enhanced the service
offering of the Group
-- Acquisition and successful integration of the business and
assets of Know Technology LLC (total consideration of $1.4
million), an acquisition that strengthened operations in the UK and
a key territory in the US
-- Continued expansion of the customer base, with new wins in
new sectors such as Legal Services
-- Recent short term sales issues in 14 May 2014 announcement
successfully addressed, recruitment is under way and mitigating
cost savings identified
Commenting on the results, Michael Walliss, CEO of Enables IT
said:
"After an encouraging six months to 31 March, a period in which
we have successfully completed two integrations, as well as
achieving early completion on The Support Force Group. We were
disappointed to announce the sales pipeline setback. This
represents a short term issue and, accordingly, the Board quickly
identified and implemented a number of operational changes, the
effect of which we expect to be a marginally positive EBITDA for
the next six months.
We remain encouraged by the long term market dynamics and shift
to cloud-based IT Services in both the US and UK. In a fragmented
market, we have demonstrated our ability to deliver on our
buy-and-build strategy and believe further opportunities exist in
this area. The business model remains sound, with recurring revenue
representing more than 50% of Group total, and we are confident of
capitalising on the significant long term market opportunity before
us."
FURTHER ENQUIRIES
Enables IT Group plc
Michael Walliss Tel: 01372 455 970
Cenkos Securities plc (Nominated Adviser and Broker)
Max Hartley / Andy Roberts Tel: 020 7397 8900
Redleaf Polhill Limited
Dwight Burden / Rebecca Sanders-Hewitt Tel: 020 7382 4730
/ David Ison enablesit@redleafpr.com
About EnablesIT
Enables IT Group plc is a leading provider of cloud computing,
managed and professional services in the UK and North America. From
on-premise private cloud networks, our IAAS/SAAS platform HAVEN
within both our US and UK Data centres, to backend core network and
wireless solutions, Enables IT specialises in the delivery and
management of mission-critical services, enabling customers to
reduce the costs, complexity and risks associated with their IT
infrastructure.
CEO Statement:
Overview
During the first half the Company managed to successfully
complete two integrations and secure wins in new sectors such as
Legal Services. As described in the trading statement on 14 May
2014 the Group conducted a detailed review of the sales pipeline
and order book in the UK and as a result has taken a more prudent
view in relation to conversion and deliverability. A reorganisation
was instigated by the Board as a consequence of this review which
included several staff changes and ongoing the Group is benefitting
from the related cost savings. Selected recruitment of sales
personnel has commenced.
Trading
As previously announced in the trading statement, revenue for
the six months to 31 March 2014 was marginally ahead of
expectations at approximately GBP3.6 million and the six months to
September broadly similar, but will also benefit from a full period
of contribution from Know Technology (KTL). We continue to expect
EBITDA to be marginally negative.
During the six months to 31 March 2014, the Company completed
the successful acquisition of KTL in the US and is pleased with the
progress made in the integration with our existing business there.
Enables IT now has an established platform for growth in the US
with data centre capacity, established offices and a sales &
marketing team. The opportunities in the US are encouraging and we
are actively seeking ways to increase the Group's exposure in this
strong market.
In the period, the Group secured contract wins with new clients
and in new sectors such as Legal Services, and anticipates that the
spread of customers and sectors will continue to grow going
forward.
Outlook
The Group continues to see significant opportunities in the
fragmented market place as corporates look to cloud-based
solutions. Growing acceptance of hosted solutions and a shift of
expenditure from capex to opex mean the market trend continues to
be positive. With its platform and product, Enables IT remains well
placed to capture the opportunity, and has continued to make
significant investment in the Group's infrastructure including both
the UK and US data centres to manage the growth potential.
The Group's financial position remains strong with sufficient
cash for current business operation and immediate strategic
plans.
Michael Walliss
CEO
Consolidated Income Statement
For the six months ended 31 March 2014
6 months 6 months Year ended
ended ended
31 March 31 March 30 September
2014 2013 2013
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Revenue - Continuing operations 3,578 2,702 7,131
3,578 2,702 7,131
---------------- ---------------- ------------------
Cost of sales (2,540) (1,691) (4,695)
---------------- ---------------- ------------------
Gross profit 1,038 1,011 2,436
Operating expenses (1,516) (953) (2,249)
---------------- ---------------- ------------------
Operating (loss)'profit before exceptional
items (478) 58 187
Exceptional items
Restructuring and redundancy costs (201) (31) (108)
Impairment of intangible assets (109) (315) (379)
Amortisation of intangible assets (66) (42) (76)
Operating loss (854) (330) (376)
Finance costs (4) (18) (35)
Loss before taxation (858) (348) (411)
Taxation 40 - 107
Loss for the period (818) (348) (304)
================ ================ ==================
Earnings per share (pence)
Basic (3.30)p (4.42)p (2.07)p
Diluted (3.30)p (4.42)p (2.07)p
================ ================ ==================
Consolidated Balance Sheet
As at 31 March 2014
As at As at As at
31 March 31 March 30 September
2014 2013 2013
(unaudited) (unaudited) (audited)
Assets GBP'000 GBP'000 GBP'000
Non-current assets
Tangible fixed assets 868 637 713
Intangible assets 656 396 581
Goodwill 1,997 185 1,390
3,521 1,218 2,684
------------- ------------- --------------
Current assets
Trade and other receivables 1,728 1,106 884
Cash and cash equivalents 682 476 440
------------- ------------- --------------
2,410 1,582 1,324
------------- ------------- --------------
Total Assets 5,931 2,800 4,008
============= ============= ==============
Liabilities
Current liabilities
Trade and other payables 1,134 1,245 1,097
Deferred income 699 480 459
Loans and other borrowings 30 - 47
Corporation tax 41 29 51
Obligations under finance leases 8 30 21
Deferred consideration 425 - 513
2,337 1,784 2,188
------------- ------------- --------------
Non current liabilities
Trade and other payables 42 - 23
Loans and other borrowings - 255 -
Deferred tax 161 - 136
Obligations under finance leases - 8 -
203 263 159
------------- ------------- --------------
Total liabilities 2,540 2,047 2,347
------------- ------------- --------------
Total assets less liabilities 3,391 753 1,661
============= ============= ==============
Equity
Share capital 3,171 3,069 3,095
Share premium 8,465 5,129 5,991
Merger reserve 1,002 1,002 1,002
Reverse acquisition reserve (8,977) (8,977) (8,977)
Other reserves 861 887 863
Retained earnings (1,131) (357) (313)
Total equity 3,391 753 1,661
============= ============= ==============
Consolidated Cash Flow Statement
For the six months ended 31 March 2014
6 months 6 months Year ended
ended ended
31 March 31 March 30 September
2014 2013 2013
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Cash inflow from operating activities
Loss from operations (858) (348) (411)
Adjustments for:
Interest paid 4 18 33
Depreciation 106 60 132
Impairment of intangible assets 109 315 379
Amortisation of intangible assets 66 42 76
Other non-cash items - - 6
Currency exchange adjustment (2) (25) (1)
------------- ------------- --------------
(575) 62 214
Share option costs - - 2
Decrease in inventories - 1 1
(Increase)/Decrease in receivables (834) (162) 109
Increase/(Decrease) in liabilities 287 210 (288)
Cash (used in)/generated from operations (1,122) 111 38
------------- ------------- --------------
Interest paid (4) (18) (33)
Tax paid (11) - (33)
------------- ------------- --------------
Net cash (used in)/generated from
operating activities (1,137) 93 (28)
------------- ------------- --------------
Cash flows from investing activities
Acquisition of subsidiaries (9) - (280)
Purchase of goodwill and assets of (578) - -
business
Cash acquired with acquired subsidiaries
under reverse acquisition - - 446
Purchases of property, plant and equipment (240) (350) (500)
Net cash used in investing activities (827) (350) (334)
------------- ------------- --------------
Cash flows from financing activities
Proceeds from issue of share capital 68 - 25
Premium on issue 2,392 - 885
Costs relating to share issues (225) (72)
Decrease in borrowings (17) (100) (409)
Finance lease payments (12) (17) (31)
------------- ------------- --------------
Net cash generated from/(used in)
financing activities 2,206 (117) 398
------------- ------------- --------------
Net increase/(decrease) in cash and
cash equivalents 242 (374) 36
Cash and cash equivalents at beginning
of period 440 850 404
------------- ------------- --------------
Cash and cash equivalents at end of
period 682 476 440
============= ============= ==============
Consolidated Statement of changes in equity
For the six months ended 31 March 2014
Share Share Retained Merger Reverse Other
capital premium earnings reserve acquisiti-on reserves Total
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
6 months ended 31 March
2013
As at 1 January 2012
(as restated) 2 - 111 - - - 113
Profit for the period - - 60 - - - 60
Dividend paid - - (180) - - - (180)
As at 30 September
2012 2 - (9) - - - (7)
Loss and total comprehensive
income for the six
months ended 31 March
2013 - - (348) - - - (348)
2 - (357) - - - (355)
Shares issued by legal
parent prior to reverse
acquisition 2,950 5,129 - - - - 8,079
Legal parent reserves
prior to reverse acquisition - - - - - 898 898
Shares issued by the
legal parent on reverse
acquisition 119 - - 1,002 - - 1,121
Reverse acquisition
adjustment (2) - - (8,990) - (8,992)
Other movements - - - - - 2 2
As at 31 March 2013 3,069 5,129 (357) 1,002 (8,990) 900 753
--------- --------- ---------- --------- -------------- ---------- ------------
Year ended 30 September
2013
As at 1 October 2012
(as restated) 2 - (9) - - - (7)
Loss and total comprehensive
loss for the year - - (304) - - - (304)
Shares issued by legal
parent prior to reverse
acquisition 2,950 5,129 - - - - 8,079
Legal parent reserves
prior to reverse acquisition - - - - - 898 898
Currency exchange adjustment - - - - - 2 2
Shares issued by the
legal parent on reverse
acquisition 119 - - 1,002 - - 1,121
Shares issued 26 934 - - - - 960
Share issue expenses - (72) - - - - (72)
Repayment of convertible
loan notes - - - - - (39) (39)
Reverse acquisition
adjustment (2) - - (8,977) - (8,979)
Share based payment
charge - - - - - 2 2
As at 30 September
2013 3,095 5,991 (313) 1,002 (8,977) 863 1,661
Loss and total comprehensive
loss for the period - - (818) - - - (818)
Movement in the period - - - - - (2) (2)
Shares issued during
the period 76 2,699 - - - - 2,775
Share issue expenses - (225) - - - - (225)
As at 31 March 2014 3,171 8,465 (1,131) 1,002 (8,977) 861 3,391
--------- --------- ---------- --------- -------------- ---------- ------------
Notes to the Interim Results
1. Basis of preparation
The Interim Results for the six months ended 31 March 2014 have
been prepared and presented in accordance with IAS 34 'Interim
Financial Reporting' as adopted by the European Union. They have
been prepared on a going concern basis with reference to the
accounting policies and methods of computation and presentation set
out in the Group's consolidated financial statements for the year
ended 30 September 2013, except as stated below. The half yearly
financial statements should be read in conjunction with the Group's
audited financial statements for the year ended 30 September 2013,
which have been prepared in accordance with IFRS as adopted by the
European Union.
The information in this announcement does not comprise statutory
accounts within the meaning of section 434 of the Companies Act
2006. The Group's accounts for the year ended 30 September 2013
have been reported on by the Group's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified
and did not draw attention to any matters by way of emphasis. It
contained no statement under section 498(2) or (3) of the Companies
Act 2006.
The financial information for the six months ended 31 March 2014
is unaudited.
2. Segmental information
The services the group provides are in regard to one activity.
Accordingly the primary segmental disclosure is based on
geographical location.
UK US Eliminations Total
GBP'000 GBP'000 GBP'000 GBP'000
6 months ended 31 March 2014
Segmental revenue - continuing 2,479 1,099 - 3,578
--------
Segmental operating profit/(loss) (492) 14 - (478)
-------- -------- ------------- --------
Year ended 30 September 2013
Segmental revenue - continuing 4,703 2,467 (39) 7,131
--------
Segmental operating profit/(loss) 214 (27) - 187
-------- -------- ------------- --------
6 months ended 31 March 2013
Segmental revenue - continuing 1,796 945 (39) 2,702
-------- -------- ------------- --------
Segmental operating profit 14 44 - 58
-------- -------- ------------- --------
3. Business Combinations
On 2 December 2013, Enables Inc., a subsidiary of Enables IT
Group plc, acquired the business and assets of Know Technology LLC,
a corporation trading in the USA, for a total consideration of
$1,430,000 (GBP891,540).
Total
GBP'000
Net assets acquired
Fixed assets 20
Fair value of net assets acquired 20
Goodwill arising on acquisition
Purchased goodwill 631
Intangible assets (customer
list) 241
Total assets acquired 892
--------
Satisfied by:
Cash consideration 578
Issue of shares (738,757 consideration
shares) * 314
Total consideration 892
--------
* The fair value of the consideration shares issued as part of
the above business combination was based on the published price for
the instruments existing at the date of the exchange.
4. Goodwill and intangible assets
Goodwill and other intangibles relate to the reverse acquisition
of Enables IT Limited, the acquisition of The Support Force Group
Limited and the acquisition of the business and assets of Know
Technology LLC.
Impairment testing has been performed over the total balance of
intangible assets which were allocated to the one cash generating
unit (CGU) of the Group, that of the sale of IT managed services
and technologies. The Group tests goodwill annually for impairment
or more frequently if there are indications that goodwill may be
impaired.
The carrying value of intangible assets and goodwill has been
assessed for impairment by reference to the value in use. Value in
use was determined by discounting the future cash flows generated
from the continuing use of the unit.
Based on the testing, an impairment charge of GBP109,000 was
recognised at 31 March 2014 against the carrying value of certain
customers at Enables IT (UK) Limited and Enables IT Inc. which were
considered to have no future value to the business.
Amortisation and impairment charges are recorded within
exceptional items.
5. Deferred Consideration
On 31 March 2014, the Group agreed an early settlement discount
in excess of 10% of the remaining consideration on the acquisition
of The Support Force Group.
The settlement of the deferred consideration (originally due
post-June 2014) will be satisfied by a cash element of GBP144,244,
and shares to the value of GBP289,611 at the end of June 2014 in
accordance with the original agreement. This represents a discount
of GBP78,819 on the original purchase price.
6. Loss per share
The loss per share is based on the net loss for the period
attributable to ordinary equity holders divided by the weighted
average number of ordinary shares outstanding during the
period.
The basic loss per share has been calculated by dividing the
retained loss for the period of GBP817,991 (2013: loss of
GBP303,839) by the weighted average number of ordinary shares of
24,771,764 (2013: 14,650,436) in issue during the period.
7. Dividends
No dividend is proposed for the six months ended 31 March
2014.
8. Copies of Interim Results
Copies of the Interim Results will be available on the Enables
IT website, Investor Section - www.enablesit.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
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Enables IT (LSE:EIT)
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