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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Coretx Hldgs | LSE:COR | London | Ordinary Share | GB00B4NJ4984 | ORD 2.5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 29.75 | 29.50 | 30.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMCOR
RNS Number : 3784K
CORETX Holdings PLC
21 September 2016
CORETX Holdings plc
("CORETX", the "Group" or the "Company")
Unaudited interim results for the six months ended 30 June 2016
CORETX Holdings plc (AIM: COR), the mid-market network, cloud and IT managed services provider, today announces its unaudited interim results for the six months ended 30 June 2016. The results represent five and a half months of contribution from Selection Services Investments Limited ("Selection"), acquired in January 2016, and four and a half months of contribution from C4L Group Holdings Limited ("C4L"), acquired in February 2016.
Highlights
-- Acquisition of Selection for an enterprise value of GBP34.8m alongside oversubscribed placing to raise GBP30.0m in January 2016
-- Acquisition of C4L for a total consideration of GBP20.2m in February 2016 -- Revenues of GBP19.2m, of which 84% are recurring -- Trading EBITDA* of GBP2.3m -- Adjusted EBITDA** of GBP1.6m -- New bank facilities of up to GBP19m secured with Royal Bank of Scotland -- Successful rebrand of the business as CORETX(TM) in April 2016
-- Integration on track with significant investment having been made in people, platforms, processes and the product portfolio
-- Strategic focus on growing recurring revenue base (increased by 9% across the Group on a pro forma basis) while reducing reliance on one off project and product resale
Andy Ross, Chief Executive of CORETX, commented:
"The work done in the first half of 2016 has focused on creating a stable and solid platform for growth going forwards. We have made good progress with the integration of Selection and C4L into a single operating business, and have made significant changes at the senior management level, putting in place an experienced management team with a track record of delivering growth and creating shareholder value. The investment we are making in new processes and systems around the FORCE.COM platform will also allow us to scale the business more easily going forwards."
Jonathan Watts, Chairman of CORETX, commented:
"CORETX is laying the foundations to become a leading supplier in the Managed Services, Cloud and connectivity space. The integration of the businesses we have acquired has progressed very well, and at the same time we have continued to compete and win business in a very competitive market. We are also expanding our products and services portfolio, establishing CORETX as the route to the Cloud for the mid-market. Andy and his team are developing CORETX into a business that can become a leading player in the market and the Board is confident that the Group will be well placed to deliver increased shareholder value in the years ahead."
Note: Prior to the acquisition of Selection in January 2016, the Company was an investing company as defined under the AIM Rules for Companies, hence comparative figures would be meaningless and have not been included
* Earnings Before Interest, Tax, Depreciation and Amortisation and excludes transaction and integration costs, charges for share-based payments and plc costs
**Earnings Before Interest, Tax, Depreciation and Amortisation and excludes transaction and integration costs and charges for share-based payments
The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.
For further information please contact:
CORETX Holdings plc +44 (0)844 874 1000
Jonathan Watts, Chairman
Andy Ross, Chief Executive Officer
Julian Phipps, Chief Financial Officer
N+1 Singer (Nominated Advisor and Broker): +44 (0)207 496 3000
James Maxwell
Jen Boorer
MXC Capital Markets LLP (Financial Adviser): +44 (0)20 7965 8149
Marc Young
Charles Vivian
Alma PR: +44 (0)7780 901979
Josh Royston
Robyn McConnachie
Further information on the Company can be found at www.coretx.com.
Chairman's Statement
I am pleased to present the interim results for CORETX for the six months to 30 June 2016, prior to which the Company was an investing company as defined under the AIM Rules for Companies.
Market and Strategy
Our aim remains to become the go-to technology provider of choice for mid-market organisations. The market remains highly fragmented and we are of the firm belief that companies in this space have to date not been provided with a full service offering by the larger IT providers.
This has been a very busy first reporting period. Through the acquisitions of Selection and C4L in January and February 2016 respectively we have been able to create a business with strong networks, data centres and managed services and with over 400 highly skilled staff. The focus in the first half of the year has been largely on integration and unifying two separate businesses onto one common platform. I am pleased to say that we have made great progress in this respect and that by adopting the FORCE.COM platform, we will be able to scale the business much more easily going forwards.
As well as integration there has been a lot of work done on product innovation to provide further sales momentum and greater quality and flexibility for our clients. In the second half of the year we will extend our network reach as well as increase the connectivity to 10 GBs. We will also be offering enhanced network security and greater public cloud connectivity.
Following the rebranding of the business to CORETX(TM) in April, the sales teams have been restructured to better reflect the new business, all of whom report in to the Chief Executive, Andy Ross. The focus is to build the order book with strong levels of recurring revenue and higher margin. I am pleased to report that this new structure is already demonstrating success and, as well as a number of new contracts signed in the first half of the year, the pipeline for the second half of the year, particularly in Q4, is looking stronger.
Summary trading results
The results for the 6 months to 30 June 2016 represent five and a half months of contribution from Selection and four and a half months of contribution from C4L. During the same period in the prior year, the Company was an investing company as defined by the AIM Rules for Companies, hence to refer to the comparative figures would be meaningless. However, in order to provide a more useful comparative for shareholders, management have calculated what the acquired businesses would have generated on a pro forma basis in the first six months of 2015.
In keeping with the Board's stated intention of building a business with good visibility through a strong level of higher margin recurring revenues, we have reduced the Group's reliance on larger one off projects and product resale. I am therefore pleased to announce that revenues of GBP19.2m to 30 June 2016 included recurring revenues of GBP16.2m (representing 84% of the total) with one off revenues of GBP3m (representing 16% of the total). On a pro forma basis, the Group would have had 75% recurring and 25% one off revenues in H1 of 2015, hence there has been a notable shift towards more recurring revenues.
Gross margins of GBP8.1m arise primarily from recurring services (GBP7.1m or 87% of the total) with the contribution from professional services and one offs being GBP1.0m or 13%. On a pro forma basis, the Group would have delivered 77% from recurring services and 23% from one off and project services in H1 of 2015, so the change in product mix is helping the business.
Trading EBITDA of GBP2.3m reflects a solid start to the newly assembled group, in line with the Board's expectations and a 16% improvement over the first six months of 2015 on a pro forma basis.
The Company has incurred exceptional costs of GBP2.1m, arising from the integration and restructuring of the business following the acquisitions of Selection and C4L and has incurred GBP1.0m of depreciation on tangible assets and GBP1.7m of amortisation of intangible assets. On a reported basis, this leads to a loss before taxation of GBP3.4m.
Cash flow
As an investing company, the Company started the period under review with GBP22.8m in cash & cash equivalents and raised a further GBP29.3m net of expenses from the successful, oversubscribed placing to new and existing investors in January 2016. This was used to fund the acquisitions of Selection and C4L. Selection was acquired with an enterprise value of GBP34.8m, paid as GBP34.4m in cash and the remainder through the issue of 1.3m new ordinary shares in the Company. Selection has now been rebranded as CORETX Manage. C4L was acquired with an enterprise value of GBP23m, paid as GBP14.2m in cash, GBP6m through the issue of 18.3m new ordinary shares in the Company and GBP2.8m cash in the business taken out by the owner. C4L has now been rebranded as CORETX Connect.
The Company signed a banking facility agreement in January 2016, comprising an overdraft facility of GBP2m, a revolving credit facility ("RCF") of GBP7m with an accordion feature giving the Company the option to increase the RCF by a further GBP10m should the funds be required for a specific acquisition. At 30 June 2016, the Company had drawn down GBP3.5m from the RCF to settle loans in the acquired businesses and to provide a working capital injection into both acquired businesses. In addition, there was significant upfront investment required in relation to a contract signed at the start of 2016. As at 30 June 2016, the Company showed a net overdrawn position of GBP1.5m.
Board Changes
As announced on 9 September 2016, Matt Hawkins and Simon Mewett have left the Company to pursue other interests. The Board would like to thank Matt and Simon for their contribution to the business and wish them success in the future.
Outlook
The first half of the year has not been without its challenges, as one would expect when combining two businesses to create a platform for growth. However, the Board is confident that it is making solid progress as evidenced by the growth of our recurring revenue base in the first half of the year.
The prospects for the future look positive, with a healthy new business pipeline, high quality, relevant new products being launched and new exciting partnerships. Combined with a focused, motivated new management team, we believe we are well placed for continued growth. The Company expects the trend to continue towards longer, recurring service contracts in IT, networks and hosting and away from one off professional services and equipment sales. This in turn will provide shareholders with greater visibility, higher margins and a better quality of earnings.
I believe this has been a period of solid progress for the Company, and the Board would like to thank all of the staff and management for their hard work, and congratulate them on their achievements in the first half of the year.
Jonathan Watts
Non-Executive Chairman
21(st) September 2016
Consolidated Statement of Comprehensive Income
Hot Features
Premium
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
Note GBP000 GBP000 GBP000
----------------------------------- ------------------ ------------ -------------
Revenue 3 19,199 88 146
Cost of sales (11,151) (31) 29
------------------------------------ ------------------ ------------ -------------
Gross profit 8,048 57 175
Administrative expenses (11,361) 1,492 279
------------------------------------ ------------------ ------------ -------------
Operating (loss)/profit (3,313) 1,549 454
------------------------------------ ------------------ ------------ -------------
Analysed as:
Adjusted EBITDA* 1,629 (135) 137
Equity settled share-based (33) - -
payment expenses
Increase in derivative (60) - -
financial instruments
Depreciation of property, (995) - -
plant and equipment
Amortisation of intangible (1,753) - -
assets
Release of exceptional
cost provisions - 1,684 1,535
Exceptional costs 4 (2,101) - (1,218)
Net financial (costs)/income (126) 467 659
Gain on sale of tangible - 11 -
assets
(Loss)/profit before
taxation (3,439) 2,027 1,113
Tax on (loss)/profit
on ordinary activities 232 (391) (363)
------------------------------------ ------------------ ------------ -------------
(Loss)/profit for the
period from continuing
operations attributable
to shareholders of
the parent company (3,142) - (977)
(Loss)/profit for the
period from discontinued
operations attributable
to shareholders of
the parent company (65) 1,636 1,727
------------------------------------ ------------------ ------------ -------------
(Loss)/profit for the
period after taxation (3,207) 1,636 750
------------------------------------ ------------------ ------------ -------------
Other comprehensive
income:
Items that are or may
be classified subsequently
to profit or loss:
Foreign exchange translation
differences - equity
accounted investments 36 9 -
------------------------------------ ------------------ ------------ -------------
(Loss)/profit for the
period and total comprehensive
income all attributable
to equity holders of
the parent (3,171) 1,645 750
------------------------------------ ------------------ ------------ -------------
Basic and diluted earnings
per share
Basic (pence per share) (1.83) 2.30 1.05
Diluted (pence per
share) (1.74) 2.30 1.05
------------------------------------ -------------- ------------ -------------
* Earnings from continuing operations before interest, tax, depreciation, amortisation, goodwill impairment, share based payments, increase in derivative financial instruments and exceptional costs
Consolidated Statement of Financial Performance
Unaudited Unaudited Audited
30 June 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
------------------------------- ---------- ---------- -------------
Non-current assets
Intangible assets 60,347 - -
Goodwill 12,359 - -
Property, plant and equipment 5,425 - -
Deferred taxation 282 - -
Financial and other assets 95 - 74
-------------------------------- ---------- ---------- -------------
78,508 - 74
------------------------------- ---------- ---------- -------------
Current assets
Trade and other receivables 10,297 4,760 80
Taxation - 557 -
Cash and cash equivalents 468 17,954 22,769
10,765 23,271 22,849
------------------------------- ---------- ---------- -------------
Total assets 89,273 23,271 22,923
-------------------------------- ---------- ---------- -------------
Current liabilities
Bank overdraft 1,962 - -
Trade and other payables 8,077 936 1,146
Deferred income 4,895 - -
Taxation 308 - 290
Finance lease obligations 1,129 - -
Derivative financial 559 - -
instruments
Provisions 1,302 391 438
18,232 1,327 1,874
------------------------------- ---------- ---------- -------------
Non-current liabilities
Loans and other borrowings 3,500 - -
Finance lease obligations 255 - -
Deferred tax liabilities 12,127 - -
Provisions 2,064 - -
17,946 - -
------------------------------- ---------- ---------- -------------
Total liabilities 36,178 1,327 1,874
-------------------------------- ---------- ---------- -------------
Net assets 53,095 21,944 21,049
-------------------------------- ---------- ---------- -------------
Equity attributable to
equity holders of the
parent
Called up share capital 4,773 1,780 1,780
Share premium account 32,191 18,025 -
Foreign currency translation
reserve (132) (159) (168)
Merger reserve - (1,261) -
Capital redemption reserve - 347 -
Retained earnings 16,263 3,212 19,437
-------------------------------- ---------- ---------- -------------
Total equity 53,095 21,944 21,049
-------------------------------- ---------- ---------- -------------
Consolidated Statement of Changes in Equity
Share Share Retained Foreign Merger Capital
capital premium earnings currency reserve redemption Total
translation reserve
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- --------- --------- ---------- ------------- --------- ------------ ---------
At 1 January
2015 1,780 18,025 1,576 (168) (1,261) 347 20,299
Total comprehensive
income for
the period
Profit for
the period - - 1,636 - - - 1,636
Exchange rate
differences - - - 9 - - 9
--------------------- --------- --------- ---------- ------------- --------- ------------ ---------
At 30 June
2015 1,780 18,025 3,212 (159) (1,261) 347 21,944
Total comprehensive
income for
the period
Loss for the
period - - (886) - - - (886)
Exchange rate
differences - - - (9) - - (9)
Transactions
with owners
recorded directly
in equity
Cancellation
of share premium
reserve - (18,025) 18,025 - - - -
Cancellation
of capital
redemption
reserve - - 347 - - (347) -
Release of
merger reserve - - (1,261) - 1,261 - -
At 31 December
2015 1,780 - 19,437 (168) - - 21,049
Total comprehensive
income for
the period
Loss for the
period - - (3,207) - - - (3,207)
Exchange rate
differences - - - 36 - - 36
Transactions
with owners
recorded directly
in equity
Share issue,
net of issue
costs 2,500 26,814 - - - - 29,314
Acquisition
of Selection 34 372 - - - - 406
Acquisition
of C4L 459 5,504 - - - - 5,963
Issue of warrants - (499) - - - - (499)
Share based
payments - - 33 - - - 33
--------------------- --------- --------- ---------- ------------- --------- ------------ ---------
At 30 June
2016 4,773 32,191 16,263 (132) - - 53,095
--------------------- --------- --------- ---------- ------------- --------- ------------ ---------
Consolidated Cash Flow Statement
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
-------------------------------------- ------------ ------------ -------------
(Loss)/profit for the
period (3,207) 1,636 750
Adjustments for:
Depreciation of property, 995 - -
plant and equipment
Amortisation of intangible 1,753 - -
assets
Net financial costs/(income) 126 (467) (659)
Equity settled share-based 33 - -
payment expenses
Derivative financial 60 - -
instrument expenses
Taxation (232) 391 363
Gain on disposal of property,
plant and equipment - (11) (22)
Other reserve movements 36 9 -
--------------------------------------- ------------ ------------ -------------
(436) 1,558 432
(Increase)/decrease in
trade and other receivables (4,211) 214 187
Increase/(decrease) in
trade and other payables 61 (906) (694)
Decrease in provisions (614) (2,616) (2,569)
(5,200) (1,750) (2,644)
Net corporation tax (paid)/recovered (30) 85 960
Net cash from operating
activities (5,230) (1,665) (1,684)
--------------------------------------- ------------ ------------ -------------
Cash flow from investing
activities:
Interest received 7 52 -
Acquisition of Selection, (34,233) - -
net of cash acquired
Acquisition of C4L, net (14,291) - -
of cash acquired
Acquisition of plant (904) - -
and equipment
Proceeds from sale of
discontinued operations
2014 - 750 12,366
Proceeds from sale of - 6,667 -
discontinued operations
2013
Proceeds from sale of
property, plant and equipment - 11 22
--------------------------------------- ------------ ------------ -------------
Net cash (used in)/from
investing activities (49,421) 7,480 12,388
--------------------------------------- ------------ ------------ -------------
Cash flows from financing
activities:
Share issue, net of share 29,314 - -
issue costs
Proceeds from borrowings, 3,402 - -
net of expenses
Repayment of loans and (1,494) - -
other borrowings
Repayment of finance (684) - -
lease obligations
Interest paid (129) - -
Acquisition of financial
and other non-current
assets (21) - (74)
--------------------------------------- ------------ ------------ -------------
Net cash from/(used in)
financing activities 30,388 - (74)
--------------------------------------- ------------ ------------ -------------
Net (decrease)/increase
in cash and cash equivalents (24,263) 5,815 10,630
Cash and cash equivalents
at beginning of period 22,769 12,139 12,139
Cash and cash equivalents
at end of period (1,494) 17,954 22,769
--------------------------------------- ------------ ------------ -------------
Notes to the half-yearly financial information
1. Basis of preparation
The condensed consolidated interim financial information for the six month period ended 30 June 2016 and 30 June 2015 is unaudited. This statement has not been reviewed by the Company's auditor. This condensed consolidated interim financial information was approved by the Board of Directors and authorised for issue on 21 September 2016. A copy of this half-yearly financial report is available on the Company's website at www.coretx.com
The Company is a public limited liability company incorporated and domiciled in Scotland. The address of its registered office is 24 Dublin Street, Edinburgh EH1 3PP. The Company is listed on the AIM market of the London Stock Exchange.
On 11 April 2016, the Company changed its name from Castle Street Investments plc to CORETX Holdings plc.
CORETX and its subsidiaries have not applied IAS 34, 'Interim Financial Reporting' as adopted by the European Union, which is not mandatory for UK AIM listed companies, in the preparation of this half-yearly financial report.
This condensed consolidated interim financial information for the six month period ended 30 June 2016 does not comply, therefore with all the requirements of IAS 34, 'Interim Financial Reporting' as adopted by the European Union. The consolidated interim financial information should be read in conjunction with the annual financial statements of the Company as at and for the year ended 31 December 2015, which were prepared in accordance with IFRS as adopted by the European Union.
This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015 were approved by the Board of Directors on 8 March 2016 and delivered to the Registrar of Companies. The report of the auditor was unqualified, did not contain an emphasis of matter paragraph and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.
Accounting policies
The accounting policies used in the preparation of the condensed consolidated interim financial information for the six months ended 30 June 2016 are in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") as adopted by the European Union and are consistent with those that will be adopted in the annual statutory financial statements for the year ended 31 December 2016.
While the financial information included has been prepared in accordance with the recognition and measurement criteria of IFRS, as adopted by the European Union, these financial statements do not contain sufficient information to comply with IFRSs.
Exceptional items
Items which are material because of their size or nature and which are non-recurring are highlighted separately on the face of the income statement. The separate reporting of exceptional items helps provide a better picture of the Company's underlying performance. Items which may be included within the exceptional category include:
-- spend on the integration of significant acquisitions and the other major restructuring programmes;
-- significant goodwill or other asset impairments; and -- other particularly significant or unusual items.
Spend on integration is incurred by the Group when integrating one trading business into another. The types of costs include employment related costs of staff being made redundant as a consequence of integration, due diligence costs, property costs such as lease termination penalties and vacant property provisions, third party advisor fees and rebranding costs.
Exceptional items are excluded from the headline profit measures used by the Group and are highlighted separately in the income statement as management believe that they need to be considered separately to gain an understanding the underlying profitability of the trading businesses.
For further details, please refer to note 4.
Going concern
The condensed consolidated interim financial information has been prepared on a going concern basis.
The Directors have prepared cash flow forecasts for the Group following its acquisition of Selection and C4L, including sensitivity analysis on key assumptions. These forecasts show that the Group expects to meet its liabilities from cash resources, taking into account all risks and uncertainties.
On 25 January 2016, the Group secured new bank facilities with The Royal Bank of Scotland plc. The facilities comprise a five year GBP7.0 million Revolving Credit Facility available to the Group until 22 January 2021 and a GBP2.0 million overdraft facility, renewable annually. In addition, the Revolving Credit Facility also contains an accordion feature that allows the total facility to be increased by up to a further GBP10.0 million to support organic and growth initiatives.
As a result, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors consider that the adoption of the going concern basis is appropriate.
2. Business combinations
Selection
On 21 January 2016, the Company acquired the entire issued share capital of Selection Services Investments Limited and its subsidiary entities ("Selection"), a United Kingdom focused provider of IT solutions and Cloud Services with over 500 active customers. The enterprise value of Selection was GBP34.8 million, paid as to GBP34.4 million in cash with the balance satisfied by the issue of 1,353,810 new ordinary shares.
The Directors' assessment of the assets acquired and liabilities assumed have not been completed at the time of these interim results. The Directors have allocated provisional fair values in preparing these results.
From the date of acquisition to 30 June 2016, Selection recorded revenue of GBP14.3 million and a loss before tax of GBP1.0 million. Assuming the combination had taken place at the beginning of the year, the interim reported revenue from Selection would have been GBP15.6 million and the loss before taxation would have been GBP1.7 million.
Acquisition costs were GBP0.9 million, GBP0.8 million of which had been accrued at 31 December 2015.
C4L
On 16 February 2016, the Company acquired the entire issued share capital of C4L Group Holdings Limited and its subsidiary entities ("C4L"), a successful and growing network services and data centre hosting business with over 550 active customers, for a total consideration of GBP20.2 million, paid as to GBP14.2 million in cash with the balance satisfied by the issue of 18,346,918 new ordinary shares. C4L brings a high quality core network infrastructure with substantial capacity for growth and a broad data centre infrastructure.
The Directors' assessment of the assets acquired and liabilities assumed have not been completed at the time of these interim results. The Directors have allocated provisional fair values in preparing these results.
From the date of acquisition to 30 June 2016, C4L recorded revenue of GBP4.8 million and a profit before tax of
GBP0.1 million. Assuming the combination had taken place at the beginning of the year, the interim reported revenue from C4L would have been GBP6.6 million and the profit before taxation would have been GBP0.2 million.
Acquisition costs were GBP0.8 million.
The total provisional goodwill and intangible assets arising from the acquisitions is the difference between the fair value of the consideration less the provisional value of the assets acquired.
Selection C4L Total
Provisional value GBP000 GBP000 GBP000
------------------------------ ---------- -------- --------
Fair value of purchase
consideration 34,771 20,211 54,982
Less fair value of assets
acquired:
Property plant and equipment (1,544) (3,937) (5,481)
Other non-current assets (632) (336) (968)
Trade receivables (2,271) (1,077) (3,348)
Other debtors (709) (1,027) (1,736)
Cash (132) 43 (89)
Trade payables 3,052 1,878 4,930
Other liabilities 4,982 8,525 13,507
------------------------------- ---------- -------- --------
Goodwill and intangibles 37,517 24,280 61,797
------------------------------- ---------- -------- --------
The consideration was satisfied as follows:
Selection C4L Total
GBP000 GBP000 GBP000
-------------------- ---------- ------- -------
Cash on completion 34,365 14,248 48,613
Equity 406 5,963 6,369
--------------------- ---------- ------- -------
34,771 20,211 54,982
-------------------- ---------- ------- -------
On acquisition of each business, the Directors assessed the business acquired to identify any intangible assets. Customer contracts and relationships in Selection and networks in C4L met the criteria for recognition as intangible assets as they are separable from each other and have a measurable fair value, being the amount for which an asset would be exchanged between knowledgeable and willing parties in an arm's length transaction. Goodwill was identified following the recognition of deferred tax liabilities on the customer contracts and network intangible assets, under the provisions of IAS 12, 'Income Taxes'.
For customer contracts in Selection, the fair value of the intangible assets was calculated using the discounted cash flows arising from the existing customer contract base. Customer retention was assumed to be 80% based on past experience.
For networks in C4L, the fair value of the intangible assets was calculated using the discounted cash flows arising from the existing network in place. Future revenues generated from the existing network was assumed to be 100%.
A long term growth rate of 8.7% was applied with a discount rate of 9.4%. The reasonable economic life of the customer relationships and networks was assumed to be 15 years. The identifiable assets are as follows:
Selection C4L Total
GBP000 GBP000 GBP000
------------------------------ ---- ---------- -------- ---------
Intangible asset - customer
contracts and relationships 37,517 - 37,517
Intangible asset - network - 24,280 24,280
Goodwill 7,503 4,856 12,359
Deferred tax liability (7,503) (4,856) (12,359)
37,517 24,280 61,797
---- ---------- -------- ---------
3. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting to the Chief Operating Decision Maker ("CODM"). The CODM has been identified as the Group Chief Executive and the Chief Financial Officer.
The Group Chief Executive and the Chief Financial Officer are jointly responsible for resource allocation and assessing the performance of the operating segments. The operating segments are defined by distinctly separate product offerings or markets. The CODMs assesses the performance of the operating segments based on a measure of revenue and gross profit.
The following table presents revenue and gross profit in respect of the Group's operating segment for the six months ended 30 June 2016. Administrative expenses are not allocated against operating segments in the Company's internal reporting.
Unaudited for the six month period ended 30 June 2016
Continuing operations Managed Services Cloud Hosting Networks Projects Central Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ----------------- -------------- --------- --------- --------- ---------
Revenue 6,872 5,055 4,316 2,956 - 19,199
Cost of Sales (3,852) (2,352) (3,007) (1,940) - (11,151)
--------------------------------------- ----------------- -------------- --------- --------- --------- ---------
Gross profit/(loss) 3,020 2,703 1,309 1,016 - 8,048
Administrative expenses - - - - (11,296) (11,296)
Operating profit/(loss) 3,020 2,703 1,309 1,016 (11,296) (3,248)
--------------------------------------- ----------------- -------------- --------- --------- --------- ---------
Analysed as:
Adjusted EBITDA* 3,020 2,703 1,309 1,016 (6,419) 1,629
Equity settled share-based payment
expenses - - - - (33) (33)
Increase in derivative financial
instruments - - - - (60) (60)
Depreciation - - - - (995) (995)
Amortisation of intangible assets - - - - (1,753) (1,753)
Exceptional costs - - - - (2,036) (2,036)
--------------------------------------- ----------------- -------------- --------- --------- --------- ---------
Net financial costs - - - - (126) (126)
--------------------------------------- ----------------- -------------- --------- --------- --------- ---------
Profit/(loss) before taxation 3,020 2,703 1,309 1,016 (11,422) (3,374)
Tax on profit/(loss) on ordinary
activities - - - - 232 232
--------------------------------------- ----------------- -------------- --------- --------- --------- ---------
Profit/(loss) for the period after
taxation 3,020 2,703 1,309 1,016 (11,190) (3,142)
--------------------------------------- ----------------- -------------- --------- --------- --------- ---------
* Earnings from continuing operations before interest, tax, depreciation, amortisation, goodwill impairment, share based payments, increase in derivative financial instruments and exceptional costs
The statement of financial position is not allocated between Managed Services, Cloud Hosting, Networks, Projects and Central in the Company's internal reporting.
4. Exceptional costs
In accordance with the Group's policy in respect of exceptional costs, the following charges were incurred:
Unaudited Unaudited Audited
Six Six months Year
months ended ended
ended 30 June 31 December
30 June 2015 2015
2016
GBP000 GBP000 GBP000
---------------------------------- ---------- ------------ -------------
Restructuring and reorganisation
costs 1,207 - 458
Acquisition costs 894 - 760
2,101 - 1,218
---------------------------------- ---------- ------------ -------------
Continuing operations 2,036 - 760
Discontinued operations 65 - 458
-------------------------- ------ ------
2,101 - 1,218
------------------------- ------ ------
5. Earnings per share
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
2016 2015 2015
GBP000 GBP000 GBP000
---------------------------- -------------- ------------ -------------
(Loss)/profit for the
period (3,207) 1,636 750
Addback:
Taxation (232) 391 363
Equity settled share-based 33 - -
payment expenses
Increase in derivative 60 - -
financial instruments
Gain on sale of property, - (11) -
plant and equipment
Amortisation of intangible 1,753 - -
assets
Release of exceptional
cost provisions - (1,684) (1,535)
Exceptional costs 2,101 - 1,218
----------------------------- -------------- ------------ -------------
Revised profit 508 332 796
Taxation (102) (66) (159)
----------------------------- -------------- ------------ -------------
Adjusted earnings 406 266 637
----------------------------- -------------- ------------ -------------
30 June 30 June 31 December
2016 2015 2015
---------------------------- -------------- ------------ -------------
Weighted average number
of shares 175,228,614 71,201,993 71,201,993
Diluted weighted average
number of shares 184,630,178 71,201,993 71,201,993
----------------------------- -------------- ------------ -------------
Basic (loss)/earnings
per share (pence) (1.83) 2.30 1.05
Diluted (loss)/earnings
per share (pence) (1.74) 2.30 1.05
Basic adjusted earnings
per share (pence) 0.23 0.37 0.89
Diluted adjusted earnings
per share (pence) 0.22 0.37 0.89
----------------------------- -------------- ------------ -------------
The basis for adjusted earnings per share, as calculated above, is a non-statutory measure, which we believe is useful to investors and is commonly used by the market in monitoring similar businesses.
6. Subsequent events
On 9 September 2016, the Company announced that it had agreed to sell its subsidiary undertaking, CORETX Media Limited ("CML"), to Matt Hawkins, Chief Technology Officer (CTO), who resigned with immediate effect as a Director of the Company in order to focus on developing the CML business.
CML was acquired by the Company for no additional consideration as part of its acquisition of C4L Group Holdings Limited ("C4L") in February 2016 and was established by Matt Hawkins to deliver network and other related services. Matt has a proven track record as a successful entrepreneur and has stepped down from his role as CTO of CORETX in order to focus full time on building a business within CML.
In light of the nature of CML's business operations and commercial activity to date, its disposal was effected for GBP1, in conjunction with which CORETX will provide CML with fibre, network connectivity and other related services.
On 9 September 2016, having overseen the integration of C4L into the CORETX group, Simon Mewett resigned from his position as Director and Chief Operating Officer of the Company.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DBLFLQKFFBBX
(END) Dow Jones Newswires
September 21, 2016 02:00 ET (06:00 GMT)
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